Learning, Working and Innovation: A Case Study in Insurance

Transcription

1 Learning, Working and Innovation: A Case Study in Insurance John C. Henderson and Christine M.A. Lentz Boston University Abstract Wordwide the environment in which IT initiatives are depoyed is changing. Increasingy, IT investments are being made to produce market outcomes as we as interna operating efficiencies. Learning about the inkage between the IT investments and business vaue is a critica chaenge in the service sector for industries such as financia services, transportation and retaiing where IT is endemic to the products and services deivered to customers [I]. Using a case study in a arge North American insurance company and recent theory [2] as our guide, we identify ways in which Information Systems (IS) organizations can become more innovative by using earning as the bridge between working and innovation. Introduction By the eary 199Os, the IS areas of arge North American insurance companies, aong with their business partners, had automated and restructured the main ine business processes, reaizing vaue in terms of cost savings and efficiency gains. Interna departments, ines of business and users were the primary recipients of these benefits. Increasingy, and at an acceerated rate, the IT contribution to business vaue is being inked to externa market outcomes such as market share, profitabiity and customer satisfaction. Senior IS managers are being asked by their CEOs to demonstrate the contribution which IT investments bring to organizationa or business unit performance [3]. Learning about the IT-performance ink is of paramount importance. For exampe, many insurance companies have invested in aptop computers for their agents seing individua ife insurance. The underying causa assumption is that the IT investment (aptops and the accompanying IT and organizationa infrastructure changes) aows agents to decrease the amount of time taken to prepare accurate and compete poicy documents. This in turn eads to increased customer satisfaction, cient retention and market share. Success of such initiatives is increasingy defined not in terms of the capabiity of the technoogy or even the eve of usage but instead by the measurabe bottom ine market impact. Yet the IT-performance ink is rarey cear, direct or immediate which makes attaining such understanding a significant chaenge. Reasons are abundant for expaining the chaenge. One reason is the compexity of the IT investments, particuary strategic initiatives. Strategic initiatives are defined as those IT investments which significanty ater the underying business appications infrastructure. For exampe, at Sun Life Assurance Company of Canada the strategic initiatives generay have wordwide impact, budgets in excess of one miion doars (Canadian) and a two to three year time horizon for design and depoyment, Invariaby they are cross-functiona in nature and often impact mutipe product areas. Correspondingy, many peope participate as members of project teams, steering committees or project review groups and more peope are eventuay affected by the impementation. Another reason for the chaenge in understanding the reationship between IT investments and organizationa performance is that strategic initiatives are aways unique to some degree. Since the ate 1980s Sun Life has impemented about eight strategic initiatives that range from a cient-server based system for the individua insurance ine of business to point-of-sae systems for agents. Such initiatives are unique in the appications affected, the technoogies empoyed and the peope invoved. A third reason for the difficuty in understanding of the reationship between IT investments and organizationa performance is the compexity of processes used to convert strategic initiatives into business vaue. Ceary, the actua systems deveopment process is compex. However, the processes that estabish vaue (i.e., panning, justification), monitor progress and enabe mid course correction are often quite compex, invoving significant uncertainty and a wide range of stakehoders. We beieve that one particuary crucia and compex process that is often overooked, and yet essentia for success. is the earning nrocea. March [4] writes that a major component of any effort to improve organizationa performance is earning. Garvin s [5] definition of organizationa earning emphasizes that /95$ IEEE 546

2 Proceedings of the 28th Annua Hawaii internationa Conference on System Sciences earning is achieved by design and not by chance. A earning organization is an organization skied at creating, acquiring, and transferring knowedge, and at modifying its behavior to refect new knowedge and insights (p.80). Recent research on organizationa earning suggests that it is the bridge between working and innovating [2]. Working incudes both the task and the processes for carrying out the task over time. This unified theory impies that managing must incude processes for both earning from and enhancing practice (innovation). In the past innovation has been separated from the rest of research, constituting a speciaized iterature [6] and thus its contribution was mitigated. Using a case study we demonstrate ways in which the bridge between working and innovating can be buit. First, we describe the genesis of this work to provide an overa context in which to pace this paper. The second section provides descriptive data on Sun Life s products, markets and competitive environment. The next three sections te the story of working, earning and innovating at the company, highighting both the successes and the areas in which the IS organization