Introduction: The Emergence of Information Technology as a Strategic Issue 1
Although information systems of some form or another have been around since the beginning of time, information technology (IT) is a relative newcomer to the scene. The facilities provided by such technology have had a major impact on individuals, organizations and society. There are few companies that can afford the luxury of ignoring IT and few individuals who would prefer to be without it . . . despite its occasional frustrations and the fears it sometimes invokes.
An organization may regard IT as a ‘necessary evil’, something that is needed in order to stay in business, while others may see it as a major source of strategic opportunity, seeking proactively to identify how IT-based information systems can help them gain a competitive edge. Regardless of the stance taken, once an organization embarks on an investment of this kind there is little opportunity for turning back.
As IT has become more powerful and relatively cheaper, its use has spread throughout organizations at a rapid rate. Different levels in the management hierarchy are now using IT where once its sole domain was at the operational level. The aim now is not only to improve efficiency but also to improve business effectiveness and to manage organizations more strategically. As the managerial tasks become more complex, so the nature of the required information systems (IS) changes – from structured, routinized support to ad hoc, unstructured, complex enquiries at the highest levels of management.
IT, however, not only has the potential to change the way an organization works but also the very nature of its business (see, for example, Galliers and Baets, 1998). Through the use of IT to support the introduction of electronic markets, buying and selling can be carried out in a fraction of the time, disrupting the conventional marketing and distribution channels (Malone et al., 1989;
Holland, 1998). Electronic data interchange (EDI) not only speeds up transactions but allows subscribers to be confident in the accuracy of information being received from suppliers/buyers and to reap the benefits of cost reductions through automated reordering processes. On a more
strategic level, information may be passed from an organization to its suppliers or customers in order to gain or provide a better service (Cash, 1985). Providing a better service to its customers than its competitors may provide the differentiation required to stay ahead of the competition in
the short term. Continual improvements to the service may enable the organization to gain a longer-term advantage and remain ahead.
The rapid change in IT causes an already uncertain business environment to be even more unpredictable. Organizations’ ability to identify the relevant information needed to make important decisions is crucial, since the access to data used to generate information for decision making is no longer restricted by the manual systems of the organization. IT can record, synthesize, analyse and disseminate information quicker than at any other time in history. Data can be collected from different parts of the company and its external environment and brought together to provide relevant, timely, concise and precise information at all levels of the organization to help it become more efficient, effective and competitive.
Information can now be delivered to the right people at the right time, thus enabling wellinformed decisions to be made. Previously, due to the limited information-gathering capability of organizations, decision makers could seldom rely on up-to-date information but instead made important decisions based on past results and their own experiene. This no longer needs to be the case. With the right technology in place to collect the necessary data automatically, up-to-date information can be accessed whenever the need arises. This is the informating quality of IT about which Zuboff (1988) writes so eloquently.
With the use of IT, as with most things, comes the possibility of abuse. Data integrity and security is of prime importance to ensure validity and privacy of the information being held.
Managing the information involves identifying what should be kept, how it should be organized, where it should be held and who should have access to it. The quality of this management will dictate the quality of the decisions being taken and ultimately the organization’s survival.
With the growth in the usage of IT to support information provision within organizations, the political nature of information has come into sharper focus. Gatekeepers of information are powerful people; they can decide when and if to convey vital information, and to whom. They are likely to be either highly respected, or despised for the power that they have at their fingertips.
Such gatekeepers have traditionally been middle managers in organizations. Their role has been to facilitate the flow of information between higher and lower levels of management. With the introduction of IT such information can now be readily accessed by those who need it (if the right IT infrastructure is in place) at any time. It is not surprising then that there is resistance to the introduction of IT when it has the potential of changing the balance of power within organizations. Unless the loss in power, through the freeing up of information, is substituted by something of equal or more value to the individuals concerned then IT implementations may well be subject to considerable obstruction.
