After transferring from Trident Technical College, where I did my freshman and
sophomore years of college, this was the first major paper I wrote. This
was written for my Introduction to Management Principles course (MGMT 301) with
Bill Perry. Clearly one of my favorite professors at the College of
Charleston. If you can take him, do it.
Specialization inside
Organizations -
Decentralization of Organizations
Networking & Information Sharing
- K-Mart vs. Wal-Mart
E-Commerce - Conclusion
Since the dawn of information technology in the workplace, IT has changed what
organizations do, how they are organized, their relationships with other
businesses and customers, how they will operate, and in some cases, if they will
even exist at all. Many of these changes are giving business organizations new
ways to improve productivity and competitiveness, build partnerships with other
companies, reduce costs, and to increase autonomy and specialization within
organizations.
The IT field remains a frontier with many opportunities and pitfalls. But like
most frontiers, Information Technology offers great potential for those with the
courage, vision, and ability to confront the unknown.
Information Technology and
Specialization inside Organizations
Management consultant Peter Drucker sees growing specialization within
organizations when he forecasted "a third period of change: the shift from the
command-and-control organization, the organization of departments and divisions,
to the information-based organization, the organization of knowledge
specialists." Drucker believed information technology would allow organizations
to focus on doing what they did best, creating a stronger focus on
specialization in organizations (Drucker).
U.S. Group is a general construction contractor based in Columbia, South
Carolina, specializing in site and road design and construction, project
engineering, and construction management services. In seeking to become one of
the few construction companies in South Carolina with a statewide presence, U.S.
Group is faced with the challenge of developing an organization that can manage
construction projects statewide, while maintaining profitability and insuring
customer satisfaction (Cook).
To help implement U.S. Group's growth plan, the Lowcountry
Region office was opened in 1999 with Greg Cook, a registered Professional
Engineer, as Regional Manager, and work crews borrowed from the corporate
office. Since then, the Lowcountry division has grown, adding two Project
Managers, an Administrative Assistant, and laborers and equipment operators who
work directly for the Lowcountry region. "Not only are we gaining
self-sufficiency," says Cook. "We're even providing support to our corporate
office in the areas of marketing, research, and human resources (Cook)."
U.S. Group traditionally focused on certain aspects of construction
projects, while relying on subcontractors to perform other parts of projects.
This allowed them to focus on their strengths, but it also limited their ability
to win contract awards for larger projects, where larger full-service companies
had advantages in cost and organization. "It's hard to compete with someone who
can come in with the full range of services, while we're trying to collect,
track, and organize quotes from dozens of subcontractors," said Laura Brown, a
Project Manager for U.S. Group's Lowcountry region (Brown).
Information Technology and
the Decentralization of Organizations
Drucker saw the growing trend of Information Technology
empowering the decentralization of organizations when he wrote "the
information-based business will use more and more smaller self-governing units,
assigning them tasks tidy enough for a 'good man to get his arms around', as the
old phrase has it (Drucker)." In their book "The Impact of Information Systems
on Organizations and Markets", organizational analysts Vijay Gurbuaxani and
Whang Seungjin believe that when used properly, IT can reduce external
coordination costs of an organization and increase its use of outside
resources. More and more, organizations are using information technology to
create more autonomy for themselves and finding new ways to employ their
strengths and skills to engage in business ventures that previously would not
have been possible.
Cook credits investment in IT as playing a key role in the ability of his Region
to manage far-flung projects as far as ninety miles from his office, and nearly
two hundred from the corporate office. A DSL Internet connection allows his
staff to research upcoming bidding prospects, a network allows for greater file
sharing, and laptop computers and Pocket PC handheld computers allow U.S. Group
managers to take their information into the field to job sites and meetings
(Cook).
In the past, U.S. Group, like many other construction companies, relied on a
central staff to handle all aspects of bid preparation. Brown, who was
recruited to U.S. Group for her expertise in bidding and with the Hard Dollar
software, expects benefits from the software: "Hard Dollar allows us to bid
accurately, using fewer people and less work, while allowing us more control and
independence over projects at the local level." In addition to other hardware
and software used by in-the-field personnel, the bidding software gives them a
larger role in the bidding process. As they are closer to potential
subcontractors needed to perform work, and are more able to scrutinize project
details in person, they can provide key information needed to submit a bid that
is competitive without losing money (Brown).
