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Strategic Alignment Revisited: Connecting Organizational

Architecture and IT Infrastructure

Chris Sauer and Leslie Willcocks

Templeton College, University of Oxford, UK

Warwick Business School

Email [email protected]; [email protected]

Abstract

Companies often find the rigidity of

information technology infrastructures a

barrier to change. This is increasinglyproblematic as, faced with high competitive

intensity and environmental turbulence,

boards and executive teams seek to formulate

and execute dynamic strategy. In the absenceof a clearly defined, long-term strategic plan,the IT infrastructure platform needs to be

designed and managed in concert with

organisational design to achieve the degrees of

flexibility the executive team most expects to

need. The paper combines IT architecture

with multivariate theories of organisational fitinto an activity that creates a joint architecture

of IT and organisation. The distinctiveadvantage of the approach is that the

architecture is harmonised to the increasingly

widespread desire to make strategy on the run.

Based on a 98 organization study, we describerelevant concepts, roles and practice for

achieving an Organisational Architecture.

1. Introduction

Organisation and flexibility constitute

a combination that is almost universally

desired but found in practice to be very much

at odds. So while companies vaunt their

flexibility, when put to the test their response

is too often limited by inertia deriving, from

among other sources, rigid informationtechnology (IT) infrastructure. The contortions

undergone by traditional PC manufacturers

responding to Dell, booksellers to Amazon,

and insurance companies to DirectLine

underlines both the difficulty and the

competitive implications of not being

responsive to unanticipated futures.

Paradoxically, the current business

climate is at the same time suited and unsuited

to developing flexibility. On the one hand

companies have the time to consolidate, put

their house in order, and build for the futurewhile on the other hand they are focused on

cost saving and paring their operations and

overheads to the minimum. Investment is

limited. It is tempting therefore to cut back on

developments for the future whether they be

skills and capabilities or information

technology (IT). Unfortunately, they are

complementary both are required.

From the early 1960s we have known

that certain kinds of organisational design

promote innovation and adaptiveness[1]. Only

in the last decade have we learnt the extent to

which IT can enable or constrain adaptive

response [2]. Creating a flexible platform foruncertain futures requires investment in an

architecture that will enable rapid deployment

of new IT. Such a platform comprises not

merely technical infrastructure but also

technical specialists and suppliers and the

organisation/s through which they function.

Delivering a flexible platform is time-

consuming and difficult to achieve. Securing

support for the requisite investment is

challenging when many companies have

reverted to viewing IT as a troublesome cost.

This papers contribution is to show

why investment is required in a new practical

discipline we term OrganisationalArchitecture, and to set out its building blocks

in terms of concepts, roles and practice. We

thus extend Enterprise Architecture and certain

theories of organisational design termed

organisational architecture by showing how

to achieve a joint architecture of IT and

Proceedings of the 37th Hawaii International Conference on System Sciences - 2004

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organisation harmonised to the increasingly

widespread desire to make strategy on the run

[3].

2. Research BaseThe argument is based on prior

research [4] and experience in combination

with insights drawn from the variousliteratures addressing dynamic strategy,

organisational design, and flexibility [5]. This

research was initially motivated by a desire to

understand how companies IT functions were

coping with the challenge of being prepared

for the kinds of unpredictable demands created

by the dot.com boom. Research was carried

out throughout 2000 and early 2001 into 97

corporations in USA, Europe and Australia.

Over 140 executives were interviewed or

surveyed. Questioning covered their e-business

models and initiatives and how these related to

building the requisite technology. Interviews

typically lasted between 45 minutes and twohours. Companies were drawn from a wide

range of sectors including technology

suppliers, distributors, financial services firms

including credit card, stock broking, insurance

and banking businesses, information providers,

pharmaceutical companies, utilities, and a

range of retailers and service operations. One

research outcome was published as a market

intelligence report in 2001[6].

This process taught us two key

lessons: (1) that the issue of being prepared for

unpredictable futures was a continuing concern

for organisations beyond the immediate

turbulence of e-business; and (2) that ourconceptualisations of the kind of platform

firms required could not be exclusively

technological but should also embrace

organisational design. We therefore revisited

our case studies and have continued to engage

with executives through 2002/3 to further

explore and develop our emerging

conceptualisation of Organisational

Architecture. In some cases this engagement

has taken the form of taped and transcribed

semi-structured interviews, and in others it has

involved presentations and discussions with

groups of managers including a number with

responsibility for aspects of OrganisationalArchitecture. We use examples drawn from

our research throughout.

