The Strategic Information Technology Plan-Final Project

Running head: THE STRATEGIC INFORMATION TECHNOLOGY PLAN 1

The Strategic Information Technology Plan

Robert Haskins

MGT 497: Strategic Technology Plan for Organizations

David Randolph

21 May 2012

THE STRATEGIC INFORMATION TECHNOLOGY PLAN 2

Executive Summary

The information age has brought us many new ways of living life and doing business.

The management of technology and innovation (MTI) is a development of processes that will

enable a firm to compete and to survive the constantly changing world of information

technology. New products and services from businesses and their competitors are forcing them to

develop ways to help firms become more efficient and effective.

These changes in the internal and external environment of the firm pressure more

emphases on the management of technology and innovation. Managers will need to establish a

strategic process of achieving goals in planning, implementation, evaluation, and control. The

development of internal innovation and obtaining new technology through external means are at

the core of the strategic process to ensure the goals of the firm are achieved. The creation and

analysis of value is a principle focus of the management team because it reinforces the goal of

obtaining and sustaining a competitive advantage. The capabilities that are necessary for the MTI

must be developed through organizational learning and knowledge management.


The Strategic Information Technology Plan

Understanding the management of technology and innovation in an organization is the

principle undertaking when considering the aspirations of an organization predominately is the

function of technology and innovation. International Business Machines (IBM) has had a long

history in the development of technology and the implementation of innovation is the core of

their business model. At a recent event that included 319,000 IBMers, Chairman, President, and

Chief Executive Officer, Samuel Palmisano concluded the event by describing what is IBM’s

mission and goal, “If we're going to solve the biggest, thorniest and most widespread problems in

business and society, we have to innovate in ways that truly matter. And we have to do all this

by taking personal responsibility for all of our relationships - with clients, colleagues, partners,

investors and the public at large” (IBM, N.D.). The mission and goal IBM has established for

itself is similar to many other organizations that procure the same ambition to produce and

deliver technology to their clients. However, what differentiate IBM from the others are the

goals they have to manage the technology and innovation. IBM has taken unique steps at

bringing the innovators within the organization to bypass the traditional developmental lifecycle

and work directly with strategic markets. This new program is called First-of-a-kind in which

“Sales identifies strategic market segments and targets early adopter clients and business partners

to work side-by-side with IBM scientists, testing new ideas and innovative technologies”

(Frederich & Andrews, 2008, pp. 7). The capabilities that IBM possesses demonstrate the

flexibility they appreciate and the Innovative Capabilities Audit Framework points out these

variables. The direction IBM is taking will elevate their status as an organization that


exemplifies the management of technology through innovation and continue to develop the

strategies of an information technology plan.

Resource Availability and Allocation

The capabilities of IBM in determining the ability to allocate the available resources into

research and development, engineering, and market research are important to comprehend

because it actuates the purpose of funding. By establishing, a percentage of sales and a

percentage of research and development funding compared with the main and/or leading

competitor, IBM will be able to evaluate the different avenues they can take.

Understanding Competitor’s Strategies and Innovative evolution

If IBM can identify, analyze, and predict competitors’ innovative strategies and industrial

evolution, they could make the proper decisions before falling behind. It is imperative for IBM

to “Anticipate facilitating/impeding external forces relevant to business unit’s innovative

strategies” (I-Hai Lin, 2008, pp. 11).

Understanding Technical Developments

Since IBM transformed from a struggling hardware selling company to a dynamic service

oriented one, they have made substantial moves at developing technology before their

competitors do. IBM has developed a strategic insight into tackling the forces of opportunity gap

and performance gap by using “Market Insight…a focus on understanding customer needs,

competitor moves, technology developments, and market economics” (Harreld, O'Reilly III, &

Tushman, 2006, pp. 18).

Structural and Cultural Context Affecting Intreprenuership


IBM is a leader in innovation and it can be attributed to having associates that are

encouraged to take risks without the consequences of being reprimanded for failure. This

freedom is important in the high technology industry that is constantly changing and new ideas

are often times have already been thought of. IBM’s associates to take these risks and gain a

sense of ownership in the projects they are involved with intensifying corporate culture.

Dealing With Innovation Initiatives by Internal Entrepreneurs

IBM has referred to these internal entrepreneurs as innovation enablers and they have

become a valuable member of IBM’s ability to use innovation. Some of the structures that have

been created to foster the innovative ideas from these innovation enablers are using them in

cross-functional teams collaborating with the same practices to manufacture innovative

archetypes. (Pohle & Wunker, 2007, pp. 3)

Assessing sustainability, CSR, and Ethics

IBM has launched an initiative called Smarter Planet that has outlined a “Commitment to

integrating sustainable development into business strategy and operations…for business

practices and for specific efforts toward developing IT products” (IBM, 2012). Corporate social

responsibility does not stop at the doors of IBM; it involves the entire community of clients that

IBM collaborates with. IBM tries to identify information gaps with suppliers and partners and

understand the CSR concerns of the customers. (IBM, 2009) IBM does not tolerate the

unethical practice of any employee or business partner. In addition, IBM will “voluntarily and

promptly disclose known violations of government procurement laws to appropriate officials of

government” (IBM, 2012).

