Virtualisation for Law Firms Adrian Wong MSc Computing and Management 2007/08 School of Computing, University of Leeds
Abstract Business virtualisation revolves around using communications and information technology to achieve competitive advantage. The literature on virtualisation focuses predominantly on isolated, disparate fields of academic study, and is principally concerned with manufacturing industries. As a result, business managers in service-based industries such as law suffer from a lack of holistic guidance on how to successfully carry out virtualisation initiatives. This thesis considers the topic of virtualisation from the perspective of business managers, with the aim of producing a framework to help the managers of law firms update their systems portfolio. A literature review provides a useful definition of virtualisation for business managers; relevant tools with links to IS strategy and cultural analysis are also identified, as well as methods of categorising systems for virtualisation. Case studies are used to verify, modify and arrange these analytical tools within a practical framework. This framework is then evaluated through ‘passive testing’ on known organisations, before being assessed for usability by a focus group of legal staff.
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Acknowledgements This thesis would not have been possible without the kindness and insight of the staff at Favell, Smith and Lawson and Wake Smith and Tofields. Special mention must be made for David and Jackie Lawson, for their hospitality and thoughtfulness throughout the case study period. I would like to thank friends, family and loved ones for their support throughout the course of this project. A special mention must also be made for my supervisor Julika Matravers, who has gone above and beyond the call of duty in providing me with information, advice and guidance. Thank you.
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Contents 1. Introduction
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1.1 Objectives 1.2 Structure
3 3
2. What is Virtualisation?
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2.1 Virtual Products 2.2 Virtual Organisations 2.3 Virtual Working Practices and Teams 2.4 Virtualisation for Law Firms
4 5 8 9
3. Analysing the Organisation with Strategic Tools 3.1 IT Investment for Competitive Advantage 3.2 Identifying Business Needs: Internal Analysis 3.3 Identifying Cultural Issues
11 11 13 16
4. Systems for Virtualisation
20
4.1 Categorising Systems: Portfolio Models
20
5. Preparing for Field Research
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5.1 Firm Composition and Location 5.2 Discussion of Research Approach 5.3 Summary of Initial Interviews 5.4 Implications for Field Research and the Framework
24 25 27 28
6. Field Research into Favell, Smith and Lawson
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6.1 Business Needs 6.2 Cultural Issues 6.3 Virtualisation Technology 6.4 Implications of the Case Study
29 31 31 32
7. Comparison Study into Wake Smith and Tofields 7.1 Virtualisation Technology 7.2 Cultural Issues 7.3 Implications of the Case Study
36 36 38 39
8. Framework
41
9. Evaluation
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9.1 Framework Passive Test: Favell, Smith and Lawson 9.2 Framework Passive Test: Wake Smith and Tofields 9.3 Focus Group Evaluation: Framework Walkthrough and Review
48 52 56
10. Conclusion
60
References
61
Appendices
65
Appendix A: Reflections on Project Work Appendix B: Interim Report
65 73
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Chapter 1: Introduction Virtualisation relates to using communications technology to implement working practices which create value-added products or services. The implementation of virtualisation can vary significantly: for example, it could range from using a PDA to allow a staff member to work when travelling, to installing a complex workflow management system to increase the flexibility of an entire workforce. Virtualisation is still very much within its infancy, and as an academic discipline is still highly underresearched. Virtualisation has been considered largely from the perspective of IT specialists, who are up to date with the frequent developments in information technology which shape the field. However, the topic also relates strongly to other academic fields such as organisational change management, business and information systems (IS) strategy; as of yet there is little consideration of virtualisation from a more holistic perspective. Therefore, this thesis provides significant academic value by considering a broad range of academic sources in a field which is highly underdeveloped. This thesis is also important from a practical perspective. Although virtualisation is theoretically complex, it is an attractive proposition for business managers as it offers very simple practical benefits. Virtualisation initiatives focus on upgrading the portfolio of information and communication systems within a business, which increases the flexibility and productivity of employees; this can lead to tangible strategic improvements such as increased responsiveness to customers, innovation and cost leadership (Bocij et al. 2006, Johnson et al. 2006). Because virtualisation initiatives improve the communications and information flow within an organisation, they are a strong match for service-based industries such as law, which rely on the application and dissemination of knowledge. However, the complex and changeable nature of virtualisation means that the business managers of law firms suffer from a lack of specific, practical information on how best to upgrade their systems portfolio. Due to highly vocational training and a slow assimilation of trends in information technology (Susskind 2006 & 2007), the senior managers of law firms are unlikely to have the experience to make truly informed decisions regarding virtualisation; owing to enormous time pressure, it is also unlikely that equity partners will have the inclination to study the disparate and often niche academic areas – such as IS strategy – which are of great importance to the field. This thesis selects, modifies and arranges analytical tools from these
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disparate fields into a framework specifically tailored to meet the needs of small and medium-size law firms, therefore providing significant practical value for the business managers of such organisations. Therefore, the aim of this thesis is to consider virtualisation from a holistic perspective, provide additional insight into an underdeveloped field, and provide practical guidance to help the managers of small and medium-size law firms virtualise their business. This thesis will begin by discussing the various definitions of virtualisation in order to identify the benefits of virtualisation. These two basic items of knowledge have created much discussion and disagreement amongst leading academics and commentators (Goldman et al. 1995, Davidow & Malone 1992, CamarinhaMatos et al. 2005, Mowshowitz 2002, Godar & Ferris 2004), yet they form the very basic building blocks for managerial decision making on the topic of virtualisation. This thesis will also discuss tools from strategic management and IS strategic theory (Stalk et al. 1992, Barney 1991 & 1997, Porter 1985, 1996, 2001 & 2008, Johnson et al. 2006, Wit & Meyer 1998, Ward & Peppard 2002), which will be used in the framework to analyse the unique qualities of an organisation, in order to tailor the virtualisation initiative. It is also necessary to gain an understanding of the technology upon which virtualisation relies. As well as an abundance of discursive literature on virtualisation, there are also numerous technological systems which can be used to provide business virtualisation (Fong 2005). These tools range from basic online services such as BoardHost, to conferencing solutions such as HP's Halo system, to cutting edge fully immersive systems such as Blue-C and CAVE-type technologies (Schroeder 2008). The next logical step is to identify the specific needs of small law firms, and how virtualisation can bring value to the organisation by better fulfilling these needs. By analysing the business practices, culture and technology of law firms, it is possible to tailor and prioritise analytical tools; from these tools an effective general framework can be derived for this category of organisation, which will enable managers to identify and capture the benefits of virtualisation.
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1.1 Objectives Thus, the objectives of this thesis are: 1. Define virtualisation and the generic strategic benefits of implementing virtual practices. 2. Review and select relevant tools from IS and business strategy to help managers analyse areas for potential virtualisation. 3. Provide a brief summary of technological systems used for virtualisation and methods of categorisation. 4. Identify the business and cultural considerations for small law firms, potential applications for virtual practices and issues which need to be addressed upon implementation to ensure future success. 5. Provide a framework which enables business managers to virtualise their business by updating the systems portfolio and working practices.
1.2 Structure In light of these objectives, the thesis will take the following structure:
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A literature review, with background information concerning the historical emergence of virtualisation and prominent definitions of the term (Chapter 2). Chapter 3 identifies and selects the most appropriate tools linked to IS strategy and cultural analysis. This section will also uncover various methods of categorising the technologies available to businesses (Chapter 4).
•
The second section documents the case studies, beginning with a discussion of the research method used (Chapter 5). This is followed by a presentation of the findings, before case study information is used to modify and arrange analytical tools into an effective framework for the managers of law firms (Chapters 6 & 7).
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The final part of this thesis will be the framework (Chapter 8) which unites the findings of the previous two chapters and the literature review. This framework will be tested and evaluated via two 'passive tests' on real-life organisations, as well as a 'walkthrough' and review with a focus group of legal staff (Chapter 9).
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Chapter 2: What is Virtualisation? Virtualisation in the field of computing refers to the abstraction of hardware resources. However, this thesis will take a wider view of virtualisation from a business perspective. Business virtualisation revolves around the strategic use of technology as a communications and transport medium to achieve competitive advantage; it can be applied internally or used to synergise the activities of geographically dispersed firms or work groups. Virtualisation can be defined as a move towards at least one of three 'virtual categories': providing virtual products, participation in part of a virtual organisation, or the use of virtual teams. The following section will discuss each of these key categories of virtualisation.
2.1 Virtual Products The modern organisation is subject to a business environment which is far more competitive and dynamic than a few decades ago (Goldman et al. 1995), and for many organisations, competing in this environment means adding value to products rather than focusing on sales volume. The virtual product is a result of this trend: a value-added, highly customised, readily available combination of both product and service. Davidow & Malone (1992), early proponents of the virtual enterprise, state that virtual products have the ability to 'deliver instant customer gratification in a cost-effective way' through customisation and rapid response to customer demand. Virtual products command high prices by taking advantage of 'rapidly opening and closing windows of opportunity' and are 'expected to evolve … as customer requirements change' (Goldman et al. 1995). The value of virtual products is created by a focus on customer needs, and realised through customisation, rapid assembly and evolution according to these needs. In this way, and unlike the value basis of mass-market products, the physicality of a virtual product is only a small part of its value. Most of the value in virtual products is created before and after the manufacture of the physical product. This is achieved through the applied knowledge of concepts, designs and techniques throughout the lifespan of a virtual product: Davidow & Malone (1992) also state that the virtual product 'mostly exists even before it is produced … in the minds of cooperating teams, in computers, and in flexible production lines'. This application of knowledge is often manifest in a type of personalised service, which means that virtual
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products are often 'combinations of physical products, services and information' (Goldman et al. 1995). Clearly, information technology is an important feature in the creation of virtual products. An example of a firm which competes with virtual products is Reckitt Benckiser, the Fast Moving Consumer Goods (FMCG) multinational. Reckitt Benckiser competes through high levels of market research, innovation and advertising investment, enabling the firm to release line extensions of base products which are customised according to market research, and released quickly through efficient distribution networks. Reckitt Benckiser's brands evolve rapidly according to customer demand: more than forty percent of the firm's revenue is derived from products released in the last three years (Bowers 2008). Recent line extensions include Air Wick Freshmatic, a value-added version of the mass-market air freshener which releases fragrance periodically without user intervention. Although the importance of technology has been emphasised, it is also worth noting that a potent enabler of Reckitt Benckiser's strategy is organisational culture, which promotes innovation through a flat management hierarchy. Knowledge-based industries such as consulting and law also map especially well to these premises of virtual products, as they provide customised mixtures of both products and services which can be enhanced by IT investment.
2.2 Virtual Organisations The virtual organisation1 is a structural entity designed to support the creation of virtual products and agile competition. They are temporally impermanent, dynamic and flexible constructs which unite the skills and knowledge of geographically dispersed partners through the use of technology (Camarinha-Matos et al. 2005). Virtual organisations have emerged from pre-existing practices such as lean enterprise, outsourcing and agile manufacturing (Camarinha-Matos et al. 2005). These practices enabled organisations to focus on their most competitive areas or to change product specification when required. Virtual organisations also use technology to enable the organisation to focus on its most competitive areas whilst retaining or improving flexibility. In this way, they allow the creation of virtual products by allowing the immediate and frequent assembly of new productive resources (Goldman et al. 1995).
1
Otherwise known as the virtual enterprise or virtual company; the terms are often used interchangeably.
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Although Camarinha-Matos et al. (2005) state that 'the terminology is not yet fixed', they present the following definition for a virtual organisation: ‘… a temporary consortium of partners from different organizations established to fulfil a value adding task, for example a product or a service to a customer.’ As these authors identify, virtual organisations are temporally impermanent and are formed to fulfil a particular task. The length of alliance can vary from short-term research agreements (e.g. external companies utilising university resources) to long-term manufacturing and development projects (e.g. the recent alliance of BAE Systems with the VT Group to produce two new aircraft carriers for the British government in 2014 and 2016). This notion of impermanence in virtual organisations means that partners can leverage the knowledge, capital or assets of other firms for a specific task or customer, without resorting to the risks of formal mergers or acquisitions. Goldman et al. (1995) identify that the virtual organisation 'uses technology to dynamically link people, assets and ideas'. The idea of dynamic relationships is a key difference between the mass market and virtual organisation; this ability to switch dynamically between partners is called the 'switching principle' (Mowshowitz 2002). Davidow & Malone (1992) reveal that dynamic relationships exist not only among horizontal partners (partners involved in the similar activities), but also forwards and backwards in the value system: virtual organisations are characterised by 'permeable and changing interfaces between company, supplier and customers'. From this we can construe that firms in virtual organisations are linked both horizontally and vertically to other partners in a value system (e.g. firms linking with similar firms as well as suppliers and distributors). Davidow & Malone (1992) also define virtual organisations as 'patterns of information and relationships' which require a 'sophisticated information network', again emphasising the ideas of dynamic relationships and technology within a virtual organisation. It is worth noting at this point that Davidow & Malone (1992) refer to technology as a data gathering tool to identify customer needs, rather than the more modern views of technology as a link between people and assets; this discrepancy is testament to the rapidly changing views and approaches to virtualisation.
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The exact structure of these relationships and alliances is enormously variable, which complicates the search for a clear definition of a virtual organisation. Camarinha-Matos et al. (2005) stipulates that these 'patterns of information and relationships' tend to fall into one of three topologies: the supply chain or process-oriented type, the hub and spoke type which revolves around a main contractor, and the peer-topeer type in which partners have 'multiple relationships between all nodes without hierarchy' (Figure 1). Figure 1: Virtual Organisation Topologies
Supply-chain (manufacturing industry)
Hub and Spoke (construction industry)
Peer-to-Peer (knowledge industry)
As a descriptive tool for common structures, the topologies provide some general guidelines for management and IT structures. However, this view is overly simplistic and by implying a relationship between virtual organisation topology and industry types, managers may fail to benefit from a potential mixture of all three topologies. Different analytical and strategic tools are necessary to determine the best pattern or structure for firms wishing to engage in virtual organisation concepts (see Appendix A). Davidow & Malone (1992) list several advantages of virtual organisations which include increased customer dependence, capturing the most attractive market segment, capacity for innovation, faster growth and higher profits. Goldman et al. (1995) present six benefits of virtual organisation concepts: 1.
Sharing infrastructure, R&D, risk and costs.
2.
Linking complementary core competencies.
3.
Reducing concept to cash time through sharing.
4.
Increasing facilities and apparent size.
5.
Gaining access to market and sharing market or customer loyalty.
6.
Migrating from selling products to selling solutions.
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Although (as indicated in section 2.4) the virtual organisation concept is currently underdeveloped in the legal industry, similar benefits can be captured through the implementation of virtual working practices and virtual teams.
2.3 Virtual Working Practices and Teams The distinction between virtual working practices and virtual teams has been made to emphasise the varying extent to which virtualisation can be implemented in an organisation. Virtual working practices are in place when employees are able to work at high capacity despite being geographically divorced from the traditional office (e.g. a database engineer working from home by updating data remotely). Virtual teams use a pattern of virtual working practices; these teams are geographically dispersed and require the use of technology for communication and transport (e.g. a consulting team with geographically dispersed members using conferencing and workflow software). This use of technology by virtual teams is known as ecollaboration. It is clear that virtual teams are strongly related to the notion of virtual organisations. However, there are clear differences between the two terms. Godar and Ferris (2004) identify virtual teams as a 'group of organizationally or geographically dispersed workers brought together to work on a common project through communication and information technologies'. These authors uncover a distinction between virtual teams and organisations: virtual teams do not need to be organisationally dispersed, and can exist within a single organisation (whereas virtual organisations are cross-enterprise constructs). Godar and Ferris also identify limitations of scope: virtual teams consist of 'a collection of four to 12 individuals', whereas there is no upper limit on the workforce involved in a virtual organisation. Therefore, it can be asserted that virtual teams are focused on fine-grained or simpler tasks, whereas virtual organisations are more often used for coarse-grained or more complex goals. One of the prominent advantages of virtual teams is the flexibility to cross the boundaries of conventional organisation. For example Majcgrzak et al. (2002) mention increasing opportunities for knowledge
dissemination through 'expanded social networks'; Lipnack and Stamps (2000) claim that virtual teams are able to work across space, time and organisational boundaries. Virtual teams allow businesses to be flexible with team composition according to dynamic needs, as well as access knowledge from across conventional organisational boundaries.