3. Evolution Of Organisational

Architecture

In our usage, Organisational

Architecture is the practice of designing and

managing the combined infrastructure of

organisational structure and IT that together

support company strategy. It is relevant to all

large companies but the need has become most

apparent and pressing where strategy is

dynamic whether by design or default. For this

reason, our discussion focuses principally on

the issue of achieving flexibility.

There are three key ingredientsimplicit in our adoption of the term

Organisational Architecture interaction

between organisation and IT; multivariate fit;

and the discipline of IT architecture. First, IT

and organisation increasingly function in

concert. For example, retail banks worldwide

have for years striven to shift from product-

based structures we can send you three

account statements but not in the same

envelope to focus on the customer. Their

speed of change has been geological because

of the inflexibility of the vast IT infrastructures

they have laid down over so many years.

Todays UK National Health Service confronts

a similar issue. Radical reform of clinical and

administrative practices to allow treatment of

the patient as a single individual requires re-

organisation but this can only be effected when

a new infrastructure has been installed that will

enable sharing of patient data across all NHS

locations. Conversely, organisations find that

in order to exploit the opportunities new IT can

present, they need to re-organise. When IBM

embarked on its turnaround strategy in the

early 1990s, it recognised that it could re-

engineer general procurement and make

savings through consolidated purchasing but to

achieve this it needed a global procurement

function in addition to the new technology.

This reciprocal interaction between IT and

organisation demands management through a

unifying authority.

The second ingredient is the core idea

within studies of economics and organisation

of multivariate fit. In organisation theory this

theme has been developed over some 30 years

[7]. Coming from a different tradition of

organisational economics, Brickley, Smith and

Zimmerman likewise adopt a multivariate

theory of fit [8]. Different authors have

emphasised different variables drawing from

an extensive range including task, people,

formal organisational arrangements (includingunit groupings, structures, coordination and

control systems, job design, work

environment, HR systems, reward systems,

and physical location) and informal

organisation (including leadership, norms,

values, intragroup relations, intergroup

relations, informal working arrangements,

communication and influence patterns, key

roles, climate and power politics).


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While these traditions do

acknowledge the role of information and

technology, neither addresses the role of

information technology either as an enabler or

a constraint. Specialists in technology studies

have been more alert to technologys key role

in organisations [9]. But even researchers in

the management of InformationSystems/Information Technology (IS/IT) who

have taken a multivariate approach have

typically thought in terms of a long-term

strategic plan with the design of organisation

and IT as occurring sequentially. They have

not considered design for flexibility.

The third ingredient is IT architecture

which refers to the IT sub-discipline most

associated with preparing for the future. IT

architects determine which technologies

(hardware, software, networks, protocols, and

standards) are acceptable in an organisations

IT infrastructure and define a blueprint for how

they should be connected together. By doing

so they aim to strike the right balance between

having a limited set of compatible components

which restricts what can be achieved for the

business and a more varied but less compatible

set of components that increases the

possibilities. The art of IT architecture lies in

trading off a range of parameters including

time, cost, quality, security, risk, and resilience

among others against the degree of

technological and, by implication,

organisational flexibility the architecture

permits.

Perhaps because of what Michael Earl

has called the ambiguity of IT [10], both

theorists and managers have preferred to see

ITs role as a delivery technology that has

often by chance influenced how the

organisation functions rather than as a crucial

contributor to flexible organisation. However,

our studies and experience suggest that it is

possible to map an evolutionary path in the

management of IT towards increasing

emphasis and focus on the relationship

between IT and organisation with a view to

achieving flexibility (see Figure 1).

The most basic application of IT is

Automation of existing business processes on

a case-by-case basis within business

functions[11]. If this has any organisationaleffects, they are likely to be accidental. The

fundamental objective is to take labour out of

the task.

Alignment aims to ensure that the

application of IT matches the strategic needs of

the business[12]. The rationale is that if a

companys structure derives from its

determining how to execute its strategy, then if

IT is designed to reflect this it will thereby

support strategy execution. This works to a

degree for an established strategic plan and

organisational structure. However, it is time-

consuming, risky and expensive to redesign

and re-implement IT infrastructure which

thereby serves as a brake on change.

