evolving and information technology itself is changing, so the impact of one on the other is ... would solve that particular problem, then selects the best of these.
STRATEGY FORMULATION METHODOLOGIES
MICHAEL S. SCOTT MORTON
November 1986
CISR WP No. 149 Sloan WP No. 1845-86 90s WP No. 86-028
¢
1986 Massachusetts Institute of Technology
Center for Information Systems Research Sloan School of Management Massachusetts Institute of Technology
Strategy Formulation Methodologies
Michael S. Scott Morton Sloan School of Management, M.I.T.
Premises
The short
topic of formulating a strategy is a hard one to address in a space of time. Concepts that help with strategy formulation are
evolving of
one
clear
and information technology itself is changing, so the impact on
the
about
other is complex.
the
the
substance
the
world
underlying
of
and
the
the
way
assumptions before beginning to address
question. it
As such, it seems important to be
There are some basic beliefs about
operates
which
underlie the arguments
developed in this paper.
The
first
strategies
of
are
premises
is
that
information
technology (I.T.)
most effective when they are developed in the context
of
business
to
know where the organization is headed before one begins to work on
the
question
and corporate strategies.
Thus a critical first step is
of what a sensible direction for the use of information
technology should be.
II
-2Such
an
explicit, statement
the
"rational
one
to use.
the
years,
Science decision Simons
terms,
in
Decision
"intelligence,"
interactive it
seems
this
published
in
1960.
In this view
solve
alternatives
"design" and "choice" being the three
phases. useful
In
In to
light
of
work
since
Simon's
add a fourth step namely "action."
model an organization, or an individual, first defines
problem,
would
one of the earliest was Herbert Simon in his New
Management
publication
the
This model has been espoused by a series of authors over
making is thought of as falling into a series of phases.
principle
Thus
actor" model of the organization is the most effective
perhaps
of
of strategy assumes implicitly that
that that
is' clarifies
it, then creates alternatives that
particular problem, then selects the best of these
following which they go through implementation, that is,
a set of actions are taken.
This work
"rational
that
is
formulation. research, as
it
actor" going
paradigm implicitly underlies much of the on
in
corporate
strategy
and
strategy
The 'rational actor' paradigm dominates the writing and
particularly
relates
in the area of methodologies and even more so
to information technology since many who work in this
area come out of an engineering and science background.
However, equally
well
example, follow
there
there a
primarily
the
are
several
activity
that
alternative
models
which describe
takes place in organizations.
For
is a large group of managers who seem to successfully
problem-solving
process
which basically acts first, based
on intuition, then examines the results in an intuitive way
-3-
and
if
senses
through
to
a
next
decision
making
second.
Such
on.
results
seem
set
actions.
the
of
action
to be good.
comes
In
first
They then cycle back
this view of management and
the
analysis
comes
a view turns the standard methodologies for strategy
upside down and there is little prescriptive or normative
formulation writing
the
for
managers or academics with this view of the world to act
the
In
comments
follow,
that
the
rational
actor model is
dominant but is not in any way meant to be exclusive.
second premise that underlies this paper is that the need for
The an
explicit
of
an
that
view of the organization's strategy is necessary because
increasingly
external environment.
turbulent
The premise is
next decade is more likely to be one of "economic war" than
the
"economic
It seems
peace".
overcapacity
discontinuities;
that in
we
are
industry,
entering
an
increasingly
era
global
expectations both of the quality of products and
competition,
rising
services
well as expectations as to one's standard of living.
indeed
as we
are
management
the
entering systems
If
a period of continuing economic change then and
ways
of
doing
business
that will be
in such a period of change will be different from those in
successful past.
the
of
is assumed that incremental "business as usual" will
It
not be adequate in the years ahead.
Although years of
than
these
social,
the pace of change is assumed to be higher in the coming it
was in the '60s and '70s, it is not assumed that most
changes
are
I.T.
related.
In fact, quite the reverse;
political, global economics, and technologies such as genetic
l1
-4-
engineering
are
enables
organization
they
the
occur
argued
technology
example,
activities
in
South
and
to
the
way.