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Virtual teams attract much attention from academics in the fields of sociology, psychology and organisational behaviour due to the interesting effects that geographically dispersed and technologically mediated working have on individuals. One of the most prominent areas of study is that of trust in virtual teams. Geographically dispersed teams are often working on highly cognitive, knowledge-based tasks; without the ability to communicate with the nuances of face-to-face contact, trust is both 'harder to attain and easier to lose' (Lipnack and Stamps 2000). This notion of trust, along with other issues in implementing virtual practices, will be explored in more depth in Chapter 3.
2.4 Virtualisation for Law Firms The literature review on the definitions of virtualisation has revealed that virtualisation is still in its infancy; it is driven by the need for flexibility in a highly dynamic business environment and customer desire for a new type of product. These virtual products are highly customised, assembled rapidly and are often a mixture of physical products and services. Constructs which enable the creation of virtual products are virtual organisations and virtual teams; virtual organisations are a form of temporary, dynamic alliance between several different organisations, whereas virtual teams are a small group of co-workers who achieve effective distributed co-working through the use of technology. Law firms are particularly suitable for virtualisation as they provide a virtual product, a mixture of physical product and service, for their clients. However, the characteristics of the legal industry make it largely incompatible with virtual organisation theories. Although there has been some conjecture on the possibility of virtual collaboration in the legal industry (Kashi 2004), there are considerable obstacles to such an arrangement; unlike other service-based industries such as consulting, the legal industry is technologically underdeveloped, and it is still largely based upon paper documentation. Richard Susskind, a leading academic in the fields of law and IT indicates that the industry is characterised by a slow, inertial uptake of technology (2006 & 2007), and there are currently no foundations or standards in place for flexible interorganisational collaboration. The lack of industry-wide standards means that there is a significant overhead in developing either a system or a framework to support virtual organisation concepts. Nonetheless, applying virtual teams and practices to the legal industry has recently found some success. A new breed of 'virtual' law firms such as Virtual Law Partners in the US and Novalex in the UK offer webbased services and employ fee earners distributed across great distances. This operating model is
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completely divorced from the operating procedures of pre-established office-based law firms and is therefore not applicable, yet virtual practices appear to be a potentially lucrative avenue for investment. Therefore, there appears to be significant value in developing a framework for implementing virtual teams and working practices in pre-established law firms, and it is this goal that will be pursued by this thesis. However, even without the added complexity of virtual organisation theory, a virtualisation initiative for an office-based law firm is still a complex task. There is an enormous range of virtual working practices and technology from which managers must choose. Therefore, in order to achieve success from virtualisation, managers must decide on the correct configuration and characteristics of the initiative for their particular firm. Tools from business strategy can be used to analyse an organisation and answer the questions posed by managers in charge of virtualisation initiatives; these tools will be discussed in the next chapter.
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Chapter 3: Analysing the Organisation with Strategic Tools Hitherto, this thesis has revealed that virtualisation for law firms encompasses a broad range of potential characteristics from which a business manager must make an informed selection. Virtualisation falls unquestionably within the definition of business strategy, as it has substantial or long-term effects and can involve large scale organisational change. Therefore strategic analysis can be used to answer the questions posed by managers in charge of virtualisation initiatives. This chapter will review and make informed selections from a range of strategic tools which can help managers virtualise their business.
3.1 IT Investment for Competitive Advantage Competitive advantage, the long-term ability to outperform rivals, is at the core of business and IS strategy. Wit and Meyer (1998) identify two main schools for achieving competitive advantage: the inside-out approach, which uses the robustness of internal capabilities to overcome environmental turbulence and the outside-in approach, which bases competition on the analysis of customers and competitors and positioning the firm accordingly (Porter 1996). Small and medium-size law firms are unlikely to have the requisite amount of marketing and industrial information to facilitate environmental analysis, and the time restraints imposed upon field research mean that the evaluation of frameworks based on environmental analysis are unfeasible within the scope of this thesis2. Therefore, the inside-out approach is a more suitable basis for analysis. Capabilities-based competitive strategy is an inside-out approach, and it helps answer the question 'how and where should we invest?'. Stalk et al. (1992) identifies four principles of capabilities-based competition: 1.
The building blocks of corporate strategy are not products and markets but business processes.
2.
Competitive success depends on transforming a company's key processes into strategic capabilities that consistently provide superior value to the customer.
3.
Companies create these capabilities by making strategic investments in a support infrastructure that links together and transcends traditional SBUs (strategic business units) and functions.
4. 2
Because capabilities necessarily cross functions, the champion of a capabilities-based strategy is the CEO.
See Appendix A for environmental factors on which further study can be conducted within a thesis of similar scope.
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This idea that strategy is based heavily upon 'business processes' is complementary to the premises of the virtual product which mostly exists even before physical production. The customer focus implied by these principles is also shared in the definition of virtual products. Therefore, it can be inferred that capabilitiesbased strategy supports the creation of virtual products, which are the drivers of virtualisation investment. Stalk et al. (1992) state that capabilities can be created through 'strategic investments in a support infrastructure' to link together strategic business units (SBUs). As previously identified, technology is a key mediator in virtualisation; therefore, the 'support infrastructure' is IT, which can be used to transform ordinary business processes into a unique and highly valuable strategic capability. In essence, capabilities are what an organisation can do; strategic investment into IT infrastructure can yield success through creating new capabilities or enhance existing ones. It is this principle on which virtualisation is based. However, generic investment in IT resources for virtualisation is insufficient to achieve competitive advantage, and can often be counterproductive. As Markus (2004) identifies, many firms investing in IT projects simply seek operational efficiency gains; Porter (1996) refers to this as 'necessary, but insufficient' for sustained competitive advantage. IT investment for virtualisation needs to be aligned with the capabilities of a firm, instead of seeking simple operational efficiency gains. Therefore, in order to invest effectively in IT, business managers must answer the question: 'What are the capabilities of the firm?' (see section 3.2). Barney (1991, 1997) claims that IT resources need to be valuable, rare, imperfectly imitable and difficult to substitute. Resources become valuable through the 'extension of knowledge' in the system (Fong 2005); by using the IT system, knowledge dissemination can be used to exploit opportunities and overcome threats (Fink 2007). Rare resources are simply resources which are uncommon among industry peers. Firms which possess valuable and rare resources achieve competitive advantage; however, sustained competitive advantage relies on the inability for industry competitors to imitate or substitute these resources. In order for resources to be imperfectly imitable and difficult to substitute, IT resources need to be tailored to the individual characteristics of the organisation. According to Barney (1991), IT resources which are closely integrated within the social complexities of the firm may be able to achieve imperfect imitability; the author claims that systems 'deeply embedded within the firm's formal and informal management
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decision-making process may hold the potential for sustained competitive advantage'. Therefore, an understanding of organisational culture has very salient strategic meaning for a virtualisation investment. As well as strategic significance, organisational culture is important from a project management perspective. Virtualisation initiatives are what Markus (2004) calls 'Technochange', a strategic process involving both IT implementation and significant changes to organisational behaviour. The author claims that value capture relies not only upon aligning IT investment to capabilities and relevant activities, but also upon changing the way that people work. This can naturally result in 'resistance to change', and so it is necessary to analyse organisational culture in order to effect a successful virtualisation implementation, and to judge whether a particular initiative is culturally viable in the first place. Clearly, significant importance lies in the idiosyncrasies of the firm's culture, both for achieving competitive advantage and judging viability or implementation issues from a project management perspective. Therefore managers must ask the question: 'What are the cultural issues?' (see section 3.3).
3.2 Identifying Business Needs: Internal Analysis As discussed in the previous section, managers need to identify the capabilities of their business to realise competitive advantage from the IT (virtualisation) investment. Identifying capabilities – what the organisation can do – is often far easier than identifying the activities which support those capabilities; these issues falls under a strategic discipline called internal analysis. Internal analysis looks at the day-today activities of a business and reveals ways of organising or enhancing them to form capabilities (Johnson et al. 2006). This section will identify relevant tools from internal analysis which can be used to look at the everyday activities of an organisation which form part of an organisation's capabilities, therefore ensuring that virtualisation investment will yield maximum value. The search for capabilities and relevant activities will be termed 'business needs'. The following section identifies tools that can be used to analyse business needs.
Benchmarking Benchmarking is based on quantitative measures and is used to measure a firm's competence in a particular activity relative to historical or industry performance (Child et al. 2005). However, despite the popularity of the tool, there are distinct shortcomings: benchmarking will not identify the drivers of good or poor
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performance (Johnson et al. 2006) and the strategic significance of the activity is ignored (Child et al. 2005); therefore, benchmarking is an unsuitable analytical tool for this thesis.
Activity Systems The activity mapping system (Porter, 1996) is a more suitable tool for IT investment, as it makes clear links between activities, capabilities and the drivers of success. Activity maps identify the unique mix of activities undertaken by a company relative to industry norms; clusters of related activities tend to revolve around capabilities or core competencies, which are key areas to be enhanced by IT.
Value Chain Another useful tool is the value chain (Porter 1985), which links value-adding activities together and has been a popular analytical tool for a generation (Figure 2). The value chain has particular relevance in the context of IS implementation; Ward & Peppard (2002) note that value chain analysis has had significant historical importance in the recent implementations of EPOS (Electronic Point of Sale) systems by food retailers such as Tesco. Internal value chain analysis can be used to analyse business needs because it identifies important internal business processes which add value to the product, thereby increasing the difference between price and cost. These business processes represent smaller 'building blocks' of analysis compared to activity systems. As mentioned earlier, these business processes are essential for the creation of virtual products which 'exist largely before production', and are a key part of capabilities-based competitive strategy. A useful feature of value chain analysis is the ability to identify horizontal or vertical links between activities; these links are strongly indicative of capabilities, and should form the basis for IT investment. Figure 2: Traditional Value Chain (adapted from Porter 1985) Primary activity Firm Infrastructure
Support activity
Human Resource Management Technology Development Procurement
Inbound Logistics
Operations
Outbound Logistics
Marketing and Sales
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Service
However, although the value chain is an excellent starting point for the analysis of capabilities and activities, it does have limitations. As noted by Ward & Peppard (2002), the traditional value chain is based upon the manufacturing and retail industries, and is less useful for systems implementation in service-based industries such as law. Stabell & Fjeldstad (1998) present the idea of the 'value shop', a firm which relies on 'intensive technology' to provide value to the customer. This model is based upon the activities of the traditional value chain, but takes into account the scheduling and application of resources 'dimensioned and appropriate to the needs of the client's problem'. This has close links with notions of virtualisation; Ward & Peppard (2002) present a visualisation of this new value chain model (Figure 3). The model is based upon two main flows of information: ascertaining the needs of the client, and devising or implementing a solution. It also features two value areas, which revolve around access to and allocation of resources, as well as the management of client relationships. This model is an excellent analytical tool for identifying key information flows, and will be the primary tool for analysis of business needs in the framework. Figure 3: Value Chain for service-based firms (adapted from Ward & Peppard 2002, Stabell & Fjeldstad 1998)
Support activities (Firm infrastructure, HRM, technology, procurement)
Primary activities External resources
Knowledge application
C Problem Specification
Business acquisition
I E
Marketing the capability
External resources Complime
L
Allocation of resources
Configure solution
Resource value management
N Execute solution
Relationship value management
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T S Client value chain
3.3 Identifying Cultural Issues Analysing the capabilities of an organisation gives managers an understanding of the functionality required from a virtualisation investment which will lead to competitive advantage. However, although the software and hardware may meet the needs of the business, an IT system includes the staff that operate the technology (Bocij et al. 2006). By considering the cultural or human issues of an IT investment, managers can align the investment to the unique human needs of the business, thereby achieving competitive advantage through imperfect imitability (Barney 1991). Analysing the culture of an organisation can also reveal whether a virtualisation initiative is culturally viable, as well as highlighting any implementation issues.
Ashridge Mission Diamond The business mission is an important consideration in any major strategic initiative, as it is concerned with the underlying goals of the organisation. Campbell and Yeung (1991) identify two schools of thought on the subject of business missions: the approach which describes mission in terms of business strategy, and the view that an organisation's mission is an extension of philosophy, ethics and values. The Ashridge Mission Diamond (Figure 4) can be used to make links between these two areas, enabling a good fit between IT investment, business goals and culture. As discussed earlier, IT investment needs to be matched against business goals; any discrepancy between IT investment and organisation culture or working practices will need to be overcome, and large discrepancies indicate that the virtualisation initiative may be unviable. For example, a systems implementation which causes workflow to be highly structured is much more viable for a company with formal protocols and standardised communications discipline, rather than a firm which uses informal communication and ad hoc interactions; the latter firm will encounter more implementation issues.
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Figure 4: Ashridge Mission Diamond (adapted from Campball and Yeung 1991)
Why the Company Exists Principal Aims and Goals
PURPOSE
Competitive Position and Distinct Competencies
STRATEGY
VALUES
What the Company Believes In
BEHAVIOUR STANDARDS Policies for Employees
Trust Heuristics Godar and Ferris (2004) define trust as an 'employee's belief that the organization's management and fellow workers will interact honestly and fairly and in a reliable and predictable manner'. Virtual teams and working are characterised by unnatural and ambiguous qualities which Fiore et al. (2003) refer to as opacity. This opacity in virtual practices means that in order to complete virtual tasks, employees are heavily reliant on other parties. Therefore trust is an important issue for successful virtual teamwork. Lipnack and Stamps (1997 & 2000) refer to trust as a constituent of social capital, and stipulate that trust may be the most important enabler of successful virtual teamwork. Goldman et al. (2004) highlight the importance of trust between customers and suppliers in virtual organisations; trust is also cited as a critical success factor in the work of many other academics (Handy 1995, Mayrhofer & Back 2003, Fong 2005). In order to encourage trust, Godar & Ferris (2004) provide a list of heuristics in terms of firm-level and team-level considerations (Figure 5). By using these heuristics as a reference point for analysis of organisational trust, it is possible to identify and solve issues which will improve existing virtual practices, or facilitate additional initiatives.
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Figure 5: Trust Heuristics (adapted from Godar & Ferris 2004)
Firm-Level Considerations •
Provide a division-wide team-building training program
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Discourage competitive relationships among virtual team members
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Have reliable, media-rich, standardised communication systems in place
Team-Level Considerations •
Establish formal communication discipline early on
•
Precisely outline explicit objectives
•
Consider social aspects of team development
•
Ensure team members are skilled with technology
•
Ensure team members have high degree of functional area competency
Figure 5 details three important, main factors in influencing trust: training, formalised communications methods and the characteristics of the communications system. These form the basic facets for analysing trust in the case studies. However, the notion of trust in the technology itself is infrequently considered by prominent academics. Dependability is equivalent to the trustworthiness of a computer system and it revolves around three areas: attributes, threats and means (Avižienis et al. 2004). Lack of trust in technology is an important obstacle for the staff of law firms to overcome; technology involved in legal work falls into the category of businesscritical systems, meaning that failure of such a system will result in large short-term financial loss and longterm detrimental effects to reputation (Sommerville 2007). Although dependability is a primary feature of software engineering and therefore out of the hands of most senior managers, it is conceivable that adherence to the heuristics shown above will improve trustworthiness in computer systems. Of these heuristics, training, standardisation and choice of system appear to be the most prominent issues, and this thesis' research will aim to show whether the importance of these issues is reflected in real-life organisations.