In the home mortgage business, which was once dominated by banks and large
mortgage finance companies, Ron Turner is a self-employed mortgage broker in
Summerville, South Carolina. With this desktop computer and his Palm Pilot, he
is able to keep in touch with a wide range of contacts in the real estate and
finance businesses, as well as to keep in close contact with potential
customers. "Twenty years ago, it would have been impossible to be in this
business by myself or in a small organization," says Turner, who previously
worked as a realtor and high school and college teacher. "I couldn't be in
business for myself without these advances in information technology (Turner)."
Information Technology,
Networking, and Information Sharing
Gurbuaxani and Seungjin find that IT allows more cost-effective
means to access market information and process transactions. IT also allows
closer connections between businesses by increased ease of information sharing
and mutual monitoring, which can also help to reduce costs (Gurbuaxani and
Seungjin).
One of the largest limitations facing U.S. Group was the inability
of personnel in the field to connect to the corporate accounting system. "In
construction, people expect results, not excuses," said Cook. "The
subcontractors and vendors we deal with already work ten or twelve hour days.
They don't want to hear 'we'll have to get back to you on that'. They want
answers to their questions when they ask them and expect prompt payment for
their work (Cook)."
The old accounting system had created a number of problems, including delayed
processing of invoices submitted from vendors, and the difficulty in being able
to track the status of invoices submitted for payment. In most cases, tracking
payment information required calling the corporate office, waiting while the
question was researched, then for a call from the corporate office with the
needed information (Kenner).
The Hard Dollar software allows U.S. Group's estimators to collect and
electronically track quotes and bids from potential subcontractors, as well as
to build a database of quotes from previous projects and bids to help evaluate
future quotes. This allows U.S. Group to more accurately analyze quotes for the
lowest costs, and present a complete and competitive bid package. The software
also improves efficiency within the company, reducing by one-third the man hours
in preparing a bid package, and if won, the bid items can be transferred
directly into the company's accounting system to help track costs on the project
(Brown).
With the use of high-speed Internet connections, such as DSL and cable Internet
services, coupled with U.S. Group's new Timberline accounting software, invoices
can be entered for payment in a local office when received, and invoices can be
tracked from any computer with an Internet connection. This enables field staff
to expedite payment, as well as to assure vendors and subcontractors that their
invoices had been processed and that payment would be forthcoming (Kenner).
Ron Turner relies heavily on the use of information technology to locate and
arrange competitive mortgages for his clients. Turner subscribes to several
electronic services, allowing him to browse available mortgages for clients for
the best possible deals, to verify the credit histories of his customers, and to
submit loan applications. "Not to many years ago, this kind of information was
either not available, not in a user-friendly format, or was prohibitively
expensive for small businesses and entrepreneurs, such as myself (Turner)."
K-Mart vs. Wal-Mart: Different approaches,
different results
For years, two large retailers have squared off in the American
marketplace: K-Mart and Wal-Mart. Wal-Mart's decision to use IT as a tool
within its organization to facilitate its primary mission has reaped great
benefits, while K-Mart's failure to embrace the effective use of Information
Technology has put it at a competitive disadvantage. While K-Mart has struggled
to keep its doors open, Wal-Mart has thrived and created a global empire, moving
over one billion dollars a day in sales from over four thousand locations, while
managing over thirty thousand suppliers (Lundberg).
Kevin Turner, CIO of Wal-Mart, describes Wal-Mart's emphasis on
quality: "we don't talk a lot at Wal-Mart about being the largest company in the
world … What we do talk about it being the best company in the world." Turner,
who became Wal-Mart's CIO at the age of thirty-three, views IT as a tool of the
company's primary objectives: profitability through increased customer sales,
explains Wal-Mart's three philosophies of IT strategy:
1. CENTRALIZATION: Run a centralized information system for Wal-Mart's
global operations.