Responsibility to Stakeholders


A stakeholder is anyone that has invested his or her time, capital, and knowledge to a

project. These people can be direct or indirect users to a product, management, and associates

that have a stake in the success of a firm, project, or product. It is important to maintain

perpetual communication with the stakeholder at every phase in the project development to

preserve the support they offer. Feedback and communication by the stakeholder will ensure

that evaluation and control of the management of technology and innovation will take place.

IBM has created a website that dedicates this communication with its stakeholders that

commissions the rights and responsibilities to the stakeholders. Some of the rights that are given

to stakeholders include “Describing [the] characteristics that make the product easy to use”

(Ambler, 2001). Scott Ambler (2001) goes on to describe the right of the stakeholder “To

receive a system that meets their functional and quality needs.” These are just a few of the

extensive list of rights to the stakeholder. In addition, IBM has established a list of

responsibilities they attempt to advocate to all of their team members. They include, “Be

specific and precise about requirements” the stakeholder desires. In addition, if changes are

made to a project, IBM is responsive by communicating to the stakeholders about the potential

risk and benefits to the change.

Social Responsibility and the Bottom Line

Social responsibility delves into the realm of doing what is right for society by examining

human moral integrity. This can be just basic human rights to abiding by the law. However,

when a corporation must consider the moral equivalence of that of humans to maintain a positive

view from the public, it can become a grey area because an organization ultimate goal is to make

a profit. In these past decades, corporate social responsibility (CSR) has become a driving force


in organizations because of the positive outlook people have for organizations that adhere to

environmental, economic, and societal challenges. The first challenge for IBM was to know

what their customers considered “responsible.” “To recognize the impact of [IBM’s] activities

on the environment, consumers, employees, communities, stakeholders, and all other members of

the public sphere that matter” (White & Bruton, 2011, p. 73), IBM found there was a knowledge

gap between their managers and the customers. The second challenge for IBM was to promote

the readiness they had for change because they knew the benefits of a positive reputation from

people and the bottom line.

Innovative Actions to Improve Its Reputation

Reputational risk can be a major reason for many organizations eventual downfall. Often

times it is much easier to create a bad reputation than it is to grow a good one. Therefore, an

organization will take great strides at reducing those risks that can damage a reputation. For

decades, IBM was the model of a good reputation demanding respect from all of their

competitors. However, during the late 1980’s and early 1990’s they wavered from their standing

with corporate clients and their ability to build the highest quality mainframe computers in the

world. (Bresnahan, Greenstein, & Henderson, 2011, p. 14) The reason for this was IBM’s

attempt to enter the personal computer industry. They failed to maintain the respect and

reputation from their top clients in the corporate world because of the distraction they created

without the proper internal organization needed to divert their talents into new markets.

(Bresnahan, Greenstein, & Henderson, 2011, p. 36) Through a reorganization effort from within,

IBM has been able to return to the good reputation they enjoyed before, IBM is now a leader in


the highly competitive consumer electronics industry, and they are always looking to improve

their reputation to gain the competitive advantage.

Favorability of the Demand for the Product

The consumers demand for a product will be determined by how it will benefit them or if

they enjoy the service. Therefore, focusing on positive aspects of the product is paramount.

Determining whether the product sufficiently alleviates the consumer’s appetite on a long-term

basis is important. The potential for sub-markets to offer products that accompany the original

product is another factor to consider. Repeated usage of the product by the consumer will ensure

the long-term product lifecycle. (McGrath & MacMillan, 2000, p. 38) The innovation planning

process is a cascading model that begins broadly and matures to the actual undertaking of

achieving the organization’s goals. The demand of a product relies on the success of the

innovation planning process in identifying the “Strategic issues focused outward on economic

and technology issues rather than on internal organizational outcomes” (White & Bruton, 2011,

p. 103).

Factors That Could Speed Adoption

Society in general is apprehensive to change and making investments into technology that

people may not grasp can affect the resources put into that technology. Some people oppose

having to take time to learn new technologies or change their habits. “Factors that tend to speed

adoption include customer dissatisfaction…, low perceived risk to the customer, and a selling

proposition in which those who stand to benefit can actually make the purchasing decision”

(McGrath & MacMillan, 2000, p. 37). Depending on what the firm’s capabilities are, they

should decide what actions to take in internal innovation planning. If management decides to be


a forerunner of the industry, they can make the decision to advance their basic research and

apply it to the market. However, if management decides to take a low risk approach to the

available technology, then systems integration is the best option. The firm can tweak the

innovation “To improve the [Firm’s] fit with existing knowledge bases” (White & Bruton, 2011,

p. 95) and gain a minimal amount of competitive advantage.

