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HJUN 22
MOTIVATING STRATEGIC
ALLIANCE FOR COMPOSITE
INFORMATION SYSTEMS:
THE CASE OF A MAJOR
REGIONAL HOSPITAL
Charles S. Osborn
Stuart E. Madnick
Y. Richard
Wang
December 1989
CISR
Sloan
WP
WP
No. 203
No. 3120-90-CISR
Center for Information Systems Research
Massachusetts
Institute of
Technology
Sloan School of Management
77 Massachusetts Avenue
Cambridge, Massachusetts, 02139
1990
MOTIVATING STRATEGIC
ALLIANCE FOR COMPOSITE
INFORMATION SYSTEMS:
THE CASE OF A MAJOR
REGIONAL HOSPITAL
Charles S. Osborn
Stuart E. Madnick
Y. Richard
Wang
December 1989
CISR
Sloan
WP
WP
No. 203
No. 3120-90-CISR
©1989 C.S. Osborn,
S.E. Madnick, Y.R.
Wang
been published in the Journal of Management Information
Systems, Winter 1989/90, Vol. 6, No. 3.
This paper has
Center for Information Systems Research
Sloan School of Management
Massachusetts Institute of Technology
Rfi.i.T.
UBRARJFS
MOTIVATING STRATEGIC ALLIANCES FOR COMPOSTTE INFORMATION SYSTEMS:
The Case of a Major Regional Hospital
Charles
S.
Osbom
Stuart E.
Madnick and
Y. Richard
Wang
Harvard Business School
Sloan School of Management, E53-320
Loeb
Massachusetts Institute of Technology
Hall, Soldiers Field
Cambridge,
Boston, Massachusetts 02163
MA 02139
ABSTRACT
This paper explores the nature of strategic goals underlying composite information systems
studies a major regional hospital and its
providing
physicians and staff convenient
relationships with its physicians as part of a case study for
This situation is a particularly appropriate CIS
interface to disparate hospital departments.
example, involving loosely-coupled and inter-dependent relationships (i.e., the physicians can
(CIS)
and ways
to increase their likelihood of success.
It
motivating strategic alliances are
Examples
bi-directional benefits, co-op)erative payoffs, and asymmetrical control.
identified:
hospital's
CIS.
implementation
of
the
illustrate how these approaches were used in the design and
affiliate
Three approaches
with any hospital they want).
KEY WORDS AND PHASES:
to
Strategic alliances, composite information systems, inter-organizationa!
information systems, information systems for competitive advantage.
1.
INTRODUCTION
The combination
of turbulent global
economy with increased competition and
computer and communications technologies have generated
examples
of,
recent advances in
significant interest in,
using such information technology (IT) for strategic applications
[8].
and successful
Many
strategic applications require inter-organizational systems (e.g., to connect with suppliers
buyers) or more integrated intra-organizational systems
business). In either case,
to
we
refer to
(e.g. to
of these
and/or
connect together disparate parts of the
such systems as Composite Information Systems (CIS).
plan and implement a CIS must deal with the issue of motivating strategic alliances
Any
effort
among
the
participants.
This paper uses the experience of one organization, a major regional hospital, to illustrate this
issue.
We
analyze the hospital's market position and key aspects of
its
organizational structure. The
cooperative and incentive-based aspects of boundary-crossing CIS receive particular attention.
suggest three elements to emphasize
bidirectional benefits,
2)
when formulating
cooperative payoffs, and 3)
strategies for
CIS design success:
asymmetrical controls.
We
We
1)
suggest that these
concepts define intenul incentives that are particularly appropriate to CIS development.
) ))
The
sections that follow
and internal motivations,
introduce the three concepts to support internal motivation,
introduce the hospital and its CIS,
briefly discuss external
i
i i
iii)
v)
discuss the concepts as illustrated by this CIS,
suggest a means for identifying key incentives and linkages, and
v
present our conclusion
iv)
i
External versus Internal Motivation
1.1
Incentives
fall
into tw^o categories: external
of force, coercion, and threat; they can be
above.
and
External incentives include elements
internal.
summarized as pressure
for
system use imposed from outside or
A chief executive or system sponsor may attempt to command
There are several disadvantages
to
subordinates to use the system.
such external motivation.
