Such concerns no doubt soon will emerge in e-commerce ventures as new IT costs are piled up on top of old IT costs and as doubt is cast on many dotcom revenue models. However in the short-term at least the currency in new IT is time not cost. Time punctuates business language, permeates IT consciousness, drives several new IT practices and fuels many of the tensions of e-business development.
Speed of decision-making, applications development, design changes, implementation, technology adoption – in short, of going to market – dominated our interview discussions. Because IT is the critical path, speed is a condition – an imperative – of success in new IT departments. For example, one IT executive in an e-commerce spin-off observed, “the intention has been quality, but we have had to compromise in favour of speed and learning”. A start-up CTO commented “we prefer to be imperfect and be there, rather than perfect and not be there”, while an incumbent company CIO reflected that “it’s a time and materials business now – you can’t cost things accurately and time is the driver”. One interviewee perhaps captured time as currency best of all: “IT can’t now fall on excuses such as ‘can’t have that quickly’ - the biggest sin is not to have something running. It is about fast against slow”.
Outward Facing When describing what was really different about IT challenges in the new economy, interviewees commonly used two related phrases: “customer-centric” and “external facing”. Doing business on-line is not new, but in most organisations most of the IT applications portfolio has been inward-facing – back office systems, order fulfilment processing and so on. Even customer-facing systems in sales, service and distribution often have impacted company personnel more than the end-customer. Exceptions like reservation systems; EPOS systems and ATM services have been regarded as just that – exceptions or special cases.
In e-commerce, customers, suppliers and partners are on-line and the systems represent the company. So our investigations highlighted four imperatives. The first is the necessity of 24 x 7 service levels (sometimes hyped up as 25 x 8!). The second is the challenge of providing infrastructure capacity to match uncertain levels of demand. Then applications development often was described in our study firms as new product development with an added ingredient of creative design. Finally – and quite novel it seems for IT personnel – there is the need to work closely with marketing people. One observation captured both the joint learning that is happening and the external shift in orientation: “The marketing guys are intolerant of longwinded, technical discussions. They are creative and overtly demanding because you have got to have a customer-spin on everything”.
Entrepreneurial style A corollary of this outward-facing orientation is the need for a more entrepreneurial style in IT. The past has been typified perhaps by a more disciplined work style. The engineering ethos, the control regimes created by project management, the performance measures which result from chargeout, quality management and service level agreements, and the routinisation implied by standards, procedures and best practices – not to mention the detailed negotiations and subsequent monitoring inherent in outsourcing - have added up to discipline.
In contrast, being at the cutting edge of business development, where time is currency and the focus is on markets and customers, inevitably leads to a more pioneering, entrepreneurial work style. “It is fun not to be safe – safe is a boring word” was one reflection which captured this change. A more formal indicator is the introduction of performance measurement and reward systems which emphasise revenue growth or meeting product time to market goals. Two of the most frequent words used by interviewees to capture how new IT differs from the past were “entrepreneurial” and “risk-taking”. “Let’s try it: I think I know how” was a phrase which seemed best to capture this entrepreneurial style.
A “Fun Climate” Most of the words we have used to characterise old IT - “cost”, “engineering”, “disciplined”, “inward-facing” convey a serious or earnest climate. The traditional IT shop very often became a production facility populated by section partitions, progress charts, orderlines and some lack of soul. Such an environment perhaps suited the often introverted personality types who entered the IT profession.
In new IT departments, multidisciplinary groups may be chatting over a screen design or surrounding a whiteboard. The CEO or COO may be deep in conversation with a programmer. There are probably icons or vision statements on the wall to remind everyone of the purpose of the business. In classical start-up mode, there may be a football table or games area in the centre of the office. One spin-off company had a “chill out” zone where IT personnel could relax - and often new norms of dressing down are being set. One IT executive observed that “the social side and work have merged: enjoy and socialise while working”. Indeed our interview conversations often were peppered with words like “fun”, “exciting”, “buzz”, “roller coaster” - and, of course, “cool”.
