copyright 2004 john wiley & sons, inc.4 - 1 information technology: strategic decision making...

Copyright 2004 John Wiley & Sons, Inc.

4 - 1

Information Technology: Strategic Decision Making For Managers

Henry C. Lucas Jr.

John Wiley & Sons, Inc

Dinesh MirchandaniUniversity of Missouri – St. Louis


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All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.


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Chapter 4

Organizational Transformation With IT


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IT’s Impact On Organizational Transformation

• IT enabled transformation can– Improve the effectiveness of the organization– Lead to new organizational structures and

relationships with other firms– Reduce overhead– Lead to high levels of employee satisfaction


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Metrics of the impact of IT on Organizational Transformation

• Market share• Sales per employee• Sales growth• Administrative costs• Employee satisfaction• Employee turnover


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Transforming Organizations

• The IT revolution has been profoundly different from the Industrial revolution because it– has been quiet and gradual

– has had limited impact on the physical landscape

– has changed the way firms operate, the nature of work, and the relationship among organizations

– is changing the basis of competition and the relationships among players in some industries

– has created new industries


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IT Transforms Organizations and IndustriesIndustry Fundamental

RestructuringMajor changes Growing Impact

Electronic retail stock brokerage

Expand self-directed investor market segment

Unbundling of services and trade execution

More price convergence for costs of a trade

Digital goods, music, movies, newspapers

Downloading music from the Internet; video next

Search for a new revenue model; legal downloading

Movies coming soon

Telecommunications Internet model of data and voice

Flat rate independent of distance

The race to the consumer: wireless, fiber, cellular?

Travel Internet reservations, ticketing and boarding pass

Yield management leverages CRS information

IT in all aspects of operations

Manufacturing Outsourcing, IT for coordination

Going offshore Lower prices, U.S. job losses

Auto retailing eBay as nationwide used car market

Informed customer Slow impact on used car sales

A new marketplace eBay Online community From individual to corporate participants


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Impact of the Internet on Retail Stock Trading

• Reduced trade commissions

• Wide availability of stock information

• Disintermediation of human broker

• Moved full service brokers to change their business model to compete with discount e-brokers–Merrill Lynch vs. Charles Schwab


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Impact of the Internet on Content Providers

• Peer-to-peer sharing of digital content (e.g., Napster)

• New business models for music distribution– Pay per downloaded song (e.g., iTunes)– Subscription services

• With broadband proliferation the movie industry is expected to mirror the music recording industry

• Affected businesses include– Record stores, movie theaters, video rental industry,

recording industry, and movie industry


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Impact of the Internet in Creating New Businesses

• Worldwide electronic auctions (e.g. eBay)– Efficient market– Eliminates time and location barriers inherent

in physical markets– Buyers rate sellers to build trust– Pictures of products can aid sales– Auctions can be monitored to prevent fraud– Market for independent vendors


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IT Variables for Designing Organizations

• Conventional organizational design literature fails to recognize new design variables enabled by IT– E.g., IT such as e-mail or groupware can

replace taskforces or liaison agents

• IT includes computers, communications, videoconferencing, artificial intelligence, virtual reality, fax, cellular and wireless phones, pagers, etc.


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Conventional and IT Design VariablesClass of Variable Conventional Design Variables IT Design Variables

Structural Definition of organizational subunits

Determining purpose, output of subunits

Reporting mechanisms

Linking mechanisms

Control mechanisms

Staffing

Virtual components

Linking mechanisms

Electronic Linking

Technological leveling

Work Process Tasks

Workflows

Dependencies

Output of process

Buffers

Production automation

Electronic workflows

Virtual components

Communications Formal channels

Informal communications/collaboration

Electronic communications

Technological matrixing

Inter-organizational relationships

Make versus buy decision

Exchange of materials

Communications mechanisms

E-customer/supplier relationships

Electronic linking


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Building T-Form Organizations with IT Design Variables

• Five organizational forms created by using IT design variables in different ways are:– Frito-Lay: hybrid–Mrs. Fields: hierarchical and flat– Verifone: blueberry pancake– Calyx and Corolla: snap together– Oticon: spaghetti


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Company Structure and IT Design Variables

IT Design Variables

Frito-Lay Mrs. Fields Verifone Calyx & Corolla

Oticon

Virtual Components

Presence of Mrs. Fields in each store

Extensive use of teams and alliances

Growers, FedEx, and credit card companies

Electronic Linking and communications

Extensive with route sales force, district managers, factories, distribution centers

E-mail and voice mail; PCs in stores

Extensive within company

With growers Within firm

Technological matrixing

Global teams to solve problems

Project teams

Technological leveling

At headquarters For store controller organization

Minimum structure and hierarchy

Electronic workflows

With growers, credit card companies

Production automation

In-store systems

Factory redesign

E-customer / supplier relationships

With growers, credit card companies


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Adopting the T-Form Organization

• Electronic linking to tie production planning, order entry, and marketing

• Technological leveling to reduce layers of management and improve communication with tools such as e-mail and groupware

• Automation of production• Using E-mail and groupware for technological

matrixing• Electronic integration with customers and

suppliers• Electronic workflows in production


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New Management Challenges

• Network partnerships– Firms that provide services to each other– Managing outsourcing agreements with other

firms to provide key products and services– Coordinating and influencing behaviors of

network partners– Managing conflicts


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Summary

• IT interacts with organizations and can be used to change the structure of the organization and its subunits

• IT can contribute to organizational flexibility• IT enabled variables can be used to design

organizations, to create the T-Form structure, or produce a range of other structures

• Organizations and people play important roles in the development and success of technology

copyright 2004 john wiley & sons, inc.4 - 1 information technology: strategic decision making...

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