WHEN GEORGE DAVID conceptualized an approach to elevator maintenance based on a centralized computer communications network, he had no idea it would become a notable example of the use of information technology to gain competitive advantage. Yet the story of the major improvement in customer service made possible by OTISLINE, the Otis system, has been told and retold from the lectern and in the trade press. David, formerly head of Otis North America and now CEO of Otis Elevator Company, was something of a trailblazer: an executive outside the IS function proposing and implementing a major change in how the company used information systems.
The system itself is striking. Previously, loosely coordinated, decentralized maintenance efforts were carried out in more than one hundred local offices; now Otis centrally coordinates the efforts of its nationwide repair force. Trouble calls are taken by highly trained, often multilingual operators who work from a computer screen to record all data concerning the problem elevator. Repair personnel are dispatched via a telephone/beeper system. Upon completion of the maintenance, all relevant information is once again recorded in the computer.
The advantages the system provides to Otis are manifold. Perhaps most important is senior management’s increased ability to view the status of maintenance efforts nationwide. A specialist can quickly be directed to a particular customer with a difficult problem. Frequent trouble from a specific type of elevator or a geographic locale can be observed as the pattern develops, and corrective action taken. The quality of telephone response to anxious customers can be closely monitored. And fault data, available both to management and the company’s engineers and designers, is more precise, more copious, and more accessible than the information that previously worked its way up through the five-level chain of command.
Although many elements of this now rather well-known story are fascinating, one often overlooked factor is particularly significant. The system was conceptualized and its implementation driven not by information systems personnel, but by George David himself. Ed Burke, Otis’s director of MIS, asserts, “It was and is George’s system. He saw the need. He saw the solution. I helped, but he made it happen.”
Even a few years ago, executives like George David would have been almost unique. Today, however, there is a small but rapidly growing number of senior line and staff executives taking responsibility for significant strategic projects centered on computer and communication technology in their companies, divisions, or departments. A pattern of emerging line responsibility for such projects is now becoming clearer. This paper presents some conclusions derived from a study of line executives in fifteen companies who have been proactive in their use of information technology. (The word “line” is used to encompass all managers — whether line or staff — having responsibility for a major segment of an organization.)
For the first three decades of the computer era, the key figures in information technology use were the information systems professionals. Today, for a number of reasons noted below, the shaping of information systems’ direction is passing to line managers. No longer willing to delegate the strategic or tactical uses of this technology to the information systems department, these managers are taking the lead in applying information technology to the most important areas of their businesses. Many are using the technology as a core element in aggressive new approaches to the marketplace or to enhance control of internal operations, as Otis did.
Including information technology as a significant component in business planning and, thus, in the process of conception of new business strategies and tactics, is only one part of an emerging senior executive role. The other, and equally important, element of this role is the active direction of the implementation of new systems. I will examine the logic underlying the need for both parts of this role later in this paper. First, however, let us look at a few other examples of “the line taking the leadership.”
- Three years ago Bob Campbell, president of the Refining and Marketing Division of the Sun Corporation, identified crude oil trading as perhaps the key business activity in his organization. He gave Woody Roe the job of improving Sun’s efforts in this area. Roe quickly realized the trading process was dispersed to a large number of groups located worldwide, each acting relatively independently. Some reported to the management of other Sun divisions.
Although he had no information technology background, Roe envisioned a central trading room supported by information from Reuters and other trade data sources. He turned to Sun’s information technology department for the technical design of the system, but then set out himself, with Campbell’s support, to initiate the process and organizational changes needed to make the system effective. Today centralized, on-line trading is recognized by Campbell and other Sun executives as a major weapon in Sun’s fight for increased revenue and profit in its very competitive industry.