coud make improvements. The summary offers concuding remarks and some insights for others doing work in this area. Background of the Study The propositions on earning and innovation in this paper stem from an ongoing program of research in the areas of strategy formuation [7], strategy impementation 181 and vaue measurement [9, 101 sponsored by the Systems Research Center at Boston University. Our centra underying thesis is that effective strategy impementation requires an activey managed and adaptive process that responds to organizationa conditions (especiay strategies, systemic risk, structure, processes and peope). One key component in strategy impementation is a mechanism of vaue management, that is a system for activey engaging executives in the creation and adaptation of processes by which the firm understands and manages the vaue of IT investments. One approach for studying the concept of vaue management is to buid upon cybernetic theory. Cybernetic theory defines a feedback process consisting of standards of performance, measures of vaue, a system for monitoring and tracking performance, processes for feeding back the information and modifying the actions [ 11, 12, 131. We use the term vaue management mechanism [14] to refer to a structure or system of working, interconnected parts (caed phases) that function together to create vaue. Each of these phases is, in itsef, a significant management process. Vaue management refects the means by which senior managers have an expicit, adaptive mechanism to systematicay infuence IT initiatives. Through an integrated set of four phases the vaue management mechanism ensures that IT resources invested throughout the company deiver anticipated and, perhaps even, higher returns. The phases of the vaue mechanism are 1) formuate vaue principes, 2) design criteria and measures, 3) depoy tracking and contro system and 4) earn IT-performance ink (see Figure 1). In this artice, we expore the earning phase of the vaue management mechanism. In this context of designing and depoying strategic initiatives, the organization earns how and why (or why not) an initiative achieved its proposed vaue. As critica as earning is, the essons earned must aso be incorporated into practice to achieve measurabe, market impacts. Figure 1, The Vaue Management (Henderson and Lent& 1994) formuate 4 vaue principes depoy e contro systea communicate Mechanism I earn IT-pC!fOI-~Ce ink This case study was conducted in the Canadian Nationa Office (CNO) of Sun Life Assurance Company of Canada and focused on two of its business units (group insurance and pensions). Data coection incuded a series of structured and semi-structured interviews with senior corporate and business unit managers and both corporate and business unit IS managers. Interview data were suppemented with interna company documentation and annua reports. Environment: Sun Life Assurance Company of Canada Sun Life Assurance Company of Canada, which began operations in 1871, is one of the argest Canadian ife insurance companies. The parent company aong with its subsidiaries serves over four miion customers in Canada, the United States, Britain, Ireand, the Phiippines, Hong Kong and Bermuda. Wordwide there are 8,000 I 547

3 empoyees (excuding agents), of whom 1,140 work in an information systems capacity. Tota assets under management at December 31, 1993, exceeded $88 biion (Canadian) and operating income was $610 miion. The quaity of the asset structure is acknowedged by Standard and Poor s and the A.M. Best Company, which have accorded Sun Life of Canada their highest caims-paying ratings. Sun Life of Canada provides a broad range of financia products and services designed to meet the protection, assets accumuation and advice needs of their cients. Products and services incude ife, heath and disabiity insurance; annuities and pensions; mutua funds and savings pans; and trust, banking and investment management services (1992 annua report). In Canada, Sun Life ranks number one in saes in force for individua and group ife and number one in pensions. This mutinationa company has standaone headquarters in Canada, the United Kingdom and the United States. These nationa offices (NOs) are simiar to domestic companies in the sense that they have much of the apparatus to operate independenty within their territories. Each nationa office has profit and oss responsibiity and is inked to the others through the internationa headquarters office, ocated in Toronto, and responsibe for corporate and internationa interests. Sun Life and its subsidiaries constitute a eading mutinationa ife insurance and financia services organization. The corporate vision is to meet the needs of its customers through a broad range of financia products backed by quaity service. Sun Life s diverse product and service offerings, arge customer base, renowned service quaity and strong asset base make it we positioned in the market. These strengths aone offer itte comfort in an increasingy turbuent, compex and diverse competitive, poitica and economic environment. For exampe in Canada, the changing reguatory environment across the provinces has made it possibe for banks, with their substantia asset base, to compete more openy with insurance companies. Working Working refers to the ways in which tasks are accompished over time [23. This incudes both the task itsef and the ways in which the process of doing the task is structured (p. 42). Brown and Duguid propose that work is accompished through both canonica (forma) and non canonica (actua) work practices and that the convergence. of these practices (or ack