Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995
Learning, Working and Innovation: A Case Study in Insurance
John C. Henderson and Christine M.A. Lentz
Boston University
AbstractWorldwide the environment in which IT initiatives are deployed is changing. Increasingly, IT investments are being made to produce market outcomes as well as internal operating efficiencies. Learning about the linkage between the IT investments and business value is a critical challenge in the service sector for industries such
as financial services, transportation and retailing where IT is endemic to the products and services delivered to customers [I]. Using a case study in a large North American insurance company and recent theory [2] as our guide, we identify ways in which Information Systems (IS) organizations can become more innovative by using learning as the bridge between working and innovation.
Introduction
By the early 199Os, the IS areas of large North American insurance companies, along with their business partners, had automated and restructured the main line business processes, realizing value in terms of cost savings and efficiency gains. Internal departments, lines of business and users were the primary recipients of these benefits. Increasingly, and at an accelerated rate, the IT contribution to business value is being linked to external market outcomes such as market share, profitability and customer satisfaction.
Senior IS managers are being asked by their CEOs to demonstrate the contribution which IT investments bring to organizational or business unit performance [3]. Learning about the IT-performance link is of paramount importance. For example, many insurance companies have invested in laptop computers for their agents selling individual life insurance. The underlying causal assumption is that the IT investment (laptops and the accompanying IT and organizational infrastructure changes) allows agents to decrease the amount of time taken to prepare accurate and complete policy documents. This in turn leads to increased customer satisfaction, client retention and market share. Success of such initiatives is increasingly defined not in terms of the capability of the technology or even the level of usage but instead by the measurable bottom line market impact.
Yet the IT-performance link is rarely clear, direct or immediate which makes attaining such understanding a significant challenge. Reasons are abundant for explaining the challenge. One reason is the complexity of the IT investments, particularly strategic initiatives. Strategic initiatives are defined as those IT investments which significantly alter the underlying business applications infrastructure. For example, at Sun Life Assurance Company of Canada the strategic initiatives generally have worldwide impact, budgets in excess of one million dollars (Canadian) and a two to three year time horizon for design and deployment, Invariably they are cross-functional in nature and often impact multiple product areas. Correspondingly, many people participate as members of project teams, steering committees or project review groups and more people are eventually affected by the implementation.
Another reason for the challenge in understanding the relationship between IT investments and organizational performance is that strategic initiatives are always unique to some degree. Since the late 1980s Sun Life has implemented about eight strategic initiatives that range from a client-server based system for the individual insurance line of business to point-of-sale systems for agents. Such initiatives are unique in the applications affected, the technologies employed and the people involved.
A third reason for the difficulty in understanding of the relationship between IT investments and organizational performance is the complexity of processes used to convert strategic initiatives into business value. Clearly, the actual systems development process is complex. However, the processes that establish value (i.e., planning, justification), monitor progress and enable mid course correction are often quite complex, involving significant uncertainty and a wide range of stakeholders. We believe that one particularly crucial and complex process that is often overlooked, and yet essential for success. is the learning nrocea.
March [4] writes that a major component of any effort to improve organizational performance is learning. Garvin’s [5] definition of organizational learning emphasizes that
Proceedings of the 28th Annual Hawaii international Conference on System Sciences - 1995 learning is achieved by design and not by chance. “A
learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights” (p.80). Recent research on organizational learning suggests that it is the bridge between working and innovating [2]. Working includes both the task and the processes for carrying out the task over time. This “unified” theory implies that managing must include processes for both learning from and enhancing practice (innovation). In the past innovation has been separated from the rest of research, constituting a specialized literature [6] and thus its contribution was mitigated.
Using a case study we demonstrate ways in which the bridge between working and innovating can be built. First, we describe the genesis of this work to provide an overall context in which to place this paper. The second section provides descriptive data on Sun Life’s products, markets and competitive environment. The next three sections tell the story of working, learning and innovating at the company, highlighting both the successes and the areas in which the IS organization could make improvements. The summary offers concluding remarks and some insights for others doing work in this area.
