Overview for success in the Internet age

by Ralph B. Sackman, PMP


AWELL-DOCUMENTED SEA CHANGE is taking place in the corporate world. The Internet, accompanied by advances in software and hardware, affords businesses unprecedented power to transform their operations. Many mid-sized and large companies, however, are struggling with outdated management practices that are inappropriate to the systems challenge at hand. It is a mistake to believe that outmoded management practices, which have not worked well for less involved projects, will support complex core process initiatives.

Companies have one chance for a successful transition to the Internet Age before competitors gain market share. The ability to conceive and implement a superior operating concept is vital. Let's look at the challenge from the two fundamental ways that the transformation affects management practices. First, strategy must interact with implementation alternatives at top management levels because of the sweeping capabilities of today's information technology. Second, top management must understand the nature of systems work to establish management practices supportive of new system concepts and effective project execution.

Strategy/IT Linkage. Top management's traditional thinking sequence must change; the strategy-structure-systems approach no longer applies. IT capabilities have become so broad and powerful that entire business models are being swept away. General Motors Corp. and Ford Motor Co. are adapting their entire purchasing, production, and distribution processes to Web-based systems to save money and to achieve build-to-order capability. The Internet is causing wrenching changes in the brokerage business and elsewhere. Nor can other business leaders think, “It can't happen here.” It can and it will. With few exceptions, customer response and cost advantages available through IT will simply be too much to ignore.

The strategy-structure-systems approach worked in the past because the scope of systems was narrower. IT supported individual functions and reengineered processes, so it made sense to set up the organizational structure first and then to appoint managers for implementation. Top management determined the strategy—the “what” to be done—and unit managers carried out its implementation—the “how” to do it.

Separation of the “what” from the “how” worked because implementation did not affect strategy; an internal production control system, for example, helped speed deliveries and control costs. Top management didn't need to think about that system or others when formulating strategy. All this has changed. The “how” is now linked directly to the “what,” because IT capabilities can influence and actually drive strategy.

The implication for top management can be dramatic. Instead of “managing by the numbers,” top managers must become more knowledgeable about business unit operations and services. They must understand what they are working with to make informed decisions about the transition to the Internet Age. This “hands-on” mode is needed because the “how” has suddenly become much more important to strategy.

Superior operating concepts can come from many sources, including top management, consultants, or master system architects. The chief information officer or her appointee performs the role of master system architect to ensure, at a minimum, that the concepts will mesh business and technical aspects into a workable solution on a broad and detailed basis. The architect's vital role secures the link between the “what” and the “how.”

Difference From Reengineering. How does this thinking sequence differ from reengineering? The move by some companies to organize by process (for example, the order-to-cash process) still held to the premise that IT enabled the organization. Instead of enabling departmental units (sales, production, distribution, and accounts receivable), IT enabled a customer-focused reengineered organization that encompassed the relevant departments. With reengineering initiatives, the traditional strategy-structure-systems thinking sequence continued to work; IT supported a broader organizational unit. It no longer applies. IT enables strategy, not the organization.

The reengineering initiative focus on customer satisfaction with reduced operating costs has improved competitive positions, and has prepared the way for full transition to the Internet Age by getting top management accustomed to thinking across functions. It would have been much harder to go from functional hierarchical thinking to strategy/IT-linked thinking without this preparatory step.

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Transition to the Internet Age. Part of the transition problem is straightforward. Almost every company has a site on the Web, and some sites are extensive. Moreover, ordering parts and supplies using the Web, although far reaching, reduces mounds of paper, phone calls, and conferences. The hard, complex part comes when companies must recast or replace their main systems to achieve full cost, flexibility, and responsiveness benefits of the Internet Age in the core areas of their business.

Recasting these areas requires major initiatives and related projects that will test even the most capable top managers. They must choose a new perspective—looking at management practices from the point of view of the nature of systems work.