- Dick Kennedy, while president of the Vitrified Products Division of the Norton Company, developed a strategic plan heavily based on the use of information technology. Realizing that his division (which manufactured grinding materials) was in a mature business, Kennedy focused on two critical success factors — low cost and excellent service. His business strategy was to make the division the international leader in both areas. To do so, he initiated a set of major information technology projects. These ranged from the “Norton Connection” (a computer-based telecommunications link between Norton and its distributors), to a more effective order-processing system, to a series of manufacturing technologies ultimately targeted at flexible manufacturing and automated materials control. Implementing several large, extremely complex systems at the same time is far from simple. But Kennedy had accomplished much of this, with considerable bottom-line impact, before Norton executive management combined his division with several others in a sweeping organizational realignment.
- In a similar manner, Jerome Grossman, president of the New England Medical Center (NEMC), took the initiative in using information technology to help him manage this 450-bed teaching hospital in Boston. Drawing upon his knowledge of the technology, he designed a “product-based” planning and control system of which any industrial manufacturing manager would be proud. The system, built with a relational database, now provides a wealth of information for future planning, day-to-day management, and retrospective analysis of operations.
The system is simple enough in concept. Each “product” the hospital delivers (e.g., a heart bypass operation) has a list of the resources (nursing hours, X rays, etc.) that will be used to help the patient. This product/resource list (or bill of materials) is used in three major ways. First, for annual planning purposes, the expected number of patients in each category can be multiplied by the resource requirements for each, and the institution’s total resource needs in X ray, laboratories, and so on, can be roughly estimated. Second, as patients are treated, the institution can monitor the use of resources by resource category, by department, by product, or by physician. Third, comparisons can be made between expected and actual resource use by case type to help set prices in the future.
A sweeping change of this type, from simple year-to-year budgeting processes to much more specific, detailed resource management using state-of-the art information technology, was conceptually innovative. But the real work had just begun. Implementing this new management system, which smacked of uncaring industrial practice, took significant education and persuasion on Dr. Grossman’s part of the management team, the medical staff, and the trustees. Only a senior executive strongly committed to this strategy could possibly implement such a system. It is now in place at NEMC.
If war is too important to leave to the generals, the deployment of information technology is far too important, in 1988, to be left to information technologists. For many reasons, a growing number of line managers have realized this and are taking charge of information technology use in their organizations.
Line involvement with information technology is increasingly evident in the development of major new projects and systems such as those described above. The new role of the line, however, has not diminished the influence of information systems executives. In fact, as the final section of this paper notes, their role has actually expanded.
The Fourth Era of Information Systems Management
Each of the managers mentioned above has explicitly or implicitly realized that, in the past few years, information technology has gone through a radical change: both the applications and the effective management of information technology look very different than they did just a few years ago. In fact, this is the fourth major wave of information technology; each new type of technology has, in turn, led to a different era of applications and managerial processes. These eras can be called — after the applications each enabled — the accounting era, the operational era, the information era, and the “wired society.”
The Accounting Era: IS Dominance.
In the 1950s and early 1960s, with only batch-processing technology available, commercial computer use centered on the applications of the accountant who, conveniently, carried out payroll, accounts payable, and other operations in batches. In those early days, the information systems staff was in charge of all systems efforts. The computer professionals were responsible for conceptual design, programming, implementation, and operation of the system. In many cases the relevant manager (in charge of payroll or accounts receivable, for example) was more a “subject” of the new system than a contributor to it. The information systems staff swept into the department, interviewed the clerks, and designed the systems — most of which were barely understandable to anyone outside the computer hierarchy. Operating managers stood to the side; they provided some assistance and guidance, but the responsibility for system design and implementation rested clearly with the information systems people.
The Operational Era: Line Involvement.
As on-line systems and direct access files became available and computers grew faster and were made more reliable, it became feasible to computerize the firm’s key logistical (operational) systems. Since these systems required continual real-time updates (e.g., withdrawals from and additions to inventory files) and direct access to their current status, they could be effectively implemented only in an online environment. IS dominance worked reasonably well for a few of the era’s simpler systems, but more complex systems, such as manufacturing scheduling, proved very difficult to implement. It became clear that complex systems were not workable unless line managers helped to define their objectives and functionality. Thus began an era of line management involvement in the conceptualization, design, and implementation of systems. Despite good intentions, however, the degree to which line managers understood and were involved in these systems varied widely. In most instances, there was little doubt among the participants as to who was ultimately responsible for the system’s success. It was still the information systems department.
