Organizations and IT- Overview and introduction

Introduction

Productivity Paradox

Information technology defined in the context of the organization

Process Automation versus Systems Reengineering

Decisive factors for IT and its implications for organization

Location

Acceptability and Percolation

Application

Organization Defined

Organizational Structure Changes due to Advent of IT

Overview and epilogue

Appendix

Charts And Tables

The story is told of Abdul Kassem Ismael - the scholarly grand vazier of Persia in the tenth century . He was known to be one of the wisest men in the world as it was known then. He had in his library a collection of 117,000 books. On his many travels as warrior and statesman he never parted with his beloved books . They were carried about by 400 camels trained to walk in alphabetical order . His camel driver librarians could put their hands instantly on any book their master asked for - Issac Assimov - Book of facts

So there is this one organization of 400 plus people , camels , caretakers and so on to see to it that one person keeps up on his knowledge and that man gets called the wisest man in the world . His library of books and his interpretations from there enables him in carrying out his other duties in a better manner .

Today given the information revolution all of us have the same access to information that at one time only the Grand Vazier of Persia had . The computers on your desk , the radios , the TVs , the internet and even the lowly calculator on your desk carry that kind of information .

This is where we begin to see the implications for the organization. IT offers Portability , Speed and Processing ability .

Interestingly though the above are guaranteed , IT does not guarantee Productivity for the organization .

Let me illustrate this point with the help of an example .

Consider an office organization which employs one typist . The typist is using a manual typewriter to do her work . In general she can type ten letters per hour and works eight hours a day .
 

Now consider a typist in another organization who is using word processor . The typist being computer literate commands naturally more salary .
 

For the second typist to become as productive as the first one she will have to produce 10111/3.17 =3189/8/20 = 20 letters per hour that is a jump in production by over 100 % which is usually not possible or not seen as available so far . Usually the gain in out put is somewhere between 15 to 25 % . The fact is not disputed that the output is much better looking , is easily reproducible and supposedly less paper is consumed . (The example is only taken to illustrate the general principle.)

This is a general example of system automation .When the organization does not know how much productivity gains it can expect to get out of IT application , it does not get much. Thus through the system automation the same inefficiencies of the yesteryears are carried forward and as the production increases the inefficiencies only go on increasing due to the increased speed . But as the production has apparently increased one feels that the productivity itself has increased.

Some of the reasons as to why the investments in IT sometimes fail to give adequate returns in productivity are

Failure to visualise and Low Expectations : In general the IT people develop the IT programs in consultation with the existing managers . The managers know existing procedures and the IT people know how to automate the procedures . As a direct consequence what we get is a faster moving model of the existing system . At times the speed improvements are considerable and camouflage the fact that the improvements are not adequate . Many managers fail to envision the various avenues that would be thrown open due to introduction of Information Technology and thus fail to guide the IT personnel effectively . Thus the IT only results in speeding up the existing processes albeit at considerable investment cost .

Secondly the bureaucrats having got used to the old ways of carrying out their jobs consider even 10 % improvement to be a great achievement as that apparently considerably reduces their workload and the tedium . They are not able to understand that their work could have been reduced to one fifth of its earlier volume by introduction of IT. If you do not expect you do not get .

 Too Rapid change in Technology : The organizations as we see them today are the results of decades of practice . The improvements have been gradual and thus adequate time was given for the improvements to sink in and to create the mind set . Each improvement has been a step forward , thus the overall impact has been limited . This can be called as the evolutionary process .

In contrast , the changes introduced by IT have been revolutionary cutting through many layers of bureaucracy and procedures ; on top of that IT itself is evolving at rapid pace . These are revolutionary changes . Sufficient time has not been given for these changes to sink in and more changes have been pushed into place. This causes a destabilizing effect on the organization and manpower . Thus the full potential of the changes is not appreciated and absorbed .