First, if
the subordinates
do not
receive benefits (or even worse, perceive threats to themselves) they can find various surreptitious
ways
how
to sabotage a system.
little
alliances
power
As one top executive conr\mented about such approaches, "you have no
a president really has."
Second,
in a
between loosely-coupled participants
[6,51,
Thus, there usually does not exist a
organizational.
externa! incentives
may be
CIS environment we are attempting
strict
has been successful with implementing systems within his or her
Internal incentives,
on a "what's
It is
in
it
for
me"
that
to
own
organization through external
operate in a CIS environment.
encourage the participation of each party
let
it
is
often the case that the benefits
may
not be the same for
require
them
computer system through terminals. The publishers were motivated primarily by
The reporters were
cooperate since there was no stated benefit to them, and since the system would
to learn
new
skills;
furthermore this system would eliminate the jobs of
union supporters, the typesetters. This resistance was overcome largely by examining
Two
major concerns
all
us consider the innovation in the newspaper industry of direct entry of a
the desire for cost savings through partially eliminating typesetting costs.
initially reluctant to
champion who
basis.
For example,
reporter's story into a
be ill-prep>ared
on the other hand, are those
important to note that
particif>ants.
may
intra-
power hierarchy through which such
delivered. This can be particularly important since a system
incentives or a shared organizational goal
form
to
whether inter-organizational or
idea
to reporters related to timing:
delay between story submission and
its
1)
appearance
2
many
of their
reporters' goals.
early deadlines for story submission and 2) the
in print.
By pointing out the
abilitv of the
new
system
to
reduce the time from submission
to printing
and, correspondingly, increasing the time until
submission deadline, considerable compelling benefit was perceived by the reporters. Thus,
same system provided very
the
we
see that
different benefits to the parbcip>ants: cost savings to the publisher
and
time adjustments to the reporter.
Internal incentives tend to be supportive
rewards
that lead to self-perpetuating
system use.
Persons using the CIS under condifions of internal incentives clearly perceive circumstances in which the
system helps them
fulfil
more
their responsibilities
efficiently or effectively.
Strategic DesigT> for Internal Mofivafion
1.2.
Because a CIS by definition tends
to
work across
traditional organizational boundaries,
CIS
design must deal directly with difficult organizational problems involving conflicting interests and
perspectives. Three types of internal incentives are particularly useful for the design of CIS under such
circumstances.
We
controls (see Figure
refer to these as bidirectional benefits, cooperative payoffs,
and asymmetrical
1).
Bi-Directional Benefits
Benefits to
B
Benefits to
A
Inseparable benefits
Cooperative Pavoff
to
A and
B
Asymmetric Control
(-)
(-)
Extra
Decrease
control of
responsibility
system
and costs
{+) Benefits of
(+) Benefits
of control of
system and
system
benefits of
decreased
responsibility
Figure
1
Approaches
to Internal Incentives
and
costs
1)
Bidirectional Benefits
-
side of the organizational boundary that the system crosses
advantages accrue
to
each party individually;
tag
-
them
clearly see "what's in
CIS provides benefits
-
aggregate as well
offer collective (as
encourage parties associated with the CIS network
to
opposed
use
is
dilemma game can reward mutual
Asymmetrical Control
-
coop»eration
In
any CIS
important. Standards can be difficult to implement
Under
certain circumstances, however,
it
may
Here
it
can clearly
for me,"
even
is
based on the notion
is individually.
to individual)
The terms
advantages that
much
the
same way
that the payoff
[1].
setting the issue of
when many
who
controls the system
disparate groups are involved
(18].
be possible to build dependencies that are of strategic
importance by keeping control of the system. This
benefits
for me."
Coof>erative payoffs can provide
it.
inseparable benefits to possibly adversarial system participants in
3)
either
we
"something in
The idea of cooperative payoffs
to participants in
emphasize that successful CIS design can
in a prisoner's
it
Tsidirectional" because
that there is
— on
pjarties
different.
Cooperative Payoffs
2)
that the
may be
we
Each can see
identify a related benefit to each participant.
though the "something"
when both
CIS appear to be more successful
may
occur
when one
from the message content of the network but not from
its
party involved, for example,
physical control, while the other
party gains from controlling the network without regard to message content.