3.3 Summary The literature review has revealed that using the inside-out approach to strategic analysis, IT investment can be used as a support infrastructure to enhance capabilities and thereby realise competitive advantage. In
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order to sustain this advantage it is necessary to align this investment with business needs and cultural issues. Benchmarking is a popular strategic tool for analysing business needs but is unsuitable for the intended framework; activity systems and value chain analysis are far more useful tools as they make clearer links between activities, capabilities and the drivers of success. The Ashridge Mission Diamond and three main factors derived from trust heuristics can be used to analyse an organisation's cultural issues. The case studies documented in this thesis (Chapters 6 & 7) will reveal how these tools are modified and arranged in a framework to help business managers of law firms virtualise their organisation.
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Chapter 4: Systems for Virtualisation Thus far this thesis has considered the strategic implications of virtualisation, from both business and cultural viewpoints. As indicated in previous chapters, virtualisation also revolves heavily around the use of technological systems, and so this chapter considers e-collaboration, a prominent practice in the fields of information systems and virtualisation, before revealing the various methods of categorising systems relevant to business virtualisation. Some commentators predict that technology will catalyse a major change in the working practices of the legal industry (Susskind 2007). Technology for e-collaboration will facilitate this change: e-collaboration is the process of two or more geographically dislocated people working together on a common goal, supported by electronic tools (Ellis et al. 1991). As mentioned above, e-collaboration is an important practice in the sphere of virtualisation as it is the means by which virtual teams and organisations achieve their goals. However, as well as facilitating virtual teamwork, most e-collaboration technology also enables solitary employees in some degree to engage in virtual working practices, such as the remote access of documents. This is not strictly 'collaboration', as a solo employee need not be part of a team. Therefore, in order to avoid confusion, this thesis will refer to virtualisation technology as facilitating both e-collaboration and solitary virtual working practices. There is a vast array of systems3 available for managers wishing to implement virtual practices. Therefore, it is necessary to explore the various portfolio models which categorise the relevant systems for virtualisation; this will enable managers to make informed decisions about the system which suits an organisation's business needs and cultural variables.
4.1 Categorising Systems: Portfolio Models The field of IS strategy yields many portfolio models which classify information systems according to their relationship with each other, their value within a business or according to other factors. Analysing the systems of an organisation and choosing new systems in which to invest are important issues in virtualisation initiatives; therefore, they are an essential part of this thesis' framework, as they allow 3
However, choosing systems may become an even greater issue in the future. See Appendix A for discussion.
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business managers to analyse current or potential systems for virtualisation. This section will consider several prominent portfolio models which can be used to classify systems for virtualisation. Godar & Ferris (2004) identify two broad categories of relevant systems for virtual teams: decision support systems and group support systems. Decision support systems are software tools, often linked to large amounts of data. They provide a simple user interface, as well as modelling or recommender-system functionality to aid decision making in non-structured, managerial domains. Group support systems are used to aid group processes, coordination and communication. While this method of categorisation is simple, it is undeniably vague; its inadequacies for law firms are compounded by the fact that decision support systems are inferior to human judgement in the legal profession. However, the authors continue by offering three further categories of technology: messaging systems, data-management systems and commercial groupware packages (Figure 6). This model is far more useful breakdown of available technologies for managers. Figure 6: Three categories model (adapted from Godar and Ferris 2004)
Messaging
Data-Management
Commercial Groupware
Gopher Telnet WWW Online Databases FTP
Lotus Notes Microsoft Exchange
Asynchronous E-mail Bulletin board systems (BBS) Discussion lists Weblogs Short message service (SMS) Synchronous Interactive messaging Chat Conferencing Video conferencing
Fong (2005) stipulates that there exists a hierarchy of technology for workplace e-collaboration. The ecollaboration pyramid, championed by Mayrhofer & Back (2003), prioritises technology for e-collaboration according to four levels (basic, fundamental, additional and add-on functions). However, this approach is misleading, as firms may prioritise technology differently according to a different structure. For example, 'basic functions' such as intranet may not be necessary in a small firm graphic design firm, whereas 'additional functions' such as application sharing may be a key part of everyday activities. This model is therefore unsuitable for the purposes of this thesis.
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However, Fong (2005) also discloses a more useful portfolio model based on two main components: interaction and content management. Three increasing levels of interaction are defined (coordination, cooperation and communication) as well as three levels of content management (none, structured storage, retrieval/versioning). This is a more effective way of categorising systems as it encapsulates a broader array of systems, and allows managers to match functionality according to the level of interaction and data retrieval required by business processes (Figure 7).
Figure 7: Virtualisation Technology Landscape (adapted from Fong 2005, Godar and Ferris 2004)
Although the virtualisation technology landscape model begins to consider the needs of business processes, its ability to support the broad spectrum of business needs is underdeveloped. Ward & Peppard (2002) indicate that this is characteristic of most portfolio models, which consider the relationship of systems to each other and the tasks being performed, rather than the relationship of systems to business success. This is a prominent shortfall: business managers need to know the current, future, operational and strategic implications of technology use and differentiate between virtual technologies which provide strategic gains
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and other advantages. This differentiation can be achieved through the use of the Strategic Grid, which categorises systems into four key areas (Figure 8).
Figure 8: Strategic Grid for Information Systems (adapted from Ward & Peppard 2002)
STRATEGIC
HIGH POTENTIAL
- Applications that create and support change
- Applications that could create opportunities
- Critical to sustaining future business strategy
- May be important in future success
SUPPORT
KEY OPERATIONAL
- Applications that improve efficiency
- Applications that sustain existing operations
- Valuable but not critical to success
- Organisation currently depends on for success
By dividing current technology into these four quadrants, the Strategic Grid is an effective way of categorising the current system portfolio with close reference to the business. On a different level, the current system portfolio can be compared directly with the value-adding activities of the business; this can highlight activities which are lacking support by current systems (gaps in the portfolio), and therefore guide future upgrades to the system portfolio through IT investment. In summary, the landscape model proposed by Fong (2005) is an effective way of categorising technology according to functionality, whereas the Strategic Grid (Ward & Peppard 2002) is a useful tool for showing the relationship between systems and business success.
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Chapter 5: Preparing for Field Research Previous chapters have identified numerous tools for analysing business needs, cultural issues and virtualisation technology (both current and potential) for use in the framework. As these tools are highly generic, the next stage in the methodology is the verification, modification and structuring of these tools within the framework according to the needs of law firms; this will be achieved through the use of case study information. The following chapter documents the preparations made before field research, including background information about the firm and a brief discussion of research approaches; following this is a summary of initial interviews, the information from which will be used to guide the field research itself.
5.1 Firm Composition and Location Favell, Smith and Lawson is a small law firm consisting of twenty-nine staff in total, including two parttime workers. Of these twenty-nine staff, thirteen are fee-earning solicitors or partners, split over five business areas: conveyancing is concerned with the transfer of property titles to one owner to another; wills and probate involves the settling of assets after death; family law handles domestic issues; civil law manages disputes between individuals and organisations; and criminal law revolves around UK penal law. The remaining sixteen staff are classified as support workers, including legal support employees such as secretaries, associates or legal executive, and office support staff such as receptionists and cashiers assistants. The majority of the workforce is based in the firm's main office in central Sheffield. There is a secondary office in Hathersage, a small town roughly eleven miles south-west of the city centre, where some of the conveyancing and wills/probate fee earners and support staff are based. The secondary office is used to leverage clients in the Hope Valley and as a more pleasant setting for client meetings and conferences. Most of the firm's revenue is from small personal or residential cases from a highly localised client base, usually within a fifteen-mile radius of one or both of the offices.
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5.2 Discussion of Research Approach Cornford & Smithson (2006) describe research as a means to discover issues of importance, using a scholarly approach. The authors also discuss the concept of research in terms of four key considerations, which are an excellent starting point for project research: 1.
What makes the issue important?
2.
What does a scholarly approach involve?
3.
How are new, valid insights to be achieved?
4.
How can these insights be communicated most effectively?
Importance and relevance are the primary criteria for conducting research. The 'diversity and fragmented nature' (Cornford & Smithson 2006) of IS research means that there is no overriding agenda for such initiatives, and explains why research in this field tends to cluster around specific topics at certain times. This project falls within the same phenomenon; the concept of virtualisation will have strong implications for business managers over the next few years, and in its infancy has received much interest from academics in its infancy. However, the field is still under-researched and provides little specific guidance for business managers. Therefore much value lies in the investigation of virtualisation, with the aim of aiding a particular area of business management: the management of small law firms. A scholarly approach to research can be considered as a methodology already championed by a renowned researcher (Cornford & Smithson 2006). However, as information systems science is a combination of both computer and social sciences, there are a number of conflicting views as to what constitutes legitimate practice. Iivari (1991) provides a useful taxonomy of research styles, which involve three areas of increasing specificity: constructive research is a style which focuses on theoretical models which may not have any physical manifestation; nomothetic research revolves around testing hypotheses through empirical data analysis; and idiographic research which involves the rich exploration of a particular situation or context. As will be shown, idiographic research maps effectively to the particular focus of this thesis on small law firms. Idiographic methods include the case study, an exploration of a single situation in depth, and action research, which involves both exploration and collaboration in order to effect organisational change. Observation was necessarily the primary focus of the research but due to the time constraints of this thesis,
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in-depth collaboration and organisational change were not viable activities. Therefore, the case study is the primary tool for research. The effective communication of results is a key issue. Cornford & Smithson (2006) identifies an important process in the presentation and extraction of meaning from research findings: validity must be translated into value. The authors note that the value of many academic journals in the field of information systems is severely hampered by a lack of focus on the wider relevance of findings. However, to make valid insights through research requires important and relevant questions. As the overall aim of this thesis is to help managers of law firms virtualise their business, the questions for field research in the following section must therefore focus on this aim. The specific aim of the field research, within the overall structure of the thesis, is to verify, organise and modify the tools discussed in Chapters 3 and 4. Therefore, the underlying question to guide field research is: How can these tools be modified and arranged into a framework to help managers virtualise their business? However, although this question clearly defines the goal of the field research, it does little to structure the field research or guide the formation of an effective framework. Nevertheless, Chapters 3 and 4 have highlighted the importance of analysing business needs, cultural issues and systems for virtualisation, and so the following field research questions are valid: What are the business needs? Do the relevant tools (Ashridge Mission Diamond, Activity analysis, Value Chain analysis) effectively identify these needs? How should they be modified or prioritised in the framework? What are the cultural issues? Do the relevant tools (Ashridge Mission Diamond, Trust Heuristics) effectively identify these issues? How should they be modified or prioritised in the framework? What systems are being used? Do the relevant tools (Virtualisation Technology Landscape, Strategic Grid for IS) categorise systems effectively? How should they be modified or prioritised in the framework?
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5.3 Summary of Initial Interviews Initial interviews for the first case study were based upon the three research topics listed above: business needs, cultural issues and systems. The interviews were carried out in order to obtain basic information about firm composition and location, as well as information necessary for guiding field research. These interviews were conducted with David Lawson, a senior partner in criminal law. Interviews were semistructured and consisted mainly of 'open' questions, enabling the interviewer to pursue avenues of interest and allowing the interviewee to expand upon perceived areas of importance. The following section in this chapter presents the findings from these initial interviews.
Business Needs •
The firm deals with small personal cases from local clients.
•
Minimal expenditure on advertising; predominantly viral marketing.
•
Teams are headed by a single solicitor, who is permanently assigned one member of support staff.
•
Solicitors belong to a single business area.
Cultural Issues •
Difficult to isolate in an interview with only a single member of staff.
•
Culture is described as informal.
Systems and Communication •
Limited information systems in place.
•
Networked computers allowed e-mail and use of Microsoft Outlook.
•
Internal phone system.
•
Oral communications generally used.
•
Conveyancing package used to track the case status according to preset stages.
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5.4 Implications for Field Research and the Framework The initial interviews revealed the following salient issues which would characterise the direction of field research:
•
The activities of employees differ greatly between business areas; so to construct a valuable framework, field research needs to focus on several business areas.
•
Solicitors spend at least thirty minutes travelling to the Hathersage office to meet clients. Field research should focus on ways of identifying this inefficiency with current tools and applying realistic virtual practices.
•
The Ashridge Mission Diamond and Trust Heuristics should be tested as appropriate tools for evaluating organisational culture.
•
As teams are headed by a single solicitor, the activities of the team can be summarised by shadowing its solicitor.
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Chapter 6: Field Research into Favell, Smith and Lawson Field research at Favell, Smith and Lawson took place in their Sheffield and the Hathersage offices. Guided by initial interviews, field research was primarily based on shadowing fee earners, but also involved short interviews with key members of staff. This chapter documents this research, which as discussed above, revolves around the business needs, cultural issues and virtualisation technology.
6.1 Business Needs Directed by the findings of the initial interviews (see section 5.4), staff activities were recorded by shadowing fee earners in different business areas. Interviews with support staff were also conducted in order to ensure that the framework would be applicable to all business areas. This section considers the general observations before considering business needs under the two 'value areas' of the service industry value chain model: resource management and relationship management (see Figure 3).
General Observations The first important general observation is that a single lawyer is assigned to a client for the majority of the case. This provides a more personalised service, which is part of the business mission as well as an inherent business need. Another prominent observation is that lawyers in all business areas undertake a multitude of activities. Criminal lawyers must designate tasks to support staff, as well as interview or represent clients; activities take place in the office, at the local court or at police stations. Conveyancing lawyers are more office-based, although their work still requires a similar mix of communications and information flow compared to criminal lawyers. Activities included organising Home Information Packs, verifying documentation and identification, organising surveys, and contacting third parties and clients.
Resource Management Observing resource management revealed several key business needs. Firstly, fee earners need to communicate with support staff in order to designate tasks such as writing letters, sending bills or phoning clients. There is only a basic task prioritisation mechanism in place, and communication channels were
29
limited out of the office. On top of this, fee earners and staff need access to case information which was only possible in the office during office hours.
•
Therefore within resource management there are three key nodes of information flow: fee earners, support staff and case information.
Supplementary issues exist which are important considerations, although these may not be transferable to other firms. The first is that staff are often unaware of the location of other employees. This is due to lack of line-of-sight, an issue compounded by the fact that the fee earner schedules are only kept on their personal computers. Fee earners also meet at the beginning of each week to discuss schedules and work load. Schedules were printed out from Microsoft Outlook and work is occasionally redistributed between fee earners.
Relationship Management Fee earners and support staff need to be in contact with clients; this occurs predominantly through letters and phone calls, from which clients can seek advice or receive updates on case status. Another business need is that clients need direct access to case information. Client relationships are maintained predominantly through letters and phone calls, from which clients can seek advice or receive updates on case status. Support staff deal with simpler administrative matters, but need to refer legal questions on to the fee earner. In this way clients have access to case information during office hours only, and this access is always through a member of staff – no direct access is available.
•
Therefore within relationship management, clients need strong communication channels with the three nodes of resource management listed above (fee earners, support staff and case information).
Several supplementary issues exist, although again these may not be transferable to other firms. The first issue is that of poor support for face-to-face communication. A large part of relationship management is face-to-face communication (interviews and meetings), yet there was no designated area for this to take place at the Sheffield office; rather, fee earners in several business areas (Family, Civil, Wills and Probate) occasionally travel to use the conference rooms at the Hathersage office.
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Another issue was that there is no significant effort made to initiate client relationships. The initiation of client relationships takes place over the phone or at the office reception, via contact with either fee earners or support staff. There is also no significant marketing of the firm's personalised service (its core competency) prior to this initial contact; at the time of research the only marketing activities were viral and through local newspapers. Finally, there is no further effort in maintaining client relationships post-case. This is despite the fact that fee earners claimed a large proportion of revenue was generated from previous clients.