Information
However,
facilitating
technology
to facilitate and mediate these changes as
information
for
added
organizations.
and impact on the organization.
that
change,
driving
live
Africa
As an aside, it could be
facilitates
television
a
faster
coverage
in
rate of
America
on
has undoubtedly increased the awareness
political pressure for America to respond in some
by
and
change
large,
or
information
technology seems to be
enabling it to happen rather than driving it
in a causal way.
A
third
several external second
premise
levers
by
world
imperative. they
occur
that
an
which
and
premise,
is that information technology is merely one of an
organization adjusts to changes in the
in management practices. there
Strategy
is to
no
As is suggested in the
assumption
of
a
technological
be effective has to be driven by ideas as
to informed capable managers.
On balance, it is unlikely
effective strategy will be driven by the technology in a way
that brooks no alternatives.
than
The
fourth premise is that strategy formulation is more of an art
a
science and to be effective it should be the province of line
management.
Hence;
formulation. differently
If in
the
resulting
and
others
the
built-in
difficulty
of
I.T.
strategy
corporate strategy formulation is an art practiced
different strategy
scarcely
at
organizations by different managers and if is articulated in some firms in great detail all,
then clearly there is no "science" of
-5-
It is an observable fact that good strategic
formulationl
strategy
is all
strategic
management
is
capabilities
among
general
traditionally
not
information
are
and
the
information
have
technology field.
correspondingly those who understand the often
are
technology
uninformed
of
the
corporate
to be effective there needs to be a shared process
Hence
strategy.
of
out
technology
information
of
come
managers
Line
managers.
I.T.
of
knowledge
the
of
lack
the
scarcity of good
this
of
top
who know their corporate strategy are often ignorant of
those
Hence,
On
rare.
too
management
strategy formulation.
This is hard since both bodies of knowledge
changing rapidly and to some extent one is asking art and science
to mix constructivelyl
Definitions and History
Terminology and
information that
I.T.
for
many management terms have widely different
that
people.
different
to
definition
field such as management is woefully undefined
a
out
it turns
meanings
in
of
purpose
the
(I.T.)
technology only
is not
are two terms which require
There this
paper.
The most important point is
itself.
There
computers.
The first of these is
is no
way
clean
of
categorizing I.T. but it consists of at least of the following:
1.
-
Computers information these through
computers technology.
are of course a central component of There
is a
full smorgasbord of
[1] ranging from large mainframe computers all the way to
the
recently
arrived
personal
computers
l1
-6-
even
the
and
Together
form.
micro computers, that exist in chip
smaller,
mainframes
to
information
that
spectrum
this
with
exists
micros,
is available
wealth
the to
an
from
computers
of
of
and
data
organization
in an
electronic form.
2.
telecommunications has only recently begun to be
-
Telecoms
as
recognized of
part
a
partner
full
with the computer itself as
main structure of information technology.
the
The
range of telecom options can be thought of as follows:
External
Internal
Broad Be
Narrow E
In
world
telecommunications
an
which
part of the
are
organization. must
deal with,
is the additional complexity of having both public and
there private is
cells
four
these
to
addition
networks
hard
computer
to
available to fill each of these cells.
capture
the
powerful
difference
between
It a
that
is isolated, and what the computer becomes in
of
the user when it is linked into a network and
the
hands
has
flexible
access
other organizations.
to
information,
other
computers and
-7-
3.
White as
Collar
office
thought
the
standard tools
letters,
such
and
could be
such
as
as writing paychecks
done
are
Here
with
information
a computer-based workstation for
Similarly, there are workstations for
worker.
clerical
support
clerical
tasks,
well-structured
technology
Tools - these are commonly known
partial robotics for clerical workers.
as
typing
and
and
automation
of
routine,
Productivity
workers
that
with management support systems in various forms.
deal
1986,
in
Typically
in
the form of computer-based terminals
managerial
these take the form of decision support
systems and executive support systems [2, 3].
4.
Blue
Collar
Productivity
Tools
- the most obvious case of
blue
collar
productivity
tools
are
factory many
automation.
and related
However, it is interesting that a great
other professional workstations are now being installed the prime purpose is for the production of the service
where
These
itself. machine
tools
terms
of
workstations and
are
used
by
humans
not by
are closely related to the shop floor in
computer-aided However
engineering. such
robotics
design
and
computer-aided
there are other interesting examples
as loan officers in banks evaluating loan possibilities
through the use of an interactive work station.