These three types of internal incentives operate within the stages of the CIS process model
depicted in Figure 2
[9].
The model suggests a
1.
Specify strategic goals;
2.
Identify an appropriate CIS;
3.
Identify technical
4.
Apply organization
four-stage approach to CIS design:
and organizational problems associated with
theories
and information technology
that CIS;
to solve the
problems.
Strategic
Goals
I
Composite
InfoSys
Definition
Organizational
Obstacles
Technical
Obstacles
V
t
Technical
Organizational
Soluticxu
Solutions
Fi gure 2
A Composite Information Systems Model
(Source:
At the highest
Madnick and Wang, 1988)
level are strategic considerations. In the following
example we
will see industry
conditions and operating limitations constraining hospital manager's strategic choices.
analysis
framework adapted from Porter
selecting
among them.
As
strategic goals
increasingly
choices.
depend on
become
[13]
The market
gives a method from categorizing strategic choices and
better defined, the characteristics of the CIS environment
the organizational problems
which impede the execution of these
strategic
Particularly important at this level are the local interests prevailing within particular
organizational boundaries.
and asymmetrical
Internal incentives based
control provide opp>ortunities for
on bidirectional
QS design
benefits, coopjerative payoffs,
to bridge organizational barriers
and
to
link those interests successfully.
2.
HOSPITAL CASE
The hospital example was chosen
specifically
because
system designers in dealing with competing organizational
effective design solutions to such
expensive.
it
illustrates the complexities faced
interests,
and because
it
by
demonstrates that
problems need be neither technically complicated nor extremely
The
hospital in question
licensed beds in
region;
its
its
is
a large and successful organization.
bed
utilization rate of
It
has over
40%
(774 beds) of the
71% compares favourably with
the
68%
of
its
The
represents the tertiary care facility of choice for over 1,000 physicians.
closest competitor;
it
institution itself
the flagship facility for one of four dominant multi-hospital systems in a large
Midwestern
is
city.
Hospital Goals
2.1.
The
CIS
hospital's
knov^m as the Professional Information Network (PIN). The PIN system
is
represents the hospital management's latest strategy for building inter-organizational bridges between
and
the hospital
its
strengthening loyalties between physicians and the hospital
Their perspjective
Competition for patients
Negotiated pricing
HMC>s
represent
combined with
The
attending physicians' practices.
is
is
based on changes
is
hospital's
managers believe
an issue of strategic importance.
market
in the health care
in the institution's local area.
increasing, intensifying the importance of patient
volume and market
HMO
50%
of the patient ptopulation,
compared with 10% nation-wide. These
rising operating costs to put hospital revenues
patients.
New
competitors are appearing.
low-risk procedures (such as radiology).
specialties.
and
profits
introduced by Porter
suppliers,
under serious pressure. Other
when
targeting low-
Free-standing clinics siphon off high-revenue,
Primary-care hospitals are attempting to develop their
own
These competitive threats can be summarized using the market framework
[12], in
terms of a combination of five forces:
from new entrants,
and
3) increasing
1) rivalry
among existing
competitors,
bargaining power from buyers, 4) increasing pressure from
5) a proliferation of substitute services.
depicted in Figure
The
have
factors
Smaller hospitals are consolidating with large multi-hospital organizations as their
financial conditions worsen.
2) threats
share.
being encouraged by Health Maintenance (Organizations (HMOs). In the region
is
hospital chains located nearer to affluent portions of the city have an advantage
risk
that
The
specific situation for this hospital
is
3.
hospital's
managers have
isolated
the critical aspects related
competitive threats and have developed strategies for countering them.
bolster market share
and patient volume by building
specialty health-care institution
among
the public.
its
reputation
among
The
to each
of
these
institution intends to
physicians and
its
image as a
—
Physician Goals
2.2.
At the same time
that the hospital is facing these threats, the physicians are very
about rising overheads in their practices.
concerned
With increasing p>ap»erwork requirements forced by the
pressure of malpractice, higher insurance premiun\s, increasing clerical salaries, and high office
expenses of
led to a
all
new
types, overhead threatens to exceed
focus on the part of
many
for
new
of a physician's revenues.
physicians: cutting the costs of their
looking more closely at the costs of running their
and searchmg
60%
own offices and
own
These factors have
businesses. This
means
opportunities to improve efficiency and
effectiveness.