6.2 Cultural Issues Organisational culture can offer significant resistance to change, and as discussed earlier in this thesis, investments need to be aligned to both business needs and cultural variables in order to achieve sustained competitive advantage; the following section highlights the three main observations. The first main observation is that the culture is relaxed and informal. The size of the firm and lack of standardisation in communications often means that fee earners and support staff share a close relationship, despite the physical layout of the office. Staff appear to be completely satisfied with the systems in place, but are wary of new technology due to a conservative and traditional office culture. For example, the conveyancing clerk voiced extreme anxiety before the implementation of a case management system (AlphaLaw). Finally, there appear to be severe inefficiencies due to culture and lack of training. Many fee earners use only the most basic communications technology available even if there is infrastructure in place to support more effective means of information transfer. For example, staff often e-mail documents to each other, instead of using the existing network. This lack of training and experience explains the low levels of trust in technology.
6.3 Virtualisation Technology The following section considers and lists the various virtualisation technology used by the firm.
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•
E-mail, MSN Messenger and Phone. Each workspace at the firm has a networked and internet-enabled computer, allowing the use of internal e-mail and MSN Messenger. Along with internal phone calls, these are the primary method of communication within the Sheffield office. The open plan office layout at Hathersage means that informal communication was used predominantly.
•
Microsoft Outlook is used to manage e-mail, address books and scheduling.
•
Tape System is used for formal communications between fee earners and support staff.
•
AlphaLaw is a case management system is used to regulate conveyancing workflow by identifying the progress of a conveyancing case, and providing indications of requirements for each stage such as identification, frameworks of letters, forms and deadlines.
6.4 Implications of the Case Study The following section displays the three ways in which the case study at Favell, Smith and Lawson had an effect on both the design of the framework and the direction of the second case study: the importance of business mission, modifications to the value chain and implications for cultural analysis.
1. The Importance of Business Mission The most important observation made during the case study is the way in which the organisation's goal (to provide a personal service to local clients) is reflected in many different aspects of the firm, including traditional working practices, informal culture and non-standardised use of a limited range of technology. Therefore, the analysis of business mission forms the first stage of the framework's structure.
2. Modifying the Value Chain In Chapter 3, activity systems and the value chain were identified as potential tools for analysing business needs. The business needs identified in the case study mostly involved communicating knowledge and information. When applying these needs as activities within activity systems the results are insubstantial because activity analysis is targeted at larger firms with a broader range of individual activities (e.g. a budget airline). In this way, value chain analysis appears to show the most promise as it provides a more thorough breakdown of the contribution of individual business processes to capabilities for firms of any size.
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However, in its current format, the service industry value chain (see Figure 4) is not an accurate reflection of how value is added in a law firm. The two information flows – determining client needs and implementing a solution (Stabell & Fjeldstad 1998) – are dealt with by a single fee earner. Therefore it is possible to divide the information flows of the fee earner into the two value areas of the firm: managing resources (fee earner to support staff) and managing relationships (fee earner to client). Figure 7 displays this author's adaptation of the value chain model: Figure 7: Revised value chain model, displaying importance of fee-earner (author's adaptation from Ward & Peppard 2002)
= fee earner adding value
Support activities (Firm infrastructure, HRM, technology, procurement)
Primary activities External resources
Knowledge application
C Problem Specification
Business acquisition
I E
Marketing the capability External resources
L
Allocation of resources
Configure solution
N Execute solution
Resource value management
Relationship value management
T S Client value chain
The author's value chain model reflects the role of the fee earner in adding value to the business. However, findings from the case study also reveal the importance and impact of: •
Three key nodes of information flow within resource management: fee earners, support staff and case information.
•
Strong client communication channels with the three nodes of resource management (fee earners, support staff and case information).
•
Different business needs and communications channels when fee earners are out of the office.
It is vital that these findings are incorporated into the value chain model. Figure 8 shows this revision.
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Figure 8: Value Chain for Law Firms (author's adaptation from Ward & Peppard 2002)
Primary activities 1.
C
6.
L
SUPPORT STAFF
7.
I
4. FEE EARNER (out of office)
E
FEE EARNER
3.
N
5.
T CASE INFO.
2.
S 8.
Resource value management
Relationship value management
Client value chain
KEY Resource Value Management 1. Fee earner (outside the office) communications with support staff. 2. Fee earner (outside the office) access to case information. 3. Support staff (within the office) access to case information. 4. Fee earner (within the office) communication with support staff (within the office) 5. Fee earner (within the office) access to case information. Relationship Value Management 6. Client communications with support staff (within the office). 7. Fee earner (within the office) adding value by applying knowledge and communicating with clients. 8. Client access to case information.
These eight channels for information flow represent the business needs of the firm, which can be thought of as the needs of a virtual team consisting of fee earner, client and support staff. The value chain model in Figure 8 is the analytical tool which will be used in the final framework (see Chapter 8).
3. Cultural Analysis and Other Implications The importance of business mission has already been mentioned in this section, and it appears that the analysis of values and behaviour standards is an effective way of evaluating both the business mission (see Figure 4) and the viability of virtualisation according to organisational culture. It then follows that business
34
mission should be the first stage of the framework, from which business needs and cultural issues should follow in parallel. The use of trust heuristics as a means to evaluate organisational trust (both in other team mates and in technology) appears to be effective. The lack of standardisation and formality in communications discipline, as well as a lack of training means that trust in technology and virtual methods is low. Finally, as systems usage in the firm was limited and inconsistent, it was decided to fully evaluate the suitability of the systems portfolio models discussed in Chapter 4 using the case study of Wake Smith and Tofields (see Chapter 7).
Summary of Implications In summary, the implications of the case study at Favell, Smith and Lawson are that: •
The analysis of business mission should form the first stage of the framework's structure.
•
The value chain model shown in Figure 8 should be used as a tool to analyse business needs in the framework.
•
In the framework, business needs and cultural issues should follow on from business mission in parallel stages of analysis.
•
The Ashridge Mission Diamond and Trust Heuristics are effective tools for analysing cultural issues.
•
A full evaluation of systems portfolio models (see Chapter 4) should be undertaken in a firm with more substantial systems usage.
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Chapter 7: Comparison Study in Wake Smith and Tofields Following the case study at Favell, Smith and Lawson, a short field study was also conducted in another law firm: Wake Smith and Tofields. As well as confirming some of the conclusions drawn in the previous case study (see section 6.4), the case study at Wake Smith and Tofields was used to evaluate the systems portfolio models discussed in Chapter 4 as well as ensure that the upcoming framework is capable of being used in both small and medium-size law firms. Wake Smith and Tofields was selected due to its size, position and recent corporate development. It is a medium-size law firm based in central Sheffield employing 190 staff, including 90 fee earners. The firm's target market and business mission are very different from that of Favell, Smith and Lawson; as a much larger firm, Wake Smith and Tofields is able to provide a broader range of both private and commercial services to its clients. The firm describes in its business mission the ability to compete on 'both price and quality with some of the largest firms in the UK'. Having developed through mergers and acquisitions, the firm has three offices in Sheffield, including a separate three-man IT department, and a small satellite office in central London. Its organisational structure and information systems have therefore undergone rapid change over the past few months. Consequently, Wake Smith and Tofields offers the potential to study very different working practices and culture to those of Favell, Smith and Lawson. Due to time limitations, the case study of this particular firm focuses on the information systems in place, and the cultural effects and issues of those systems; the following sections in this chapter begin with a discussion of the various systems which support resource and relationship management before considering the cultural issues and staff feedback on the recent systems implementation.
7.1 Virtualisation Technology Usage of systems was substantial and thoroughly integrated into the working practices of the firm; it is therefore helpful to list technology use under the headings of resource and relationship management, the two value areas of the revised value chain (see Figure 8).
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Resource Management •
Heavy Use of Systems. Internal information transfer, communication and workflow is highly structured and heavily regulated and mediated by technology, although informal communication is still effective due to an open-plan office.
•
Management Information Intranet is accessible to all staff. Access arranged according to hierarchy: senior management has access to an overview of current cases and associated fee earners, as well as financial and contact information. Senior staff reported that a security system which records staff entry through magnetic swipe cards was in fact a useful tool for knowing staff whereabouts.
•
Partner for Windows (by TFB) is one of the main resource management systems; it is a customisable multifunction case management system which is used by all fee earners to integrate workflow, document trails and e-commerce. Resource management functionalities of Partner include recording of individual records (e.g. communications, bills, phone calls) for a variety of matters (e.g. conveyance, litigation, matrimonial dispute), and integrated accounting.
•
Partner Interacts Directly with Other Systems. The most notable resource management applications include Crystal Report (by Business Objects) and TaskCentre (by Orbis). •
Crystal Report is a customisable report generator which can deliver a variety of report styles and visualisations from data embedded in enterprise systems such as Partner.
•
TaskCentre is an application automation package, which can be used to automate business processes according to customisable triggers. For example, TaskCentre uses date-triggers to automate weekly reports for fee earners, support staff and receptionists.
•
Flexible Working through Internet. Partner is accessible by support staff and fee earners through remote terminals, allowing employees to add resource value anywhere with an internet connection.
•
WinScribe Author (by Nelson Systems) is used instead of a tape system. This allows increased virtualisation of resources; support staff in the relevant business area have access to all the recordings on the server, each marked with case information, length and time of recording, fee earner, and priority. The system also enables support staff to complete tasks in other business areas during busy periods.
•
Dedicated IT Professionals managed the firm's systems. These staff are located in a separate office, who are contactable by internal phones and e-mail. IT staff were solely responsible for regular updates, customisation and educating fee earners and support staff; specific tasks included updating address books, improving visual layout, adding additional options and installing or testing new modules.
37
•
Use of PDAs. The London office is used in much the same way as the Hathersage office of Favell, Smith and Lawson: to leverage the client base of a different geographical area. Fee earners often spent significant time travelling to London to engage with clients, during which fee earners had the capability to answer e-mails and perform limited value-adding tasks through company-provided PDAs.
Relationship Management •
Partner Provides Templates. Partner provides customisable letter and billing temples for all necessary legal domains, allowing structured and efficient delivery of these client communications. One Partner module under test was an SMS plugin which, in combination with TaskCentre, could be used to send automated case updates or appointment reminders.
•
Partner Improves Responsiveness. Client information is easily accessible, and all previous records from current and past cases relating to a client are visible. This enables any staff member to gain immediate access to information whilst on the phone to a client, therefore improving client relationships.
•
No Direct Access to Case Information. Despite an abundance of IT investment into systems, the firm's clients are still unable to gain real-time access to case status or information out of office hours.
•
Moderate Investment into Marketing. Marketing is focused on below-the-line activities and on a website. The website, although elegant and functional, gives little indication of the capabilities of the firm (the ability to deal with large cases with a personal and professional approach).
•
Fee Earners Need to Travel to London Office. Fee Earners often travelled to London for clients meetings. Sheffield fee earners conducting cases for London clients had to compromise on their Sheffield-based clients, and therefore London clients were restricted to high value cases only. Clients still suffered from increased costs and decreased flexibility as a result of fee earner travel.
7.2 Cultural Issues Although the time available to conduct this second case study was limited, the field research revealed much about the organisational culture and potential resistance to change. The following section reveals three important observations made about organisational culture.
38
The first of these observations is that IS are regularly updated, modified or supplemented by additional modules or plugins. Unfortunately, the value in these updates is not always captured due to lack of structured staff training and a lack of awareness of improved functionality. The culture is also adapted to dynamic change. Owing to the regular updates of major information systems and a forward-thinking management, the firm seems to be culturally aligned with technology implementation and related change. Recent technology implementations have generally been received with enthusiasm; for example, the provision of PDAs has been extremely successful, with many fee earners voicing their approval of the new devices. Finally, although the firm seems to be in an effective position to implement further virtualisation, it is difficult to predict how clients will respond to more virtualised services. Clearly clients will appreciate additional communications channels and increased information availability; however, the replacement of face-to-face contact with other forms of communication may encounter cultural resistance.
7.3 Implications of the Case Study The following section discusses the four main ways the case study at Wake Smith and Tofields influenced final design of the framework.
1. Confirming the Importance of Business Mission The case study at Wake Smith and Tofields confirms that the business mission should be the first stage in the framework's structure. The impact of Wake Smith and Tofield's business mission (to expand and compete with larger firms on price and quality) was reflected in the management's focus on innovation, the widespread and standardised use of systems and an organisational culture adapted to dynamic change.
2. Possible Value Chain Modifications The revised value chain model (Figure 8) appears to be transferable to this medium-size firm. According to senior partners, a small percentage of the firm's cases required more than one fee earner; however, to a large extent the technology used to communicate between fee earners and support staff would also support fee earner communication and collaboration. For this reason, no further modifications to the value chain model are necessary.
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3. The Effectiveness of Cultural Analysis In a similar manner, the use of the Ashridge Mission Diamond and Trust Heuristics as tools for analysing organisational culture appear to be transferable to medium-size firms. A comparison of case study findings with trust heuristics shows that the firm's standardised communications discipline encourages trust in virtual teamwork – the virtual teams facilitated by the digital recording systems are successful due to the standardised protocols in place. However, lack of structured training means that the value in systems upgrades is not always captured. Therefore, training is therefore an important issue and will be included in the framework. In addition, the case study has revealed that the Trust Heuristics can provide guidance for the selection of technology; for example, in order to nurture client trust in high opacity conditions (i.e. that of a virtual meeting) it is necessary to employ media-rich technology which is easy to use.
4. When to use Portfolio Models The Virtualisation Technology Landscape and Strategic Grid are effective ways of categorising technology for the framework. The Strategic Grid is more useful for analysing current systems and making modifications: the model allows managers to distinguish systems that are strategic (i.e. match up with both business needs and business mission) and identify gaps in the portfolio. The landscape model is a useful guide for selecting new technology according to functionality; this will be included in the final stage of the framework.
Summary of Implications In summary, the implications of the case study at Wake Smith and Tofields are that: •
Business mission should form the first stage of the framework's structure.
•
The value chain model shown in Figure 8 requires revising for firms which frequently use more than one partner per case, however, for the purposes of this framework it remains in its current form.
•
After portfolio modifications have taken place, structured training is necessary. This should be included in the framework.
•
In the framework, the Strategic Grid can be used to categorise current technology and the Virtualisation Technology Landscape is useful for selecting new systems according to functionality.
•
Issues of trust should affect the choice of technology in the framework.
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Chapter 8: Framework Based on the research discussed above, this framework has been developed to help senior managers of small to medium-size law firms virtualise their business by providing: 1. a concise definition of virtualisation; 2. methods to analyse the unique characteristics of a firm (business mission, business needs, and organisational culture); and 3. information on evaluating current system portfolios and choices of new systems.
What is Virtualisation? Virtualisation relates to using communications technology to implement highly flexible working practices, in order to create value-added products. The topic is a complex one; it deals with many different areas of academic interest, and the implementation of virtualisation itself can vary significantly: for example, it could range from using a PDA to allow a staff member to work when travelling, to installing a complex workflow management system to increase the flexibility of an entire workforce. Nevertheless, virtualisation can lead to tangible strategic improvements such as increased responsiveness to customers, innovation and cost leadership (Bocij et al. 2006, Johnson et al. 2006). Service industries such as law firms are particularly suited to virtualisation initiatives, as their products are virtual: a mixture of both physical product and service, with value added through the application of knowledge (Davidow & Malone 1992). Virtualisation initiatives in law firms require the implementation of virtual working practices or virtual teams. Virtual working practices are aimed at breaking down the conventional physical boundaries of the office, enabling staff to work flexibly and at high capacity from a variety of locations within and external to the office (Lipnack & Stamps 1997, Godar & Ferris 2004). For example, the client, fee earner and associated support staff in a legal team can display the following virtual characteristics: the number of support staff changes regularly, fee earners work at high capacity from different locations, and meetings with clients are conducted without face-to-face contact. This framework can be used to help managers virtualise their business by modifying their system portfolio and working practices, whilst overcoming cultural and implementation issues.
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STAGE 1. IDENTIFY BUSINESS MISSION The two cases studies4 have revealed that identifying organisational goals is the most important issue in a virtualisation initiative (see sections 6.4 and 7.3). To ascertain the business needs and cultural issues on which a virtualisation initiative must be based, the business mission of the organisation must be identified. This can be achieved using the Ashridge Mission Diamond (Campbell and Yeung 1991). To do this, the following questions must be answered: PURPOSE – Why does the firm exist? What are our principle goals? E.g. compete with larger firms, provide a personalised service.