Factors That Could Block the Success of an Innovation

Competitors, governments, and social groups with agendas use blocking techniques to

restrict access to resources and customers to make it more difficult for a firm to make money.

“The trouble with blocking is that it can either simply stop business in its tracks or it can require

enormous investments of managerial time and other resources to resolve” (McGrath &

MacMillan, 2000, p. 37). If a firm operates within a regulatory structure that restricts them from

making a profit, they may have to reengineer the work process to allow means that are more

efficient. Government regulations may dictate how the work process is carried out and a firm

will have to adjust to those regulations if they are to become successful. If a firm cannot adjust

to those regulations, they will have to consider changing the innovation planning.

Likelihood of Strong Competitive Response

Competition will continue to drive the firm’s decisions on many factors including

competitors matching the firm’s capabilities with their own justification and resources. This is

especially damaging in industries “In which customers neither know nor care about inputs to the

product or service, but simply evaluate the offering on the basis of what they can observe”

(McGrath & MacMillan, 2000, p. 39). Imitation is another competitive response that a firm will

have to consider because competitors can simply imitate a product with lower quality standards


and drive down prices that will eventually affect the firm that originally produced the product.

The evolutionary aspects of technology benefit start-up and growth related firms that use their

competitor’s technology to sustain a competitive advantage. Start-up companies will “[Look] for

opportunities in the environment, and contacts with external groups…to identify those

opportunities and understand how to take advantage of them” (White & Bruton, 2011, p. 111).

Likelihood That the Potential Competitive Advantage Is Sustainable

Whatever the competitive response is to the firm’s products either it is through matching

or imitation, sustaining the competitive advantage ought to be the focus of the firm. Controlling

the competitor’s response is the best solution to these problems, having the products under

patents and trademarks will be effective however, using entry strategies will sustain the

competitive advantage. Commercializing existing products with new technologies will “Embody

formally protected process or trade secrets” (McGrath & MacMillan, 2000, p. 39). Development

of products that are difficult to reverse-engineer is another way to maintain sustainability.

Taking a proactive response to competitors will help to sustain the dominance in a market and

allowing research to become transformative from basic to applied research will lessen the time

needed to bring technology to the customer quicker.

Factors within Your Organization That Would Allow You to Set Standards

If the firm is to sustain competitive advantage it will have to create the dominate design

and set the standards the product will be accepted to live up to. “It is much more likely to enjoy

sustainability than if it must wrestle in a world in which no standard has been established, or

worst yet, find itself on the wrong side of the standards battle” (McGrath & MacMillan, 2000, p.

40). Taking creative ideas and implementing them to discover new possibilities will help to be


the firm that sets the standards of a market. A firm will have to encourage their employees to try

new ideas and create cross-functional teams that are actively adventuring, confronting, and using

their portfolio of skills. (White & Bruton, 2011, pp. 106-107)

Cost Factors In Commercialization

Commercialization cost can easily be maintainable when the costs are “Modest and

contained” (McGrath & MacMillan, 2000, p. 40). Some factors of cost that need to be addressed

are investments in creating and distributing the product or service, production assets, costs of

inputs, training and organizing a staff, positioning a pathway to the market, and advertising and

promoting. (McGrath & MacMillan, 2000, p. 40) The innovation planning process takes in

consideration some of the commercialization costs by initializing the costs into the planning. A

firm will need to “Identify events that occur in its environment and then to adjust and adapt

constantly” (White & Bruton, 2011, p. 104).

Resources Available For Commercialization

Commercialization will require resources that are already obtained or readily obtainable.

Resources that are already in place will be an advantage because customers will continue to use

the product as long as it is satisfactory. However, if the firm changes the supplier it can affect

the resources used for the product and adversely affect the customer’s relationship with the firm.

This could also have a reverse effect in which it could give the firm a new competitive advantage

because of smaller costs to bring the product to market. This is another example of the

importance of the stage, tactics, and actions, in the innovation planning process.

The Level of Novelty the Innovation Captures


Commercialization of the product before the firm’s competitors will allow the firm to

gain a competitive advantage because of the novelty of the innovation. However, a balance

between creating a product that is attractive to customers and the costs of creating the product

must be achieved. A product that is an unattractive project “Is one in which revenues are

constrained or likely to be so long in coming that costs could balloon out of proportion”

(McGrath & MacMillan, 2000, p. 42). Anticipating how the customer will benefit from the

product is one factor but the concentration should be on whether it is worth the cost of

development to capture the value of the product. A clear understanding of the vision of the firm

should be the focus. A clear vision will dictate if the product the firm wants to create will help

the leaders convey the goals to their associates and ultimately benefit the customer.

