Kling, Rob & Roberta Lamb. 2000. "IT and Organizational Change in Digital Economies: A Socio-Technical Approach" Understanding the Digital Economy -- Data, Tools and Research. Brian Kahin and Erik Brynjolfsson (eds). The MIT Press. .
1. Introduction to the Digital Economy and Organizational Change
Many people are enthusiastic about the prospects of a digital economy (sector) energizing the larger US economy. Much of the speculation and reporting emphasizes new business models – a fun topic. However, it is easy to assume that business firms and public agencies can readily change to take advantage of new business models when they decide which ones are most appropriate. Regardless of the specific business models that are devised and selected, they have to be enacted by organizations in order to realize their expected economic and social value.
We know that organizations are imperfect implementers of business strategies, even those that appeal to many experienced managers. For example, between 1993 and 1995, Business Process Re-engineering (BPR) was enthusiastically advanced by the popular business press and was tried by a substantial number of our major business firms, despite high costs and a high failure rate (75%) (Bashein, Markus, and Riley, 1994). Many professional managers have now become wary of BPR, and have turned to Knowledge Management as “the next big thing,” despite considerable confusion about what it means in practice and how to change organizations to take advantage of its insights. These recent kinds of events should make us cautious about the ease that organizations will be able to effectively implement new business strategies, especially those that depend in critical ways upon complex information technologies (IT). Many competent managers have significant trouble in implementing exciting ideas about new informational regimes and organizational strategies.
More seriously, thirty years of systematic empirically grounded research about IT and organizational change suggests that many organizations have trouble in readily changing their practices and structures to take effective advantage of IT. Of course, computerized information systems are widely used in industrialized countries to support an immense variety of organizational activities. Research has found it requires complex organizational work to get information systems “up and running.” In addition, researchers have found that there are sometimes major differences between the ways that systems have been envisioned and how they are used in practice. The body of research that examines topics like these is called Organizational Informatics (OI). OI research has lead us to a deeper understanding of IT and organizational change and some highlights of this “deeper understanding” are the substance of this article.
Before we discuss some key ideas from this body of research, it helps to characterize a Digital Economy, so that we may better understand how IT is to play an enabling role. The term “digital economy” was popularized by pundit and consultant Don Tapscott in his 1996 book, The Digital Economy. Tapscott provides many engaging examples of the ways that IT plays a role in business operations, and he is specially enthusiastic about the role of the Internet in fostering electronic commerce. But he doesn’t provide a significant analytical conception of a digital economy. In fact, he often uses the term “digital economy” interchangeably with “new economy” (which is a different construct – one that emphasizes high growth, low inflation, and low unemployment).
A recent Commerce Department report, The Emerging Digital Economy, is much more analytical. It characterizes a “digital economy” based on industries and forms of IT-enabled business activity that are likely to be significant sources of economic growth in the next decade. These include the IT industry itself, electronic commerce among businesses, the digital delivery of goods and services, and the IT-supported retail sale of tangible goods. Tapscott includes a wide variety of IT-enabled activities, such as Boeing’s “paperless design” of the Model 777 wide-body jet airplane with complex mainframe-based CAD-systems. In contrast, The Emerging Digital Economy emphasizes systems and services that utilize the Internet rather than proprietary commercial networks.
Our approach builds on both of these, by focussing upon important forms of IT-enabled business activity. These developments were initiated (in the U.S.) in the 1950s, long before the Internet was conceived. They were widely expanded during the 1960s, 1970s, and 1980s, before the Internet was reconceived as a commercial service. We have much to learn from these computerization projects about the character of organizational change with new technologies. There will continue to be important proprietary networks for the foreseeable future – such as those that clear checks between banks and communicate credit card transactions between merchants and banks. While the Internet is likely to become the major enabler of growth in electronic commerce, we should not conceptualize a digital economy in ways that make the Internet central by definition.
The “digital economy” is conceptualized differently than the better understood and more carefully studied “information economy” (Porat, 1977; Cooper, 1981; Katz, 1984; Robinson, 1986; Jussawalla and Lamberton, 1988; Kling, 1990; Schement, 1990; Engelbrecht, 1997). In brief, the digital economy focuses on goods or services whose development, production, sale, or provision is critically dependent upon digital technologies. In contrast, the information economy includes all informational goods and services, including publishing, entertainment, research, legal and insurance services, and teaching in all of it forms. These are overlapping but different conceptions. The digital economy can include some forms of production which are excluded from the information economy, such as computer-controlled manufacturing. However, the information economy includes many services that are only partly included in today’s digital economy, such as all K-12 education, all legal services, all forms of entertainment, and so on.
We identify four subsectors of a Digital Economy:
1. Highly Digital goods and services: These include those goods that are delivered digitally and services where a substantial portion of the service is delivered digitally. These include interbank fund transfers, online information services (e.g. Lexis/Nexis, DIALOG), electronic journals, some software sales, and so on. It may soon include a significant portion of music sales. It can also include distance education that is enacted primarily on-line. However, many distance education courses are not wholly conducted online: students may be required to attend a face-to-face orientation meeting and to purchase books and other materials which they obtain through specialty stores. By acknowledging that many of these services are “Highly Digital” rather than purely digital, we can have a better understanding of the organizational activities that are required to support them.2. Mixed digital goods and services: These include the retail sale of tangible goods, such as music, books and flowers via the Internet, as well as services such as travel reservations. While a significant fraction of some of these products, such as pop music, may be sold in purely digital form within the next decade, there is a durable market for tangible goods. For example, around Valentine’s Day, many people want “real flowers,” not digital simulacra. In addition, people who make airline reservations to fly to a resort hotel usually want “a real flight” and a “real hotel room.” In practical terms, the retail sale of tangible goods usually rests upon the availability of inventory, distribution points and high quality delivery services (i.e., Federal Express) as well as advertising and on-line sales and secure banking to support the front end of the transaction. The production and distribution system for tangible goods can be the same one that is used for mail catalog or telephone sales; the Internet serves as another sales channel.
