The Challenges Ahead Lecture 30

Today’s Lecture Organizing Principles  The Learning Organization  Processes Rather Than Functions  Communities Rather Than Groups  Virtual Rather Than Physical  Self-Organizing Rather Than Designed  Adaptable Rather Than Stable  Distributed Rather Than Centralized

The Challenges Ahead The computer’s capability to leverage people’s brain power allows companies to not only communicate in new ways, but to compete in new ways It looks at the challenges facing IS organizations worldwide by assembling a collage of opinions about possible principles underlying the e-world  Acknowledging our transformation into a networked world, it describes three viewpoints of the differences between non-networked and networked and their importance

The Challenges Ahead Case examples include NYNEX, a football team, National Semiconductor, Sun Microsystems, Cemex, Semco S.A., Capital One, MIT’s IT for the Non-IT Executive Program and SIM’s Strategic Business Leaders Program

Introduction Despite all the ‘bad news’ of the dot-com crash etc.  Enterprises around the world are quietly redefining their strategy, work environment, and skills to move into the e-world In this Lecture we address the challenges faced by IS organizations worldwide by assembling a collage of possible principles underlying the ‘e-world’

Introduction.. The computer is an amazing machine  Leverages people’s brain power, not just muscle power This capability is being used to process data & communicate in new ways This communication in turn allows companies to compete in new ways

Organizing Principles EXCITING TIMES! We are in a time of grand exploration – a new economy is being born (perhaps in fits and starts) Equally frustrating though – is that the tenets of this evolving economy are so different that the rules are just now being formulated, reformulated and reformulated again! As the economy matures – some principles will prove to be true, while others will fall by the wayside The following opinions offer promising new thinking on organizing principles They point to areas enterprises need to focus on to succeed in an ‘e-economy’

Organizing Principles The Learning Organization Most organizations live only 40yrs – 1/2 the life of a person, because they have ‘learning disabilities’ Organizational Learning Disabilities 1. Enterprises move forward by looking backward in that they rely on learning from experience = companies solve the same problem over & over

Organizing Principles The Learning Organization.. 2. Organizations fix on events – yet the real threat comes from processes that move so slowly, no one notices them 3. Teamwork is not optimal, contrary to current belief. Team based organizations operate below the lowest IQ on the team = skilled incompetence

Organizing Principles The Learning Organization cont. Organizations that can learn faster than their competitors will survive  In fact, it is the only sustainable advantage To become a learning organization, an enterprise must create new learning & thinking behaviors on its people

Organizing Principles The Learning Organization cont. An organization and its people must master the following five basic learning disciplines: 1. Personal mastery: lifelong learning People reach a special level of proficiency when they live creatively This personal mastery forms the spiritual foundation for the learning organization, so organizations need to foster these aspirations

Organizing Principles The Learning Organization cont. 2. Mental models: deeply ingrained assumptions, generalizations, and images that influence how people see the world and what actions they take Organizations can accelerate their organizational learning by spurring executives to surface their assumptions and test them for relevancy

Organizing Principles The Learning Organization cont. 3. Shared vision: organization’s view of its purpose, its calling It provides the common identity by which its employees and others view it A shared vision is vital to a learning organization because it provides the rudder for the learning process

Organizing Principles The Learning Organization cont. 4. Team learning: “dialog”: where people essentially think together, occur when people explore their own and others’ ideas, in order to arrive at the best solution; “discussions”: occur when people try to convince others of their point of view Few teams dialog; most discuss, so they do not learn. 5. Systems thinking: to understand systems, people need to understand the underlying patterns Systems thinking is a conceptual framework for making complete patterns clearer

Organizing Principles The Learning Organization cont. Of these 5 disciplines – systems thinking is the cornerstone Until organizations look inwardly at the basic kinds of thinking and interacting they foster, they will not be able to learn faster than their competitors

Organizing Principles Processes Rather Than Functions Key point in the re-engineering movement wasn’t that changes needed to be dramatic – but that they needed to be made from a process centered rather than task centered view Tasks - about individuals Processes – about groups, we are now in a ‘group economy’ The shift to processes ramifications include:  Need for new position, such as process owners