thereof) directy affects the earning and innovation that resuts. In the case of impementing strategic initiatives at Sun Life, standing senior management committees (forma) work in conjunction with initiative-specific committees (actua). One way to enhance work practice is through a we articuated governance structure. S true tura configurations, appropriatey defined, hep to reduce compexity and increase rationaity [15]. In the IT context, governance specifies the aocation of decision rights for IT activities, such as panning, systems deveopment and infrastructure, to the various decision makers within the organization as we as to outside vendors and partners [16]. Governance is not concerned with the day-to-day operationa decisions but is concerned with the distribution of decision rights that is consistent with the ogic and perspective of the strategy. At Sun Life the business units have a great dea of autonomy for achieving their profit and market share targets. Correspondingy an IS group, responsibe for appications deveopment, resides in each business unit to specificay support its requirements. Beow we provide a detaied discussion of the forma distribution of decision rights at Sun Life. Roes and Responsibiities - forma work practice The Genera Managers (GMs) of the nationa offices in Canada, the United States and the United Kingdom report to the president and are responsibe for the business units (product ines and administrative functions) in their territories. In the Canadian Nationa Office (CNO), business units incude individua ife and heath insurance, group insurance, pensions and savings products. Other major areas incude IS, finance and administration, human resources, pubic reations and communications. The business unit vice presidents report to their GMs and utimatey to the President for achieving vaue from IT investments depoyed. An Assistant Vice President manages the appications deveopment effort in each business unit and reports directy to the business unit head. In addition to the business units, IS activities reside at both the corporate and nationa office eves (see Figure 2). The Vice President for IS (CIO) has responsibiity for company-wide IS and reports to the president. In the CNO an Assistant Vice President, IS manages the Information Systems and the Operations Improvement areas. Together, corporate and nationa office IS constitute the corporate IS activities. Corporate IS operates the arge transaction processing systems, backbone communication networks and shared systems; coordinates IT panning, infrastructure and security; manages data administration, training and consuting. In genera, business unit specific appications deveopment is the responsibiity of the business unit. A other IS activities are the responsibiity of corporate IS. 548

4 Proceedings of the 28th Hawaii Internationa Conference on System Sciences (HICSS '95) Figure 2, Simpified Organizatona President Structure during the passed year. However, the additiona ayers of active, standing committees are not as common and may we represent an innovation in their own right. Such a structure expicity recognizes the overap, economies of scope and potentia synergy among ines of business and nationa offices wordwide. This governance structure provides a means for voicing and resoving conficts and conficting priorities as we as earning from each other. Additionay, it represents a resource commitment on the part of senior management to deveoping work practices which support and not hinder earning and innovation. Beow we buid on this description by recounting the actua work practices which specificay support the &sign and depoyment of strategic initiatives. Roes and Responsibiities - actua work practices Coordination between business units and among nationa offices for IT investments is managed through a muti-eveed structure of standing senior management committees.. Senior Advisory Counci (SAC) This senior, non systems oriented group addresses genera management and strategic issues for Sun Life. SAC is composed of the chairman (chair), the president, the GMs of the nationa offices and the Senior Vice Presidents of Actuaria, Finance, Financia Services, Investments and Marketing. 9 Systems Steering Committee (SSC) The SSC is the most senior systems group and is chaired by the president. This committee estabishes the strategic directions for IS, monitors the vaue of IT investments, aocates resources for IT initiatives with company-wide impications, sets high eve information systems poicies and provides a forum for discussion and confict resoution. The SSC incudes SAC members (the president is the chair), the CIO, the Vice President for IS Panning (IS Panner) and the Vice President Human Resources. Systems Internationa Advisory Counci (Systems IAC) The Systems IAC is a internationa poicy body composed of the senior IS managers from the Nationa Offices and corporate IS and is chaired by the CIO. The councis mandate is to make the whoe more than the sum of the parts by everaging IT, sharing knowedge and fostering innovation. This forma structure where vice presidents manage a ine of business (e.g., individua, group, pensions) is common according to the insurance companies we studied Coordination for design and depoyment of strategic initiatives with company-wide impications are managed by project steering committees and coordinated by the IS Panner with a wordwide mandate. Steering committees are chaired by the senior manager responsibe and composed of the senior business and IT managers invoved at the corporate, nationa office, business unit and functiona eves. For exampe, the