Cost Considerations in Development

Considerations in cost require a level of management that evaluates the return of

investment on the facilities and skills used for “Design, prototypes, testing, and model

development” (McGrath & MacMillan, 2000, p. 42). The historical aspect of the cost of

products similar to what the firm already produces is a way to determine cost for development.

In addition, “The extent to which investing in the new project offers the potential to create

benefits in your ongoing businesses, or positive spillover effects” (McGrath & MacMillan, 2000,

p. 42). Finally, the cost of risk involved in the development effort must be addressed. A factor

that favors innovation for a firm that decides to become a fast follower in the market will help

maintain the cost of risk because first movers will receive the majority of the risk. Thus, the fast

follower will need to enter the market shortly after and perform better in an industry. (White &

Bruton, 2011, p. 92)


Other Opportunities That Could Be Leveraged

If the firm has established a competitive advantage they have the edge on development

cost over their competitors because it cost more develop a product from scratch. (McGrath &

MacMillan, 2000, p. 42) The competition will find it harder to match or imitate your technology

because they do not possess the artisanship and knowledge of the technology. The leverage a

firm has over its competitors in the function of creating spillover technology at a lower cost

improves profitability. Product innovation allows a firm to integrate existing knowledge with

new ideas to create incremental improvements “In established products [and open] new markets

with an existing product” (White & Bruton, 2011, p. 95).

Potential Area Where Damage Might Occur

If a project has the potential of imminent failure, the investments made into the project

will be in jeopardy. The scope of the project may “Require so many of your best people that the

rest of the business is likely to suffer” (McGrath & MacMillan, 2000, p. 44). Some of the areas

more prone to distraction and a need for attention according to milestones are development,

engineering, marketing, operations, and capital structure. (McGrath & MacMillan, 2000, p. 43)

It is prudent for a firm to evaluate each phase of development when certain deliverables are made

to the project. This will effectively determine when potential damage can occur before

production and marketing efforts are made. One of the characteristics of the planning process is

“Promoting widespread support and involvement in the entire process” (White & Bruton, 2011,

p. 103). This characteristic is consequential in structuring a means of evaluation of deliverables

to the project.


Vision LeadershipDoes the team have a clearly articulated vision, mission, or set of objectives?Does everyone share the vision (objectives)?Is the vision (objectives) clearly stated?Did everyone participate in creating it (them)?Is this vision (objective) attainable?

Is excellence of central importance to the team?How does the manager monitor and improve performance levels?Are all team members committed to excellence?Does the leader encourage open idea exchanges?

Processes ResourcesDo team members share information fully?Do all team members participate in decision-making?Are team members comfortable proposing new ideas?Are team members able to challenge standard practice?Is there a climate of trust within the group?

Does management support new ideas?Do team members support new ideas by giving time, cooperation, and resources?Does the team leader offer practical help and resources for the development of new ideas?What happens when a new idea fails?

Figure 4.7 Checklist for Innovation Strategy (White & Bruton, 2011, p. 147)

The readiness to implement an innovative strategy

To determine the readiness of the firm to implement innovation strategy begins with

defining the objectives. Assessing the core business and industry demands and establishing the

goals will effectively set the vision for the team members to coalesce around. Each member of

the team will help build the sense of personal responsibility of the other members. The team

members will have to choose a priorities list to define the vision and “What actions are critical

today, what needs to be done later, and what can be ignored for now” (White & Bruton, 2011,

pp. 123). IBM has taken a unique opportunity of using their web capabilities to connect with

members all over the world by having what they call an Innovation Jam. This is a worldwide

brainstorming session where nearly 150,000 of its 356,000 members took part in. what is

fascinating about the Innovation Jam is not the ideas that were formulated over the two day,


three hour sessions, but the emerging new vision that came afterwards. (Bjelland & Wood,

2008, pp. 33)

To bring together the diverse members of a team to work towards the common goals of

the firm, leadership is a key component to the success. A leader will effectively help members

convert problems into ideas by embracing problems to encourage ideas. The leaders will need to

demonstrate to the members what is expected of them by setting a timeframe and the milestones

the firm wants to achieve. To help motivate the members to capitulate to ideas when they are in

favor of internal innovation, leaders may have to offer incentives that try to change the negative

attitudes of external innovations. (Lichtenthaler, Hoegl, & Muet, 2011) Edward Bevan, Vice-

President of Technology and Innovation at IBM Research, described the new role leaders were

undertaking with the new concept of Innovation Jam when he said, “Idea generation is in some

ways the ‘easy’ part…of innovation, whereas advancing, refining and building support for those

ideas is the really tough part” (Bjelland & Wood, 2008, pp. 40). This understates the new

challenges of leadership when determining the readiness of innovation strategy.

