Organizations are investing millions of dollars annually in Information Technology (IT). Setting priorities for IT projects and effectively allocating resources to align IT and business strategies have become fundamental aspects of an organization’s success. The well-documented pace of investment in Information Technology during the past two decades has led many IT managers, consultants, and academics to identify useful methods assessing and justifying the business value of these investments. Ask 10 different business and IT leaders how best to measure the value of IT investments, and you will likely get at least 10 different approaches. One difficulty of their search is increased by the recognition that traditional financial valuation methods typically look at each investment opportunity individually as an independent project. Focusing on individual projects limits the firm’s ability to ensure that overall IT resources are being leveraged appropriately; hence, not aligned with business strategies.
Additionally, too frequently, the attainment of the benefits from these projects is based solely on the information technology. Naturally, the value brought to the business should be the focus of any measurement; it has long been recognized, however, that if the organization applies the latest and greatest information technology to inefficient, ineffective business processes, there will be little if any value added by the technology. The benefits come from how the business modifies its processes based on the new information technology. IT alone brings little value.
IT and business managers are required to evaluate and manage a collection, or portfolio, of projects, where each project is defined by its relative value to the business and by its relative risk. These dimensions reflect central elements of the firm’s strategic management of its IT resources within the context of the firm’s business goals.
Another consideration that needs to be addressed, and that is implied in what has been described to this point, is that both IT and other business managers share in the evaluation of the portfolio of projects. It is important to recognize that the ultimate value of the project(s) will not come from the technology alone. The real value comes from how the business applies the technology to change the respective business process(es). Changes to a business process cannot be “owned” by the IT project team. It must be “owned” by a business sponsor. The role played by the business sponsor and critical to the success of the project and to the attainment of its benefits. The project executives should first identify the business objectives and benefits, and then identify the business processes that will be changed. Finally, the IT that will be deployed will be approved.
1. In your opinion, did Canon make the right decision? Justify?
A key challenge for any organization in the twenty-first century is to seek to maintain and improve its performance in an increasingly complex and competitive global operating environment, where change pressures appear to offer the only certainty. Despite the pursuit, over the last two decades, there remains a prevailing sense of failure in fully realizing hoped-for levels of improvement. In this context then, it is not surprising that there should be some sense of cynicism when it is argued that, by focusing upon identifying, valuing and managing information and knowledge (IKM) assets, there are significant opportunities to achieve more effective organizations and to improve their efficiency by reducing the amount of wasted time, effort and lost opportunity through better and more integrated use of both tangible and intangible organizational resources. Knowledge Management is big business. It has been flaunted as the differentiator between companies, the means to gaining competitive advantage. As the information society continues to grow exponentially, so have the opportunities to gather and use knowledge to optimum effect. To conceive of knowledge as a collection of information seems to rob the concept of all of its life. Knowledge resides in the user and not in the collection. It is how the user reacts to a collection of information that matters. Such a definition helps to focus our attention upon the two primary players in the KM dynamic: the human, most usually defined as the employee, and the way in which they interact with and use information.
While the Canon approach maybe considered as an effective approach to the whole concept these approach raises the concern wherein most of these traditional approaches, organizations that apply them at the beginning of a project rarely, if ever, apply them at the end of the project to assess the attainment of their goals. Additionally, some of these organizations fail to leverage the knowledge available at the end of the implementation to improve the process applied to select and prioritize projects at the beginning. Greater resources should be allocated to assess and learn from the measurements at the end of the process than are used to create and review the metrics created at the start of a project. It must be clear to everyone that the objective of the post review is not so much to find blame but, rather, to better prepare for the future. The lessons learned could affect all aspects of project practices (e.g., prioritization, selection, resource allocation). A major opportunity to learn is too often missed.
2. What are the other alternatives that Canon could have considered?
The argument that IT can shape business strategy as well as support it has become more potent with the arrival of the Internet and e-commerce. Two claims often are made. First, potentially these “new technologies” can lead to firms repositioning themselves as industry boundaries change and value systems are reconfigured, and they can enable new ways of doing business by exploiting network structures and information richness. Second, because this is new territory, all the options are not yet known or understood; therefore, elements of both imagination and learning by doing are required.
The first claim suggests that any application development portfolio that claims to be strategic, or is also concerned with tomorrow, should comprise some investments that are carving out new positions and new ways of doing business. Otherwise, a firm may be blindsided by more perceptive and nimble players. The second claim suggests that necessarily some projects will have to be seen as “soft, ” either rather creative and speculative (options if you will), or more experimental in which the goal is as much about discovery and learning as about pursuit of a definitive commercial payoff.
Most IT strategy-making and the resultant strategies do not score highly on either creativity or experimentation. The same could be said for business strategies, although recently more attention has been paid to these issues— at least in the literature. Some of the possibilities which Canon could have opted for are as follows: (1) working in industries where pressures for change, innovation and creativity are critical to success and business survival; (2) building a relationship with a client and providing some element of tailor-made or value-added product or service upon which competitive advantage is built;(3) invest significant sums in staff training and development on an ongoing basis;(4)information-intensive organizations with well-developed strategies for the identification and management of such resources;(5)typically employing over a thousand people, often spread across diverse offices and sites.