Background of the Study
The propositions on learning and innovation in this paper stem from an ongoing program of research in the areas of strategy formulation [7], strategy implementation 181 and value measurement [9, 101 sponsored by the Systems Research Center at Boston University.
Our central underlying thesis is that effective strategy implementation requires an actively managed and adaptive process that responds to organizational conditions (especially strategies, systemic risk, structure, processes and people). One key component in strategy implementation is a mechanism of value management, that is a system for actively engaging executives in the creation and adaptation of processes by which the firm understands and manages the value of IT investments.
One approach for studying the concept of value management is to build upon cybernetic theory. Cybernetic theory defines a feedback process consisting of standards of performance, measures of value, a system for monitoring and tracking performance, processes for feeding back the information and modifying the actions [ 11, 12, 131. We use the term value management mechanism [14] to refer to a structure or system of working, interconnected parts (called phases) that function together to create value. Each of these phases is, in itself, a significant management process. Value management reflects the means by which senior managers have an
explicit, adaptive mechanism to systematically influence IT initiatives.
Through an integrated set of four phases the value management mechanism ensures that IT resources invested throughout the company deliver anticipated and, perhaps even, higher returns. The phases of the value mechanism are 1) formulate value principles, 2) design criteria and measures, 3) deploy tracking and control system and 4) learn IT-performance link (see Figure 1). In this article, we explore the learning phase of the value management mechanism. In this context of designing and deploying strategic initiatives, the organization learns how and why (or why not) an initiative achieved its proposed value. As critical as learning is, the lessons learned must also be incorporated into practice to achieve measurable, market impacts.
Figure 1, The Value Management Mechanism (Henderson and Lent& 1994)
formulate 4
value principles I
deploy e learn
control systea IT-pC!lfOIll-l~Ce link I
communicate
This case study was conducted in the Canadian National Office (CNO) of Sun Life Assurance Company of Canada and focused on two of its business units (group insurance and pensions). Data collection included a series of structured and semi-structured interviews with senior corporate and business unit managers and both corporate and business unit IS managers. Interview data were supplemented with internal company documentation and annual reports.
Environment: Sun Life Assurance Company
of Canada
Sun Life Assurance Company of Canada, which began operations in 1871, is one of the largest Canadian life insurance companies. The parent company along with its subsidiaries serves over four million customers in Canada, the United States, Britain, Ireland, the Philippines, Hong Kong and Bermuda. Worldwide there are 8,000
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995 employees (excluding agents), of whom 1,140 work in an
information systems capacity. Total assets under management at December 31, 1993, exceeded $88 billion (Canadian) and operating income was $610 million. The quality of the asset structure is acknowledged by Standard and Poor’s and the A.M. Best Company, which have accorded Sun Life of Canada their highest claims-paying ratings.
“Sun Life of Canada provides a broad range of financial products and services designed to meet the protection, assets accumulation and advice needs of their clients. Products and services include life, health and disability insurance; annuities and pensions; mutual funds and savings plans; and trust, banking and investment management services” (1992 annual report). In Canada, Sun Life ranks number one in sales in force for individual and group life and number one in pensions. This multinational company has standalone headquarters in Canada, the United Kingdom and the United States. These national offices (NOs) are similar to domestic companies in the sense that they have much of the apparatus to operate independently within their territories. Each national office has profit and loss responsibility and is linked to the others through the international headquarters office, located in Toronto, and responsible for corporate and international interests.
Sun Life and its subsidiaries constitute a leading multinational life insurance and financial services organization. The corporate vision is to meet the needs of its customers through a broad range of financial products backed by quality service. Sun Life’s diverse product and service offerings, large customer base, renowned service quality and strong asset base make it well positioned in the market. These strengths alone offer little comfort in an increasingly turbulent, complex and diverse competitive, political and economic environment. For example in Canada, the changing regulatory environment across the provinces has made it possible for banks, with their substantial asset base, to compete more openly with insurance companies.