Internationa Accounting Systems Liaison Committee, which is overseeing the design and deveopment of the new genera edger system (GALAXI), is chaired by the company comptroer and members incude the nationa office comptroers, the head of IS for each Nationa Office, the head of each finance and administration business unit and its IS director and the CIO. Project steering committees form in response to a particuar business need. Business needs arise from both demand pu and technoogy push and thus can emanate from any eve of the company or area of the business. For exampe, recommendations to buy or buid major business appication software (e.g., software that might be used to administer a significant ine of business) are made by the heads of the business units in the nationa offices that woud be using the software. Corporate IS tries to be aware of the business unit IT investment decisions through SSC or Systems IAC meetings and its informa network of contacts. If these investments invove something substantive (e.g., new or emerging technoogy, cross business unit processes, mutipe nationa office impacts), corporate IS engages the senior business unit managers in some form of approva (committee) process. For exampe, the company wanted to reengineer the core business systems used by the individua insurance business units, corporate IS assembed the nationa offices and faciitated a coaborative decision making process to make sure that, as a whoe, the nationa offices considered the opportunity for using the same system. These actua work practices, where project steering committees form dynamicay based on the work 549

5 Proceedings of the 28th Annua Hawaii Internationa Conference on System Sciences requirements, projects are coordinated by the business manager most directy responsibe and steering committees incude the managers most affected, are not new and have been reported in the project management iterature. However, severa aspects of Sun Life s impementation of these concepts provide a new twist, perhaps demonstrating that the bridge to earning and innovation resides in the detais of the impementation. First, the project steering committees for strategic initiatives routiney operate horizontay across business units, nationa offices and hierarchica reporting reationships. This faciitates Sun Life s strategy of expicity everaging the wordwide IT investment. For exampe, when the US individua insurance business unit wanted to reengineer their core systems, corporate IS (in the person of the IS Panner) assembed the individua units from the other nationa offices in an attempt to see if they had simiar needs. This internationa coaboration, coordinated by corporate IS, invoved common vendor trips, visits to other companies that were using the products and joint discussions and evauations. Eventuay, the systems based on the same product were instaed in three out of the four offices. In the fourth office a cosey reated product was instaed. Second, these actua work practices dictate that the senior business manager responsibe for achieving vaue from the strategic initiative is responsibe for the project and chairs the project steering committee. It is that manager s mandate to design and depoy the project to reaize the anticipated impacts. Senior business and IT managers directy affected are incuded as part of the steering committee; steering committees may be composed of more business managers than IS managers. Third, corporate IS pays an active roe in supporting the senior business manager. It provides standard measures for assessing the reative vaue of the investment (cost benefit guideines), a company-wide standard appications systems deveopment methodoogy (ASDM) for design and depoyment of initiatives and corporate guideines aimed at ensuring that benefits are achieved. Learning Learning the reationship between IT investments and organizationa performance is critica to improving operationa effectiveness and increasing organizationa performance. Yet the ink between IT initiatives and business vaue is rarey cear, direct or immediate. Organizationa earning in the traditiona sense, that is, earning from past experience, is difficut because no two events are exacty aike Simiary, the IT initiatives depoyed in an organization are aways unique to some degree. Yet, having depoyed strategic IT initiatives, the organization may acquire some knowedge and insights which are usefu for depoying other IT initiatives. The chaenge is to gather the knowedge and make it avaiabe to those peope who have the power to act on it. Our fied studies revea that companies see merit in the organizationa earning concept but few have specific processes in pace to achieve it. Garvin [5] beieves that this quandary is party caused by earning theorists who portray organizationa earning as mystica and utopian and who provide abstract recommendations. Managers need a framework for action from which they can derive distinctive poicies and practices for changing the way that work gets done. Attribute-based organizationa earning Drawing from the Sun Life case study and the work of some earning theorists 118, 19, 201 this section describes severa attributes of organizationa earning. These attributes are not entirey mutuay excusive; in practice they overap to some degree. The attributes are used to guide the impementation of distinctive poicies and practices which form the buiding bocks for organizationa earning [5]. Without accompanying changes in the way that works gets done, ony the potentia for improving [earning] exists (p.80). The organizationa earning attributes are target oriented, context