Information, Organizations,

Processes and Control

Hierarchical organizations of past years

Today

Process-oriented, Learning, Team-based,

and Fast-cycle organizational models

Flat, flexible, focused on core competence

Inside, empowered, interfunctional teams of

knowledge workers are reengineering and
continually improving core business
processes.

Information, Organizations,
Processes and Control

Strategic alliance and partnership that will

enable them to focus on core competence
while expanding capabilities, scale and
scope.

Creation of virtual organizations

Challenge:

How do we meet these challenges?

How can organization be both global and local,
big and small, and radically decentralized with
centralized reporting and control?

Flattening the Organizational Structu

Matrix Organizational
Structure

But, hybrid designs bred conflict,

confusion, information overload, and
costly duplication of resources

Virtual Organizational
Structure

Information, Organizations,
Processes and Control

Question: Can firms take the advantage of the

information management communication tools this
revolution provides to create an information age
organization that simultaneously manages speed
and complexity?

Information, Organizations,
Processes and Control

Notes:

Although the networked IT infrastructure can provide important

tools, it can not define neither the information that needs to be
in the systems nor the meaning of the information and how to
use it to coordinate and manage the business.

Nor can the networked IT infrastructure define the

organizational structures, processes, and culture required to
enable people to use the information to make decisions and
take actions.

These tools cannot provide incentives that would motivate

people to use the information to meet both organizational and
personal objectives.

What should firms do?

Information, Organizations,
Processes and Control

To accomplish the organizations of the year 2000 and

beyond firms must change the way they are
organized, and employees at all levels must become
information literate - not just computer literate.

Information, Organizations,
Processes and Control

Notes:

Implementing networked information and communication

system in a traditional, hierarchically structured organization
will not work.

A much more comprehensive approach to organizational

change is required.

In general implementing the technology is the least

complicated part; redesigning the organization and defining
the information to manage it constitute major constraints on
organizations attempts to meet the challenges of the the
year 2000s

Creating the Information Age

Organization

Speed Counts, but not at the Expense of Control

New products must be introduced quicker, order

processing cycle must be cut dramatically, etc.

The faster the pace, the greater the need to

monitor business operations and clearly define and
enforce rules.

Empowerment is not Anarchy

In an empowered organization, senior managers

are more involved, not less; and organizational
boundaries and value systems must be more
clearly communicated, closely monitored, and
more consistently enforced.

Creating the Information Age

Organization

Transforming an Organization Requires more than just Changing

the Structure.

True change occurs deep within the organization as individuals

and work teams redefine the way they work and the values
that guide decision making and action.

Managers need to rethink the nature of control and authority

Smashing together the features of the hierarchy with features

of an entrepreneurial firm will not work.

Work must change and people must change

New knowledge and skills are needed

Creating the Information Age

Organization

Transforming an Organization Requires more than just Changing

the Structure.

The personal values and frameworks that people people use

to make decisions and take actions must be realigned with
new organizational priorities and goals.

The ability to transform the firms information infrastructure

is a critical component that both supports and enables the
organizational transformation

Change must not stop at the doors of the corporate

headquarters but must be infused throughout every part of
the organization

Laying collaborative structures (e.g. team-based units and

incentives) over a traditionally structured organization will
not work neither.

Streamlining the Business Cycle

Process

Operating Cycle

The activities through which an organization

designs, produces, markets, delivers, and supports
its product and services
Management Cycle

The activities through which an organization

manages the design, produces, markets, delivers,
and supports its product and services

Management

Operational

Process

Strategic Alignment

Basic questions confronting managers

What are the implication of IT in my business operations?

Today and in the future?
What are the alternative perspectives for leveraging IT
capabilities for business operations?
Is the locus of IT component inside or outside the
operation?
What is the executive role of senior management for
leveraging IT capabilities?
How should the IT function be organized, and what is the
role of IT outsourcing
What are the appropriate criteria for assessing IT based
benefits

Building the Networked Business

Our dream and our plan well over a

decade ago was simple. We set out to
shape a global enterprise that preserve the
classic big company advantages while
eliminating the big company drawbacks.
What we wanted to build was a hybrid
enterprise with the body of a big
company and the soul of a small
company

Jack Welch Former GE CEO

Building the Networked Business

ABB is an organization with three

internal contradictions. We want to be
global and local, big and small,
radically decentralized with
centralized reporting and control. If
we resolve those contradictions, we
create real competitive advantage

Percy Barnevik, CEO Asea Brown Boveri

(ABB)

Building the Networked Business

We saw two challenges ahead of us, one external and

one internal Externally, we faced a world economy
that would be characterized by slower growth, with
stronger global competitors going after a small piece
of the pie. Internally, our challenge was even bigger.
We had to find a way to combine the power,
resources, and reach of a large company with the
hunger, agility, spirit, and fire of a small one.