Developments in IT have caused revolutionary changes not only for individual organizations but for society in general. In order to understand the situation we now find ourselves in with respect to IT, it is as well to reflect on their developments. This is the subject matter of Chapter
1. Written by Somogyi and Galliers, it describes how the role of IT has changed in business and how organizations have reacted to this change. They attempt, retrospectively, to identify major transition points in organizations’ usage of IT in order to provide a chronicle of events, placing today’s developments in a historical context. The chapter charts the evolution of the technology itself, the types of application used by organizations, the role of the DP/IS function and the change in the methods of system development. Such histories are not merely academic exercises, they can serve as a foundation for future progress, allowing organizations to avoid past mistakes and to build on their successes. A postscript has been added in order to bring the original article up to date, listing a number of key applications that have appeared over the past decade or so.
1 Developments in the Application of Information Technology in Business 3
Information technology in business: from data processing to strategic information systems
Introduction
Computers have been used commercially for over three decades now, in business administration and for providing information. The original intentions, the focus of attention in (what was originally called) data processing and the nature of the data processing effort itself have changed considerably over this period. The very expression describing the activity has changed from the original ‘data processing’, through ‘management information’ to the more appropriate ‘information processing’.
A great deal of effort has gone into the development of computer-based information systems since computers were first put to work automating
clerical functions in commercial organizations. Although it is well known now that supporting businesses with formalized systems is not a task to be taken lightly, the realization of how best to achieve this aim was gradual. The change in views and approaches and the shift in the focus of attention have been caused partly by the rapid advancement in the relevant technology. But the changed attitudes that we experience today have also been caused by the good and bad experiences associated with using the technology of the day. In recent years two other factors have contributed to the general change in attitudes. As more coherent information was made available through the use of computers, the general level of awareness of information needs grew. At the same time the general economic trends, especially the rise in labour cost, combined with the favourable price trends of computer-related technology, appeared to have offered definite advantages in using computers and automated systems. Nevertheless this assumed potential of the technology has not always been realized.
This chapter attempts to put into perspective the various developments (how the technology itself changed, how we have gone about developing information systems, how we have organized information systems support services, how the role of systems has changed, etc.), and to identify trends and key turning points in the brief history of computing. Most importantly, it aims to clarify what has really happened, so that one is in a better position to understand this seemingly complex world of information technology and the developments in its application, and to see how it relates to our working lives.
One word of warning, though. In trying to interpret events, it is possible that we might give the misleading impression that things developed smoothly.
They most often did not. The trends we now perceive were most probably imperceptible to those involved at the time. To them the various developments might have appeared mostly as unconnected events which merely added to the complexity of information systems.
Summary
The role of computerized information systems and their importance in companies have undergone substantial transition since the 1950s. Over the same period both the technology and the way it was viewed, managed and employed changed considerably. The position and status of those responsible for applying the technology in various organizations have become more prominent, relevant and powerful, having moved from data processing, through management services, to information processing. At the same time, hitherto separate technologies converged into information technology.
As technology moved from its original fragmented and inflexible form to being integrated and interconnected, the management of its use in terms of both operations and system development changed in emphasis and nature.
Computer operations moved from a highly regulated, centralized and remote mode to becoming more ad hoc and available as and when required. The systems effort itself progressed from concentrating on the programming process, through discovering the life-cycle of systems and the relevance of data, to more planned and participative approaches. The focus of attention changed from the technicalities to social and business issues.
Systems originally replaced clerical activities on the basis of stand-alone applications. The data processing department’s original role was to manage the delivery and operation of these predominantly back-room systems. When data became better integrated, and more management-orientated information was provided, the management services departments started concentrating on better management of their own house and on making links with other departments and functions of the business which needed systems. This trend, combined with the increased variety and availability of sophisticated and easier to use technology, has led to the users taking a more active role in developing their own systems.
Lately, since it is realized that information is an important resource which can be used in a novel way to enhance the competitive position of business, information technology and information systems are becoming strategically important for business. Information systems are moving out of the backroom, low-level support position, to emerge as the nerve centres of organizations and competitive weapons at the front end of businesses. The focus of attention moved from being tactical to becoming strategic, and changed the nature of systems and the system portfolio.
It is evident that activity in the information systems field will continue in many directions at once, driven by fashion and market forces, by organizational need and technical opportunity. However, it appears that the application of information technology is at the threshold of a new era, opening up new opportunities by using the technology strategically for the benefit of organizations and businesses. It is still to be seen how the technology and the developers will deliver against these new expectations.