3. IT-intensive services or goods production: These include services that depend critically upon IT to be provided. They include a majority of accounting services in the U.S., data-intensive market research, and complex engineering design. They also include the manufacture of tangible goods where IT is critical in their production (such as the use of computerized numerical control for precision machining or the computerized control of chemical process plants). This set of activities has been the major focus of computerization between the 1950s and the early 1990s.
4. The segments of the IT industry that support these three segments of the Digital Economy: The goods and services of the IT industry that most directly support these three segments of the Digital Economy include a large fraction of the computer networking sub-industry, PC manufacturing, and some IT consulting firms. (Some analysts of the Digital Economy characterize the IT Industries in more expansive terms, and add Communications Equipment (including broadcast) and Communications Services (including all telephone as well as all radio, television, and cable broadcasting.) (See (Margherio et al., 1998, Appendix I.) The industrial classification codes don’t always align well with the boundaries of a digital economy (i.e., some computer networking is classified within telephone communications.) However, we see no substantive rationale for gerrymandering all of the telephone industry and the broadcast industry into the Digital Economy.
Taken together, these four segments represent a significant scale
of economic activity, and one that will grow in the next decades.
Most of the systematic analytical empirically-grounded research about IT
and organizational studies has been focussed on the third sector: IT-intensive
services or goods production. However, we believe that many key concepts
and theories that have come from this research provide a useful basis for
understanding some key aspects of the first and second sub-sectors, and
also help inform a research agenda.
2. Information Systems as Socio-technical Networks
It is easy for business analysts and IT specialists to become enthusiastic and even evangelical about the prospects of a Digital Economy to be a source of business innovation and economic growth (Tapscott, 1996). This professional enthusiasm has lead, unfortunately, to a rather promotional literature which emphasizes streamlined “success stories,” and legitimate kinds of “old technology” examples are dressed up in new language to signify new practices.
A close reading of The Emerging Digital Economy (Margherio et al., 1998.), is instructive. Most of the projects are described in terms of a series of tasks, and give us little clue about how organizations changed to accommodate new practices. Improvements in organizational sub-systems are treated as organization-wide gains. For example, a description of the way that General Electric’s Lighting Division developed an on-line procurement system focuses upon the efficiencies in the procurement department (faster orders, 30% cost reduction, and 60% staff reduction). However, there is no account of the costs of developing the on-line procurement system, deploying and maintaining numerous new workstations in the Lighting Division, training those who request materials (“the internal customers”) to correctly specify orders on-line to effectively use the on-line forms with digital drawing attachments, and so on. There may still be important net savings after these costs are factored in, but the cost reductions would not be so dramatic. The magnitude and characteristics of the co-requisite organizational changes would also be clearer.
Most seriously, this expanded view suggests that IT should not be conceptualized simply as a “tool” which can be readily applied for specific purposes. GE Lighting’s on-line procurement system has important features as a complex technological system in which the orchestration of digitized product drawings and purchase orders has to be synchronized. It has important social properties regarding the authorizations to initiate an electronic purchase order, the control over product drawing versions that have been subject to engineering changes or manufacturing changes, and so on. In short, organizational researchers have found that systems like this are better conceptualized as “socio-technical networks” than as tools. In practice, the boundaries between what is social and what is technological blurs because some of the system design encodes assumptions about the social organization of the firm, in this case GE Lighting.
A different kind of example comes from the experience of Charles Schwab and Co. to develop an on-line trading operation (e.Schwab) in 1995-1996 (Schonfield, 1998.) Like many firms, Schwab initially set up a new small division to develop the software, systems, and policies for e.Schwab. To compete with other Internet brokerages, Schwab dropped its commissions to a flat fee that was about one-third of its average commission. Schwab’s regular phone representatives and branch officers could not help e.Schwab customers. e.Schwab customers were allowed one free phone call a month; all other questions had to be e-mailed to e.Schwab. While over a million people rapidly flocked to e.Schwab, many of these customers found the different policies and practices to be frustrating. In 1997, Schwab’s upper managers began integrating e.Schwab and “regular Schwab.” This integration required new, more coherent policies and training all of Schwab’s representatives to understand e-trades. It also required the physical integration of e.Schwab’s staff with their “jeans and sneakers” culture into the offices of regular Schwab staff with a button-down “jacket and tie” culture. One result was the development of a more flexible dress code in Schwab’s headquarters.
e.Schwab has been discussed in some business articles as a tool or a technological system. But the policies and procedures for any trading system -- including pricing, trade confirmations and reversals, and advice – are integral to its operation. These are social practices without which there is no e.Schwab. Consequently, the standard “tool view” is insufficient for adequately understanding the design of e.Schwab, its operations, and consequently the character of the organizational change required to develop this line of business.
