Abstract
The question of how NWU IT creates value has remained constant, but the answer has significantly changed during the past decade. To understand the changes, one needs to understand the NWU’s strategy changes and the resulting ICT value expectations.
In this paper we will look at the changing IT value proposition and we will be incorporating/comparing the research and best practices with regarding “Value creation theories” and how IT and the business needs to change with regards to IT value creation.
Background
The University
For the past decade (or so) the University has changes from predominate a rural contact based Teaching/Learning institution to a multi campus contact and distance based with balanced teaching/learning and research focus. The ever increasing reliance and integration of ICT in both Teaching/Learning (Blended Learning) and research (e-Research) has forever changed the value expectations in these two core University aspect.
With the above expectation for T/L and research in mind, we must also note that the other two core IT (University) activities nl. Administrative support and community engagement has not changes its expectations. For the Administrative component especially, being a pure supportive function, the expectation is still “doing it at the lows cost” or Operational Excellence.
The Value Theory
When looking at organizational value creation theory, two prominent models are regularly used. The two models are:
Original Porter’s Value chains and strategy
Porter sees value creation in a process view of organizations looking at the organization as a system made up of subsystems, each with inputs, transformation processes and outputs that involve the acquisition and consumption of resources. These resources typically consist of money, labor, materials, equipment, buildings, land, administration and management. Porter contends it is how value chain activities are carried out that determines costs and affects profits (Porter 2001).
Porter’s value chain is the set of activities for which a product or service is created and delivered to customers (Porter 2001). Porter sees every organization as a value chain composed of nine generic activities, which are linked to each other and to the activities of its suppliers, channels and buyers. These activities can be divided into two broad types: primary activities, which involve the physical creation of the product, its sale and transfer to the buyer, and after-sales service; and support activities, which support the primary activities by providing purchased inputs, technology, human resources, and various firm-wide functions. (see figure 1)
Porter (1980, 1985, 1990, 1991) has published several works that matter greatly in the context of strategic management and identification of competitive advantage, including publications on competitive strategy (1980), on five forces (1980) and the diamond model (1990), and finally on the value chain (1985). He (1980, 1991) adopts a design school stance with regard to strategy (Mintzberg, 1990), as “strategy is the act of aligning a company and its environment” (Porter, 1991, p. 4). Succeeding and maintain that success require clearly defined goals and objectives, awareness of one’s market position, internal strengths and weaknesses, external opportunities and threats, and the ability to exploit core competences. Porter originally suggests two generic strategies, cost leadership and product differentiation (Porter, 1985).[1] Cost leadership aims at having the lowest cost compared to competitors, whereas a differentiation strategy suggests offering something unique and different to competitors.
The shortfall with Porters approach was three fold:
1) it was postulated before the empaths change from productions to a services culture.
2) It did not take cognizance of the Barney (Barney et al., 2001) resource-based theory that requires focusing on the organization’s resources and capabilities, and how they are used to develop and maintain competitive advantage.
3) It was a generic model and not directly applicable to Higher education
The Hutaibat (Khaled Abed Hutaibat el al., 2011) refined the work of Groves et al. (1997) and add/addressed these dimensions and is now widely used. (see figure 2)
While conceptually similar to Porter’s model, the value chain for higher education entities is notably different than that for most commercial businesses.
Both Hutaibat and Groves recognized the importance of Barney (Barney et al., 2001) resource-based theory and this is reflected in the fact that Academic recruitment is now part of Primary Activities and not secondary activities.
Both Hutaibat and Groves also introduced a third ‘intermediate’ dimension which refers to income-generating activities.
A simplified or customized version of this is currently being used by many Ivey league Universities eg. CMU model is:
Carnegie Mellon’s strategic plan is built on six pillars: 1) Research & Artistic Creation, 2) Education & Student Life, 3) Regional Impact, 4) Globalization & International Initiatives, 5) Carnegie Mellon Community Success, and 6) Finance & Infrastructure. These pillars are associated with higher education value chain activities as illustrated in figure 3.
Treacy and Wiersema (1995) three value disciplines
The Treacy and Wiersema (1995) value model consists of three value disciplines. These are:
- Operational Excellence
- Product Leadership
- Customer Intimacy
Those familiar with Michael Porter‘s work will see that Tracey and Wiersema’s model reflects Porter’s three basic strategy concepts of cost leadership, segmentation strategy and differentiation strategy. Tracey and Wiersema extend them into “value disciplines”. The primary difference between Porter’s work and the value discipline model is that Tracey and Wiersema deepened the focus on the customer relationship by defining the Customer Intimacy value discipline. The value discipline model can be seen as refining elements of Porter’s (1980) generic strategy model (Day 1997).
