This article is based on a three-year-old and ongoing research project conducted by the author and sponsored by International Business Machine Corporation's Advanced Business Institute. The ideas presented here are based on a number of sources, including field research, personal contact with managers in a number and variety of organizations, understanding of current literature, and exposure to cases and teaching material. The author has met with a number of managers from a dozen firms based in several countries and on multiple continents. The firms are from several industries, including health care, consumer products, telecommunications, financial services, and industrial manufacturing.
Process capabilities includes broadly the management, manufacturing, procurement, delivery, service, marketing, sales and other necessary functions and activities associated with the creation, production, and distribution of an organization's products or services. Changing product demands involves the demands for new products or services placed on a firm; for example, the changes firms face in markets that results from competitor moves, shifting customer preferences, or from the firm entering new geographical or national markets.
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It is important to stress that the requirement to achieve some degree of success from both a low-cost and differentiation strategy has already existed for many firms. However, many of these firms were able to focus their resources and management attention on one of these dimensions over another and still be successful. It is my contention that for many firms, resources and management attention must increasingly be placed on the firm competing successfully on both low cost and a product differentiation basis, and that this requirement creates demands on organizational design and strategic thinking that are going to be an increasingly important component of strategic thinking. A stream of economic, organizational, and strategic research and thinking on this “dual” strategic requirement has been collectively labelled “Post-Fordism” and is an important source of ideas on how organizations are coping with increasingly harsh competitive conditions. For Post-Fordist concepts see; PioreMichael J.SabelCharles F., The Second Industrial Divide (New York, NY: Basic Books, 1984); KenneyMartinFloridaRichard, “Beyond Mass Production: Production and the Labor Process in Japan.”Politics & Society (1988); CoriatBenjamin, “The Revitalization of Mass Production in the Computer Age,” Paper presented to the UCLA Lake Arrowhead Conference Center, Pathways to Industrialization and Regional Development in the 1990s, March 14–18, 1990.
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I am not the first to make this claim. Others eloquently discuss the rise of new, fundamental requirements for today's organizations attempting to combine low-cost advantages with rapid market response. See DavisStanley M., “Mass Customizing,” in Future Perfect (Reading, MA: Addison-Wesley, 1987); DertouzosMichael L.LesterRichard K.SolowRobert M., and the MIT Commission on Industrial Productivity, Made in America: Regaining the Productive Edge (Cambridge, MA: The MIT Press, 1989); PioreSabel, op. cit.
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Process technologies and know-how management refers broadly to human, manufacturing, distribution, service, marketing, and financial capabilities within a firm. The focus in this article is on information and information technology which can play an important role in the organization and management of these capabilities throughout an entire firm.
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The concept of core process capabilities and their relationship with strategic advantage has been discussed by a number of authors and plays a central role in emerging strategic thinking. See TeeceDavid J., “Economies of Scope and the Scope of the Enterprise,”Journal of Economic Behavior and Organization (1980); PrahaladC. K.HamelGary, “The Core Competence of the Corporation,”Harvard Business Review (May/June 1990); QuinnJames BrianPaquettePenny C., “Technology in Services: Creating Organizational Revolutions,”Sloan Management Review (Winter 1990).
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PrahaladHamel, op. cit.
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The intent with this discussion of Scope, Vertical, and Horizontal Systems is to classify and align information system requirements with a specific set of organizational and strategic requirements. In particular, it is an attempt to show me importance of alignment between information management requirements and the specific strategic and organizational challenges posed by dynamic stability. Firms attempting to achieve either
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low-cost mass production efficiencies or product differentiation through invention or increased variety, for example, would have some similar, but many different, particular information management challenges than those discussed here. Others have developed important ideas relating information requirements to organizational form. See HuberG.DaftR., “The Information Environment of Organizations,” in JablinF.PutnamL.RobertsK.PorterL., eds., Handbook of Organizational Communication (Beverly Hills, CA: Sage); HedbergB.JonssonS., “Designing Semi-Confusing Information Systems for Organizations in Changing Environments,”Accounting, Organizations, and Society, 3/1 (1979): 47–64; and GalbraithJ., Organization Design (Reading, MA: Addison-Wesley, 1977).
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The term “Systems of Scope” was derived from the requirement of firm to apply its know-how and competencies to achieve scope economies in a rapidly changing market environment.
