Transforming the IS Organization

The goal of any information services organization must be to create a management process for using information technologies - telecommunications, computers, workstations, and multimedia data - as a coordinated business resource. The barriers to achieving this are generally not knowledge or budgets or technology but the politics of ambiguity.

• The gap between authority and responsibility that creates ambiguity around who decides rather than what is to be decided;
  
  
• The lack of clarity about the new role of IS given its historical role and its distance from centrality in the organization;
  
  
• The historical emphasis on managing IS by delegation rather than by senior management's direct and overt oversight;
  
  
• The insularity of IS in its relationships and contacts across the organization, and the insularity of management in its handling of the business implications of IT and IT management.

These are the agenda items for the IS manager in his or her relationships with peers and seniors in line and corporate functions.

Managing IS as a business service function has no precedents. Historically IS has been treated differently from other areas of business and in many ways IS reinforces its difference by emphasizing itself as a major competitive force in business. As "data processing" IS was different and unimportant, part of corporate overhead. As MIS it became more important but was still different; management looked for MIS professionals who could outline strategic plans that went beyond automating back office functions. Management supported its MIS people but failed to provide any new authority; an MIS manager had to make a case for increased budgets, and had to recapture funding through cost allocations. The MIS manager's political currency was influence, not authority.

Now IS is clearly seen as important; a new term, Chief Information Officer (CIO), reflects the new importance, even though it may only be a fashion whose vogue will generate a backlash. In any case, the CIO is vaguely defined; there is after all no Chief Marketing Officer title though there is a Chief Financial Officer and a Chief Operating Officer. The title suggests that IS is still different. It is not embedded in the firm's management process and management tradition.

Integrating IS and the business management process is much more difficult than technically integrating telecommunications and computing; without established precedents the problems of ambiguity and insularity make IS intensely political.

The problem has to be faced head on; there is no quick fix. Without senior management's recognition of the issues, an IS manager can make only incremental moves. That is acceptable only if the IS manager is not trying to use IT to create or support radical business and organizational change.

Authority Versus Responsibility

Exhibit 2-1 summarizes the IS manager's main political dilemma. Each quadrant identifies a stereotypical IS role.

The Whipping Post is the IS manager who recognizes the need to define an organization-wide plan for deploying IT and seeks to take on the following new level of responsibility:

• To be an advocate for meshing IT with the firm's strategic business plans;
  
  
• To define the standards and policies that move IS away from fragmented systems and towards an integrated information utility.

The Whipping Post's responsibility is not backed by authority. Standards and policies lack teeth. Real authority lies with the business unit manager who has the lowest level of responsibility for profit and loss. The IS manager's strategy is aggressive and proactive but the dialogue with the business managers is reactive and easily becomes defensive.

The Monopolist, by contrast, has the authority but does not make any effort to play a coordinating role or to add a technician's view into the business. This is the old line data processing manager who for decades controlled all aspects of computing resources, including an effective veto over the use of outside services. The Monopolist fought personal computers and lived by control and allocations.

The Information Janitors have neither authority nor responsibility. They run a tight shop and focus on quality of operations. Any use of IT for business innovation is irrelevant and they do not intrude on anyone else's political turf.

The Information Executive, whether grandiloquently entitled CIO or simply Vice President of Information Systems, has the necessary political clout and the business and organizational responsibility to balance the joint trend towards:

• Central direction of the main infrastructures and enabling systems (particularly the backbone communications network), the priority data resources, and the key standards for phasing the move towards technical integration; 2. Decentralized development and use of IT, especially in the areas of personal computing, end user computing, and office technology and customer service applications.

The Whipping Post's position is very difficult. He or she is creating plans that require these two trends to move together, but unless senior management clarifies the question of "who decides?" rather than "what do we decide?" political tension is guaranteed. Also guaranteed are IS's frustration, and users' rejection of IS's right to make initiatives for corporate purposes that intrude on their territory or affect their autonomy.