These brief examples illustrate an approach to understanding IT as a socio-technical system. Table 1 characterizes some of the key differences between the Standard (tool) models of IT and organizational change and the Socio-technical models. The socio-technical approach has been developed by analytical empirically-anchored researchers who have studied IT and social change in a diverse array of public and private sector organizations during the last 25 years (see Kling & Scacchi, 1982; Kling, 1992; Kling & Star, 1998; Kling, 1999; Kling, Crawford, Rosenbaum, Sawyer, and Weisband, 2000). The research is robust insofar as it rests on studies of diverse kinds of IT ( from accounting systems through engineering design to knowledge bases) and varied organizations.
Unfortunately, the Standard Model still undergirds many of the stories
about electronic commerce that appear in the professional and popular business
and technological magazines. The major predictive errors that result
from relying upon the Standard Model are to overestimate the ease of “going
digital” by substantially underestimating the complexity and time of the
required organizational changes.
Table 1
Conceptions of IT in Organizations in Accounts of the Digital Economy
|
|
|
| IT is a tool | IT is a socio-technical network |
| Business model is sufficient | Ecological view is needed |
| One shot implementation | Implementation is an ongoing social process |
| Technological effects are direct and immediate | Technological effects are indirect and involve different time scales |
| Incentives to change are unproblematic | Incentives may require restructuring (and may be in conflict with other organizational actions) (Section 3.1) |
| Politics are bad or irrelevant | Politics are central and even enabling (Section 3.2) |
| IT infrastructures are fully supportive.
Systems have become user-friendly, people have become "computer-literate,” and these changes are accelerating with the “net-generation” |
Articulation work is often needed to make IT work. Socio-technical support is critical for effective IT use. (Section 3.3) |
| Social relationships are easily reformed to take advantage of new conveniences, efficiencies and business value. | Relationships are complex, negotiated, multi-valent*the nature of the relationship with the customer makes a difference in what can become digital (including trust) (Section 3.4) |
| Social effects of IT are big but isolated and benign | Potentially enormous social repercussions from IT (not just QWL, it’s overall quality of life) ) (Section 3.5) |
| Contexts are simple (described by a few key terms or demographics) | Contexts are complex (matrices of businesses, services, people, technology history, location, etc.) |
| Knowledge and Expertise are easily made explicit | Knowledge and Expertise are inherently tacit/implicit |
3. Illustrations from Organizational Informatics Research
A socially rich view of Highly Digital and Mixed Digital products and services—one that follows a Socio-technical model rather than the Standard model--can help policy makers and practitioners anticipate some of the key organizational shifts that accompany introductions of new technologies. That view is supported by a large and growing body of carefully designed empirical studies, known as organizational informatics (OI) research (Kling, 1996; Kling and Star, 1998). We have selected and briefly summarized a few OI studies that exemplify some important contrasts between socially rich and socially thin accounts about IT and: incentives, politics, support, interorganizational relationships and social repercussions (as outlined in Table 1.) These studies illustrate the ways in which a socio-technical perspective may guide researchers toward important insights about technology and organizational change.
3.1 Organizational and Social Incentives Shape IT Configurations and Use
OI researchers have found repeatedly that incentives matter in shaping the adoption and discretionary use of new technologies. People need good reasons to change their organizational practices, and they need the time and the training to make those changes. In many cases, work incentives require restructuring in ways that conflict with other organizational actions. Too often, however, the sponsors of new technologies hold the standard-model view that incentives are unproblematic. They believe that information workers will “naturally” see the advantages of using a new technology, like Lotus Notes, and adopt it immediately.
Lotus Notes at Alpha Consulting
Alpha Consulting is the psuedonym for an international consulting firm with tens of thousands of employees worldwide, and about 10,000 of them in the U.S. In 1989, the vice-president of information systems bought 10,000 copies of Lotus Notes. Depending upon how Notes is used, it can act as an e-mail system, a discussion system, an electronic publishing system, and/or a set of digital libraries. At that time, Lotus Notes was superficially similar to an Internet-like system with bulletin boards and posting mechanisms, discussion groups and electronic mail. The vice president believed that the firm’s line consultants, who worked on similar projects in offices all over North America (but, none of whom were located in his corporate office), could use some kind of computerized communication and information system to store what they knew, and to share it. He also believed that Lotus Notes 1.0 was such a powerful new technology that it would sell itself. No consulting applications of Lotus Notes existed yet, but the VP did not see this as a problem. To the contrary, he thought that examples might hinder inventive new uses--the main thing to do was to rapidly roll it out to the consulting staff and let them use it to find creative ways to share information.
The information technology staff tended to use fairly aggressively for sharing information about their own projects. The tax consultants in Washington, D.C. also used Lotus Notes as they monitored the behavior of the Internal Revenue Service and the U.S. Congress, and disseminated tax advisories to Alpha Consulting offices around the country about shifting changes in tax legislation that might affect their clients (Mehler, 1992). The line consultants, who were supposed to become Lotus Notes’ primary users, often seemed uninterested in learning how to use Notes, readily gave up if they faced early frustrations with Notes, and, as a group did not spend much time with it. The senior line consultants, who were partners in the firm, tended to be modest users. The more numerous junior line consultants, called associates, were low users.