Business needs
STRATEGY – What is the competitive position? What are the distinctive competencies? E.g. close relationships with only a few clients, leverage strong brand name. VALUES – What are the cultural values? E.g. professionalism vs. informality, treating clients ethically. BEHAVIOUR STANDARDS – How are employees expected to behave?
Cultural issues
E.g. maintain good social relationships within the firm.
STAGE 2. BUSINESS NEEDS Business needs are the individual requirements of the business at the operational level, and have strong links to notions of capabilities-based competition (Stalk et al. 1992). Priority must be given to those requirements which closely adhere to the PURPOSE and STRATEGY of the organisation. The literature review and case studies have indicated that the best tool for analysing these needs is the author's proposed version of Ward & Peppard's (2002) service-industry value chain model (see section 6.4). The Value Chain for Law Firms can be used to show where value is added through RESOURCE management (internal activities and communication) and RELATIONSHIP management (making clients feel 'looked after'):
4
The framework contains references to other sections of this thesis and other academic sources. It has not been presented as a standalone entity because the framework – within the greater confines of this thesis – is assessed as an academic exercise. Managers are unlikely to need such references; therefore, unlocking the full practical value of the framework (for example when using the framework in collaboration with managers as part of a real-life virtualisation initiative) can be achieved simply by removing the references contained within the framework.
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Figure 9: Value Chain for Law Firms (author's adaptation from Ward & Peppard 2002)
Primary activities 1.
C
6.
L
SUPPORT STAFF
7.
I
4. FEE EARNER (out of office)
E
FEE EARNER
3.
N
5.
T CASE INFO.
2.
S 8.
Resource value management
Relationship value management
Client value chain
KEY Resource Value Management 1. Fee earner (outside the office) communications with support staff. 2. Fee earner (outside the office) access to case information. 3. Support staff (within the office) access to case information. 4. Fee earner (within the office) communication with support staff (within the office) 5. Fee earner (within the office) access to case information. Relationship Value Management 6. Client communications with support staff (within the office). 7. Fee earner (within the office) adding value by applying knowledge and communicating with clients. 8. Client access to case information.
STAGE 3. SYSTEMS PORTFOLIO Having identified the activities which are strategically important to the business, it is necessary to identify how current systems meet the requirements of these activities. A literature review of several portfolio models reveals that a useful tool exists in the form of the Strategic Grid model (Ward & Peppard 2002), which categorises the current portfolio of systems according to their relationship with the organisation:
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Figure 10: Strategic Grid for Information Systems (adapted from Ward & Peppard 2002)
STRATEGIC
HIGH POTENTIAL
- Applications that create and support change
- Applications that could create opportunities
- Critical to sustaining future business strategy
- May be important in future success
SUPPORT
KEY OPERATIONAL
- Applications that improve efficiency
- Applications that sustain existing operations
- Valuable but not critical to success
- Organisation currently depends on for success
By comparing business needs to the current systems portfolio, it is possible to identify business needs which are not met by current systems. These business needs can therefore be met in one of two ways: migrate current systems from HIGH POTENTIAL to other quadrants, or formulate plans for IT investment in the areas of the systems portfolio which are not meeting business needs.
STAGE 4. CULTURAL ISSUES Cultural issues are moral and social factors of importance to a virtualisation initiative. The culture of the organisation can be either conducive or unfavourable for virtualisation, but in any case the emotional and human effect of a virtualisation initiative needs to be considered. Many cultural issues can be derived from the VALUES and the BEHAVIOUR STANDARDS identified in stage 1. ORGANISATIONAL CULTURE – Is the virtualisation initiative viable? Analysing organisational culture will identify cultural issues which need to be considered, therefore narrowing down the characteristics of a potential virtualisation initiative. E.g. culture can be traditional/innovative, dynamic/inertial, and formal/informal. Certain virtualisation initiatives may be unviable for organisations which are highly informal and unaccustomed to change.
TRUST – What trust issues will be caused by the virtualisation initiative? Levels of trust need to be high, both in the new information systems and in other staff, in order to capture the value of virtualisation. Trust is often cited as the most important factor in virtual teams,
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and trust in unfamiliar technology is naturally low. Training can be used to encourage trust in both virtual team members and technology. Three main factors can be used to analyse trust in an organisation: formality of communications discipline, training or experience, and the characteristics of the systems (derived from Trust Heuristics, Godar & Ferris 2004).
STAGE 5. VIRTUALISE Virtualisation is achieved through modifying the existing systems portfolio (stage 3) to fulfil business needs (stage 2) more effectively, whilst ensuring cultural fit (stage 4). Having identified the gaps or shortcomings in the systems portfolio, managers must then choose the type of system required to support the business activity. Figure 11: Virtualisation Technology Landscape (adapted from Fong 2005, Godar and Ferris 2004)5
The Virtualisation Technology Landscape (see section 4.1) can be used to categorise systems according to the level of CONTENT MANAGEMENT (the ability to store, manage and retrieve information) and 5
For larger version, see also Figure 7.
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INTERACTION (the ability to communicate effectively with other employees), thereby enabling an informed selection of systems according to functionality (Figure 11).
It is worth noting at this point that while the diagram above refers to the software application side of the system, managers may also wish to consider modifications to the hardware side of the system to improve functionality. For example, e-mail requires two devices and a connection to the internet; a law firm may have office-based e-mail, but could benefit from investing in new hardware (such as e-mail enabled mobile phones or laptops). Finally, managers must consider the use of structured training, which is an effective method for overcoming cultural dissonance and improving trust in technology and virtual team members (see section 7.3).
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Figure 12: Framework for Virtualisation of Small and Medium-size Law Firms
1 Ensure business needs are relevant to purpose and strategy
2
IDENTIFY BUSINESS MISSION PURPOSE
VALUES
STRATEGY
BEHAVIOUR STANDARDS
4
BUSINESS NEEDS Categorise communications into RESOURCE and RELATIONSHIP management
Identify potential issues from expected behaviours and organisational values
CULTURAL ISSUES Identify issues in ORGANISATIONAL CULTURE and TRUST Can they be overcome with training?
Compare business needs with current systems portfolio
3
PORTFOLIO STRATEGIC
HIGH POTENTIAL
SUPPORT
KEY OPERATIONAL Ensure modifications to strategic grid do not clash with cultural issues
Identify business needs not met by systems portfolio
5
VIRTUALISE Update systems portfolio Choose new technology according to level of CONTENT MANAGEMENT or INTERACTION support. Design and implement training programs
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Chapter 9: Evaluation The evaluation of this thesis consists of two parts. The first part applies the framework to the two case study firms in the same manner as a software 'passive test'; information from the case studies is entered into each stage of the framework and the results of each stage are recorded, with particular focus on the suggestions for virtualisation made in stage 5. Passive tests are equivalent to a verification stage in a software project (Bocij et al. 2006), thereby ensuring that the framework is functioning appropriately. The second part assesses the framework from a higher level using a focus group of legal staff. This second phase includes a framework 'walkthrough' – a software engineering methodology which familiarises end users with the individual stages of the framework (Sommerville 2007) – and a review session. This is equivalent to a validation stage in a software project (Bocij et al. 2006), thereby evaluating the usefulness of the framework and the suggestions made by the framework6. This chapter documents both of these phases.
9.1 Framework Passive Test: Favell, Smith and Lawson The following section documents the application of the virtualisation framework on the smaller of the two firms, based on field research.
STAGE 1. IDENTIFY BUSINESS MISSION PURPOSE – provide a simple, high quality, personalised service to a local client base; senior managers held no particular desires to compete with larger firms or to pursue growth goals. STRATEGY – leverage the strengths of its diminutive size. The firm targets clients looking for personal and residential legal services; promotion is via viral marketing. The service provided is high quality and personal relationships with the fee earner are important. BEHAVIOUR STANDARDS and VALUES – informality, staff share a close relationship; working methods are fairly flexible and based on rules-of-thumb rather than formal protocol. 6
Evaluating the framework in only one phase of the methodology has disadvantages - see Appendix A for discussion.
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STAGE 2. IDENTIFY BUSINESS NEEDS According to the firm's strategy, a personal relationship with the client is the key capability; resource management communications and activities must be supportive of this, but are not primary strategic needs. Resource Value Management7 1. Off-site communications are limited to mobile phone only. Therefore, fee earners can add only very limited value during time spent out of the office. 2. Fee earners have no off-site access to information about other cases. 3. Case information access is limited by paper storage methods. 4. Fee earners use informal methods and tape system to communicate tasks to support staff. Limited flexibility in distributing work amongst support staff; limited task prioritisation. Fee earner schedules are invisible to other staff. 5. Case information access is limited by paper storage methods. Relationship Value Management8 6. Clients communication with support staff is well supported. 7. Fee earners add value mostly through face-to-face contact. Limited support for initiating client relationships or maintaining them after cases are completed. 8. Clients have no direct access to case information. Business Needs Identified Therefore, the following strategic business needs exist: •
Improve fee earner relationships with clients in both initiation and post-case phases.
•
Give clients real-time access to case information.
The following improvements to operational efficiency can be made: •
Improve off-site fee earner information channels.
•
Prioritise and distribute work amongst support staff virtually.
•
Virtualise internal access to case information.
•
Let staff know where fee earners are and what they are doing.
•
Use real time virtual communication with clients to reduce travel between offices.
7&8
See figure 9 for key.
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STAGE 3. SYSTEMS PORTFOLIO Figure 13: Current Systems Portfolio for Favell, Smith and Lawson
STRATEGIC
HIGH POTENTIAL
(Applications that create and support change)
(Applications that could create opportunities)
Face-to-face interviews External e-mail External phone contact
Internet capability Website
SUPPORT
KEY OPERATIONAL
(Applications that improve efficiency)
(Applications that sustain existing operations)
MSN Messenger Internal e-mail Mobile phone Internal phone system
Tape system AlphaLaw case management External phone contact External e-mail
There are few systems in place to support strategy (providing a high quality, personal service). Current systems which could be migrated to strategic status include: •
Internet capability – could be used to permit real-time case access for clients; case information could be held on a server, which could then be accessed by clients and updated by fee earners or support staff at any time.
•
Website – could be used to initiate client rapport through posting videos of fee earners; blogs, RSS feeds or podcasts could be used to keep clients informed post-case.
STAGE 4. CULTURAL ISSUES ORGANISATIONAL CULTURE – Culture is based on close personal relationships, both within the firm and with clients. Employees work according to traditional methods accrued over many years. Change is slow and inertial, rather than sudden. Viability for virtualisation is therefore low. TRUST – Trust levels between members of staff are high due to regular face-to-face contact; this facilitates potential virtual working practices in the resource management area. Trust in new technology is low, due to lack of training and experience in using technology. Client trust in virtual working practices is also an unknown factor.
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STAGE 5. VIRTUALISE Improvements are based around migrating current systems or by investing in new systems or upgrades.
•
The two strategic business needs of the firm (see stage 2) can be fulfilled by migrating current systems to strategic usage (see stage 3). Upgrading internet capability and the website in these ways will be minimally disruptive to culture (stage 4), and are in line with the organisation's business mission (stage 1).
•
Improve off-site fee earner information channels by investing in PDAs. PDAs offer high levels of interaction and modest data management support with minimal initial outlay. These are a strongly viable investment as the nature of their use would encounter minimal cultural or trust-related issues.
•
Prioritise and distribute work amongst support staff virtually with a digital dictation system. However, the framework indicates that such an investment will encounter cultural resistance (adherence to timehonoured working practices) and trust issues (with technology). The greatest benefit from such a system would be the capability to take on larger individual cases or a greater number of smaller ones: this is not part of the business mission and is therefore not a strategic investment.
•
Virtualise internal access to case information: currently AlphaLaw allows such functionality in the conveyancing business area. It is possible that other business areas could use the same technology and incur fewer cultural issues due to the pre-existence of the software within the firms working practices. This new infrastructure would give the firm the potential to expand if the business mission were to change.
•
Let staff know where fee earners are and what they are doing: this could easily be achieved with minimal disruption through publishing fee earners schedules on the network or using MSN Messenger's status feature to give live updates.
•
Use real time virtual communication with clients to reduce travel between offices: using conferencing systems this is a possibility; however, travel times are relatively short and such an investment would incur trust issues for clients, and therefore this virtual investment is impractical.
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Figure 14: Proposed Systems Portfolio for Favell, Smith and Lawson
STRATEGIC
HIGH POTENTIAL
(Applications that create and support change)
(Applications that could create opportunities)
Internet [client access to cases] Website Face-to-face interviews External e-mail External phone contact
Internet capability Website AlphaLaw [integrate in more business areas]
SUPPORT
KEY OPERATIONAL
(Applications that improve efficiency)
(Applications that sustain existing operations)
MSN Messenger [use status feature] Internal e-mail PDA Mobile phone Internal phone system
Tape system AlphaLaw case management External phone contact External e-mail
9.2 Framework Passive Test: Wake Smith and Tofields The following section documents the application of the virtualisation framework on Wake Smith and Tofields, based on field research.
STAGE 1. IDENTIFY BUSINESS MISSION PURPOSE – provide a high quality service to a broad range of private and commercial clients. Senior managers hold aspirations to compete with larger firms on both price and quality: market expansion and operational efficiency are key goals. STRATEGY – leverage its 200-year history to attract new clients and to maintain long standing loyalty from larger commercial clients. BEHAVIOUR STANDARDS and VALUES – these reflect the larger number and size of client cases: relationships within offices are formal, and working methods are standardised through regulation and the widespread use of systems. Partners are expected to have a high level of involvement within individual cases.
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STAGE 2. IDENTIFY BUSINESS NEEDS According to the firm's PURPOSE and STRATEGY the firm's ability to 'punch above its weight' is a key capability. Its goals for expansion mean that flexible RESOURCE management and the efficient processing of large cases is crucial. RELATIONSHIP management communications and activities are also important in order to make clients feel 'looked after', but are not primary strategic needs. Resource Value Management9 1. Off-site communications channels are relatively well established; PDAs enable fee earners to receive and compose e-mails, draft documents and make phone calls. 2. Fee earners cannot access the case management system when off-site or travelling to the London office to meet clients. However, the system can be accessed through home PCs. 3. Case information access is effectively mediated by current systems which are updated regularly with additional modules or features. However, staff take some time to capitalise on modifications due to lack of information and training. 4. Fee earners use integrated systems to designate and distribute tasks among support staff. 5. See 3. Relationship Value Management10 6. Clients communication with support staff is well supported. 7. Fee earners add value through face-to-face contact. Most fee earners based in Sheffield; therefore to leverage London client base without investing in additional employees, fee earners must travel. Limited support for initiating client relationships or maintaining them after cases are completed. 8. Clients have no direct access to case information.
9&10
See figure 9 for key.
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Business Needs Identified Therefore, the following strategic business needs exist:
•
Continue to 'punch above weight' and expand client base.
•
The case management system is modified regularly. The value of these upgrades is not being exploited fully, as staff need to be aware of system changes given the skills to use new functionalities.
•
Efficiently leverage additional clients at the London office without increasing workforce size: either improve fee earner ability to add value whilst travelling, or virtualise client meetings in London from the Sheffield office.
•
Give clients real-time access to case information.
STAGE 3. SYSTEMS PORTFOLIO Figure 15: Current Systems Portfolio for Wake Smith and Tofields
STRATEGIC
HIGH POTENTIAL
(Applications that create and support change)
(Applications that could create opportunities)
Partner (case management) Crystal Report (report generator) TaskCentre (automation system)
Partner (case management) Internet capability Website
SUPPORT
KEY OPERATIONAL
(Applications that improve efficiency)
(Applications that sustain existing operations)
Internal e-mail Internal phone system Intranet
MS Exchange (e-mail and contact management) WinScribe Author (digital dictation) PDAs
Currently, there are a number of systems which are key elements of the firm's strategy (expansion and competing with larger firms). Current systems which could be used to further enhance strategy: •
Partner – staff require structured training and regular guidance with regard to updates.