The Information Era: Individual Decision Support.
The availability of improved, “fourth generation” user languages and relational databases, as well as the personal computer, ushered in a new era in the late 1970s and early 1980s. The focus changed from transaction processing, which epitomized the first two eras, to the use of information.
Able at last to access and manipulate data and text, individual users reveled in the ability to “do their own thing.” Many analytically oriented decision support systems were created. Staff worked hard to understand and exploit the new opportunities for information acquisition and manipulation. Information systems managers set up information centers and other end-user support organizations and turned much of the responsibility for end-user programming and information access over to the users. Yet information systems management retained its responsibility for developing and maintaining databases, setting computer and telecommunications standards, and other aspects of information technology. The seeds for line leadership in all aspects of computing were sown. What emerged from this era was a partnership between the users of information (who decided what they wanted to do and also did some programming) and the information technology organization (which provided networks, access to data, and so forth).
The Wired Society: Line Leadership in Strategic Systems.
Vastly improved communications capability has been the key technology change driving the most recent era. Combined with ever more cost-effective computer hardware and software, cheaper, higher band-width communications have led to the fourth era, perhaps appropriately characterized as the wired society. The label is relevant because a significant aspect of this era’s applications is the wiring together of sub-organizations within a single firm and, more strikingly, of firms to each other. At Sun, crude trading information flows from around the world to one location. At Otis, the geographically distributed repair offices are no longer as independent; they are logically and physically wired to the corporate office. At Xerox and Hewlett-Packard, design, engineering, and manufacturing functions are now closely intertwined in the development of new products. Norton and a number of other companies are closely attached to their customers through terminal-based order entry systems.
It is this multiorganizational, multifunctional aspect of fourth era systems that makes line leadership imperative. Significant business understanding, which exists primarily at senior levels, must go into system conception. Equally important, implementation of these systems most often requires significant organizational change. Information technology management cannot effect these changes. Only line management can. The next sections develop this idea more fully.
Line Leadership in Conception and Implementation
An entirely new level of opportunity, complexity, risk, and reward has been opened up by the new, communications-intensive information technology. Vastly greater managerial attention to the use of the technology is now demanded. The exact form of a system that, for instance, links a business to its customers is (or now should be) the result of a strategic managerial decision. Line managers must ensure that appropriate features within the system support the chosen strategy. The exact data to be gathered by salespeople with portable computers, for example, as well as the functionality of the system and the periodicity and rapidity with which data is gathered, is most appropriately dictated by line management.
As information technology becomes increasingly significant in business operations, its use should be shaped by the managers running the business. More significantly, if they are to be operated effectively, today’s systems almost always require major, sometimes radical, alterations in an organization’s structure, personnel, roles, and business processes — sometimes even in the culture of the corporation itself. Thus the economic, behavioral, and political consequences of today’s information technology applications should be well thought out and the requisite change processes effectively managed by those responsible for the management of the business itself. As Dudley Cooke, Sun’s general manager of information systems, notes, “All the information technology people can do is provide the appropriate technology platform, program the system, and install the equipment. It is the task of line management to make the extremely difficult, but very necessary, changes in personnel, roles, allied systems, and even organization structure required to make today’s uses of information technology pay off for the company.”
The Organization as a Dynamic Equilibrium
The fact that major changes in information technology can profoundly affect the people, processes, structure, and strategy of an organization was documented in the pioneering theoretical work done by Harold Leavitt at Carnegie-Mellon University and by Alfred Chandler at M.I.T. Although they came from different academic backgrounds and were doing research in different fields, these two men independently developed compatible points of view.