specific, shared and routine based. Beow we briefy define each attribute using avaiabe iterature and then describe specific exampes of each at Sun Life. The attributes are given in Tabe 1. e 1. wutes of Lmmhg target oriented - aimed at achieving a specific goa context-specific - embedded in practice or work shared - experienced in groups, through interaction. routine based - impemented through poicies & procedures target oriented Organizationa earning is target oriented [19], i.e., aimed at achieving a specific goa. This attribute provides focus for earning processes as we as a common frame of reference for discussions. It is our position that, in the earning phase of the vaue management mechanism, organizations shoud be earning how and why (or why not) strategic initiatives achieved their goas [14]. Project steering committees meet on a reguar basis to manage, track and contro the strategic initiatives. Committees are not merey informationa in nature but aso pay an active roe in taking corrective action on the initiatives, as needed. Acquiring knowedge about detaied aspects of the IT-performance ink is a byproduct of this committee process. Steering committees review and discuss current project status reports, cost/benefit 550

6 Proceedings of the 28th Hawaii Internationa Conference on System Sciences (HICSS '95) anayses, status in reation to expectations and any critica, project-specific issues. Through these discussions committee members gain a detaied understanding of the project s costs, a deeper understanding of the appication of the ASDM and a genera understanding of the technoogies used in the project. The reguary schedued (weeky or monthy) project steering committee meetings focus predominanty on earning project status and taking corrective action. Recenty, they have aso begun to focus on earning the causes and the reasons for the present status. Post impementation reviews (PIRs) are stipuated in the ASDM with the goa of providing information to improve future projects and the deveopment process itsef. Even for the arge projects PIRs are not commony conducted. Out of the six major projects depoyed in the ast year in the Pensions Division, three received a PIR. However, this number is up from the year before. There is renewed interest on the part of senior management in providing a forum for earning from past impementations and deveoping a means of determining whether or not (and how) the company is getting better at deveoping and impementing systems. A PR of the three nationa offices who impemented securities projects during 1993 was hed in May, Simiary, Sun Life conducted a PIR for the Human Resource system projects. Recenty, due to the magnitude of the resources being invested in strategic initiatives, the president of Sun Life has mandated that project review meetings be hed with representatives of each initiative. The review group consists of the president, IS panner, CIO and senior vice president of marketing. Meetings are hed during the impementation phase with the project sponsors, typicay incuding the business unit head and the GM of the nationa office, and are focused on acquiring an understanding of the resuts being reaized from the investments. However, discussions may incude a aspects of the initiative s design and depoyment. Project review meetings are hed to find specific ways in which to everage the experiences gained and to capture essons earned from the strategic initiatives. Senior managers review the benefits achieved, incuding project steering committee minutes and PIR reports, in the hopes that this information may be appicabe to other ongoing strategic initiatives as we as those which may be depoyed in the future. The president s direct and persona interest in the review meetings serves to both garner the attention of project sponsors and to focus initiative resources on creating a better understanding the IT-performance ink. context-specific Learning is context specific [20], embedded in work practices. Organizationa earning incudes the process of improving actions through better knowedge and understanding [21]. To improve actions and modify behaviors a detaied understanding of the circumstances in which the initiative is depoyed is required. Sun Life s earning phase may be described as moderatey context-specific because steering committees, and to a esser extent the project review and PR groups, are invoved in and informed about the detais of the project and the particuar context in which it is embedded. Some steering committees meet weeky to review progress and address specia concerns. However, it is evident that the project team itsef is the most deepy embedded in the specific day-to-day detais of the project. Currenty there are no mechanisms (poicies or procedures) in pace which augment the earning which occurs at the project team eve. Sun Life has attempted to everage the project steering committee s earning by recording the proceedings in minutes and then broady distributing the minutes across the company to a stakehoders. For exampe, the internationa cient-server committee disseminates information to a eves of Sun Life using the company s standard e-mai system. Minutes are designed to record the detaied discussions and refect specific earning that has occurred during the meeting. It is management s intent that this information be used to modify behaviors or actions of initiative sponsors, steering committees and project team members. shared Organizationa earning is the resut of shared experiences which, athough not aways whoy accurate, bind the individua experiences into a coective understanding [17]. As this