Working
Working refers to the ways in which tasks are accomplished over time [23. This includes both the task itself and “the ways in which the process of doing the task is structured” (p. 42). Brown and Duguid propose that work is accomplished through both canonical (formal) and non canonical (actual) work practices and that the convergence. of these practices (or lack thereof) directly affects the learning and innovation that results. In the case of implementing strategic initiatives at Sun Life, standing senior management committees (formal) work in conjunction with initiative-specific committees (actual).
One way to enhance work practice is through a well articulated governance structure. S true tural configurations, appropriately defined, help to reduce complexity and increase rationality [15]. In the IT context, governance specifies the allocation of decision rights for IT activities, such as planning, systems development and infrastructure, to the various decision makers within the organization as well as to outside vendors and partners [16]. Governance is not concerned with the day-to-day operational decisions but is concerned with the distribution of decision rights that is consistent with the logic and perspective of the strategy. At Sun Life the business units have a great deal of autonomy for achieving their profit and market share targets. Correspondingly an IS group, responsible for applications development, resides in each business unit to specifically support its requirements. Below we provide a detailed discussion of the formal distribution of decision rights at Sun Life.
Roles and Responsibilities - formal work practice The General Managers (GMs) of the national offices in Canada, the United States and the United Kingdom report to the president and are responsible for the business units (product lines and administrative functions) in their territories. In the Canadian National Office (CNO), business units include individual life and health insurance, group insurance, pensions and savings products. Other major areas include IS, finance and administration, human resources, public relations and communications. The business unit vice presidents report to their GMs and ultimately to the President for achieving value from IT investments deployed. An Assistant Vice President manages the applications development effort in each business unit and reports directly to the business unit head. In addition to the business units, IS activities reside at both the corporate and national office levels (see Figure 2). The Vice President for IS (CIO) has responsibility for company-wide IS and reports to the president. In the CNO an Assistant Vice President, IS manages the Information Systems and the Operations Improvement areas. Together, corporate and national office IS constitute the “corporate” IS activities.
Corporate IS operates the large transaction processing systems, backbone communication networks and shared systems; coordinates IT planning, infrastructure and security; manages data administration, training and consulting. In general, business unit specific applications development is the responsibility of the business unit. All other IS activities are the responsibility of corporate IS.
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995 Figure 2, Simplified Organizatlonal Structure
President
Coordination between business units and among national offices for IT investments is managed through a multi-leveled structure of standing senior management committees.
. Senior Advisory Council (SAC)
This senior, non systems oriented group addresses general management and strategic issues for Sun Life. SAC is composed of the chairman (chair), the president, the GMs of the national offices and the Senior Vice Presidents of Actuarial, Finance, Financial Services, Investments and Marketing.
9 Systems Steering Committee (SSC)
The SSC is the most senior systems group and is chaired by the president. This committee establishes the strategic directions for IS, monitors the value of IT investments, allocates resources for IT initiatives with company-wide implications, sets high level information systems policies and provides a forum for discussion and conflict resolution. The SSC includes SAC members (the president is the chair), the CIO, the Vice President for IS Planning (IS Planner) and the Vice President Human Resources.
l Systems International Advisory Council (Systems
IAC)
The Systems IAC is a international policy body composed of the senior IS managers from the National Offices and corporate IS and is chaired by the CIO. The councils mandate is to “make the whole more than the sum of the parts” by leveraging IT, sharing knowledge and fostering innovation. This formal structure where vice presidents manage a line of business (e.g., individual, group, pensions) is common according to the insurance companies we studied
during the passed year. However, the additional layers of active, standing committees are not as common and may well represent an innovation in their own right. Such a structure explicitly recognizes the overlap, economies of scope and potential synergy among lines of business and national offices worldwide. This governance structure provides a means for voicing and resolving conflicts and conflicting priorities as well as learning from each other. Additionally, it represents a resource commitment on the part of senior management to developing work practices which support and not hinder learning and innovation. Below we build on this description by recounting the actual work practices which specifically support the &sign and deployment of strategic initiatives.
