Articles

Companies can successfully challenge industry leaders even without radical technological innovation.

Distorted information along a supply chain can lead to tremendous inefficiencies. How can companies mitigate them?

Most of the existing frameworks for strategic management assume an environment that is stable and simple. But technological advances and global changes have created dynamic, complex climates in which companies must operate. Chakravarthy examines the industry he calls Infocom & #8212; information providers, information processors, communication providers, and communication support. Technology has lowered many entry and mobility barriers among the industries; Microsoft is an example of a company that has exploited many strategic opportunities now available to Infocom companies. Chakravarthy compares and contrasts the popular frameworks for formulating competitive strategy. Porter’s framework assumes stable competitors, suppliers, and buyers. The company finds an appropriate strategy and erects the necessary barriers. But, says the author, technological change quickly makes the barriers obsolete, Infocom players have deep pockets, and government policy has a diminishing role. In the Hamel and Prahalad approach, the role of strategy is not to accommodate an existing industry structure but to change it. However, the author comments, Infocom is not evolving predictably, so benchmarking against its current structure is futile. The D’Aveni framework assumes that strategy must continually seek to change the rules of the game because companies will quickly retaliate against any new strategy. Chakravarthy points out that a firm cannot continuously move from one advantage to another. His proposed framework, applied to the Infocom industries, has three elements: Reconceptualizing strategy. Companies must repeat innovation; e.g., Canon’s successful launch of inkjet printers damaged its position in laser printers but was necessary to respond to competition. Companies must build customer networks around products or services. They must also be able to sense market flow, as Microsoft did when it found that its proprietary strategy for Microsoft Network would isolate it from the Internet. Sharing responsibility for strategy broadly within the firm. Employees must share a vision that is purposely vague but describes the firm’s guiding philosophy. Strategy must come from the bottom up and from small, focused units. Focusing on organization capabilities as the source of competitive advantage. Companies must leverage, strengthen, and diversify their competencies. In the end, according to Chakravarthy, “going with the flow” may be the best strategy for a firm in a turbulent environment. Rigid top-down strategies may be counterproductive. Firms should concentrate instead on growing distinctive competencies for the future.

Each member of a jazz band embellishes and improvises on the same rhythmic structure. Similarly, a model for managing technological change recognizes the need to improvise in response to unexpected opportunities. According to Orlikowski and Hofman, traditional models, in which an organization plans for change, implements change, and tries to become stable again, no longer work in an environment that is turbulent, particularly when the technology involved can be customized. The authors propose that the changes associated with technology implementation, rather than having a beginning and an end, are ongoing. Managers cannot anticipate all the changes made during the process. Orlikowski and Hofman's alternative model recognizes three types of change. Anticipated changes occur as intended. Emergent changes arise during the process. And opportunity-based changes are introduced during the process in response to an opportunity, event, or breakdown. The three build on each other iteratively over time, much like the jazz band members improvise on the original structure of a musical composition. In a customer service department at Zeta, a large U.S. software company, the authors follow the implementation of Lotus Notes in developing a tracking system to log calls and record customers' problems. While the company anticipated some changes before introducing the technology, other changes emerged as specialists and managers began working in new ways. The department built on the anticipated and emergent changes to introduce opportunity-based changes. Zeta learned from practical experience to respond to unexpected outcomes and adapt the new technology to its needs. Not all companies are currently suited to an improvisational model. Two enabling conditions necessary are (1) alignment of the change model, the technology, and the organization and (2) resources dedicated to adapting the organization and the technology to changing conditions. Companies need to recognize the discrepancy between the way people think about technological change and the way they implement it.

Why are new products frequently canceled in midstream or introduced later than planned? Why do product developers often have no time to devote to “top priority” projects? Companies may not be integrating strategic, conceptual, and planning functions at the front end with the detailed design and development that follows. Khurana and Rosenthal isolated seven activities critical to product and project success. The foundation elements, those that require cross-functional effort and senior management support, include developing a clear product strategy, formulating a product portfolio, establishing a structure that facilitates product development, and sharing responsibilities throughout the organization. Project-specific elements, which focus on the individual project, include clarifying the product concept, defining the product and market requirements, and planning and estimating the project’s resource requirements. The authors point out that the interrelationships between the elements are as important as the elements themselves. Khurana and Rosenthal examine in detail how the eleven companies in their study implemented the seven activities. While the authors rated two companies as outstanding and two as satisfactory, they considered seven to have serious deficiencies in their development of product strategies. Some had product development teams and managers but no one in charge of formulating product strategy. Others made decisions on new product development based on project criteria rather than strategic fit. And others had an isolated R&;D department that funded projects based on technology rather than on their potential to satisfy product requirements. How can a company improve its front-end process? Khurana and Rosenthal offer a checklist and map for diagnosing a company’s integration of front-end activities. And they discuss how a company can make the transition to a better managed product development process.