When we examine these areas of commonality, there would appear to be a clear business case for the adoption of KM approaches. If we map this experience against what might typically be found in a public service organization, it is immediately recognize that in terms of size there are obvious synergies between KM adopting firms and the structures typically found in the public sector. The issue of size is not by any means an illusory one, for it is true to say that in organizations that might be classified as small and medium-sized enterprises (SMEs), typically employing no more than 750 people, the strength and impact of local knowledge networks, operating on a largely informal basis, are already likely to be largely effective. However, once a certain operating size and structural complexity have been reached, the influence and efficacy of informal mechanisms and avenues for information and knowledge exchange become diminished; at this point the importance and potential value of focusing on KM in a systematic manner should become apparent. Public service organizations are typically large in respect of numbers of employees, hierarchical in structure and often also complex in terms of geographical spread of offices and links to other functions of service provision or governance.
In the case of IT strategy-making, there often are calls for visions and visioning, but examples still tend to be grounded more in the present than in the future. If the intent is shaping business, this is where imagination, scenarios, brainstorming, and storyboards take over from analysis, success factors, continuous improvement suggestions, and feasibility studies. Of course, the scenarios or storyboards have to make business sense, but you are not likely to hit pon novel and different ideas by starting with business analysis. To imagine futures may lead IT strategists, and business strategists, to discovering an exciting yet realistic strategic vision. Sometimes technology and new media may even mediate such imagination. One rationale for an experimental approach as well is that the future, and thus viable strategies, are uncertain and unknowable and therefore may need to be discovered by doing. A related argument is that in rapidly changing times—for example, in the e-commerce boom—strategy is a race to learn. Therefore, learning devices such as experiments make sense. Indeed, experimentation is not entirely unknown in the information systems domain; prototyping is one obvious example. Here we are concerned, however, with prototyping the future. The tomorrow spirit is, “Let’s see if we can change the paradigm and if it makes sense, ” rather than the more usual today spirit of prototyping, namely, “Let’s see if this application will work and discover how to make it work. ”
Many IT managers are aware of the future strategic options (e.g., cost savings, new products/services and markets) that may evolve from current investment projects even if they are uncertain about the eventual dollar amounts resulting from these options. Lacking a clear grasp of the fundamentals of real options valuation (a field normally mastered by financial specialists), however, these managers are generally unable to exploit the power of this method, and to more appropriately align their IT investments with the financial valuation of their firm. Fortunately, has provided an excellent explanation of this somewhat esoteric topic. Following his example, it is assumed that the decision to pursue an investment project can be deferred for a period of time.
An opportunity to create an IT investment at some future time is similar to the financial concept of a call option. This is an option (but not an obligation) for the decision maker to buy an asset (e.g., financial security) by paying a given amount on or before a certain point in time. If a financial call option could be identified that is very similar to the IT investment being considered, then the market value of that financial call option, determined in a well-defined and efficient security market, would provide a good approximation of the value of the opportunities expected from the IT investment. As finding such a similar financial security is unlikely, real options analysis attempts to build one.
3. How do these alternatives match up to the solution that Canon has decided to implement ?
Visions are those projects that are bold moves to create new strategic positioning or some new source of competitive advantage. High in potential for shaping the business of tomorrow. Unless there is no thread back to the current business or business context—and most strategic thrusts or visions ex post are seen to be connected to the present or past— they also will make increasing sense in terms of supporting today. At the least there is a good story to tell now. Because these are “big bets” or “strategic investments, ” however, any scheme would not contain more that one or two such visions. It is conventional wisdom and practice to think of the information systems plan as an applications development portfolio. As the theory and practice of strategy making, in both the business and IT domains, have evolved it is perhaps useful to revisit these ideas.
One perspective is time. In bad times, IT managers worry that the short-term drives out the long term. In heady times, the emphasis seems often to be the reverse. The schemes attempts to explicitly and formally examine how a firm is competing for today and for tomorrow. It seeks both to ensure that the other does not subjugate each timeframe and to provide a tool to engage in executive discussion about the appropriate balance at different times.
It also recognizes that IT can both support and shape business strategy. Often it is the support aspect that dominates executive thinking in both business and IT strategy making. As a planning tool or an audit tool, the these schemes may help ensure these twin-enabling contributions of IT are properly examined. It would seem able to accompany any style or process of strategy making. A key point of this paper is that competitive advantage in future business environments will come not from applying corporate capital to the right information technology but by applying the right human capital to information technology. This human capital includes all IT professionals as well as all corporate users of information technology. Winning in this environment won’t depend on whether you have all the IT tools; for very little cost, future business computing technology will be ubiquitous and relatively cheap. Successful IT competitive strategies will depend more on how information technology is applied than to what. And how it is applied will depend on corporate human capital recognizing opportunities, innovating, identifying potential solutions, making decisions, and executing them with sound action. Although these challenges can be formidable, we think that each challenge also presents an opportunity for organizations to capture competitive advantage through sound, effective IT human resource strategies.
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