Roles and Responsibilities - actual work practices Coordination for design and deployment of strategic initiatives with company-wide implications are managed by project steering committees and coordinated by the IS Planner with a worldwide mandate. Steering committees are chaired by the senior manager responsible and composed of the senior business and IT managers involved at the corporate, national office, business unit and functional levels. For example, the International Accounting Systems Liaison Committee, which is overseeing the design and development of the new general ledger system (GALAXI), is chaired by the company comptroller and members include the national office comptrollers, the head of IS for each National Office, the head of each finance and administration business unit and its IS director and the CIO.
Project steering committees form in response to a particular business need. Business needs arise from both demand pull and technology push and thus can emanate from any level of the company or area of the business. For example, recommendations to buy or build major business application software (e.g., software that might be used to administer a significant line of business) are made by the heads of the business units in the national offices that would be using the software. Corporate IS tries to be aware of the business unit IT investment decisions through SSC or Systems IAC meetings and its informal network of contacts. If these investments involve something substantive (e.g., new or emerging technology, cross business unit processes, multiple national office impacts), corporate IS engages the senior business unit managers in some form of approval (committee) process. For example, the company wanted to reengineer the core business systems used by the individual insurance business units, corporate IS assembled the national offices and facilitated a collaborative decision making process to make sure that, as a whole, the national offices considered the opportunity for using the same system.
These actual work practices, where project steering committees form dynamically based on the work
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 199.5 requirements, projects are coordinated by the business
manager most directly responsible and steering committees include the managers most affected, are not new and have been reported in the project management literature. However, several aspects of Sun Life’s implementation of these concepts provide a new twist, perhaps demonstrating that the bridge to learning and innovation resides in the details of the implementation.
First, the project steering committees for strategic initiatives routinely operate horizontally across business units, national offices and hierarchical reporting relationships. This facilitates Sun Life’s strategy of explicitly leveraging the worldwide IT investment. For example, when the US individual insurance business unit wanted to reengineer their core systems, corporate IS (in the person of the IS Planner) assembled the individual units from the other national offices in an attempt to see if they had similar needs. This international collaboration, coordinated by corporate IS, involved common vendor trips, visits to other companies that were using the products and joint discussions and evaluations. Eventually, the systems based on the same product were installed in three out of the four offices. In the fourth office a closely related product was installed.
Second, these actual work practices dictate that the senior business manager responsible for achieving value from the strategic initiative is responsible for the project and chairs the project steering committee. It is that manager’s mandate to design and deploy the project to realize the anticipated impacts. Senior business and IT managers directly affected are included as part of the steering committee; steering committees may be composed of more business managers than IS managers.
Third, corporate IS plays an active role in supporting the senior business manager. It provides standard measures for assessing the relative value of the investment (cost benefit guidelines), a company-wide standard applications systems development methodology (ASDM) for design and deployment of initiatives and corporate guidelines aimed at ensuring that benefits are achieved.
Learning
Learning the relationship between IT investments and organizational performance is critical to improving operational effectiveness and increasing organizational performance. Yet the link between IT initiatives and business value is rarely clear, direct or immediate. Organizational learning in the traditional sense, that is, learning from past experience, is difficult because no two events are exactly alike 1171. Similarly, the IT initiatives deployed in an organization are always unique to some degree. Yet, having deployed strategic IT initiatives, the organization may acquire some knowledge and insights which are useful for deploying other IT initiatives. The
challenge is to gather the knowledge and make it available to those people who have the power to act on it.