Alignment therefore reinforces the existing

organisation.One particular form of alignment, the

federal structure [13] has sought to alleviate

this problem through IT architecture. One

objective sometimes set for such an

architecture is to anticipate and support future

developments that may be demanded of the IT

function. However, this objective can be and

often is undermined by further objectives. For

example, an IT architect may be asked to

restrict the technologies that can be used in

order to facilitate bulk purchasing of IT

facilities or to reduce the range of technical

skills required.

The intensely technical and highly

conceptual nature of the role means that

although in principle IT architects are often

charged with anticipating future business

needs, in practice they are almost never privy

to the top teams thinking about its future

strategy, and are rarely strongly competitively

or organisationally focused. Safeways

experience with its ABC loyalty card and

associated data mining illustrates the point.

Anticipating the competitive needs of the

business in the 1990s, Safeway built a

sophisticated data warehousing and data

mining infrastructure that permitted micro-

marketing. Organisationally, the business

lacked the capabilities to execute micro-

marketing successfully on a sufficiently large

scale to justify the continued IT investment.

Despite their best endeavours, IT architects

alone are rarely able to deliver a sufficiently

flexible platform that meets the real needs of

the business.

Reverse alignment involves the

adoption of enterprise systems (ERP) on the

basis that they provide a common upgrade path

because the supplier continually enhances the

technology and a common platform that allows

extensive interconnection across a large,

complex organisation. Adopting companies

have chosen to redesign their business aroundthe IT systems. This approach has certainly

supported the development of greater

integration across organisational units within

the existing structure. But, as one CIO put it to

us, ERP is like pouring wet concrete all over

your organisation because the organisational

structure is a parameter in the implementation

of the software. Changing the organisation

means re-implementing the ERP system.


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Over time, then, ITs role in

businesses has evolved from being narrowly

focused on business processes to having far

greater influence on the way the structure

operates as an organisation. As the sociologist,

Bruno Latour, has put it, it is no longer clear

if a computer system is a limited form [of]

organization or if an organization is anexpanded form of computer system[14].

4. The Next Step Real Options

In our studies of both established and

start-up companies the most common form of

preparation for the future proved not to be the

creation of a universally flexible platform.

Rather we saw companies taking a more

concrete approach by exploring real options

[15]. These are highly specific experiments

designed in part as a hedge against future need.

They combine anticipation of the future with

creation of the future. They are a distinctstrategy but also represent a component of the

final stage of evolution to Organisational

Architecture the development of flexible

capabilities (see Figure 1 and below).

In the 1990s, Safeway created a

number of real options. It established a

detailed data warehouse of customer

information for micro-marketing. It established

an Internet shopping facility, Collect-and-Go.

And it pioneered customer scanning in-store

(Shop-and-Go) to enable self-checkout (Easi-

Pay) to abolish checkout queues. Each of these

initiatives required significant IT investment

but they varied as to the organisational changethat accompanied them. Micro-marketing was

not well supported organisationally and was

not pursued. Shop-and-Go had an extended

life with some 160 stores being reconfigured to

support it. It lasted and evolved as a continuing

experiment for several years. Collect-and-Go

was more short-lived, most probably a victim

of Safeways reversion to a high-low price

strategy.

Electrocomponents, the parent of

global electrical and electronic component

distributor, RS Components, started its journey

into e-business by making an initial investment

in a web-based catalogue. It established aseparate e-business unit to develop this thereby

keeping it isolated from business-as-usual so

that it could be more easily managed as an

innovation and with the potential that it could

be closed down without impact on core

business if it proved unsuccessful. In the event,

it is today a successful sales channel. Having

done enough to feel confidence that the first

option was likely to be successfully adopted,

Electrocomponents started to set up other

options such as offering its customers e-

procurement support as well as engaging in

consolidated procurement from its own

suppliers. This latter option revealed the need

for both technology and organisation to be

appropriate to the need. The initial option to

establish a global procurement unit proved

constrained by the lack of a shared ITinfrastructure which made it prohibitive to

monitor existing country-based procurement.

Investigation indicated that a single shared

ERP system was inappropriate to the very

different levels of business conducted in

different countries, so a regional ERP

infrastructure was planned and the

organisation adjusted to support consolidated

procurement at the regional rather than the

global level.

A different distributor told us about

its attempt to establish a direct to consumer

business. The company failed to provide a

distinct organisational location for the start-up

so that it was pressed into a corner of a highly

automated warehouse to whose facilities it was

denied access. Unsurprisingly, the business

was floundering and as a result, though

established as an option, it failed to represent a

real avenue for future growth and

development.