5.
Smart
Products - in addition to the above four categories of
information technology
technology into
the
there product
is
also the inclusion of the
itself.
Thus
we have in a
-8-
modern
car
anti-skid
several
computers
in
the car to control fuel,
brakes as well as information supposedly useful to
the driver in terms of computed fuel consumption, etc.
The
important
information important that
point to make in the context of this paper is that
technology are
must
the
is
other
only
four
partially
computers.
Equally
categories of information technology
be thought of when one thinks about formulating strategies
for I.T. in the context of a corporate strategic move.
of
The
second
this
paper
hundreds
of
or
that on
Some
of
strategy
strategy
and
central range future,
There are literally management
examples are Strategic Management:
in
the
A New View of
Policy and Planning by Dan Schendel and Charles W. Hofer [4]
Hax and Nicolas Majluf [5].
these
itself. strategic
more recently Strategic Management:
Arnoldo of
is
books
literature. Business
definition which is important to make for the purpose
kinds
of
books
An Integrative Perspective by
This article assumes the content
is well
understood
to the reader.
The
point is that strategy is not long range planning, if by long
planning starting
we
mean this
laying from
the
out
the step by step path into the
present
and
assuming incremental
progress of existing businesses and markets.
The
original
Greek word from which strategy comes means "the art
of the (military) General."
-9-
For
the
formulation to
position
the
reality
and
the
purposes
this
here,
can
be
translated into strategy
being about how to create an appropriate mission, and
as
organization to accomplish this mission in light of
the
its internal strengths and weaknesses, its customers
of
environment.
external
Strategy
formulation is concerned
about the desired positioning of the firm and how to get there.
If
one
at business strategy historically one can see five
looks
phases in the development of the field up to the present time.
1.
An
early
phase
desirability landmark
merely
of
book
functionally
range
long
made
established
a
planning.
strong
(marketing,
based
for the first time the
case
Steiner [6] in his
for
making explicit a finance, etc.)
production,
plan that covered several years into the future.
2.
By
the
early
business
1970s
planning
the interest had shifted to a focus on To oversimplify this point of view,
[7].
basically one of executives giving top down guidance
it
was
to
the organization and bottom up plans then coming from the
division
and
functional
levels.
These
were
then
put
together for an overall corporate plan.
3.
The by [8].
third
was that of portfolio planning as espoused
phase
Bruce
in his 1970s book on Portfolio Planning
Henderson The
corporation
essence as
a
of
series
this of
approach separate
was
to
strategic
see
the
business
-10-
units
(SBUs)
markets
which
and
their
needs
appropriate
the
corporation.
These
and
balance
of
relative
and large had independent products,
missions.
cash
reality
by
growth
in
the
market
possibilities to identify an of
sustainable
to
position
looked at in terms of
portfolio
maximum
Important
were
this
SBU's given the growth
point
of
view
for
the
was the
vis-a-vis the competition and the
growth potential of the markets served.
4.
Industry stage Here the
structure
in
the
and
generic strategies [9] was the next
evolution strategy formulation methodologies.
the analysis was focused on the competitive position of firm
in
industry.
the The
context premise
different
structures
understand
these
of was
and
before
the
infrastructure
that
of
its
as industries have very
dynamics
identifying
it
is
the
important
to
possible generic
strategy appropriate for the firm itself.
5.
The
fifth
strategic which
and
most
recent
phase
in
the
evolution
of
planning is focused on a value chain [10] approach
turns
organization.
the
attention
back
to
the
inside
of
the
This technique analyses the internal steps by
which an organization adds value to its product or service.
The there suspect
point has
to
note
with all of these various approaches is that
been a steady progression of ideas. that
we
have
reached
any
kind
of
There is no reason to end
point
in this
-11-
progression purposes
and
for
change. that
which
This
will
strategy
in
light
strategy
of
the turbulent environment the
formulation
must
be
undertaken will
in turn will demand newer techniques and new concepts
prove powerful in helping organizations to formulate their in
formulation strategy
indeed
an
effective
way.
is a moving
formulation
to
Thus it can be seen that strategy
target,
and
this
suggests
that linking
changing information technology is going to
require unusual effort and flexibility.
