Looking towards the future
Identifying & communicating relevant IT trends for the Human
Resources and Communications departments within a automotive
company
Author:
Xander Snijders
Email:
snijders@gawab.com
Student nr:
1160559
University:
University of Groningen (RuG)
Faculty:
Management and Organization
Study:
Business Administration
Specialization:
Small Business & Entrepreneurship
1st Supervisor:
Dr. A. Boonstra
2nd Supervisor:
Drs. D.F.F.R. Maccow
Duration:
March 2005 – May 2006
Company:
Classified
Department:
Department ITP/M
Supervisor:
Dr. ir. R. Arts
Looking towards the future
Identifying & communicating relevant IT trends for the Human
Resources and Communications departments within a automotive
company
Prologue
In March 2005 I received the opportunity to perform my thesis research on the topic of trend management in the information technology industry at the international headquarters of a automotive company in Stuttgart (Germany). This internship provided the opportunity to work at the headquarters of a large multinational that produces great products, to focus on an interesting thesis subject, and gain experience working and living abroad. This opportunity enabled me to finish my studies and provided a solid foundation for a successful career start, for which I am grateful.
During my internship (and the extension as a temporary employee), I learned a lot about the organization. I have experienced the merging of the ITB organization with the ITP organization in April 2005, which had a large impact on the ITB organization by increasing their number of employees and sub departments. Additionally, as successor of the former CEO of the automotive organization, Mr. (classified) presented his new management model (NMM) at the beginning of January 2006. This will have a great impact on the whole automotive organization, as it will reduce redundancies, increase process efficiencies and reduce the headcount of the administrative and headquarter functions. This reorganization process was an impressive experience. Furthermore, I have seen the production line of the vehicles at a German production site, I have spoken to managers by telephone conferences and video conferences, and I had the opportunity to drive several cars. Furthermore, the drifting experiences at the formula 1 circuit in Hockenheim are definitely memorable.
From a personal viewpoint, life in Germany was very interesting as well. Within the automotive organization, it was fascinating to experience the German culture by its formal, rather bureaucratic but no-nonsense work environment. Additionally, I have met some great friends from whom I learned a lot about the German life and culture outside the organization, such as the wine production in the Baden-Württemberg region and the food for which this province is famous.
Initially, I thought that trend management had little to do with my specialization in small business and entrepreneurship. Yet as I gained insight into the trend management process (TMP), I discovered that effective and efficient trend management is a prerequisite to come to effective and efficient innovation in rapidly changing environments. This research describes how ITP/M can improve the first three steps of its TMP and it is primarily meant to contribute to a more effective and efficient ITP/M organization. Furthermore, it intends to contribute to the volume of knowledge of trend management at the University of Groningen.
The writing of a research like this is only possible by getting the right support. Therefore, I would like to personally thank Dr. Albert Boonstra and Drs. Delano Maccow from the University of Groningen for their theoretical support, comments and time. Furthermore, I owe a lot of thanks to my supervisor at ITP/M Dr. ir. Rudi Arts and my direct colleague Ms. Hao Tam Dinh for giving me the opportunity to research this topic at a great automotive company, for your patience, support and the freedom you gave me in conducting my research.
Last but not least, I would like to mention that an internship is impossible without the support of friends and family. Therefore, I would like to thank all my friends and above all my family for their unconditional support. I had a great time in Stuttgart and without all of you, this never would have been possible.
Xander Snijders
Management Summary
This report discusses the first three phases of the Trend Management Process (TMP) within the ITP/M department of the automotive organisations’ headquarters. The ITP/M department is responsible for all central (mostly headquarter) systems of the automotive organization. It develops system solutions for the Board of Management, the Human Resources- (HR) & Communications- (COM) as well as Research & Technology (R&T) departments. Because the IT industry is an industry in which changes are taking place rapidly, external IT developments are increasingly influencing the ITP/M strategy and its success. Therefore, the central question in this research is:
“How should ITP/M identify, classify and communicate IT trends in order to enable business partners to become more innovative and remain effective and efficient in a changing environment?”
Research Approach
Because a literature study on the TMP revealed only a few success factors, open interviews with internal as well as external managers were held and used for developing an adequate trend management framework (figure 1). This should enable ITP/M to improve its IT trend identification, classification and communication. A comparison of the current TMP of ITP/M with the ideal TMP made it possible to draw conclusions for an improved design. This was based on information collected using qualitative methods, such as for example open interviews, participation and group meetings.
Main Conclusions
The research shows that there is a gap between the current and the desired TMP. The traffic light system was used to indicate the degree of completion of the different sub processes and their interfaces (figure 1). The current steps within the three sub processes of Trend Management are disjoint and sub processes are insufficiently aligned with each other. As a result, information produced or made available in the identification sub process is hardly used to actually and effectively improve business processes or communicate opportunities to business partners. Here, the weaknesses of the current process will be briefly mentioned, the suggested process is described and the most important conclusions are drawn.
Figure 1: The conceptual model and research results
Identification
Throughout the whole ITM organization new developments are being identified by means of various kinds of identification sources (figure 2). However, the information from these sources is not yet brought together on a regular basis and responsibilities for different identification methods are not clearly
allocated. In order to efficiently and effectively identify new concepts, trends and related terminology, ITP/M should especially strengthen its relationships with business partners (BP), suppliers (SU) and consultancies (CS). Events & exhibitions (E&E) in the IT industry remain important for identification matters. Competitors (CP), universities and research institutes (U&I), publications
and media (P&M), inter- and intranet (I&I) and employees and shareholders (E&S) are less important sources for ITP/M in the identification process. This identification of new concepts should be done by the internal business consultant of ITP/M, because he/she needs to have strong industry knowledge. In order to gain more insight into these concepts, it is recommended
that these business consultants regularly meet with industry experts, like Gartner or Forrester. Additionally, the ITM technology/emerging technologies papers of the ITI/T department, as well as the Sensor Newsletter of the STRG department, should be reviewed and used as input for the next sub process, classification.