Our field studies reveal that companies see merit in the organizational learning concept but few have specific processes in place to achieve it. Garvin [5] believes that this quandary is partly caused by learning theorists who portray organizational learning as mystical and utopian and who provide abstract recommendations. Managers need a framework for action from which they can derive distinctive policies and practices for changing the way that work gets done.
Attribute-based organizational learning
Drawing from the Sun Life case study and the work of some learning theorists 118, 19, 201 this section describes several attributes of organizational learning. These attributes are not entirely mutually exclusive; in practice they overlap to some degree. The attributes are used to guide the implementation of distinctive policies and practices which form the building blocks for organizational learning [5]. “Without accompanying changes in the way that works gets done, only the potential for improving [learning] exists” (p.80).
The organizational learning attributes are target oriented, context specific, shared and routine based. Below we briefly define each attribute using available literature and then describe specific examples of each at Sun Life. The attributes are given in Table 1.
le 1. wutes
of Lmmhg
l target oriented - aimed at achieving a specific goal l context-specific - embedded in practice or work l shared - experienced in groups, through
interaction
. routine based - implemented through policies & procedures
l target oriented
Organizational learning is target oriented [19], i.e., aimed at achieving a specific goal. This attribute provides focus for learning processes as well as a common frame of reference for discussions. It is our position that, in the learning phase of the value management mechanism, organizations should be learning how and why (or why not) strategic initiatives achieved their goals [14].
Project steering committees meet on a regular basis to manage, track and control the strategic initiatives. Committees are not merely informational in nature but also play an active role in taking corrective action on the initiatives, as needed. Acquiring knowledge about detailed aspects of the IT-performance link is a byproduct of this committee process. Steering committees review and discuss current project status reports, cost/benefit
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995 analyses, status in relation to expectations and any critical,
project-specific issues. Through these discussions committee members gain a detailed understanding of the project’s costs, a deeper understanding of the application of the ASDM and a general understanding of the technologies used in the project. The regularly scheduled (weekly or monthly) project steering committee meetings focus predominantly on learning project status and taking corrective action. Recently, they have also begun to focus on learning the causes and the reasons for the present status.
behaviors a detailed understanding of the circumstances in which the initiative is deployed is required.
Post implementation reviews (PIRs) are stipulated in the ASDM with the goal of providing information to improve future projects and the development process itself. Even for the large projects PIRs are not commonly conducted. Out of the six major projects deployed in the last year in the Pensions Division, three received a PIR. However, this number is up from the year before. There is renewed interest on the part of senior management in providing a forum for learning from past implementations and developing a means of determining whether or not (and how) the company is getting better at developing and implementing systems. A PlR of the three national offices who implemented securities projects during 1993 was held in May, 1994. Similarly, Sun Life conducted a PIR for the Human Resource system projects.
Sun Life’s learning phase may be described as moderately context-specific because steering committees, and to a lesser extent the project review and PlR groups, are involved in and informed about the details of the project and the particular context in which it is embedded. Some steering committees meet weekly to review progress and address special concerns. However, it is evident that the project team itself is the most deeply embedded in the specific day-to-day details of the project. Currently there are no mechanisms (policies or procedures) in place which augment the learning which occurs at the project team level.
Sun Life has attempted to leverage the project steering committee’s learning by recording the proceedings in minutes and then broadly distributing the minutes across the company to all stakeholders. For example, the international client-server committee disseminates information to all levels of Sun Life using the company’s standard e-mail system. Minutes are designed to record the detailed discussions and reflect specific learning that has occurred during the meeting. It is management’s intent that this information be used to modify behaviors or actions of initiative sponsors, steering committees and project team members.
