Will Information Technology Really Turn Organizations Upside Down This Time?

by James Heskett

Summing Up

Do not read too much into a possible relationship between the development of information technology and the incidence of "upside-down" management. That's the overwhelming message from responses to the column raising questions about the possible connection between the two.

First, as Greg Waldrip points out, let's get things in perspective. These are only means to carry out a strategy after goals are determined, all in a supportive management environment. Dennis Crane concurs, adding that "Information technology should only turn businesses upside down when they've already determined that there's some truly fundamental reason to do so."

Some question whether the "upside down" organization is an idea whose time has come. David Koltermann warns, "The potential revolution to turn management upside down is overstated... In the marketplace of ideas, inhabited by academics and consultants ...personal advancement may be better served by being provocative than by being right."

Others question the importance of the linkage between information technology and the shape of the organization. Allen Roberts suggests that the latter is just one of many potential impacts of information technology, implying that it may not be the most important.

For any of this to have a high degree of relevance, however, depends on other factors in the view of respondents. As John Ladge states, "I know first-hand that it can work, but it really depends on the culture of the organization." Waldrup puts it more strongly: "Providing more information without creating an atmosphere that allows people to use their judgement will only cause failure."

Still others pointed out that information technology is most often used in the context of "medium risk, medium gain scenarios like credit card processing, market forecasting, etc." in Shankar Avsb's words. He suggests that information technology will play a major part in remolding organizations for only a few, but that "possibly, these would be organizations poised to become the new market leaders."

Even if many things have to happen before fundamental organizational changes occur, it still leaves us with questions: Is this kind of change worth pursuing? If so, what changes in information technology and policies of disseminating its products will be required? If the process is a long one, is it even practical to begin it in organizations with "continuity-challenged" leadership? Is there any real purpose served by academics in continuing to spread the word about upside down management and preparing potential managers for its possible emergence? What do you think?

Original Article

Periodically, somebody comes up with the idea of turning the organization upside down, with the customer on top. Those serving customers in the frontline come next, and top management winds up at the bottom. It's eye-catching and too often grossly out of step with what really happens when organizations employ the concept.

Now we learn that the Army is experimenting with satellite-driven information technology that enables a tank commander to have a full view of the battlefield, including the positions of both friendly and enemy tanks. Armed with this knowledge, the best tank operators can make better, more timely decisions than their superiors—but only under certain conditions. First, frontline tank commanders have to have the intelligence and judgement to sort through a heavy load of information that is changing in real time (not unlike the best video game players). Second, the technology has to operate dependably, a problem in combat. And third and most significant, superiors have to be willing to delegate such decisions to frontliners. As a result, there have been as many spectacular failures as successes in military tests of the technology. In fact, the implementation of information technology generally has been quite disappointing to the "fighting bottom line" in the modern Army to date.

But let's suppose that all three of these barriers eventually are overcome. What will it mean for the traditional hierarchical military chain of command? Or for business?

For years, W. Edwards Deming, the father of modern continuous quality improvement, had trouble convincing U.S. (as opposed to Japanese) auto manufacturers to implement the keys to improved quality. They include, among other things, improved information, training to improve quality, and delegating authority to frontline production workers to shut down a billion-dollar production line in the interests of quality improvement. More recently, Gary Hamel, in his book Leading the Revolution, has talked of putting such information to use in encouraging people at all levels of an organization to come up with new business ideas and advance them within the company.

If there is a common theme here, it is that information technologies, combined with proper selection, training, and the willingness of managers to rethink their jobs, have the potential for literally turning organizations upside down, changing forever what we have thought of as the role of management, if not leadership. But will it happen, given what the Army has found?

What about the unwillingness of frontliners to employ their information in the service of the organization as a whole, even if their individual performance may be penalized? What about the potential for substituting technology for judgement on the frontline? What about the fact that frontline employees are paid according to their rank rather than their potential impact on performance? And what about management's ability to change? Is information technology fueling a false hope or are we really entering a new era of upside-down management? What do you think?