Classification
The current classification of new IT developments is not sufficiently structured. Technologies are measured within the ITI/T department, on their maturity level and overall organizations’ impact, but this measurement method is too generic for the specific needs of the business partners of the different IT departments. Important in this second sub process of Trend Management is that the current loose coupling of trend and technology information should be further structured.
Therefore, different trend concepts and technologies should first be grouped. It is recommended that this grouping is performed by a Special Interest Group (SIG) Innovation which consists of technology experts, IT architects, business consultants and at least one senior manager. This SIG Innovation will weigh different trends and technologies on three metrics: 1) the probability of occurrence, 2) the time till impact, and 3) the financial impact it will have on the different business processes of the business partners. This model can be brought back to a 2D framework, by multiplying the probability of occurrence with the time till impact, to form the readiness metric (figure 3). By means of this figure and the measuring process, the more important IT trends can be separated from the less important ones. After weighing these trends and technologies according to this method, consultancies could be asked to research selected ones in depth for confirmation purposes. Additionally, standardization discussions with people responsible for the overall infrastructure should take place in order to find out which technologies of the pre-selected trends fit with the current infrastructure. This will provide the SIG Innovation with detailed IT trend and technology insight and will enable ITP/M to optimize the business processes of its business partners. For transparency purposes this information should be kept in an easy-to-access database for all ITP/M employees. The last step of this sub process is to present the findings of the SIG Innovation to the Virtual Process Team Human Resources & Communications (VPT HRC). This VPT HRC should decide which trends and technologies need to be analyzed in detail for implementation purposes and they should decide which trends should be communicated to the business partners.
Communication
The current identification and classification sub processes make it difficult for the ITP/M department to communicate with their business partners on details regarding IT developments. Therefore, the Special Interest Group Communication (SIG COM) has so far mostly used mass communication initiatives in communicating with internal business partners (figure 4), which are not yet satisfying their needs. Furthermore, discussions on new IT developments are not yet structurally integrated within the strategy/consultancy meetings with business partners.
Figure 4: Current communication initiatives at ITP/M
In order to overcome the current problems in communicating with business partners, the first task within this third sub process of Trend Management is allocated to the SIG Innovation. This team should analyze the individual business process impact of the trend(s) chosen for all business partners. This impact analysis per business partner should be transferred to the Special Interest Group (SIG) Communication, which, by means of coordination with senior management, selects the proper medium and prepares the right message to communicate. Upon receiving confirmation of senior management, this message should then be communicated to the business partners and finally, feedback should be asked and used – preferably by the ITP/M business consultant. In this way, business partners will receive more valuable IT trend and technology information. This will improve the relationship between the ITP/M organization and its business partners.
Culture of the organization
Improving the TMP is a first step towards becoming a more innovative IT organization. The culture of the ITP/M organization, however, plays a significant role as well. It should enable and actively support coordinated intrapreneurship in order to become truly innovative. Thus, for effective use of the TMP, ITP/M should have a closer look at its culture. In general, ITP/M employees are satisfied with the way they are treated within the ITP/M organization. This means that they have the feeling that there is genuine concern for them, and that they are not treated as wheels in a machine. Additionally, they believe that there is a good balance between truthfulness and tact when it comes to use of information within the department. However, to enable innovation, ITP/M senior management needs to monitor and consider longer term developments, and not just look one year ahead. The ITP/M organization should make sure
that the departments’ vision and strategy enables its employees to set priorities and to live these. This could be done by operationalizing the strategy, for example by reinstalling a monthly scorecard of ITP/M performance. The operationalized strategy should provide the basis for independent decision making in cross-functional teams, to which senior management should not be afraid to delegate responsibilities and tasks. ITP/M should provide its employees with more freedom to make decisions. Additionally, ITP/M should provide more opportunity to display intrapraneurship. Some tolerance of failures should therefore be part of the organizational culture and failures should not directly turn into career limiting events.
Table of Content
Prologue ...3 Management Summary ...5 Table of Content ...10 Table of Figures...12 List of Tables ...13List of Abbreviations & Glossary ...14
Preface ...15 1 Research Concept ...17 1.1 Research Opportunity ...17 1.2 Problem Identification ...17 1.3 Research...18 1.4 Overview ...20 1.5 Conceptual Model ...21 1.6 Research Scope ...22
2 Management of trends in organizations ...23
2.1 Strategic Relevance of Trend Management ...23
2.2 Trends ...25
2.3 How to manage trends?...28
2.4 Detailed information to trend management processes ...30
3 Organizational Context...38
3.1 The automotive organization...38
3.2 The Information Technology Management (ITM) Department ...40
3.3 The ITM (classified) Car Group and Business Systems (ITP) Department ...41
3.4 The ITP Methods and Central Systems (ITP/M) Department...42
4 IT Trend Identification ...45
4.1 Description of the current situation ...45
4.2 Diagnosis of the current situation ...49
4.3 Ideal IT trend identification process ...51
4.4 Recommendations ...57
5 IT Trend Classification & Weighing ...62
5.1 Description of the current situation at ITP/M...62
5.2 Diagnosis of the current classification ...64
5.3 Ideal IT trend classification process at ITP/M ...65
6 IT Trend Communication...79
6.1 The current communication process...79
6.2 Diagnosis of the current IT trend communication process ...82
6.3 Ideal IT trend communication process...84
6.4 Recommendations ...87
7 Conclusions & Implementation of the TMP...89
7.1 The gaps in the current TMP ...89
7.2 How to overcome the gaps in the TMP?...90
7.3 Implementation of the new TMP ...93
7.4 Motivation for changes in the TMP ...98
Bibliography ...101
Table of Figures
Figure 1: The conceptual model and research results...6
Figure 2: The identification framework ...6
Figure 3: The IT trend weighing framework ...7
Figure 4: Current communication initiatives at ITP/M ...8
Figure 5: Trend Management Framework...21
Figure 6: The main types of trends ...27
Figure 7: Research link with Innovation Management ...28
Figure 8: The external business environment ...29
Figure 9: The identification framework ...32
Figure 10: Technology Hype Cycle ...34
Figure 11: The Evolution Cycle ...35
Figure 12: Example of the technology weighing results...36
