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Question -1

Strategic Integration

Strategic integration is a process that addresses the business-strategic impact of technology on organizational processes. That is, the business-strategic impact of technology requires immediate orga- nizational responses and in some instances zero latency. Strategic integration recognizes the need to scale resources across traditional business–geographic boundaries, to redefine the value chain in the life cycle of a product or service line, and generally to foster more agile business processes (Murphy, 2002). Strategic integration, then,

Figure 3.1

Responsive organizational dynamism.

Technology as an independent variable

Creates

Organizational dynamism

Symptoms and implications

Requires

Acceleration of events that require different infrastructures and organizational processes

Strategic integration

Cultural assimilation

is a way to address the changing requirements of business processes caused by the sharp increases in uses of technology. Evolving tech- nologies have become catalysts for competitive initiatives that create new and different ways to determine successful business investment. Thus, there is a dynamic business variable that drives the need for technology infrastructures capable of greater flexibility and of exhib- iting greater integration with all business operations.

Historically, organizational experiences with IT investment have resulted in two phases of measured returns. The first phase often shows negative or declining productivity as a result of the investment; in the second phase, we often see a lagging of, although eventual return to, productivity. The lack of returns in the first phase has been attributed to the nature of the early stages of technology exploration and experimentation, which tend to slow the process of organizational adaptation to technology. The production phase then lags behind the ability of the organization to integrate new technologies with its existing processes. Another complication posed by technological dynamism via the process of strategic integration is a phenomenon we can call factors of multiplicity—essentially, what happens when several new technology opportunities overlap and create myriad projects that are in various phases of their developmental life cycle. Furthermore, the problem is compounded by lagging returns in productivity, which are complicated to track and to represent to management. Thus, it is important that organizations find ways to shorten the period between investment and technology’s effective deployment. Murphy (2002) identifies several factors that are critical to bridging this delta:

1. Identifying the processes that can provide acceptable business returns from new technological investments

2. Establishing methodologies that can determine these processes

3. Finding ways to actually perform and realize expected benefits

4. Integrating IT projects with other projects

5. Adjusting project objectives when changes in the business

require them

Technology complicates these actions, making them more difficult to resolve; hence the need to manage the complications. To tackle these compounded concerns, strategic integration can shorten life cycle maturation by focusing on the following integrating factors:

· Addressing the weaknesses in management organizations in terms of how to deal with new technologies, and how to bet- ter realize business benefits

· Providing a mechanism that both enables organizations to deal with accelerated change caused by technological innova- tions and integrates them into a new cycle of processing and handling change

· Providing a strategic learning framework by which every new technology variable adds to organizational knowledge, par- ticularly using reflective practices (see Chapter 4)

· Establishing an integrated approach that ties technology accountability to other measurable outcomes using organiza- tional learning techniques and theories

To realize these objectives, organizations must be able to

· Create dynamic internal processes that can function on a daily basis to deal with understanding the potential fit of new technologies and their overall value to the business

· Provide the discourse to bridge the gaps between IT- and non-IT-related investments and uses into an integrated system

· Monitor investments and determine modifications to the life

cycle

· Implement various organizational learning practices, includ-

ing learning organization, knowledge management, change management, and communities of practice, all of which help foster strategic thinking and learning that can be linked to performance (Gephardt &Marsick, 2003)

Another important aspect of strategic integration is what Murphy (2002) calls “consequential interoperability,” in which “the conse- quences of a business process” are understood to “dynamically trigger integration” (p. 31). This integration occurs in what he calls the five pillars of benefits realization:

1. Strategic alignment: The alignment of IT strategically with business goals and objectives.

2. Business process impact: The impact on the need for the organi- zation to redesign business processes and integrate them with new technologies.

3. Architecture: The actual technological integration of appli- cations, databases, and networks to facilitate and support implementation.

4. Payback: The basis for computing return on investment (ROI) from both direct and indirect perspectives.

5. Risk: Identifying the exposure for underachievement or fail- ure in the technology investment.

Murphy’s (2002) pillars are useful in helping us understand how technology can engender the need for responsive organizational dyna- mism (ROD), especially as it bears on issues of strategic integration. They also help us understand what becomes the strategic integration component of ROD. His theory on strategic alignment and business process impact supports the notion that IT will increasingly serve as an undergirding force, one that will drive enterprise growth by identify- ing the initiators (such as e-business on the Internet) that best fit busi- ness goals. Many of these initiators will be accelerated by the growing use of e-business, which becomes the very driver of many new market realignments. This e-business realignment will require the ongoing involvement of executives, business managers, and IT managers. In fact, the Gartner Group forecasted that 70% of new software applica- tion investments and 5% of new infrastructure expenditures by 2005 would be driven by e-business. Indeed, this has occurred and contin- ues to expand.

The combination of evolving business drivers with accelerated and changing customer demands has created a business revolution that best defines the imperative of the strategic integration component of ROD. The changing and accelerated way businesses deal with their customers and vendors requires a new strategic integration to become a reality rather than remain a concept discussed but affecting little action. Without action directed toward new strategic integration, organizations would lose competitive advantage, which would affect profits. Most experts see e-business as the mechanism that will ulti- mately require the integrated business processes to be realigned, thus providing value to customers and modifying the customer–vendor relationship. The driving force behind this realignment emanates from the Internet, which serves as the principle accelerator of the change in transactions across all businesses. The general need to optimize resources forces organizations to rethink and to realign business pro- cesses to gain access to new business markets.