2. STANDARDIZATION: Using common hardware systems run on common software
platforms.
3. BUSINESS FIRST: Emphasizing being retailers first, and using IT as a
tool to support that goal (Lundberg).
John Ferramosca, a retail IT consultant, identified K-Mart's failure
to embrace IT in its supply-chain management. "Kmart has never had the
technology culture. But that culture lets you know what consumers want, when
they want it, and by constantly taking the data you collect at the cash
register, getting your suppliers to get you inventory when you need it
(Lundberg).
K-Mart has had considerable difficulties with managing its
Information Technology program. In seven years, five Chief Information Officers
have held the CIO position in K-Mart, including a five-month period in which the
position went vacant. Retired CIO Dan Hammond, a thirty-year K-Mart veteran,
had begun a massive overhaul of K-Mart's IT systems to overcome its inability to
effectively manage inventory and collect sales information. Shortly after
Hammond's retirement, the project was abruptly cancelled by K-Mart's CEO and the
$130 million investment in hardware and software technology was written off (Wendland).
While K-Mart's aborted supply-chain management system implementation kept
vendors and suppliers shut out of its operations, Wal-Mart has reached outside
of its corporate organization, using IT to build stronger relationships with its
suppliers. "Wal-Mart has decided that sharing mission-critical information with
its suppliers is in both their interest and the supplier's interest," said
retail logistics expert Joseph Andraski. Over ten thousand retailers are given
near-total access to Wal-Mart's retail system to track the sales of their
products and help insure they can supply the needs of Wal-Mart stores (Wendland).
While Wal-Mart views information technology as a means to reduce
operating costs, IT is not viewed as a "final solution" for improving efficiency
within its organization. "Eliminate before we automate," says Turner.
"Eliminate steps, processes, reports, keystrokes (Lundberg)."
E-Commerce: The Next Frontier of Information
Technology
Information technology has been a valuable tool to help
organizations with management, planning and cost reduction. In recent years,
the continuing growth of information technology has created a whole new
frontier: Electronic commerce, also known as E-commerce. In the four decades
since the dawn of E-commerce, technology and market pressures have transformed
it from a tool to help facilitate financial transactions to an all-encompassing
approach that allows businesses and consumers to shop and purchase goods and
services, without ever going to a store or speaking with another person. Now,
for as little as $50 a month, businesses can purchase business services,
including simple product catalogs and online purchase transaction processing.
Larger companies will sometimes invest hundreds of thousands of dollars in a
full-fledged E-commerce website, able to reliably handle large volumes of
traffic, display large catalogs, and process many different kinds of
transactions (Lyman).
The first step was the introduction of Electronic Data Interchange (EDI) in
1968. While a major breakthrough, the lack of compatibility through a common
standard limited the appeal of EDI. In 1984, the introduction of the ASC X12
standard for EDI created a universal standard which dramatically increased the
use of EDI for information transfer. The release of the Netscape web browser in
1994 gave Internet users an interactive and graphic interface with which to
access information, making online retail a possibility. Online retailing
exploded during the 1998 holiday shopping season, when America Online and
Amazon.com each generated over $1 billion in sales (Lyman).
Beginning in New York City in the 1960's, Barnes and Noble had built itself into
a nationwide empire in the book retail industry. In 1995, the retail chain was
caught off guard by the rollout of the E-commerce website Amazon.com, an online
book retailer who took aim at more upscale and literate Internet users that
comprised Barnes and Noble's customer base, offering them the conveniences of
large selection and direct delivery to their doorstep. Barnes and Noble
scrambled to catch up, offering online retail services via its own website:
barnesandnoble.com (Patton).
By 1999, Amazon held a staggering lead over Barnes and Noble in
online retail, with $1.6 billion in sales, compared to Barnes and Noble's $193
million. In December of that year, Time magazine named Jeff Bezos,
Amazon's founder, their Man of the Year, crediting him for Amazon's role in
E-commerce's rise to prominence. The next year, Amazon continued to lead the
E-commerce field in book sales, growing their sales receipts to $2.8 billion,
compared to $320 million for Barnes and Noble's website (Patton).