Conceptual Frameworks
If
strategy
follows
that
answer. as
a
creative line management task then it
is no formula or technique that will produce an it is possible to use frameworks and methodologies
of stimulating ideas, aiding consensus among management, and
generally
helping to maintain perspective.
It is frameworks from the
two of the phases mentioned above that appear to be particularly
valuable IT
there
However
ways
last
is indeed
as a way of stimulating powerful creative methods of linking
use
for
suggested
the
ways
corporate of
strategic
looking
thrusts.
There are a host of
at the linkage that have come out of the
major business schools of the last five years [11].
At internal
its core, strategy formulation inevitably involves analysis of strengths
opportunities. problem.
This
and
weaknesses
is a
fundamental
and
external
equation
threats
and
in any strategic
III
-12-
it
As
an
example
is
possible
developed
in
book
was
he
literature draw it
of a framework being used to stimulate creativity
to
focusing
to
technology.
used
This
known
Porter framework that he
Review.
is
used
within
is
suggestive
the
Industrial
In this particular
Organizations
the framework itself.
to
has
most
Business
generate
well
look
been
visible
economic
He then proceeded to
of the framework for corporate strategy.
be
the
on
establish
also
perhaps
the
his book Competitive Stratecy [12].
implications can
take
However,
at the implications for information
done
article
by a number of academic authors; is
by
McFarlan
in the Harvard
Arguably it is the process by which this framework the firm that is its principle value.
The framework
and
has some useful categories but there is no way to
"answers"
unless it is creatively and knowledgeably used by
experienced line managers.
Using of
Porter's
forces
it
is
opportunities with
a
others the
small by
come
buyers
possible to go through the four areas and identify each.
group
In some organizations this is done formally
of
dimension up
(i.e.,
customer
diagram (Figure A) of the major categories
line
managers including an I.T. person, in
different combinations of the line and staff.
"buyer"
might
their
in
basic
an
needs,
with its
Focusing on
of Porter's diagram, for example, the company an
idea
customers)
for an electronic linkage between its and
itself.
The linkage gives the
ability to directly choose items that most closely match the
process
product to the customer.
also
markedly
speeds up delivery of the
-12AFIGURE A
THREAT OF NEW ENTRANTS
BARGAINING POWER OF SUPPLIERS
BARGAINING POWER OF BUYERS
1:
Q THREAT OF SUBSTITUTE PRODUCTS
11
-13-
A
example of a conceptual framework that has proved to be
second
effective for understanding the strategic opportunities inherent
very
the
internal aspects of the organization is the use of the "value
chain."
One of the first published references to its use occurred in
1980
a
in
as
(SPA), of
a
its
clients to
chain.
classes
found
it
based on the "value added
latter analysis is management's
critical
book
concept
and
leverage
points
in the value
(Competitive
Advantage, 1986) drew
expanded its application.
The value
a product activity, the
support
to
those
percent
of
cost
organization's
makes
the
to those
goods direct
Figure B shows the two
customer.
directly associated with the process of and services and those that are necessary Organizing this "value chain" as a
steps.
leads to insights and provides a way of focusing on
that
steps
offer
the initial stages of what it does through to the
from
of of
in, as it adds value to its product or service
engages
"manufacturing"
also
most
This
Porter's
the
it moves
delivery
that
analysis
the
SPA
work by SPA was not followed up in the academic
early
to
organization
those
application,
is a pictorial representation of the sequence of activity the
chain
as
the
until
attention
both
practical
leverage."
to
This
literature
In
is, on the cost of the value adding steps) and one based
as
judgement
work that Strategic Planning Associates
consulting firm in Washington, DC, did with some
[13].
added
"value
some
utilize
(that
cost"
of
strategic
effective
on
result
cost
clearly
account
structure.
for
a
large
proportion of the
Such steps very often are the ones
the greatest potential for I.T. application. it
clear
which
steps
might
be
linked
Such a view to
other
-13A-
FIGURE 1
INTERNAL: The Value Added Chain
Management Support:
Accounting! Legal Personnel
R & D PURCHASING MANUFACTURING
MARKETING
omputer
DISTRIBUTION SELLING SERVICE
11
-14-
organizations chain
in be
might
joint ventures, or perhaps which piece of the value all together and contracted out to somebody
removed
else.