Interested in comparative business history, Chandler investigated the changing strategy and structure of large industrial organizations in the United States.1 He found that changes in an organization’s structure followed changes in the firm’s strategy and that organizational structure often had to be modified continually until it effectively supported the strategy. Chandler also focused on individuals and their roles in organizations and in organizational changes. He found that particular individuals played unique and crucial roles in developing the fit between the organization’s evolving strategy and an appropriate structure. In addition, he noted that many structural changes and shifts in strategy were caused by changes in the technology. For example, Du Pont took advantage of new chemical processes to move from munitions supply into industrial chemicals by broadening its strategy and opening up that new field. (One can readily recast Chandler’s “structure follows strategy” paradigm into four of the five interacting elements portrayed in Figure 1.)
Coming from an entirely different direction, Leavitt concluded that any organizational analysis should include four components: task, technology, people, and organizational structure.2 He saw one of management’s key functions as maintaining a “dynamic equilibrium” among these four elements. Although Leavitt’s main interest was in the individual and that person’s fit with the organization, he came up with the same four factors as Chandler did. The theoretical underpinnings of Leavitt’s work came largely out of the social psychology field and drew on the work of Chapple and Sayles, Argyris, and others.3
In a paper that discussed the impact of information technology on corporate strategy, Michael Scott Morton and I modified Leavitt’s approach.4 First we changed his generic “task” into the broader concept of the organization’s strategy (see Figure 1). This does not violate Leavitt’s conceptual structure, since “strategy” represents a summing of an organization’s tasks. Second, we included an additional box for “management processes.” This is in the middle of the diagram because we see management processes as part of the glue that holds the organization together. Here we include such processes as strategic planning; meetings, discussions, and evaluations that result in the annual or the capital budget; compensation; and personnel management. Every organization has such processes, and they represent a good deal of what is done in an organization.
Implementation as Transformation
Leavitt’s conceptual structure, as modified in Figure 1, aids in understanding the necessity for line leadership in information technology’s fourth era. Figure 2 notes four major stages of applications development. In era one, the accounting era, the data-processing people carried out all of the functions — system conception, design and programming, implementation, and operation. Today, in era four, while the bulk of design, programming, and operation remains the domain of information technologists, conception and implementation need to be line dominated.
The logic behind the need for line management involvement in system conception is straightforward. The people who run the corporation, the division, or the department are the people who must envision the direction in which they plan to drive their organization. Appropriate use of information technology can be a major factor in the accomplishment of that vision. Just as effective leaders plan to deploy key people for significant tasks, so too must they guide the most effective use of information technology.
The need for line involvement in implementation is more complex but equally compelling. Figure 1 suggests why. Any change in the technology will lead, as Leavitt notes, to changes in all or most of the other four elements. In fact, the systems described earlier have all changed organizational roles, processes, and structures. The changes have not been minor. At Otis, the roles of branch managers and district and corporate executives were all affected. The number of organizational levels was questioned. Several processes allied to maintenance, such as engineering data gathering, were also affected. Similarly, Sun’s system caused more centralization of a major business process. Comparable proposed changes in the major elements shown in Figure 1 can be traced in each of the other companies discussed here and in almost all of the organizations we studied.
These changes are so significant that the term “implementation” is too weak a word to describe what takes place when systems such as these are integrated into the organization’s functioning. John Henderson at M.I.T. prefers the word “transformation” for the third stage of project management noted in Figure 2, and he is right. When implementation is carried out with strong line direction (as it is at Otis, Norton, NEMC, and Sun), it becomes a transformation that cuts across previously independent divisions, functions, or other organizational subunits. It affects aspects of most (if not all) organizational elements noted in Figure 1. That is why this step of application development must now belong to the line. Only line management has the power to initiate and execute an organizational transformation of any magnitude. (See Levinson for an excellent description of the change process involved.5)
A Major New Responsibility
What results from this emerging pattern of line direction of fourth era information technology applications? Quite simply, the line managers we interviewed believe they have merely added another item to their list of significant responsibilities.