CitiPower, the Melbourne-based

utility, hired its new CIO, Gill Lithgow

specifically to create a platform for e-business.

One of his early realisations was that the

organisation was pursuing too many options

for it to be able to advance the most promising

ones. He therefore both set about limiting the

investment in options and in establishing an

organisational office and a process for

monitoring those options it decided to

continue.

In summary, we saw a number of

companies seeking to achieve a degree of

flexibility by taking out real options. Some

were IT-led and some were business-led. All

were a gamble with uncertain outcomes. In

some cases, there was just IT investment

initially and in some there was organisational

adjustment to complement the technology

innovation. Where options were unsuccessful,

some were unsuccessful as options and some

were unsuccessful as business. Thus SafewaysShop-and-Go represented a very successful

option that the company could have chosen to

adopt but its micro-marketing option was less

successful as an option because lacking

organisational micro-marketing capability, it

was never clear whether it had a future.

Successes were less risky where

complementary organisational change was

viewed as integral to the option.


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The further evolution of

Organisational Architecture involves a shift

from merely second-guessing or experimenting

with future initiatives to institutionalising the

dynamic capabilities that enable firms to

flexibly explore, create and respond to new

futures. A more sophisticated approach is

called for.

5. The Broader Framework of

Organisational Architecture

Many companies want a greater

degree of freedom than is allowed by

investment in specific real options.

Organisational Architecture to support

dynamic capabilities requires three principal

elements:

Design concepts terms for describing

dynamic capabilities

Architectural process ways of

designing and implementing theArchitecture

Aftercare the continuing process of

maintaining the Architecture

5.1. Architectural Design

Our starting point is to ask what

characteristics do you want your organisation

to have? It is a question that should be asked

whenever strategy is reviewed and before an

organisation settles on a desired structure. We

draw upon several sources to define common

architectural design requirements for different

forms of flexibility and to show how their

achievement requires designed interaction

between information technology and

organisation (see Table 1). These include

earlier work as well as modern usage in

journalism and everyday management

discourse[16].

As we noted earlier, what makes

Organisational Architecture so challenging is

not merely that organisation and technology

need to be knowledgeably combined (and

traded-off) but also that the variables

themselves have characteristics on multiple

dimensions including cost, quality,

accuracy/risk, efficiency/productivity, andspeed. Thus, a company may seek to be

efficient of process, rapidly and cheaply

scalable, with a low risk infrastructure, but

innovative only at higher cost and with no

aspirations to increased reach. Achieving

knowledgeable agreement at the top level to

such a balance and overseeing delivery is the

Organisational Architects task.

For design communication processes

to function well there has to be some shared

language. We believe that a basis exists in two

complementary respects: common conceptual

underpinnings, and emerging new

organisational concepts that are deeply

embedded in IT-based thinking. First, there is

a common conceptual underpinning to thelanguages of organisation design and IT

architecture. Both operate with the concepts of

differentiation and integration, communication

and control, standardisation and routinisation

although the IT community cloaks them in its

own jargon. Enterprise application integration

(EAI) may sound intimidating to a business

strategist, but it is merely the technologists

seeking to achieve process integration. Where

information technologists talk of best-of-breed

systems, traditional organisational designers

speak of functional differentiation in both

cases their interest lies in achieving the

advantages of specialisation. IT architects talk

at length about standards and understand the

tensions between autonomy and control as well

as any organisational design consultant.

However, while there are shared concepts,

both the language of organisational design and

that of IT architecture have limited purchase

upon organisational adaptiveness and change.

A further set of concepts is therefore

required and these derive from recent attempts

to provide some conceptual structure to

dynamic strategy [17]. Table 2 summarises

Brown and Eisenhardts core concepts, their

contribution to achieving dynamic strategy,

and their architectural character.

5.2. Architectural Process

We do not suggest that there is an

established set of processes for successfully

achieving and maintaining an appropriate

architecture - experience is limited. However,

we can infer certain elements of process from

general design principles and from IT

architecture in particular.