•
Internet capability – could be used to permit real-time case access for clients; case information could be held on a server, which could then be accessed by clients and updated by fee earners or support staff at any time.
•
Website – could be used to initiate client rapport through posting videos of fee earners; blogs, RSS feeds or podcasts could be used to keep clients informed post-case.
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STAGE 4. CULTURAL ISSUES ORGANISATIONAL CULTURE – Staff use relatively formalised working practices, reflecting the widespread use of systems. Management is forward-looking as the firm wishes to expand and compete with much larger companies. Staff are accustomed to regular modifications to the case management system. Viability for virtualisation is therefore high. TRUST – Trust amongst employees is high: staff already work using highly disciplined communications protocol, and actual opacity is low due to high levels of face-to-face contact. However, a truly virtual team would mean decreased client trust levels from lack of face-to-face contact; this indicates that a media rich system must be in place to compensate. Technology is clearly dependable, although trust in systems suffers from a lack of structured training.
STAGE 5. VIRTUALISE •
Implementing regular training programmes. Upgrades to the case management system, a key part of current virtual practices, are often not as successful as hoped. Regular training programmes will allow staff to understand the new system functions and have greater trust in the system.
•
Investing in small laptops to supplement PDAs would allow fee earners remote access to the firm's case management system. Therefore, fee earners could work at near full capacity anywhere with an internet connection (e.g. on the train to the London office).
•
Invest in conferencing system to enable virtual meetings with London clients, therefore allowing fee earners to stay in Sheffield. Systems need to be media rich, with high levels of interaction support. Larger companies such as HP, Sony and Polycom provide a variety of tailored video conferencing solutions which use existing or proprietary hardware and software. To nurture trust, it will almost certainly be necessary to initiate client relationships with a face-to-face meeting before using virtual methods.
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Figure 16: Proposed Systems Portfolio for Wake Smith and Tofields
STRATEGIC
HIGH POTENTIAL
(Applications that create and support change)
(Applications that could create opportunities)
Partner [invest in training] Internet [client access to cases] Website Crystal Report TaskCentre Conferencing system Laptops
Partner Internet capability Website
SUPPORT
KEY OPERATIONAL
(Applications that improve efficiency)
(Applications that sustain existing operations)
Internal e-mail Internal phone system Intranet
MS Exchange WinScribe Author PDAs
9.3 Focus Group Evaluation: Framework Walkthrough and Review Ideally, the framework should be tested in collaboration with business managers, on a systems implementation initiative. However, the time frames, legal and financial involvement required for such an initiative are far beyond the scope of this thesis (see Appendix A for suggestions for further study). Therefore, a framework walkthrough and review was conducted with a focus group at Wake Smith and Tofields. In order to acquire a broad spectrum of feedback, the group in question consisted of several partners (equity and non-equity) and fee earners across the firm's business areas. The focus group session concentrated on two main areas which will be documented by this section: the value of the framework as a tool, and the value of the results for managers wishing to virtualise their business. The criteria for evaluation are therefore relatively simple: 1. Comprehension: managers should be able to understand the framework and its results. 2. Scope: the framework should consider a sufficient range of salient issues. The suggestions made by the framework should offer significant results. 3. Relevance: the framework should be relevant to the legal industry. The suggestions made by the framework should be unique to the conditions of the firm. 4. Feasibility: managers should be able to apply the framework without additional support. The suggestions made by the framework should be feasible for the organisation.
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Value of the Framework as a Tool •
Fee earners reported that the basic function of the framework was easy to understand; the combination of the framework diagram and explanation of accompanying stages was particularly effective.
•
Equity partners were especially keen on the prominence of organisational goals in the framework's structure. The multifaceted nature of the business mission (purpose, strategy, values etc.) was thought to be an excellent starting point on which to base virtualisation.
•
Managers often commented that they 'had not thought about technology in this way'; the way that framework united a range of issues (organisational goals, business needs, cultural issues) encouraged discussion amongst staff about the wider issues and applications of virtualisation.
•
One criticism was that the framework analysed only internal factors (organisational goals, capabilities, culture etc.); managers noted that environmental factors such as industry competition were not considered.
•
Managers stated that the framework does not account for financial concerns; it is possible that in some cases the framework would produce unfeasible suggestions for virtualisation investment.
Value of the Results for Managers •
Fee earners reacted positively to the fact that suggestions for virtualisation were relevant to the unique business mission of the firm; they were particularly excited by the feasibility of the framework’s suggestions, such as the prospect of virtual meetings between Sheffield solicitors and London clients.
•
Despite a comprehensive range of systems, managers were impressed with the way that the framework analysed weaknesses in the current systems portfolio according to the firm's unique business needs.
•
Senior partners had considered the prospect of installing live video feeds and permanent virtual connections to the London office, not for value-adding purposes but in preparation for aligning organisational culture for virtual working methods. This is not covered by the scope of the framework.
•
Managers therefore implied that trends in industry may mean that a 'business need' of the future could be the alignment of culture to virtual working. The framework's scope does not include environmental factors, instead focusing on the internal operations as the drivers of investment. Therefore, a strategic investment into organisation culture cannot be accommodated by this framework.
•
Fee earners were adamant about the practicality of the results for a one-off, monolithic virtualisation initiative, but mentioned that the framework's scope does not include guidance for incremental investments into virtualisation.
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Summary of Evaluation The passive tests resulted in no noticeable issues, indicating that the framework is functioning correctly. The suggestions appear to be logical, and the analytical stages of the framework were completed successfully using information readily available to business managers. A focus group of fee earners at Wake Smith and Tofields was used to verify the results of the first stage of evaluation (the passive tests), and evaluate the framework according to the following four criteria: ease of understanding, scope, relevance and feasibility. Comprehension: Fee earners reported that the framework and its results were easy to understand, and they displayed a positive reaction to the combined use of framework visualisation and explanation of the individual stages. Relevance and Feasibility: Feedback on these two criteria was very positive; staff were impressed by the way in which the framework closely followed the business mission and the unique internal conditions of the organisation, thereby providing a highly relevant and tailored solution. However, (although there were no issues present in this instance) staff mentioned potential issues with feasibility due to the lack of financial analysis (see 'scope' below). Scope: The scope of the framework and its results appear to be well within the necessary boundaries; the analysis of business needs, cultural variables and technology can be conducted with readily accessible information. However, fee earners recognised that the framework was unable to encompass environmental factors such as trends in industry, competitors and shifts in customer needs. This is because the framework is based upon the inside-out approach, as discussed in Chapter 3; the shortfalls of this decision are manifest in the framework's inability to respond to the above factors. Staff also mentioned that financial analysis should be considered, although this was not possible due to the sensitive nature of financial information, and its incompatibility with the scope of the thesis itself. Another issue of scope is the inability of the framework to deal with incremental investments into virtualisation. The literature review revealed that the legal industry is characteristically a low-tech industry, and it was therefore expected that law firms would derive the most value from guidance for one-off investments. However, it appears that larger firms showing a greater interest in systems usage would undoubtedly benefit from guidance on incremental investment or system modification. For suggestions for
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additional study based upon these issues of scope, as well as discussion of methodology and use of the outside-in approach, see Appendix A. Finally, it is valuable to discuss the suitability of the criteria used in the evaluation. The evaluation criteria appear to be appropriate for the aims of this thesis (producing a framework to guide managers through a virtualisation initiative), although they are limited by the qualitative nature of the focus group itself. Ideally, the framework should be applied and used to effect a systems investment for a live organisation, from which quantitative performance data could be used to judge success. Nevertheless, the evaluation has revealed, through two passive tests of the framework and focus group feedback, that the framework is a practical and potentially valuable tool for guiding the business managers of law firms through a virtualisation initiative. Ideas for further research based upon a more thorough evaluation of the framework in a live organisation can be found in Appendix A.
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Chapter 10: Conclusion This thesis has revealed that virtualisation is a field still very much within its infancy. The literature review has shown that for business managers, virtualisation revolves around virtual products, organisations, and working practices. Virtual working practices are particularly applicable for adding value in law firms; however, applying virtual organisation theories are unrealistic due to lack of standardisation and other industry conditions. Virtualisation is a strategic decision; this thesis demonstrates how analytical tools from business strategy can be used to derive suitable characteristics for a virtualisation initiative. The inside-out approach – looking at internal capabilities – was selected as it is more suitable for the scope of this thesis. The relevant literature reveals that IT investment can provide a support structure as part of capabilities-based competition. However, for sustained competitive advantage investment needs to be aligned to business needs and cultural issues. In order to analyse business needs and cultural issues, a range of tools and models were selected according to relevance, popularity among leading academics and practicality. Case studies at two Sheffield law firms were used to modify these tools and begin formulating a structure for the framework. The resulting framework prioritises organisational goals, treats business needs as the drivers of investment, and regards cultural issues as an entity to which virtualisation must be aligned. An evaluation of the framework and its results by a focus group of fee earners reveals that the framework is a useful practical tool for guiding virtualisation investment. Of particular significance is the author's value chain model for law firms, which provides specific and valuable guidance from a generic tool. As well as providing significant practical value for business managers, the methodology used to create the model is an important academic contribution, as a foundation on which other highly specified tools can be built. Although this thesis only encapsulates one approach to fulfilling the needs of a highly defined group of organisations, it must be concluded that an exploration of the currently under-researched and developing field of virtualisation still holds much value for both business managers and academics alike. However, it is hoped that the literature review and the framework developed in this thesis will provide practical and theoretical worth to such business managers and academics in the further investigation of virtualisation.
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References ANSOFF, H. 1957. Strategies for diversification. Harvard Business Review, Vol. 35 Issue 2, pp.113124. AVIŽIENIS, A, LAPRIE, J-C, RANDELL, B & LANDWEHR, C. 2004. Basic Concepts and Taxonomy of Dependable and Secure Computing. IEEE Transactions on Dependable and Secure Computing, Vol. 1 Issue 1, pp.11-33. BARNEY, J. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, Vol. 17 Issue 1, pp.99-121. BARNEY, J. 1997. Gaining and Sustaining Competitive Advantage. Boston: Addison-Wesley Publishing Company. BOCIJ, P, CHAFFEY, D, GREASLEY, A & HICKIE, S. 2006. Business Information Systems: Technology, Development and Management for the E-Business. Harlow: Prentice Hall. BOWERS, S. 2008. Reckitt Benckiser revenue up 20%. Guardian Online [online]. [Accessed 28 July 2008]. Available from World Wide Web: CAMARINHA-MATOS, L M, AFSARMANESH, H, & OLLUS, MARTIN. 2005. Virtual Organisations: Systems and Practices. New York: Springer. CAMPBELL, A & YEUNG, S. 1991. Creating a Sense of Mission. Long Range Planing, Vol. 24 Issue 4, pp.10-20.
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CORNFORD, T & SMITHSON, S. 2006. Project Research in Information Systems. London: Palgrave Macmillan. DAVIDOW, W H & MALONE, M S. 1992. The Virtual Corporation. New York: Harper Collins. ELLIS, C A, GIBBS, S J & REIN, G L. 1991. Groupware: Some issues and experiences. Communications of the ACM, Vol. 34 Issue 1, pp. 38-58. FINK, L. 2007. Coordination, Learning, and Innovation: The Organizational Roles of E-Collaboration and Their Impacts. International Journal of E-Collaboration, Vol. 3 Issue 3, pp.53-70. FIORE, S M, SALAS, E, CUEVAS, H M & BOWERS, C A. 2003. Distributed coordination space: Toward a theory of distributed team process and performance. Theoretical Issues in Ergonomic Science, Vol. 4 Issue 3, pp.340-363. FONG, W L. 2005. E-Collaborations and Virtual Organisations. London: IRM. GODAR, S H & FERRIS, S P. 2004. Virtual and Collaborative Teams; Process, Technologies and Practice. Hershey: Idea Group Publishing. GOLDMAN, S L, NAGEL, R N, & PREISS, K. 1995. Agile Competitors and Virtual Organisations. New York: Van Nostrand Reinhold. HANDY, C. 1995. Trust and the virtual organization. Harvard Business Review. Vol. 71 Issue 3, pp.40-50. IIVARI, J. 1991. A paradigmatic analysis of contemporary schools of IS development. European Journal of Informations Systems. Vol. 1 Issue 4, pp.249-272. JOHNSON, G, SCHOLES, K, & WHITTINGDON, R. 2006. Exploring Corporate Strategy. Harlow: Prentice Hall.
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KASHI, J. 2004. Law Practice Today [online]. [Accessed 18 February 2008]. Available from World Wide Web: < http://www.abanet.org/lpm/lpt/articles/ftr01042.html#top> LIPNACK, J & STAMPS, J. 1997. Virtual Teams: Reaching Across Space, Time and Organizations with Technology. New York: John Wiley & Sons. LIPNACK, J & STAMPS, J. 2000. Virtual Teams: People Working Across Boundaries with Technology. New York: John Wiley & Sons. MAJCGRZAK, A, RICE, R E, KING, N, MALHOTRA, A & BA, S. 2000. Computer-mediated interorganizational knowledge-sharing: Insights from a virtual team innovating using a collaborative tool. Information Resources Management Journal, Vol. 13 Issue 1, pp.44-53. MARKUS, M L. 2004. Technochange management: using IT to drive organizational change. Journal of Information Technology, Vol. 17 Issue 1, pp.4-20. MAYRHOFER, D & BACK, A. 2003. Workplace e-collaboration in practice: Identifying preconditions for successfully implementing e-collaboration in organizations. In: IRMA International Conference 2004, Philadelphia, PA. MOWSHOWITZ, H. 2002. Virtual Organization; Toward a Theory of Societal Transformation Stimulated by Information Technology. Westport: Quorum Books. PORTER, M E. 1985. Competitive Advantage. New York: Free Press. PORTER, M E. 1996. What is Strategy?. Harvard Business Review, Vol. 74 Issue 6, pp.61-78 PORTER, M E. 2001. Strategy and the Internet. Harvard Business Review, Vol. 79 Issue 3, pp.62-78.
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PORTER, M E. 2008. The Five Competitive Forces that Shape Strategy. Harvard Business Review, Vol. 86 Issue 1, pp.78-93. SCHROEDER, R. 2007. Virtual Environments and Other Media for Being There Together: Towards a Convergence of Technologies, Uses and Research Agendas. In: Lectures on Presence, 2007, Barcelona, Spain [online]. [Accessed 20 June 2008]. Available from World Wide Web: SCHROEDER, R. 2008. Being There Together: The Future of Social Interaction in Virtual Environments. [seminar attended 8 May 2008, School of Computing, University of Leeds]. SCHWARTZ, P. 2004. Inevitable Surprises: thinking ahead in a time of turbulence. London: Free Press. SOMMERVILLE, I. 2007. Software Engineering. Harlow: Addison Wesley. STABELL, C B & FJELDSTAD, O D. 1998. Configuring value for competitive advantage: On chains, shops and networks. Strategic Management Journal. Vol. 19 No. 1, pp. 29-40. STALK, G, EVANS, P, SHULMAN, L E. 1992. Competing on Capabilities: The New Rules of Corporate Strategy. Harvard Business Review, Vol. 70 Issue 2, pp.54-66. SUSSKIND, R. 2006. The Next Ten Years. [seminar attended 23 November 2006, Royal Armories, Leeds]. SUSSKIND, R. 2007. Times Online: Legal profession is on the brink of fundamental change [online]. [Accessed 17 June 2008]. Available from World Wide Web: WARD, J & PEPPARD, J. 2002. Strategic Planning for Information Systems. New York: John Wiley & Sons.
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Appendix A: Reflections on Project Work The following appendix reflects on the work done for this Master's level thesis and considers the methodology and scheduling used, as well as different approaches and avenues for further study.