The innovation process is at the core of the entire lifecycle of bringing ideas to the

customer. Team members will need to be able to share information and participate in the

decision making process. The team will need to be assembled with confidence that they are

allowed to take risks and propose new ideas. The cohesiveness of the team to trust one another

is an important factor in determining the preparedness of the innovation strategy. IBM has

become a service-oriented company by openly discussing challenges with their customers adding

value to them. IBM encourages sharing of information and participation amongst the team

members as a way to implement an “inside-out” approach at developing solutions for the


customers. (Chesbrough, 2011, pp. 88) IBM’s concept to include everyone in the decision-

making process and promote new ideas without the repercussions of failed risks is conceived in

the Innovation Jam sessions held each year. This also helps to create a corporate culture that

“Gives people the sense they are being listened to, as well as generate valuable new ideas”

(Bjelland & Wood, 2008, pp. 32).

The innovative strategy depends on resources from leadership and team members for the

success of the established objectives. To foster support of new ideas management and team

members will need to display effort, cooperation, and resources. Leadership is at the forefront to

offer practical help and resources and ought not to discourage team members from taking risks

without apprehension to giving new ideas.

Evaluation of the implied innovative strategy

In determining the readiness of an organization to implement innovation strategy,

evaluation of the outcome before the final product is conducted to determine whether the product

is worthy of the innovative strategy or will it be outdated or outmoded. Therefore, some metrics

need to be tested and some questions need to be answered. For instance, do we have a broad

enough range of models of technological possibilities, understanding the customer expectations,

and societal trends? How well do we understand the future? Will we reach the target customer

with this innovation strategy? Are we prepared for any changes in the attitudes, positions, and

ideals of our customers? These questions will help to anticipate changes the future may hold and

avoid outdated innovation strategies.


Figure 1 Courtesy of SAP Enterprise Management (SAP Enterprise Management, N.D.)

The Balanced Scorecard (BSC) is an evaluation matrix that analyzes the alignment of

“Business activities to the vision and strategy of the organization, improve internal and external

communications, and monitor organization performance against strategic goals” (The Balanced

Scorecard Institute, 2011). This is a framework created by Dr. Robert Kaplan and Dr. David

Norton to combine performance metrics with financial measurements and allow managers a

more equitable view of the organization’s performance. Kaplan and Norton recognized the

inconstancies the financial measurements caused by looking primarily at past results. They had

the insight to include three other perspectives including customers, knowledge of employees, and

the internal business process “To develop metrics, collect data, and analyze it relative to each of

these perspectives” (SAP Enterprise Management, N.D.) to determine the impact on the vision

and strategy for the firm in the future.

International Business Machines (IBM) is a for-profit organization and the world’s top

provider of computer products and services. The primary focus of the company is the computer


hardware services business. “The company is also one of the largest providers of

semiconductors, and its computer hardware legacy lives on in the form of its industry-leading

enterprise server and data storage product lines” (Cella, 2012).

Mission Statement: “At IBM, we strive to lead in the innovation, development, and

manufacture of the industry’s most advanced information technologies, including computer

systems, software, storage systems, and microelectronics.

Vision Statement: “Solutions for a small planet”

Strategy Map Performance Measures

Targets Initiatives

Financial Results Increased profits Increased operating

income Lower liability costs

~Percentage of profit margin~Percentage of operating margin~Lower short-term debt liabilities

~47.5% profit margin~19.6% operating margin~>20% of total current liabilities is short-term debt

~Control production costs~Diversify delivery methods~Implement a new inventory control policy

Customers Increased customer

Satisfaction Increase the value of

our products and services

~Image Manager Active Edition1

~95% answered inquires on the first call

~Retain and increase customer lifetime value by quick follow-up inquiries

Human Resources Developing new

ideas Recruit and retain a

highly skilled workforce

~Increase knowledge capital~Enhanced training programs

~%100 participation~Constructive Innovation Jam sessions

~Consider every new idea as important and valuable

Sustainability Convey the

corporate culture Improved business

practices

~Improve communication within internal environment~Tweaking

~Completing intranet capabilities~Analysis of the work process will show deficiencies

~Plan a work process initiative, analyze what needs to change, obtain resources, and

1 A program any organization can take advantage of that provides a highly scalable, high-performance access to billions of objects for its business, eliminating the need for off-site storage and the associated costs. (IBM,2007)


business work process

implement them for improvement

One stark difference between for-profit and non-profit organizations is the approach of

the financial perspective. Non-profit organizations will not see the importance of the financial

perspective because they are not in the business in making a profit. The strategy is more

reflective on how efficient the non-profit is with their relationship with their customers and its

funding source. In addition, more emphasis on how the organization can improve incurred costs

and creates value. (Zimmerman, 2004)

The Wounded Warriors Project is a not-for-profit organization dedicated to assist armed

service members that have been critically wounded in battle. It was created in response from a

group of people that exchanged stories of loved ones experiences and tragedies from the Iraqi

and Afghanistan wars. The Wounded Warriors Project provides “Comfort items to wounded

service members [and] has grown into a complete rehabilitative effort to assist warriors as they

recover and transition back to civilian life” (Wounded Warriors Project, 2012).

