Business Agility and IT Agility

Business Agility and IT Agility

About this blog

Organizations increasingly need to be agile, which can be defined as the ability to respond pro-active or reactively to uncertain or unforeseen internal and external events and changes. A key area of interest is how agile Information Technology can enable agility of organizations and business networks.

Business Agility in the Netherlands: Research Study Public Sector (2005)

ProjectsPosted by Marcel van Oosterhout Monday, December 04 2006 11:27:16

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In 2005 an explorative, multi-disciplinary study on business agility was conducted by a research team from the Rotterdam School of Management (RSM), Erasmus University Rotterdam. Business Agility is the ability to swiftly change businesses and business processes beyond the normal level of flexibility in order to effectively deal with unpredictable external and internal changes. The study was conducted among managers in the Dutch Public Sector (73 questionnaires and 18 face-to-face interviews with high level executives and sector experts) in the period April to August 2005. In our data gathering we used a database of 3000 persons active in the public sector. We have analyzed three sub-samples:

1. Central government (Ministries, Policy makers)

2. Higher Education (Universities, Higher Education and a few ROCs [Regional Educational Centres])

3. Other (Public Institutes with an operational task, like implementation authorities (ZBOs) (e.g. Belastingdienst [Tax Authority], Kadaster [Land Registry]), some hospitals and local government)

The majority of the respondents have a function related to IT (68.1%), while active at central level (83.6%) in their organization.

Overall level of agility

Respondents in the Public sector state that the overall level of business agility of their organizations is slightly below neutral (average 2.96 score on a 5-point scale). This is a fairly low score, compared to managers in the business community, who rated themselves as a bit more agile (average score 3.2 on a 5-point scale)

Change factors requiring agility

The most important external change factors requiring agility in the public sector are related to the increasingly demanding customers, who require on-line multi-channel and customized communication and transactions. Furthermore, accountability and financial transparency requires many changes in the way work processes and supporting systems are organized. Since more and more processes are executed in a network of interrelated organizations and units, this requires the sharing of information on a structured basis. An important change factor that creates turbulence is the large volume of new legislation. New regulations require a lot of change, especially within Higher Education and our sub-sample Other. An important bottleneck is the short time span between the moment of publishing new regulations and the required moment of implementation.

When we look at the internal change factors requiring agility, there are three categories of change. Respondents expect most internally driven change to result from the digitalization of documents and signatures. This requires a fundamental redesign of processes and supporting systems. Internal performance requirements to IT services are increasing. Therefore, most respondents are involved in a restructuring of the internal IT systems and IT support function. This involves restructuring, increased integration, transforming legacy systems to open flexible platforms, consolidation and standardization. A third type of internal change factor that requires fundamental change is the need to increase levels of expertise of employees.

Agility gaps

Change factors with a high probability of change (score 4 or 5) and which are quite difficult to cope with (score 4 or 5) create an agility gap. When we analyze the agility gaps for the overall sample, a majority of the gaps (8 out of top 15) are internal change factors/changes requiring agility – most of them as a result of external change factors/changes. The gaps are found in the increased complexity of the network interdependencies and the need to share information with other organizations in the network, the need to increase (or change) expertise and productivity of employees and the restructuring of IT systems and support (consolidation, centralization, integration and digitalization).

The major agility gap within Higher Education is the need to restructure and reposition organizations, due to the shrinkage in public financing on the one hand (which is entrenched in new legislations), the increased expectations of more demanding customers, and the changing marketplace with new competition from international players, substitution from e-learning and blended learning initiatives and new compensation schemes (due to BaMa). Education is regarded as a political and hype-sensitive area. This leads to many changing demands via new legislation. Respondents find it difficult to respond to these changes, since these on the one hand require sometimes fundamental changes (e.g. BaMa), whilst on the other hand the exact requirements resulting from new legislation are not quite clear or keep changing. Furthermore there is no tradition of storing certain data in a structured way (e.g. student profiles that might be used in various levels of education). New security measures, e.g. to safeguard the privacy of student information, pose an agility gap. As more and more information becomes available in electronic formats and databases, staff members need to be aware of the risks of misuse and the privacy of certain data. There is a continuous trade-off between security and flexibility: the more systems are secured, the less flexible they become. The increased need for accountability (quality control and accreditation) poses an agility gap, since the organization and supporting systems have not been developed to comply with this need. Due to the increased usage of information technology, (inter)dependencies between different units within and between organizations is increasing. All these developments require, on the one hand, more productivity from the employees and on the other hand it also requires new levels of expertise. As these organizations have direct customer contact, there is a high pressure to solve the agility gap issues.