Recently, due to the magnitude of the resources being invested in strategic initiatives, the president of Sun Life has mandated that project review meetings be held with representatives of each initiative. The review group consists of the president, IS planner, CIO and senior vice president of marketing. Meetings are held during the implementation phase with the project sponsors, typically including the business unit head and the GM of the national office, and are focused on acquiring an understanding of the results being realized from the investments. However, discussions may include all aspects of the initiative’s design and deployment. Project review meetings are held to find specific ways in which to leverage the experiences gained and to capture lessons learned from the strategic initiatives. Senior managers review the benefits achieved, including project steering committee minutes and PIR reports, in the hopes that this information may be applicable to other ongoing strategic initiatives as well as those which may be deployed in the future. The president’s direct and personal interest in the review meetings serves to both garner the attention of project sponsors and to focus initiative resources on creating a better understanding the IT-performance link.
l shared
Organizational learning is the result of shared experiences which, although not always wholly accurate, bind the individual experiences into a collective understanding [17]. As this shared understanding grows, it produces learning [221 and, through groups or “communities of practice,” a collective understanding develops which becomes part of the ongoing work practices and serves as a bridge to innovation 1211.
l context-specific
Learning is context specific [20], embedded in work practices. Organizational learning includes the process of improving actions through better knowledge and understanding [21]. To improve actions and modify
This shared understanding is evident at Sun Life where standing committees, project steering committees, PIR groups and project review groups are an inherent part of the work environment. Collaboration on large IT initiatives occurs in project steering committee meetings and also results from more personal and direct means across national offices. Examples of shared experience at Sun Life include collaboration on network planning between Canada and Asia Pacific and a client-server based application developer’s workbench designed and tested in Canada and used by both the Canadian and U.S. national offices. Similarly, the development of entire application systems are implemented through shared processes. The SOLAR system, which is the US individual system, will be the basis for the Asia Pacific Individual system and the same base system for securities management is being installed for evaluation in two of the national offices. Each of these initiatives involved research materials being shared, visits to other insurance companies and employees
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995 participating in project team, project steering and project
review meetings.
l routine based
Organizational learning is ‘routine’ [19], based on
“regular and predictable behavioral patterns” [6, p.141. The existence of such routines enables decision makers to concentrate on the content rather than the process of organizational learning and makes learning endemic to the work practices.
Project steering committee meetings are routinely held for each project. PIRs and project review meetings are becoming increasingly common. All of these meetings involve standard processes. One presidential level project review meeting is convened, with the senior management project sponsors involved, for each strategic initiative. Each review meeting lasts an hour or two and is conducted during the initiative’s implementation phase. Preparation for the meetings consists of the IS planner reviewing the project steering and PIR committee minutes and having discussions with key people involved in the project. From this data he prepares advance notes for the review group. During the meetings he takes detailed minutes. Later, he pools the notes to illicit more general lessons learned. To Sun Life, these lessons learned (also called principles) appeared to be intuitively obvious, however, after reviewing many of these projects, the principles appeared to be critical to the success of the project.
One example of what appears to be “conventional wisdom” is the principle: “if you have a project of any size you should have an appropriate level of full-time resources and a full time project manager.” While this principle appears to be obvious, the actual work practice did not reflect it. In the words of the IS Planner, “some less experienced business managers may try to get by with 50% or 30% of their time or 30% of three people’s time, trying to do some bits and pieces of the project. Also, a less experienced business manager may put someone they can spare on the project as opposed to someone that the project needs or someone who can succeed on the project.” From this lesson, Sun Life has learned that the lack of convergence between formal and actual work practices must be addressed or projects will continue to experience delays in implementation,
Another example of a lesson learned concerns the development and updating of cost benefit analyses. The project reviews have shown that business cases need to be updated and reanalyzed at key project milestones, to reassess the project’s viability. This principle reflects Sun Life’s understanding of the dynamic nature of strategic initiatives and the need for a dynamic mechanism to coordinate these efforts (e.g., value management).
After compiling the lessons learned from the review meetings in the early winter of 1993 the IS Planner
presented them to the SSC and the Systems IAC. Members discussed the implications of the lessons and suggested ways in which they might be communicated company-wide and incorporated into practice. As a result of these meetings, the lessons were distributed on the e- mail system to senior business and IS managers worldwide. The lessons, about thirty e-mail screens, were sent out in May.