Appendix A1: Scheduling and MethodologyI One of the most prominent lessons learned from this project is the amount of time required to conduct a thorough literature review. The field of virtualisation reflects the complexity of business management: many different areas of academic interest need to be considered, and although the vast majority of the required literature was researched within the allocated period (see Figure I), the literature review continued throughout the course of the project period in order to maintain currency with emerging trends and issues.
Figure I: Gantt Chart
Aside from the aforementioned time dedicated to the literature review, other scheduling issues of note included the case study. As discussed in Chapter 5, case studies provide rich `detail of a particular situation. As a result, the large volumes of information procured over the course of a ten-day period meant that I
Full size Gantt Chart and copy of Project Log can be accessed from the Leeds University School of Computing at http://wwwdev.comp.leeds.ac.uk/mus3aw
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analysis and contemplation of results could not occur until after the case study period. Therefore, the degree of focus and information management required during case studies should not be underestimated, and time should be allocated accordingly. The above Gantt-style chart provides an overview of the main milestones of the project (indicated in different colours). Unlike traditional software development projects, there are few specific 'deliverables' in the project, although the project milestones roughly correlate with chapters within the project structure.
An Evaluation of Methodology The methodology of creating the framework began with a literature review, which identified a selection of relevant tools; these were then organised and modified according to case study information. As a researchbased project this methodology is effective. Owing to rapid developments in the field and the occasionally nebulous nature of current literature on virtualisation, a literature review is without doubt the necessary first step. From such a literature review, it is then possible to test any theories or tools through case study or similar field research. It is unlikely that more advanced forms of field research such as action research or conceptual development (Cornfield & Smithson 2006) will be of significant value to the field of virtualisation considering the time limits imposed, and therefore the methodology used appears to be appropriate.
An Incremental Development Methodology for Prospective Researchers As indicated by Figure II, the methodology used over the course of this thesis has essentially followed the 'waterfall model', a popular way of structuring the development of bespoke information systems (Bocij et al. 2006). Owing to the temporal overhead of the literature review, it was necessary to follow this structure. However, with careful planning it may be possible to interleave the framework development and evaluation stages between case studies, therefore introducing an element of iterative progression within the methodology. Such an approach would allow incremental evaluation of the framework by business managers, instead of compressing the evaluation period into a single phase; this new methodology would therefore identify potential gaps in the framework's scope or functionality (see section 9.3) earlier on in the project.
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Figure II: Methodology for Creating Framework
LITERATURE REVIEW Understand subject and relevant academic areas and identify where the researcher can add value to the field.
IDENTIFY TOOLS Evaluate and select relevant tools from literature review most suitable for the aims of the research.
Methodology Used: Linear 'Waterfall' model
CASE STUDY Conduct case studies in relevant organisations. Evaluate the selection of tools; make modifications to tools according to specific needs of target industry or sector.
Proposed Methodology: Interleave case studies iteratively with framework development and evaluation
DEVELOP FRAMEWORK Arrange tools into framework structure according to case study findings.
EVALUATION Evaluate usability of framework and the results provided by the framework.
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Appendix A2: Avenues for Further Study The framework pursued by this thesis has a very specific aim: to help managers successfully conduct a oneoff virtualisation initiative tailored to the internal characteristics of the organisation. Over the course of this research thesis, the literature review, case studies and focus group feedback has revealed eight different avenues for further study, which will be considered below.
1. Further Evaluation and Testing As indicated at the start of Chapter 9, the framework should ideally be tested as part of a virtualisation initiative. However, the restraints imposed upon this project led to an evaluation via focus group: a theoretical evaluation of the framework. Testing the framework on a real-life practical virtualisation initiative provides enough logistical and intellectual challenges to justify a separate project for future students.
2. Adding Financial Analysis to the Framework Feedback from the focus group (see section 9.3) revealed that the current framework lacked the capacity to encompass financial concerns. Using the current framework as a structure on which to base further research, there is potential value in including stages of ratio-based financial analysis into the framework, which would allow managers to assess the financial as well as cultural viability of their investments. This would improve the feasibility of the framework’s results.
3. Developing a Framework for Incremental Virtualisation Investment Another area for potential development lies in incremental virtualisation investment. The framework, and the methodology used to create it, is based upon one-off monolithic investment initiatives. However, as revealed by the case study at Wake Smith and Tofields, there is another salient strategy for firms with highly integrated modular or flexible systems: upgrade and modify existing technology. The upgrades at Wake Smith and Tofields were directed purely by the three-strong IT department, who were given an annual budget; there was apparently little communication with fee earners or partners as to the business needs or cultural issues implied by these incremental investments. If this is a typical case within mediumsize law firms, then there is clearly room for potential researchers and students to produce a framework to guide such investments according to the needs and characteristics of the organisation.
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4. Law Firms and Virtual Organisations As the aim of this thesis is to provide practical guidance on virtualisation initiatives, the virtual organisation concept was largely omitted (see section 2.4). Virtual organisations are essentially short term strategic alliances, and yet the topic has been only been superficially considered by academics in the field of cooperative strategy. At this time, research into virtual organisations for the legal industry would be largely theoretical; however, hypothetical models and frameworks are necessary in order to develop practical methods for the future. Therefore, one potential avenue of enquiry is the selection of partner, a 'critical issue' in both traditional and virtual cooperative strategy (Child et al. 2005). Tools for guiding managers through corporate development initiatives are a practical and logical starting point on which future students and academics could base their research (see Figure IV). Figure IV: Horizontal and Vertical Integration for Virtual Organisations (adapted from Johnson et al. 2006)
VERTICAL INTEGRATION (INPUTS)
Raw materials manufacturer
Raw materials supplier
Product R & D
HORIZONTAL INTEGRATION Complimentary capabilities Complimentary products
ORGANISATION Competitive products By-products
Marketing information
Distribution outlets
VERTICAL INTEGRATION (OUTPUTS)
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5. Using an Outside-In Approach to Strategic Analysis As discussed in Chapter 3, this thesis focuses on the inside-out (capabilities-based) approach to strategic analysis. This approach appears to be more suitable for analysing small and medium-size law firms, who may not have access to the requisite data for environmental analysis; processing and evaluating environmental data from external sources is a task which necessitates a severe shift from the methodology of this thesis, and may well exceed the time constraints and resources available during a project of this type. However, case study results and feedback from the focus group reveals that there is practical and academic significance in pursuing an outside-in approach to analysis. According to Johnson et al. (2006), environmental factors consist of three 'layers' of influence: broad or macro-environmental factors have national or global effects (e.g. all firms in the UK); industrial factors have effects on firms producing the same principle product (e.g. all law firms); market factors have effects on firms competing on similar bases (e.g. all small law firms in Sheffield). There are numerous analytical tools such as PEST analysis (Johnson et al. 2006), the product lifecycle (Wit & Meyer 1998), the Five Forces Model (Porter 2008) and scenario planning (Schwartz 2003) which are designed to analyse environmental conditions and position the organisation accordingly. For researchers with additional time and resources it may be fruitful to pursue an outside-in approach to virtualisation analysis, based upon these tools. Although environmental analysis may be beyond the scope of projects at the level, this thesis has identified predictable environmental changes which are relevant to the field of virtualisation. These changes in environmental conditions include increased client trust in virtual relationships, and the widespread availability of a variety of virtual technologies. These issues can be pursued successfully with a similar level of resources to those available during this project, and three potential areas for further study are shown below.
6. Predictable Environmental Changes: Increased Client Trust in Virtual Relationships One of the significant issues highlighted by the framework is the importance of the client. The client is an essential part of the virtual team (see Figure 9), and currently the idea of a purely virtual relationship with fee earners has been embraced only by small firms operating in highly defined legal problem areas such as conveyancing. Leading academics such as Richard Susskind (2006) believe that clients over the next ten years may be more accepting of virtual working practices, and larger commercial or civil cases could be conducted entirely over mediating communications systems. In this way, further study could be conducted
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into developing a framework or set of heuristics to guide firms through a significant industrial shift in the way that legal services are provided and relationships maintained.
7. Predictable Environmental Changes: Changing Industrial Forces Related to the increasing popularity of virtual client relationships is a more general issue: the possibility of a pan-industry shift towards virtual working practices. This would put pressure on business managers to invest in a virtualisation initiative which is driven by external industrial forces, and not the internal factors considered by this thesis. An example of these changing forces lies in the growing number of web-based, virtual law firms practicing in the UK, which offer lower fees and highly flexible services for small and medium-size cases. For established office-based firms such as those analysed in this thesis, it is likely that these new virtual law firms will represent significant competitive force over the coming years; therefore there exists significant value in analysing strategically and culturally the best way for an organisation to respond to such pressures. As discussed in section 9.3, a strategic response could be a virtualisation investment with the purpose of preparing a traditional organisation for cultural change; as noted in section 9.3, such issues are not covered by the scope of the proposed framework. Environmental tools such as the Five Forces Model (Porter 2008) and scenario planning (Schwarz 2003) will undoubtedly be useful in research based on this topic.
8. Predictable Environmental Changes: An Abundance of Technological Choice Ralph Schroeder (2007 & 2008) indicates that in the near future, users will not have to use a 'particular modality of representing themselves' because of technological constraints or tradeoffs; instead the users of virtual technology will have the choice of a variety of complementary systems suitable for different circumstances. This implication results in several questions which are largely unanswered by the academic community: faced with an abundance of technological choice, what kind of virtual environment, appearance and level of engagement is most suitable for virtual communication in service-based industries such as law? The virtualisation technology landscape (see Figure 7) is undoubtedly a good starting point for further research in this area, and Schroeder himself provides his own models for analysing the changing landscape of virtual technology (figure III).
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Figure III: Levels of Engagement in Four Technologies (Schroeder 2007)
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Appendix B: Interim Report The following appendix contains the minimum requirements form for the project, the Interim Report submitted as part of the project schedule on 12th June 2008, followed by feedback on the Interim Report.
Appendix B1: Aims and Minimum Requirements Form Aim of project: Help the managers of small and medium-size law firms virtualise their business by updating their systems portfolio. Background reading: (IS) strategy and virtualisation literature. Methodology: Review and select relevant tools, frameworks and models suitable for analysing small and medium-size law firms; use case study findings to tailor or modify these tools and inform the structure of the framework; evaluate framework. Product: A useful definition of virtualisation for business managers; a framework to help managers of law firms virtualise their business through strategic analysis and the implementation of virtual practices. Evaluation of product: Feedback from business managers.
Minimum requirements: (1) Study the relevant literature on virtualisation and (IS) strategic theory. Provide a useful definition of virtualisation and identify the benefits for business managers. (2) Evaluate and select appropriate tools from business and IS strategy to help managers analyse their organisation and appraise current or potential system portfolios. (3) Evaluate analytical approaches and field research techniques. Apply these techniques to a case study of a real-life organisation, delivering findings in the most appropriate format. (4) Using case study findings, modify and tailor strategic tools selected in (2) according to the needs of law firms; arrange these tools logically in the structure of the framework to help the managers of small and medium-size law firms virtualise their business.
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Enhancements to Minimum requirements: Enhancement to requirement (2): As well as tools from business and IS strategy, tools for analysing organisational culture were evaluated. Enhancement to requirement (3): Through networking, the author was able to conduct a second case study at Wake Smith and Tofields for comparison and supplementary field research. Enhancement to requirement (4): Framework now also incorporates elements of cultural analysis for consideration in virtualisation initiatives.
Foundation modules: 1 LUBS5225M Strategic Management 2 COMP5235M Business Information Systems
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Appendix B2: Interim Report Contents* 1. Introduction 1.1 Objectives 1.2 Structure 2. What is Virtualisation? 2.1 Background 2.2 Virtual Products 2.3 Virtual Organisations 2.4 Virtual Working Practices and Teams 2.5 Summary 3. Strategic Benefits and Links to Strategic Analysis 3.1 Choosing a Virtual Partner: Corporate-Level Strategy 3.2 Identifying Areas of Investment: Business-Level Strategy 3.3 Where Exactly Should we Invest in IT? 4. Tools and Technology for E-Collaboration 4.1 What is E-Collaboration? 4.2 Summary of Tools 5. Case Study 5.1 Discussion of Research Method 5.2 Presentation of Findings 6. Framework 7. Evaluation 8. Conclusion
*
NB Chapters 1-3 are covered by this interim report; the remaining chapters are to be completed as part of the full report and are included in this contents page to provide an idea of structure.
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Chapter 1: Introduction The overall aim of this research project is to help the senior managers of small law firms understand the potential benefits of virtualisation. The research will culminate in a high-level framework which identifies potential applications of virtualisation techniques, therefore empowering managers to add value to their organisation. The principal questions which this thesis aims to answer are as follows: What is virtualisation? What are the strategic benefits of virtualisation? What are the relevant tools and practices for virtualisation? In what ways could virtualisation be successfully implemented in an organisation?
The subject of virtualisation has caught the attention of academics in many different fields since the 1990s (Davidow and Malone 1992). Due to the broad and multi-faceted nature of the topic, managers are often faced with a plethora of information, much of which is over-specified or irrelevant to the strategic needs of the business. Therefore, to increase focus and provide practical, useful insight, this thesis focuses primarily on the specific requirements for the senior managers of small law firms. In order to help business managers make informed choices, it is necessary to discuss the various definitions of virtualisation, and identify the generic strategic benefits of virtualisation. These two basic items of knowledge yield much discussion and discrepancy amongst leading academics and commentators (Goldman et al. 1995, Davidow & Malone 1992, Camarinha-Matos et al. 2005, Mowshowitz 2002, Godar & Ferris 2004), and form the very basic building blocks for managerial decision making on the topic of virtualisation. This paper will also discuss material from strategic management and IS strategic theory (Stalk et al. 1992, Barney 1991 & 1997, Porter 1985, 1996, 2001 & 2008, Johnson et al. 2006, Wit & Meyer 1998) which reveals why virtualisation can be strategically beneficial and yields insight into how to capture these benefits. It is also necessary to gain an understanding of the technology upon which virtualisation relies. As well as an abundance of discursive literature on virtualisation, there are also numerous technological tools which can be used to provide business virtualisation (Fong 2005). These tools range from basic online services such as BoardHost, to conferencing solutions such as HP's Halo system, to cutting edge fully immersive systems such as Blue-C and CAVE-type technologies (Schroeder 2008). The next logical step is to identify the specific needs of small law firms, and how virtualisation can bring value to the organisation by better fulfilling these needs. By analysing the business practices, culture and technology of a small law firm, it is possible to identify which of these conditions need to be addressed in order to effect the implementation of virtual practices. From this an effective general framework can be derived for this category of organisation, which will aid managers identify and capture the benefits of virtualisation.
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1.1 Objectives Thus, the objectives of this thesis are: 6. Define virtualisation and the generic strategic benefits of implementing virtual practices. 7. Identify relevant techniques from business and IS strategy to help managers analyse the potential for virtualisation. 8. Provide a brief summary of relevant tools and technologies, as well as indications of future developments. 9. Identify the specific needs of small law firms, potential applications for virtual practices and issues which need to be addressed upon implementation. 10. Provide a framework of guiding principles to capture the benefits and facilitate the implementation of virtual practices. 1.2 Structure In light of these objectives, the thesis will take the following structure: •
•
•
A literature review, with background information concerning the historical emergence of virtualisation, prominent definitions of the term, and links to business strategy. This section will also uncover the various enabling technologies available to businesses. The second section will revolve around a case study. This chapter will commence with a discussion of the research method used, before an analysis of the case study itself and a presentation of the findings. This case study will yield information about the needs of small law firms, potential applications for virtual practices and potential issues in implementation. The final part of this paper will be the framework of guiding principles which unites the findings in the previous two chapters.