This outcome might puzzle technology enthusiasts, like the Alpha Consulting VP, who hold to the Standard model. Socio-technical analysis, in contrast, reveals that reimbursement incentives go a long way toward explaining this mixture of results (Kling, 1999.) The partners, who had substantial job security, could afford to experiment with Notes. Many of the information technology staff were technophiles who were also willing to work with an interesting new application. The tax consultants, who were located in Washington D.C., had a significant incentive to show that they were visible and valuable in the firm. Lotus gave them the ability, in effect, to electronically publish their advice, and make it quickly available to many of the consultants around the firm who wanted to read the Notes database. They hoped it would enhance their visibility, and thus show that the Washington office was not just overhead, but an important contributing part of the firm.
It was not clear to the line consultants, however, what their incentives were for using Notes. Alpha Consulting -- and many other large consulting firms in North America -- reviews its consultants every two years, for “up or out” promotions. At major firms about half of the associates are fired at each review, while the few consultants who are promoted up through the ranks to the status of partners can expect annual incomes over $300,000. Alpha Consulting's associates were valued for their billable hours, and were effectively required to bill almost all of their time. “Billable hours” means they have an account that they can charge their time to. Consultants who wanted to use Notes had to have an account to charge their time against, and the initial learning time was in the order of 20 to 30 hours. In 1991, the consultants were billed at about $150 an hour, so they had to find a client who would be willing to pay $3,000 to $4,500 for them to learn a system whose value wasn’t yet clear to them -- there were no exemplary demonstrations showing them how other successful line consultants used Notes. Consequently, relatively few associates saw value in Notes.
Lotus Notes at Ernst & Young
An organization with a different explicit incentive system, might use Notes very differently. Ernst and Young (E&Y), another major consulting firm, created an organization whose charter was to organize E&Y’s consultants’ know-how in specific high profile areas. By 1997, E&Y had developed 22 cross-office networks of consultants with expertise about certain industries, organizational reforms, and technologies that were a focus of E&Y’s business (Davenport, 1997; Gierkink and Ruggles, n.d.). Each network was assigned one line consultant, on a short term half-time basis, to codify in Notes databases the group's insights from specific consulting projects, to prompt line consultants to add their own insights, and to edit and prune a project’s discussion and document databases. Some developed topical "Power Packs" in Notes -- structured and filtered sets of online materials, including sales presentations and proposal templates. Davenport (1997) observed that these “knowledge networkers” became network domain experts whose consulting services were in demand throughout the firm, and that Lotus Notes served as their information support system.
The case of E&Y illustrates an important idea -- that of conceptualizing the design of computer and networked systems as a set of interrelated decisions about technology and the organization of work. Unfortunately, thinking and talking about computerization as the development of socio-technical configurations rather than as simply installing and using a new technology is not commonplace. It is common for managers and technologists to discuss some social repercussions of new technologies, such as the sponsorship of projects, training people to use new systems, and controls over access to information. However, these discussions usually treat all or most social behavior as separable from the technologies, whereas the E&Y case suggests how a more integrated socio-technical view is critical. We include this example, not to show that E&Y executives were "smarter" than Alpha Consulting executives, but to demonstrate the value of research guided by a socio-technical approach. Because some E&Y managers, like Davenport, were cognizant of the Alpha Consulting failures through the publication of OI studies (cf. Kling, 1999), E&Y was able to avoid making the same mistakes.
Different incentive systems for different groups is one way to view
a key concept that helps to integrate seemingly disparate cases—one that
may helpfully guide implementations of Highly Digital and Mixed Digital
products and services, such as web-based publishing. Authors and
publishers, for example, are conflicted about putting their intellectual
property on the web. They may gain a wider reading audience, but
at the same time risk losing revenues by providing their works in a form
that is easily copied and distributed. Varied and conflicting consequences
in different settings is a common finding in OI research. Our job
as researchers is not simply to document the various consequences of computerization,
but also to theorize them (see Lamb, 1996; Robey, 1997).
3.2 IT Implementations Have Important Political Dimensions
OI researchers have also found that organizational politics can have very different effects on the outcomes of new technology implementations. A Socio-technical view of the backroom manipulations of key players allows that these can be enabling and even central to the success or failure of complex system implementations, such as financial accounting systems and material resource planning (MRP) systems. Interestingly, many Standard-model discussions, particularly those that report on successful implementations, simply ignore behind-the-scene activities, implying that they are irrelevant. (See for example the account of an inventory control system by IBM’s Personal Systems Group in Margherio et al., URL.) Other accounts, particularly those that report on failed IT implementations, dismiss the political wrangling as unusual or aberrant. The following OI research examples show that organizational change, technology implementation and political activities are commonly associated in complex ways. Key organizational actors can both promote and thwart the changes needed for widespread use of a new technology. They can also vie for power by backing competing technologies. The PRINTCO and Golden Triangle cases show that it can be folly to ignore organizational “histories” when trying to evaluate what has made a new technology implementation successful—more so if one seeks to emulate that success.
PRINTCO
PRINTCO is the pseudonym for a medium-sized manufacturing firm (about 800 employees) which designed, manufactured and marketed several lines of medium-speed dot matrix line printers for the mini-computer and small business computer marketplace in the 1970s and 1980s (Kling and Iacono, 1986.) A case study from the 1980s may seem anachronistic when we are discussing 21st century IT developments. But it helps to illustrate some organizational dynamics of upgrading IT that are as pertinent today as then.
