Essay requirements of the business environment and
Essay Title 3: The emergence of information economy has far-reaching strategic implications for managers in many organizations. Select and discuss some of these implications by reflecting on three aspects, namely (1) the rationale behind your selection, (2) the changing requirements imposed by the new economy and (3) the disconnections between an organization’s IT capability and the external requirements. It is vital to address the increasing commoditization of IT and/or IT–? based solutions when illustrating their strategic potentials.The changes businesses have had to accommodate to because of the emergence of information economy, have been immeasurable. Moving from vertical integration to outsourcing in an increasingly virtual organization focused on specialization, the accent on networking and strategic alliances have all been examples of such changes, all in response to growing competition and necessity to be different. The strategic implications IT has had for managers in organizations are extensive, “as companies have come to view it as a resource ever more critical to their success.
(Carr 2003:5) It is challenging to understand the strategic implications information technology has had on organizations, its role in businesses being contextually relative depending on type, size of organizations. However, some trends have emerged, allowing for better appreciation of the changing requirements of the business environment and managers in many organizations. This essay will discuss communication, economic and organizational changes impacting managers, whilst paying attention to issues causing the disconnection between an organization’s IT capability and external requirements.Moreover, because practical examples help to substantiate understanding, the essay will also analyze real-life organizations behaving under the pressure of change, whilst addressing the increasing commoditization of IT when illustrating their strategic potentials. Implications Communication and intra-enterprise relationships While speed, flexibility and reliability have always dominated industries, “technological innovations have transformed each of them”(Dicken, 2007:414).Before the emergence of communication and information economies, “little attention was paid to the collaborative relationships possible between enterprises”(Meyer, 2011) as organizations, stressed traditional remunerations of vertical integration. However, “managers are continually being confronted with new and ever-changing competitive pressures from deregulation, globalization… convergence of industries and technologies”(Prahalad, C.
K. and Krishnan, M. S. 2002):24) Furthermore, the lack of alignment between technological deployment and business strategy is creating the disconnection. Moreover, internal rejection of innovation creates issues when “managers’ ability to respond rapidly to those challenges is predicated upon a degree of information-technology flexibility that traditional approaches cannot provide”(Prahalad, C.
K. and Krishnan, M. S. (2002):25). “Before the rapid development of the Internet, separate systems – telephone, television and video, individual computer systems – stored and transmitted voice, video and data.
Today, these systems are converging”(OECD, 2008), implying that managers need to see change as an instrument necessary for growth, as was mobile technology in the past. Dell exemplifies how the emergence of the information economy has meant the end for the traditional intermediary organization. Using the Internet as a platform, Dell replaced the conventional communication between customers, suppliers and retailers, gaining a sustainable competitive advantage. “The customer order activates the supply chain. Customers can ‘design’ their products from a lot of options to be incorporated into a production schedule.The order then initiates a flow of component parts from suppliers to be assembled into a final product, turned over to a logistics service provider, merged with a monitor from another source and delivered to a final customer.
The system avoids holding finished product inventory, providing both lower cost and more product variety. ”(Schary and Skjott-larsen as cited in Dicken 2007:418) IT commoditization raises important questions as to whether “IT industry is looking more and more like a traditional, mature manufacturing business” by falling prices, offshore production and undifferentiated products (Carr 2004).However, proponents argue that “the new telecommunication technologies are the electronic highways of the informational age, equivalent to the role played by railway systems in the process of industrialization” (Henderson and Castells 1987:6 as cited by Dicken 2007:83) implying that IT indeed is in the process of reaching maturity but that there are still gaps where the advances in IT have not been exploited fully. “The time-space convergence process is geographically uneven”(Dicken, 2007:83) since two thirds of all registered domain names are in just three countries (US, Germany, UK).Therefore IT services are far from being globally available which implies that even if IT-based solutions are reaching homogeneity in developed parts of the world, for underdeveloped ones IT can still be looked upon as a source of competitive advantage if implemented adequately. Economic benefits The emergence of the information age has greatly impacted the concept of economies of scale, since its “goal is to provide ease of change at the business-component and interface levels and deliver ‘economies of change’”(Prahalad & Krishnan, 2002:27).
Like bulk buying, the information economy is meant to provide an opportunity to take advantage of reduced costs of capital, labor and market participation by increasing organizational degree of flexibility and tolerance to change. As a result, management in organizations emphasize on increasing investments in technology due to its low cost compared to other capital investments. Nevertheless, there exists a disconnection between an organization’s plans and its actual realizations owed in part to “constrains of legacy IT infrastructures-incompatible databases and applications, poor quality data systems”(Prahalad & Krishnan, 2002:25).Also, “because IT departments are often assessed on their ability to control costs and not on ability to respond flexibly to strategy, expectations of managers are not in line with those of CIO”(Prahalad & Krishnan, 2002:25), thus consideration between IT Deployment and business strategy is deemed critical. Rising necessity for integrated consumer information, platforms offering support and limiting unforeseen costs which may appear due to lack of expertise- like not acknowledging the significance of technological infrastructure, have triggered transformation.Some erroneous decisions include investing in unnecessary technologies to obtain transformation in legacy systems without understanding cost implications, therefore familiarization with Miles and Snow’s typology1 could prove helpful since “Strategic orientation of firm could be a crucial aspect in determining bottom line results”(Croteau & Bergeron, 2001:79), and technological deployment varies along the four categories.A suitable example of a company that was subject to the drawbacks of legacy systems, Delta airlines invested heavily in transformation in order to keep up with competitors.