Sometimes the benefits do not even appear in the most direct measures of IT effectiveness., This also is because of the fact that rapidly-evolving technology leaves little time for the technology to be digested at various levels of the organization .

Mismanagement of IT function : Information Technology is seen as the domain of the privileged few and these geeks go on automating one process after the other and leaving old technology for the new without any consideration for the ripple effects of the changes .In these cases of system automation due to suboptimization of the functions the organizational slack is increased instead of output or profits.

The rapid speed-up enabled by IT can create unanticipated bottlenecks at each human in the information processing chain. Taking the example of the typist , if she made any mistake she will have to retype the whole letter while the computer operator will churn out many copies easily . So who is the one to check it all ? The boss of course. Thus earlier on the bottleneck used to be the typist , now it has shifted to the boss . Successful IT implementation process cannot not simply overlay new technology on old processes.

For example , a researcher makes an analogy to the electrification of factories at the turn of the century. Major productivity gains did not occur for twenty years, when new factories were designed and built to take advantage of electricity's flexibility which enabled machines to be located based on work-flow efficiency, instead of proximity to waterwheels, steam-engines and power transmitting shafts and rods.

This brings us to the issue of taking a holistic view of the organization and improving it . The scientific name given to it will be Systems Reengineering which Dr Nitin will be addressing in days to come .

Let me backtrack a little and define IT. Information Technology or Information Science is defined as the study or use of processes especially computers , microelectronics and telecommunications for storing , retrieving and sending information of all kinds like words , pictures and numbers .

Going by this definition the following become IT in the organizational context

Telephones

Computers Hardware and Software

Telex

Calculators

Printers

Fax Machine

Local Area Network LAN

Digital Camera

Dictaphone

Tape recorder

Internet

When we add technology , it means the systematic gathering , retrieving and transferring of information for organizational purposes using the optimum method as available at that time .

Before we see what are the implications of IT to the organization , we have to see three basic aspects of the relationship which are

Location

Acceptability and Percolation

Application
 

If we consider the organization as a body what do we see the location of IT to be ? Is it in the head , hands , legs or in the heart ? By this I mean is IT used for implementation of Decision Support ,production ,transportation or is it the core value around which the organization is built ? Let me illustrate it using an example .

All of you know about the fast food restaurant chains Pizza Hut and Domino's Pizza . We too have ventured into the restaurant chain business with the brand name of Pizza Corner . Both Pizza Hut and Dominos Pizza are highly IT intensive companies . At both places you can place an order by telephone and they deliver it to your doorstep a piping hot pizza inside of thirty minutes anywhere in the city . When we go into organizations in the 21^st century we will see this in greater details .

The mechanism is briefly this - You make a telephone call . The operator takes your call , and telephone number . The telephone number she punches into her computer . If you have ordered even once before from that telephone number , they have your address , directions for reaching you , nearby landmarks and history of your earlier orders . Then she will take your order and will confirm it . She hangs up , and presses a button sothat the order is communicated to the pizza outlet nearest to your place . The order is printed out there , the pizza is made and is delivered to you by a special messenger . When you pay he goes back and puts the money in the cash box . Depending on the recipe of the pizza the inventory is automatically reduced , the cash balance is automatically updated and both these information are conveyed to the central controlling center for further necessary action . If the inventory is short at any outlet , the commissary is notified which dispatches additional supplies to replenish the stock . Intensive and extensive analysis is carried out of the information gathered so far , wastage reports , hourly consumption , customer preferences ,a their response to various promotions are analyzed and debated and further strategize are planned to gain maximum advantage .

To this extent both the organizations are identical . But now I will let you know that in case of Dominos the IT resides at the heart of the operation while in case of Pizza Hut it resides in the hands and legs . Can you reason why ?