Based on the lessons learned from the review meetings and post implementation audits from the steering committees, project management guidelines are being published and distributed by the office of the IS Planner. In booklet form, the lessons serve as an implementation guide for project managers and steering committees. Corporate audit has also incorporated some of the lessons into their procedures and documentation.
Organizational learning is an important topic and occurs incrementally over time [231. Using the attributes companies can actively manage the learning process to ensure that it occurs by design rather by chance. The above discussion has sought to highlight some of the activities which can be undertaken to improve learning and shed light on the relationship between investments in IT and realized market outcomes. The next section shows how the learning can be used to foster innovation.
Innovation
Innovation is the implementation of inventive ideas [24]. The development process is inherently innovative [2] and may also include creativity [24,253. Innovation is described as “somehow getting a new thing done” [26] and defined as enhancing practice [2]. These definitions imply that innovation, like creativity, results from deliberate activities and processes [27]. The challenge for the IS organization is to capture and communicate the innovations across the company. “The ability of a firm to recognize the value of new information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities” [23]. The design and deployment of strategic initiatives should be fertile ground for innovation.
Innovative products and services produced at Sun Life have been facilitated by their learning processes and work practices and delivered to both external or internal clients. Below we provide examples of innovations at both the business unit and corporate levels.
l new products and services for Pensions’ customers
Top management of the pensions division determined that flexibility and quick response would be important organizational capabilities in the dynamic climate of the financial services industry and particularly critical in the market for retirement and savings products. As a result the IS organization, with their business partners, designed and deployed a strategic initiative to build a new,
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995 integrated applications, hardware, software and
communications platform. After 2,200 man weeks of work, they had successfully reengineered the main administration system.
The project steering committee, together with the PlR group, discovered that unanticipated benefits had resulted from this initiative. Using both the knowledge acquired during this reengineering process and the capabilities of the new infrastructure, the pensions division is now positioned to offer their clients new products and services. For example, they have split the administration and investment management functions and now offer their customers (large institutions) products and services tailored to the customers’ specific needs. If a customer wants Sun Life to administer their employees’ benefits but contract with a third party to manage some or all of their investments (such as stocks and bonds), this can be easily and efficiently accomplished. No other competitor offers this type of service. The Pensions division has wooed new customers based on this new offering.
l improved operating effectiveness for the Group
Insurance division
The group insurance division of Sun Life found that software purchased for one initiative had additional, unexpected capabilities for the business unit and these capabilities may eventually be used company-wide. This discovery was made partly by the project team, in conjunction with an extended PIR. That is, initially the PIR did not recognize the benefit but as the division learned more about the product through use and provided feedback to the PIR and project steering committee group the broader capabilities of the software became clear.
A component of the software is a dynamic letter writing capability which produces system generated correspondence easily and simply through a single package. Senior management decided to replace all letter writing capabilities throughout the division with this one product. As a result the division has realized savings in both operations and maintenance expenses (for other software packages which are no longer needed) and personnel time (the new capability simplifies operations).
l availability of lessons learned, position papers and
general findings
Innovation, or enhancing practice, can be directly augmented by the activities of the IS organizations in the company. At Sun Life corporate IS engages in activities such as researching and pilot testing of new and emerging technologies, hosting issued-based (e.g., security) or functional (e.g., officer-level IS people worldwide) conferences and producing and distributing papers, policies, standards and minutes. The office of the IS planner researches and publishes position papers on new or emerging technologies which are likely to impact the business. Conferences are held to communicate policies,
share information and foster interactions. Worldwide IT infrastructure standards for communications (e-mail, WAN and routers), PC networks (Novell) and software (Lotus and WordPerfect) help to provide a standard operating environment which is conducive to the sharing of systems and data.
