Department of Economics
Voronezh State University
Voronezh 394063, Russia
pozdniak@gwu.edu
Stuart A. Umpleby
Department of Management Science
The George Washington University
Washington, D.C., 20052 USA
umpleny@gwu.edu
The year 2000 computer problem became an unprecedented management challenge. In terms of money spent, about 500 billion dollars, it was the largest technical project in human history. Before January much of the discussion was devoted to assessing how successfully different countries would meet the New Year. Comparison is possible when problems, are faced by several nations at once. According to USA Today [July 12, 1999] Russia was among the least prepared for the crisis. If we define “1” as meaning significant possible disruptions, “0” as meaning insignificant disruption and compare these meanings for the two countries then we have four possible outcomes: (0,0); (0,1); (1,0); (1,1). Of these possible outcomes, the most frequently discussed in the American press were (1,1) and (1,0), significant disruptions in Russia and possible isruptions in the US. But forecasts of systems behaviors rarely consider factors underlying that behavior. What occurred makes it important to look at some of those factors. The (0,0), or no significant disruptions outcome requires an explanation.
In order to better understand the reasons for (0,0) outcome, we shall
- consider the stages of evolution of the problem in the US and Russia within the context of current economic trends in both countries;
- consider some cultural features of the Russian approach as opposed to the American approach;
- compare how business organizations were affected in the US and Russia.
2 Stages of Evolution of theY2K Problem
In this section we shall briefly consider the evolution of the Y2K problem in the US and Russia. As any social and managerial problem, Y2K evolved in time, attracting attention of different professional and social groups. This evolution occurred in the context of economic and social trends and priorities in each country. In describing four stages of evolution we take into account those trends. Not all stages received equal attention. The least researched is the last stage, which we call the stage of relief and which is continuing now. By the term “stages” we mean changes in the perception of the problem in the US as a “measurement” scale of the evolution process.
N.K. Perkov [1998] has distinguished three distinct stages in the evolution of the Y2K problem before 1999 based on how the world was preparing for the Year 2000.
The first stage, beginning in 1993, is the appearance of the problem. Stimulated by the efforts of Peter de Jager, the problem gained the attention of scientists, corporations, and policymakers and became the object of articles in scientific periodicals and the press in general. Mainly the technical nature of the problem was addressed at that time. Several software malfunctions appeared in 1995 increasing understanding of the problem. However, the embedded systems problem was not widely recognized until 1997. During this period the Y2K problem was evolving in parallel with the sharp growth of the “emerging digital economy” in the US, which was significantly influencing the economic development of the country. According to a report by US Department of Commerce [1999] the information technology (IT) portion of the US GDP growth was constantly increasing from 1994 to 1997. The IT nature of the Y2K problem contributed to its significance.
Meanwhile Russia was moving through the painful process of building a market economy by mass privatization accompanied by hyperinflation and a growing number of people trying to accumulate a little capital. Consequently, IT problems were not of high priority for most managers in Russia. Although this was a time when commercial organizations were starting to grow, they could realize their purposes without systematic incorporation of information technology. Their growth was largely based on the redistribution of property, financial operations and new operations in different business sectors without the use of computer-based transactions.
The number of computers and embedded systems was growing mainly in the financial sector, but they were simple and not oriented toward attainment of strategic business goals. Banking, one of the most rapidly growing sectors of the economy, could afford computerization for making short-term profits on operations, including trading currencies and state bonds. In general Y2K was an exotic issue for Russia at that time.
The second stage of problem evolution, beginning in 1996, was characterized by increasing awareness of the problem in the US. As the number of computer malfunctions grew, the problem became a government concern. Disaster scenarios were discussed in the press. The “Millennium bug” at this stage was addressed at three distinct levels: societies (or larger communities), organizations, and individuals.
In Russia at this time the presidential elections and the future of the transition process was actively discussed. Organizations and the economic policy of the government continued to be short-term oriented. The information technology personnel in most organizations were not skilled enough to think about the problem in any way other than by purchasing Y2K compliant equipment. However, this equipment did not become available in Russia until around 1997.
The third stage began in the se second half of 1997, when practical activities had begun to be implemented. The investment needed to solve the problem was estimated by the US government. Testing of equipment had begun. When it became clear that technical solutions needed managerial support, organizations and communities started preparing contingency plans. By fall 1999 most organizations had set up command centers to manage the date transition.