shared understanding grows, it produces earning [221 and, through groups or communities of practice, a coective understanding deveops which becomes part of the ongoing work practices and serves as a bridge to innovation This shared understanding is evident at Sun Life where standing committees, project steering committees, PIR groups and project review groups are an inherent part of the work environment. Coaboration on arge IT initiatives occurs in project steering committee meetings and aso resuts from more persona and direct means across nationa offices. Exampes of shared experience at Sun Life incude coaboration on network panning between Canada and Asia Pacific and a cient-server based appication deveoper s workbench designed and tested in Canada and used by both the Canadian and U.S. nationa offices. Simiary, the deveopment of entire appication systems are impemented through shared processes. The SOLAR system, which is the US individua system, wi be the basis for the Asia Pacific Individua system and the same base system for securities management is being instaed for evauation in two of the nationa offices. Each of these initiatives invoved research materias being shared, visits to other insurance companies and empoyees 551

7 Proceedings of the 28th Hawaii Internationa Conference on System Sciences (HICSS '95) participating in project team, project steering and project review meetings. routine based Organizationa earning is routine [19], based on reguar and predictabe behaviora patterns [6, p.141. The existence of such routines enabes decision makers to concentrate on the content rather than the process of organizationa earning and makes earning endemic to the work practices. Project steering committee meetings are routiney hed for each project. PIRs and project review meetings are becoming increasingy common. A of these meetings invove standard processes. One presidentia eve project review meeting is convened, with the senior management project sponsors invoved, for each strategic initiative. Each review meeting asts an hour or two and is conducted during the initiative s impementation phase. Preparation for the meetings consists of the IS panner reviewing the project steering and PIR committee minutes and having discussions with key peope invoved in the project. From this data he prepares advance notes for the review group. During the meetings he takes detaied minutes. Later, he poos the notes to iicit more genera essons earned. To Sun Life, these essons earned (aso caed principes) appeared to be intuitivey obvious, however, after reviewing many of these projects, the principes appeared to be critica to the success of the project. One exampe of what appears to be conventiona wisdom is the principe: if you have a project of any size you shoud have an appropriate eve of fu-time resources and a fu time project manager. Whie this principe appears to be obvious, the actua work practice did not refect it. In the words of the IS Panner, some ess experienced business managers may try to get by with 50% or 30% of their time or 30% of three peope s time, trying to do some bits and pieces of the project. Aso, a ess experienced business manager may put someone they can spare on the project as opposed to someone that the project needs or someone who can succeed on the project. From this esson, Sun Life has earned that the ack of convergence between forma and actua work practices must be addressed or projects wi continue to experience deays in impementation, Another exampe of a esson earned concerns the deveopment and updating of cost benefit anayses. The project reviews have shown that business cases need to be updated and reanayzed at key project miestones, to reassess the project s viabiity. This principe refects Sun Life s understanding of the dynamic nature of strategic initiatives and the need for a dynamic mechanism to coordinate these efforts (e.g., vaue management). After compiing the essons earned from the review meetings in the eary winter of 1993 the IS Panner presented them to the SSC and the Systems IAC. Members discussed the impications of the essons and suggested ways in which they might be communicated company-wide and incorporated into practice. As a resut of these meetings, the essons were distributed on the e- mai system to senior business and IS managers wordwide. The essons, about thirty e-mai screens, were sent out in May. Based on the essons earned from the review meetings and post impementation audits from the steering committees, project management guideines are being pubished and distributed by the office of the IS Panner. In booket form, the essons serve as an impementation guide for project managers and steering committees. Corporate audit has aso incorporated some of the essons into their procedures and documentation. Organizationa earning is an important topic and occurs incrementay over time [231. Using the attributes companies can activey manage the earning process to ensure that it occurs by design rather by chance. The above discussion has sought to highight some of the activities which can be undertaken to improve earning and shed ight on the reationship between investments in IT and reaized market outcomes. The next section shows how the earning can be used to foster innovation. Innovation Innovation is the impementation of inventive ideas [24]. The deveopment process is inherenty innovative [2] and may aso incude creativity [24,253. Innovation is described as somehow getting a new thing done [26] and defined as enhancing practice [2]. These definitions impy that innovation, ike creativity, resuts from deiberate