Mission Statement: The mission of Wounded Warrior Project® is to honor and empower

wounded warriors. (Wounded Warriors Project, 2012)

Purpose: To raise awareness and to enlist the public’s aid for the needs of injured service

members, to help injured servicemen and women aid and assist each other, and to provide

unique, direct programs and services to meet their needs. (Wounded Warriors Project, 2012)

Strategy Map Objectives Measurement Target


Community ~Reaching out to more people, awareness~Accepting new service members in need

~Increased membership to monthly donations

~Advertise on new mediums (i.e. radio, television, social networks)

Internal Processes ~Maintain technical operations~Communication with medical institutions for support

~More support for mental and physical rehabilitation

~25 new medical institutions to help in support of wounded service members

Learning and Growth

~Expand the needs of volunteers and supporters by training and education

~Awareness among the internal and external environment is increased

~Increased volunteerism and support to include service members of other wars

Financial ~Increased donor support

~Donor ship surpasses previous year

~15,000 new monthly donor subscriptions

With the influx of recent mergers and acquisitions, corporations reap great benefits in

acquiring other corporations including technological, financial, and the ability to gain innovation

over its competitors, to name a few. However, there are numerous unfavorable benefits to enter

into alliances. Risk management has the obligation to take the issues that could potentially

damage the relationship with the newly acquired company and the customers/clients the parent

company services and make an assessment to how the issues can be avoided. Once risk

assessment, or due diligence, is performed on the prospected technology or innovation the firm

wants to acquire, “It should integrate the knowledge into its planning process” (White & Bruton,

2011, p. 223). If due diligence does not show evidence of obtaining the goals of the firm, efforts

into purchasing the technology or innovation ought to be rejected.

Cultural Environment


Often times, a large amount of time and effort on due diligence to analyze the possible

alliance with another firm is spent on “Physical resources, markets, and the logic of potential

mergers” (Carleton, 2010, p. 2). However, if the cultural environment between the parties

involved is not compatible it could lead to problems with coalescing management working

towards a common goal. Due diligence is required to examine the cultural compatibility to

alleviate any possible misunderstanding in the corporate culture that would dominate the

alliance. An important step in disseminating the concerns a firm may have is to compare and

contrast the examiner’s culture with the examinee and what differences may cause barriers for a

mitigated transition. The elements that may create confrontations with cultures are:

1) Cultural identity – How people speak and what clothes they wear are concerns that

must not be overlooked. In addition, their work habits and processes may be different and what

kind of company sponsored work activities exist.

2) Work environment – Differences in the workspace from one firm to the next may

cause problems if one firm normally works in open, bright areas and are then asked to work in

closed, cubical areas.

3) Learning new technologies – “Both in relation to internal systems and equipment, as

well as product and services provided to the customer” (Carleton, 2010, p. 9). The differences in

the technology that is used between firms could pose a problem in the way employees of one

firm may perceive the other.

4) Manager’s ability to manage – Managerial leadership over their employees help to

maintain moral, direction, and intricate relationships. Due diligence must be considered in this

area because a type of management execution may not be well excepted in another and if there is


a developing alliance, you would want the leadership of either firm to understand the overall

goals of the firm.

5) Organizational practices – An analysis of how the potential acquired firm operates in

each department as far as what part does each play in the daily lives of their employees.

Especially formal functions like budgetary needs, “It is not unusual…to find that some particular

person or function is considered sacrosanct, regardless of the impact a person or function may be

having on important business issues” (Carleton, 2010, p. 8).

6) Infrastructure – Examination of the protocols that employees are expected to have

compared to what they are accustomed. For instance, the hierarchy of the leader’s employees is

to report to and the nature of the relationships that are expected.

7) Core business initiatives – Understanding how a firm may view its industry and the

approach it may have on decisions of future aspirations of developing the firm. This analysis

speaks a lot of management operandi towards innovation.

8) Intended direction – “Ascertain, from the top of the organization on down what the

company intends to accomplish” (Carleton, 2010, p. 6). Understanding how senior

management’s viewpoint on competitive advantage may be different from those that work in

other departments can demonstrate a lack of communication and overall cohesiveness. This can

create problems when those same senior management officials try to collaborate with the

acquisition firm.

Using due diligence to investigate the cultural environment that a potential acquisition or

merger will give insight to as how management and their associates are able to transition from

one business culture to the other.


Human Resources Policies

Due diligence involves investigating all the departments to understand the advantages

and disadvantages, and risks involved in the decision of whether or not to purchase a company.