Obviously, the Whipping Post cannot simply reinstate the old monopoly in a new context with an even bigger budget. If line managers are unresponsive to the Whipping Post, they will hardly welcome an information czar. That in itself may be a strong reason for any IS manager to avoid being crippled politically by a CIO position title.

Clarifying the importance of meshing authority with responsibility is essential, but the case can be made effectively by tackling another area of ambiguity: the mission of IS. Quite simply, IS has no inherent right to a powerful new mandate and corporate oversight; these need to be justified in business terms.

Clarifying the IS Mission

It has become increasingly clear that IT can be used strategically in a firm only where senior management's statement of vision provides a context for planning. The statement underlies deploying scarce capital for IT investments rather than for some other priority and gives a reason for taking a global view of IS versus the more normal department-by-department and project-by-project perspective.

When General Electric Chairman of the Board Jack Welch stated "We're out to make sure that GE uses computer technology more effectively than anybody else in the world," he was providing his Manager of Corporate Information Systems, John Cunningham, the corporate vision around which to build his IS mission. In 1985 that mission involved close to a billion-dollar investment by GE on computing and telecommunications and a projected 1990 IS budget of two billion dollars. (Infosystems, December 1985, pp. 32-37.)

This kind of vision is a direction for business rather than a plan. It is needed because of the long lead times for IT innovation, and because product and market initiatives based on IT create radical changes in work, the selling process, relationships, and even organizational structures. Such initiatives disturb the status quo and intrude on stable practices, assumptions, and territories.

Senior management needs to focus on its business vision in order for IT to be managed as a strategic, business entity and a priority contender for capital, instead of being treated as a tactical, technical expense. The IS management can then define the mission that corresponds to the vision, thus clarifying the issue of authority.

Historically, IS has not had a mission embedded in the wider management process of the firm. It has been a builder of systems and operator of facilities. Its relationships with its users have been more like master/servant or priesthood/laity rather than like a partnership between equals. Defined as an expense item, IS has been part of the organizational overhead; it has a function, not a mission.

A mission requires a fundamental shift in mind set within IS. Technology and the ability to make technology work are the means, not the ends. The end is a business accomplishment that would not occur without a mission. The mission statement has to define that end in those terms and align management support, not just at the top but among the line executives who are the main users of IS's services. The components of a mission are:

• A consensually meaningful and organizationally credible statement of the business drivers for IS;
  
  
• An identification of the "news";
  
  
• A practical philosophy for creating a partnership and managing a dialogue with the user community.

The natural starting point for the statement of business drivers is one to avoid: a collection of clichés about using IT for competitive advantage. The stories on which those clichés were built were part of a process of awareness building and propaganda to get business managers to think about IT in new terms. The many case studies of success-American Airlines, American Hospital Supply, and more recently, Federal Express-were striking claims for managerial attention.

They still remain so, but skeptics can argue that those are special instances-that while IT is certainly relevant to competitive plans and options, it has been oversold. The best counter to this criticism may simply be to focus on IT and competitive disadvantage: to look at the ways some industries have redefined their base level of service with electronic delivery and coordination and to conclude that no firm can afford to fall behind such pacesetters. This approach defines the IT mission in terms of supporting the firm's business thrust, especially on the vital priority of focusing on technology to build and keep customer loyalty. The result is IS's relation to the business less in terms of strategic innovation and more in terms of participating in areas of the business that are critical survival factors in a volatile marketplace.

Reviewing the history of using IT for competitive advantage shows that the noted exemplar firms benefited most in the area of capturing the customer in basic transactions. For example, American Airlines' Sabre program, the first of the now ubiquitous computer reservation systems, involved very little that was new. The airline didn't change service, alter routes, or attempt to squeeze in additional seats. It merely developed the most efficient way of handling its core transactions: an order entry system for travel agents. Similarly, American Hospital Supply's legendary system was a new way of handling the company's most basic transactions: sales calls to hospitals and placing orders.

