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Levels of function (and dysfunction) IT can have with business: Part 1 of 8

Published on: 2014-05-11

A lot of articles are written about how IT and the rest of the business have difficulties working together well. Clearly there are differences between companies that merely have challenges with communication between IT and companies that have such horrible communication that business creates "shadow IT" departments. What should be just as obvious is that solving problems within each type of group should take a drastically different approach. There are no frameworks that I'm aware of that help companies gauge their problem, though. Luckily for us, Steven Wheelright and Robert Hayes from the Harvard Business School came up with a useful framework (payment needed for the full PDF), to describe how manufacturing is treated in the rest of the business. This post is my attempt to adapt their terminology to IT.

Stage One: Internally Neutral (Minimize Manufacturing's Negative Potential)

The "Minimize Manufacturing's Negative Potential" subtitle describes quite accurately the level of interaction between manufacturing and the rest of the business at this level. Rather than look upon ways of manufacturing products as a source of strength, companies at this level merely see manufacturing as a necessary function whose importance and effect on the rest of the business should be minimized. Here are some characteristics of this stage as given by Wheelright and Hayes:

  • Managers attach little to no strategic importance to infrastructure issues [such] as workforce policies, planning and measurement systems, and incremental process improvements.
  • …production managers run into top-level insistence to remain flexible and reactive so as not to get locked into the wrong decisions.
  • …Stage 1 organizations think of production as a low-tech operation that can be staffed with low-skilled workers and managers.
  • Eager to keep the manufacturing function as simple as possible, they feel justified in thinking that "anybody ought to be able to manage manufacturing"
  • With a self-limiting view of what manufacturing can do, managers find it difficult to upgrade their labor-intensive, low-technology processes when [new] products … appear

Based on my interpretation of the article, here are some signs that your IT department is in Stage 1:

  • Your software developers don't interact with end users or your customers, they simply take orders from management, business analysts, and/or project managers.
  • Neither your business analysts nor your project managers know much about software development or how it fits into the business as a whole. The business analysts merely document requests and the project managers merely report on which tasks have been completed.
  • Your programmers must have their requirements spoon-fed to them, since they are incapable of interpreting the intent of a request.
  • You have nobody with a technical background in executive levels of management.
  • Your employees with a technical background are managed by whomever in the company is willing to do so, and rarely by someone with technical experience.
  • You have no problems asking your developers to work 60-100 hours a week on a regular basis.
  • You don't give your developers any time to learn new products or technologies and don't allow them to try out new technologies on new products.
  • You have never heard of user experience designers or information architects.
  • When problems arise, upper management gets involved to fix the problem, despite the fact that they know little about its causes.

Stage Two: Externally Neutral (Parity with Competitors)

The goals of a company whose interactions with their manufacturing department could be described as being in Stage 2 would be to keep up with their competitors manufacturing-wise, but primarily look for opportunities for creating a competitive advantage elsewhere. Here are some characteristics of this stage, as defined by Wheelright and Hayes:

  • Following Industry practice in matters regarding the work force, … equipment purchases, and the timing and scale of capacity additions.
  • Avoiding, where possible, the introduction of major, discontinuous changes in product or process.
  • Treating capital investments in new equipment and facilities as the most effective means for gaining a temporary competitive advantage.
  • Top managers of Stage 2 companies regard resource allocation decisions as the most effective means of addressing major strategic issues in manufacturing.
  • Offensive investments to gain competitive advantage are usually linked to new products; manufacturing investments … are primarily defensive and cost-cutting in nature.

Based on my interpretation, here are some signs that your IT department is in Stage 2:

  • Your software developers do not interact with end users much and still rely largely on project managers and business analysts to give them direction.
  • Your software developers do not want to interpret the needs of end users, instead they prefer to have their requirements spoon-fed to them so they don't have to think.
  • Whenever you upgrade your technology, it is because you can or because your competitors are, not because you have a specific need you're trying to solve.
  • You primarily hire people that will fit within your existing process rather than those that will improve it.
  • Your entire software development team is ignorant of any new product opportunities in the pipeline and are on a "need-to-know" basis regarding new business strategies.
  • Software development managers can come from a technical background or not, but either way are expected to enforce the status quo rather than improve the current situation.