In 1977 key actors adopted and began operating a simple Material Requirements Planning (MRP) inventory control system that they purchased from a nearby manufacturing firm. They wanted better control over their investments in purchased parts. As PRINTCO grew, by diversifying the variety of printers produced, the new products complicated the logistics of managing inventory. The material control managers began looking for more sophisticated MRP software to help resolve manufacturing problems, like capacity planning, tracking multiple simultaneous revisions of products, and accounting for planned orders. An informal committee found an MRP package that satisfied their preferences. But it ran on a Data General (DG) minicomputer, a DG S350 Eclipse, rather than on their IBM System 34. The new MRP package was also written in BASIC -- a new language for PRINTCO's manufacturing division -- since all of their administrative information systems were written in RPG-II.
The conversion began in 1980, but 18 months later the staff still had not completed the conversion. Unexpected problems plagued the project, such as lack of onsite vendor support from DG and difficulties in hiring programmers with the necessary skills, in addition to the complexities of making large-scale modifications to poorly documented system code. The senior vice president of manufacturing saw an impending crisis, and he formed a data processing steering committee to help guide the Data Processing (DP) manager. Some months later, the steering committee hired a new DP manager with stronger managerial skills but weaker technical skills. They ended the conversion project, deciding instead to upgrade the existing IBM System 34 and enhance the MRP system. Unfortunately, the new DP Manager spent his effort mobilizing support for the purchase of a more sophisticated computer (an IBM System 38). When after 10 months, the steering committee saw little progress on the enhancements of their MRP system, they replaced the new DP manager, with the manager of engineering services, who was promoted to the role of Operations Director. Almost immediately, they decided to buy an IBM 4331, found new MRP software to satisfy their preferences, and started a new conversion project.
Because of problems in DP, no one paid much attention to the proliferation of microcomputing at PRINTCO. At first, a few departments obtained DEC LSI-11 microcomputers from test equipment cast off by other departments. They upgraded them into usable computing equipment with the help of their own skilled staff. Soon 6 to 10 LSI-11's were scattered around the firm. One staff member in the test equipment area became the informal "expert" in operating, programming and using the microcomputers.
PRINTCO’s management was not simply replacing one MRP system with another, they were also attempting to replace the existing social organization of computing in their firm with an altered configuration. Management generated a lot of action that substantially strengthened the infrastructure for computing support at PRINTCO, but their fiscally conservative approach stopped short of doing what was needed to complete the conversion. The existing RPG-II programmers, for example, attended several BASIC programming classes at local colleges, but the simple class exercises did not provide lessons for programming complex MRP applications with DG's proprietary BASIC, and their learning curve was steep. PRINTCO's managers presumed that their information systems staff had all the skills necessary for most computing tasks or could easily acquire them. They had not realized that the skills and work routines of the department were very specialized and limited. Later, key managers tried to hire people who could program in both BASIC and RPG-II to expedite the conversion. Unfortunately, they could not locate and hire new programmers with programming skills in both languages at the offered rate. And they were not willing to create a DP milieu that would attract programmers with appropriate developmental skills to effectively convert their software. PRINTCO's managers were acting in ways they knew (standard operating orientations), such as minor reorganizations and changing managers. These kinds of changes did not shake up their organization, but they were not effective either.
While PRINTCO management was focused on the MRP system crisis, other staff in the organization, especially test-engineers, had to develop their own microcomputing environments. Many of these staff had the skills to develop an adequate infrastructure of support for their own work groups, but because they were effectively cut out of discussions about the conversion project, the firm never took advantage of their expertise. These staff viewed their micros as tools that helped them develop small scale systems independently of the ineffective DP shop. Their micro-revolution lasted a year, before control over computing equipment and programming was recentralized under DP. However, during the conversion project, two parallel computing environments were developing independent of each other. Each required investments of time and money from the organization. Each was left to run its own course with little direction and modest resources.
Golden Triangle
Pfeffer’s (1981) account of the design of a financial information system at Golden Triangle serves to further illustrate the ways in which IT implementations are often entwined with power struggles within many organizations. Golden Triangle Corporation, is a major chemical manufacturing concern which operates internationally, with sales in excess of $3 billion. It is organized into a staff group that includes accounting and four fairly autonomous operating groups. Within each operating group, divisions are headed by general managers. Divisional accountants report directly to these general managers, with only an indirect relationship to corporate accounting, which is supposed to provide “broad policy guidelines” (Markus, 1980: 7-8).
In 1971, Golden Triangle had seven different computerized systems and numerous manual systems in use in the divisions. The introduction of the financial information system would serve to standardize these systems by collecting and summarizing financial data from input covering transactions involving expenses, revenues, assets, and liabilities; and storing all transactions in a single, centralized data base. The system would output monthly profit and loss statements by division and for the whole company, as well as balance sheets. Prior to the development of the new system “divisional accountants had collected and stored transaction data however they saw fit, but had reported summary data to corporate accountants in a standardized format” (Markus, 1980:7). Clearly, the introduction of the standardized system would profoundly change the relationship between corporate and divisional controllers, as well as between the division and headquarters operating managers.
Over the years Golden Triangle had grown by the acquisition of newer, more rapidly growing divisions, that would attempt to operate independently and resist control from corporate headquarters and the original chemical division. To complicate matters further, corporate accounting was headed by someone who was a long-standing enemy of the controller of the original chemical division. Much more than managerial control and effective resource deployment was at stake. A single, centralized data base would enhance corporate accounting’s power over the various division controllers. It would enhance the centralized control of the corporate management over the divisions. Divisions would be unable to resist or delay in the furnishing of information, and any alleged misreporting of figures would also be stopped by the centralized system. Of course, the divisions saw the new system as a loss of autonomy and control over their operations information.