In Russia at this stage a number of publications were appearing. The State Duma passed a law on Y2K. According to this law government and private entities must work out plans for averting chaos at midnight on December 31. This law was thought to be late and, considering the poor awareness in society of the problem, would “provide no real relief” [Reuters, June 1999]. Since 1998 assessments of the preparedness of Russia have appeared in the Western press. Much of this analysis has focused on Russian nuclear missiles and nuclear power plants. For most Russian organizations and individuals trying to survive after the economic crisis in August 1998 the Y2K problem remained of secondary concern. However, in fall 1999 interest was growing. Organizations were starting to ask whether their equipment was susceptible to the problem.
The fourth stage, characterized by relief, began in the US in 1999. The government was actively reassuring the public. Many companies reported that they were ready to meet the New Year. In Russia, however, awareness of the scope of the problem was still spreading. Economists provided a thorough evaluation of the cost to fix the Y2K problem. It turned out to be six times higher than the amount estimated in 1998 [Volynkina, 1999]. Despite better awareness in 1999 of the nature and consequences of the problem, it was still perceived by most Russians as “one more risk in a risky environment” [Babakian, 1999]. The stages of problem evolution in both countries are presented in Table 1.
3 Approaches to the Problem and Cultural Traditions
The Y2K problem highlighted traditional cultural patterns in both countries. Among them are the following Russian cultural patterns, identified by Gouchtchina and Umpleby [1998]:
- Managers pay attention to “big, global problems, not to small, insignificant” ones. In Russia Y2K was regarded only as an operational problem for the computer staff of organizations.
- Managers strive for “immediate success,” in this case an immediate solution to the problem. For instance the spokesman for Russia’s Atomic Energy Ministry said in 1998, “We shall deal with the [Y2K] problem in the year 2000” [The Associated Press, June 1998]. Although government leaders changed three times since then, the approach remained the same. A substantially different approach could not have been adopted because of time limits. Many business organizations were still developing their own cultures. Their managers, due to their age, have a background of working and living in the state-centered administrative system. They still imitate a government administrative process when choosing the basic mode of operation. Therefore, it is quite likely that those who were aware of the problem had chosen the approach of immediate success.
- Managers “do not think much before acting”. Dealing with the problem in the year 2000 reflects this pattern best of all.
Gouchtchina [1999] has mentioned some distinctive patterns of American culture which were observable in Y2K work in the US:
- A systematic approach to the problem with all parts of society aware and involved in preventing negative consequences. The problem was addressed in the US
| 1993-1995 (awareness among a few technical people) | Articles in scientific periodicals and press | Lack of awareness |
| 1996-first part of 1997 (increasing awareness in society) | Early government activities; business organizations (especially IT corporations) test their products and equipment | Lack of awareness |
| 1997-1998 (action) | Widespread equipment repair and replacement, contingency planning | Articles in press,Government plans activities for state organizations, remediation, launch of millenium bug campaign |
| 1999- present (relief, rethinking) | Fewer problems found than expected with embedded systems | Reassessing the scope of the problem, contingency planning, absence of significant disruptions |
- Approaching the problem as a learning experience for the whole society, regardless of differences in attitudes toward the problem. The evolution of the problem can be viewed as a social learning process, when people acquire knowledge of the problem by becoming aware of it and gain skill in dealing with it by taking action. The fact that early in the stage of relief many people expressed their opinion about the problem as nonsense meant sometimes lack of information but more often confidence due to actions taken.
Another pattern is the self-reliance of organizations and individuals in the US in dealing with problems. By the time the government began the Y2K campaign, a large part of society had already been aware of the problem, and many organizations had started testing equipment.
According to Gouchtchina, the American approach to the problem showed the “interconnectedness of all parts of the society, which seem initially to be separated.”
4 Business Organizations and Y2K
In this section we shall analyze some changes in business organizations in the US and Russia, which took place during their preparation for the date change. The Y2K problem could be viewed by business organizations from two perspectives: on the one hand it was an internal problem, requiring action to fix internal equipment. On the other hand it was an external problem, requiring that organizations ensure that supplies and customers were also ready. We shall consider how the problem influenced the internal organization using the Seven-S model for organizational effectiveness proposed by Waterman and Peters [1980]. The model includes the following components: goals, structure, strategy, skills, staff, style and systems.