We begin our discussion of key aspects of strategic information management by focusing on information systems (IS) strategy, the inner circle of our conceptualization of the term, reproduced below as Figure I.1, and comprising:
• an information strategy
• an information technology (IT) strategy
• an information management strategy, and
• a change management strategy.
Information systems planning, the process by which IS strategies are formulated and/or emerge, is the subject of Part Two.
In our search for articles that focus on these components of IS strategy, it became clear that some aspects of the topic receive more attention than others; that there are various definitions and conceptualizations of strategy relating to information systems; that there is some confusion between the terms information systems strategy and information systems planning; and that there is little to be found on the context of IS strategy. Also, there are very few current articles focusing on IS strategy.* It would seem that IS strategy is now more important than ever, with flexible information infrastructures being a requirement for any organization hoping to grow efficiently and effectively (Ciborra et al., 2000). In this part of the book, we set out to provide greater clarity as to the IS strategy domain, as well as to highlight key features and the results of recent research into the topic. Our overall orientation is to focus on the topic at a fairly general level rather than to look at the specifics, such as management of IS and the IS development process or the changing role and requisite capabilities/skills of IS managers and IS personnel generally. Useful sources of information covering these topics include Avison and Fitzgerald (1995) and Willcocks et al. (1997). Other important topics not covered in any depth here include infrastructural issues; sourcing IS services, and lessons from implementation failures. Useful references here include Gunton (1989), Ciborra et al. (2000), Ward and Griffiths (1996), Kwon and Zmud (1987), Willcocks and Lacity (1997), Lacity and Willcocks (2000), and Sauer (1993).
We commence, in Chapter 2, with a general overview of the topic by reflecting on the socalled ‘stages of growth’ concept as applied to IS/IT, first articulated by Nolan (Gibson and Nolan, 1974; Nolan, 1979), following Greiner’s (1972) broader consideration of evolutionary and revolutionary phases of organizational development. The ‘stages’ model has come in for considerable criticism as a means of predicting future developments, its overly narrow technological focus, the original concept’s grounding in the database technology of the mid- to late-1970s, and its lack of empirical support (e.g. Benbasat et al., 1984; King and Kraemer, 1984), but its intuitive appeal to both IS and business executives is remarkably robust.
Galliers and Sutherland’s original intention was to extend the earlier Nolan frameworks to counter criticisms of their narrow, and dated, technological orientation, by focusing on a broader set of strategic, organizational and managerial issues, as well as those related to IS per se. Their work was informed by the so-called ‘Seven-S’ concept popularized by McKinsey & Co., with a view to providing a closer ‘fit’ between IS and the business, and by a range of ‘stages’ models that had been developed during the latter half of the 1980s (including, e.g. Earl, 1986 and Hirschheim et al., 1988). Experiences of applying the framework in many organizations since its original development give credence to the earlier claim regarding its robustness, in terms of its general applicability and time independence. Note, however, that the authors would not wish to claim that the framework represents reality; rather, it can be used to considerable effect in raising questions and awareness regarding key IS strategy and IS management issues across a range of stakeholders. The sociologist, Karl Weick, tells a story of a detachment of the Italian army lost in a blizzard in the Alps. After a period of uncertainty and no small amount of fear for their safety, and with no apparent means of knowing which route to take to get back to base camp, an old rumpled map is found at the bottom of someone’s rucksack. A route is determined, and the group regain base camp with much relief. It is only under the brighter camplight that they realize the map is of the Pyrenees – not the Alps!
Galliers and Sutherland’s framework should be interpreted with this story in mind: it does not pretend to represent reality, but provides a means (a map) of obtaining some shared understanding as to what the key issues might be, and what might need to be done to move ahead. Further reading on applications of the framework may be found in Galliers (1991) and Galliers et al. (1994), for example.
Chapter 3, by Smits, van der Poel and Ribbers, is the closest we found to an article representing our view of information strategy, as depicted in Figure I.1. Our intention was to include a chapter which focused attention on the strategic information required to enable the implementation of business strategy, and which would provide strategists with information that would enable the questioning of assumptions on which that strategy was based. This would include information from the business and technological environment, and feedback information concerned with the impact (both intended and unintended) of the strategy once implemented.