The major agility gaps within our sub-sample Other are found in the increased complexity of the network interdependencies and the need to share information with other organizations in the network, re-organization of the internal processes (including via outsourcing of supporting activities), and the need to serve customers quicker, via multiple channels and increasingly on-line - given the increasingly adoption and usage of the Internet as the channel for personalized communications and transactions.

Perspective on the network and demand-driven processes

Respondents in the public sector see the importance (and challenges) of the network perspective in terms of the need to be more agile, given the increasing interdependencies between departments and different governmental organizations and the increased need for sharing of information in the network (agility gaps 1 and 3 in our overall sample). This focus on the network perspective can be explained by the increased consolidation in shared service centres on the one hand (to cut costs, increase efficiency and improve quality of supporting services), while there is an increased attention for the end customer and a process orientation on the other hand. This supersedes the boundaries of functional organized departments. The network perspective creates an urgent need and also many opportunities to redefine the way the Dutch public sector is organized.

Enablers and hindrances to agility

The main agility enabling factor as indicated by the respondents of our survey are the skills and motivation of the staff, followed by partnerships with the private sector, vision and leadership of top management and the degree to which manual processes have been automated.

The main barriers to achieving more agility are internal politics, the way organizations and departments are structured and decisions are made (the Dutch Polder Model). The media plays an important role in the public sector. Whilst this increases the need to be agile - if something happen the media is on top of it in most cases, requiring public sector organizations to react quickly - the influence of the media also reduces the level of agility. Policy makers are afraid to make the wrong policy decisions. A result is long lead-times before decisions are made, extensive detailed risk analyses, before a decision is eventually implemented. In general, culture & values in the public sector need to adapt to a new more dynamic society, which requires agility from the operational side and the policy makers. Since a lot of expertise is hired externally on a temporary basis, much expertise leaves the organization. Due to recent regulations, the possibility to quickly acquire external expertise has become more difficult, given the increased level of bureaucracy introduced. This knowledge problem is exacerbated by the aging staff, who retire or are insufficiently open to change. There is a high need to secure knowledge within Public sector organizations, for instance via knowledge management methods & tools and a change in culture. The inflexible compensation and reward structures in the public sector make it difficult to attract or retain the expertise sought. Of course, there are alternative ways of motivating staff, but this still poses a problem. Furthermore, more attention to stronger project management is needed with respect to how programs and projects are implemented.

Business Agility implications for IT

Respondents expressed an increased need for central authority to enforce required standards, which are seen as an important basis for an agile Information System. Some organizations have implemented this central coordination; others are still struggling with IT. In general, respondents indicated that technology is no longer the problem. It is the way you organise your processes around the available IT. In particular, the implementation of IT takes a very long time

Overall we found large differences between the key IT issues and importance of specific applications between the three sub domains. The central government (consisting of policy making organizations) is characterized by rather simple IT architectures, with office automation as one of the main applications. Access is important - independent of time and place. In order to become more agile, increasingly project collaboration tools are being used. To comply with the speed of communication by the media, increased speed of (mobile) communication is important. Finally, document management & authorization is very important, given the need for knowledge management and quick access to previous documents, for instance in case of emergencies.

Within Higher Education, IT is used especially for interaction with students as part of blended learning concepts, for information and personalized communication and transactions via the web. Most problems are found in the administration of student data and information architectures. In particular, faculties have a rather autonomous position within universities, which makes it difficult to enforce central standards and usage of applications. On a network level, there is an increased need for sharing of data, for instance student registration data via Studielink. Furthermore, due to a number of mergers, education institutes are being confronted with heterogeneous infrastructures that need to be consolidated and centralized.

Within the sub-sample Other most organizations have direct customer contact. There is an increased need for a web interface to customers as part of a multi-channel architecture for communications and transactions. Some organizations in this category are characterized by large-scale processing of data, like the Belastingdienst and Kadaster. In contrast to automated processing of data from standard interactions, these organizations increasingly need tools for data mining and support of exemption handling. Given the increasing interdependence of these organizations and decisions to make additional use of authentic data from different organizations, this will lead to increased levels of data sharing and connections to other organizations. Operating in such a network setting – given the sensitivity and privacy of certain data – creates an increased need for proper authentication and authorization tools & IDs. Aligning and synchronizing the different channels in a multi-channel setting also poses a lot of challenges.

Challenges facing the Dutch Public Sector and especially central government require new methods of organization. Actual themes of interest that require a change or new policy often supersede the boundaries and structures of the Ministries. IT can play an important role in overcoming these boundaries and responding in an agile manner.
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