Dominos only operate through delivery outlets . They do not have any restaurants . If you want Dominos Pizza either you order it on phone or go there an carry it home or to office . You cannot sit there and enjoy it . Thus delivery of pizza accounts for more than 90 % of business of Dominos . Not having restaurants means less staff , less assets and less expenditure . But that is a strategic decision that we do not need to go in at this stage . consider now that if all telephones and computers were down , what will happen ? Almost all of the operations of Dominos' will come to a grinding halt . They will virtually have an heart attack as the expression goes . So where is the IT located ?

In case of Pizza Hut which primarily operates through a series of restaurants which double up as delivery outlets , the majority of business is conducted in the restaurants . They keep the stress on the restaurants by giving bottomless jumbo glass , promotions like eat all the pizza you can etc . If the telephones and computers were to go down for some reason , hardly any operation of Pizza Hut other than the home delivery part will be affected . They will carry on manually and will refurbish their stocks by utilizing their now idle delivery boys to transport the commodities from the commissary to the outlets . Where is the IT located ?

The second aspect of IT versus the organization is the acceptability of IT across the organization and the mindset of the individual . Look around and you will see in your organization many people who are called as technology shy . Unless they accept the IT does not give the value benefits that we envisage . This is both true on the intra organization and interorganisation basis . Let us take first the inter organization basis . Technically our organization became paperless office for interoffice communication two years ago with introduction of LAN and interoffice mail that can transfer everything on the computer across to anywhere . We had thought that after we did this the demand for paper will dramatically reduce . well the opposite has been the case . Our demand for paper has increased tremendously over the period of time . The generation of paperwork has become very easy as a result of which more cc or carbon copies of email are sent across and most of the recipients keep a hard copy of the email - just in case ! Photocopy too is easy and thus instead of becoming paperless , we are getting inundated by paper . It is only now after intensive training and now the people have some faith in keeping soft backups that the paperwork has started declining . Thus IT was available to all but was not acceptable to all which led to wholesale rejection of the concept of the paperless office .

Let us now take the inter organizational acceptability . The fax preceded the advent of telex by at least a decade but when did you see the first commercial fax machines coming to market say 15 to 20 year ago ? the fax machines remained commercially nonviable due to the fact that people at large were not able to perceive the utility of fax machines and thus telephoto as it may have been called then remained a pipe dream for a long long time .

Percolation plays an important role too. Consider that your organization is the most savvy on the IT front . You have all the electronic gadgets that money can buy , the most expensive LAN set up and multimedia computers and the best programmers in the world . If the other organizations in your vicinity are not on par with you what purpose will IT serve other that increase intra company activity . It does not even give you competitive advantage . Sounds atrocious ?

Let us consider this . I have email and EDI but none of my customer or suppliers do . What do I do with the EDI ? For that matter fax , If I have fax and most of my customers do not , I have to go outside and get the telex machine that they use . This is the main reason why so many US jewelry companies who are very high tech as far as their front ends go cannot have high tech back ends to use for procurement . Most of these companies are forced to open representative offices or have agents in Asia who physically go around procuring and checking jewelry for their principals abroad .

Lotus has been arguably the best spreadsheet program I have experienced , but wherever I go I see people using Excel only and I had to change over to the same . Percolation plays two important roles - It makes the technology affordable and it makes the technology desirable . If Jack has it Jones will take it . That is the way it goes .

The third major aspect of IT is to its application . This is somewhat different from the location that we discussed above . Location denotes as to where the IT is located while application denotes the use to which it is being put to .

The Organizational work can be divided into two broad categories . Creative and Reproductive .

Reproductive aspects denotes all the process that we have to repeat innumerable times over a period of time . Number crunching , accounting , general letter writing , order taking , inventory control , street signals , airline timetables , scheduling , PERT and CPM fall in these categories . The basic framework remains fixed and everything within the framework can be changed to suit the individual requirements . For example in the accounting area there are three guiding principles which are followed by all accounting programs and the entire construct is made out . It is the same operations that are repeated again and again . Frills and fancies may be added and there is no limit to it but the basic conceptual construct is not disturbed. This has been by far the most wide application of IT in the our times . Also as you go along , the process improves . So far as possible the possible variables are fully structured so the stimuli itself is structured which is responded to by a structured response. Even in areas where the stimuli by nature itself is going to be unstructured , the responses are broken down into many modules which by themselves are highly structured and thus the choice for creativity is very limited .