Smits and colleagues describe the information strategies of three major insurance companies in the Netherlands. The chapter includes reflections on the various stakeholders involved in the IS process, and on aligning IT to business goals and processes. A major finding, contrary to the above comment regarding necessary feedback information (and in our experience common to most organizations), was that none of the companies studied assess the effects of their information strategies at an organization-wide or business process level, and certainly not over time.
Chapter 4, by Karimi and Konsynski, focus attention on alternative structures associated with different global strategies and consider the need to align the information technology departmental structure with these alternatives in mind. Useful illustrations are given from various, very different, parts of the world including, for example, Finland and Singapore, as well as North America. Key issues associated with, for example, different regulatory environments and transborder data flows are highlighted. A key point that this chapter makes relates to the kind of relationship that should exist between considerations of organizational form and IT infrastructure, highlighted in the innermost circle of our conceptualization of strategic information management in Figure I.1. For further reading on transnational organizations and associated strategic management issues see, for example, Ohmae (1989).
In Chapter 5, we turn to the topic of managing change – a key feature in any IS strategy, as in any other strategy process (see, for example, Whittington, 1993). While strategy formulation (or formation) is one thing, implementation is quite another matter, suggest Markus and Benjamin! The authors focus on the role of IS professionals in the change process, their motivation being to ‘stimulate IS specialists’ efforts to become more effective – and more credible – agents of organizational change’. They describe – and critique – what they believe to be a commonly-held view of this role on the part of IS professionals, namely one which is embedded in technological determinism: a belief in ‘the ability of technology (versus people) to cause change’.* Referring to the organizational design† literature, they propose two alternative models that might be more appropriate, and more successful, in the light of the rapidly changing nature and impact of modern IT: the ‘facilitator’ model and the ‘advocate’ model. As a result they propose new skills and career paths for IS personnel and IT managers, a revised research agenda for IS academics, and reform of IS educational curricula‡ to take account of the ‘softer’ skills necessary for the changed conditions pertaining in the late 1990s and into the twenty-first-century.
Chapter 5 brings Part One of the book, dealing with IS strategy, to a close. We trust that our treatment of this aspect of strategic information management has demonstrated just what a diverse and important topic this is – i.e. that it is much more broadly based than commonly assumed, often with the focus being little more than on information technology issues. Part Two then focuses on information systems planning, the means by which this more broadly based strategy may be developed.
Introduction
For some time, reason has held that the organizational growth with respect to the use of Information Technology (IT) and the approach organizations take to the management and planning of information systems could be conceived of in terms of various, quite clearly defined, stages of maturity. Whilst there has been some criticism of the models that have been postulated, many view the various ‘stages of growth’ models as being useful in designating the maturity (in IT terms) of organizations. Four such ‘stages of growth’ models are described briefly below, i.e. those postulated by: (a) Nolan (1979); (b) Earl (1983; 1986, as amended by Galliers, 1987a, 1989*); (c) Bhabuta (1988), and (d) Hirschheim et al. (1988).
The Nolan model is perhaps the most widely known and utilized of the four – by both practitioner and researcher alike. Despite its critics, by 1984 it had been used as a basis for over 200 consultancy studies within the USA by Nolan, Norton and Company, and had been incorporated into IBM’s information systems planning consultancies (Nolan, 1984); Hamilton and Ives (1982) report that the original article describing the model (Gibson and Nolan, 1974) was one of the 15 most cited by information systems researchers.
This chapter describes the information strategies of three major insurance companies in the Netherlands. A research model was developed as an aid to describe how managers nowadays deal with information strategy. We report on the linkages between information strategies and business strategies, the roles of the stakeholders involved, and how the results are perceived. We found that in all three companies the executive board, IT management and line management are heavily involved in the information strategy process. The main focus in the three companies is on adjusting IT to business goals and processes, with only some attention directed towards creating a competitive advantage with IT. With respect to the effects of information strategy, we found that none of the three companies systematically evaluate the effects of information strategies on an organizational or a business process level. More case study research is required to look into the evolutionary changes of information strategies within organizations, and the effects of information strategies on the business processes and the use of IT over time.
6 Conclusions
The research questions were: (i) how can the practice of information strategy in an organization be analysed; (ii) what is the actual practice in the insurance industry; and (iii) how does information strategy relate to business strategy?