    • Greg Waldrip
    • Senior Technical Advisor, National Institute of Standards and Technology

    Information technology is only the means to achieve the goal. Organizations, whether they are the Army or a small independently owned manufacturer, must first determine several things. What are the goals of the company? For an owner these include both personal and business goals. From this comes a strategy for survival, growth, or leaving a market.

    Having an upside down organization requires a culture that encourages change and does not flinch when challenges to the status quo are raised. Providing more information without creating an atmosphere that allows people to use their judgment will only cause failure. Deployment of information technology requires an analysis of needs. More is not better. Define the critical decision factors and move others to the background. Deming was an advocate of Pareto analysis. Define the significant few for immediate attention and leave the insignificant many for later.

    IT toys and gizmos may be nice, but they must serve a goal. If you know the goal, the rest will follow.

    • David Koltermann
    • Ph.D. Candidate, Richard Ivey School of Business

    The potential revolution to turn management "upside down" is overstated. Even in the Japanese auto assembly example, what workers are given is the power to make tactical decisions within specific limits. It is an important advance to entrust line employees with the power to shut down a line, but it is not the same as deciding a financial structure, a market strategy, a management system, or maneuvering between conflicting interests in foreign trade negotiations.

    Likewise, in the military example, tank commanders may be given greater latitude of action within battle situations, but the larger strategy of war will remain the responsibility of their superiors.

    We need to examine carefully just what is the nature of the greater information that technology is bringing us and what use can it be put to. In some cases, it may actually be irrelevant, in other cases it will permit better tactical decisions to be made, but without much effect on strategy.

    One challenge for strategic thinking has always been to discern what is important from the mass that is not. That is one of the things the case method of teaching is intended to convey. Much of the most valuable information is not amenable to mechanical (computer) processing.

    As long as no one takes it too literally, it can be helpful to shake up our thinking and try on new paradigms such as these "upside down" management ideas.

    In the marketplace of ideas, inhabited by academics and consultants, getting attention is crucial. Personal advancement may be better served by being provocative than by being right. Whether one was right or wrong will usually be hard to prove anyway and only be determined long after it no longer matters. For a case in point, consider how much nonsense was disseminated about the economic effects of the Internet and how much of it was disproved in only a few years. The academics and consultants who promoted it benefited handsomely at the time and seem to suffer no ill effects from the subsequent debunking.

    • Dennis Crane
    • CEO, bValuation

    In the vast majority of cases, information and technology should be viewed as "a means to an end". In other words, start with a clear mission or vision and a business or organization goal. Then, identify the most effective process activities to achieve those ends. With the foundation in place, you can then consider whether and how to employ information and technology to enhance the activity.

    In the Army tank context, it's not clear that individual tank commanders are the right place to implement broader strategic battle planning and adjustment enabled by the technology noted. In a business setting, it seems better to focus on conveying knowledge to the right people at the right time, rather than overwhelming them with data or information. We can consider knowledge as the distillation/extraction of information that will cause those who possess it to act more effectively. Information simply has the ability to cause people to act differently—but not necessarily with greater effectiveness.

    Back to the theme: Information technology should only turn businesses upside down when they've already determined that there's some truly fundamental reason to do so.

    • Allen Roberts
    • General Manager, Agri Chain Solutions Ltd.

    For businesses that believe (i.e. the CEO believes) that IT is an end in itself, there will be no real change They will continue to go broke. Investment in IT will just be another dumb business decision.

    By contrast, for those who see IT investment as a means to an end, and that end is clearly articulated by effective commercial leadership, and understood by those impacted by it in any way, the potential impact is profound. Turning a business "upside down" is just one of them, think what it can do for your inventory investment, effectiveness of your supply chains, capacity to deal directly with customers rather than through accumulating intermediaries, remove entire processes by redesigning and them onto a "live" platform etc, etc.

    • Anonymous

    This could not be closer to the truth if you had asked company directors all over the world.

    We are going to see empowerment of staff at all levels in business to allow companies to cut out the continual need for regressive meeting. Companies will need to have the ability to react quicker, think faster, and respond to change better. This will only come with the continued support of training and development of the staff we employ.