Information is shared across the company through steering committee meetings and minutes, e-mail, internal conferences, policies and standards. Lessons learned from strategic initiatives are gleaned from project review meetings and subsequently the general findings and opportunities for synergy among the national offices are circulated worldwide. Project review meetings are now being held in the national offices by the GMs in charge with the business unit heads in attendance.
The process of innovation at Sun Life is one of continuous improvement and involves several critical components. First, innovation is a natural byproduct and extension of working and learning at Sun Life. The company may not have set out to make the IS organizations more innovative. Instead innovation was a second order effect, emanating from the work practices and the learning processes. Second, innovation required deliberate, thoughtful management processes to bring it to the surface. It did not happen accidentally. Third, dedicated resources, in the form of the IS planner and his staff, facilitated innovation at the corporate level. The IS Planner had a worldwide mandate from the president to produce results. Finally, broad-based communication and detailed documentation were critical and necessary features of the effective innovation processes at Sun Life.
Summary
This case study provides an operationalization of the unified theory of working, learning and innovation. In doing so it supports the importance of viewing these three separate constructs as complementary and integrated. This exploratory work is designed to develop an understanding of how these constructs may apply to practice in IS organizations and how learning operates in the value management mechanism.
Working encompasses both the formal and actual routines for designing and deploying strategic initiatives. Sun Life’s organizational structure is hierarchical, vertically integrated and functionally oriented around product lines. However, at an operational work is accomplished through a web of cross-functional, multiple disciplined committees. The committees provide a rich environment for learning and the company has implemented several processes (e.g., convening project review groups, communicating and publishing lessons learned) to enhance practice.
Brown and Duguid 121 argue that work routines, organizational learning and innovation are endemic to organizations, embedded in the context of organizational life. These three activities affect each other and are both interrelated and compatible. Learning and innovation are embedded in the daily work practices of business units, functional groups and project steering committees at Sun Life. Concerted effort by these groups is required to understand and incorporate into practice the lessons learned and to foster the development of innovations.
An explicit management process is required to foster and communicate innovations. In a sense, innovative ideas and practices exist but they need to be harvested if results are to be realized by the organization. This harvesting requires management commitment and specific resources devoted to this purpose. At Sun Life learning and innovation receive the personal attention of the president and the chairman. Additionally, the IS Planner and his staff are dedicated to facilitating, augmenting, documenting and communicating lessons learned and the innovations which result.
The organizational learning processes and the innovations presented in this paper are part of the company’s value management system. We propose that the benefits anticipated from IT investments (e.g., innovation) are marginal unless integrated, dynamic processes exist to actively manage and adapt these investments. Our ongoing research in this area will examine how the four phases of the value management mechanism (i.e., formulate principles, design measures, deploy tracking and control system and learn about the IT-performance link) operate in organizations to ensure that value is achieved in ongoing strategic initiatives and that the knowledge gained is leveraged in future initiatives.
References
[l] National Research Council, Computer Science and Telecommunications Board, Information Technology in the Service Society: A Twenty-First Century Lever, National Academy Press, Washington D. C., 1994
[2] Brown, John Seely and Paul Duguid, “Organizational Learning and Communities-of-Practice: Toward a Unified View of Working, Learning and Innovation,” Organization Science, 2:l. 1991.4057
[3] Clark, Thomas D., Jr., “Corporate Systems Management: An Overview and Research Perspective,” CACM, February 1992, 35:2. 61-75
[4] March, , James G., “Exploration and Exploitation in Organizational Learning,” Organization Science, 2:1, 1991, 71- 87
[5] Garvin, David A., “Building a Learning Organization,”
Harvard Business Review, July - August 1993,78-91
Proceedings of the 28th Annual Hawaii International Conference on System Sciences - 1995
[6] Nelson, Richard R. and Sidney G. Winter, An Evolutionary Theory of Economic Change, Cambridge, MA, Harvard University Press, 1982
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We gratefully acknowledge the cooperation of Sun Life in the conduct of this study. This research was made possible by a grant from the IBM Worldwide Consulting Group.