Technology Edge For many years IT executives as much as business executives have been somewhat risk-averse about new technologies and techniques. “Leading edge is bleeding edge” captures this attitude. New technologies have enabled new ways of doing business, but many firms prefer to be quick followers rather than early adopters. Even IT professionals often would see beta-testing of a new version of software as the limit to risk-taking. Indeed there is a very sound case for at least believing in appropriate technology (Bensaou and Earl 1998), matching the sophistication of a technology to the business need.
In E-commerce ventures, the technology risk profile has changed. There is a willingness, even a recognition of the imperative, to be early adopters and to experiment. During our six month study, several start-ups and spin-offs assessed, initiated and implemented new WAP-based channels. Others were investing in interactive digital television channels as complements to PC-Internet channels. Most of our companies were actively engaged in technology forecasting and scanning, technology R&D and joint ventures with new technology companies. It is not unusual for CEOs of dotcom start-ups and spin-offs to go on regular technology study tours and to meet with their counterparts in core technology supplies. Finally, expenditure on IT is rising rapidly in e-commerce ventures, not least as new platforms are developed. As one incumbent CIO remarked: "We have been reluctant to engage in technological R&D in the past, but now it’s becoming an imperative.”
These seven shifts in the character or conduct of IT may be temporary, reflecting the fervour of “dotcom mania”, the disequilibrium effect of new technology and, in the case of spin-offs and incumbents, the explicit attempt to change the context. However, they seem likely to stimulate both unlearning and new learning and we collected evidence of at least seven shifts in IT practice across the sample firms (Table 2).
New Practices in IT
In our interviews we focused on the fundamental management issues in IT: organisation, planning, architecture, project control, systems development, systems maintenance and skill deployment.
Boutique Organisation Traditional IT departments obviously vary in size, but despite outsourcing and downsizing, IT headcounts of 2,000 or more - even 10,000 - can be found in large companies. Inevitably size generates bureaucratic models of organisation: hierarchies, specialist units, support staffs, command and control structures. The IT departments often evolved into a specialist function.
New IT departments - those engaged in e-commerce and new media are relatively small. A young dotcom start-up may employ five or six IT personnel, a spin-off or incumbent business from twenty to two hundred. More importantly, they “behave small”, avoiding hierarchical structure and specialist demarcation and opting for flat, team-based structures.
They also tend to seek the best people and recognise that in return high salaries and share options are expected. Accordingly exacting human resource policies and procedures are adopted, either deliberately or by emergent necessity. These include induction bootcamps, incentives for time to market performance, revenue growth, or meeting service level targets, bonuses for recruiting other IT personnel and employee satisfaction surveys. Such initiatives are reminiscent of HR policies in strategy boutiques. The belief that such boutique-style organisation and HR practices are necessary often was one of the arguments behind spinning off an e-commerce venture or creating a new “E-IT” department within an incumbent company. In web application development companies, dotcom start-ups and many spin-offs, the IT personnel are not, however, in a separate department; they cohabit with the rest of the business.
PRACTICE FROM TO
Organisation Specialist Function Boutique Activity
Planning Long Term Exercises Rolling Plans
Architecture Uniform Platform Three Tier Architecture
Development Waterfall Method New Venture Development
Control Project Management Programme Managers
Life Cycle Build to Last Launch and Learn
Work Organisation Division of Labour Multi-disciplinary Teams
Table 2 New Practices in IT
Weekly Planning The practice of IT Strategy or IS Planning has been a top IS management issue over the years. It has spawned methodologies, consultancy practices, research and a veritable lexicon of terms. These include “IS Strategy Planning”, “IT Strategy”, “the Applications Development Portfolio” and “Systems Long Range Planning”.
None of these ambitions is nonsensical. There was and is a need to align IT investments with the business; it helps to have a long range plan for IT resource development and deployment; there is often a need to prioritise application needs and requests; IT application development projects could be multi-year activities. So whether IS/IT planning was an annual, occasional, three yearly (or more) exercise, it was generally long term and involved substantial effort.
In e-commerce ventures, IT planning often is done through weekly, Monday meetings. In one 18 month-old dotcom start-up, the CEO and CTO meet weekly to agree priorities in order of urgent fixes, missed deadlines, reactive opportunities and next step business developments. This practice was explained thus: “The vision is constant but plans change and details drive tactics”.