Figure 13: The new organization structure ...39
Figure 14: Structure of the ITM organization ...41
Figure 15: Current usage of identification resources at ITP/M...50
Figure 16: Current identification process at ITP/M...51
Figure 17: Ideal usage of identification resources at ITP/M...52
Figure 18: Current vs. ideal usage of information resources ...58
Figure 19: Recommended identification process for ITP/M ...60
Figure 20: Current classification process at ITP/M ...64
Figure 21: The IT trend weighing framework ...69
Figure 22: The IT trend weighing framework ...70
Figure 23: Overview of current IT trends...71
Figure 24: Highlighting the ‘on demand management/shared services’ - trend...72
Figure 25: Relation between IT trends and technologies...74
Figure 26: Recommended classification & weighing process for ITP/M...77
Figure 27: Current communication process at ITP/M ...80
Figure 28: Current communication initiatives at ITP/M ...83
Figure 29: Step approach towards effective communication ...86
Figure 30: Ideal IT trend communication at ITP/M...88
Figure 31: Current status of the trend management sub-processes at ITP/M...89
List of Tables
Table 1: Sources used for the research ...20
Table 2: Development of the ITM Technology Report ...26
Table 3: Sources for spotting developments...31
Table 4: Example of assessing trends ...33
Table 5: Current vs. ideal usage of participants as identification sources ...53
Table 6: Current vs. ideal usage of business relations ...54
Table 7: Current vs. ideal usage of external sources...55
Table 8: Current vs. ideal usage of public sources ...57
Table 9: The velocity and financial impact metrics and values ...66
Table 10: Probability of occurrence metric and values ...68
Table 11: The values readiness metric and its values ...69
List of Abbreviations & Glossary
BoD Business-on-Demand
Business Partner Internal Client of ITP/M organization
CEO Chief Executive Officer
Client Vehicle owner
COM Communications
DOV Diagnosis, Development and Change method of Dr. De Leeuw
GTC Global Technology Council
HID Horizon Innovation Day
HNL Horizon Newsletter
HR Human Resources
HTR Horizon Trend Report
ITI/T Information Technology Infrastructure, Technology Strategy, Global Architecture and Standards
ITM Information Technology Management Department
ITP ITM (classified) Car Group and Business Systems Department ITP/M Information Technology Methods and Central Systems Department ITP/MC ITP/Methods and Central Systems, COM/HR-Systems and Center of
Competence Document Management/Archive
ITP/M Cabinet Meeting Regularly scheduled meeting of all Sr. Mgrs of ITP/M and its director ITP/MT ITP/Methods and Central Systems, Technology and Methods
(classified) Car Group
R&T Research and Technology
SIG Special Interest Group
SAS Strategic Assessment Survey
STRG Society and Technology Research Group
TMP Trend Management Process
Preface
This report is the result of research conducted for the ITP/M department of a automotive organizations’ headquarters in Stuttgart. It was developed for the ITP/MC Business Strategy Team to improve their strategic excellence and for the ITP/M organization to remain effective and efficient. The basic premise of this report is that organizations in fast changing environments should explore the external influences and developments in order to remain innovative and competitive. At ITP/M this could be done using the TMP described in following pages.
Another reason for this research was that business partners have expressed that ITP/M could improve itself in the areas of technology awareness and communication. This research is a critical step in both of these directions and will focus on the first three phases of the TMP: identification, classification and communication. This thesis explains the meaning of IT trend management, its success factors and addresses how ITP/M could gain value out of it. Most of all, it provides ITP/M with guidelines on how to manage the ever faster changing external IT developments effectively and efficiently.
The spectacles on the cover refer metaphorically to this research. Sunglasses protect one’s eyes from harmful sunlight and give one an alternative view of the world. Similarly, this research provides ITP/M with a view on its trend management world and protects the organization for adopting too risky future IT developments or not identifying important IT trends in a timely manner. Furthermore, sunglasses can change the image of a person. The same applies to the effect this research can have on the ITP/M organization. By communicating the interesting IT developments of the future to their business partners, ITP/M should be able to change its image in a positive way.
The structure of this research is unusual, even though the DOV research structure was used where possible (De Leeuw, 2000). First the results of the literature research will be presented, followed by an analysis of the organizational context. Key for the structure of the research however, is the framework approach (see figure 1 in the Management Summary). These phases form the main part of the sub structure of this research and are the essential first sub processes of the TMP. Therefore, these sub processes are analyzed in separate chapters. Within each of these chapters the DOV research method is used. The last chapter brings the research results of the different chapters together and draws conclusions from them.
The research contains several abbreviations and business terms, which are explained in the glossary at the beginning of this report. Additionally, the lists of figures and tables can be found at the beginning of the report. An overview of the scientific literature used for this research is available at the end of this thesis. Finally, in the appendices all additional figures, interview questions and results are provided in order to give further insight into the research.
1
Research Concept
In this section, the research concept is explained. The methodology, the approach, and the reasons for starting the research are given. The main research question and the sub questions are provided. Additionally, the conceptual model is presented and this should provide further clarification of the research focus.
1.1
Research Opportunity
As described in the introduction, ITP/M is an organization in the Information Technology field. New technologies, innovations and trends develop rapidly in this area of business. Consequentially, business partner wishes and demand change rapidly as new technologies emerge and evolve. During the definition of the strategy of the ITP/M department (appendix 1), the cabinet members agreed on the strategic objective to build up potential and strengthen existing business partners’ relationships and increase business partners’ satisfaction. Eventually, this should lead to more effective and efficient business partner processes.
Consequently, insight into the business partners’ satisfaction level is needed. To get an overview of the level of business partner satisfaction, ITP/M, as well as other ITM departments, sends a yearly questionnaire, called SAS – Strategic Assessment Survey, to its main business partners (appendix 2). In the fall of 2004, these main business partners evaluated the ITP/M organization on 5 questions with ratings at 6 levels. Results showed that the business partners thought that ITP/M could do a better job in two aspects of its performance in particular: technology awareness and communication. In discussing the results of the questionnaire, some business partners told ITP/M senior managers that they would like ITP/M to more proactively inform them about new IT trends. However, ITP/M did not have an effective method for creating “technology awareness” and for communicating relevant technology trends and developments to its business partners.