Jack Welch Former CEO of GE.

The Organization Design Challenge

Building the Networked Business

Organization

Complex &
Global

?
Hierarchy

Simple &
Local

Entrepreneurial
Organization
Stable &
Certain

Environment

Dynamic &
Uncertain

Source: Applegate, Lynda M., Robert D. A usti n, and F. Warren McFarlan, Corporate I nformation Strategy and Management. Burr Ridge, I L:
McGraw-Hill/I rwin, 2002.

Chapter 3 Figure 3-1

Building the Networked Business

Hybrid Organization design

To improve control and efficiency while

simultaneously enabling flexibility and
speed of response

But, hybrid designs bred conflict,

confusion, information overload, and
costly duplication of resources

Networked Organizational Models are Enabled by Networked Technologies

Information Requirements

Complex &
Global

Hierarchical Organization &

Mainframe Technology

Networked Organization &

Networked Technology

+
Centralized intelligence

+
Shared intelligence

Entrepreneurial Organization &

PC & LAN Technology

+
Simple &
Local

Local Intelligence

Stable &
Certain

Business Decision Making Environment

Dynamic &
Uncertain

Source: Applegate, Lynda M., Robert D. A usti n, and F. Warren McFarlan, Corporate I nformation Strategy and Management. Burr Ridge, I L:
McGraw-Hill/I rwin, 2002.

Chapter 3 Figure 3-2

Building the Networked Business

Note

Although the networked IT infrastructure can

provide important tools, it cannot define the
information that needs to be in the system.

In addition, while the networked infrastructure

can enable new organization structures and
systems, it cannot motivate people to use the
information to make decisions and take actions
on behalf of the organization.

New organization capabilities are required to

execute the sophisticated network strategies and
business models

Blueprint for the Networked

Organization

Challenge

Designing, implementing, and constantly evolving the

structure and systems that enable an organization to
executes its strategies and accomplish its goals is
one of the most formidable tasks facing 21st century
executives

Continuous change is one of the most challenging

issues facing the 21st century executives

Operating and Innovating

Managing and Learning
Leading and Engaging

Blueprint for a Big-Small Business

Sample Organizational
Components

Sample Technology
Components

Leading & Engaging

Human Resources Management

Strategic Alliances
Customer Loyalty
Supplier Loyalty
Partnerships

HR Systems
Customer Relationship Management (CRM)
Personalization
Communication Infrastructure
User Access Devices

Managing & Learning

Planning and Budgeting

Performance Monitoring
Organization Structure and Reporting
Organization Decision Making and
Learning

Management Reporting
Decision Support Systems and Tools
Business Intelligence Systems
Data and Knowledge Management

Enterprise Resource Planning (ERP)

Supply Chain Management
Order Fulfillment
New Product Development
Distributed Information Processing
Infrastructure

Operating & Innovating

Operating Process
New Product Development
Business Venturing

Source: Applegate, Lynda M., Robert D. A usti n, and F. Warren McFarlan, Corporate I nformation Strategy and Management. Burr Ridge, I L:
McGraw-Hill/I rwin, 2002.

Chapter 3 Figure 3-3

Blueprint for a Networked

Organization

Operating and Innovating

The operating processes of a firm include all the

activities a firm and its suppliers and partners
undertake to design, build, market, sell, and
deliver products and services for customers,
suppliers, and business partners.

Ability to flexibly adapt to constantly changing

business environment is the key to success.

Blueprint for a Networked

Organization

Operation and Innovating

Hierarchical Operations

Entrepreneurial Operation

Define rigid procedures, top down

Company do not depend on well-defined polices and
procedures or structured jobs.

Networked Operations

Big-small companies,
Precision execution and fast-cycled innovation
Operation is designed to fully exploit the power of both
people and technology whether this assets are in your
firm or in someone elses.
Technology can ensure precision and people can use the
information in real-time to deal with unforeseen problems

Blueprint for a Networked

Organization

Precision
Execution
Hierarchy

Entrepreneurial

Fast-Cycled
Innovation
Networked

Blueprint for a Networked

Organization

Managing and Learning

The management processes and structures of a

firm include all the activities that a firm and its
business community undertake to:

Plan strategy and how it will be executed

Allocate resources

Organize people into groups and coordinate

work

Monitor and measure performance

Adjust strategies, plans, budgets, and

organizations based on learning

Blueprint for a Networked

Organization

Traditional Management Process

Driven from top down, incremental goals and
allocation of resources to carry them out.