In many respects, the financial information system design was a political choice. Corporate accounting used an outside vendor to implement it, to avoid having to rely on internal operating support. The divisions fought cooperation with the new system, attacking its design, technical adequacy, and feasibility. This process dragged on over years, costing numerous hours of effort and meetings. Divisional accountants even attempted to sabotage the system. During the conflict, the head of accounting for the chemical division was reorganized out of his job, which alleviated tensions and drastically altered the political rationale that had originally driven system design.
As we consider the potentially radical organizational restructurings that Highly Digital and Mixed Digital products and services will require, like those that are currently underway at Schwab, the lessons learned from these cases could provide critical guidance. In some ways, the technology can be held hostage by the political milieu, as at PRINTCO. In other organizations, like Golden Triangle, key actors may seek to enlist the technology as a political tool. Even successful IT implementations cannot always be easily understood or emulated without an adequate description of the attendant political arrangements.
3.3 Socio-technical Support Is Critical for Effective IT Use
Discussions about supporting IT infrastructures are often constrained to the physical architectures of systems and networks. In practice, a “supporting infrastructure” involves a much wider range of “systems” and “networks” that include organizational practices, key support staff, and access to technical and social skill sets. These extensions are often referred to as ‘the hidden costs of computing,’ because most IT systems are built around a set of assumptions and defaults that makes deviation difficult and expensive. Processing errors is very costly, even though some systems may require users to do this routinely in order to achieve desired results (Gasser, 1986.) Suchman (1997) terms this ongoing additional support required to make information technologies function for the organization ‘articulation work’. As organizations seek to collaborate with other organizations, infrastructural demands escalate. However, most accounts portray IT infrastructures as fully supportive—they rarely refer to the articulation work needed to make IT implementations usable and dependable. The brief description of a Collaborative Planning Forecasting Replenishment system in Margherio et al.’s report (1998) on the Emerging Digital Economy gives few clues that would help us understand the challenges member firms faced as they each implemented the system within their own organizations. But another account of a collaborative effort among geneticists at 50 organizations shows clearly that supporting infrastructure and articulation work are key components of networked collaboration.
Worm Community System
The Worm Community System (WCS) was a large-scale, custom software, collaborative system that was designed to serve a geographically dispersed community of geneticists. Ultimately, WCS was used by 250 geneticists at 50 commercial and University laboratories. It was based on Internet communication technologies, and it allowed geneticists to publish and share documents and data, to create links among the content, and to analyze, navigate and select among its contents. WCS also included access to relevant external databases, like Medline and Biosis, as well as newsletters and meeting information. Although the system had a well-designed interface, that users found easy to manipulate, many still found the system difficult to access and use routinely. This failure was not due to any inadequacies from an end-user point of view—the system met the demands of the geneticists. However, the demands on University computer support staff were often greater than their system skills and availability.
The social infrastructure of networked computer systems like WCS--which includes not only hardware and software, but also knowledgeable, skilled support staff to maintain system availability and to respond to user problems or questions--is not usually homogeneous, and therefore equally robust, across all collaborating sites. In short, lack of attention to local infrastructure can undermine the workability of larger scale projects. WCS is no longer used. Much of its functionality has been added to newer, more popularized web-based systems developed for the genome projects. These preserve some of the best features of WCS, like the link-following capability, nice graphical displays and easy to use interface; and are better integrated to the desktop tools, operating systems, and networking skill sets that are commonly supported for web browsing.
In some cases, the need to provide an adequate infrastructure in support
of collaborative knowledge work can trigger a local organizational transformation
and large-scale infrastructural change as support practices, tools, computers
and networks are upgraded to meet system operational requirements and as
new staff are hired or existing staff are retrained to acquire the needed
system skills. There is a small body of OI research that amplifies
these ideas. Web models of computing (which are not related to WWW)
treat the infrastructure required to support a computerized system as an
integral part of it (Kling and Scacchi, 1982; Kling, 1992.) Star
and Ruhleder (1996) have also shown that there are subtle individual and
organizational learning processes underlying the development of local computing
infrastructure--including the ability of professionals with different specialties
to communicate about computerization issues. We expect these concepts
to become even more relevant as organizations find new technologies to
support their interorganizational networks.
3.4 Interorganizational Computer Networks Are Also Social Networks
Many network characterizations seem to suggest that the most important relationships can all be wired directly, and that they can be easily established and reformed. The Automotive Network Exchange (ANX), for example, a high-maintenance, tightly managed, virtual private network for automotive design, was recently characterized as a network of routinized interactions among a stable set of participants (Margherio et al, 1998.) In sharp contrast, OI studies show that interorganizational relationships are complex, dynamic, negotiated and interdependent. As the following study shows, a socio-technical approach can expose the complexities of using online technologies in support of interorganizational relationships, and can help to explain why some firms find online technologies essential, while others use them very little, or not at all.