As is the nature of design, there are no

simple algorithms for balancing an

organisations requirements and the design

decisions that realise them. But two-way

communication processes are essential. At the

heart of this communication is the goal of

creating a platform of organisational capability

that permits certain degrees of flexibility

against certain constraints such as cost, risk

and resilience. This involves moderating

unrealistic ambitions on the part of executive

teams through understanding of the enabling

and constraining characteristics of possible IT

architectures, while at the same time informing


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IT architects of the business needs that drive

the demand for essential degrees of flexibility

[18]. In summary, they involve asking the

following questions of both the CEOs inner

circle and the IT specialists and brokering their

differing answers:

What does the future look like?

What aspects of the business and itstechnology will be core to that future?

What does it mean for this company to

be dynamic and flexible outside that

core?

What level of flexibility is achievable

given that there will be some hard-to-

remove constraints?

How can the company match its

ambition and capability?

The desired outcome is a jointly accepted

position on the degree of flexibility required

and its implications in terms of organisation

and IT.

The other principal element ofprocess is implementation of organisational

and IT change to establish the architecture.

Because the architecture defines the

organisation in terms of its future capabilities,

this can be a significant transformation

requiring leadership from the top. Oracle

Corporations e-business initiative exemplifies

this well. In the late 1990s Oracle wanted to

create a platform for itself to exploit a range of

possible opportunities. CEO Larry Ellison saw

the potential for cost savings, customer service

improvements, a shift to global account

management, and more central oversight of

country business activities. He recognised thata sufficiently flexible platform required a more

centralised organisational structure supported

by a common IT infrastructure. He also

realised that he could only achieve this by

securing country buy-in to greater

centralisation. He thus set about changing

country Managing Directors remuneration

targets from being based on revenue to profit,

at the same time as centralising IT and

Marketing and offering the MDs these services

for free. They were at liberty to retain their

local IT and Marketing functions but they

would have to believe that these added more to

their profitability than they cost. The countryMDs willingly accepted centralisation, thereby

enabling a common IT platform to be

established and common marketing strategies

to be executed. Plainly Ellison wanted his own

company to be a reference site (role model) for

its own products and therefore was highly

motivated to achieve his objectives, and this

might have sharpened his awareness of what

needed to be done. Whether or not his implicit

understanding of the co-dependence of IT and

organisation and his adept change management

were the result of his having special

knowledge inaccessible to other companies,

the importance of this example is its

demonstration of the necessity of skilled

change management in delivering a new

Organisational Architecture.

Others take a different approach. Onemanager who fulfils many aspects of the

Organisational Architect role in a global

consumer goods company takes a more

bottom-up, incremental approach. He seeks out

areas of the business where by applying

architectural practice he can achieve a win that

demonstrates to senior executives the value of

Organisational Architecture so that they will

subsequently seek him out to help them apply

architectural practice more widely within their

spheres of authority.

5.3. Architectural Aftercare

The experience of IT architecture also

vividly demonstrates the need for aftercare. An

architecture cannot and does not contain its

own guarantee of longevity. As a compromise

among competing demands it is immediately

subject to the pressure for exceptions. Without

a guardian, entropy results in complexity and

disorder. Whatever value the architecture

promoted dissipates. Architects and

committees are called upon to police

compliance[19]. The other aftercare issue is

evolution of the architecture. Business change

and technology advance both change the

equation on which the architecture wasinitially predicated. A strategy of demerger and

focus such as that pursued in recent years by

the Kingfisher and P&O groups may promote

the importance of experimentation over cross-

business integration leading to legitimate

architectural change. However, we have seen

too little adoption and adaptation of flexible

capabilities thus far to do more than draw

attention to the need for continued review and

supervision of the Organisational Architecture.

6. Conclusion

ITs increasing pervasiveness inbusinesses means that their IT infrastructure

more and more defines their organisational

characteristics. IT choices are thereby

organisational choices. At a time when

strategy is becoming less explicit and more

dynamic, flexible execution depends heavily

on having the right organisational capabilities.

But, because IT constrains some organisational

choices at the same time as enabling others, it


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is inappropriate to ask information technology

architects to design a flexible platform without

giving them careful guidance as to the

types/degrees of flexibility required. Because

this guidance involves important trade-offs, it

must be given by senior executives in the full

knowledge of its potential future implications.

Thus a bi-partite architectural activity isrequired in which organisation and IT

infrastructure design are informed by deep

knowledge of business vision and ambition,

while at the same time that vision and ambition

is matched and modified in the light of the

limits imposed by the organisational and

infrastructural design.