activities and processes [27]. The chaenge for the IS organization is to capture and communicate the innovations across the company. The abiity of a firm to recognize the vaue of new information, assimiate it, and appy it to commercia ends is critica to its innovative capabiities [23]. The design and depoyment of strategic initiatives shoud be fertie ground for innovation. Innovative products and services produced at Sun Life have been faciitated by their earning processes and work practices and deivered to both externa or interna cients. Beow we provide exampes of innovations at both the business unit and corporate eves. new products and services for Pensions customers Top management of the pensions division determined that fexibiity and quick response woud be important organizationa capabiities in the dynamic cimate of the financia services industry and particuary critica in the market for retirement and savings products. As a resut the IS organization, with their business partners, designed and depoyed a strategic initiative to buid a new, 552

8 Proceedings of the 28th Hawaii Internationa Conference on System Sciences (HICSS '95) integrated appications, hardware, software and communications patform. After 2,200 man weeks of work, they had successfuy reengineered the main administration system. The project steering committee, together with the PR group, discovered that unanticipated benefits had resuted from this initiative. Using both the knowedge acquired during this reengineering process and the capabiities of the new infrastructure, the pensions division is now positioned to offer their cients new products and services. For exampe, they have spit the administration and investment management functions and now offer their customers (arge institutions) products and services taiored to the customers specific needs. If a customer wants Sun Life to administer their empoyees benefits but contract with a third party to manage some or a of their investments (such as stocks and bonds), this can be easiy and efficienty accompished. No other competitor offers this type of service. The Pensions division has wooed new customers based on this new offering. improved operating effectiveness for the Group Insurance division The group insurance division of Sun Life found that software purchased for one initiative had additiona, unexpected capabiities for the business unit and these capabiities may eventuay be used company-wide. This discovery was made party by the project team, in conjunction with an extended PIR. That is, initiay the PIR did not recognize the benefit but as the division earned more about the product through use and provided feedback to the PIR and project steering committee group the broader capabiities of the software became cear. A component of the software is a dynamic etter writing capabiity which produces system generated correspondence easiy and simpy through a singe package. Senior management decided to repace a etter writing capabiities throughout the division with this one product. As a resut the division has reaized savings in both operations and maintenance expenses (for other software packages which are no onger needed) and personne time (the new capabiity simpifies operations). avaiabiity of essons earned, position papers and genera findings Innovation, or enhancing practice, can be directy augmented by the activities of the IS organizations in the company. At Sun Life corporate IS engages in activities such as researching and piot testing of new and emerging technoogies, hosting issued-based (e.g., security) or functiona (e.g., officer-eve IS peope wordwide) conferences and producing and distributing papers, poicies, standards and minutes. The office of the IS panner researches and pubishes position papers on new or emerging technoogies which are ikey to impact the business. Conferences are hed to communicate poicies, share information and foster interactions. Wordwide IT infrastructure standards for communications (e-mai, WAN and routers), PC networks (Nove) and software (Lotus and WordPerfect) hep to provide a standard operating environment which is conducive to the sharing of systems and data. Information is shared across the company through steering committee meetings and minutes, e-mai, interna conferences, poicies and standards. Lessons earned from strategic initiatives are geaned from project review meetings and subsequenty the genera findings and opportunities for synergy among the nationa offices are circuated wordwide. Project review meetings are now being hed in the nationa offices by the GMs in charge with the business unit heads in attendance. The process of innovation at Sun Life is one of continuous improvement and invoves severa critica components. First, innovation is a natura byproduct and extension of working and earning at Sun Life. The company may not have set out to make the IS organizations more innovative. Instead innovation was a second order effect, emanating from the work practices and the earning processes. Second, innovation required deiberate, thoughtfu management processes to bring it to the surface. It did not happen accidentay. Third, dedicated resources, in the form of the IS panner and his staff, faciitated innovation at the corporate eve. The IS Panner had a wordwide mandate from the president to produce resuts. Finay, broad-based communication and detaied documentation were critica and necessary features of the effective innovation processes at Sun Life. Summary This case study provides an operationaization of the unified theory of working, earning and innovation. In doing so it supports the importance of viewing these three separate constructs as compementary and integrated. This exporatory work is designed to deveop an understanding of how these constructs may appy to practice in IS organizations and how earning operates in the vaue management mechanism. Working encompasses both the forma and actua routines for designing and depoying strategic initiatives. Sun Life s organizationa structure is hierarchica, verticay integrated and functionay oriented around product ines. However, at an operationa work is accompished through a web of cross-functiona, mutipe discipined committees. The committees provide a rich environment for earning and the company has impemented severa processes (e.g., convening project review groups, communicating and pubishing essons earned) to enhance practice. 553

