IT-Enabled Business Capabilities For turbulent Environments

IT-Enabled Business Capabilities
For Turbulent Environments

Omar A. El Sawy and Paul A. Pavlou,
MIS Quarterly Executive,
2008,
pp.139-150.

정보자원관리론
국민대학교 비즈니스IT전문대학원 차상민 (skykids@skykids.kr) 2009-05-08 1 / 31

Contents
Executive Summary
1.
The Business Capabilities Trifecta
2.
Prioritizing The Capabilities In The Trifecta
3.
Turbulent Environments Require IT To Be Woven Into The
4.
Enterprise Fabric
Emerging IT Infrastructures For Turbulent Environments
5.
Managing The IT Function In Turbulent Environments
6.
CIO Guidelines For Overcoming Turbulent Environment
7.
Hurdles
Applying The Lessons Of Our Research In Practice
8.


1. Executive Summary
Turbulent environments

IT-enabled business capabilities

Operational capabilities

Dynamic capabilities

Improvisational capabilities

Operational → Dynamic and Improvisational


Relationships between IT infrastructure capabilities 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
Trifecta


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 Improvisational

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 operational

capabilities to match the shift in business environment.
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 changing the

enterprise’s operational capabilities by understanding market needs and
identifying new internal and external opportunities.
Learning

Acquiring, assimilating, and developing new knowledge needed to revamp

operational capabilities with new knowledge and skills.
Integrating knowledge

Embedding new knowledge into the new operational capabilities by creating a

shared understanding and collective sense-making.
Coordinating activities

Orchestrating and deploying discrete reconfigured tasks, resources, and

activities embedded in the new operational capabilities.


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 organized 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
Strategic Advantage

Operational
Capabilities

Environmental Turbulences

Dynamic Improvisational
Capabilities Capabilities

IT Infrastructure Capabilities


F. IT Infrastructure vs IT Infra Capabilities
IT infrastructure is the sets of IT hardware, software, and

networks, including applications software 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 environments.

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 improvisational capabilities become.

The case of IndyMac Bank’s e-MITS system



A. Trade-Off (continued)
The more turbulent the environment, the more resources are

needed to build and enhance an enterprise’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 reconfiguration process.

As turbulence increases to very high levels, improvisation

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 business processes.

Immersion: IT infrastructure was viewed as a business enabler.

Fusion: IT becomes part of the integral fabric of an enterprise.


Fusion is the most effective form of IT-business coupling in

The necessary shared mindset is most common in progressive

enterprises in industries that are undergoing major IT-enabled business
transformation.
Case of Marshall Industries



5. Emerging IT Infrastructures
For Turbulent Environments


A. Influence to Dynamic Capabilities
IT infrastructure capabilities can affect an enterprise’s strategic

advantage indirectly.
IT infrastructure capabilities help an enterprise to:

Stay responsive to market intelligence by affectively sensing the

environment.
Acquire, assimilate, and use knowledge by effectively

coding, synthesizing, and sharing knowledge to generate new learning.
Make information visible and accessible, facilitate information sharing and

support rich communication, which in turn enhances the enterprise’s
ability for integrating knowledge.
Allocate resources to tasks, monitor performance, and indentify

synergies among people and tasks, thus enhancing the enterprise’s ability
for coordinating activities.


B. Influence to Improvisational Capabilities
IT infrastructure capabilities can improve an enterprise’s

awareness of internal and external conditions by:
Providing access to information.

Providing enhanced information flows that enable the information to be

shared.
Enhancing collaboration.


IT infrastructure capabilities facilitate the sharing and building

of colleagues’ ideas through brainstorming 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 information 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



C. Three Types of Architectures (continued)
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 configurations of

smaller modules to be more easily enabled and activated.
Second, the domain knowledge needed to outsource the development of

a smaller application module is much less, resulting 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 removes 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)
Self-learning Architectures

Each time a business process is executed, the architecture can “learn”

on-the-fly.
A self-learning architecture expands the knowledge-creating capacity of

business processes and enriches the interactions between processes and
all who touch them.
A case of Dot Hill



6. Managing The IT Function In
Turbulent Environments


A. The Application Infrastructure
The IT infrastructures typically implemented in enterprises

today are encumbered by legacy architectures.
CIOs need to make changes in both the application

infrastructure and the IT human resources (HR) infrastructure.

The Applications Infrastructure

CIOs can take operational steps at the application infrastructure level to

cement more effective contextual coupling.
“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 reconfigurability at the

top layer rather than the ERP/transactions layer.


A. The Application Infrastructure (continued)
The Application Infrastructure

The core needs tightly controlled specifications and requirements, and a

disciplined way of maintaining architectural 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-controlled

reconfigurability in applications sensitive to changes in the business
environment.
Standardized software applications are used in a best of breed fashion in

some contexts.


B. The IT Human Resource Infrastructure
The IT Human Resource Infrastructure

The IT fusion mindset requires that system developers receive 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 worried 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 business customers,

who are using their dynamic improvisational capabilities, are especially
crucial.


7. CIO Guidelines For
Overcoming T. E. Hurdles


A. Hurdles and Guidelines
Hurdle No. 1: IT Seen Primarily as an Enable of Operational

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

Hurdle No. 3: IT Not Woven Into the Enterprise’s Business

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 infras on

dynamic and improvisational capabilities, rather than operational ones.


A. Hurdles and Guidelines (continued)
Hurdle No. 5: Difficulty of Funding Emerging IT Infrastructures

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 enterprise’s

business units.
Hurdle No. 7: The Temptation to Cut Corners

Enterprises should implement IT HR policies that foster inner calm and

discipline.


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 operational capabilities
and processes, and support for its dynamic and improvisational
capabilities.
The second trade-off is between reconfiguring existing

operational capabilities by leveraging dynamic (planned
reconfiguration) capabilities and improvisational (spontaneous
reconfiguration) capabilities, versus deploying IT
infrastructures that enable these capabilities.


Thank you! 

http://www.slideshare.net/SkyKiDS/itenabled-
business-capabilities


IT-Enabled Business Capabilities For turbulent Environments

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