THE PROFESSIONAL INFORMATION NFTWQRK
3.
The Professional Information Network (PIN) system
and provides seven core
is
primarily inter-organizational in scope
services:
1)
The
electronic mail service links physicians offices with the hospital
2)
The
referrals service routes patient referral information
between physicians and the
31 TT\e lab status service allows physicians to request lab tests
and obtain
other;
hospital;
results;
and advises on new dosages and drugs;
4)
The pharmacy
5)
The pre-admission and operating room scheduling
service takes orders for medications
and with each
services allow physicians' offices to contact
hospital staff electronically with information important to hospital
work flow and
cost
control;
6)
The consultation request
7)
The
service allows physicians
schedule inter-physician consultations;
a
attempting to
highway"
and intraorganizational divisions (between hospital departments).
initiate access to distributed
sources of data and to provide a standardized "data
for all of the hospital's constituencies.
PIN
exists to establish connectivity
between independent systems.
within the hospital by providing the physician a
PIN
to
Composite Information System, PIN crosses both interorganizational boundaries (from
hospital to physician's offices)
is
each other, via the network,
library' application service allows physicians to send notes to the hospital's librarians
asking for database searches on chosen medical topics. The result of the searches - article
abstracts and studies - are sent back to the physicians by electronic mail.
As
PEN
to contact
exhibits important CIS characteristics:
8
common
interface to
many
It
spans "product areas"
hospital services.
As
such,
1.
derives
It
its
department
value from specific cross-boundary linkages (hospital to physician, hospital
to hospital depjartment, physician to physician).
allows asynchronous coordination of potentially conflicting interests and procedures.
2.
It
3.
Its
4.
It
operating details are largely transparent to
used by
is
its
its
target audience (the physicians).
developer (the hospital) as a partial solution to specific strategic problems
(physician satisfaction referrals and patient volume, operating cost control).
MOTTVATTNG STRATEGIC ALLIANCES
4.
The
hospital's
PIN
relies
on
these internal incentives were applied are illustrated briefly below.
the key
PIN
4.1.
Bidirectional Benefits
applications
is
Some examples
internal incentives for its design success.
presented in section
A more
of
how
detailed description of
5.
PIN'S referral system provides an example of bidirectional benefits by giving both hospital and
physicians individual benefits.
If
If
a physicians refers a patient to the hospital, the hospital benefits.
the hospital refers a patient to a physician, the physician benefits.
By
sustained internal motivation can be established.
nature of the benefits for each participant
all
PIN
by each party
to this relationship, a basis for
In the particular
example described above, the
realizing the reciprocal benefits to be gained
(i.e.,
referrals)
is
similar.
This
is
not necessarily the case in
applications.
Cooperative Payoffs
4.2
Physicians want to use the hospital's pre-admission and operating
because
it
saves them time and frustration on the telephone. The physician's offices run more smoothly,
scheduling
and
less
room scheduling system
is
more
efficient,
and busy physicians and
their staff
can spend more time seeing patients
time dealing with office problems. The hospital gains directly as well;
the scheduling load on
procedures than
Note
different.
it
did
its
when
facilities,
and
it
it
has a better idea of
has more flexibility in rescheduling admissions and
requests had to be processed in a single telephone conversation.
that the sp)ecifics of the benefits to be gained
But neither party benefits unless both participate.
pre-admission information, there would be no
way
by each party
If
may
be, as in this case,
the physicians did not provide the
the hospital could gain
its
improved operational
efficiency.
the hospital did not use the pre-admission information, the physicians
If
traditional, less efficient, telephone scheduling procedures.
would have
to
use
By cooperating and coordinating through
PIN, both parties achieve a cooperative payoff.
Asynvnetrical control
4.3.
The hospitals plans
develop
in
this
its
physicians hinges at least in part on a desire to
physicians the habit of sending irxformation across the network.
the market to
increasing
provide services to
to
change over the next
amounts of
five yeers in
ways
potentially proprietary data.
that will force the hospital to ask physicians for
They
anticipate that this task will be easier
information could automatically be captured by the PIN system and
familiar with the process.