In summary:
ITP/M sees a TMP as an opportunity to improve its technology awareness and its communication of this technology awareness to business partners in order to improve their effectiveness, efficiency and satisfaction.
1.2
Problem Identification
The Cabinet (board of senior managers) therefore decided that it is important for ITP/M to improve the business partner view on its technology awareness & communication performance as soon as possible, since business partner satisfaction is one of the main performance metrics of the organization. Business partners have indicated that improvement in ITP/M’s focus on new
technological developments is necessary. Based on this input, ITP/M identified the organization of a so-called “innovation day” and the regular publication of “trend reports” as ways to meet this expectation1. As the business partner satisfaction survey (SAS) showed similar results for other parts of the ITM organization within the automotive company (appendix 2), a new indicator of innovativeness, Business Process Innovation, was added to the scorecard of each ITM division in 2005. Every ITM Vice President is expected to implement one new idea a year. As the bonus payment of ITM executives is based on the results on these scorecards, amongst others, this measure certainly initiated a stronger focus in various divisions of ITM on innovation (appendix 3). IT Trend analyses have been identified as a major source of input for this process and by communicating these trends, ITP/M will be able to better understand the needs and demands of their business partners. This will enable ITP/M to become a more constructive and innovative partner by transferring and exchanging trend knowledge.
Furthermore, ITP/M uses the “Strategic Excellence through Challenges” (STRETCH) process to improve its strategy, internal processes and its results (appendix 4).In 2003, the strategy team of ITP/M identified the need for a “trend scouting process”. Basis for this was the STRETCH process. Since that time, all elements of the STRETCH process have been analyzed, except for the influence of external drivers on ITP/M. The ITP/M TMP should complete the implementation of the STRETCH process.
In summary:
Business partner satisfaction with the performance of ITP/M in the area of business partner ‘communication’ and ‘technology awareness’ needs to be improved. Furthermore, the TMP should define and identify the main external drivers (as show in the STRETCH process) that influence ITP/M’s business environment and develop a process to manage these. By this means, the strategic excellence of ITP/M should improve.
1.3
Research
As the drivers for this research have been introduced in the former sub sections, in this sub section the research goals, methodology and questions will be presented. This will increase the readers’ insight into the research and will enable further understanding of the desired outcomes.
Research Goal
Primary driver of this research is the desire of ITP/M to improve business partner satisfaction. ITP/M would therefore like to develop a repeatable process for identifying, classifying and communicating information technological (IT) trends in the sectors that are of interest and the
1
impact these trends can have on the business processes of ITP/M’s business partners. The “innovation day” event and creation of “trend reports” were initiated to fill this gap, but no structural process has yet been developed. Such a process should enable ITP/M to quickly identify IT changes in the business environment and to enable better alignment of ITP/M to the business processes of its business partners. By developing such a process, ITP/M will enable its business partners to become more innovative and respond faster to changes in the business environment by providing them with information regarding new IT trends. This could give ITP/M and its business partners a competitive advantage which, by building the organization in a more flexible and innovative way, might be a sustainable advantage.
In summary:
Design a TMP for ITP/M, which would lead to a more innovative support by ITP/M of their business partners, and would lead to an increase in business partner satisfaction.
Main Research Question
How should ITP/M identify, classify and communicate IT trends in order to enable business partners to become more innovative and remain effective and efficient in a changing environment?
Sub questions
1) How could the ITP/M organization process relevant IT trends?
2) How is ITP/M’s organizational context influencing IT trend management?
3) To what extend is ITP/M currently managing external IT trends effectively and efficiently?
4) What should ITP/M (re)design to increase the effectiveness and efficiency of their TMP?
Research Methodology
The research sub questions are based on the DOV–methodology of De Leeuw (2000). Sub question 2 and 3 describe the diagnostics phase, sub question 4 describes the design phase. It was an applied research because we looked at the reality within a specific company. A specific problem within the ITP/M organization was observed, an analysis of theories was performed before assessing the current organization on the topic. By assessing the organization, the problem areas were identified and an attempt to find solutions was made, before applying the findings to the problem situation. This conforms to the regulative cycle (Van Strien, 1986:19). It is a decision supporting research (De Leeuw, 2001:76) for the decision makers within ITP/M. The research aimed to produce concrete knowledge about “innovation management”, which is useful for decision makers within ITP/M in a specific situation concerning their business
partners. As the researcher worked in the organization itself to get a good understanding of the problem situation, culture and information needs, this was also a participating research (De Leeuw, 2001:98).
Data gathering for this research was carried out from the beginning of March 2005 till the end of May 2006. The usage of multiple data collection sources increased the validation (De Leeuw, 2001:36) of the research results. To provide an overview, the data gathering methods are presented in table 1. As can be seen, usage of interviews, action research and internal documents were the most important research methods. In the designing and implementation phase of the research active participation and group sessions contributed to an efficient data collection method.
Table 1: Sources used for the research
In summary:
Multiple data collection methods were used for the different chapters of this report in order to increase the validity of the research results. The complete overview of the research methods per chapter is given in the table above.
1.4
Overview
In order to increase the readability of the thesis, some recommendations for reading this report are given in this section. First, chapter 2 will introduce current theories and scientific knowledge about trend management and IT trends. Chapter 3 will introduce the organizational context of automotive organization. These two chapters are introductory chapters and form the basis for the further chapters. The chapters 4, 5 and 6 are divided into respectively IT trend identification, classification and communication, in order to maximize insight into the differences between these sub processes. Chapter 7 integrates the findings of these three sub processes, and increases the readers understanding of the overall TMP. It provides the conclusions drawn and recommendations made for implementation within The automotive organization.
In summary:
The three most important steps of this research are analyzed in detail in separate chapters. They are then considered jointly in the final chapter. This approach was taken to first optimize the sub processes of the TMP, and then considered jointly and optimized as the overall TMP.