We also looked for possible changes in the approach to information strategy over a period of about four years.
With respect to the research methods employed, we conclude, in line with Earl (1993), Walsham and Waema (1994) and others, that the analysis of information strategy should not be based on the results of only one interview with one (senior) manager, nor should it be based on postal surveys alone. It requires significant effort to obtain an accurate view on information strategy in an organization, due to the complex and often implicit meaning of the concept of information strategy. Our study in a substantial and representative part of the insurance industry in the Netherlands shows significant differences with findings based on surveys reported in the literature: we found more participants involved with, and more effort spent on information strategy, and more efforts to link information strategy to business strategy and processes.
We found that information strategy is a well-known and important concept, with often an implicit meaning to the managers involved. Senior management is heavily involved in information strategy: the members of the executive board in two companies in this study spent up to 20 per cent of their time. This is also reported by Walsham and Waema (1994): the CEO of a building company (500employees) was involved in information strategy 25 per cent of his time.
We find it peculiar that the organizations spend significant efforts in information strategies but do not evaluate their effects, nor try to learn from
previous information strategy planning experiences and effects. The reasons for this might be that managers are not used to evaluating strategies, and, obviously related to this, do not expect to gain useful insights.
Henderson and Venkatraman (1993) described the linkages between business strategy and information strategy in the strategic alignment model
(Figure 3.1). In the model they distinguish four (linked) domains in an organization: (i) the business strategy domain; (ii) the business processes
domain; (iii) the IT strategy domain; and (iv) the IT processes domain. We have found in the three cases that serious attention to information strategy is paid by various managers from all four domains. The main role can be played by the chief executive from the business strategy domain, or by the senior IT manager, but in each case all domains play an active and important role.
Of importance is how the information strategy and the business strategy are aligned, or linked (Parker et al., 1989; Henderson and Venkatraman, 1993).
There are two main perspectives on how alignment can take place. In the first perspective the business strategy is the driving force for the business processes or for the IT strategy, ultimately affecting the IT processes. In the second perspective it is the other way around: the IT strategy is the driving force for the IT processing or the business strategy, ultimately affecting the business processes. In the three cases we encountered mainly the first perspective. More specifically, the business processes and (in a lesser extent) the business strategy are the driving force for the IT processes, which subsequently influence the information strategy. We have not found clear examples indicating a more immediate influence of business strategy on information strategy, or vice versa.
An added dimension to information strategy is offered by the insight in the evolution through the years of the information strategy of the three companies.
We found some indications that the roles, responsibilities and influence of the various managers in the three cases change over time, but more case studies are needed to be able to look into the developments of information strategies (Smits and van der Poel, 1996). Additional research, also in other lines of business, is needed to compare and further clarify the relations between the environment, the process, the content, and the effects of information strategy.
Changes in technologies and market structures have shifted competition from national to a global scope. This has resulted in the need for new organizational strategies/structures. Traditional organizational designs are not appropriate for the new strategies, because they evolved in response to different competitive pressures. New organizational structures need to achieve both flexibility and coordination among the firm’s diverse activities in the new international markets.
Globalization trends have resulted in a variety of organizational designs that have created both business and information management challenges. A global information systems (GIS) management strategy is required.
The key components of a GIS management strategy should include: (1) a centralized and/or coordinated business/technology strategy on establishing data communications infrastructure, architecture, and standards, (2) a centralized and/or coordinated data management strategy for design of corporate databases, and (3) alignment of global business and GIS management strategy. Such a GIS management strategy is appropriate today because it facilitates coordination among a firm’s value-chain activities and
among business units, and because it provides the firm with the flexibility and coordination necessary to deal effectively with changes in technologies and market structures. It also aligns information systems management strategy with corporate business strategy as it provides a foundation for designing information systems architecture (ISA).
In addition to the global enterprise’s competitive posture, globalization also refers to the competitive posture of nations and city-states.26,27 The issues related to coordination and control in the global enterprise also invest the nation/state to review the alignment of its cross-industry competitive posture.31,42 It is incumbent on governments to seek appropriate levels of intervention in the business practices of the state that influence the state’s competitive position in the global business community.