    • Matthew
    • Director, Brodeur/Imagetime

    I think one of the challenges to this revision of organizational structure, especially in the Army, is that front-line decision making is very often not strategy driven but situational. Generals or managers are there to maintain a dispassionate perspective. Sometimes actions need to be taken that involve huge sacrifices that are strategically necessary as diversions or as straw dogs that those executing the strategy would not chose for very obvious reasons.

    • John Ladge
    • President, Organizational Change Dynamics

    I know first-hand that it can work, but it really depends on the culture of the organization. People want to do a good job, and if management provides them with the necessary tools (information is a tool) they will exceed expectations. Of course, reward systems need to be aligned with sought after results.

    • Shankar Avsb
    • Associate, Infosys Technologies Limited

    The battle tank example used by Professor Heskett is a high risk, high gain scenario for an information technology (IT) application. The latest advances in IT have the highest marginal utility for a tank commander because it is a question of life and death. However, the majority of us prefer to deploy IT applications for medium risk, medium gain scenarios like credit card processing, market forecasting etc., and prefer the manual route where it really matters.

    The battle tank example presents two distinct scenarios. On one hand, a badly implemented IT application could lead a tank commander to make a wrong decision. On the other hand, a well implemented and intuitive IT application could actually lead the same tank commander to save his life and that of his comrades. He could fight more and increase his country's chances of winning the battle.

    In business terminology, the latter scenario is equivalent to large gains in employee productivity and increased employee contribution towards winning market share. All CEOs want this to happen, but only a few suceed. Why?

    It is because organizations differ in their risk-taking profiles. We can divide organizations in two broad categories. On one end, we have organizations like the pension funds that are risk-averse because their investors want it that way. Their employees tend to have the same philosophy. And because they are giant investors themselves, they pass their risk-averse sentiment along with their investments. The quarterly reporting on Wall Street represents this sentiment. Strategic investments like high-end IT applications tend to get flagged as low priority in the annual budgeting exercise, even though some of them could turn out to be market winning applications.

    On the other end, we have organizations that want to experiment, and their investors want them to do exactly that. Failure is usually a part of the annual expenses. The firms in biotech and wireless are examples of this category. They are smaller in size than the typical Fortune 500 and the employees know their regular customers. They tend to know how an event could affect their revenues and profits. These firms not only sell their experimentation, but also pass their innovative methods on to their customers.

    Most of today's Fortune 500 organizations lie in between these two ends. And therefore, they vary in their zeal to try out an innovative approach, which could be an IT application.

    It is true that exposing decision-making information to frontline employees is a business risk. But a well-implemented IT application can mitigate that risk and still bring the benefits of speed into business. For example, it could help a customer service rep to identify potential sales, and pitch right away from a pool of ready-made product demos while the competition is still planning an internal meeting. It is the same as the ability of a Japanese autoworker to stop the billion-dollar production line and correct a defect right away, and avoid expensive and embarrassing recalls later.

    So, will information technology really turn organizations upside down this time? Yes it will, but only for a few organizations. These would be organizations willing to experiment with the capabilities of their frontline employees using innovative approaches. These would be organizations willing to place the knowledge acquired by the seniors in front of the juniors. And possibly, these would be organizations poised to become the new market leaders.

    • Anonymous

    My achievements cover significant turnarounds and enhanced P&L usually involving deployment of information technology. "Top executives" protect themselves and fear others making decisions, as Deming found many years ago within the U.S. Sadly, this same attitude exists today. Many U.S. businesses will fail since "top executives" approach decision making with paranoia.

    • Ismail Syed Mohammad
    • Senior Consultant, Infosys Technologies Ltd.

    Information technology is nothing but a way to collect information about the organization; I would call IT the building blocks or the nuts and bolts of the organization.

    Real success comes in the way information is interpreted and in the proactive/reactive/corrective actions that are taken based on the interpretation.

    It is not the information technology that could really turn the organization upside down. It is the interpretation that matters. Interpretations need to be made in conjunction with the vision of the organization. It is something like: You know where you want to go and you have a map in your hand as well as possibly the best GPS, but if you don't know how to interpret the information given by the "gizmo," you will not be able to reach your destination.