However, the value disciplines model focus on the processes or competences of an organisation believing that all successful companies have one thing in common: the ability to focus on a single “value discipline”. The value discipline model is different from Porter’s in that they argue that organisitions must not only excel in at least one value discipline but also meet a minimum threshold of competence in the other two. These value disciplines can be seen as placing different emphasis on each of the nine generic activities within Porter’s value chain (Kaplan & Norton 2001). Treacy and Wiersema’s (1995) model has a number of advantages. First, it can be linked to the value chain more easily than it can be to Porter’s generic strategies (Kaplan & Norton 2001). Second, it also explicitly explores how organsiations that use different strategies have differing information needs (Weill & Broadbent 1998).
Operationally excellent
Treacy and Wiersema (1995) argue that operationally excellent companies deliver a combination of quality, price and ease of purchase that no one else in their market can match. They are not product or service innovators, nor do they cultivate one-to-one relationships with customers. They execute extraordinarily well, and their proposition to customers is guaranteed low price or hassle-free service, or both. These organisations win by cost and are very similar to Porter’s cost leadership generic strategy, though less emphasis is placed by Treacy and Wiersema (1995) on market share and other advantages.
The principles of an operationally excellent enterprise are:
- Efficient management of people – employees trained in the most efficient and lowest cost ways of doing things;
- Management of efficient transactions – maximizing the efficiency of all parts of a transaction, including the full supply chain;
- Dedication to measurement systems – ensuring rigorous quality and cost control, with measurement targeted at finding ways to reduce costs; and
- Management of customer expectations – provision of a limited variety of products and/or services and managing customer expectations accordingly.
The dimensions of Operational Excellence are:
- Enterprise performance – efficiency through improved processes and automation for speed and hassle-free delivery;
- Quality – detecting, understanding and removing problems in processes, products and services that have efficiency impacts both before and after delivery; and
- Cost – analyzing and adjusting processes and products to facilitate the most cost- effective delivery.
Product leadership
Companies pursuing product leadership continually push products into the realm of the unknown, the untried, or the highly desirable. Reaching that goal requires that that these organisations be not only creative but able to recognise and embrace ideas that originate both inside and outside the company Most importantly the must be able to commercialise ideas quickly. To do so, product leadership organisations’ business and management processes are engineered for speed (Treacy & Wiersema 1995). Product leadership is similar to Porter’s second generic strategy differentiation based on product.
The principles of a product leadership enterprise are:
- Encouragement of innovation – a culture that fosters experimentation and innovation and rewards product or service improvement;
- Risk-oriented management style – management that allows the enterprise to take risks and reap the rewards of new ventures;
- Recognition that the enterprise’s current success and future prospects lie in its talented design people and those who support them; and
- Recognition of the need to educate and lead the market in the use and benefits of new products or services.
The dimensions of Product Leadership are:
- Capability maturity – maintaining the level of capability to deliver products or services and the continuous improvement of those capabilities;
- Intellectual leverage – developing and using intellectual assets for improved product and service delivery; and
- Responsiveness – minimizing the response and turnaround times for product and service design and delivery.
Customer intimacy
A company that delivers value via customer intimacy aims to build lasting relationships with customers. Treacy and Wiersema (1995) argue that customer-intimate companies don’t deliver what the market wants but what a specific customer wants. The customer-intimate company makes a business of knowing the people it sells to and the products and services they need. It continually tailors its products and services and does so at reasonable prices. Its proposition is: “We take care of you and all your needs,” or “We get you the best total solution”. The customer-intimate company’s greatest asset is its customers’ loyalty. Customer intimacy is similar to Porter’s differentiation based on service.
The principles of a customer intimate enterprise are:
- Having a full range of services available to serve the customers on demand – may involve having a wide range of services available from other suppliers at very short notice through contract arrangements; and
- A corporate philosophy and resulting business practices that encourage deep customer insight and breakthrough thinking about how to improve the customer’s situation or business.
The dimensions of Customer Intimacy are:
- Reach and range – location of service access points, number of channels through which the product or service can be accessed, level of self-service available;
- Cycle time – time between awareness of customer need and delivery, and product or service development time; and
- Product identification – ability to identify new products or services required by customers.
Summary and conclusions
The combined University strategy changes and the value theories, it become apparent that while IT has excelled in the past with Operational Excellence, the new strategy and focus of the University is requiring IT to refocus on either customer intimacy and product leadership value plains, while still maintaining minimum Operational excellence. As the value theory explains, excellent organizations can excel in only one value discipline, while still meet a minimum threshold of competence in the other two plains.
The current expectation that IT should excel at all three, while being governed by the Operational Excellence mode, is not recommended and experience has shown that it’s not achievable
In conclusion the University needs to reconsider measuring IT on Operational excellence only and should start focusing on one of the other two value domains (nl. Customer Intimacy or Product Innovation). The choice of which should be dominant one is difficult because the Teaching /Learning environment (with blended learning) requires product innovation and the research core requires Customer intimacy.
[1] In later Porter works he added a third the segmentation concept, that is refined by Treacy and Wiersema to accommodate the service culture
van Belkum 