I believe I need to explain this a little better here . I will take an illustrative example . Let us consider the process of cartoon film making . When Walt Disney made his first film , Snow White and the seven dwarfs , each drawing for each movement of had to be made slightly differently . They used so much paper that it is said that if that paper was to laid down on the ground it would have covered area equivalent to 100 foot ball fields . In this case other than the main idea and the face of Snow White and the dwarfs and the first drawings the rest of the effort was very much reproductive in nature . Something very much suited for computer graphics . That is where the information technology has conquered and made a difference.

Nowadays once the basic image is made all animations are done using computers thus giving huge savings in terms of money , effort and manpower .

The more structured the area the easier the application of IT is . For example the very first application of IT was in case of accounting , or mindless number crunching and for decades it remained the only area where IT was used . It is only now that Decision Support Systems , Personal Information Managers , and Fuzzy Logic and geographical mapping are coming of age .

Many of the trends in economics have become visible only with the advent of computers . The sheer volume of data was so large , by the time it was properly collected and tabulated , the concerned economist would be too old to draw any inferences from the data . Just for example in India it took 15 years to construct Input Output tables for the economy so by the time it is ready it is useless as one of the basic underlying assumption in creation and forward usage of Input Output tables is that the technology has to remain the same . This will make more sense to Mr. Rodrigo here .

Given the above , how does the percolation of IT in an organization change the organization ? How does the organization respond and what are the fallouts ? As has been experienced by many companies all over the world , putting in the hardware and the software and the systems is the easiest part of the whole process . It only takes a couple of months to do that .The difficult journey begins then . The training , acceptability , percolation , optimum usage for the purpose it is meant to be , the change of the individual mindset and putting it all together in order for the organization to derive tangible benefits from the systems is the challenging part and as has been seen not many organizations are upto it .

In my opinion when we introduce IT into an organization the whole structure of the organization has to undergo a big change to absorb and advance with the new realities . How does a Boss respond to the fact that he is not going to have a secretary anymore and he has to type out all his letters and memos and file them himself ? Also now after twenty years in the company he has to learn basics of word-processing from the kid next door ? How can he make judgements based on what he sees on the small screen while he used to fly down to the site himself earlier on ? These are the impediments to the growth of IT.

What effect will this have on the organizational structure ? Does the IT become a mere appendix to the office of the Financial Controller or does it change the whole of the organization on its head ? does the organization become more structured or becomes loose at the seams ? What are the implications /? We will see this in more detail when I present the case study on Gemkey on the final day of the seminar but for the time being let us go through some of the concepts .

Essentially there is only one organizational structure existing . The Pyramid . All other structures are some or other variation of the theme of the pyramid . It may be an assembly of pyramids like in matrix type organization , it may be a flattened pyramid as in Ricardo Semler's circular organization , or it may be a transient assembly of pyramids as in a functional organization in a scientific research institute . It is pyramid all the same .

An organization may be defined as a combination of individuals , structures and utilities with disparate resources, values ,goals and strengths to achieve a set of objectives that are individually unattainable .

On the ulterior level it remains a power play ( the reference is descriptive and not derogatory )where each player individually or collectively ,attempts to maximize his power position by various means available to him .

The efficiency of the organization is decided by the how much fraction of power of each unit gets translated into fruitful contribution to the organizational objective .

The effectiveness of the organization is decided by the power interaction between the organization and its environment and the extent to which the organization fills the needs of its environment's perceived needs.

We will see this in more detail when I take the dais again on the penultimate day .