But
why
Hospital managers expect
if
physicians are already
should physicians give control of the system
to the hospital?
Physicians vary greatly in their systems knowledge and technical interest.
practices, they probably could not find the time to thirJc
about system specifications,
a single design. Thus, the physicians are willing to give
up some
PIN and
efficiency benefits provided b\
if
Busy with
much
less
their
agree on
control in return for the functional and
the convenience of having the hospital operate
it.
By
presenting them with a service and essentially controlling the mechanics of the network completely,
the hospital can
to
(1)
make PIN easy enough
to
use so that
build habits supportive of electronic data transfer.
interest
to
the hospital,
and both
arise
it
will
be used and
(2)
encourage physicians
Both aspects of the system are of straiegic
from the hospital's asymmetric control over PIN's
specifications.
5.
DESCRIPTION OF PIN APPUCATIONS
This section describes each key PIN application
in
more
detail to illustrate
how
the internal
incentive concepts can be applied.
5.1
Electronic Mail
PIN provides
a
UNIX-based
electronic mail system connecting all system participants.
mail network links physicians' offices with the hospital, with each other, and with selected
The
result has
been much better communication of routine news between
particularly important because
many
all parties.
The
HMOs.
This link has been
of the hospital's non-surgical physicians have been forced by
industry changes to spend less time in the hospital and more in their
10
clinics.
The mail network can
reach them and
answer
their
is
sometimes more
effective than jMgers.
Because the physicians are not always able
pagers immediately during office hours, messages are more frequently
lost
to
during those
times.
Referrals
5.2
The
hospital provides a
number
PIN provides the Medformation
staff
The PIN
who
services,
such and the Medformation Hot-Line.
with the ability to enter the information from a caller and refer
the caller to an appropriate physician.
patients with physicians
community
of
This
a natural extension of the hospital's efforts to place
is
practice near them.
through the
referrals service also routes patient referral information to physicians
This routing allows the hospital to capture
hospital's information network.
more marketing
information (such as geographic patient concentrations derived from patient zip codes) and more
tracking data (such as which physicians are getting
use of hospital
facilities)
referrals
and whether they ultimately make
than previous telephone referrals permitted.
becoming a useful marketing
may
what
tool for the hospital.
potentially pass through hospital facilities.
areas are short of physicians and
may
listings of physician consultations
be
It
The growing
has generated a mailing
Hospital
list
of
management knows, by
fertile territory for
opening a new
data
p>ool of
all
patients
is
who
zip code, which
The database's
practice.
allows the hospital to pinpoint the best of
its
physicians.
Compilation also shows which physicians bring the most patients through the hospital.
Cross-tabulation of
The
physicians.
its
younger
hospital has
physiciaris,
and
all
these factors provides a picture of potential high-quality, loyal
made
a conscious decision to identify such practicioners especially
to invest in
such individuals by suggesting locations
hospital has even helped finance the practice until the physician's
own
patient
to
open a
among
practice.
The
volume becomes high
enough.
5.3
Lab Status
Lab
test
were previously ordered by surface mail or by pneumatic tube system. Results were
returned by mail or by courier.
some
tests
- during which
When
labs
became backed up, delays could
time the physician would have no idea of the
1
1
stretch for several
test's
progress.
days on
Physicians
now
use PINTs lab status system
hospital s labs, saving time
and keeping
to request tests
and receive
from the
results directly
informed. PIN allows for immediate checks on
jjatients better
the status of lab results, removing the delay of physical mail-handling once tests are completed.
system reduces the number of times the physician
are
in'^
embarrassed
in front of a patient
tplicably delayed, lost, or incomplete.
The PIN pharmacy system takes orders
available.
available
for time,
is
on new dosages and drugs
in a
a steadily
more complicated
The
task.
a
way
pharmacy
for the hospital
for the hospital to suggest alternative
to
less
provide
dosages or
non-threatening nrvanner. The system also remembers personalized directions for each patient,
provide small but helpful touches to dosages and prescriptions.
to
system provides a record of the
memory on
latest available
Lastly, the
formulations so that a physician can refresh his or her
{particular details.