To clarify the legitimacy of IS authority and the basis for partnership, a mission has to relate to the core business drivers and must be recognizable to anyone in the firm as justifying new rules of management for and with IS. Both the Royal Bank of Canada and Citibank Latino have demonstrated this ability to create an IS mission built around the core business. In order for IS to effect and accelerate the core business drivers, IS must be able to discern the "news," differentiating acceptable IT applications from "gee whiz" prototypes.

We are in an era of overblown promises about information; too many statements about IT in the business and computer press ignore the tough details of implementation and long lead times IS intrinsically involves, and "technobabble" substitutes for concreteness and practicality. For IS to talk about its mission in terms of productivity, offices of the future, competitive advantage, etc., now gets at best a ho-hum response and at worst an "oh yeah?". At the same time, beneath the noise is a business message that matters to everyone in the firm, a message that must be there if IS is to claim special attention from management. There has to be some "news." This point is illustrated by John Watson, head of Information Management for British Airlines, who pioneered automated reservations systems-BOADICEA predates any U.S. system and its successor BABS (British Airways Booking System) has been a 20-year evolution from it. Watson points out that in the late 1960s it was news to talk about using computer terminals to confirm airline bookings instantly. Later on it was news to suggest that a travel agent could make reservations directly.

What is the news now? Not expert systems, telecommunications, the power of personal computers, or the promise of office technology, but a concrete statement of the special contribution IS offers. The news is not a plan. Many IS organizations are good at planning. They can provide managers with lengthy and well-written summaries of application plans, major projects, technology trends, capital expenditures, and budgets, but planning can cloud rather than clarify the mission and obscure the news.

This takes us to the most important element of the IS mission: the philosophy of partnership. The philosophy is expressed in decisions about formal structure, but the decisions are effect not cause. How will IS relate to its clients, colleagues, and users? In large firms who are leaders in business, technical, and organizational aspects of IS the trend is towards

Adopting a philosophy based on account management and marketing, with service and support the new ethic rather than the building and running of systems and facilities.

Distributing development to business units, often with a form of matrix management where divisional IS units report to corporate IS and to the business unit manager. The divisional unit may be either physically located with its users or-a more cautious choice - still remain with the main IS unit but with a clearly defined support and service role.

Moving away from basing the relationship on budgets and cost-based allocations towards some form of quasi-profit center, where prices replace costs and user managers have options about sources and levels of service. The old monopoly becomes a regulated free market.

Whatever the choices about structure and accounting, IS has to send a strong signal about how it intends to behave-will it be a real vendor, a corporate support unit, or a consultant? Will the master/serf relationship-where what IS does is set by agreed-on budgets and deliverables - disappear, along with the priest/laity one-where IS controls the trade-offs between cost, time, and technology? This latter relationship with users is often criticized as the "Cadillac syndrome," where "the trouble with systems is they give us Cadillacs that take years to build when we just want a Chevy, now." The IS leadership has to view the mission as a priority. Changes in organization are an outcome of the mission, not the reverse. The process of clarifying the mission has two audiences:

• The external world of business units and clients for whom the outputs of the process establish unambiguously the basis for partnership and the value of the IS services and strategy;
  
  
• The internal IS unit itself in which many, often most, of the experienced professionals may be the main obstacle to change. Their career path and background have emphasized technical skills, systems development, control, and traditional project management methodologies that focus on technical work rather than business orientation.

Ending the Tradition of Senior Management Delegation

Delegation is not a strategy. More and more firms are heeding that message. Whether or not IT is a force for competitive advantage or the new base for efficiency of operations and effectiveness of service, it is a growing component of the company's capital commitments. It involves frequent business risk, frequent technical risk, organizational stress, long lead times, complex project management, and difficult details of implementation. It has to be directed from the top.

Although the need for direction from the top ought to be obvious, the history of IS encourages delegation because of a notion that it is so different from any other organizational function that no precedents are available to guide senior management. It is fair to say that senior executives simply do not feel that they have valid intuitions about IS. Too often they rely on written, formal plans and fall back on established cost-based justifications, thus creating a barrier to management action.

