John Henderson, the Richard C. Shipley Professor of Management and Faculty Director, Information Systems Department, at the Boston University School of Management, conducts research on the strategic impact of technology. In this excerpt from an interview, he discusses how some companies gain a competitive edge using technology
The companies that have sustained strong performances—Kraft, P&G, Wal-Mart, BP, UPS, Progressive—have had strong IT organizations. They have committed to technology and evolved their capability to manage information technology strategically, and they have continued to stay in front.
It’s because they have good leadership. Leadership is a differentiator of companies. Technology is not a differentiator. It’s about the effectiveness of the leaders on both the IT side and the line side.
Emerging Architectures
We’re moving away from a business architecture defined by processes toward an architecture that combines both process and infrastructure. It is defined in terms of things like the ability to innovate, adapt, and respond to the marketplace.
A business platform that allows you that agility requires you to have both some centralized control over shared services and decentralized management of market-based capabilities. It requires a lot of shared vision among the leadership. At the end of the day you measure your success on your ability to acquire or absorb innovation. For example, if your business platform allows you to spin off companies or to acquire companies and to do that in a way that meets the economic expectations of the investors, then you have achieved IT and business alignment.
“It means that you have the ability to launch products and services in the marketplace with faster cycle times. You have the ability to cross-sell or integrate your product portfolio to a customer. In the old days, business architectures were market based—meaning my architecture recognized that I had businesses and processes lined up with markets. My architecture had notions of channel and geography in it. Today, I see more and more the notion of a business architecture being my ability to drive innovation and to be agile in the marketplace. I call them edge organizations.
The Story at Sears
An example is Sears Home Services. It had a business architecture defined in terms of geography, meaning regions and districts, an organization structure on top of that and an information system set up to support that business architecture.
They consolidated all the information systems in one location. They dispatch and manage 12,000 service people daily, delivering parts directly to the home of the service person. And they have automated the customer transaction system. So the Sears person drives into the driveway of the customer and flips on his 802.11 mobile WiFi. He gets out of his truck with a laptop connected to the truck, and the truck’s connected back to headquarters, and when he does a purchase or a parts order, it’s real time in front of the customer, directly connected to the ERP systems of the business.
It’s a good example of an organization that at one level became more centralized, because they brought the information flows into a centralized organization. But on another level, they became extremely decentralized. They drive everything at the edge of the organization. Every service person works out of his house and can coordinate with people adjacent to them to adapt to a change in a customer need. It’s neither centralized nor decentralized—it’s an information-enabled edge organization.
It’s not technology that drives the success. It’s the fact that they’ve created a completely different business model. Everybody at the edge of the organization knows as much about the customer as anyone at the central part of the organization, and they know at the same time.
The role of leadership in that organization is different. On the business side, one of the things that happened was a significant delayering. Supervisors became coaches who recognize patterns and create conditions for success. Individuals at the edge became more responsible. The leadership is more about thinking through conditions and products and capabilities needed to succeed than it is the day-to-day supervising of activities.
The result? They’ve had huge savings in parts management, huge increases in productivity, and significant increases in customer satisfaction. Over the last ten years it has gone from being one of several players to being the dominant service provider in the United States. It’s gained huge market share.
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