To
repeat
made above, the concepts are merely vehicles
a point
management to discuss the potential of their businesses and hence
for
information technology might be used.
where
is
step
one on
dependent
that is much less dependent on hard costs and much more informed judgement.
management's
Value added leverage
to those steps in the "value chain" where management feels the
refers
has
organization
a
advantage
unique
greatest
leverage
unimportant
relatively
or
where
there
is the most
For example, an oil company arguably gets
form of leverage.
powerful its
The value added leverage
from
finding
oil in the first place.
It is
efficiently it manages the manufacturing
how
delivery process if it is in fact sitting on huge supplies of low
and
In this case, the exploration stage in the "value chain"
oil.
cost
is the
one
with
the
greatest
leverage, although its costs may be
proportionately small.
These
two
particularly think
about
changed,
as
frameworks useful
(industry
because
structure
and value chain) are
together they force the organization to
how it does its business and ways in which that could be well
as
explicitly
variables which impact the firm.
forcing
attention on the external
-15-
Both
these
of
"electronic
strategy.
points
powerful been
some
itself.
use
by
to
managers jobs,
the
having
an
impact
that
on
suggest
corporate
particularly
most
well
methodology
known
of
these is Rockart's
which was developed initially
in planning their information needs [14]. the
in the
by
overshadowed
is
the process of thinking through strategy
The
managers
success
initial
one of the major ways
frameworks
on
Factors
be
technology may be utilized there has also
which work
Success
Critical
of
domain
use
of
the
information as
technique
systems
has
Its been
a mechanism to get
think
through what are the critical dimensions of their
ones
to
which
they
must
pay
undivided
attention.
if
an organization can agree on those things that must be
uniquely
well for it to be successful it has gone a long way in
Obviously, done
at
useful
formulation
for
beyond
to
seems
technology
However,
then, encourage thinking about
view,
which
integration"
information
which
of
points
identifying its strategic thrusts.
Recent
work
of
managers share.
assumptions get
to
that
and
sharing
numerous
of
what
adds the
a
__
He has shown it is important to get at the the
critical success factors in order to
really
and
thinking
definitive
needs
creativity
to
be
done
to move the
organizations
to
be
by
managers.
The
CSF
process that results in articulating
organization's direction.
changed behavior [16, 17].
______
[15] has built on the foundation that
These two conceptual frameworks are being used
forward.
stimulate
methodology
underlie
core
the
organization to
Henderson
established by identifying the Critical Assumption Set that a
Rockart group
by
analytically
These have been shown in useful and to result in
-16-
There yield more
is another perspective which is being explored and seems to
a
different
pervasive
This
third
fundamental first
of
research these who
this
he
book
same
that
obvious
been
of
done done
by
streams
the 1950s and 1960s.
the
of The
Alfred Chandler, a business In
thesis that an organization's strategy
as it changes, the organization adjusts its Although this point is regarded
Leavit
produced
an
article
[19]
At about the based
on an
of the organizational behavior literature and studies that
it and
At
in
important
important book in the early '60s [18].
to that point. could
sets of forces.
was
two
it is nonetheless a powerful point.
Harold
(in
employs,
In this article he established a case be
thought
of
not
some the
the
organizations
information e.g.,
ways people
its in
and
technology
telephone,
time, it
in fundamental research.
as
consisting of four
These were the tasks that the organization strategy), the organization the
organization
the technology that is utilized.
technologies, etc.
were
an
organization
structure
case
out
work
and,
accomplish
skills,
arose
that
wrote
time
done
an
to
in the first two analytical frameworks.
is the
today
time,
important has
those
to match the new strategy.
evaluation had
insights that are in many ways wider and
developed
over
structure as
than
of
framework
historian,
changes
set
this
was
so
materials,
and their
The technology in this
much as it was any of the manufacturing
process,
a novel and powerful way of viewing
had the added advantage of being well grounded
-17-
In of
to Chandler and Leavit there was also at this period
addition
time
strategy lists
development
the
but
"scenario"
school
of
corporate
the heart of their work was the idea that the external
at
could most usefully be examined in context of its social,
environment political, influence
the
school developed both methodologies and check
This
[20].
of
economic
and
technical components.
Their work had a big
in the '60s but fell out of favour until its recent revival
[21].
If
three streams of work are combined together one arrives
these
at the diagram given below.