Three factors can end delegation and create a new management partnership in which IS managers and line executives together are responsible for a business deliverable. These are:

1. An industry context of opportunity, threat, volatility or vacuum that opens a new business-oriented perspective on IT;
   
   
2. A top management team that provides a focused statement of vision;
   
   
3. A management forum where the business and IS leadership can create momentum for shared action.

Although IS managers cannot greatly influence the first two of these factors (except through informal mechanisms for dialogue with senior business executives), the third area is one of strong potential leverage.

One fairly fashionable approach is to set up IS "steering committees." These can be effective if they focus on building awareness and briefing business leaders on critical issues rather than on detailed IS plans. Sears' rules for the Advisory Board to its telecommunications organization (a separate service company) provide a useful summary of the principles for such committees.

The purpose of the meetings is mainly to build a shared understanding. (Many steering committees begin their existence with reviews of IS plans and then quickly recognize they need to shift to briefings that help de-obfuscate the plans and that raise the level of attention from projects and budgets to business criteria and tradeoffs, especially those involving priorities, lead time and people resources.)

There are no formal votes and one goal is to avoid getting into situations where there has to be an appeal to a referee.

The Board includes officers of the individual business groups who have the seniority and influence to represent their business unit's views and to be listened to when they return to the unit.

The Board handles the negotiations that are a natural aspect of joint planning as an integral part of working together, so that "political" work is carried out in a cooperative way, directly and to open resolution, impasse, compromise, or consensus.

The Advisory Board members are the ambassadors to their own business unit committees and management planning and decision-making fore. This is how IS gets away from the old political arguments where it lacks authority. The Advisory Board provides clout and credibility.

With the right level of membership and appropriate briefings and rules of behavior, such committees are an essential step in getting rid of political ambiguity.

Obviously, the nature of the membership in such a group is critical. Citibank coined the term "the Gang of Seven" to describe the group that gave clout and impetus to its international telecommunications plans. That group also later generated some disastrous decisions when it overlooked the importance of being well-briefed before making major decisions involving unproven technology, but in its early years it created immense energy and credibility for the technical staff's plans and implementation.

The individuals named to the Gang of Seven were the signal to the organization that this was not going to be yet another committee. The members were recognized as movers and leaders, expected to provide the bank with aggressive new products and market strategies. No one in the organization needed to be told that senior management now viewed telecommunications as a central part of the firm's business strategy. No management memos or high level mandates would have had the same impact if the committee membership had included people who lacked influence and centrality in the business.

The problem of political clout is a central one for IS. The following available options do not resolve the issue of clarifying ambiguity and legitimizing authority:

1. Recreate the monopoly and get a mandate. If anything, this compounds the problem of delegation. Without the type and level of ambassador the Sears Advisory Board and Citibank Gang employ, IS has to fight its own political battles dealing with unbriefed managers instead of ones who have been part of the thinking process.
   
   
2. Avoid the problem and stay with the Whipping Post role. The problem remains the same.
   
   
3. Push the problem on to the user managers. That abandons any effort to mesh authority with responsibility or, worse, abdicates responsibility. Senior management delegation ends with getting a statement of vision and creating a suitable management forum.

Ending Organizational Insularity

All the actions and mechanisms described above play a part in helping to end insularity, not just inside IS or between IS and users, but across every area relevant to using IT, whether for innovation in customer service, improved organizational efficiency, or meeting competitors' moves.

Insularity is often a result of several sets of circumstances:

• Senior business managers are often too far away from the firm's customers and take too narrow a view of "competition." Many banks have been preempted in the use of IT in ways that have created substantial competitive disadvantage for them. They were unfamiliar with the ways third-party competitors were using IT to intrude on their traditional territory.

These predictable, but too often overlooked, competitors have included companies like American Express, Sears, Merrill Lynch, and Geisco; multinationals such as Volvo, British Petroleum, and Mobil, who used the banks' technology to help them set up their own in-house banks; and Florida supermarkets who have taken over point of sale from the state banks who thought they would control it.