The challenges to general managers in the emerging global economic environment extend beyond the IT infrastructure. At the same time, with the information intensity in the markets (products, services, and channel systems) and the information intensity associated with coordination across geographic, cultural, and organizational barriers, global general managers will rely increasingly on information technologies to support their management processes. The proper alignment of the evolving global information management strategy and the global organizational strategy will be important to the positioning of the global firm in the global economic community.
We wrote this chapter to stimulate Information Systems (IS) specialists’ efforts to become more effective – and more credible – agents of organizational change. It describes what we believe to be a view of the IS specialists’ change-agent role that is very commonly held by IS specialists.
We believe that this role, while well-intentioned and supported by structural conditions in IS work, often has negative consequences for organizations and for the credibility of IS specialists. Further, it does not fit the emerging structural conditions of IS. We describe two alternative models of what it means to be a change agent, their potential consequences, and the structural conditions that support or inhibit behavior in that role. We conclude that increased behavioral flexibility of IS specialists – the ability to switch roles in different circumstances – would improve organizational effectiveness and IS specialist credibility. Finally, we discuss the implications of our analysis for research, teaching, and practice.
Conclusion
We undertook this research to stimulate IS specialists’ efforts to become more effective agents of organizational change. We discovered a variety of obstacles. First, we found widely differing views about what it means to be a change agent. Unless these differences are acknowledged directly, miscommunication is likely to arise, inhibiting progress. We found, further, that many IS specialists do not see any need to change, because they already view themselves as effective change agents. However, their definition of the IS change-agent role does not fit the emerging structural conditions of inhouse IS work, and this role erodes the credibility of the in-house IS function. In addition, we found several structural barriers to change in the IS changeagentry role, especially overreliance on technical expertise, control authority, and an inappropriate reward system.
Despite these obstacles, we remain optimistic about the prospects for change in the role of the in-house IS specialist. IS managers and executives have the structural ability to act as effective change advocates inside IS departments. Further, IS managers and executives are likely to be effective change advocates with their peers and superiors when the topic is structural change in the IS function. Voluntary efforts on the part of IS departments to relinquish or share the control that their clients so resent could substantially
increase IS credibility and influence in major enterprise change efforts.
Having considered information systems (IS) strategy and its various component parts, we turn, in Part Two to that aspect of strategic information management concerned with information systems planning (cf., the shaded portion of Figure II.1 below) which, as already noted, we view as the means by which an IS strategy may be developed. We first place IS planning in context and then consider various approaches to and the process of IS planning. We conclude Part Two with the vexed question of evaluating the outcomes of the IS planning process. For further reading on IS planning see, for example, Earl (1989) and Ward and Griffiths (1996).
As an increasing number of businesses expand their operations into international markets, in order to succeed they need to understand the considerable cultural, economic, and political diversity that exists in different parts of the world. For these reasons, while information technology is a critical enabler and many times a driver of global business expansion, it cannot be applied uniformly across the world. This chapter is aimed at
analyzing the key information systems/technology (IS/IT) issues identified during the last decade in different regions of the world. Spurred by periodic key IS issues studies in the USA, several researchers have attempted to do the same for many other countries. We summarize many of their findings, and provide insights into the various differences and similarities among countries.
A precursory model is developed to help understand the underlying causes into the nature of the issues. Elements of a more detailed model, worthy of further exploration, are also presented.
Conclusions
Reports of information systems management issues in different parts of the world are useful to organizations as they begin to plan and implement IT applications across the world. In this chapter, we have presented IS issues for many countries, and have examined the issues in USA, Taiwan, India, and Kenya and Zimbabwe in greater depth. The world is a large place, and attempting to understand the critical issues in every single country, or even selected countries, would be an arduous, perhaps an imprudent task. Instead, we have divided countries into four classes, and have provided an example in each class. An elementary model for the global IT environment has been postulated based on this categorization. While generalizations are fraught with risks, the provision of such a model will help practitioners and researchers alike in a preliminary assessment of the criticality of the various IT issues in different regions of the world. In closing, we would like to exhort others to pursue the following lines of investigation:
1 Develop and validate sound models that seek to explain the country issues.
A simple model was presented in Figure 6.1. Elements of a more comprehensive model may include economic growth, national culture, and political system as causal factors, among others (as in Figure 6.2).
