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Organizational Structure and Design

Dependence on Technology

Integrating Technology with Business Environment

IT and Corporate Strategy

Sustaining a Competitive Edge

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An organization is a rational coordination of activities of agroup of people for the purpose of achieving some goal.

There is a joint effort There are basically 2 types of organizations:

Formal what everything that appears on chart.Well-defined reporting relationships among managers and workers

Social Organizations

that arise spontaneously from the interaction of a group.Have no rational coordinated structure and generally lack explicit

goals.

Informal -It is pattern of relations and coordination among members of the

formal organization that is not specified o a formal chart.It represents social interaction and a realistic portrayal of the

workplace.

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The factors that influence the structure and design of

modern organizations. They are:

Uncertainty: managers try to eliminate or reduce uncertainty such

as

Technical uncertainties: about whether a new product can be

manufactured or whether it will work.Market uncertainties: as how a product will be received, potential

demand, response from competitors, etc.

Internal management uncertainty: key personnel may leave or may

not perform assigned duties.

Specialization: are specialized skills or conditions required forsome task?

Coordination: when there is specialization, management needs to

coordinate diverse specialties. E.g. marketing and production.

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Interdependence how different departments or subunits within the

department depend on each other. Thompson (1967) has described

three types of mutual dependence-

Pooled interdependence 2 organizations are part of larger

organization. Not directly dependent.Sequential interdependence when the output of one unit is the input

to another. E.g. painting of product units .

Reciprocal interdependence output of each unit becomes input for

the other.

In designing an organization or modifying the design, various

interdependencies must be coordinated.

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The ability to adapt when confronted with new

circumstances.

Helps in quickly defending against threats and take

advantage of new opportunities.

Provides the organization with the ability to adapt to changeand respond quickly to market forces and uncertainty in its

environment.

Speeds up the order processing.

Enabled faster searching of books from a library catalogue Enabled communication with anyone at remote location.

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Through IT, colleagues working on a project do not have to be insame physical location.

Can communicate with colleagues while travelling.

With internet can conduct business at any time, day or night.

These all are the impact of organizational flexibility.

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Technology makes it possible to create new forms of

organizations through the use of different design

variables.

A variable is something that takes on different values.

For organizations variables can be span of control i.e.

how many subordinates a manager can have.

IT is defined to include computers, communications,

video conferencing, artificial intelligence, virtual reality,

fax, cellular & wireless phones and pagers.

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Conventional design variables IT design variables

Structural

Virtual components e.g. raw material

Electronic linking mail, video conferencing, faxTechnological leveling elimination of layers, greater span of

control (approval of messages from layer below to level above)

Work process

Production automation

Electronic workflows contribute to monitoring and coordination

of work

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Communications

Electronic communicationsTechnological Matrixing e.g. make a temporary task force from

marketing, sales, production using mail and groupware to prepare for a

trade show

Inter-organizational Relations

Electronic consumer/supplier relationships Use of EDI

Class of variable Conventional design IT design variables

Structural Definition of organizationalsubunits

Virtual components

Determining purpose,output of subunits

Linking mechanisms

Reporting mechanisms

Linking mechanisms Electronic mechanisms

Control mechanisms

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Class of variable Conventional design IT design variables

Work process Tasks Production

Workflows Automation

Dependencies

Output of process

Buffers Virtual components

Communications Formal channels Electronic communications

Informal communication Technological Matrixing

Inter-organizational relation Make vs. buy decision Electroniccustomer/supplierrelationship

Exchange of materials Electroniccustomer/supplierrelationship

Communication

mechanisms

Electronic linking

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The most significant challenge of the management

would be to consider that how technology affects their

decisions and Vice-versa.

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InformationTechnology

Search for newtechnology (find out

what technologyoffers)

Seek opportunities

Technologicalconstraints

Manage existingtechnology

Decision makingPlanning

Execution

Managedevelopment of new

technology

+

Impact

Impact

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First, the manager has to search for new technology to

help create new technology.

Opportunities + technology = new development projects.

Development projects have technological constraints. Technological constraints & opportunities influence

decision making.

The decisions will have an impact on technology and its

development within the firm.

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Vision for theorganization & IT

IT and Organizationstructure

Corporate strategicplanStrategy

Alliancesand

Partnership

Integrationof IT and

DM

Ongoing IT

OperationsIT initiatives

ITinfrastructu

re

A framework of Managing IT

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Vision for the organization & IT Leaders should develop a vision for the business and IT in

achieving that vision. Vision should describe the mission and the identity of the

product and services it produces. It should identify the markets in which the firm will compete

and its strategy for competition

Plans for mergers, partnerships, alliances, and acquisitions are

also part of vision. IT plays an important role in shaping the structure of the

organization and in supporting its value chain activities.