Stage Three: Internally Supportive (Provides Credible Support to the Business Strategy)

A company could be characterized as Stage 3 when manufacturing is expected to actively support, but not shape, the strategy of the business as a whole. Here are some characteristics, again as defined by Wheelright and Hayes:

  • Screening decisions to be sure that they are consistent with the organization's competitive strategy.
  • Translating that strategy into terms meaningful to the manufacturing personnel.
  • Seeking consistency within manufacturing through a carefully thoughtout [sic] sequence of investments and changes over time.
  • Being on the lookout for longer term developments and trends that may have a significant effect on manufacturing's ability to respond to the needs of other parts of the organization.
  • Stage 3 companies … view technological progress as a natural response to changes in business strategy and competitive position.
  • Another characteristic of Stage 3 organizations is that their manufacturing managers take a broad view of their role by seeking to understand their company's business strategy and the kind of competitive advantage it is pursuing.

Here are some signs that your IT department is in Stage 3:

  • You have executive-level leadership with technical knowledge in your organization, but they report to the CFO, CMO, or COO, not the President or CEO.
  • Your software developers have access to end users during the development and testing phases, but the software strategy and software design phases are still driven by non-technical personnel.
  • Your management team goes to your technology team relatively often with ideas, looking for feedback about how to make them a reality.
  • Most of your technology managers have at least some knowledge of both the company's overall strategy and the nuts and bolts of the technology that their staff is using.
  • Your project managers and business analysts are very technical and may have once been programmers themselves.

Stage Four: Externally Supportive (Provides an Important Contribution to the Competitive Success of the Organization)

What distinguishes this stage from the other three is that this is the only stage where manufacturing is expected to make an equal (or greater) contribution to the overall success of an organization as its fellow departments. It is important to note here that there are two distinct types of Stage 4 companies:

  1. Companies whose business strategies place primary emphasis on manufacturing-based competitive advantage to the detriment of other functions, which are relegated to a Stage 1 or 2 role.
  2. Companies who strive to provide equal weight to all departments to achieve balance within the organization.

For purposes of this blog, I am going to ignore the first type of Stage 4 company. Companies that are dysfunctional because they emphasize manufacturing or technology too much are as dysfunctional as those who emphasize manufacturing or technology too little.

Here are some of Wheelright and Hayes' key characteristics of Stage 4 companies:

  • [Manufacturing] anticipate[s] the potential of new manufacturing practices and technologies and seek to acquire expertise in them long before implications are fully apparent.
  • They give sufficient credibility and influence to manufacturing for it to extract the full potential from production-based opportunities.
  • They place equal emphasis on structural (building and equipment) and infrastructural (management policies) activities as potential sources of continual improvement and competitive advantage.
  • By treating the manufacturing function as a strategic resource … they encourage the interactive development of business, manufacturing, and other functional strategies.
  • There is an expectation in Stage 4 that all levels of management will possess a high degree of technical competence and will be aware of how their actions may affect manufacturing activities. Further, they are expected to have a general understanding of the way products, markets, and processes interact and to manage actively these interactions across functions.

Here are some signs that your IT department is in Stage 4:

  • You expect your software developers to be actively involved in all stages of the software development lifecycle, including strategy and design.
  • Your software developers are trained in areas other than pure software development, such as business areas and leadership.
  • You do not have dedicated project managers or business analysts; instead your software development team manages themselves and gathers their own requirements.
  • Your software development team has a pretty solid knowledge of most new software development techniques, regardless of whether they're using them at the moment.
  • You have someone whose job is primarily to manage the technical side of the company at the highest levels of management.
  • Your technology people understand how the technology enables the business strategy and the rest of the business understands the potential and limitations of technology and how that affects the business.

Why this matters

Putting terminology around these levels is fine for an academic discussion, but this isn't an academic blog. Where I see the value in this structure is in recognizing that it takes different solutions and approaches to solve issues in a Stage 2 organization than in Stage 4. But since this topic is too huge for a single blog post (indeed, Wheelright and Hayes wrote an entire book about manufacturing), I will be rolling out a series of posts for the rest of the year to apply these concepts to the real world.

Here is the current schedule:

May: Levels of function (and dysfunction) IT can have with business
This article was originally posted here and may have been edited for clarity.