Murphy’s (2002) pillar of architecture brings out yet another aspect of ROD. By architecture we mean the focus on the effects that technol- ogy has on existing computer applications or legacy systems (old exist- ing systems). Technology requires existing IT systems to be modified or replacement systems to be created that will mirror the new busi- ness realignments. These changes respond to the forces of strategic integration and require business process reengineering (BPR) activi- ties, which represent the reevaluation of existing systems based on changing business requirements. It is important to keep in mind the acceleration factors of technology and to recognize the amount of organizational effort and time that such projects take to complete. We must ask the following question: How might organizations respond to these continual requirements to modify existing processes? I discuss in other chapters how ROD represents the answer to this question.

Murphy’s (2002) pillar of direct return is somewhat limited and nar- row because not all IT value can be associated with direct returns, but it is important to discuss. Technology acceleration is forcing organiza- tions to deal with broader issues surrounding what represents a return from an investment. The value of strategic integration relies heavily on the ability of technology to encapsulate itself within other departments where it ultimately provides the value. We show in Chapter 4 that this issue also has significance in organizational formation. What this means is simply that value can be best determined within individual business units at the microlevel and that these appropriate-level busi- ness units also need to make the case for why certain investments need to be pursued. There are also paybacks that are indirect; for example, Lucas (1999) demonstrates that many technology investments are non- monetary. The IT department (among others) becomes susceptible to great scrutiny and subject to budgetary cutbacks during economically difficult times. This does not suggest that IT “hide” itself but rather that its investment be integrated within the unit where it provides the most benefit. Notwithstanding the challenge to map IT expenditures to their related unit, there are always expenses that are central to all departments, such as e-mail and network infrastructure. These types of expenses can rarely provide direct returns and are typically allocated across departments as a cost of doing business.

Because of the increased number of technologyopportuni- ties, Murphy’s (2002) risk pillar must be a key part of strategic integration. The concept of risk assessment is not new to an organiza- tion; however, it is somewhat misunderstood as it relates to technology assessment. Technology assessment, because of the acceleration factor, must be embedded within the strategic decision-making process. This can only be accomplished by having an understanding of how to align technology opportunities for business change and by understanding the cost of forgoing the opportunity as well as the cost of delays in delivery. Many organizations use risk assessment in an unstructured way, which does not provide a consistent framework to dynamically deal with emerging technologies. Furthermore, such assessment needs to be managed at all levels in the organization as opposed to being an event-driven activity controlled only by executives.

Summary

Strategic integration represents the objective of dealing with emerg- ing technologies on a regular basis. It is an outcome of ROD, and it requires organizations to deal with a variable, that forces acceleration of decisions in an unpredictable fashion. Strategic integration would require businesses to realign the ways in which they include technol- ogy in strategic decision making.

Question-2

Information Technology Roles and Responsibilities

The preceding section focuses on how IT can be divided into two dis- tinct kinds of business operations. As such, the roles and responsibili- ties within IT need to change accordingly and be designed under the auspices of driver and supporter theory. Most traditional IT depart- ments are designed to be supporters, so that they have a close-knit organization that is secure from outside intervention and geared to respond to user needs based on requests. While in many instances this type of formation is acceptable, it is limited in providing the IT department with the proper understanding of the kind of business objectives that require driver-type activities. This was certainly the experience in the Ravell case study. In that instance, I found that making the effort to get IT support personnel “out from their com- fortable shells” made a huge difference in providing better service to the organization at large. Because more and more technology is becoming driver essential, this development will require of IT per- sonnel an increasing ability to communicate to managers and execu- tives and to assimilate within other departments.

teChnoloGY As A vArIAbleAndresponsIve61

The Ravell case, however, also brought to light the huge vacuum of IT presence in driver activities. The subsequent chief executive inter- view study also confirmed that most marketing IT-oriented activities, such as e-business, do not fall under the purview of IT in most orga- nizations. The reasons for this separation are correlated with the lack of IT executive presence within the management team.

Another aspect of driver and supporter functions is the concept of a life cycle. A life cycle, in this respect, refers to the stages that occur before a product or service becomes obsolete. Technology products have a life cycle of value just as any other product or service. It is important not to confuse this life cycle with processes during devel- opment as discussed elsewhere in this chapter.

Many technical products are adopted because they are able to deliver value that is typically determined based on ROI calculations. However, as products mature within an organization, they tend to become more of a commodity, and as they are normalized, they tend to become support- oriented. Once they reach the stage of support, the rules of economies of scale become more important and relevant to evaluation. As a prod- uct enters the support stage, replacement based on economies of scale can be maximized by outsourcing to an outside vendor who can provide the service cheaper. New technologies then can be expected to follow this kind of life cycle, by which their initial investment requires some level of risk to provide returns to the business. This initial investment is accomplished in ROD using strategic integration. Once the evalua- tions are completed, driver activities will prevail during the maturation process of the technology, which will also require cultural assimilation. Inevitably, technology will change organizational behavior and struc- ture. However, once the technology is assimilated and organizational behavior and structures are normalized, individuals will use it as a per- manent part of their day-to-day operations. Thus, driver activities give way to those of supporters. Senior managers become less involved, and line managers then become the more important group that completes the transition from driver to supporter.

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