9 Brown and Duguid 121 argue that work routines, organizationa earning and innovation are endemic to organizations, embedded in the context of organizationa ife. These three activities affect each other and are both interreated and compatibe. Learning and innovation are embedded in the daiy work practices of business units, functiona groups and project steering committees at Sun Life. Concerted effort by these groups is required to understand and incorporate into practice the essons earned and to foster the deveopment of innovations. An expicit management process is required to foster and communicate innovations. In a sense, innovative ideas and practices exist but they need to be harvested if resuts are to be reaized by the organization. This harvesting requires management commitment and specific resources devoted to this purpose. At Sun Life earning and innovation receive the persona attention of the president and the chairman. Additionay, the IS Panner and his staff are dedicated to faciitating, augmenting, documenting and communicating essons earned and the innovations which resut. The organizationa earning processes and the innovations presented in this paper are part of the company s vaue management system. We propose that the benefits anticipated from IT investments (e.g., innovation) are margina uness integrated, dynamic processes exist to activey manage and adapt these investments. Our ongoing research in this area wi examine how the four phases of the vaue management mechanism (i.e., formuate principes, design measures, depoy tracking and contro system and earn about the IT-performance ink) operate in organizations to ensure that vaue is achieved in ongoing strategic initiatives and that the knowedge gained is everaged in future initiatives. References [] Nationa Research Counci, Computer Science and Teecommunications Board, Information Technoogy in the Service Society: A Twenty-First Century Lever, Nationa Academy Press, Washington D. C., 1994 [2] Brown, John Seey and Pau Duguid, Organizationa Learning and Communities-of-Practice: Toward a Unified View of Working, Learning and Innovation, Organization Science, 2: [3] Cark, Thomas D., Jr., Corporate Systems Management: An Overview and Research Perspective, CACM, February 1992, 35: [4] March,, James G., Exporation and Expoitation in Organizationa Learning, Organization Science, 2:1, 1991, [5] Garvin, David A., Buiding a Learning Organization, Harvard Business Review, Juy - August 1993,78-91 [6] Neson, Richard R. and Sidney G. Winter, An Evoutionary Theory of Economic Change, Cambridge, MA, Harvard University Press, 1982 [7] Henderson, John C. and N. Venkatraman, Strategic Aignment: Leveraging Information Technoogy for Transforming Organizations, IBM Systems Journa, ~1, 4-16 [8] Venkatraman, N., John C. Henderson and Scott Odach, Continuous Aignment: Expoiting Information Technoogy Capabiities for Competitive Success, European Management Journa, Summer 1993, 11:2, [9] Curey, Katheen Foey and John C. Henderson, Vauing and Managing Investments in Information Technoogy: A Review of Key Modes with a Proposed Framework for Future Research, ACMIOIS, Conference on the Vaue, Impact and Benefit of Information Technoogy, Minneapois, MN, May 1989 [o] Kambi, Agit. John C. Henderson and Hossein Mohsenzadeh, Strategic Management of Information Technoogy Investments: An Options Perspective, p in Banker, Rajiv D., Robert I. Kauffman and MO Adam Mahmood, Strategic Information Technoogy Management: Perspectives on Organizationa Growth and Competitive Advantage, Idea Group Pubishing, Harrisburg, PA, 1993 [] Dechert, C. R., The Socia Impact of Cybernetics, 1966, South Bend, IN, University of Notre Dame Press [12] Green, Stephen G. and M. Ann Wash, Cybernetics and Dependence: Reframing the Contro Concept. Academy of Management Review, 1988, Vo. 13. No. 2, [13] Hofstede, G.. The Poverty of Management Contro Phiosophy, Academy of Management Review, 1978, 3, [14] Henderson, John C. and Christine M. A. Lentz. Achieving Business Vaue from Information Technoogy Investments: A Vaue Management Mechanism, Boston University Working Paper, 1994 [15] Hrebiniak, Lawrence G. and Wiiam F. Joyce, The Strategic Importance of Managing Myopia. Soan Management Review, Fa [16] Venkatraman. N. and Lawrence Loh, Diffusion of Information Technoogy Outsourcing: Infuence Sources and the Kodak Effect, information Systems Research, Voume 3. No. 4, December 1992, [17] March, James G., Lee S. Sprou and Micha Tamuz. Learning from Sampes of One or Fewer, Organization Science. 2:1,1991, 1-13 [ 181 Argyris, Chris, Doube Loop Learning in Organizations, Harvard Business Review, September-October 1977 [19] Levitt, Barbara and James G. March, Organizationa Learning, Annua Rev of Socioogy, 14, 1988,

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