Because of lack of technical infrastructure it could not develop such things as the ““publish and subscribe” capability that makes data on flights, customers, crews, equip, baggage simultaneously available to Delta customer and employee systems” (Ross & Beath, 2002:54).Similarly, “measuring organizational performance can be a problem since there is no universally recognized measure of this concept” (Croteau & Bergeron, 2001:81), and often the most significant advantages of IS implementation are intangible, thus impossible to measure in monetary terms through methods such as ROI2. Hence, managers should loosen their typical business mindset and instead assess information systems by reflecting on intangible benefits such as user satisfaction or work satisfaction.
Being that interest groups use different criteria to assess IS effectiveness, it is vital for managers to be objective and open to IS projects, which may not be in their best interest but in the organizations. Nevertheless, it is vital to address the increasing commoditization of IT and whether investment is still feasible and Intel exemplifies the economic impact technological shifts have had on organizations and how using IT commoditization can be advantageous.By selling their Centrino Wi-Fi chips for their fabrication cost meant “turning Wi-Fi technology into a cheap commodity to crush would-be competitors and making Wi-Fi chips broadly affordable encourages people to buy laptops” (Carr, 2004). The propositions of IT from this perspective are that managers should perhaps shift their interest in IT as a source of competitive advantage and rather than invest large quantities of money in a vacuum, they should look at IT as they look at energy,Typology consists of four types of business strategy: prospector (organizations wanting to have access to the largest possible market and bring changes in their industry), analyzer (both prospector and defender characteristics in moderation), defender(restricted market and stress production efficiency, lower prices and quality of services) and reactor(ignore new opportunities and cannot take risks to maintain competitive advantages).Firms choose one type over the other according to their perception and judgment, which may be biased or subjective Anne–? Marie Croteau and Bergeron, F. (2001):79) 2 Return on Equity as a utility.
Therefore, instead of looking at new ways IT could help improve software or workforce functionality, managers should look at how to minimize risks of current software breaking down as well as exploiting current internal technological assets to their full potential, as “70% of the storage capacity of a typical Windows network is wasted” (Carr, 2003:12).Organizational & Behavioral Impact The information age has changed organizational structures not only from the technological perspective but also by facilitating flattening of hierarchies and impacting managers at the decision-making level. The increasing diffusion of information increases management efficiency while at the same time results in decision-making authority being pushed lower in organizations as employees receive necessary data to make judgments without supervision.
As underlined by Boonstra et al. , IT has increased “the accessibility, storage and distribution of knowledge in organizations” as well as radically decreased transaction costs leading to simpler business processes, fewer employees and flatter organizations. ” Consequently, information economies “dramatically alter how people in organizations interact and communicate, how managers think about IT…”, as stressed by Bansler et al.This in turn has implications for managers as leaders, since information availability and ease of accessibility has given employees autonomy; managers’ authority relies on competences and experience, not just on formal positions and control. On the other hand, management’s new role of supporting employees embrace IS(Information Systems) innovation, has emerged as “managerial supervision of end users is needed because they resist change and trial an innovation only if prompted by their managers.
(Yetton, Sharma & Southon, 1999:55). Hence, the agency problem stresses that employees have no motivation to do more for the organization than what is included in their job description therefore need to be pushed by a form of influence in order to see it as an objective. In practice such companies like Nokia, which used to be important pioneers until recently, have felt first hand what it means to be irresponsive to change as the world’s largest mobile phone maker struggles to keep pace with more innovative rivals.Recently the company fired the CEO in an effort to remedy the situation, thus proving the importance of managerial support in the organization.
“The time is right to accelerate the company’s renewal -to bring in new executive leadership with different skills and strengths in order to drive company success. ” The management replacement is younger and has a “strong software background and proven record in change management (which) will be valuable assets as we press harder to complete the transformation of the company. “(Foxnews, 2010).Hence, the existence of management former knowledge and narrow mindsets, hinder change and it is thus vital for management to understand the necessity for “organizational support and training, assessment of change, positive experience and informal support, and individuals’ feelings and expectations. ”(Becker, 2010) Furthermore, to underline the strategic importance of organizational culture and vision, Oticon3 is an example of organization foreseeing that the information age would conduce to change and used IS to eliminate hierarchy.By appointing a new CEO, such changes emerged which increase involvement and overcome resistance: traditional departments were replaced by free movement of employees between projects, increasing staff mobility in that employees could occupy several positions and give output and access to databases and replaced paper based documents with electronic ones which could be used by other colleagues in their projects(Based on Bjorn-Anderson and Turner (1994); Foss (2003) as cited in Boonstra et al. 2008:168).
Conclusion Overall the research has shown how competition is driving businesses to transformation at an un-preceded rate. Information economy has impacted organizations on three levels. In terms of communication, technological developments have transformed the basic time-space infrastructure of organizations changing the relationships between consumers, suppliers and retailers.
Information economies have shifted the organizational culture towards centralization and penalized legacy systems and mindsets, which cannot keep up.In monetary terms, the emergence of profitable solutions and cost cutting advantages submerged from IT urge managers to step out of the business mindset and consider methods of measuring intangible IS success criteria such as user satisfaction. The examples envisaged the strategic implications managers have submerged to, and how the manager’s distinctive function as influential figure of strategic importance for organizations has been outshined by emergence of information economy.Nevertheless, the transformed culture of the manager underlined by the fact that “Information flow, communication, uncertainty reduction have only limited role in organizational IS implementation.
It is instead managerial actions and support which is essential”. (Yetton, Sharma & Southon, 1999:55) encourages organizations to react positively to change and address education, training, management culture or cooperation instead of control. Furthermore, the concept of IT as a commodity commands one to make informed choices and rely less on technology and more on human competence.Ultimately, I believe that the perceived notion of competitive advantage obtained through information technology, has been exaggerated since only the first ones to see such opportunities are the ones gaining real advantages.
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