1.5
Conceptual Model
At the start of this research, ITP/M did not yet have a structured identification and assessment process for information technological changes in the external environment and realized it could certainly use one. The outcome of ITP/M’s business partner survey showed that business partners agree with this vision and that ITP/M needed to improve its environmental scanning process, especially at the external technology side. Furthermore, business partners believed IT trends should be communicated with them. By means of the funnel theory of the structured innovation process, which Muus (2004:12) derived from Pinchot & Pellman (1999), valuable insight was gained into the different steps in the process (appendix 5). This theory showed that the number of technological developments decreases the further along the TMP an organization gets, as shown in figure 5.
Figure 5: Trend Management Framework
Furthermore, the different steps in the TMP are revealed. As can be seen, the focus of this research was on the first three steps (identification, classification and communication). The Trend Management Framework is based on both the funnel theory and on practical experience within the automotive organization.
In summary:
Developing and implementing the three steps of the TMP (identification, classification and communication) leads to a better strategic planning process of ITP/M (STRETCH) and improves the business partners’ satisfaction level (SAS) with the “communication” and “technology awareness” performance of ITP/M. Additionally, it enables a more innovative support by ITP/M of their business partners.
1.6
Research Scope
The primary focus of the research was on the development of a management process for IT trends. Therefore, the external technological environment was analyzed. Strenghts and weaknesses of the current processes are identified and the ideal situation is described. Additionally, methods and frameworks for the identification, classification and communication of IT trends and technologies are developed and presented.
In summary:
Of all possible developments areas in the external business environment the information technology area was chosen as focus area for this research. This area was chosen because ITP/M realized it could use support by IT trend and technology scouting. Weaknesses and strenghts of the current process are described and methods and frameworks on how to improve the TMP are provided.
2
Management of trends in organizations
In this chapter, findings on a literature research on the TMP will be presented. Key terms and the strategic relevance of trend managing will be explained further, before some trend managing methods will be presented. The goal of this chapter is to provide general information about the topic, as well as to give insight into the matter. It should be seen as an introductory chapter for the chapters 4, 5 and 6, which discuss the three trend management processes (identification, classification, communication) in detail.
2.1
Strategic Relevance of Trend Management
Today more than ever, people are influenced by all kinds of media. Because of this, hypes are created faster and the life-spans of trend cycles are decreasing. “Trends are trendy” at the moment2. They do not only have a journalistic and sociological meaning, but also an economic one. Trends influence the business and consumers’ environment. The important thing about trend research is to recognize trends in an early stage, to measure the position in their life span and to predict their possible impact on society and business (Eggert, 1997). Faith Popcorn, a famous American trend expert, already identified this more than a decade ago as; “Trends have significance for the future, because they start as small runlets and will evolve into big streams. If you can connect the point at which a trend begins with the point at which it will impact your business, then you could adapt your product in detail according to this trend” (Popcorn, 1991:37). This shows that companies need to develop strategic alertness to the fast changing technological developments and to the potential changes in the technological paradigm by continuously developing the necessary absorptive capacity in the organization in order to be able to understand and exploit new information and technological developments (Darso, 2002). Organizations that do not monitor trends run the risk of losing business partners, turnover and, eventually, of being acquired. “The greatest strategic blunders arise from refusing to look beyond the nose. Trend spotting is about keeping eyes and ears open, understanding the spotted trends”3. Examples like the ones below show us the importance of timely identification of trends:
Thomas Watson CEO of IBM in 1943 once stated: “I think there is a world market for maybe five computers” (Noordam, 2002:9). However, Apple pitched the PC as a tool for personal empowerment and liberation in 1980. The American public had long been wary of computers, suspicious that IT was a force of standardization, centralization and hierarchy. The popular image of the computer at that time was the giant IBM mainframe. It turned out to be a battle between the bad technology - centralized, authoritarian - which crushes the human spirit and
2
http://home.nyc.rr.com/dradosh/trends.html (Aug,2005)
3
controls peoples' minds (read; IBM) and the good technology - independent, individualized - of Macintosh (Apple). By 1983 however, Apple was in danger. Their competitors in the emerging PC industry had finally been joined by IBM. Now IBM has sold over a million personal desktop computers and laptops4.
In 1995, Netscape dominated the internet browser market and Bill Gates declared that the Internet wasn’t quite strategic for Microsoft. After Netscape turned down Microsoft’s proposals for collaboration on the Windows 95 browser version, Microsoft had to integrate their Internet Explorer 4.0 in the Windows operating system products. After that, Microsoft’s Internet Explorer became the dominant player in the market5.
The Leica organization is a legend. It revolutionized the world of photography with the development of miniature camera in the 1913 and its large batch production in the 1920-ies. However, in the first half year of 2005/06 its losses were as high as in the two years before. The turnovers went back for years and repeat each other gradually. Further decreases in the number of employees are coming close. The cause: Leica didn’t recognize the importance of digital photography. It had always thought that business partners would not be interested in mega-pixels, but in the experience of highest quality possible in optics of pictures (Koch, 2006:98). This proved to be a mistake. 4 http://www.duke.edu/~tlove/mac.htm (Aug, 2005) 5 http://visionarymarketing.com/articles/engnetscape.html (Jan, 2006)
IBM initially misinterpreted the individualization trend in society that was developing rapidly. Eventually, IBM decided to join the competition in the PC industry. Right now we know that the personal computer market is way bigger than the mainframe market and IBM wouldn’t been able to keep the market leadership position in the IT industry if they would have stayed in the mainframe market only. This example shows us how important it is to timely spot emerging trends.
It turned out that Netscape underestimated a possible competitor as well as the technology integration trend. As being part of AOL now, the Netscape browser is still struggling to survive in the internet browsing market. If Netscape would have chosen to integrate their product with the Windows operating system, they would possibly have remained the biggest internet browser provider in the world. This example shows how a company can miss opportunities due to an ineffective TMP.
Leica failed to recognize the importance of the digital photography trend and to timely change their camera design accordingly. This led to major losses and possible reduction in the number of employees through retrenchment is threatening the organization.
In summary:
Trends have relevance for the future, because they will turn into big streams at a sudden point in time. Therefore, especially in fast moving markets, like the IT industry, timely identification of trends is important to remain competitive, to prevent the organization for record losses and to ensure the sustainability of the business.