What does the advent of IT do ? Of course its leverage will depend on the three factors that I discussed above namely

Location

Acceptability and Percolation

Application

But does it bring about a fundamental change in the organization ? In my opinion it does and the change is irreversible

 

The advent of Information Technology makes the organization soft and symbolic. Suddenly the Financial Controller is not sitting on top of the bank account and the production manager is not sitting atop the finished goods nor is the CEO up there in the ivory tower . Information Technology proves to be a great leveler . The hard assets of the organization are turned into symbols - the numbers to which virtually everyone has access . The organization becomes more conceptual than ever before . You no more have to visit the shop floor to know how much production we got the other day or to the store to see how much inventory we have left . The power equation has changed and information itself has become power that drives the organization . The speed has increased tremendously keeping in line with the investment so have the demands .

There is only one power and that is information . The one who has the maximum information and can make intelligent inferences from the same reigns supreme . but then again this supremacy is very transient because no one can remain on top of things all the time . Everyone get to know different things and different ways of doing different things and the processes are dramatically different . Rapid changes in software or hardware lay many efforts in the past to waste . For example when Excel spread sheet came out with increased number of rows to 65000 from the earlier on 16000 a number of database programs that we were using became redundant overnight while the need for having hardware upgrade in terms of substantial increase in memory increased . Thus the database programmer were no more needed and the people in finance who are well versed in spreadsheets came in very high demand across the organization. Thus you will see that there is a lot of movement in the organization . Whatever may be the formal structure or administrative structure , the power equations go on changing . I call this as the vortex organization . The maximum power of the vortex is at the center while the maximum speed is at the periphery .If you have the most useful knowledge for some time the organization revolves around you and if you do not have any information you find yourself at the periphery being whirled around at a very high speed . If you cannot keep up you do not have any inactive post to go to , as the organizations are getting leaner and leaner and you find yourself outside . It is a team based approach but the constituents of the team and their own composition keeps changing from time to time . Thus if we have to take a pyramid comparison it is a pyramid that is very soft and transient , that goes on revolving around itself , and at the same time also has high three dimensional motion .

The organization also becomes somewhat impersonal . Thus though a much greater interaction is needed it is not assured by the organizational structure . Greater flow of information does not mean greater or better communication . Individuals become very important and in some case indispensable . The indispensability is transient though .The information flow is no more defined well and the informal structure comes to the fore in a much accentuated way . We will go into much more detail about this later.

The organization is highly decentralized in terms of physical facilities thus the control aspect of earlier organization structures cannot be exercised well . In fact in the new context control does not have the same meaning as it had before . We will see debate these issues in much more detail at the time of our next meeting .

I will like to leave with just one very interesting observation at this stage .The entire middle management is just gone . Many layers from middle of the pyramid have totally vanished; interestingly the top of the pyramid has not collapsed in but the bottom has gone upwards . The number of people in the organization has reduced with the reduced layers of management but the workers are better educated , better treated and better paid . This is as if the middle layer is cut and the bottom is lifted upwards .

I have not considered ,the improvements that can be gained by using advanced IT tools like email , soft faxes , Electronic Data Interface , Personal Information managers . This session is only the introductory session and is only meant to give you a glimpse of things to come during the course of the seminar .

Let me give you an overview of what we have gone through today other than skipping our afternoon naps .

This presentation has been made in HTML , the language of the internet , which you will be learning on the 4^th and 5^th November .

We have dealt with Productivity paradox - the pitfalls of high tech investment and you will see how to avoid those and get competitive advantage on 4^th , 5 th and 6 th November . We have seen the importance of business process reengineering as against process automation . You will go into details of the same on 9 th and 10 th of November .

We have seen that the wages of the skilled labor necessary to shoulder and sustain the IT related organizational improvements have increased and so have the minimum educational requirements for the employee. You will see on 12 Th of November how to deal with the educated workforce , how to manage and nurture them .

After that we will meet for an objective stocktaking of where we are at the present , what are the different advancements of IT that are coming our way and what will the adaptive corporations that will see the light of the 21 st century look like ; on the penultimate and the ultimate day of this experience .