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Should E-Business Be Inside or Outside of IT?

Written By: William Friend
Published On: July 5 2003

Editor's note:
I have tried to distinguish e-business from E-Business. When it is to be a separate department, it is capitalized, when it is a responsibility of IT it is lower case. Except for IT, we do not usually capitalize departments in the context of an article, for example, marketing, sales, operations, etc.

Background

Many companies separated their early organizational effort in e-business from the traditional IT function.Often, a company's Web presence was developed and managed by its marketing department. The IT function was viewed as "too slow" and "too busy" to be involved. Companies turned to outside resources in the early planning and development of the company's Web sales brochure and the ensuing enhanced Web sites.

During the dot-com frenzy, some companies created new organizational structures to manage e-business. Is that approach still valid? In this paper we explore the organizational approaches that companies might take to e`-business in the context of today's business environment.

Do You Want E-Business to be a New Major Initiative?

The initial management reaction to major changes in the business environment has traditionally been to create a position in the organization that is the focal point of the change. Over the years, a number of "C-level" positions have been created to focus organizations on everything from information (CIOs) to customers (CCOs) to technology (CTOs) to marketing (CMOs).

What drives companies to set up these positions? Often, when a company feels it needs to focus more intense management scrutiny on a business discipline it creates a position that has over-arching responsibility across the enterprise. In traditional management theory, any position must be vested with the triad of Responsibility, Authority, and Accountability to manage a business function. Positions need to be vested with all three attributes if they are going to be able to work effectively in the organization.

Establishing an organization with E-Business Responsibility, Authority, and Accountability for the company's E-business activities will tend to move new technology leadership away from other functional groups. A separate E-Business organization will have the effect of:

  • Prioritizing E-Business activities across the company, thus reducing the ability of any one department to operate independently

  • Creating another interface in relationships with suppliers, customers, and internal departments to promote the companies E-business agenda.

  • Influencing the priorities of IT by creating a powerful lobby for IT resources, thus competing with other corporate IT priorities

If the company creates a separate E-Business organization, the existing functional departments that have E-Business initiatives will find that their initiatives will be subject to the agenda of the new E-Business initiative. No question, creating an E-Business position will set up E-Business as a major strategic initiative in the company.

If a company feels that the emergence of E-Business will have a profound impact on its ongoing business, with the potential to transform the company, then they certainly should set up E-Business as a separate functional group. However there are some issues that will develop. When a company establishes E-Business as a separate department, a potential conflict may develop with the traditional IT department. IT resources are prioritized across the company and E-Business, given its executive charter, may need more resources than IT is able to deliver. The second phase of E-Business could be to set up a staff of analysts and programmers to concentrate on just E-Business initiatives.

With E-Business it would be ideal if companies could "bake" an E-Business strategy into ALL of the functional groups and incorporate E-Business opportunities into the mainstream of corporate planning. The problem is that organizational change often requires that management provide the company with strong signals that the new tool or technique is important. A high profile appointment of an evangelist with the requisite staff is often the obvious and simple solution.

If E-Business is Not a Major Initiative, Where Does It Fit?

If an E-Business position is going to be established as only an advisory, strategic planning function, then the limited scope of that position will affect where the position should report in an organization.

Unfortunately, when new methods of improving business practices are developed, there may not be an obvious place to put them in the organization. All the recent management trends from Continuous Improvement to Business Process Re-engineering have had the same issue we see with E-Business. They have enterprise-wide implications and tend to become part of the corporate department that started the initiative.

Mid sized companies should take care in the amount of organizational emphasis they give to improvement tools like e-business if they do not think that their business will be fundamentally transformed by the initiative. Dan Palumbo, Manager of Information Technology at the ConAgra subsidiary Lamb-Weston, found that, "all of our E-business initiatives so far have involved putting new technology to existing business relationships." Palumbo found his IT resources adequate to handle the e-business initiatives, "E-business hasn't been about getting new business, its just changing the technology we use when we work with the suppliers and customers that we have always worked with".

Today, e-business initiatives are developing at a time that companies are making major changes in their allocation of resources to IT. Many mid-sized companies have determined that their e-business initiative should be managed within the IT structure. Assigning e-business responsibility to IT will tend to have the effect of:

  • Focusing e-business plans into "information technology centric" projects.

  • Enhancing the IT department's focus on business process improvement activities.

  • Creating some internal conflicts if IT is viewed as unresponsive.

Conclusions

E-Business technology will continue to be a powerful business tool. Companies need to consider the potential of E-Business in their strategic planning processes. When they determine that there is a business case to use E-Business technology to significantly change the way they do business, then they need to create and staff a highly visible organization and place it at an appropriate level in the company. The staff should include the technical IT resources that will be required.

If a company finds that e-business technologies should lead to more evolutionary change then e-business should become part of the IT department's deliverables. Adding the e-business responsibility to IT will enhance the IT's organizational position. With e-business responsibility, the IT organization will tend to build on its consultative relationships with the rest of the organization.

If a company is in doubt about the strategic importance of e-business it should consider starting out by creating e-business responsibility in the IT department. If, over time, it is determined that E-Business should be a separate department that move can easily be made. Creating a separate E-Business department when the strategic importance of E-Business technology is not well understood may undermine the current IT organization and set up the E-Business group for failure.

About The Author

William R. Friend is a principal of WR Friend & Associates, a business process consulting firm. With over 25 years experience in the food and chemical industries, his business background includes executive positions in Supply Chain Management, Information Technology, Logistics, Production Planning, Purchasing, and Labor Relations. He is an award winning speaker and writer on topics related to the application of technology in solving enterprise-wide problems.

He can be reached at bill@wrfriend.com.

 
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