Organizing Principles Processes Rather Than Functions..  In one process virtually all departments are involved  One person needs to have end-to-end responsibility  Process owners provide the knowledge of the process – not just manage people (still important!)  Sense of urgency & intensity as teams are more intense & allow less slack time

Organizing Principles Processes Rather Than Functions cont. Requires measuring a process:  How long it takes to complete  Accuracy rate  Cost, etc. Process centered structure requires:  Measures of processes which are different from measures of tasks  Measuring a process means measuring an outcome from the customers’ point of view

Organizing Principles Processes Rather Than Functions cont. Process Centering:  Turns people into professionals rather than workers If you define a professional as someone who is responsible for achieving results rather than performing a task The professional is responsible to customers, solving their problems by producing results

NYNEX Case Example: Process centered organization (1) Targeted 12 major processes for redesign in a company wide business process redesign initiative  11 used the traditional approach.  The 12 th group used participative design & involved the Work Systems Design group, along with 8 employees from across one provisioning process This project was the only one of the 12 implemented, and = excellent results

NYNEX USA Telephone Services Company

NYNEX Case Example: Process centered organization (1) It followed a socio-technical approach to design a new process for handling customer orders. Rather than pass a customer among specialized groups, all the people in the process worked together, in one area, as a multifunctional team — with engineers working alongside salespeople. A major difficulty with an innovative new process was under-rating how difficult it would be to keep it going when it is counter cultural

A (U.S.) FOOTBALL TEAM Case Example: Process centered organization (2) Has 2 processes:  Offensive  Defensive Process owners:  Offense co-ordinators  Defense co-ordinators

A (U.S.) FOOTBALL TEAM Case Example: Process centered organization (2) Team has:  Position coaches  Head coach Once on the field – the team is self-directed. It adapts to the unfolding play

Organizing Principles Communities Rather Than Groups Communities – form of their own volition Groups – formed by design, their members are designated a priori Communities:  Perform the same job, or collaborate on a shared task/product  They have complementary talents & expertise  They are held together by a common purpose & a need to know what the others know

Organizing Principles Communities Rather Than Groups cont. Most people belong to several communities of practice, and most important work in companies is done through them Note: not necessarily ‘defined’ Communities are the critical building blocks of a knowledge-based document

Organizing Principles Communities Rather Than Groups cont. Three reasons:  People, not processes, do the work  Learning is about work, work is about learning, and both are social  Organizations are webs of participation

NATIONAL SEMICONDUCTOR Case Example: Community of Practice Company began encouraging communities after its business model that built low margin commodity chips collapsed Community of practice:  Energize & mobilize the firms engineers  Shape strategy & then enact it A community of practice on signal processing grew slowly over 18 months & now includes engineers from numerous product lines & has been influential in strategy decisions

NATIONAL SEMICONDUCTOR Case Example: Community of Practice cont. National is extending communities of practice by:  Formally recognizing them  Offering funding for their projects  Handing out a toolkit to help people form their own communities of practice

Organizing Principles Virtual Rather Than Physical A virtual organization doesn’t exist in one place or time – it exists whenever & wherever the participants happen to be The virtual organization is a popular description of new organizational form Underlying principle = time & space are no longer the main organizing foundations

SUN MICROSYSTEMS Case Example: Virtual rather than physical organization Chief Scientist – John Gage The network creates the company “Your flow determines whether you’re really part of the organization: the mailing lists you’re on say a lot about the power you have.”