Pre- Admission
and Operating
Room Scheduling
The PIN pre-admission and operating room scheduling systems allow
contact hospital staff electronically with information imf>ortant to hospital
When
this job
being
left
used
to
be done over the phone, physicians'
on hold and of making multiple
calls for
staff
members
one simple
task.
operating roonns used to involve a serious bottleneck. For the hospital,
the operating suites at full capacity; they are
physician's office,
it
is critically
and physician, and
PIN changes
is
also
hospital has found that nrvany physicians, pressed
and some are more expensive
The phannacy system provides
allowing physicians
patient
is
develop favorite drugs and dosages over the course of several years. Some of these are
than others.
5.5
for medications; advice
Choosing the correct drug and dosage from among the increasing numbers of alternatives
effective than the alternatives,
which
because lab results
Pharmacy
5.4
drugs
is
The
to
do
important
so in a
the scheduling
among
to
manner
work
work flow and
cost control.
consistently complained of
Scheduling the hospital's 26
it is
critically
important
the most expensive parts of the facility.
to
run
For the
schedule an operation at a time convenient for both
that allows for flexible schedule
flow.
Physicians' staff
then immediately available to the hospital's operating
staffers build the
physicians' offices to
members
fill
changes
if
needed.
out an onscreen form,
room scheduling
office.
Hospital
schedule as usual and assigned times are communicated through the e-mail network.
12
TTie
new system has
(b) hospital
several advantages: (a) physicians' staffers
schedulers have a better idea of operating
assignments or make other changes
example, are the same
size);
to increase
physicians get scheduling results back faster
and
hospital
5.6
its
—
room load
scheduling
as a result, operating
(c)
no longer waste time on the telephone;
at critical times,
and can
flexibility (not all opjerating
room schedules appear more
shift
room
rooms, for
flexible;
and
(d)
leading to significantly improved relations between the
physicians.
Consultation Requests
The PIN consultation request system allows physicians
hospital's network, to schedule inter-physician consultations.
to contact
each other, using the
These arrangements increase the
better data
on the flow of consultation work. PIN
provides an electronic form for requesting consultations.
Delays are less frequent than when
arrangements were made through phone
office staffs,
physicians' revenues and give hospital
managers
calls
by physicians'
record of every consultation requested and billed.
and the hospital gains a
can assemble information on which physicians
It
request the most consultations and which are asked most often for a second opinion.
It
can
tell
which
types of cases are most likely to generate consultations, and so flag serious cases that might generate
above-average exp)ense
levels.
In a highly comp>etitive market, such information
assumes
strategic
importance.
5.7
Library
Lastly, the
PIN
library application system allows physicians to send requests to hospital
librarians for database searches
abstracts
on chosen medical
and studies - are sent back
These young
MDs
usually
The
results of the searches
-
article
to the physicians
through PIN's electronic mail. This service has
who
are considering the hospital as a place to base a
proven especially popular with young physicians
practice.
topics.
come from medical
schools that have a search service (although
usually without PIN's ease of electronic requests and responses); this aspect of
PIN
is
a strong selling
point for PIN.
6.
CIS
If
DESIGN BASED ON BENEFITS. PAYOFFS. AND CONTROL
bidirectional benefits, cooperative payoffs,
acceptance and usefulness of a CIS,
how
and asymmetrical control
all
play a part in the
can system sponsors and designers identify elements that a
13
system should emphasize?
This paper suggests an approach to identifying key benefits, important
cooperative payoffs, and potential points of control.
Porter's
market structure model
organizational jxjsitions that the CIS
approach
[15]
is
used
to
is
provides a basis for examining individual and
[12]
intended to connect.
Rockart's Critical Success Factors
describe the key interests and needs associated with each position.
analysis clarifies the constituent interests that the CIS
must
treat.
Porter's
This
Value Chain model
provides a means for identifying areas where the CIS nrdght link complementary needs.
Lastly, v^e
introduce a "value chain payoff matrix" as an aid in prioritizing potential CIS applications
Identifying Strategic Goals
6.1.