It can be argued that most managers have traditionally accepted three major responsibilities (see Table 1). First, they have always been responsible for the operations of their organization. For an accounts receivable supervisor, this means ensuring that the cash is collected. For a transportation manager, it means seeing that the trucks run on time and that deliveries are made. As one moves up from functions to divisions and from there to the organization as a whole, the "operations" job becomes one of managing lower-level managers.
In addition, line managers have always been responsible for control of two major resources, money and people. Although corporate staff groups may assist in these areas, the responsibility of a line manager to meet budget and revenue goals is clear, as is the responsibility to deploy, develop, and manage human resources.
About three decades ago, an additional major responsibility was added to each line manager’s agenda. In the early 1960s, when it became increasingly evident that “planning” (beyond one-year budget projections) was vital, corporations attempted to meet that need using a central planning staff. Unfortunately, this did not work. When it was realized that the planning process needed to be integrally connected to each line manager’s actual competitive environment, the primary responsibility for planning was shifted from staff planners to line managers. In most organizations today, line managers are responsible for annual, long-range, and strategic planning to ensure that their resources are used effectively to meet their goals.
In 1988, an increasing number of line managers are taking on an additional responsibility — that of actively exploiting information technology resources. For some, proactive management of information technology is as critical as the management of other resources, if not more so.
The Growing Role of the Information Technology Manager
Given the state of the technology and many line managers’ lack of expertise about that technology, the line cannot develop strategic uses of information technology by itself. In every case we have seen, IS staff has been involved in system conception and implementation. This interaction ranges from simple education or consulting to serious involvement in translating ideas into systems or designing and assisting during implementation. For major new systems, a full partnership between the line and the IS group has most often been evident.
In fact, as the line role grows, the information systems group role is also expanding.6 This is not a zero-sum game. While several traditional functions remain, the role of the senior information technology executive is a far more significant one today than ever in the past, along five major dimensions (see Table 2).
First, with regard to system development, even those systems in which the line is heavily involved require greater competence and skills on the part of the IS organization than ever before. To effectively play the helping role noted above, IS personnel need significant knowledge of the business. Equally important, the technical design, programming, and operation of these business-critical, often highly complex, systems present a far greater challenge than did earlier-era systems. Today’s systems require database, project-management, telecommunications, and a host of other skills not previously demanded of IS personnel.
Second, today’s systems require the development and implementation of a general, and eventually “seamless,” information technology infrastructure. The challenge to IS management of providing leadership for this profoundly important set of “highways” in the “wired society” cannot be overstated.
Third, there is a need to educate line management about its new responsibility. The line executives noted above are an intentionally biased sample. Not many like them exist today. The need now is to get all line executives to take on this new role, and it can only be done through formal and informal education, sometimes over an extended period of time.
Fourth, IS executives must educate themselves and their staffs about the business itself. Otherwise they will not be able to help line managers create systems that facilitate strategy implementation. Nor will they be able to carry out their fifth newly critical function, that of “seeding” line managers with ideas about effective applications of each new technology.
In short, the role of the information systems executive has also expanded. He or she is now a business executive — increasingly responsible for providing the line with knowledge about applicable technology and with the tools and infrastructure that allow development and implementation of innovative business systems. The ingredients of this leadership role were clearly expressed by Ed Schefer, previously the senior information executive at General Foods. Before his promotion to a senior line position, Schefer noted that he spent one-third of his time running the IS organization, one-third communicating with General Foods executives (both learning about the business and educating them about the technology), and one-third of his time outside of General Foods — learning about advances in the technology and business conditions in the industry.
Thus, in the “wired society” there is a need for a significant line leadership role, but there is also a need for growth and expansion of the IS leadership role. With the increasing importance of information technology in industry today, these developments are far from surprising.