The same has been true in the airline business, where the traditional players now find that Dun and Bradstreet in the United States and ABC internationally are taking control of their distribution networks even while the airlines pay them to display the schedule data that is the base for D&B's and ABC's independent home travel reservation systems.

A company's management insularity is often the main reason other firms have surpassed them. The people at the top here do not recognize how quickly the rules of business can be changed by (a) a combination of deregulation or the expectation of deregulation; (b) sophisticated consumers responsive to convenience of service and ease of access to the firm; (c) telecommunications as the vehicle for adding new services; and (d) customer data as the base for cross-selling products and capturing the customer relationship.

IS leaders manage in terms of a technocentric mind set and isolation from the organization's needs, processes, and priorities. This type of insularity, reflected in today's IS organization, is the reason we have to think through how to move quickly and firmly to build from first principles for tomorrow's organization.

Business units now have more personal computers than filing cabinets but they are still unlikely to have formal business plans for IT or realize that they need to take an active management role.

IS and business units each operate in separate worlds, with different vocabularies and blurred understandings of each other.

One of the IS manager's primary objectives has to be to end insularity. A major vehicle for doing so is education, targeted not to train people about technology but to increase awareness and then to turn awareness into action. Senior management education is the fastest growing part of the IS budget in many leading firms. The aim is to alert managers to what IT is doing to the competitive dynamics of their industry and to help them identify opportunities. A more recent trend is to help IS professionals broaden their perspective and extend their skills to add functional/business and organizational/personal abilities to their technical ones. Business units also need briefings both on what IS means to their management process and on what they should do to get business benefit from the technology they have.

No IS manager can afford to be without an education plan, which is the human resource R&D. Just as computer vendors who cut back on R&D can boost profits in the short term, IS organizations that neglect education sacrifice a quiet life today for tomorrow's energy, innovation, and knowledge base.

Education is of course not the only way to end insularity. Enterprising IS managers can help break it down through almost every organizational mechanism discussed in this chapter: 

• Education;
  
  
• Distributing development;
  
  
• Building end user support teams and other bridgeheads such as information centers;
  
  
• Steering committees;
  
  
• An account management or marketing-based organizational structure;
  
  
• Informal relationships;
  
  
• Project management and development methods that focus on the user's perspective rather than on structuring the technical work. Prototypes and such user-led project techniques as IBM Canada's JAD (Joint Application Development) are examples.

Whatever the mechanism, insularity is the barrier to building the IS organization of tomorrow and IS managers must take every opportunity to end it.

Conclusion: Mutuality

The relationship between IS and business managers has to be one of mutual understanding-not of the details of each other's activities, knowledge, and skill base, but of the other's needs, constraints, and contributions to an organizational venture partnership. This co-responsiveness of equals, where negotiation, facilitation and IS service, plus business unit targeting of opportunity and priority, takes the place of separation of functions and imbalance of responsibility and authority.

This last point is illustrated in Exhibit 2-2, which can be overlaid on Exhibit 2-1 to summarize what has to be created to ensure that IS resolves ambiguity and organizational instability. Exhibit 2-3 combines the two preceding exhibits.

The Missionary and Whipping Post are often the same. The Missionary is ahead of the business leadership and hence is unlikely to have been able to get authority but takes on responsibility. The Footdragger and Monopolist are also often equivalent, with both of them not recognizing the new business responsibility of IT in supporting line units. The Loser and Information Janitor are amiably content with well-run data centers and no backlogs (which means no customers looking for service) and no projects in trouble (i.e., no risks taken and no innovation created).

The Information Executive has balanced authority and responsibility, and has the business leadership setting a pace and challenge to which he or she responds.

To succeed in overcoming the politics of ambiguity and insularity, IS and the rest of the organization must evolve a synergistic relationship that focuses equally on the overall corporate strategy and recognizes information as a resource to be exploited in ways very different from the past.