EXrtERAL
SOC:O - COO
This diagram [24] recognizes that an
tC^*GAIt,
/
~[
O~
tetOWCaL rC.OLOGICA.
S~muCUm!
[~v~mOtoot
AC,*ott curt
j \\TEY
t[W ORG4 ST ·
PPO CTEESS
I
//0CES
COLOGY
, o
can
organization in
a
state
strategy,
dynamic
be thought of as a set of forces existing equilibrium.
On the one hand you have its
the mission it wishes to accomplish, and all the tasks that that mission.
make
up
more
importantly
structure
~""""~"'~""""""~"'-'
of
usefully
/
become
-
You also have its organization structure and,
perhaps, alive
and
the
corporate
vibrant.
culture
that
makes
the
You also have the people, and
-18-
only the people themselves, but the roles they are being asked to
not
For
play.
that
are
available,
defined
systems
the
the
of
information
technologies as
the budgeting, and the control
planning,
All these sets of forces exist in an
does its business. which
environment
economic
head
well as the informal processes that represent the way the
as
external
the
Holding all these four forces together are the
processes;
organization
consists
factors.
technical
and
of
the
social,
political,
These changing factors can impact
of the sets of organizational forces although principally of
one
any
particularly
previously.
management
becomes
he/she
fourth major set of forces are the technologies
The
manufacturing.
when
than
individual
different
as head of marketing becomes a very
a person
example,
course they are reflected in the strategy of the organization.
In be
to be a force in its own right and it certainly has a direct
seen
to
mechanism
the
gave
ordering
situation
where
competitors terminal
competitive
sustainable
advantage
in the
AHS took information technology, gave its customers a
cost
customer and
An
Supply (AHS) [22] and its choice of a
and allowed the customers to order directly from AHS.
terminal,
quality
them
give
place.
market
their
Hospital
is American
example
gave
strategies that are available to an organization.
the
on
impact
of this diagram then, information technology can
context
the
quicker
and
response
and higher
the ability to know more about its customers,
AHS
patterns both
savings
This
and
parties
their
tastes.
gained.
The combination was a
It was also true that AHS's
had a hard time breaking through the barrier of installe)
systems
to
sell to these customers.
There are hundreds of
-19-
of
experience
whole if
likely
Similarly, if the
is inconsistent with the
that
Such an outcome is made even more
processes
and reward schemes continue to
old ways of doing business and not the new. attempt
that
any
thinking
very
carefully
would
fail.
will
seen
be
culture are inconsistent with
of peoples' expectations then it is likely
management
the
the
reflect
organization
the reality
the
and
culture the
in
people
the
impact this technology
of technology assumes a set of skills and attitudes
vision
strategic
clearly
which
is likely to come to nothing.
it
then
idea
this
In addition, there are
corporate
and
structure
organization
accomplished.
One can have the best idea in the world but if the
linkage.
strategy
be
forces
of
sets
other
three
to
strategy
the
enabling
for
hold
is merely
technology
the
strategy,
the
for
force
driving
major
suggests, the external environment is the
diagram
this
as
However,
advantage.
competitive
for
uses
I.T.
similar
of
[231
examples
to
strategies
without
about the implications that such a strategy
structure,
the
I.T.
formulate
Thus it can
the
and the processes, is
people,
likely to fail.
An origin
expanded of
in
involving
15-20
corporate
sponsors
the
impact
information processes,
-1II1--_1I_.
of this line of thinking was the conceptual
project at the Sloan School of Management at MIT called
a
Management
on
_iaPI_
version
1990s [24].
the
faculty
at
the
This is a five year research program Sloan
School
together
with
ten
of
who are giving MIT $5 million to conduct research information
technology strategy,
Xli--llll_--^. ..._
per
se
technology. but
the
Our concern is not with
impact it will have on the
structure, people, and human resource practices
-20-
in
Our sponsors consist of three manufacturing firms,
organizations.
British
Service
Revenue namely
and
BellSouth,
papers
in
are the
although
of
series
the
public
conferences
and working conferences.
papers domain
remain
and
are
limited
ideas
and conclusions become better formed.
there
has
and
in
been
many
of
Internal
The research program is in its third year and is
and MCI. a whole
producing
the
Ltd., Digital Equipment Corporation,
Computers
International
and
involved in information technology
firms
four
Young,
Arthur
Express,
American
organizations,
Motors, and Eastman Kodak, three service
General
Petroleum,
available
from
The MIT'
to the sponsors until the Already it is clear that
a major impact on organizations as a result of I.T. the
most
successful
cases
this
impact has gone
straight to the core of the way they do their basic business.