2.2
Trends
In this section, some trend definitions will be provided, as well as an explanation of the key types of trends to improve the readability of this thesis. Additionally, the definition of an IT trend will be presented as it is consequentially used within this thesis.
Trend Definitions
Trends are exponents of meaningful change. For those organizations who are prepared to act, trends are also the harbingers of opportunity6. In literature, as well as in a lot of organizations, different trend definitions exist. Here some of these definitions will be explained in order to provide insight into the trend topic. Based upon multiple trend definitions the definition of IT hypes and IT trends will be presented:
o Define something a trend if a specific number of senior managers within a board committee agree that a specific issue can be considered a trend. This means regular trend discussions need to take place within board meetings. A deeper analysis/research should be conducted after committee confirmation of the trend (Ovum).
o "The long term movement of a variable; business, technology and/or societal"(IBM).
o “A trend is a long-term global development (> 5 years) which has influence on more than one department within an organization” (Bosch).
o In statistics, a trend is a long-term movement in time series data after other components have been accounted for (Wikipedia)7.
Terminology
Global trends are developments that result out of the interaction between the major global components. These are (interactive) developments that occur in the external business environment: the socio-cultural, the economical, the technological, the political, the global and/or the demographic areas (Hitt, 2001:50). Examples are a) the increasing environmental
6
http://www.trendresearch.com/globalno.html (Sept, 2005)
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consciousness of people, b) the ever increasing mobility of people and c) “cocooning8” (Popcorn, 1996:52).
Technology trends are pure technology developments that are mostly driven by IT suppliers. They consist of hardware-, software-, standard/protocol- and/or method- components that are used within organizations. Technologies are evolving rapidly and replacing each other with a fast speed. This is being confirmed by the development of the amount of technologies researched in the ITM Technology Report (table 2).
Table 2: Development of the ITM Technology Report
Amount of Technologies Researched
Technology Report 2003 70
Technology Report 2004 122
Technology Report 2005 145
Technologies, like for example 3G communication networks, come with their own hardware, software, methodical and standards/protocols developments. More often IT suppliers come up with a specific concept name for specific sets of technologies. A good example is the “Business-on-Demand9”-trend, which has been made possible by some set of different technological developments (like for example on-demand computing10, service oriented architecture11 (SOA) and grid computing12). All these relatively interdependent technologies have separated hardware, software, standards and methodical aspects. Concept names of other IT solution providers contain roughly the same technologies. All IT suppliers however, promise that their concept is the best. It is likely that some of these kinds of IT concepts will have a large impact on specific organizations, other concepts however will not. Often there is some confusion between hypes and trends. In order to create a better understanding of trend management, these terms are defined here. These terms however, do not fully exclude eachother. An IT trend usually has a specific IT hype level, which means that some (implementation/security) risks will always be there.
8
People, which are increasingly retracting into their homes in order to feel secure.
9
http://www-306.ibm.com/e-business/ondemand/us/overview/overview.shtml (Nov, 2005)
10
On demand computing is a business model in which computing resources are made available to the user as needed.
11
SOA is a software system architecture approach in which an application consists of software services and software service consumers. SOA differs from other client/server models in its definitive emphasis on loose coupling between software components, and in its use of separately standing interfaces.
12
Grid computing is applying the resources of many computers in a network to a single problem at the same time.
The following figure is drawn to create a better understanding of what IT trends really are. The outer circle (figure 6) presents the areas in which global trends can occur. The inner circle is determined as technology trends and consists of software, hardware, methods and/or standards/protocols developments. The middle circle however, is the focus of this thesis: IT trends. These are concept names, mostly being driven by IT solution provider organizations which consist out of multiple interdependent technology sets.
Figure 6: The main types of trends
IT Trend: “A set of relatively new and interdependent information technologies which conquered (or are very likely to conquer) the (security) risks and development failures and are ready to be introduced into the market as an IT solution product. It is mostly being reinforced by other developments in the external business area. A trend can be seen as a “winner” (Noordam, 2002:24), which is very likely to influence the IT world at a sudden point in time.
IT Hype: A new and very promising set of interdependent information technologies which are being hyped by IT businesses and IT people talking and writing about it. However these technologies still contain too many (security) risks and development gaps and therefore only few organizations really implement them: organizations are able to unmask it (Noordam, 2002:24). (This definition also applies to single technologies.)
In summary:
An IT trend is a set of relatively new and interdependent information technologies which conquered (or are very likely to conquer) the (security) risks and development failures and are ready to be introduced into the market as an IT solution product. It is mostly being reinforced by other developments in the external business area. A trend thereby can be seen as a “winner”, which is very likely to influence the IT world at a sudden point in time.
2.3
How to manage trends?
Trend identification has a big overlap with the first stage of the innovation process as described by Tidd et al (2005).Innovation management will result in radical or incremental innovations. Radical innovations produce fundamental changes in the activities of the organization and represent clear departure from existing practices, whereas incremental innovations result in a lesser degree of departure (Brockhoff, 1999:65). Identifying trends and changes is an important aspect of innovation management, as can be seen by the ‘search’ part in figure 7. Organizations need to take a look outside of their daily operations and develop and implement processes for gathering information about new trends and developments, both inside and outside of organizational boundaries. It is very important to investigate the external environment.
Figure 7: Research link with Innovation Management (Source: Tidd, 2005:348)
Organizations need to detect signals in the external business environment about potential changes. New technological opportunities or changing requirements emerge in specific parts of the markets. Most innovations, changes and trends are a result of several simultaneously operating forces. Organizations need to be capable to perceive what is going on in their business environments, to think through what this means for them, and then to act upon this knowledge (Van der Heijden, 2002:2). In the trend identification phase, it is essential to have well-developed mechanisms for identifying and selecting information about these changes in the turbulent environment. Organizations should not search the infinite space, but search in places where they expect to find helpful information.
Therefore, organizations need to know which parts of the external environment they need to focus on. Most of the time, as confirmed by literature (Tidd, 2005:347), this is done intuitively and mostly (totally) focused on the specific industry the company or department is in; this explains the inner part of figure 8. The external business environment provides other important areas for analysis as well.
