it-enabled business capabilities for turbulent environments

04/13/2023국민대학교 비즈니스 IT전문대학원 차상민 ([email protected])

IT-Enabled Business CapabilitiesFor Turbulent Environments

Omar A. El Sawy and Paul A. Pavlou,

MIS Quarterly Executive,

2008,

pp.139-150.

정보자원관리론 1 / 31

국민대학교 비즈니스 IT전문대학원 차상민 ([email protected]) 04/13/2023

Contents

1. Executive Summary2. The Business Capabilities Trifecta3. Prioritizing The Capabilities In The Trifecta4. Turbulent Environments Require IT To Be Woven

Into The Enterprise Fabric5. Emerging IT Infrastructures For Turbulent Envi-

ronments6. Managing The IT Function In Turbulent Environ-

ments7. CIO Guidelines For Overcoming Turbulent Envi-

ronment Hurdles8. Applying The Lessons Of Our Research In Prac-

tice



1. Executive Summary

Turbulent environments IT-enabled business capabilities

Operational capabilities Dynamic capabilities Improvisational capabilities Operational → Dynamic and Improvisational

Relationships between IT infrastructure capabili-ties and IT-enabled business capabilities

Emerging IT infrastructures Event-drive Service-oriented Self-learning

Guidelines for CIOs to overcome the hurdles



2. The Business Capabilities Tri-fecta



A. The Business Capabilities Trifecta

Operational capabilities may no longer match the rapidly changing environment Market demand Consumer preferences New technology developments Technological breakthroughs Enterprises must rapidly innovate, adapt, and reconfigure

themselves to match the changing environment Enterprises need Dynamic capabilities and Impro-

visational capabilities to successfully compete in turbulent environments



B. A Collaborative Trio

Operational capabilities The planned ability to effectively execute substantive day-

to-day activities, such as manufacturing, logistics, and sales.

Dynamic capabilities The planned ability to effectively reconfigure existing op-

erational capabilities to match the shift in business envi-ronment.

Improvisational capabilities The learned ability to spontaneously reconfigure existing

resources in real time to build new operational capabilities that better match novel environmental situations.

The Business Capabilities Trifecta



C. Dynamic Capabilities

A measurable model of dynamic capabilities Sensing the environment

The ability to spot, interpret, and pursue the need for chang-ing the enterprise’s operational capabilities by understanding market needs and identifying new internal and external oppor-tunities.

Learning Acquiring, assimilating, and developing new knowledge

needed to revamp operational capabilities with new knowl-edge and skills.

Integrating knowledge Embedding new knowledge into the new operational capabili-

ties by creating a shared understanding and collective sense-making.

Coordinating activities Orchestrating and deploying discrete reconfigured tasks, re-

sources, and activities embedded in the new operational ca-pabilities. 정보자원관리론 7 / 31


D. Improvisational Capabilities

Insufficient time for formal planning Managers must adapt new conditions on-the-fly by

acting outside their formal plans. Improvisation is likely to be a repeated activity

that is enhanced with practice. Enterprises engage in improvisation in an orga-

nized manner.

Dynamic capabilities stress disciplined flexibility, “Logic of opportunity.”

Improvisational capabilities require creativity and intuition, “Logic of responsiveness.”



E. IT Infra Capas and the Biz Capas Trio

Opera-tional

Capabil-ities

Dy-namic

Capabil-ities

Improvi-sational Capabil-

ities

정보자원관리론

Environmental Turbu-lences

IT Infrastructure Capabilities

Strategic Advantage

9 / 31


F. IT Infrastructure vs IT Infra Capabilities

IT infrastructure is the sets of IT hardware, soft-ware, and networks, including applications soft-ware and database management software, that are available to the enterprise.

IT infrastructure capabilities are the enterprise’s ability to be aware of what functionalities the IT infrastructure has to offer, to understand when and how to use them, and, when using them, to take advantage of specific IT functionalities and their combinations.



3. Prioritizing The Capabilities In The trifecta



A. Trade-Off

An organization’s dynamic and improvisational capabilities are the primary predictors of its long-term strategic advantage in turbulent environ-ments.

Operational capabilities can only offer a series of short-term temporary advantages that are likely to be fleeting as the environment changes and new contingencies emerge.

The more turbulent the environment, the more valuable an enterprise’s dynamic and improvisa-tional capabilities become.

The case of IndyMac Bank’s e-MITS system정보자원관리론 12 / 31


A. Trade-Off (continued)

The more turbulent the environment, the more re-sources are needed to build and enhance an en-terprise’s operational capabilities.

In moderately turbulent environments, dynamic capabilities are the primary influential capability in reconfiguring existing operational capabilities.

In highly turbulent environments, improvisational capabilities completely dominate the reconfigura-tion process.

As turbulence increases to very high levels, im-provisation capabilities become more influential than dynamic capabilities.



4. T. E. Require IT To Be Woven Into The Enterprise Fabric



A. Connection, Immersion, Fusion

Relationship between IT infrastructure and the business context has been changed during the last 20 years.

Connection(1970s) > Immersion(1990s) > Fusion(most recently) Connection: IT was viewed as a tool that supported busi-

ness processes. Immersion: IT infrastructure was viewed as a business en-

abler. Fusion: IT becomes part of the integral fabric of an enter-

prise. Fusion is the most effective form of IT-business

coupling in turbulent environments. The necessary shared mindset is most common in pro-

gressive enterprises in industries that are undergoing ma-jor IT-enabled business transformation.

Case of Marshall Industries정보자원관리론 15 / 31


5. Emerging IT Infrastructures For Turbulent Environments



A. Influence to Dynamic Capabilities

IT infrastructure capabilities can affect an enter-prise’s strategic advantage indirectly.