Our approach assumes that long-term

strategy is more about developing capabilities

than achieving an advantageous and

sustainable competitive position. So although

the term Organisational Architecture sounds

like a one-off project such as the design of a

building, in fact it is more a continuing process

to adjust and develop a platform that will give

rise to and enhance capabilities.

Thus we have used logical argument

to establish the need for Organisational

Architecture. We have used observation from

the field and discussion with relevant

executives to suggest that this is not merely a

theoretical possibility but that companies are

moving in the direction we indicate. Our

observations have also helped us to give shape

to our ideas which has ensured both that they

have appeal to executives and that they are

practically realistic.

One aspect of which we have said

little is who is to play the role of

Organisational Architect. We contend that it

must be a senior executive, possibly themself a

member of the top executive team, but

certainly with the trust of that team. It is

essential to achieving a realistic compromise

between costs and degrees of freedom that the

Architecture is informed by the most realistic

assessment of possible futures unmediated by

layers of hierarchy. At the same time, this

function must be IT-knowledgeable so as to

understand the trade-offs implicit in any IT

architecture. In our experience a few CEOs

such as Larry Ellison of Oracle combine the

relevant understanding, but most lack thetechnology background. Likewise not all CIOs

have the relevant depth of understanding of the

strategy and organisational design. Hence

somebody such as a strategy director supported

by a multi-functional team will in most cases

be appropriate.

Much as the Chief Information

Officer role when first adopted was not a well

established role but one into which individuals

were required to grow, so too we believe it is

the case with the Organisational Architect.

Those who currently fulfil some part of the

role as we conceive it are pioneers necessarily

feeling their way and experimenting. Our

contribution is to offer some structure and

coherence to what we see happening, but to the

extent that not all of our suggestions are welltested, we must expect new, different and

better ideas to emerge. For example, our

application of Brown and Eisenhardts

dynamic capabilities is indicative and may

well be superseded as practice develops.

Is an Organisational Architect

required in every business? Our research does

not as yet tell us because we started with a

focus on organisational flexibility. The more a

company required flexibility and the more

pervasive IT was within it, the more it seemed

that Organisational Architecture was required.

Equally, as the research has developed, it has

become apparent that the fundamental idea of

creating a joint organisational design and IT

architecture is as relevant to a commodity

business seeking to become super-efficient or a

professional services firm seeking to exploit its

dispersed professional knowledge as it is to a

high-tech company operating flexibly in

dynamic markets. The organisational

capabilities the Architect seeks to realise will

vary but the principle remains intact. Similarly,

while large, decentralised organisations are

architecturally challenging because of their

centrifugal tendencies, the basic issue of IT

acting as an enabler and constraint also applies

to smaller more centralised firms.

Organisational Architecture may be easier to

achieve but is nonetheless needed.

This wider applicability of the

concept reinforces the importance of

Organisational Architecture at board level. But

the issue of boardroom buy-in highlights a

challenge if Organisational Architecture is

for the long-term, will it justify the effort and

investment in a time frame that will reward the

board and senior executives for their foresight?

In due course, we might expect that not only

will the real options companies take out be

factored into their share price but so too will

the Organisational Architecture on the basis of

what futures it enables. In the meantime, amore practical response will be to find

principles of Organisational Architecture that

can be applied and take effect in a shorter time

frame.

In summary, another way of putting

what we are saying is dont delegate the

provision of flexibility to the IT function and

dont treat the creation of a flexible IT

platform as somehow separable from your


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organisation design. Instead, invest in

Organisational Architecture and in doing so

recognise that you are investing not in a

product but a programme of reforming the way

you make strategy, structure your organisation

and plan your IT.

6. References

[1]. T. Burns and G.M. Stalker, Management ofInnovation, Tavistock Publications, London (1961).[2.] M. Hammer and J. Champy,Reengineering theCorporation: a Manifesto for Business Revolution,HarperCollins, New York, (1993).

[3]. M.A. Cusumano and C.C. Markides, StrategicThinking for the Next Economy, Jossey-Bass, SanFrancisco (2001).[4] C. Sauer and L. Willcocks,Building the E-

Business Infrastructure: Management Strategies forCorporate Transformation, Business Intelligence,Wimbledon (2001).[5]. E.g. S.L Brown & K.M. Eisenhardt, Competing

on the Edge: Strategy as Structured Chaos, HarvardBusiness School Press, Boston, Mass., (1998), R.T.