Figure 8: The external business environment (Source: Hitt, 2001:50)
Organizations need to focus on the main aspects that will influence their business. The senior managers of ITP/M, as well as ITP/M’s business partners, identified the industry environment and technological field as the focus areas for ITP/M at the moment. Hamel and Prahalad (1994) confirm the importance of a future view of the industry environment. It supports the managers with answers on three main questions: a) which new client wishes could we offer in five or ten years, b) which new competencies do we need to develop in order to enable our production of these new products, and c) which client interfaces could we restructure in the coming years (Hamel, 1994:123). The technological field has been under research at ITP/M and could certainly benefit from a process for analyzing the IT developments in a structured way.
The main focus of this research lies in the technological segment, because technological factors are vital for competitive advantage, and are a major driver of change and efficiency13. The following aspects within the technological field should be closely monitored, in order to effectively identify the changes that are taking place: a) Product innovations, b) Applications of knowledge, c) Private and government-supported R&D expenditures and d) New
13
communication technologies14. Furthermore, it is recommended that the technological segment is being analyzed by experts with different functional backgrounds regularly. This will make sure that the organization is always up-to-date about technological developments and that the process will be less influenced by group thinking. Besides this, analysis of the environment should be conducted out of the viewpoints of the different business partners, because business partners have different needs and therefore have different interests in trends.
Tidd et al (2005:350) state that it is very important to properly execute the identification stage as an organization and give useful information about the specific mechanisms an organization needs to build up in order to effectively “spot” trends. They confirm the thoughts of F. Popcorn that “insights need to be based on careful observation of the present and never (as most businesses do) solely on extrapolating the past”15. However, no information is given about implementing these identification mechanisms in organizations. This is under-researched in other literature as well.
In summary:
In the literature review there is little detailed information about structuring the content of trend management processes - specifically focussed on trend identification, classification and communication processes within the information technological field - found. It was confirmed (Tidd, 2005:347) that most organizations have structured their TMP in a non-systemically way around behaviour routines and on an ad-hoc basis over time. Usually, they have never really looked at it closely in order to properly manage it. This does not mean however that the process is unmanageable.
2.4
Detailed information to trend management processes
To find out more about the important detailed elements within trend management processes, Ms. Dr. Reeb of the Society and Technology Research Group of the automotive organization and Mr. Barnett, an IT expert of the Ovum consultancy organization (London), were interviewed and contacted several times. They were asked about their (organizations’) methods for managing trends. Therefore, aspects like the main trend identification sources, effective communication methods with clients and ways to determine trend importance were discussed. They acted as discussion partners in the analysis and provided useful information about processes within their organizations. Additionally, other organizations, like ING, Bosch, IBM, Lindt & Sprüngli, DSM, Hertex and Gartner shared their respective views about this matter, in order to find out more about structuring the TMP and to produce valid research results. The semi-structured interview can be found in appendix 6. Some of the interviewees were
14
employees/managers within the IT department. Others did not work within the IT department (Lindt & Sprüngli, DSM & Hertex), in order to get out-of-the-box views as well.
Identification
Firms which are early adopters of new technology often achieve higher market shares and earn higher returns. Therefore, executives must verify that their organization is continuously scanning the external environments to identify potential substitutes for technologies that are in current use, as well as to spot newly emerging technologies from which their organization could derive competitive benefits (Hitt, 2001:64). Interview partners stated that it is often a matter of experience to identify trends and that a real structure is not there most of the time. Their approach mostly depends on the line of business and the focus areas of that business. Most of the mechanisms are informally structured over time. Research has consistently shown that those organizations which adopt an active, as opposed to a parochial, approach to seeking out links with possible suppliers of technology or information, are more successful innovators (Tidd, 2005:352). According to that publication, Kreuz (2004:18) and the conducted interviews, the sources that could be involved in the identification process are as shown in table 3.
Table 3: Sources for spotting developments Sources of identification
Participants: Employees & Shareholders (E&S) Business Partners (BP) Suppliers (SU) Business Relations:
Consultancies & Research Institutes (CS) Competitors (CP) External Sources:
Universities & Non-profit Research Institutes (U&I) Events & Exhibitions (E&E) Publications & Media (P&M) Public Sources:
Internet & Intranet (I&I)
In this thesis, these sources are placed in a framework to further structure the process of IT trend identification (figure 9). These different sources are mapped into a web figure, with a scale from 1 (low usage) to 5 (high usage). This represents the amount of focus of an organization on a specific identification source. A higher score means that the organization is using that source as a major source of trend identification and a lower score means that this source is not important for the organization. By this means, it is possible to determine on which trend identification sources a specific company relies. In this thesis the sources are divided into different groups:
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o “Participants” are the internal stakeholders and closest to the organization; they will directly influence the organization by their work and behaviour.
o “Business Relations” are possible identification sources that are a bit further removed from the organization, but could still directly influence the organization. Business relations can deliver important information, i.e. demand changes and changes in supplier processes. o “External Sources” are stakeholders that are even further removed from the organization; these could influence the ITP/M organization by their knowledge or competitive movements. o “Public Sources” are the sources that are furthest removed from the business, but provide open access to their findings. Often organizations have to develop their own search mechanisms for these kinds of sources.
Figure 9: The identification framework
The principle behind using multiple identification sources is to increase the likelihood of obtaining available technological intelligence. “Trend spotting is an approach which can be applied in many areas to pick up on, or bring into sharper focus trigger signals about innovation. Tipping points16 are identified as an idea associated with long term trends, where an imperceptible movement in opinion or values suddenly flips the rules of the game into
16
something new” (Tidd, 2005:352). Examples are the growing worries about nutritional values in fast food, the usage of energy sources, and the concern of global warming.
Classification
o Measuring global trends
More literature on classifying and weighing trends was found than on identification. Mostly, the subject of these classifying and weighing methods is not IT trends, but either single technology trends or global trends. A measuring method of sets of technologies was not found in literature. To provide further insight into the matter of global trend classification, a mega-trend assessment method is introduced.