The Future
The the
impacts
of
information
technology which the researchers in
1990s program are finding would not be of such major significance
if it were not for the fact that there is no indication that changes are
slowing down.
That is, the external environment shows every sign
Management in the 1990s Research Program Massachusetts Institute of Technology Sloan School of Management 1 Amherst Street Cambridge, MA
02139
(617) 253-0585
-21-
of
continuing
to
experience
major
changes
over
the next several
years.
These changes will in turn demand that organizations adapt to
them.
Such
adaptation
can
technology.
information
be
This
facilitated by the creative use of is itself continuing to
technology
Recent technological breakthroughs suggest that the changes
change.
will affect some areas in major ways.
The
of
first
continuing
drop
architecture
these in
have
machine
at
hardware/software domain.
the
plus
costs
developments
The
in software
in machines that have now fallen below a
For example in 1986 it is possible to buy a "LISP"
around
particularly
in
hardware resulted
threshold.
cost
is
the
suitable
level which can deal with languages
$15,000
for qualitative knowledge and its manipulation
and be coupled with a knowledge base of a usefully realistic size.
The in
second
is conceptual in nature.
Herbert Simon
the 1950s first raised the idea of heuristics and its place in the
field
of Artificial Intelligence.
work
by
many
able
knowledge
of
so-called
do
so
"expert
to
concepts
in to
concept
used
have got us to the point [25]
very
which
limited
This
has
resulted
in
the
are an interesting development in
of
However,
systems" and artificial intelligence can be
"expert "expert
domains and therefore are of marginal
strategy over the next ten years.
corporate
build of
systems"
experts.
But to the extent they replace human judgement they can
only
importance the
that
researchers
acknowledged
field.
the
Since then there has been a lot of
it is possible to capture and work with judgemental qualitative
where
_
breakthrough
support
systems"
(ESS).
These
take the
"expert systems" but apply them to an interactive system
_I_1XII___II____
Ih1
-22-
a manager very much in the loop in a crucial part of the
leaves
that
decision making process.
The
breakthroughs
conceptual an
software
for
drop
cost
in
the
directly
the
for
the
[26].
information
in
time gives us the tools to attack
first
qualitative
data
from
passage
This
with
working
of
challenge
information
judgemental
in the early 1960s to
the 1970s to knowledge in the 1980s is of fundamental opens
and
significance
build
to
of the hardware has resulted in an economically viable
which
combination
one
system" coupled with the enormous
support
"expert
allow
that
another
up
class
of problems for which an
organization must have an effective strategy.
"knowledge
This
last
the
over
touched
been
scarcely
repetitive
tasks
activities
of
on
viable
together and tasks
organization.
telecommunications
that
it
credit
more been
have
well
the
do
have
understood,
routine,
with the transaction processing
More recently we have begun to work
has
The advent of low
allowed us to link remote sites
of
inventory
things.
routine risk a
tightly with the organization. affected
entry,
order
day-to-day
components
workers
and capture transaction processing data closer to the source
integrate
payroll,
the
an
help to
knowledge
We have done a lot with computers
far.
to
have
that
since
physical manufacturing process via robots.
the
cost
thus
years
25
matters
era"
of
a
have been largely clerical, such as control
and
keeping track of the
More judgemental areas such as assessing
possible
complicated
However, the
loan
candidate or configuring the
customer order do not yield to the old
-23-
and
concepts work
with
hardware architecture that we have had to
"sequential"
thus
far.
The and
heuristics,
capturing
at
architectures"
science
new
the
of knowledge engineering,
availability
of
"parallel
prices offer the tools that will allow
reasonable
us to increasingly deal with these judgemental areas.
Given
the
technology
continuous
challenge
managers
of
firms
and
an I.T. strategy is tricky.
of
in the It must
both
getting
In addition, it involves
the I.T. professionals and the line
thus
far
From the evidence we
in the 1990s program, it would appear that
have
used
I.T. successfully are the ones who have
starting
such
a
which
dialogue.