Pascale, M. Milleman and L. Gioja, Surfing theEdge of Chaos: The Laws of Nature and the NewLaws of Chaos, Crown Publications (2000).[6]. C.Sauer & L. Willcocks,Building the E-

Business Infrastructure: Management Strategies forCorporate Transformation, Business Intelligence,

Wimbledon, 2001.[7]. Leavitt, H.J. Applied organizational change in

industry: structural, technological and humanisticapproaches, in J.G. March (ed.), Handbook ofOrganizations, Rand McNally, Chicago (1965);R.E. Miles and C.C. Snow, Fit, failure and the hall

of fame, California Management Review, 26, 3,Spring, 10-28, (1984); R.E. Miles and C.C. Snow,

Fit, Failure and the Hall of Fame: How CompaniesSucceed or Fail, Free Press, New York (1994); D.Miller, Configurations revisited, StrategicManagement Journal, 17, 505-512 (1996); D.A.

Nadler and M.L. Tushman, Competing By Design:The Power of Organizational Architecture, OxfordUniversity Press, New York (1997).[8]. J.A. Brickley, C.W. Smith and J.L.

Zimmerman, Teaching the economics of

organization,Financial Practice and Education, 9,2, 120124 (1999).[9]. K.B. Clark, What strategy can do for

technology,Harvard Business Review, 67, 6, 94-98(1989); A.M. Kantrow, The strategy-technology

connection, Harvard Business Review, 58, 4, 6-21(1980).

[10]. M.J. Earl, Private meeting of French Thornton

Partnership Change Leadership Network, London,

26 February 2003.[11]. S.ZuboffIn the Age of the Smart Machine: the

Future of Work and Power, Basic Books, NewYork, (1988).

[12]. J.C. Henderson and N. Venkatraman, Strategicalignment: a model for organizational

transformation through information technology, in

T. Kochan & M. Useem (eds),TransformingOrganizations, Oxford University Press, New York(1992).

[13]. R.W. Zmud, A.C. Boynton and G.C. Jacobs

The information economy: A new perspective foreffective information systems management,Data

Base, Fall, 17-23, (1986).[14]. B. Latour, Social theory and the study of

computerized work sites, in W.J. Orlikowski, G.Walsham, M.R. Jones and J.I. DeGross (eds.),

Information Technology and Changes in

Organizational Work, Chapman and Hall, London,

295-306 (1996).[15]. The options approach is also advocated in J.

Ross, C. Beath, V. Sambamurthy and M. Jepson,

Strategic levers to enable e-business

transformations, CISR Working Paper No 310, MIT,Boston, Mass. (2000) where it is proposed as one of

four IT infrastructure strategies.

[16]. C. Sauer, Managing the Infrastructure

Challenge, in L. Willcocks, C. Sauer & Associates,

Moving to E-Business: The Ultimate PracticalGuide, Random House, London, 2000; C.Sauer &L. Willcocks,Building the E-Business

Infrastructure: Management Strategies forCorporate Transformation, Business Intelligence,Wimbledon, 2001.[17]. S.L Brown and K.M. Eisenhardt, Competingon the Edge: Strategy as Structured Chaos, HarvardBusiness School Press, Boston, Mass. (1998); K.M.

Eisenhardt and S. Brown, Patching: RestitchingBusiness Portfolios in Dynamic Markets,Harvard

Business Review, 72-82, May-June (1999); K.M.Eisenhardt and D. Sull, Strategy as Simple Rules,

Harvard Business Review, 106-116, Jan (2001).[18]. C. Sauer and L.P. Willcocks, The Evolution of

the Organizational Architect, Sloan ManagementReview, 43, 3, 41-49, Spring (2002).[19]. C.U. Ciborra and Associates,From Control to

Drift: The Dynamics of Corporate InformationInfrastructures, Oxford University Press, Oxford(2000).


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Table 1: Design Requirements For Flexibility

Design Requirements Description Interaction of IT and Organisation

Flexible process Involves continual adaptation of

business process logic and

assembly/disassembly of process

elements.

Increasingly pre-packaged IT software defines (best

practice) process structure and organisation. Process

logic change requires organisational change.

Asset exploitation Ability to obtain increased value from

assets integral to the business includingdatabases, knowledge bases, algorithms,

and business processes.

Today, increasingly about exploiting different forms

of intellectual property embedded, or part-embeddedin IT. Only exploitable if organisational incentives

are in place and silo ownership barriers removed.

Flexible infrastructure The underlying capital (buildings,

inventory, relationships etc), HR and IT

investment that permits the business to

function.