IT infrastructure capabilities help an enterprise to: Stay responsive to market intelligence by affectively sens-

ing the environment. Acquire, assimilate, and use knowledge by effectively cod-

ing, synthesizing, and sharing knowledge to generate new learning.

Make information visible and accessible, facilitate informa-tion sharing and support rich communication, which in turn enhances the enterprise’s ability for integrating knowledge.

Allocate resources to tasks, monitor performance, and in-dentify synergies among people and tasks, thus enhanc-ing the enterprise’s ability for coordinating activities.



B. Influence to Improvisational Capabilities

IT infrastructure capabilities can improve an en-terprise’s awareness of internal and external con-ditions by: Providing access to information. Providing enhanced information flows that enable the in-

formation to be shared. Enhancing collaboration.

IT infrastructure capabilities facilitate the sharing and building of colleagues’ ideas through brain-storming and real-time interaction.



C. Three Types of Architectures

Event-driven Architectures To help create real-time enterprises that can react quickly

to market events A “publish/subscribe” architecture that enabled informa-

tion about business events to be distributed in real time across private and public networks on an exception basis

Based around the techniques and tools of complex event processing in distributed enterprise systems.

Vigilant Information Systems “alertly watchful” The concept of an observe-orient-decide-act(OODA) loop. They

include: Observing requirements Orienting requirements Deciding requirements Acting requirements



Service-oriented Architectures(SOAs) Based on Web services that allow applications to be more

modular (“Lego-like”) First, an SOA allows different flexible different flexible configu-

rations of smaller modules to be more easily enabled and ac-tivated.

Second, the domain knowledge needed to outsource the de-velopment of a smaller application module is much less, re-sulting in much faster application development time.

Third, an organized approach to getting things done quickly yields higher quality applications than when “fighting fires” under time pressure.

An effective way of conserving IT investments because it re-moves the need for massive integration and re-integration expenditures when requirements change.

Moving to an SOA and Web services creates a whole new set of enterprise requirements.


C. Three Types of Architectures (continued)

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Self-learning Architectures Each time a business process is executed, the architecture

can “learn” on-the-fly. A self-learning architecture expands the knowledge-creat-

ing capacity of business processes and enriches the inter-actions between processes and all who touch them.

A case of Dot Hill


C. Three Types of Architectures (continued)

21 / 31


6. Managing The IT Function In Turbulent Environments



A. The Application Infrastructure

The IT infrastructures typically implemented in en-terprises today are encumbered by legacy archi-tectures.

CIOs need to make changes in both the applica-tion infrastructure and the IT human resources (HR) infrastructure.

The Applications Infrastructure CIOs can take operational steps at the application infra-

structure level to cement more effective contextual cou-pling.

“Venture systems” layer is the application layer that is closest to the customer. This means the layer needs to be the most dynamic and highly configurable.

“Simultaneous loose/tight coupling” is providing reconfig-urability at the top layer rather than the ERP/transactions layer.



The Application Infrastructure The core needs tightly controlled specifications and re-

quirements, and a disciplined way of maintaining architec-tural integrity as modifications are made in response to business requirement changes.

There also needs to be a mutual accommodation across the business units, the IT department, and IT vendors.

One approach is to have an acceptable level of user-con-trolled reconfigurability in applications sensitive to changes in the business environment.

Standardized software applications are used in a best of breed fashion in some contexts.


A. The Application Infrastructure (continued)

24 / 31


B. The IT Human Resource Infrastructure

The IT Human Resource Infrastructure The IT fusion mindset requires that system developers re-

ceive extensive training on the business context. And that business users are trained to be savvy about IT

in the application context. In enterprises in highly dynamic environments that wor-

ried the most about contextual coupling at the application level, system developers were continually trained to act as business partners, rather than just as problem solvers and requirements translators.

A “slowing down to go faster” principle is most important when the pace is frenzied.

IT developers who interface directly with demanding busi-ness customers, who are using their dynamic improvisa-tional capabilities, are especially crucial.



7. CIO Guidelines For Overcom-ing T. E. Hurdles



A. Hurdles and Guidelines

Hurdle No. 1: IT Seen Primarily as an Enable of Opera-tional Capabilities Enterprises should put dynamic and improvisational capabilities

in the foreground and relegate operational capabilities on the background.

Hurdle No. 2: Improvisation Seen as Unacceptable Enterprises should develop improvisational capabilities for highly

turbulent environments. Hurdle No. 3: IT Not Woven Into the Enterprise’s Busi-

ness Fabric Enterprises should consider IT as integral to the business fabric.

Hurdle No. 4: Limited Availability of IT Infrastructures for Supporting Dynamic and Improvisational Capabilities Enterprises need to focus on leveraging the effects of their IT in-

fras on dynamic and improvisational capabilities, rather than op-erational ones.



Hurdle No. 5: Difficulty of Funding Emerging IT In-frastructures for Business Agility Enterprises should embrace emerging reconfigurable IT

infrastructures sooner, rather than later. Hurdle No. 6: Resistance to Loose/Tight Coupling

The IT department should embed IT processes into the en-terprise’s business units.

Hurdle No. 7: The Temptation to Cut Corners Enterprises should implement IT HR policies that foster

inner calm and discipline.


A. Hurdles and Guidelines (continued)

28 / 31


8. Applying The Lessons Of Our Research In Practice



A. Two trade-offs

The first trade-off is between IT support for short-term efficiencies in the enterprise’s existing oper-ational capabilities and processes, and support for its dynamic and improvisational capabilities.

The second trade-off is between reconfiguring ex-isting operational capabilities by leveraging dy-namic (planned reconfiguration) capabilities and improvisational (spontaneous reconfiguration) ca-pabilities, versus deploying IT infrastructures that enable these capabilities.



Thank you!

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