2 Evaluate the predictive capability of such models as well as report on the use of the models for prediction. While descriptive studies are helpful in identifying the key issues of individual countries at a point in time, this can be an enormous and time-consuming proposition given the number of countries in the world and the temporal nature of the issues. However, if the determinants of the key issues are known, then a preliminary estimation of the issues will be easier to make.
3 Use the model for focused research. For example, if culture is identified as one of the factors influencing IT needs, then it can be explored in more detail both in terms of culture components and IT components that are influenced by it.
4 Develop a comprehensive universal instrument and methodology that can be applied globally to identify the key IS issues. This instrument should then be administered simultaneously (or approximately in the same time frame) by a group of researchers in different countries. One of the limitations of previous ‘key issue’ studies is that they have used different questionnaires, different time frames, and different methods to assess the issues. While difficult, this undertaking will be very helpful in obtaining reliable results.
5 Develop specific practical implications and uses of the ‘key issues’ results.
How can they be incorporated into the formulation of national policy, corporate policy or IS policies within an organization?
Strategic information systems planning (SISP) remains a top concern of many organizations. Accordingly, researchers have investigated SISP practice and proposed both formal methods and principles of good practice. SISP cannot be understood by considering formal methods alone. The processes of planning and the implementation of plans are equally important. However, there have been very few field investigations of these phenomena. This study examines SISP experience in 27 companies and, unusually, relies on interviews not only with IS managers but also with general managers and line managers. By adopting this broader perspective, the investigation reveals companies were using five different SISP approaches: Business-Led, Method-Driven, Administrative, Technological, and Organizational. Each approach has different characteristics and, therefore, a different likelihood of success. The results show that the Organizational Approach appears to be most effective. The taxonomy of the five approaches potentially provides a diagnostic tool for analyzing and evaluating an organization’s experience with SISP.
Conclusions
This study evolved into a broad, behavioral exploration of experiences in large organizations. The breadth of perspective led to the proposition that SISP is more than method or technique alone. In addition, process issues and the question of implementation appear to be important. These interdependent elements combine to form an approach. Five different SISP approaches were identified, and one, the Organizational Approach, appears superior.
For practitioners, the taxonomy of SISP approaches provides a diagnostic tool to use in evaluating the effectiveness of their SISP efforts and in learning from their own experiences. Whether rethinking SISP or introducing it for the first time, firms may want to consider adopting the Organizational Approach.
Two reasons led to this recommendation. First, among the companies explored, it seemed the most effective approach. Second, this study casts doubt on several of the by now ‘traditional’ SISP practices that have been advocated and developed in recent years.
The ‘approach’ construct presented in this chapter, the taxonomy of SISP approaches derived, and the indication that the least formal and least analytical approach seems to be most effective all offer new directions for SISP research and theory development.
Conclusion
Effective SISP is a major challenge facing business executives today. It is an essential activity for unlocking the significant potential that information technology offers to organizations. This chapter has examined the challenges of SISP.
In summary, strategic information systems planners are not particularly satisfied with SISP. After all, it requires extensive resources. Top management commitment is often difficult to obtain. When the SISP study is complete, further analysis may be required before the plan can be executed. The execution of the plan might not be very extensive. Thus, while SISP offers a great deal – the potential to use information technology to realize current business strategies and to create new ones – too often it is not satisfactorily done.
In fact, despite its complex information technology ingredient, SISP is very similar to many other business planning endeavours. For this reason alone, the involvement of top management and business planners has become increasingly indispensable.
Introduction
Information Technology (IT) now represents substantial financial investment.
By 1993, UK company expenditure on IT was exceeding £12 billion per year, equivalent to an average of over 1.5% of annual turnover. Public sector IT spend, excluding Ministry of Defence operational equipment, was over £2 billion per year, or 1% of total public expenditure. The size and continuing growth in IT investments, coupled with a recessionary climate and concerns over cost containment from early 1990, have served to place IT issues above the parapet in most organizations, perhaps irretrievably. Understandably, senior managers need to question the returns from such investments and whether the IT route has been and can be, a wise decision.
This is reinforced in those organizations where IT investment has been a high risk, hidden cost process, often producing disappointed expectations.
