Automated market makers incentivize users to become liquidity providers in exchange for a share of transaction fees and free tokens....Read More
The current business environment is characterized by a considerable level of competitive rivalry and therefore businesses have to maintain a continuous improvement process in order to develop a sustainable competitive advantage. This requires business process reengineering which is facilitated through IT innovations. IT innovations have the advantage that they lead to cost-cutting measures. However not all IT innovations equate to progress. Sometimes their effects can be harmful. One of the methods through which IT innovations cut costs is through automation. The automation makes most of human resources in an organization redundant. This leads to a higher level of unemployment. As a result of implementing IT innovations, the management might also become over-dependent on computer systems. This leads to a situation in which the organization might become inflexible and as a result unable to cope with the fast changing external environment. This means that the organization might no longer have an effective strategic focus.
In the highly competitive world in today’s business environment, access to information has become the critical success factor. For this reason, maintaining a continuous process of innovations has become the critical consideration. However when it comes to implementing IT innovations, the management must maintain the strategic alignment process. The alignment takes place between four areas: IT strategy, business strategy, organizational issues and information systems issues. IT strategy is the process of selecting the best software and hardware platforms. Business strategy is the process of ensuring the cost-effectiveness of implementing the IT strategy. Organizational issues refer to maintaining the skills sets of the employees current. Information systems issues refer to maintaining an effective knowledge management system. When implementing IT innovations, the management must ensure that these four areas are aligned. Unless this alignment is maintained, the company’s strategic focus will have been lost and the investments made in IT will have been rendered ineffective. Therefore the management might decide to hire outside consultants.
Implementing IT innovations is a process of managing change. As mentioned before, organizations have to maintain the continuous improvement program in order to develop a sustainable competitive advantage. It is in this respect that the process of managing change becomes relevant. Organizations have to maintain a continuous process of managing change in order to adapt to the fast changing external environment. For this reason, organizational structures have to be built to change. However this change takes place mostly in the form of IT innovations rendering most of the human resources useless. This facilitates the process of downsizing. However this also means that the manpower that has been made redundant has to find jobs elsewhere. However before they can find new jobs, they will have to update their skills in alignment with the most recent advances in the field of IT. Most of the time, they may not be in a position to pay for the costs of training because they no longer have jobs. As a result, the government has to pay for these costs.
In addition to aggravating unemployment, IT innovations can also hamper business productivity through reducing flexibility. In some situations the management might continue to upgrade the technology without any regard for the consequences in relation to the strategic focus of the company. In this respect, spending in IT becomes misaligned. In case of such a misalignment, employee morale can suffer. Progress in IT management means that the work processes become simplified so that the employees are able to focus on tasks that have greater strategic relevance. However this kind of progress may not be possible to attain when the IT innovations are no longer aligned to the strategic focus of the company. This is because employees are no longer able to make the connection between their work and the strategic focus of the company. Employees are the most important assets of an organization. Therefore it is the duty of the management to create the best possible working conditions for the employees. However IT innovations can defeat that purpose when they are undertaken just for the sake of upgrading the technology.
The process of implementing IT innovations is effective only to the extent that they enhance organizational productivity. This is an issue of aligning IT innovations to organizational core competencies. However, building effective organizational core competencies means that the management must invest in training and development in order to maintain the skills sets of the employees current. The problem with formal training and development programs is that they cannot always anticipate all the issues that are likely to arise in the actual business environment. As a result, HR managers should promote the process of informal learning. In order to make the process of informal learning effective, formal training and development programs must enable the employees to see how their work connects to the strategic focus of the company. This means that the management must decide upon the extent to which different departments can be given access to mission critical information. This is the problem with IT innovations. By taking information online, they can violate confidentiality of department-specific information.
As mentioned before, employees are the most important assets of an organization. For this reason, the management must address the organizational issues which constitute one of the four areas in the strategic alignment process. This means that the management must maintain the skills sets of the employees current. However the constant process of IT innovations can defeat this process by not being aligned to the strategic focus of the organization. This prevents the employees from conducting informal learning effectively. Effectiveness in informal learning depends on whether the learning process is aligned to the strategic focus of the organization. This objective can only be met when employees are aware of how their work is linked to the strategic focus of the organization. Progress in IT innovations takes place when the innovations enhance the employees’ productivity. Only in that manner can IT innovations enhance the organizational core competencies. Otherwise the consequences are disastrous.