In a spin-off e-business, the management team reviews the project portfolio and new application ideas in terms of both priority and progress. A three month project would be long-term in this company whose new motto is “ruthless execution at speed”.
In an incumbent company with a separate “E-IT” department, the e-commerce ventures management team meet with the E-IT managers every Monday to review progress and review priorities. “We limit our portfolio to six projects but there are usually ten requests, so it’s all about prioritisation … Our IT plan is a project portfolio written on one page showing which projects are in scoping phase and which are active”.
IT planning, then, has become short term and the plans are typically rolling ones. This new practice is perhaps analogous with rolling budgets, a procedure which also evolved in dynamic environments.
Three Tier Architectures “Architecture”, the conceptual design or framework for IT infrastructure development, is concerned with meeting objectives of systems integration, technology interoperability, platform reliability, application maintainability and IT cost management. It is perhaps easier to describe than implement, but in recent years the drive for a single “desk top” or common enterprise resource planning systems or global data standards in corporations has been evident. There has been a quest for uniform platforms.
However, when technologies are evolving rapidly and business change is endemic, architecture design and implementation are very difficult. Not only is there high technological`and business uncertainty, but in any but the most youthful e-commerce ventures, there is the need to connect and integrate short lived and volatile customer-facing applications to more enduring, perhaps old or even legacy, systems and to incorporate new, immature and perhaps rapidly obsolescing technologies. So the spirit of architecture becomes more like “mix and match”.
For example, one dotcom start-up talked of begging, borrowing and bargain basement buying of technologies which got them started, but soon were found to be non-scalable, unreliable or too complicated. However, they had to be replaced over time depending on business imperatives and affordability. Spin-offs often have to patch web-based front-end applications on top of inherited legacy transaction processing systems and then the search begins for how to both ensure reliability and provide adequate response times. Some application development boutiques did rapid builds of web-based consumer-facing systems and then contacted their clients’ IT departments later on to discuss how to connect their front-ends to quite differently constructed back-ends.
Terms we heard to describe these practices included “band aid”, “held together by chewing gum and string” and “patchwork quilts”. It seemed as though mix and match architectures were displacing the drive for uniform platforms. However, as our project unfolded, a new concept was evolving and dotcom start-ups and spin-offs especially were already embracing it. Three-tier or multi-tier architecture was taking over.
The central idea is that the volatility and perhaps rapid obsolescence of the front-end applications is recognised, but so too is the need for stable, robust, reliable back-end applications commonly the transaction processing systems and data warehouses. So (Fig.1), these two domains or tiers are recognised as different and are connected by a “middleware” or “technical wrapping” tier which translates data messages between the two layers, stores processing logic and data objects and provides a gateway between ephemeral systems and more permanent ones. This practice makes both business and technological sense.
Fig.1 Three Tier Architecture
New Venture Development IT students and systems analysts traditionally have been brought up on the “waterfall method” in systems development. This formalises and codifies a set of stages from feasibility study through systems analysis, systems design, coding, testing, implementation to post implementation audit. It is logical, provides a structure and suggests review points for project planning and control.
However in the e-commerce arena, it has been found wanting. “It’s too linear”, “it doesn’t appeal to creative designers”, “it takes too long” and “it can’t cope with continuous ideas and change” were sample criticisms. Instead, systems development for e-commerce has become much more like the process of new venture development.
Such an approach is most evident in web application development boutiques and dotcom start-ups where typically a system being developed is also a business development exercise - or a case of new product development. Indeed as in new product development, it is not unusual for some of the different tasks of the waterfall method to be executed in parallel in order to accelerate time to market.
However two other inter-related behaviours caught our attention and led us to explicate this venture development approach and propose a new model. First, aggressive time-boxing is the norm. For example, some companies will only undertake systems development projects that can be completed in three months or less. Many look to reducing the elapsed time of any stage to one month or less. Even redeveloping an early but fragile version of a system to industrial strength standard - a common need - mostly must not take more than nine months in total.
Second, the waterfall stages are being collapsed into three phases which, especially in start-ups, are very similar to the early financing phases of new business ventures: preseed, seed, and first stage financing.