Once top management understands the nature of systems work, the related management practices become obvious. The work consists of four major aspects regardless of the development path (integrated or functional application packages, custom programs, or any combination):

img Driven by Concepts. The operating concept (how the system will work to fulfill the strategy), not requirements (what the system will produce for users), drives transformational systems work. User needs must be tested against proposed concepts. Proceeding directly from management goals and objectives to user requirements locks in outdated traditional concepts. Spending millions on information systems development without commensurate return often is caused by using old concepts.

img Cross Boundary in Scope. An IT-based initiative can cut across function, process, business unit, geographic, and/or company boundaries. In general, a wider scope contributes to a more powerful system. Work scope flows from the operating concept and cannot be preset without considering IT capabilities. All work must be coordinated at a high level to keep the operating concept intact, foster cooperation, and control the scope.

img Continual Changes. Requirements, scope, and even concept changes beset those involved in transformational project work. Change is endemic to systems work, even without external changes, because participants learn more as work proceeds.

img Undividable Process. Systems work is a dynamic continuum from initiative goals and objectives through final cutover of the last related system; changes flow in both directions. Furthermore, specifications cannot be expressed in concrete form. A building architect can define abstract concepts in physical length, height, and width dimensions, allowing a clean handoff and transfer of accountability to a construction manager. A system architect cannot escape from the abstract—a thought cannot be expressed in three-dimensional form.

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The nature of systems work dictates four management practices and related actions, as shown below. The combined aspects of systems work and management practices become the Transformational Project Paradigm (TPP). This approach provides a logical framework of supportive management practices to increase the probability of success.

img Beginning-to-End Accountability. Appoint a business area initiative leader responsible for the entire endeavor from goals and objectives through cutover of the last system. This person should select project owners as needed and hold them accountable for success or failure of individual projects. Accountability extends to coordinating with implementation and support teams to ensure that the systems operate in production as planned. The chief information officer cannot be made responsible for the initiative because she does not control three determining factors—concept, scope, and user requirements.

img Cross-Boundary Coordination. Require all project participants—including functional managers, system architects, and project managers—to report to an initiative leader or project owner on a project basis. This strong matrix promotes central coordination essential to hold the operating concept together and facilitate accountability.

img Information Systems Division (ISD) Home Departments. Establish home departments (also called centers of excellence functional areas) to give members maximum ability to develop their skills and to have a career path within their specialty. The departments should consist of system concepts for system architects, project management for project managers, and a development resource pool for analysts, programmers, and technical specialists.

img Management Reporting System. Implement an appropriate management reporting system to make accountability real. Align the system with the flow of responsibility from the initiative goals and objectives through cutover of the last system.

What are the criteria for success, and how does the TPP contribute to desired results? The following outcomes must be achieved:

img Reduce Risk of Shortfall or Failure. A company cannot afford to fall short on a core process transformational initiative. Failure opens the door to competitors who will take advantage of weakness. With the TPP, beginning-to-end accountability reduces risk because there is clarity about who is in charge. No longer is this issue up in the air between users and ISD. The management reporting system makes accountability real.

img Promote Transformational, Not Incremental, Change. Top managers must overcome the bias toward making things better but not dramatically different. The link between top management's “what needs to be done” and middle management's “how it will be accomplished” must be strengthened. Otherwise, results will be disappointing. With the TPP, the danger of using traditional approaches is reduced because the initiative leader, assisted by the master system architect, is responsible for formulating a superior, workable operating concept. The initiative leader has strong matrix authority to hold the concept together through the execution steps.

img Minimize Disruption of Existing Operations. A company must carry on its existing operations while changes are under way. Enough lead-time is needed to handle effects on personnel. With the TPP, the initiative leader has the responsibility and authority to coordinate the entire effort, including retraining and consideration of on personnel. Everyone will be working from an approved operating concept that will give an advance portrayal of the new approach, making lead-time available for planning.

MOST IMPORTANT, THE TPP—by resolving the conflict between outmoded management practices and the nature of systems work—gives technical team members a chance to reach full productivity. After all, they do most of the work and so deserve a setting that fosters their best efforts. ■

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Ralph B. Sackman, MBA, CPA, PMP, CCP, is president of Information Systems Concepts Inc., in Moraga, Calif., USA, and is a member of PMI's San Francisco Bay Area Chapter. He is the author of Achieving the Promise of Information Technology: Introducing the Transformational Project Paradigm [Project Management Institute, 1998].

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM Network June 2000



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