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2. The impact of digital networks on organizations

This article explores the history of IT and organizational change, the role of networks in organizational form, and the management of IT within organizations. It discusses the shift from centralized to decentralized systems, the impact of office technology and communication tools, and the productivity paradox. It also delves into the different levels of IT impact on businesses, including localized exploitation and business scope changes. Additionally, it explores the transformation of organizational form, including vertical control, horizontal coordination, and inter-organizational forms. Lastly, it discusses the role of the CIO and the importance of business models in the context of IT.

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2. The impact of digital networks on organizations

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  1. 2. The impact of digital networks on organizations A. IT & organization: A brief history B. IT and Organizational Change C. Networks and organizational form D. Managing IT: the CIO Next time: business models --January 18, 2001--

  2. A. A brief history of the relationship between IT & organization “bureaucracy = organized information (Max Weber) • the corporation begins with double entry bookkeeping (accounting) • the modern organization begins with organized paper information flows • standardized information formats, record keeping • hierarchical (vertical) control of information flows • routine procedures eliminate individual judgement

  3. IT and the workplace Documents: handwritten > steel nib pen (1850) > typewriter (1900) > word processor (1964) > personal computer (1980) > ??? Information systems: chronological ledger > files (1880) > binder (1894) > Dewey decimal system (1876) > database? The trend: from centralization to decentralization. -- more on p. 314 of the reader --

  4. Office technology... Transactions: the letter (1860) > telephone (1900) > email (1900) > EDI (1990) > eBay??? Communication: mimeograph (1870) > printer (1980) > FTP (1990) > the Web (1995) > Decision systems??? The trend from organization by geographical proximity to organization by information process. -- more on p. 314 of the reader --

  5. B. IT & Organizational Change Venkatraman’s argument: 1. IT changes the organization of business processes. Business process = roles and responsibilities. Who does what? Who knows what? Who reports to whom? Who works together? • In planning IT projects, it is essential to understand the kind of organizational change your technology implies, in order to manage the stress of the change process. --page 29 of the reader--

  6. The Productivity Paradox The introduction of IT into production (manual labor, blue collar work) generally leads to productivity gains, but the introduction of IT into administration (white collar work, mental labor) does not. Why not? • Productivity gains require business process redesign (reorganization of work) • How is productivity measured? Does quality of work count? Changed outputs?

  7. Managing productivity... Two key dimensions. • IT design. Why the user is important. • defining the organizational goal (see Venkatraman) • Understanding the organizational impact of code • implementation = business process redesign = change, therefore organizational stress • participation legitimates • you can’t possibly communicate too much.

  8. Five levels of impact 1. Localized exploitation = standalone systems; goal = efficiency; minimal impact upon business processes (online library catalog?) • Internal Integration = technical interconnectivity (systems integration). Implies business process interdependence across functional organizational boundaries (“stovepipes”). --page 31 of the reader--

  9. Business process redesign. Note the variables: Expertise functional cross functional decision making centralized coordinated work unit individual team role of information support enabling 4. Business network reconfiguration. Redesign of transactions between businesses. Note beyond EDI (info exchange) to new kinds of business relationships. 5. Business scope. How is IT changing our business scope (business model)?

  10. C. IT & Organizational Form Fulk & DeSanctis. From tree to nervous systems. 1. Vertical control (“flattening the organization”) Note decline of middle management because standards and controls are built into IT --replacing personal supervision. • Horizontal coordination. Work flow coordinated by information systems (concurrent engineering, stockless production, virtual organizations, etc). --page 43 of the reader--

  11. Fulk & Desanctis... 3. Smaller organization. Examples: outsourcing; integrated processing; business networks > vertical integration. 4. New forms. Spinoff entreprenurial activities. Federated organizations. 5. Core product through manipulating information rather than physical products (Cisco; Sabre).

  12. Fulk & Desanctis... 6. Inter-organizational forms. Integration of value chain by EDI or virtual markets. (eBay, auto industry). Note: IT can lower transaction costs, raising question whether transaction costs lower through vertical integration or external sources (Coase, Williamson). --page 46 of the reader--

  13. D. Managing IT The CIO = what the reporting structure tells you about the use of IT in an organization • A note on entrepreneurship • Intrapreneurship. Why it’s hard for established organizations to change. --page 54 of the reader--

  14. Next: business models The strategic question: What business are we in? • How does IT change our business model? • Our business process • Our competition • Our customers • Our relationship to our customers?

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