Page 238 - Operations Strategy

THE CHAllEngEs of infoRmATion TECHnology (iT) 213
Moreover, information processing and computing power has undoubtedly had a major
impact on almost all technologies but there are still limits to what computers can do.

the challenges of information technology (It)
As we saw in the previous discussion of the three ‘dimensions’ of process technology, the
dominance of information technology (IT) has caused a profound rethink of the issues
connected with technology in an operations strategy context. Surprisingly, given the
ubiquity of IT, the cost effectiveness of investment in IT is not altogether straightforward.
Generally, research recognises a plain and positive connection between investment in IT
and operations productivity growth, even if the returns can vary widely. As one author-
ity put it, ‘there’s no bank where companies can deposit IT investment and withdraw an “aver-
age” return . . . [A] strategy of blindly investing in IT and expecting productivity to automatically
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rise is sure to fail.’ Moreover, there is a high failure rate for IT projects (often cited as
between 35 and 75 per cent, although the definition of ‘failure’ is debated). Yet there is
extensive agreement that the most common reasons for failure are connected in some
way with managerial, implementation or organisational factors. And of these manage-
rial, implementation or organisational factors, one of the main issues was the degree
of alignment and integration between IT strategy and the general strategy of the firm.
This is a particularly important point for operations strategy. It reinforces the idea that
IT strategy must be regarded as an integral part of overall operations strategy.
Of course, different kinds of IT pose different kinds of challenge. The impact of some
IT is limited to a defined and (relatively) limited part of the operation. This type of IT is
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sometimes called ‘function IT’ because it facilitates a single function or task. Examples
include computer-aided design (CAD), spreadsheets and simple decision support sys-
tems. The organisational challenges for this type of technology can usually be treated
separately from the technology itself. Put another way, function IT can be adopted with
or without any changes to other organisational structures. Yet this does not mean that
no organisational, cultural or development challenges will be faced. Often, the effec-
tiveness of the technology can be enhanced by appropriate changes to other aspects of
the operation. By contrast, ‘enterprise IT’ extends across much of, or even the entire,
organisation; because of which, enterprise IT will need potentially extensive changes to
the organisation. The most common (and problematic) enterprise IT is an ERP system.
Because of the importance of ERP to operations strategy we will describe it in some
detail in the next section. The third IT category is network IT. Network IT facilitates
exchanges between people and groups inside and/or outside the organisation. How-
ever, it does not necessarily predefine how these exchanges should work. For example,
email is a network IT. It has brought significant changes to how operations and supply
networks function, but the changes are not imposed by the technology itself; rather
they emerge over time as people gain experience of using the technology. The challenge
with this type of technology is to learn how to exploit its emergent potential.

enterprise resource planning (erP)

As information technology established itself within most businesses, the various func-
tions within the business developed appropriate systems and databases to meet their
own needs. ERP systems attempt to integrate all these various systems. This allows
changes made in one part of the business to be reflected immediately in information

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