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A firms structure is highly interrelated with its strategy, so

these 2 aspects of the organization must be consideredtogether. E.g.

a firm decides to compete on the basis of extremely efficientoperations, to become the low cost, low overhead producer in the

industry. For this, firm might use production automation to reduce costs and

improve quality. It can opt for EDI

The ideas can be generated by reviewing what competitorsare doing, staying abreast of the technology, looking foranalogies in other industries for strategic advantage.

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It is the most significant responsibility of managementto integrate technology with all business decisions.

Integrating means that the manager is aware of hownew technology can create opportunities.

A decision to enter a new line of business has a directeffect on existing information processing system. E.g.

Frequent flyer program.

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It comes from the firms vision for its future activities. The plan includes the vision;

Road map for bringing about the vision.

IT should be integral part of firms strategic plan.

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E.g. Intel and Microsoft One organization enhances the operations of the

offerings of another. It can be appealing to work with

the other organization

It is done by electronic linking and communication

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With the advancement in technology, new ideas should

be stimulated as how IT will improve some aspects of

the organization.

Corporate strategic plan should identify broad areas in

which technology can contribute to the firm.

IT plan adds further details and identifies specific

applications of the technology for development.

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The combination of firms various common

technologies constitutes information structure.

The network with which the computers are connected.

Development of interactive application which isavailable to all employees.

Developing the Intranet.

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Vision and strategy are long-term in nature; a firm stillfaces day to day task of managing IT.

This consists 2 tasks:

Developing new applications

Operating the existing stock of application.

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IT can Enable new strategies

Provide new ways to reach customers

Expand the markets in which the firm participates

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Market shareNumber of markets in which a firm participates

Number of new markets

Sales growth Size of the average sale

Sales per employee

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Strategy is an approach to achieving a series ofobjectives

Corporate strategy describes how a firm will achievethe vision of its senior management

Corporate strategy and IT strategy are intertwined The new economy has created threats and opportunities

for corporate strategy

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The value chain divides a firms activities into two types

Primary: activities associated with the mission of the firmsuch as inbound logistics, operations, outbound logistics,

marketing and sales, and service

Support: activities represented by the firms infrastructure such

as human resources management, technology development,and procurement

The Internet and electronic commerce have impacted the

traditional value chain

E.g., Amazon.com has no physical stores and hence a smallerinfrastructure which is easier to manage

Comparing value chains can highlight the differences among

business models based on the internet and web

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Forces that shape a firms competition Competitive rivalry

The threat of new entrants

The bargaining power of suppliers

The bargaining power of buyers

The threat of substitutes

The Internet has affected the five forces by Lowering entry barriers for new firms

Creating substitutes for traditional businesses (e.g., Stock trading

and music) Creating new markets that change the way buyers and suppliers

interact

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Low cost producer Differentiation Market niche strategy

Some specific strategies Customer driven Reducing cycle time Global competition Right sizing Quality

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Level of dependence on existing IS/IT systems:

High = systems essential to companys survival

Low = systems improve performance of work

but are not essential

Strategic impact of current and planned IS/IT

developments:

High = IS/IT is a critical success factor (CSF) to

business

Low = IS/IT is useful but has low business

potential

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Support:(e.g., Cement company)

requiring average or below average investment occasional senior management attention

Factory:(e.g., Steelworks) crucial to current operations and management

Turnaround:(e.g., retailer on-line and real-timesystems)

crucial to current operations and management

sensitive to productivity and effectiveness

Strategic:(e.g., Credit card company) determining the business survival and growth

foreseeing future opportunities

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Support

organizations may spend a lot of money on IT, but they are

not totally dependent on IT systems for operational success

day to day, minute to minute.

Neither do they gain strategic advantage from innovative

application developments.

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Factory organizations are completely dependent on the

smooth running of their IT systems. For instance, a

manufacturing unit might grind to a halt if the ITsystems were to fail.

However, with this type of organization,innovative applications developments, although

important, are not crucial to the organizationsability to be competitive, except when its

performance starts to lag behind competitors, and amove to the strategic quadrant occurs.

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Turnaround

organizations are those in which innovative

applications developments are crucial to the

firms strategic success, but the day-to-dayrunning of IT systems is not so critical.

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Strategic organizations such as banks and insurance

companies are those in which innovative

applications development brings significantcompetitive advantage and day-to-day processesare highly dependent on the smooth running of ITsystems.

In these types of organization, there is a very tightlink between business strategy and IT strategy, andthe head of IT normally sits on the board ofdirectors.

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Look for ways to incorporate technology in a product orservice

Seek ways to use technology to connect with other firms

Seek ways to use technology to make dramatic changes

in the way you structure the organization

Integrate technology with planning - Managers need to

understand:

The operation of their business

The capabilities of technology

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Internet, Intranet & Extranet

Intranet

Management

Employees

Production Centres

Other departments

Extranet

Vendors/Suppliers

Distributors,

Bankers

Consultants

Internet

Customers

Competitors

General Public