Taking operations online as indicated above also facilitates storage of information. When the system has been taken online, customer information is recorded at many touch points and they are instantly made available to those departments which need those information. This allows the company to record purchase patterns of different product categories. Such information centring round purchase patterns can be of immense value inasmuch as it spurs innovation which in turn benefits the society to a significant extent. Innovations are made keeping the society’s needs in view. Therefore one of the most important tasks for the management of a company is to determine which products features the society tends to embrace and which it tends to reject. The only way for the management to make that determination is to collect information and the process of collecting information can be very resource intensive. However if the management had decided to implement a package like Enterprise Resource Planning earlier which since installation had been capturing the purchase patterns and the demographic details of its purchasing public, then that additional investment in collecting information is no longer required. All the management has to do now is research the data that is already available. Even in this respect, there are intelligent computer systems that can sift through the data and create charts and graphs depicting demand saving the management additional time and money. This benefits not just the management of that company, but also the society as a whole. On the one hand, it enables the management to develop and market products that the society is most eager to buy, helping the bottom line substantially to say the least. On the other hand, the society gets a better quality of products and services to its satisfaction.
As mentioned before, IT innovations enhance the strategic focus of a company through automation. Automation of the existing business processes means that the management is no longer in need of maintaining the same level of manpower. As a result organizational downsizing takes place and in the process a lot of employees lose their jobs. This means that they no longer have the purchasing capacity as before. Therefore the high quality products and services that become feasible as a result of IT innovations no longer have demand in the society. Therefore not all inventions equate to progress. IT innovations do facilitate the attainment of the objective of profit maximization. However that is from the organizational perspective. The objective of profit maximization is met through cost minimization. The objective of cost minimization is met though downsizing manpower requirements. Technological advancements are copied quickly throughout the industry and across other industries as well as applicable. As a result, IT innovations enable organizations to eliminate manpower and this puts pressure on the labour market. In the long run, the organizations are harmed as well because a higher level of unemployment means that the society no longer has the ability to generate purchases to the same extent as before. Therefore the organization’s objective of profit maximization is defeated in the long run.
According to Michael Porter’s framework for strategy formulation, a business organization has three strategies at its disposal: differentiation, cost minimization and quick response. However as mentioned before, the critical success factor in today’s business environment is to build an organizational culture which acts as the source of a sustainable competitive advantage. The three strategies of differentiation, cost minimization and quick response do not lead to the development of a sustainable competitive advantage because they can be copied quickly by competitor organizations. However when the competitive advantage stems from the organizational culture, then it becomes sustainable because the organizational culture in each organization is unique and therefore not all the best practices may not be transferable from one organizational culture to another (cited in Hitt, 2007). The primary reason for this is the unique set of core competencies that are created by the human resources. However the attention on developing human capital may be diverted when it comes to IT innovations. In such cases, the consequences are adverse.
IT innovations have also facilitated the process of globalization the effects of which have not been benign for everyone. The effects on the third world are mostly disastrous while the effects even in advanced economies such as the US have also been harmful. IT innovations facilitate the process of global communications. As a result supply chain management on a global basis becomes feasible. This has enabled businesses in the US and in Europe to move their operations off-shore to low cost regions such as China and India. This means loss of jobs for the people in the West. However businesses are forced to move their operations to low cost regions in order to maintain their profitability. IT innovations are also enabling multinational companies to set up operations in third world economies in which the local organizations do not have the resource to compete on a global basis. As a result, local companies have to rely on support from the government. This hampers their efficiency.
There are many benefits to be gained from IT innovations. However there are also adverse consequences. In the drive to implement greater IT innovations, the management might lose sight of the importance of building adequate human capital. This is the source of an organization’s sustainable competitive advantage. However when the management is implementing IT innovations, then the strategy of downsizing becomes feasible and as a result, the focus on building adequate human capital is lost. In the process, the strategic alignment process might also lose its effectiveness. In the event that the management becomes focused on implementing more sophisticated IT innovations, then alignment with strategic focus may become impaired in which case the company ends up losing its competitiveness rather than enhancing it. Therefore not all inventions equate to progress. IT innovations can also harm business and society through weakening the focus on human resource management.
Hitt, Michael A., et al. (2007). Strategic Management Concepts. Wiley.