In the most illustrative examples, a team spends one or two days (but this can be one week to one month) on the concept, or preseed, phase. This involves brainstorming, storyboarding and rapid prototyping to develop a business or product idea and visualise it as a simple system. The team (see later) typically comprises business strategists, commercial managers, software developers, graphics and navigator designers, modellers and storyboard facilitators - and all may contribute to development of the concept.
The next design or seed phase typically lasts from one week to one month and produces a richer and more robust design. Graphics and navigation designers take centre stage here as do modellers and software developers. Usability and customer interaction tests are an important activity.
The third development or substantial financing stage is dominated by the technology specialists whose job is to make the application robust. They may throw away the prototype from phase two and start again. Typically this stage lasts from one to three months.
Fig.2 The Venturing Life Cycle Methodology
An ideal model of this “methodology” is proposed in Fig.2, where clearly the end of each stage can provide a review point, or in venture capital parlance, a financing decision. We borrow from the organisational development literature to propose labels for each phase of storming, forming and norming.
Programme Management Project planning and control is an essential management tool in traditional IT departments. The waterfall method provides a template and various mixes of time, cost and resource schedules are drawn up and then monitored. Change control procedures are commonplace as are devices whereby managements sign off on each stage. Often best practice or proprietary project planning and control systems are deployed.
In e-commerce ventures, timeboxing and deadlines are the major mechanisms used to plan and control systems development, in the spirit of time as currency. Typically, site or product launch dates drive the project and as deadlines approach, functionality (and sometimes robustness) are sacrificed or compromised in favour of time. “Delivery means delivery” was one observation we heard, because e-commerce projects are business projects with implicit or explicit promises made to the marketplace.
So project management has been simplified and project managers often do not exist. They are not affordable in start-ups and young spin-offs and as described in the process of rolling plans, progress and priorities are continuously reviewed in most e-commerce ventures.
However, a common learning has occurred in many of the firms we studied. Because systems are the product, the channel or the business process, there are other related activities that have to be planned, monitored and implemented in parallel. Examples include promotion, partnership agreements, legal matters and content acquisition. Thus start-ups, spin-offs and incumbents are experimenting with programme management - an office or manager responsible for overseeing and co-ordinating all systems projects, resource planning and tasks that have to be executed in parallel.
Launch and Learn The engineering ethos of traditional IT both grew out of and cultivated a “build to last” philosophy of systems development. As a result, there are businesses today running on core applications that are twenty-five years old or more. The term “legacy system” is certainly appropriate, but it is as much a complimentary term as a pejorative one. These systems have proved reliable and long-lasting.
By comparison, the systems built for e-commerce often are disposable or throw-away applications. They are built on a “launch and learn” principle, driven by time to market goals, sometimes at minimum feasible cost and often to learn about the product, channel or market by doing.
One start-up described the systems activity as “doing, adapting and then doing it again”. One large incumbent reported that they “plan to throw away the first version”. A spin-off “will go to market even if the system is incomplete and linked to the back end with wires and tape”. An experienced spin-off finds the working life of a system so short - perhaps eighteen months to two years - that “it is not worth documenting either the system architecture or the coding”. An incumbent has learnt to abandon early versions of a web-based application when the business idea is clearly wrong, but never throws away the code because of re-use potential and the associated speed to market benefits that might be realised.
Launch and learn may be a transient policy appropriate when business models are evolving fast. It may even be a means of adopting the storming, forming, norming methodology and then reverting to the traditional waterfall method when requirements are certain. It is certainly one example of how the entrepreneurial style is being enacted.
Multi-Disciplinary Teams The traditional IT department has been built around specialist jobs, each with their different status. Application programmers, systems programmers, systems analysts and project leaders have made up the typical hierarchy. Each role was clearly defined and demarcation between tasks was relatively unambiguous.
In e-commerce ventures, software developers, technology experts, graphics designers, business strategist, usability engineers, navigation designers, marketing specialists, modellers and media designers work collaboratively, especially in the storming and forming phases of the venturing lifecycle. While they bring their own experience and expertise, they often will contribute ideas or experiment outside their specialism. Demarcation lines are very thin and everyone or anyone can contribute to the system concept and design if it advances the endeavour in a constructive manner.