While Amazon dominated in online retail, Barnes and Noble held an
advantage in real-time book sales. According to Prudential Securities, Barnes
and Noble held twenty-eight percent of the overall book market, compared to
twenty-one percent for Amazon. Instead of trying to outdo Amazon's website
sales, Barnes and Nobles chose to develop their website services in partnership
with their traditional in-store services, including piggybacking in-store and
website marketing together, using the website's database to help order books for
customers and offering in-store returns for online customers. This approach
showed results, as Barnes and Noble's web business showed twenty-three percent
growth in revenue in 2001, as compared to just two percent for Amazon's book and
music sales (Patton).
While E-commerce has brought great changes in the retail sector, it
has also been embraced in business-to-business relationships, also known as
"B2B". "Traditional B2B is governed by complex processes and constrained by
information inefficiencies, geography, and market hours," wrote Rakesh Sood, an
analyst for Goldman Sachs. However, Sood noted the Internet offered B2B
purchasers "a single destination for commerce, content, and community that wraps
around end-used and compels them to come back (Landry)." In 1998, Business to
Business, or B2B e-commerce made up eighty-four percent of all e-commerce
revenue in the United States (Greenberg).
While E-commerce has become a useful tool for organizations, there are those who
point out E-commerce's limitations. Charlie Moore, who founded the website
Carstation.com, a online supplier of parts to automotive garages, points out
that those who provide E-commerce solutions must still understand the features
and processes unique to the industries they seek to serve. Tim Stojka, CEO of
Commerx, a provider of E-business services to the E-commerce industry, shares
Moore's view. Stojka believes that the purpose of E-business is not to reinvent
businesses, but rather to help them improve upon their operations and allow them
remain true to their own missions.
Conclusion
Information technology continues to transform how
organizations are designed, and how they will perform. However, new innovations
in Information Technology need not spell the end for traditional organizations.
Those organizations willing to combine their existing organizations and
knowledge with the wise and appropriate use of new technology can survive, grow,
and prosper in the Electronic Age.
Peter Drucker predicted: "the job of actually building the information-based
organization is still ahead of us - it is the managerial challenge of the future
(Drucker)." Indeed, this will be the challenge faced by organizations as they
seek ways to use information technology in designing effective and successful
organizations.
WORKS
CITED
Brown,
Laura. Personal interview. 23 November 2002
Cook,
Greg T., P.E. Personal interview. 23 November 2002
Drucker,
Peter. "The Coming of the New Organization". Harvard Business Review. Jan-Feb
1988.
Greenberg, Paul A.. "B2B E-commerce: The Quiet Giant." 4 January 2000.
E-Commerce Times. <http;//www.ecommercetimes.com/perl/story/2130.html>
Gurbaxani,
Vijay and Seungjin, Whang. "The impact of information systems on organizations
and markets". Communications of the ACM, Vol 34. Jan 1991.
Kenner,
Bruce. Personal interview. 21 November 2002
Landry,
Julie. "Is B2B e-commerce ready for prime time?" 19 November 1999. Red
Herring. <http://www.redherring.com/insider/1999/1117/news-b2bconf.html">
Lundberg,
Abbie. "The I.T. inside the world's biggest company." CIO Magazine. 1 July
2002. <http://www.cio.com/archive/070102/walmart_content.html>
Lyman,
Jay. "Ups and Downs of Building an E-Commerce Site." E-Commerce Times. 18
November 2000. <http://www.ecommercetimes.com/perl/printer/20006>
Patton,
Susannah. "Barnesandnoble.com fights back." CIO Magazine. 15 September 2001.
Turner,
Ron. Personal Interview. 16 November 2002.
Weisman,
Jon. "The Making of E-Commerce: 10 Key Moments." E-Commerce Times. August 22,
2000. <http://www.ecommercetimes.com/perl/printer/4085>
Wendland,
Mike. "Kmart missed the opportunity Wal-Mart found in technology." Detroit
Free Press. 26 January 2002.
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