Entrepreneurial Management Process

Planning, decision making, action, and
performance management are informal and
ad hoc.
Ability to respond quickly on the basis of
what is being learned are fundamental to
effective entrepreneurial management

Blueprint for a Networked

Organization

Network Management Process

Big-Small most provide assess to a shared

source of real-time information on market
dynamics, operations, and performance that
enables real-time planning and performance
monitoring.

Networked management Process

Improved access to information enables

employees, customers, and partners to invent
new ways of working and to respond quickly.

Efficiency &
Integration
Hierarchy

Entrepreneurial

Learning by
Doing
Networked

Blueprint for a Networked

Organization

Leading and Engaging

While management is all about coping with

complexity, leadership is all about attracting and
mobilizing the resources for change

Leadership involves defining a clear, compelling vision

and ensuring that is translated into a set of actionable
strategies and initiatives.
Attracting, motivating, energizing, and retaining top
talent inside an organization and within partner,
supplier, and customer networks
Creates a culture and ensures that values, beliefs and
behaviors are deeply ingrained and reflected in the
decisions made and actions taken

Blueprint for a Networked

Organization

Hierarchal Leadership

Emphasis managing complexity and minimizing it.

Management process overshadowed leadership

Risk were minimized by centralizing decision making,

segregating activities and structuring work rigidly.

Entrepreneurial Leadership

Create or seize an opportunity and pursue it

regardless of the resources currently controlled

Attract, motivate and engage people, partners and

investors in the task of working together to create a
clear and compelling vision that excites and deeply
engaged all involved.

Blueprint for a Networked

Organization

Networked Leadership

In the Networked Economy, the free flow of information

throughout the company enhances the ability of
employees, customers, partners, and executives to share in
defining both a clear and compelling vision for change and
the necessary tactical initiatives required to achieve
business goals

When aligned with incentives and motivations that foster

commitment rather than simply compliance.

In complex global organizations senior executives cannot

oversee every decision or action taken by empowered
teams. So, it more important for them to identify key
strategic risks critical success factors and ensure that
they have effective control systems in place.

Strategic Focus
& Resource Allocation
Hierarchy

Shared Culture
& Commitment
Entrepreneurial

Networked

Networked Organizations (cont.)

Building Value Networks

Building the value chain network

Where Should Activities Be Performed?

How Should We Relate to Market Participants?

Building Value Networks

Building the value chain network

Where Should Activities Be Performed

Options
Vertical Integration
Selective Sourcing
Virtual Integration

Description
Locate all but the most routine, transaction-oriented activities inside the
firm.
Source selected activities from the outside. Traditionally, sourced activities
were controlled through short-term contracts.
Become part of a network of highly specialized, independent parties that
work together to perform, coordinate, and control value chain activities.

Building Value Networks

Building the value chain network

Basis of
Interaction
Duration of
Interaction
Level of
Business
Integration
Coordination
and Control
Information
Flow

How Should We Relate to Market Participants?

Transaction
Discrete exchange of
goods, services, and
payments (simple
buyer/seller exchange)
Immediate
Low
Supply and demand
(market)
Primarily one way;
Limited in scope and
amount;
Low level of customization

Contract
Prior agreement governs
exchange (e.g., service contract,
lease, purchase agreement)
Usually short-term and defined
by the contract
Low to Moderate
Terms of contract define
procedures, monitoring, and
reporting
One or two way;
Scope & amount are usually
defined in the contract

Partnership
Shared goals and processes for
achieving them (e.g.,
collaborative product
development)
Usually long term and defined
by the relationship
High
Interorganizational structures,
processes, and systems;
Mutual adjustment
Two-way (interactive);
Extensive exchange of rich,
detailed information;
Dynamically changing;
Customizable

Evolving Market Structures

Proprietary Capabilities and Infrastructure Create Walls
Inside an Organization and Among Members of a Value Chain Network

Questions that can help executives to

evaluate organization capabilities

What are your organizations core capabilities, strengths and weaknesses

What operating processes, policies, structures, and systems must be

changed to enable you to operate efficiently

What management system must be changed to enable you to ensure

that the company is in control yet is able to learn by doing

Is leadership stressed throughout the company. What organizational

structures, incentives. And cultural changes need to be made to enable
the company to act both big and small simultaneously.

Within which market do you currently participate? How do the market

participants relate.

Given your current and future strategy, what is the stream that must be
accomplished to develop products and services that create value for all
stakeholders