The human resource department is a critical department concerning the relationship of every

employee to the business. Examining the advantages and disadvantages of the operation in the

human resource department will give valuable information as to that relationship. A good due

diligence practitioner will concentrate on these concerns:

1) Compensation and benefits – This is a major concern that includes things that

employees care about the most. The contents of this concern may even need to have its own due

diligence evaluation because of the numerous options it contains. For instance, the acquisitioned

compensation philosophy, severance, retirement, and bonus plans. In addition, special

agreements, disability benefits, profit sharing, savings plans, and employee loans. A firm

interested in another will have to consider each of these compensation and benefits that

employees receive and a change in them could effectively alter the perception the employees will

have on the buying firm.

2) Relationship with labor organizations and/or collective agreements – Examine the

relationship with labor unions and inquire about union leadership, internally and externally,

consider work disruptions and internal strife. Due diligence will find out about any current and

past collective bargaining agreements and how it effects the workforce.

3) Worker compliance with the law – To avoid problems in the workforce, due diligence

is needed to inspect each employees legal work status, “Auditing I-9 forms and information


submitted online that proves all of the company's employees are documented workers”

(Mayhew, 2012).

4) Recruitment and training – An evaluation of the recruitment process is needed to

ensure the standards of the parent company will be followed and the training is sufficient to be

acclimated to possible changes in technology and innovation.

5) Possible employee liabilities – Reviewing employee files to show whether there is a

potential for some to become a liability in the aspect of sexual harassment, “Unresolved

employee complaints or pending litigation in which the new company may become embroiled”

(Mayhew, 2012).

6) Code of conduct agreements – Management with the acquisitioned firm may have

signed agreements of acknowledgement of code of conduct with the employees. A decision of

whether these forms ought to be honored should be considered or to have new employees sign

one that conforms to the purchasing corporate culture.

7) Integration of human resource information systems – Examine the acquisitioned

employee data processing and human resources information systems. Investigating the

transferability of human resource information systems and how it complies with data protection

laws. Has the employees been notified of the possibility that their records are going to be

transferred?

8) Third party agreements – The tool of due diligence to examine outsourced work from

the acquisitioned firm will need to be investigated. It could cause problems with contracts

offering employees to conduct work orders for third party entities. Thus, creating legal problems

the parent company may have never considered.


Due diligence is need to evaluate the critical department of human resources because the

implications that can cause negative perceptions from employees from the newly acquisitioned

firm and the contracts they may have, internally and externally. Investigating the relationship

between the business and its employees is a fundamental step in the due diligence in deciding on

taking on a new firm to increase the parent’s technology and innovation.

Value analysis, or value engineering, is a process of value-based decision making to find

improvements in essential functions to progress towards lower costs for the organization and its

customers. The basic process of value engineering consists of the information phase, speculation

phase, evaluation and analysis phase, and the implementation phase. Although, there is a

number of ways that this process can be fulfilled, the fundamental procedure contains the

aforementioned phases. What value engineering is not is a cost cutting measurement for the sake

of saving money. Value engineering is to acquire information and create new ideas.

Furthermore, taking the qualitative ideas and implementing them to attain lifecycle fixes to the

organization’s product and/or services. When a firm decides to purchase another firm that is

smaller to acquire their technology the larger firm will need to make a value analysis to

determine how the new technology’s value will affect the cost and how it will best serve the

firm.

Information phase

The information phase is the foundation to a value analysis because it supplies the

analysis with material knowledge of the project, product, or service from the newly acquired

firm. Defining what technologies have been acquired and what value it represents is the core

components to the information that is gathered. An organization is more fortunate to ask the


question “What must it do… [and] avoid the question of how to do it [because it] constrains

creativity” (Michaels & Younker, 1994, p. 1). During this phase, it would be prudent to use the

Function Analysis Systems Technique (FAST) because it lays out the groundwork to a wide

array of study approaches and analysis techniques.

Speculation phase

The speculation phase is born with team members coming together in brainstorming new

ideas without restrictions or apprehension because of criticism. “Creative thinking is essential to

this stage if the situation where the same old ideas are used to solve design problems is to be

avoided” (Facilities Society, 2012). The goal in the speculation phase is to suspend judgment of

the ideas and create as many creative ideas as possible. An environment of progressive, out-of-

the box ideas is preferred because this will motivate newer, never thought of, ideas.

Evaluation and analysis phase

The evaluation phase proceeds in shifting towards testing the new ideas and functionality

to find the value added benefits without the added costs to the organization. The point to this

phase is to filter out the brainstormed ideas down to the most viable idea. The idea chosen to be

most technologically and economically feasible is then developed further to determine if this

alternative is better than the original design. An analysis of comparing the idea to the existing

design should be like comparing apples to apples and not apples to oranges. Therefore, a cost

estimate will be conducted to conclude what idea has the best value to cost. The conclusion of

the evaluation and analysis phase culminates with a final review and recommendation to how to

proceed with implementing the innovation.