One media company had experienced programme or website producers working jointly with systems designers. A CIO of an incumbent business observed that “even marketing managers are working with techies now”. A CEO of an established dotcom looks for IT specialists who are excited about the business and will be teamplayers.
Why is this happening? One reason is that some of the new skills are not yet codified into specialist jobs or careers. Another is that the small boutique ambiance encourages collaboration and teamwork. Third, because systems development is business development the logic of interdependence outweighs tendencies towards segregation and independence. Significantly, perhaps because new IT is a boutique operation often in small start-up or incubator-style spaces, co-location is inevitable and barriers are removed. Then once managers see the advantages of multidisciplinary teamwork, they are determined not to destroy it.
From Description to Prescription
Our research set out to examine whether the character and practices of IT were changing in the new economy and if so to describe and analyse the shift. We also were concerned to discover whether a) some of the new practices seemed to be adequate responses to the challenges of the new economy, b) any practices were emerging that could be transferred with benefit to traditional IT departments. In short, there could be lessons for both “new IT” and “old IT”.
Clearly any suggestions are inductive, interpretative and somewhat subjective. However, we have reported back our findings to some of the sample companies, or their CIOs, and to other CIOs who have had to respond to the challenges of e-commerce. Two practices which address the challenge of “Internet time”, or the race to learn or the search for first mover advantages, the top two boxes in Fig. 3, are generally accepted as promising. Two others (the bottom two boxes) are generally thought to be lessons or principles which should be imported to traditional or old IT departments as well.
Fig.3 Four Principles for New IT
Rolling Plans are an obvious means of coping with responsiveness to fast-emerging market needs, problems that arise in the daily operations of e-commerce, sudden shifts in strategy and pro-active adoption of new technologies. They also provide a routine mechanism for intensive review of projects jointly between IT executives and business executives. Rolling plans therefore also would seem to be a good device for IT - business integration, especially when “IT is the business”.
New Venture Development is a metaphor for systems development in e-commerce; it is also the philosophy which underpins the suggested three-phase venturing life cycle for systems development. This suggested new methodology provides a structure for evolving from loose exploration of an idea through iterative design to tight implementation. It also provides two checkpoints for funding, resource allocation and go/no-go decisions. By adopting the venturing label, it might also symbolise and legitimise the goal of fast execution.
Three Tier Architecture offers a means of reconciling fast and ephemeral development of customer-facing systems-based products and channels with more permanent, industrial strength back office processing and data management. Business and technology uncertainty always limited the degree to which IT architectures could be comprehensive and stable (Earl, 1989). Recognising what must be adaptable and what should be more stable is a sensible way of confronting reality. Clearly the key is the availability of middleware which does the interpretation job effectively. However, some companies are already committed to this principle; indeed some have adopted what may be an even more sophisticated approach, namely multi-tier architecture.
Multi-disciplinary Teamwork is the principle, it appears, that IT executives who have worked in both old IT and new IT departments most value. They want to ensure it is not lost as their e-commerce ventures grow larger and they are encouraging their peers in old IT departments to adopt this way of working. It has been advocated in the past (Bensaou and Earl 1998); the new context of e-commerce has stimulated it - indeed it has emerged naturally.
We suggest that these four principles should guide the management of IT in e-commerce ventures; they may well make sense in traditional IT departments as well.
References
Bensaou, M. and M.J. Earl (1998), The Right Mindset for Managing Information Technology. Harvard Business Review Sept.-Oct. pp119-128
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Earl, M.J. (1989), Management Strategies for Information Technology, Prentice Hall, London
Feeny, D.F. and L. P. Willcocks, (1996), Core IS Capabilities for Exploiting Information Technology. Sloan Management Review, Vol.39, No.3, Summer
Hartman, A. and J. Sifonis (2000), Net Ready: Strategies for Success in the New Economy, McGraw-Hill, New York
Rockart, J.F., Earl, M.J. and J.W.Ross (1996). Eight Imperatives for the New IT Organisation, Sloan Management Review, Vol.38, Fall, pp43-55