Interorganizational Relationships and Information Services (IRIS)
In a recent study of online information resources, we examined the
differences in online information use among 26 California firms in three
industries: biotechnology, law and real estate (Lamb, 1997.) We found
that there are as many differences among firms within an industry as there
are between firms in different industries. Five factors seem to affect
the greater use of online information by some firms over others:
1. Interaction with regulatory agencies, as illustrated by biotechnology firms who submit documentation about product and productThese factors describe a set of influences that come from the interorganizational relationships of the firm. Some, like profiling, have a technical orientation, and some, like documentation, have an institutional orientation. The first two factors lead to increased use of online information resources. Firms that interact directly with regulators and those that see a need to demonstrate competence, use more online information than firms that don't. The third factor, leads to decreased use. When firms have an opportunity to shift data gathering responsibilities to another firm, they will do less of it themselves. The fourth factor may also lead to decreased use if the infrastructure provides an alternative to going online, such as publicly supported law libraries. But it will lead to increased use if the infrastructure is online, such as the multiple listing services of the real estate industry. The fifth factor may, similarly, lead to either decreased or increased online use, depending on the types of resources (including support staff) that are available to busy firm members in the evenings or on weekends; but time pressures generally lead to increased use of online information resources.
effects to regulatory agencies for review and approval, and by law firms whose clients are governed by such agencies.2. Demonstration of competence and superior service to clients, as illustrated by the packaging of information from online and other
information sources in the real estate industry, and by the profiling of competitors and markets in all three industries.3. Opportunities to obtain information from other organizations through load-shifting, whether through outsourcing, partnering or
purchasing information services.4. Existence of industry-wide information infrastructures to provide critical information, such as law libraries and real estate multiple
listings services.5. Client expectations for timely, cost-effective information exchanges, such as corporate clients’ demands for immediate, specialized legal
advice outside “normal” business hours.
Figure 1: Informational Environments with Interorganizational Influences
All organizations face varying degrees of technical and institutional demands from their environments. Scott (1987) has categorized industries as being more strongly or weakly influenced by these demands (see Figure 1.) The IRIS study shows that, in addition to such general influences, firms in each quadrant may be more or less incented to gather data and use information resources depending on the clients they serve or wish to attract. Thus client relationships have a very strong impact on data gathering practices and the use of information resources (in Figure 1, see the arrows placed next to the "corporate law firms" and "commercial real estate" labels.) Firms that work very closely with institutions, such as federal regulators, report gathering more data overall than firms that do not interact with regulators as intensively; and, when firms partner with one another, they may shift the responsibilities for gathering data across organizational boundaries (in Figure 1, see the arrows placed next to the "biotech/biomedical" label.)
The IRIS study illustrates how careful and effective designs for interorganizational
networks must take into account the nature of interorganizational relationships.
It also suggests that it is not ‘just a matter of time’ before all organizations
adopt online technologies. Some firms have less need and fewer incentives
to use online technologies, by the very nature of their industry, their
clientele and their interorganizational relationships. Although small
firms are commonly portrayed as being more enabled to reach customers via
the Internet, much still depends on their main business. There will
be many more opportunities in e-commerce for providers of Highly Digital
goods and services, than for vendors of physical products and personal
relationships.
3.5 Profitable Electronic Retailing May Weaken Community Life
The power of online technologies to strengthen or reshape relationships
is not restricted to organizations. Internetworking has the potential
to reshape relationships within our local communities, and to affect the
way we live, work and shop. The authors of
The Emerging Digital Economy (Margherio et al., 1998) report that companies
are beginning to use the Internet for customer service and to better manage
customer relations by operating around the clock and around the world.
Going beyond Standard model assumptions of workforce flexibility, they
also discuss the skills that workers and consumers will need to acquire,
as well as expected consumer behaviors in the Cybermall to come.
Socio-technical analyses, however, go even further toward examining the
social repercussions of sweeping reforms like Internet shopping.
Irvine, CA
Some technology developers and enthusiasts believe that Cyberspace
will radically reshape our physical space. They could be right.
The visions
of utopian planners have, in fact, frequently shaped our landscapes
and lifestyles (Kling and Lamb, 1998.) The city of Irvine, California
serves as a case in point. Irvine is a post-suburban version of the
‘city of efficient consumption’ (Goodman and Goodman, 1960.)
It is characterized by a fundamentally decentralized spatial arrangement
“in which a variety of commercial, recreational, shopping, arts, residential,
and religious activities are conducted in different places and are linked
primarily by private automobile transportation—[making it] complex, seemingly
incoherent and disorienting, and yet dynamic and lively" (Kling, Olin,
and Poster, 1995:p.viii). Broad boulevards allow shoppers speedy
access to local shopping centers, and Irvine residents can conveniently
reach 12-lane freeways for their workday commutes.
Irvine is a city of efficient consumption, because its developers and planners conscientiously control how Irvine citizens can exercise their economic power as consumers. Although Irviners often have more discretionary income than citizens of neighboring cities, their discretion is locally limited to a relatively small number of choices among restaurants, movie theatres, sporting facilities and retail outlets. The number, location and type of consumer services have been planned by the community developers to maximize financial returns on their investment. The Irvine Company, as the original developer of the area, still owns most of Irvine retail commercial property. It rents these properties to retail shops that agree to pay a monthly rental fee plus a percentage of their gross monthly revenues. This arrangement favorably predisposes The Irvine Company toward high-revenue producing renters, or low-risk renters whose gross revenues can be reasonably estimated beforehand. Therefore, national and regional chain stores, which already have wide name recognition, rent most of the available shopping mall space.