Implementation phase


The final phase of the value analysis is the implementation procedure. This phase takes

the recommendations from the evaluation phase and creates the plan of action to implement the

approved solution. (Michaels & Younker, 1994, p. 1) Teams are created and leaders are made

during this phase and “Periodic checks on the progress in implementing the approved solution”

(Michaels & Younker, 1994, p. 1) are made.

The value analysis is a valuable tool that creates valuable solutions. Through finding

information, creative thinking, analyzing those ideas, and implementing those ideas,

organizations can determine whether the technology they acquired will help to reduce the costs

without sacrificing value.

Obtaining technology either by internal or external acquisitions forces an organization to

make decisions to how this new technology will advance the cause for the organization. The

organization will have to decide to implement the capabilities at hand including the

administrative structure, “That support the product and process technologies of the firm” (White

& Bruton, 2011, p. 291). A structure that will combine both the products and processes of the

firm and develop a platform or portfolio to increase the chances of success will benefit the firm.

As the complexity of the firm grows from single-product technology to product

platforms, either internal or external technologies, then to portfolios, the capabilities of the firm

will have to adapt. If the firm fails to extend the capabilities, then they can become a burden on

the firm. An examination of the environment of four core areas the firm operates within is

economic, political-legal, social-cultural, and technological. These four areas will need to be

examined because it will effect the strategic direction of the firm’s technology.

Economical


Questions in regards to how the firm will handle the strategic direction of the technology

economically depend mainly on what the tradeoffs are between the expected benefits and the

cost that are related. For instance, how long will the benefits last? What will the proposed new

technology cost to build and operate? How will the costs change over time? What resources

will be needed to maintain, update, and repair the new technology? The best possible metrics

available to determine whether the costs are benefitting the firm is consistent use of the same

evaluation and control methods throughout the lifetime of the technology in question.

Political-Legal

A firm that develops a strategic direction of the technology will need to consider the

political and legal challenges the technology will pose. Management will need to ask how

specific regulations, foreign and domestic, will affect that direction. How will regulations affect

the cost in developing innovation? How does the political instability of a host country change

the direction of technology strategy? How should the opinions of the public reflect how

regulations are administered? Are the regulations administered on sound science or personal

opinion? Before the strategic direction is decided on, these questions will need to be asked to

avoid the costly overruns to adhere to regulations, both foreign and domestic.

Social-Cultural

Social and cultural considerations are taken when the successes of technology a firm will

pursue will is determined by the users themselves. Questions that need to be answered are; what

are the social costs? What environmental risks are there from using it or not? What will be done

to dispose safely of the new technology's waste materials? The most feasible way to measure the

social benefits the technology will make is how the customer reacts to the technology and


whether it becomes will receive. This will come at the end of the time frame of the strategic

directional change.

Technology

The technical direction of a firm will have many factors that depend on a number of

questions that need to be asked. For instance, does this technology supersede the previous

version or technological advantage? Is the innovation consistent with existing platforms? Is this

technology too difficult to understand for the common user? Can this technology be easily

adoptable? These questions are answered by interviewing users and controlling the complexity

of the technology.

The development of new technologies will challenge an organization in defining the

benefits of the technology, maintaining the value, and ensure the firm will continue to get

positive results into the future. The firm will need to develop a plan to continue the success of

the new technology by putting in safeguards to prevent those successes succumbing to losing

focus of the benefits. If the firm can continue to deliver products that meet the customers’

requirements and with good quality, the favorable outcome will continue.

The building of the capabilities is often a difficult one for an organization.

Implementation of the plan to create the capabilities must be done in a fair and timely manner for

the technology to become successful. It is important for an organization to patiently plan and

pace the implementation of technology to allow the growth of the organization to imitate the

implementation plan. This will prevent the technology to become too much of a burden on the

employees to learn quickly. In addition, the technology will develop timely enough so that the

organization will not outgrow the technology because “Too frequently organizations buy a


software application that meets only their current needs” (Consultive Group to Assist the Poor,

2012, p. 20).

The purpose to measure the performance of the technological capacities is to measure the

maximum possible output the firm could achieve with the available resources, or inputs. In the

development of the capabilities, the same matrix will be applied to the strategic components that

produce the capacities. For instance, “Leadership to provide a clear strategic focus with visible

top management commitment” (White & Bruton, 2011, p. 312) is measured by input and output

expectations. Depending on the commitment, the leaders put forth can affect how the employees

will respond to the decisions that are made in regards to developing the capabilities. The

willingness to share knowledge among the whole of the organization will advance the ideas,

empower and incentivize employees, and give them the perception they are part of something

larger than themselves. The structural makeup of the organization will change according to the

size and scope of the firm. An organization will need to match the proper fit to the structure of

the “Goals and activities of the organization. The more innovative the organization is the flatter

and more networked the structure will be” (White & Bruton, 2011, p. 312). The skills of the

employees will be necessary to develop the management of time, space, and technology. A wide

range of skills is necessary for the firm to sustain a competitive advantage.


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