In
order
to
get this
succeeded
in
effective
dialogue it appears that one way to start, is to start.
certainly
seems
those of
who
clear
that
the
-I
business
It
world is not waiting for
are slow to begin this process as is evident from the host
corporate
The 1990s it appears will continue to be a
takeovers.
time of change.
1_1__1_( _11____
environment
engage in a constructive dialogue.
to
collected
the
the
the management of change.
with
effectively
have
formulation
the
in
line managers thinking creatively and it must involve dealing
involve
the
changes
·
____
-24-
References 1.
Scott Morton, Michael S. "Decision Support Systems - Emerging Tools for Planning," TIMS-ORSA Conference Proceedings, New Orleans, May 1979.
2.
"Chief Executives Define Their Own Data Rockart, John F. Needs," Harvard Business Review, March-April, 1979, pp. 81-93.
3.
Keen, P.G.W. and Scott Morton, Michael S. Decision Support An Organizational View, Addison Wesley, Boston, HA, Systems: 1978.
4.
Schendel, D. and Hofer, C.W. Strategic Management: A New View of Business Policy and Planning, Little Brown and Company, Boston, MA 1979.
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Henderson Henderson, B.D. Cambridge, MA, 1979.
9.
Porter, Michael.
Competitive Strategy, Free Press, NY, 1980.
10.
Porter, Michael.
Competitive Advantage, Free Press, NY, 1985.
11.
"Information and Treacy, Michael E. Yannis J. Bacos, A Research Prospective," Strategy: Technology and Corporate MIS Quarterly, Vol. 10, No. 2, June 1986.
George
W.
Top Management Planning, MacMillan & Co.,
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Beaty, Cynthia M. and Ives, Blake. "Competitive Information Sysetms in Support of Pricing," MIS Quarterly, Vol. 10, No. 1, March 1986. "IS Redraws Competitive J.I. and Kousynski, B.R. Cash, Vol. 63, No. 2, Review, Business Harvard Boundaries," March-April 1985. "The Information System as a Ives, B. and Leamoutz, G.P. Competitive Weapon," Communications of the ACM, Vol. 12, No. 12, December 1984. "Information Technology Changes the Way McFarlan, F. Warren. You Compete," Harvard Business Review, Vol. 62, No. 3, May-June 1984.
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Competitive Strategy, Free Press, NY, 1980.
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Porter, Michael.
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Strategic Planning Associates, Inc. Commentaries, Washington, DC, 1981.
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"Chief Executives Define Their Own Date Rockart, John F. Needs," Harvard Business Review, Vol. 57, No. 2, March-April, 1977.
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Henderson, J.C., Rockart, J.F. and Sifonis, J.J. "A Planning Methodology for Integrating Management Support Systems," CISR Working Paper 116, MIT Center for Information Systems Research, Cambridge, MA, September 1984.
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"A Primer on Bullen, Christine V. and Rockart, John F. Critical Success Factors," CISR Working Paper 69, MIT Center for Information Systems Research, Cambridge, MA, June 1981.
17.
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18.
Chandler, Alfred D. Cambridge, MA, 1962.
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"Applied Organizational Change in J. Harold Leavitt, Industry," in Handbook of Organizations, Rand-McNally, Chicago, IL, 1965.
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The "Learning to Design Planning Scenarios: Wack, P.A. of Royal Dutch Shell," unpublished manuscript, Experience Harvard Business School, March 1984.
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Lorange, Sumantra. 1986.
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"The Fortune. pp. 56-61. 1982,
23.
"Merrill Lynch Quacks Like a Bank," October 20, 1980, Fortune. pp. 134-144.
Jr.
"Beyond the Portfolio,"
Strategy and Structure, MIT Press,
Morton, Michael S., and Ghoshal, Scott Peter, Strategic Control, West Publishing, St. Paul, MN,
Hard-Selling
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Rockart, John F. and Scott Morton, Michael S. "Implications of Changes in Information Technology for Competitive Strategy," Interfaces, Vol. 14, No. 1, January-February, 1984.
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Morton, Michael S., Malone, T.W. and Luconi, F.L. Scott "Expert Systems: The Challenge for Managers," Sloan Management Review, Summer 1986.
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