Level One: Localized exploitation
Localized exploitation is the first level in IT-enabled business transformation. It insists on the decentralization of decision-making over isolated systems among different functional and operational managers. It insists on making changes in the deployment of the IT applications of the firm to enhance the business process.
The distinctive characteristic of this level is leveraging IT functionality in various departments of the organization by redesigning key areas of business operations. The main strength of this level transformation is that the potential IT capability can be identified and exploited on a cost-benefit basis. The resistance to change reduced at this level. A potential weakness of this type of transformation is the chance of duplication of efforts in the organization’s process. In the case of redesigning a highly qualified system with the new IT-based system, it seems to be failed.
The challenge faced by management at this level is to select the key areas of the business where the redesigning is useful. They also required achieving competitive differentiation from their prevailing best practices. There is no benchmark for measuring the success of the new transformation system at this level. For example, the Whirl Pool Corporation has opened a customer service center in Knoxville in Tennessee, which helps to route their customer’s toll-free calls to the service agent. Together with this, a call identification signal is also sent to the IBM host server. Due to the interconnection of these processes, the service agent gets the identity of the caller through the network.
Level Two: Internal Integration
At this level, along with technical interconnection, organizational interdependence is also implemented. The advantage of this level transformation is that it ensures total quality in the organizational process. Organizational efficiency can be improved by smoothing the interdependence of various organizational levels. This level transformation ensures customer satisfaction through the linkage of various functional areas of the organization in a single line. Customer service can be improved.
Potential weaknesses of this level are that in the field of automated business processing, there is always innovation of new ideas. Thus, the current business processes become outdated within a short period.
The benefits of this level transformation are that the valuable resources of cost and time can be minimized. The efficiency in operations of managers can be improved through the interconnection of different functional areas. For example, Merrill Lynch employed business integration in its Cash Management Accounts, and it helps them to achieve technical sophistication. Through the ability of interdependent business processes, they make it possible to deliver integrated products according to the changing needs of the market. The above two levels are considered to be evolutionary in nature.
Level Three: Business process redesign
At this level, the key processes of the organization are redesigned through the implementation of the IT transformation for getting competency in the organizational functions. At this level, IT functionalities are used for increasing future organizational capability. The main benefit from this level transformation is that the organization can offer high-value services to its customers. Level three: Business process redesign: This level implies the view that greater IT functionality over current business processes is not helpful for attaining the maximum benefits. This is due to the fact that current business processes are controlled by a set of organizational principles which change with the external business environment.
Conflicting organizational policies of centralization and decentralization span of control and the line of management and the various administrative are depending on the organizational principles. As per the requirements of IT functionalities, the prevailing organizational principles can be redesigned. In redesigning current processes, the cost and benefit analysis must be carried out in order to identify the feasibility of such redesigns.
The potential danger of redesigning processes is that there will always threat of outdating the current technology with new innovative one. Thus the technology selection must be made by taking into account the organizational issues and needs. In the process of Information system planning, the organization takes into account the portfolio of technology-based applications in its processes to enhance the capability of the organization in achieving its business goals.
Level four: Business network redesign
The process here involves outside forces other than the organizations and functions within the organization. An IT implementation may actually stop at the above levels. But for more effectiveness and profitability, the following two steps, namely business network redesign and business scope redefinition, are also recommended. The outside forces referred to here can be the suppliers, bulk customers, logistics providers, etc. If the organization is not moving on to this stage, all these activities can remain as before. But if these forces have the IT and managerial capability for integration, then it is advisable to go for this level also.
Moreover, competing companies may implement this process for themselves. So, to keep up with industry standards, business network redesign is necessary. The author says that this does not just involve electronic data exchange with these forces. It also involves managerial level interaction between the organization and the outside forces. It should also involve mutual policy and decision-making based on the information provided by the IT systems. A better way would be to design the system for all the information required between the two parties. There are different levels and factors in this process with reference to data exchange as well as business network design.
The primary objective in the case of the former is data exchange while it is interdependence between the organization and the outside forces. Persons responsible for implementation for data exchange are the IT department or vendor. For the latter, it will be at the managerial level. The focus is tangible for data exchange, while it is intangible for network design. Performance for the former is assessed through technical criteria, while it is the actual effectiveness of the mutual agreements and arrangements. Data exchange will be more or less standardized across the industry while it will be specific for each firm in the case of network design. The advantage will be collaborative in the case of data exchange while it will be competitive (for all concerned) in the case of the latter.
The author also states that proprietary systems will not be effective until the business network design is implemented in an effective manner. Activities here include transaction processing, inventory movement, process linkage, and knowledge leverage. An example would be a link between an auto manufacturer and its suppliers. The supplier could be linked to the spare part stock of the manufacturer. The former will be responsible for seeing that stocks are replenished (as per prior agreement) without the manufacturer specifically ordering for it.
Level five: Business scope redefinition
This is the stage when the maximum organizational transformation may take place. This basically involves a change in the scope of business of the organization itself. The IT system may enable the organization to let go of some of its activities. A company may have an IT department for developing software. Outsourcing this job to a capable vendor may enable the company to let go of its IT department (which is not a core activity) and let the vendor handle all IT-related issues. It may also allow the firm to make money from the IT-enabled services. American Airlines had developed proprietary software called SABRE. It was so efficient that the company started making substantial amounts of money by providing software solutions using SABRE for other organizations as well.