Malone suggests that greater decentralization in business is a response to fundamental changes in the location of decision making; the changes are enabled by the dramatically decreasing costs of IT. A central issue for organizations in the twenty-first century, the author posits, will be how to balance top-down control with bottom-up empowerment. He proposes radically decentralized organizations such as the Internet as new models for organizing work. Malone examines the three stages in the relationship between lowered communication costs and the economics of decision-making structures. When communication costs are high, decision makers are independent and decentralized; for example, people in tribes, villages, and towns. When costs fall, decision makers become centralized, as in large, global corporations. As costs fall further, connected, decentralized decision makers can combine the best information from anywhere with their own local knowledge, energy, and creativity. Malone uses the history of retailing as an example. Mom and pop stores with unconnected, decentralized decision making are replaced by Wal-Mart type stores with connected, decentralized decision making via electronic ordering and inventory systems. The Internet is an even more decentralized form of retailing in which anyone can establish a global sales operation. The author sees three types of decision makers: cowboys, who are independent and decentralized and have low communication needs; commanders, who are centralized and, like military commanders, have high needs for communication; and cyber-cowboys, who are connected and decentralized and make independent decisions based on large amounts of information from electronic networks. Three IT-related factors determine where decision making in an organization occurs or is most desirable: (1) decision information & #8212; IT enables organizations to communicate information to people who have the knowledge, experience, and capabilities to make decisions; (2) trust & #8212; IT can increase trust by making remote decision makers more effective, controlling them, and socializing them; (3) motivation & #8212; IT enables people to make their own decisions about how to do their work. Autonomy makes them enjoy their work more. In radically decentralized organizations, Malone sees power emanating from the bottom rather than from the top. Who makes the decisions and who can overrule decisions will become crucial issues. In a growing knowledge-based economy, empowered decision makers enabled by new IT will have increasingly important roles.

In a study of lean production in a global computer company, Levy determined that the necessary flow of goods and information was costly and difficult to achieve. Managers frequently underestimated the associated costs because they did not plan for a complex, dynamic supply chain. However, some aspects of lean production such as reduction of defects and engineering change orders may facilitate globalization. In the case of CCT, a PC company, Levy compared various aspects of domestic and international sourcing. Distance was often responsible for severe delays, and the company frequently used air rather than sea freight to expedite deliveries. The expense wiped out the location's cost advantages. Managers often did not plan for the extra inventory needed to cope with fluctuating demand when the source of supply was one month away. Distance affected the accuracy of sales forecasts and impaired communications. Design-for-manufacture issues, which relied on face-to-face communication, also suffered. And production problems, which normally took a day or two to resolve with local suppliers, took almost a week with foreign suppliers. Quality control was also hampered. Levy warns companies to plan for the additional costs of operating an international supply chain. He suggests locating value chain activities close to each other, for example, in Mexico and the United States. Managers need to anticipatefrequent disruptions and see the chain as a dynamic system, with some links more critical than others.

Will the Japanese business system survive the current recession?

Why do so many IT change management projects result in failure? According to Markus and Benjamin, people stay in their prescribed roles as line executives, IS specialists, and so on, with little cross-functional cooperation. People see IT as magic that can prevent them from working in old, unproductive ways. In the "magic bullet theory," there is no assigned change agent; people assume that the gun fires itself. Well-built IT makes it easier for users to work more effectively, according to the authors, but it cannot ensure that users will use it as intended. A change agent must bring together all the conditions necessary for change. Markus and Benjamin suggest that, because agents must change people's minds about IT, they frequently distance themselves from helping people to change by focusing on the power of IT rather than the reason for the change. This leads to a lack of discussion in the organization. Real issues are never confronted or resolved, which also allows users to blame the technology itself for failure rather than the change idea. And with a lack of cross-functional cooperation, line executives and IT specialists may join in resisting IT change that seems to serve different stakeholders. Markus and Benjamin examine two alternative roles for the change agent. They base the IT change facilitator model on that of an organizational development practitioner. Facilitators believe that people, not technologies, create change. They seek to bring together sound ideas, well-built IT, and organizational conditions to enable change. They seek to ensure that all people -- technologists, entrepreneurs, and users -- are empowered about IT. They remain neutral and create trust and mutual respect among functions. Companies may need to hire outside consultants to play this role, but executives and IT specialists may also be able to act as facilitators. IT change advocates focus less on empowerment and more on inspiring people to adopt a change. Rather than remaining neutral, they use any tactic to convert people -- persuasion, manipulation, communication, even "water torture" (constant but varied repetition). They know clearly what their organizations must do to use IT effectively and show people what kinds of IT they want and need. According to the authors, there are effective change advocates anywhere in an organization; they are not necessarily top managers but may be line managers or IT specialists. As a substitute for the magic bullet theory, the authors offer the metaphor of the Trojan horse, a highly coordinated effort by Greek warriors to breach the walls of Troy. Every warrior, no matter what his role, had to plan, execute, improvise, and share responsibility for the horse. In IT-enabled transformation, change is everyone's first priority; line managers, IT specialists, and other organizational members must all practice the change agent role.

As a tool for business process reengineering, "the matrix" can help managers determine how to approach change and change management.