IT can substitute for other forms of infrastructure

but only if the organisation is redesigned, eg an e-

store substitutes for a branch network so long as the

back office/logistics is redesigned.

Innovation Ability to think differently and

creatively, and to bring new ideas into

use.

Product and process design innovation are highly

dependent on IT, but inappropriate structures and

immature capabilities block translation of ideas intouse.

Resilience Ability to withstand turbulence and

shock.

Managing shocks requires organisational choices

about loose/tight coupling and provision of slackresources within business processes and IT to

absorb and mitigate the impact of shock.

Scale Ability to scale up or down as required. Product and process knowledge is increasinglyconcentrated in few individuals and embedded in IT.Diffused knowledge necessary to support growth

and avoid losses during retrenchment.

Scope Ability to vary products and markets as

required.

Business unit structure needs to be balanced against

increased industry/market specialisation of

packaged software.

Reach Ability to vary geographical scope. Orchestration of the supply chain to permit entryinto new territories requires a combination of

organisational and IT decisions.

Learning Ability to capture knowledge from

innovation and execution.

Organisational processes needed to motivate

learning. Management consultancies knowledgebases only started to work once they solved the

problem of sharing expertise. Data warehouses and

knowledge banks are easily created but requirestructures, roles and skills to interpret their contents

and act effectively.

Responsiveness Ability to respond to contextual

turbulence economic, competitive,

political, regulatory, environmental,

social, technological.

Requires information resources (email,

collaboration technologies etc). Critical balance lies

between structuring (through systems) and enabling

(through resources).


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Figure 1: The Evolution Of Organisational Architecture

Table 2: Architectural Concepts for Realising Flexible Capabilities

Concept Description Contribution to

Dynamic Strategy

Architectural Character

Simple Rules high level

heuristics that have wide

applicability

Enable improvisation. Guide

rapid, autonomous but

coherent, decision-making

Organisationally, decision-makers need to have autonomy

and be freed from unnecessary constraints. Technologically,

what is needed varies according to the content of the rule

see example in text below.

Co-adaptation a blend of

business independence withadaptive inter-business

collaboration

Influences cost and speed in

fast-moving markets.Emphasises adaptation in

pursuit of domination in high

potential markets

A key element is frequent joint focus across businesses on

highly targeted areas of Group or Alliance opportunity andmutual advantage.

Organisationally requires motivation and opportunity for

interests to meet, be mixed, and resolved into action.Technologically requires superior data analysis to keep the

focus in tune with the changing business.

Regeneration provocation of

adaptive response throughpersistent stimulation to

change

Evolves new and enhanced

businesses and capabilitiesfrom established strengths.

Avoids risk of stagnation.

Organisationally, requires fast-moving people, processes and

structures. Requires adaptable and responsive IT structureand specialists. The extensible IT platform they create needs

to be shaped by understanding of the kinds of stimulation, eg

acquisitions and de-mergers, product launches and exits, newforms of contract etc

Modularity having

specialised organisational

building blocks. Traditional

differentiation with the

addition of defined points ofinterconnection to enable plug

and play

Permits focus on

improvement. Provides speed

of start-up/response if

module can be acquired off

the shelf. Increased ability tohandle complexity, scale,

expand and divest.

Modularity is usually based around core IT applications that

fulfil common business functions. Modularity is achievable

only if there are simple and constrained interconnections

among modules. This requires collaborative design of both

the technological interconnection strategy and theorganisational interfaces.

Experimentation constant

probing of the future throughexploratory ventures

Anticipates the future before

it happens to you.

Organisationally, requires design that balances protection of

ongoing business with promotion of experiments. Requiresresponsive technologists, and information technologies that

can either be converted rapidly to industry-strength ordetached and thrown away

Time-pacing defining a

rhythm of change that matches

internal capabilities to the

needs of the market

Institutionalises the right rate

of change

Organisationally requires staff selection and management

processes attuned to the rhythm. Requires information

technologists with developmental and operational processes

aligned to the rhythm

Organisational

complexion of

IT

Automation AlignmentReverse

Alignment

Real Options Flexible

Capabilities

Organisational

effects by accident

Reinforces

established

organisational

structure and

processes

Fits organisation

to chosen

information

technology

Ability to turn on

IT options must be

matched by

organisational options

Convergence of

IT and organisational

capabilities

Realm of Organisational

Architecture


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