One way to view Y2K was as temporary problem which would not significantly change key organizational concepts, values and aspirations. The other way of looking at the problem was to generalize it to the whole path of technological development. Such an attitude to the problem could have influenced many organizations, if people came to question the role of technology in their lives. Most managers in US organizations preferred to interpret Y2K as reinforcing their goals instead of questioning them. Most Russian business organizations are still in search of their goals. Y2K could have changed the direction of that search. However, the attractiveness of IT outweighed any possible negative views IT in the minds managers.
Many organizations in the US made some changes in structure during preparations. Those changes included setting up command centers and implementing Y2K preparedness projects by specially created organizational units. In Russia most of the preparedness activities were outsourced or undertaken by the IT departments of organizations.
With regard to strategies some companies may have considered buying failed companies, but so far few companies have failed.
Preparedness activities were impossible at US organizations without changes of organizational systems and introduction of special managerial procedures during equipment testing and contingency planning. For Russian organizations equipment testing was part of the usual operation of the IT units.
As far as management style was concerned, the problem was communicated by managers of US businesses to the whole organization, while in Russia mainly to IT specialists.
Staffing of the problem solution reveals the same difference. In the US different departments were involved in contingency planning and in reassuring customers, while in Russia only IT staff was involved. The success of IT staff in US organizations in dealing with the problem often influenced their careers. In Russia the demand for IT specialists is higher. Therefore, some malfunctions rarely influence their careers in any significant way.
For US businesses Y2K was an experience in acquiring new skills in such fields as finding ways of preventing technological problems, finding an appropriate IT service subcontractor, and inventorying their technology. Although the experience of Russian organizations was similar, it was less intensive, because less equipment had to be repaired or replaced.
In the summer of 1999 a representative of the Russian the government said, “Russia expects nothing terrible” [Babakian, 1999]. It should be mentioned here that years of market reforms made the level of perception of what is
considered to be terrible higher in Russia. This is true for Russian organizations, their managers and customers.
Supply chain management was also a problem addressed in many publications in the US. Just-in–time delivery is the most obvious and frequently used example of how manufacturing systems are vulnerable to supply chain disruptions. This type of delivery system is not widespread in Russia.
Due to weak competition in most sectors, businesses were not threatened by the possibility of losing customers merely because of some operational problems. So, organizations did not pay significant attention to the problem before January 2000.
A summary of American and Russian approaches to the Y2K problem is shown in Table 2.
5 Conclusions
Our analysis allows us to illustrate some economic, cultural and organizational differences between the US and Russia by comparing their approaches to the Y2K problem.
For Russian organizations Y2K was considered to be merely an additional lesson in crisis management. For American organizations Y2K was an unprecedented challenge. As it turned out, both passed the test. The Russian approach was less expensive than the American approach. Russian businesses are jumping through stages of evolution from an industrial to a post-industrial economy using both innovation-accepting and innovation-imitating strategies. But still Russian businesses are rather far from the stage of a developed digital economy.
Spending money on a problem of a rather obscure nature and uncertain consequences shows the importance of technology issues for developed digital economies. The attention paid to Y2K and the amount of money spent by organizations in both public and private sectors is a good indicator of the level of development of the digital economy in a country. Russian business organizations were less influenced by the problem because it was not a significant environmental threat for them.
The highlighted cultural differences paralleled differences in economic priorities and showed the interdependence of economics and culture. As was mentioned above, US IT researchers and the mass media paid considerable attention to the preparedness of Russian computers for the date change. The major shortcoming of those forecasts and evaluations was that they took a digital perspective of the problem. As Leon Kappelman [2000] indicates, “our experts did not understand this (the fact that Russian organizations do not use many microprocessors), as they never went to (Russia).”
Y2K may become one of the first issues to study in such courses as “Digital Political Economy” or “Digital Management”.
References
[Associated Press, 1998] The Millenium Can Wait. The
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| Early awareness of the problem | Late awareness of the problem |
| Many embedded systems | Few embedded systems |
| Many computerized business systems | Few computerized business systems |
| Preventive and reactive strategy for problem solving | Reactive strategy for problem solving |
| Organizational variables affected include structure, systems, staff, management style, skills | Organizational variables affected include systems |
| Contingency planning at strategic and operational levels | Contingency planning at the operational level |
| Considerable infrastructure for solving the problem | Little infrastructure for solving the problem |
| Attention distracted by impeachment, elections | Attention distracted by political and economic problems |
| Extensive use of internet to share solutions | Less use of internet |
| Long history of taking individual initiative and not waiting for government to act | Tradition, although changing, of not acting until government says to act |
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