The
hospital
is
under pressure
in
each area identified in Porter's model (see Figure
•
it
has a poor location relative
•
it
faces threats
3):
competitors for attracting low-risk patients;
to
from large out-of-state specialty
clinics,
which are absorbing high-end business
with their nationally-known expertise;
•
the regiorial concentration of
•
rising costs
HMOs and
and higher overhead
affect the health of physicians' practices that
hospital with patients, thus forcing
•
large corporate health care plan sponsors is increasing;
them
to seek
supply the
higher prices, and
walk-in clinics siphon off low-end business, offering substitute medical care v^athout the burden
of full hospital overhead.
The
hospital's
managers have develof>ed
as depicted earlier in Figure
changing;
options;
(b) the
and
Their decisions reflect
options aveiilable to the hospital;
(d) the
referrals represent a
patient volume.
3.
strategies for dealing with these comp>etitive factors
The
(c)
(a) the
the choices that they prefer
consequences implied by those choices.
key link through physicians
referrals, consultations,
and
and how
industry's structure
among
it
is
those
In the hospital's case, for example,
to the potential patient
base
- and
library research services provided
so to increased
by PIN attempt
to
strengthen this hospital-physician connection.
A
key factor
system sponsors
to build
first
in the success of
CIS development
lies in
the organizational boundaries that
choose to cross. PCM demonstrates that hospital management recognizes the need
bridges in key areas between the hospital and
examined the business needs
of
its
physicians and
is
its
jjatient-providers.
closely
attempting to construct electronic services that
emphasize areas where physician and hospital needs can be made
14
Management has
to
match.
Interlinked Value Chains
6.2.
One way
of expressing this process
to use Porter's "value chain" concept to represent the
is
Both the hospital's operations and the physician's
interests of each organization involved [11, 12).
practice can be described as
profit.
•
similar stages of providing service
and earning surplus or
Using an industrial production operation as a metaphor, both hospital and physician engage
Inbound
p>atients
•
moving through
lo gistics
For the hospital and
:
its
physicians, these activities center
in:
on gaining
through referrals and other sources.
Op>erations
:
hospital provides the physicians with services
The
and access
to hospital
equipment. The physicians provide patients and hospital with diagnosis, prescriptions, and
ojjerations.
•
Outbound
this
•
lo gistics
Discharges, billing, and cash flow considerations
:
cire
important asp>ects of
value chain segment for both parties.
Marketing and infrastructure Value Chain categories also cover non-direct expenses such as
:
marketing or overhead. Examining these aspects of hospital operations and the physicians'
practices highlights the importance of referrals to each jsarty, as well as emphasizing the
importance of rapid collections
An examination
incentives
-
of inter-
to the hospital
and
of overhead expenses to the physicians.
and intra-organizational value chains reveals relevant
internal
particularly the characteristics of localized constituencies, their particular interests,
the threats they perceive from other organizational units.
provides inbound logistics and marketing benefits
of collecting patients faster
and
to
(making both hospital and physician look better
For example, the PIN Referrals application
makes
the process
improves response time
to referrals
both hospital and physician.
easier (inbound logistics).
and
It
also
in the patients' eyes)
It
while providing important
marketing information about the regional patient base. The linkages supported by several PIN services
are
shown
in Figure 4.
Each PIN application
is
carefully constructed
by bridging common
interests in
these value chains.
6.3
Value Chain Payoff
Figures 5 categorizes bi-directional benefits, cooperative p>ayoffs, and asymmetrical controls for
four selected
PCM
applications in a value chain payoff matrix.
from using the system;
their potential as target
it
The
table suggests
how
each party gains
can be used to analyze specific inter-organizational value chain linkages
CIS boundary-crossings. Earlier
takes advantage of bidirectional incentives,
how
15
we
described
how
for
the referrals application
scheduling can result in cooperative payoffs, and
how
the separation of the design
and the use
of the system allows the hospital to gain
from the
asymmetrical controls. Similar results can be observed for the Pharmacy application and for other PIN
applications not included in this matrix.