Organizing Principles Self-Organizing Rather Than Designed Form of future organizations – chaos theory, ecology, biology, and look at nature & how it organizes itself The basic tenet is that nature provides a good model for future organizations that must deal with:  Complexity  Share information & knowledge  Cope with change The message is about being to adapt, it’s like imitating structures found in nature

CEMEX Case Example: ‘Self organized’ organization Cemex (Cementos Mexicanos) delivers ready mix cement in Monterey Mexico Delivering mix on time difficult – traffic jams, poor road conditions, contractors not ready for their order Delivery rate = 35%

CEMEX Case Example: ‘Self organized’ organization Deal with problem of unpredictability:  No reservations required  Deliver faster than pizza Turned attention to managing information rather than assets

CEMEX Case Example: Self designed organization cont. To do so:  They installed a GPS system for all the trucks & full information to all employees  Drivers to schedule themselves in real time as calls came in, rather than dispatchers Result = 98% delivery rates = delivery time 20mins, (rather than 3hrs) = less wasted, hardened cement = 35% fewer trucks = lower fuel costs = happier customers

Organizing Principles Self-Organizing Rather Than Designed cont. The self-organization point-of-view Requires taking the perspective of “organizing-as-a- process” rather than “organization-as-an-object” Self-organizing systems create their own structure, patterns of behavior, and processes to accomplish their work

SEMCO S.A Case Example: An organization with a self organizing principle Maverick the success story behind the worlds most unusual work place – CEO Semco Richard Semler Company – a Brazilian manufacturer of industrial equipment moved from 56 th to 4 th place in its industry by breaking all the rules to get costs down & productivity up

SEMCO S.A Case Example: An organization with a self organizing principle cont. Result = Factory workers:  At times set up their own production quotas  Help redesign products  Formulate marketing plans  Choose their own bosses Bosses:  Set their own salaries – yet everyone knows what they are as workers have unlimited access to Semco’s one set of books

SEMCO S.A Case Example: An organization with a self organizing principle cont. The changes have been rough & not undertaken in an orderly or cohert manner BUT the radical changes to a far more democratic workplace allowed the company to grow 600% at the same time that the Brazilian economy was faltering A dramatic story & illustrative of the benefits of self- organization

Organizing Principles Adaptable Rather Than Stable Speculation on future organizations  Successful organizations will be structured to naturally support (perhaps even foster) volatility and continual surprises Today’s organizations are structured to maintain stability; change is minimised  Change costs a lot  Firms built for stability are not adaptable

Organizing Principles Adaptable Rather Than Stable  IT is causing the world to become more connected Connectivity increases volatility To keep pace companies will need to adapt more quickly The only way to achieve adaptability = through distributed intelligence and action  Thus organizational models will be built around networks and will be designed to evolve

CAPITAL ONE Case Example: Adaptable Rather Than Stable Credit company that believes in “the law of large numbers”  Conducts ‘000s of tests to read the marketplace  Strategy = dreaming up credit programs that might have value to customers Then = testing numerous variations of each program to see which yield the best results Example = discovered from its first test that “balance transfer” was a winning offer

CAPITAL ONE Case Example: Adaptable Rather Than Stable Strategy goes with its bottom-up culture where decisions are made at the bottom based on the market tests  Management controls funds for rolling out new products but not for conducting the testing Has the lowest charge-off rate and the highest risk adjusted margin in the industry Grew 45% in one year!

Organizing Principles Distributed Rather Than Centralized Organizations of the future could become more distributed. Two views: 1. Distributed Capitalism – Commercial purpose of organizations is changing, hence structures will change – Managerial capitalism will not really satisfy today’s consumers due to the huge gap between consumer desires and the good and services for sale – Will possibly lead to federations

Organizing Principles Distributed Rather Than Centralized 2. Market-Based Organizations – Cost of communications has influenced the structure of organizations High = centralize Reducing (like now) = more decentralized – Organizations will structure more like democracies or markets – Job of management will move from command and control to coordination and cultivation

Summary We have Covered Today Organizing Principles  The Learning Organization  Processes Rather Than Functions  Communities Rather Than Groups  Virtual Rather Than Physical  Self-Organizing Rather Than Designed  Adaptable Rather Than Stable  Distributed Rather Than Centralized

Summary…. NYNEX Case Example: Process centered organization (1) A (U.S.) FOOTBALL TEAM Case Example: Process centered organization (2) NATIONAL SEMICONDUCTOR Case Example: Community of Practice SUN MICROSYSTEMS Case Example: Virtual rather than physical organization