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Chapter 2: What is Virtualisation? Virtualisation in the field of computing refers to the abstraction of hardware resources. However, this thesis will take a wider view of virtualisation from a business perspective. Business virtualisation revolves around the strategic use of technology as a communications and transport medium to achieve competitive advantage; it can be applied internally, or used to synergise the work of geographically dispersed firms or work groups. Virtualisation can be defined as a move towards at least one of three ‘virtual categories’: providing virtual products, participation in part of a virtual organisation, or the use of virtual teams. The following section will discuss each of these key categories of virtualisation. 2.1 Virtual Products The modern organisation is subject to a business environment which is far more competitive and dynamic than a few decades ago (Goldman et al. 1995), and for many organisations, competing in this environment revolves around adding value to products rather than focusing on sales volume. The virtual product is a result of this trend: a value-added, highly customised, readily available combination of both product and service. Davidow & Malone (1992), early proponents of the virtual enterprise, state that virtual products have the ability to 'deliver instant customer gratification in a cost-effective way', through customisation, rapid response to customer demand. Virtual products command high prices by taking advantage of are 'rapidly opening and closing windows of opportunity', and are 'expected to evolve … as customer requirements change' (Goldman et al. 1995). The value of virtual products is created by a focus on customer needs, and realised through customisation, rapid assembly and evolution according to these needs. In this way, and unlike the value basis of mass-market products, the physicality of a virtual product is only a small part of its value. Most of the value in virtual products is created before and after the manufacture of the physical product. This is achieved through the applied knowledge of concepts, designs and techniques throughout the lifespan of a virtual product: Davidow & Malone (1992) also state that the virtual product 'mostly exists even before it is produced … in the minds of cooperating teams, in computers, and in flexible production lines'. This application of knowledge is often manifest in a type of personalised service, which means that virtual products are often 'combinations of physical products, services and information' (Goldman et al. 1995). Again, the importance of information technology is clear. The work of consultancies and law firms map especially well to these premises of virtual products, as they provide customised mixtures of both products and services which can be enhanced by IT investment. Another example of a firm which competes with virtual products is Reckitt Benckiser, the FMCG multinational. Reckitt Benckiser competes through high levels of market research, innovation and advertising investment, enabling the firm to release line extensions of base products which are customised according to market research, and released quickly through efficient distribution networks. Reckitt Benckiser’s brands evolve rapidly according to customer demand: more than forty percent of the firm’s revenue is derived from products released in the last three years. Recent line extensions include Air Wick Freshmatic, a value-added version of the mass-market air freshener which releases 78
fragrance periodically without user intervention. Although the importance of technology has been stressed, it is also worth noting that a potent enabler of Reckitt Benckiser’s strategy is organisational culture, which promotes innovation through a flat management hierarchy. 2.2 Virtual Organisations The virtual organisation8 is a structural entity designed to support the creation of virtual products and agile competition. They are temporally impermanent, dynamic and flexible constructs which unite the skills and knowledge of geographically dispersed partners through the use of technology. Virtual organisations have emerged from pre-existing practices such as lean enterprise, outsourcing and agile manufacturing (Camarinha-Matos et al. 2005). These practices enabled organisations to focus on their most competitive areas or to change product specification when required. Virtual organisations also use technology to enable the organisation to focus on its most competitive areas, whilst retaining or improving flexibility. In this way, they allow the creation of virtual products by allowing the immediate and frequent assembly of new productive resources (Goldman et al. 1995). Although Camarinha-Matos et al. (2005) state that ‘the terminology is not yet fixed’, they present the following definition for a virtual organisation: ‘… a temporary consortium of partners from different organizations established to fulfil a value adding task, for example a product or a service to a customer.’ As these authors identify, virtual organisations are temporally impermanent and are formed to fulfil a particular task. The length of alliance can vary from short-term research agreements (e.g. external companies utilising university resources) to long-term manufacturing and development projects (e.g. the recent alliance of BAE Systems with the VT Group to produce two new aircraft carriers for the British government in 2014 and 2016). This notion of impermanence in virtual organisations means that partners can leverage the knowledge, capital or assets of other firms for a specific task or customer, without resorting to the risks of formal mergers or acquisitions. Goldman et al. (1995) identify that the virtual organisation 'uses technology to dynamically link people, assets and ideas'. The idea of dynamic relationships is a key difference between the mass market and virtual organisation; this ability to switch dynamically between partners is called the 'switching principle' (Mowshowitz 2002). Davidow & Malone (1992) reveal that dynamic relationships exist not only among horizontal partners (partners involved in the similar activities), but also forwards and backwards in the value system: virtual organisations are characterised by 'permeable and changing interfaces between company, supplier and customers'. From this we can construe that firms in virtual organisations are linked both horizontally and vertically to other partners in a value system (e.g. firms linking with similar firms as well as suppliers and distributors). The authors also define virtual organisations as 'patterns of information and relationships' which require a 'sophisticated information network', again emphasising the ideas of dynamic relationships and technology within a virtual organisation. It is worth noting at this point that Davidow & Malone (1992) 8
Otherwise known as the virtual enterprise or virtual company; the terms are often used interchangeably.
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refer to technology as a data gathering tool to identify customer needs, rather than the more modern views of technology as a link between people and assets; this discrepancy is testament to the rapidly changing views and approaches to virtualisation. The exact nature of these relationships and alliances is enormously variable, which complicates the search for a clear definition of a virtual organisation. In order to develop a useful framework for virtualising a business, it is extremely important for business managers to understand and analyse the different structures available. Camarinha-Matos et al. (2005) stipulates that these 'patterns of information and relationships' tend to fall into one of three topologies: the supply chain or processoriented type, the hub and spoke type which revolves around a main contractor, and the peer-to-peer type in which partners have 'multiple relationships between all nodes without hierarchy' (Figure 1). As a descriptive tool for common structures, the topologies provide some general guidelines for management and IT structures. However, this view is overly simplistic, and by implying a relationship between virtual organisation topology and industry types, managers may fail to benefit from a potential mixture of all three topologies. Different analytical and practical strategic tools are necessary to determine the best pattern or structure for firm wishing to engage in virtual organisation concepts (see Chapter 3). Figure 1: Virtual Organisation Topologies
Supply-chain (manufacturing industry)
Hub and Spoke (construction industry)
Peer-to-Peer (knowledge industry)
2.3 Virtual Working Practices and Teams The distinction between virtual working practices and virtual teams has been made to emphasise the varying extent to which virtualisation can be implemented in an organisation. Virtual working practices are in place when employees are able to work at high capacity despite being geographically divorced from the traditional office (e.g. a database engineer working from home by updating data remotely). Virtual teams use a pattern of virtual working practices; these teams are geographically dispersed and require the use of technology for communication and transport (e.g. a consulting team with geographically dispersed members using conferencing and workflow software). It is clear that virtual teams are strongly related to the notion of virtual organisations. However, there are clear differences between the two terms. Godar and Ferris (2004) identify virtual teams as a 'group of organizationally or geographically dispersed workers brought together to work on a common project
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through communication and information technologies'. These authors uncover a distinction between virtual teams and organisations: virtual teams do not need to be organisationally dispersed, and can exist within a single organisation (whereas virtual organisations are cross-enterprise constructs). Godar and Ferris also identify limitations of scope: virtual teams consist of 'a collection of four to 12 individuals', whereas there is no upper limit on the workforce involved in a virtual organisation. Therefore, it can be asserted that virtual teams are focused on fine-grained or simpler tasks, whereas virtual organisations are more often used for coarse-grained or more complex goals. Virtual teams attract much attention from academics in the fields of sociology, psychology and organisational behaviour due to the interesting effects that geographically dispersed and technologically mediated working have on individuals. One of the most prominent areas of study is that of trust in virtual teams. Geographically dispersed teams are often working on highly cognitive, knowledge-based tasks; without the ability to communicate with the nuances of face-to-face contact trust is both 'harder to attain and easier to lose' (Lipnack and Stamps 2000). 2.5 Summary The literature review on the definitions of virtualisation has revealed that virtualisation is still in its infancy, and is driven by the need for flexibility in a highly dynamic business environment and customer desire for a new type of product. These virtual products are highly customised, assembled rapidly and are often a mixture of physical products and services. Constructs which enable the creation of virtual products are virtual organisations and virtual teams; virtual organisations are a form of temporary, dynamic alliance between several different organisations, whereas virtual teams are a small group of co-workers who achieve effective distributed co-working through the use of technology. It is useful to note at this point the links between virtual products, organisations and teams. A change from mass-market to virtual products often catalyses the creation of virtual organisations and the implementation of working practices; however, this is not always the case. It is possible to use virtual working practices and teams to improve the performance of mass market firms, and there are also many firms producing what we define as virtual products without the use of virtual working practices. In order to decide the exact approach for a specific organisation, it is useful for managers to identify the general and potential benefits of virtualisation for their organisation.
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Chapter 3: Strategic Benefits and Links to Strategic Analysis By linking the key themes and benefits of virtualisation to the studies of leading strategists, it is possible to uncover strategic tools which can aid managers wishing to virtualise their business. Davidow & Malone (1992) list several advantages of virtual organisations which include increased customer dependence, capturing the most attractive market segment, capacity for innovation, faster growth and higher profits. Goldman et al. (1995) presents six strategic benefits of virtual organisation concepts: 7. 8. 9. 10. 11. 12.
Sharing infrastructure, R&D, risk and costs. Linking complementary core competencies. Reducing concept to cash time through sharing Increasing facilities and apparent size. Gaining access to market and sharing market or customer loyalty. Migrating from selling products to selling solutions.
The benefits highlighted by these authors display some of the potential rewards for implementing virtual practices. By identifying themes which are common to both virtualisation and leading strategic thought, the analytical tools used by strategists can be used to help managers capture the benefits of virtualisation. 3.1 Choosing a Virtual Partner: Corporate-Level Strategy Corporate-level strategy revolves around directions and methods of development. For managers hoping to engage in virtual organisation concepts, the growth-vector matrix (Ansoff 1957) provides a simple breakdown of strategic directions in terms of new or existing markets and products (figure 4). Participation in a virtual organisation can encompass any of the four quadrants. However, the most relevant of these strategic directions is diversification, where firms seek partners with different capabilities and knowledge, who perform activities which are complementary (horizontal integration) or form inputs and outputs to the business (vertical integration). Dividing potential partners into vertically or horizontally relevant groups is useful for clarifying and presenting options for managers (figure 5). Service-based organisations such as law firms revolve around time, skills and knowledge; organisations such as law firms are often not located within a particularly defined or developed value network. For this reason, horizontal integration is often more relevant than vertical integration. For manufacturing firms, whose inputs and outputs are clear, both vertical and horizontal integration are highly relevant. Methods of development are the means to achieve the directions listed in the Ansoff matrix. As well as the formation of a virtual organisation or external alliance, there is the option of internal development. Internal development involves the development of strategy based on the organisation's own capabilities; it is slower process, enables the spread of costs over time and does not require a large initial investment of time or capital (Johnson et al. 2006). Internal development can be supported by lightweight virtual teams, which allows the learning and dissemination of knowledge within the organisation without the interaction complexities of external alliances.
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Figure 4: Ansoff Growth-Vector Matrix
EXISTING PRODUCTS
NEW PRODUCTS Product Development
MARKETS
Market Penetration Consolidation Withdrawal
NEW
Market Development
Diversification
EXISTING
MARKETS
Figure 5: Horizontal and Vertical Integration for Virtual Organisations (adapted from Johnson et al. 2006)
VERTICAL INTEGRATION (INPUTS)
Raw materials manufacturer
Raw materials supplier
Product R & D
HORIZONTAL INTEGRATION Complimentary products
ORGANISATION Competitive products By-products
Marketing information
Distribution outlets
VERTICAL INTEGRATION (OUTPUTS)
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3.2 Identifying Areas for Investment: Business-Level Strategy “a company must have the right core competencies with which to create new customer opportunities and to respond to customer opportunities that present themselves” (Goldman et al. 1995)
Business-Level strategy is the search for competitive advantage. Wit and Meyer (1998) identify two main schools of strategic thought: the outside-in approach, which revolves around positioning an organisation to serve specific market segments and environmental conditions (Porter 1996), and the inside-out approach, which uses the robustness of internal capabilities to overcome environmental turbulence. The inside-out approach is perhaps a more useful first step in the context of virtualisation, as it helps managers identify and capitalise upon the unique strengths of an organisation. The capabilities-based competitive strategy is one such inside-out approach, and it helps answer the question 'how and where should we invest?'. Stalk et al. (1992) identifies four principles of capabilitiesbased competition: 5.
The building blocks of corporate strategy are not products and markets but business processes.
6.
Competitive success depends on transforming a company's key processes into strategic capabilities that consistently provide superior value to the customer.
7.
Companies create these capabilities by making strategic investments in a support infrastructure that links together and transcends traditional SBUs and functions.
8.
Because capabilities necessarily cross functions, the champion of a capabilities-based strategy is the CEO.
This idea that strategy is based heavily upon 'business processes' is complementary to the premises of the virtual product, which mostly exists even before physical production. The customer focus implied by these principles is also shared in the definition of virtual products. This implies that capabilitiesbased strategy supports the creation of virtual products, the drivers of virtualisation investment (see figure 3). Stalk also stipulates that a company involved in capabilities-based competitive strategy ties in 'other parts of the capability chain … into its own business systems'. Outsourcing has been the traditional method for tying in external parts of the value system; the new model for this is the virtual organisation, the relationships in which exist both horizontally and vertically in the value system. In this way, capabilities-based strategy also has strong links to the formation of virtual organisations. Stalk states that capabilities can be created through 'strategic investments in a support infrastructure' to link together strategic business units (SBUs). As previously identified, technology is key mediator in virtualisation; therefore, Stalk's 'support infrastructure' is IT, which can be used to transform ordinary business processes into a unique and highly valuable strategic capability. In essence, capabilities are what an organisation can do; strategic investment into IT infrastructure can create new capabilities or enhance existing ones. 3.3 Where exactly should we invest in IT? However, generic investment in IT resources is insufficient to achieve competitive advantage, and can often be counterproductive. As Markus (2004) identifies in his paper on 'technochange', many firms 84
investing in IT projects simply seek operational efficiency gains, which Porter (1996) refers to as 'necessary, but insufficient' for sustained competitive advantage. IT investment needs to be aligned with the specific strategic position of a firm, instead of seeking simple operational efficiency gains. In order to achieve sustained competitive advantage, IT resources need to be valuable, rare, imperfectly imitable (Barney 1997) and difficult to substitute (Barney 1991). Resources become valuable through the 'extension of knowledge' in the system (Fong 2005), which simply this means that IT resources must be used to be valuable. The other traits (rare, imperfectly imitable and difficult to substitute) are measures of value or attainability relative to competitors within the same industry. These traits are achieved through tailoring IT resources to the unique historical conditions of an organisation (Barney 1991), and through integration with the social and cultural complexities of an organisation. Therefore, in order to achieve successful virtualisation, managers must make strategic investments into IT resources which are synergistic with both existing business processes (business needs) and organisational culture (cultural needs). There are several tools in business strategy which enable managers to analyse an organisation and identify specific areas for investment. Value chain analysis (Porter, 1985) has been a popular analytical tool for a generation; it identifies important business processes which add value to the product. As mentioned earlier, these business processes are essential for the creation of virtual products which 'exist largely before production', and are a key part of capabilities-based competitive strategy. An extremely useful feature of value chain analysis is the ability to identify horizontal or vertical links between activities; these links are strongly indicative of capabilities, and should form the basis for IT investment. Another useful tool for identifying potential business needs is the activity mapping system (Porter, 1996). Activity maps identify the unique mix of activities undertaken by a company relative to industry norms; clusters of related activities tend to revolve around capabilities or core competencies, which are key areas to be enhanced by IT.
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Summary of Interim Report This report provides the first part of a literature review on virtualisation; it will be followed by further research into virtual technologies and data collection techniques for the case study. Shown below is a Gantt-style chart displaying the schedule for the project, which is currently running according to plan. The author would like to thank Julika Matravers and Ken Brodie in advance for their feedback on this report.
Project log available from SoC at: http://wwwdev.comp.leeds.ac.uk/mus3aw/index.html
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