Incrementalism
6.4
The
last
column
of the matrix, labelled "Factors Supporting Incrementalism," suggests
organizational reasons for adopting a highly modularized, incremental, evolutionary approach to
implementing each CIS application.
provides evidence for the importance of a careful match
It
between what the organization needs and what the CIS technically provides
addition to emphasizing benefits and incentives, the system must
factors that
referrals
might unduly threaten
network
to
network (attempting
to
For example,
local interests
grow slowly - by example
grow with
rather than
by
fiat.
it
is
(see Figure 2).
sensitivity
towards those
probably preferable for the
Forcing the physicians to use the
apply an external incentive) might convince physicians that the hospital
trying to take advantage of them, leading
In
is
establishment of informal referral networks that
to the
leave the hospital out of the loop.
Hospital
need
in
management emphasizes
mind, not a technical solution.
that the
system was
80 p>eople.
validation,
Unix mail
is at
best
developed with an organizational
The system hardware costs
inconsequential figure for a hospital that runs two
staff of
first
IBM mainframes with
less than $1(X),(X)0.
--
an
a Data Processing support
an interim solution; the network has
little
security,
no data
and few of the safeguards of the larger systems. The system, however, does match the
hospital's organizational
needs
at the
moment;
it
provides physicians and
convenient interface to disparate hospital departments.
New
applications can be
staff
an adequately
added
in
hours and
days, not weeks. Starting small and growing as physicians' needs grow, the system can evolve over time
as the organization changes.
16
HOSPITAL
FINANCE:
Accounting, Collections
its
physicians used to providing data
satisfy third-party payers) will
now
so that conversion to bulk data provision in the future (to
be possible.
Value Chain analysis suggests methods
Figure 4 diagrams the key value chains involved in the hospital-physician
potential solutions.
relationship,
and shows how
selected
PIN
The Value Chain Payoff Matrix (Figure
method
key organizational problems and
for identifying
for identifying
and
applications
make connections within and between them.
5) concentrates
on organizational solutions by showing
from value chain linkages.
prioritizing benefits or payoffs arising
suggest areas in which system development should
start
- areas
of highest potential.
suggest areas in which the hospital might benefit from asymmetrical controls.
threats represented
by each application
to
various parties
—
threats that
It
It
a
can
It
can also
details potential
might argue
for
an
evolutionary, incremental system design.
The hospital case
in an evocative illustration for several reasons.
complex market; patients arrive
and the
at the hospital largely
First,
it
deals with a
under the auspices of physicians'
characteristics leading to hospital preference are only partly
simple network that has complex organizational overtones:
PIN
is
known. Second,
it
practices,
focuses on a
small but reaches across
many
boundaries, both inter- and intra-organizational.
Composite information systems cross organization boundaries by
definition.
Each boundary
crossing implies elements of bidirectional benefits, cooperative payoffs, and asymmetrical controls.
Bidirectional benefits affect organizational units individually, cooperative payoffs benefit the
organization at the aggregate level, and asymmetric controls allow for the development of strategic
depjendencies.
and
stable.
A
CIS must emphasize the positive aspect of these relationships
The PIN network provides an example of an organization doing so
in
order to be effective
for strategic reasons.
NQIES
1.
This
common theme
of the
Human
top-down conunand techniques are
participation of
persp>ective
[16],
was
Relations school of
in the
long run of
management
little
theorists
but some of
described in this century by Barnard
its
12]
This bottom-up
and Roethlisberger and Dickson
basic ideas have existed for centuries (see
18
that
use without the acquiescence and
managers and workers who must execute the orders.
first
emphasizes
Sun Tzu
119]).
Current
organizational theorists also tend to subscribe to this view (see Pfeffer (10, p.l6ffl and Brunsson
[3]).
Indeed, open systenns organization models describe a world in which coercive incentives
might be expected
to
have
little
long run effect (see Weick
[20]; Scott [17]
provides an
overview).
Barnard
[2]
saw
for individuals
Oldham
what
[7]
a manager's job in large part as setting
who
reported to
have approached
characteristics of
or her.
the propier
mix of
intenial incentives
Social psychologists such as
Hackman and
problem from the point of view of work design, examining
an individual's job might support internal incentives that improve
organizational performance.
forms as a response
this
him
up
Economic
theorists
to the cost of individual
19
have discussed hierarchical organization
aggrandizement
[21].
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72^3 067
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