Table 4: Example of assessing trends (Source: Eggert, 1997:327)
In his book “Mega-trends III”, Mr. Eggert researched global “mega-trends” and tried to measure society impact, thereby identifying “spread” and “intensity” as main trend factors (table 4). Knowing these elements, he was able to determine trends’ importance and their ranking. These terms (“spread” and “intensity”) however are not clearly defined. By interviewing organizations on their classification methods, a couple of metrics for weighing IT trends were identified. The results showed that the “spread” and “intensity” are not the main factors for IT trend classification and weighing.
o Measuring technologies
Within the automotive organization specific departments do measure technologies. The ITI/T17 department, which is another department of ITM, is occupied with (emerging) technologies, infrastructures & technology standards. It is part of their work to identify new technologies, their
Trend
Globalization
Bringing Jobs
Survival in land of wealth
Reasons for existence
Education crisis
Criminality
Spread Intensity Trend factor Ranking Own Opinion
50 30 15 10 70 50 3 8 5 5 3 7 3,5 0,9 0,75 0,3 5,6 2,5 3 11 12 17 2 5
speeds and their impact. The report, which is being published trough out the ITM organization, will be further explained here, because it could be useful for the classification process at the ITP/M organization.
The IT technologies that are identified within the ITI/T department are analysed and allocated along the technology hype cycle line18 in the ITM Technology Trend Report (Bhagavathula, 2005). By this means it will become possible to distinguish different phases along the line (figure 10). According to Gartner Group, the hype cycle presentation is used to classify the evolution of a technology. Each technology will go through this curve of success in the market.
Figure 10: Technology Hype Cycle (Source: Bhagavathula, 2005)
In the following, the evolution of a given technology through the four coloured segments, the “Evolution Quarters”, will be further explained, in which the maturity levels at the bottom will be explained too. The evolution quarters are grouped to form a cycle – the evolution cycle (see figure 11) – which can be used for yearly technology planning. The speed at which technologies move along this hype cycle line varies a lot. Some technologies mature in 2 years, others take over 10 years. Technologies, which reach the productivity phase, will go through all 4 evolution quarters. Not successful technologies will be faced out through the quarters 1 till 3. The “Sun-Down” phase is added, to show that technologies can be over mature as well. The meaning of the different coloured quarters is as follows:
o Technology trigger: Technologies of which IT vendors have built first pilots, but which are not yet visible at the market as products. These technologies will reach the next evolution
17
Information Technology Infrastructure, Technology Strategy, Global Architecture & Standards
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quarter (technology hype) in less than 3 years and there is still a high risk that the technology will die.
o Technology Hype: Technologies of which first products have been built and which are available as early products at the market. The technology is at the “peak of inflated expectations”: people are intensively writing and speaking about all the advantages the technology could have for organizations and individuals. However, these products turn out to be unstable and their early vendors usually have small venture capital to fix problems. At the end of this phase, large IT organizations buy the products and often even the early vendor. Furthermore, early users of the technology are often frustrated and there is still a high risk that the technology dies. Nevertheless, the technology could move to the next evolution quarter (stability & growing) in less than 2 years.
o Stability & Growing: More and more problems with the initial technology products are identified and negative publicity is paramount: the technology is in the “trough of disillusionment” phase. This is the phase in which many technologies fail. Some technologies however, will reach the start of the “slope of enlightenment”, the technology problems are solved and more organizations will start to adopt the technology. Technologies, which are available as usable products and which are normally offered by large IT vendors (2nd generation products), are found to be in this phase. Technologies could go to next evolution quarter (productivity) in less than a year.
o Productivity: Sales of the technology products will further increase again and the technology will finally move on to the “plateau of productivity” phase, in which more large organizations will adopt the technology and competition on these technology products will be fierce. Technologies which are available as usable and robust products. They can be used to build production systems and skill for the technology is widely available at the market. The large IT vendors start to control the market regarding these products and users have built the first successful production systems.
o Sun Down: Technologies which are over-aged as products and will be replaced soon. Product vendors will start to stop distributing products. It does not pay off anymore to develop further product updates.
The most interesting phases for the ITP/M organization are initially the stability/growing and the productivity phase, because in these phases technologies develop into mature products. In the stability/growing phase development failures are to be solved and first usable products are manufactured. This is presented by the line that is slowly going upwards again in the technology hype cycle figure (figure 10). In the productivity phase, more and more organizations are going to implement the new, but less risky, technology product. However, in order to become innovative, a large organization should strive to move their technology implementation phase more forward (to the left in the technology hype cycle), so they can gain a (sustainable) competitive advantage over their competitors. In order to do so, it is necessary to analyze technologies on a regular basis.
Furthermore, different technologies are weighed on impact and maturity level (figure 12). Additionally the technology integration is measured, which means that a technology could be integrated into products for the first time or that is an update of previous versions. This weighing process provides a pretty good overview of the technology maturity in order to forecast more efficiently. As can be see in the example figure, it is obvious that text mining is moving towards maturity faster than distributed answer mining.
Communication
The external persons that were interviewed stated that it is necessary to discuss common trends at a strategic level in the organization, because it could have an impact on the strategy and the way organizations are managed. To give managers of specific departments, platforms or committees a fast overview of a specific trend, it needs to be written down and presented in similar ways. This makes it easier to compare trends and to draw conclusions. A protocol for writing a specific trend identification report before discussing it, is recommended. Predictions of the trend development and its main failures / drawbacks need to be identified as well. So IT trend communication covers a set of defined actions. These are:
1. First definition of the trend (what is it?)
2. Prediction of arising accents (where will the trend lead to, what will be its impact on the organization/industry, what are the advantages/disadvantages?)
3. Recording of recognizable developments (are other companies already moving towards it?)
4. Warning about development failures (what are the gaps in the IT trend?)
In summary:
The identification framework is a useful tool for the identification process, as well as the technology measuring method of the ITM Technology Reports is a useful tool for usage within the classification process of IT trends (and the sets of technologies of which it is consisting). Furthermore the latter provided two important measurements; impact and maturity. Internal trend communication proved to be important because of the strategic importance for organizations. Some points of attention concerning communication are mentioned. Literature however, did not provide a complete detailed insight into the three sub-processes.