When Irvine residents verbally interact with non-residents who work in Irvine retail outlets, there is little chance that the interaction will blossom into an ongoing relationship. The types of efficient, high-volume transactions favored by the national and regional chain stores that dominate Irvine shopping malls allow only for a brief encounter between a customer and a service provider. And since these types of service provider jobs are not well-paid, there is usually a high personnel turnover, further lessening the probability of an ongoing relationship. As Gutek (1995) has observed, the prevalence of encounter-based services is not unique to new cities. It is a growing phenomenon in many service industries, including retail sales, social services, education and medical care. Social scientists worry that this phenomenon contributes to the deterioration of a sense of community. The human interaction seems so disconnected. What's the difference between this type of an encounter and a fully automated electronic encounter, complete with computer-controlled voice synthesis? For the most part, Irvine residents seem comfortable with the encounter-based service format. It is often convenient, but it is not their only option. If they want more personalized service, they can afford to go elsewhere and pay more for it.
Wal-Mart vs. the Web
Some California commercial realtors speculate that the Cybermall is
about to do to Wal-Mart and The Irvine Company, what Wal-Mart is accused
of doing to small downtown retailers in the 1980’s and ‘90’s. According
to Gary London (1995), as the expansion of Internet retailing brings more
choice, lower prices and better service to consumers, it will result in
a downsizing of all physical-space retailers. He is not suggesting that
traditional retail shopping centers will be eliminated, but that in order
to remain profitable, shopping center owners will have to rethink how retailers
pay rent. If local stores become mere showcases for products and
services, like some Gateway computer stores, with the eventual purchase
being made online, the shopping center owner cannot depend on retail receipts
for revenue.
But the threat of Internet retailing isn’t just to small shopping centers and retailers. The ‘big box’ discounters, like Wal-Mart, Circuit City, Costco, CompUSA and others, will also be challenged. Their centers usually have a warehouse-type interior, and their selling approach has changed the nature of retail consumer relationships--inadvertently making it more comfortable for consumers to shop online. "The emphasis is on large selection, discounting and convenience. They have de-emphasized customer service and presentation. The concept has taken the nation by storm and appears to represent a permanent change in the nature of shopping” (London, 1995.)
Faced with declining market share for the past two decades, traditional
"downtown" retailers and those in regional community centers have been
forced to establish alternative marketing or rehabilitation plans.
London has participated in at least one physical rehabilitation of a small
shopping center. The project, which may indicate the shape of ‘malls
to come’ involved the evolution of an inspired thematic concept.
The center’s pedestrian-only streets became an extension of those of the
community. The developers simulated a dynamic downtown retail center--a
pseudo-community that they hope will redefine why people go shopping, where
they go, and how they spend their time. As our shopping habits become
more rationalized, and more often online, we may also be inadvertently
encouraging the developers who have planned our post-suburban landscapes
to begin planning more and more of our ‘quality’ life experiences.
4. Conclusions
A research agenda that examines the organizational issues in developing Highly Digital and Mixed Digital goods & services can be usefully guided by a socio-technical approach. Our analysis of prior research amply demonstrates the ways in which socio-technical IT studies can foster a deeper understanding of organizational change in increasingly digitally-enabled environments. Table 1 and Section 3 of this paper identify a few key areas where socio-technical perspectives diverge from mainstream conceptualizations of IT in organizations, and where further research may amplify our abilities to benefit economically and socially from new information technologies. From these areas, a few key empirically researchable questions emerge:
1. What are the organizational and social processes, the technological opportunities and constraints, and the dynamics of key combinations that influence the ways organizations “go digital”? How do these shape the development of new services, business viability, etc.? (For example, how do these processes work out in bookstores such as amazon.com, Barnes & Nobles, Borders, and major independent bookstores?)Questions such as those listed above should be studied with some significant historical perspective and ecological awareness. For example, firms like amazon.com could not have functioned on the Internet alone: they rely upon a financial infrastructure (i.e., credit cards) and a distribution infrastructure (i.e., rapid national shipments of small parcels). Some of this infrastructure has been developing over a 100 year period, since the advent of mail order!2. What are the organizational and social processes that influence the ways that whole industries “go digital”? How can we understand differences between industries, such as travel versus steel manufacturing?
3. What kinds of customers and services seem to be advantaged by digitally supported goods and services, and which kinds of customers and services are cut back or cut out?
This research agenda is preliminary and is far from exhaustive. But,
we believe it provides a starting point for discussions that will lead
to a robust research program that examines the social, technical and organizational
aspects of the emerging Digital Economy. Socio-technical perspectives
can continue to guide researchers of e-commerce and new technology configurations,
as they have guided IT researchers in the studies we highlighted.
Moreover, organizations, like Ernst & Young, can continue to learn
important lessons from the both the successful and failed implementations
that these studies analyze. A research program which fosters this
approach, and which supports the longitudinal research that such studies
often require, will ensure that insightful analyses are available for thoughtful
managers of IT systems in the emerging Digital Economy.
Acknowledgements: This article was originally presented
at "Understanding the Digital Economy -- Data, Tools and Research” May
25-26 at the U.S. Department of Commerce, Washington D.C. (http://www.ecommerce.gov/schedule.htm).
Blaise Cronin and Suzanne Iacono were invaluable discussants when we were
preparing this manuscript. Brian Kahin provided some helpful comments on
an intermediate draft. The development of the Digital Economy model owes
much to Ph.D. students in IU’s seminar L764, especially Chris Ferguson,
Joanna Fortuna and PyungHo Kim.
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