This is a difficult area about which to generalize, but research studies suggest that at least 20% of expenditure is wasted and between 30% and 40% of IT projects realize no net benefits, however measured (for reviews of research see Willcocks, 1993). The reasons for failure to deliver on IT potential can be complex. However major barriers, identified by a range of studies, occur in how the IT investment is evaluated and controlled (see for example Grindley, 1991; Kearney, 1990; Wilson, 1991). These barriers are not insurmountable.
The purpose of this chapter is to report on recent research and indicate ways forward.
Conclusions
The high expenditure on IT, growing usage that goes to the core of organizational functioning, together with disappointed expectations about its impact, have all served to raise the profile of how IT investment can be evaluated. It is not only an underdeveloped, but also an undermanaged area which organizations can increasingly ill-afford to neglect. There are wellestablished traps that can now be avoided. Organizations need to shape the context in which effective evaluation practice can be conducted. Traditional
techniques cannot be relied upon in themselves to assess the types of technologies and how they are increasingly being applied in organizational settings. A range of modern techniques can be tailored and applied. However, techniques can only complement, not substitute for developing evaluation as a process, and the deeper organizational learning about IT that entails. Past evaluation practice has been geared to asking questions about the price of IT.
Increasingly, it produces less than useful answers. The future challenge is to move to the problem of value of IT to the organization, and build techniques and processes that can go some way to answering the resulting questions.
We now turn, in Parts Three and Four, to the contexts within which both information systems planning and information systems strategy take place. First, in Part Three, we consider the information systems strategy–business strategy relationship, while in Part Four we consider information systems strategy in the wider organizational environment. As can be seen from Figure III.1 (cf. the shaded portion of the diagram), our focus in Part Three is on aspects of the relationship itself (Chapters 10 and 11), on key strategic issues that have exercised minds in recent years, namely electronic commerce and the impact of the Internet (Chapters 12 and 13), and on
the ever important issue of how to evaluate IS investment proposals.
In the first edition of Strategic Information Management we included an article by Clemons and Row (1991), which reflected the then state-of-the-art thinking on the attainment of competitive advantage from the astute utilization of information technology. This article was representative of many on this topic that appeared in the period from the mid-1980s through to the 1990s. The earlier articles focused on the issue of obtaining competitive advantage from IT (see, for example Ives and Learmonth, 1984; McFarlan, 1984; Cash and Konsynski, 1985; Porter and Millar 1985; Copeland and McKenney, 1988), while concerns in the latter part of the period were directed more towards sustaining that advantage (see, for example, Feeny and Ives, 1990, 1997; Mata et al., 1995). In the second edition of Strategic Information Management, we changed
the focus somewhat by reflecting more of the thinking of the 1990s on this important topic. Now, with the third edition, we focus on recent thinking in relation to the important issues of alignment, eBusiness and IT evaluation. All but one of the articles appearing in Part Three are new to this
edition.
We begin in Chapter 10 with an article by Reich and Benbasat that examines factors that influence alignment between business and IT objectives. Reich and Benbasat consider social alignment as a state in which business and IT executives have a shared understanding and commitment to the business and IT mission, objectives and plans. Using data gathered from ten business units in the Canadian life insurance industry, they looked at four factors: shared domain knowledge between business and IT executives; IT implementation success; communication between business and IT executives, and connections between business and IT planning
processes. All these four factors influence short-term alignment whereas only shared domain knowledge appears to influence long-term alignment. Reich and Benbasat further our understanding of what alignment entails and what factors are important in obtaining alignment.
Whereas Reich and Benbasat focus on the question of what influences alignment, Sabherwal, Hirschheim and Goles in Chapter 11 focus on the question of how alignment is actually achieved.
In contrast to the approach in Chapter 10, Chapter 11 employs a qualitative analysis of three case studies to highlight the value of a punctuated equilibrium model of alignment. They use the case studies to explain the way in which alignment evolves through modifications to an existing alignment pattern, punctuated by periodic transitions to a different alignment pattern. The transitions can be of an evolutionary or revolutionary character. Unlike prior research in the area
of alignment, Sabherwal et al. find that evolutionary periods of organizational change may or may not entail a high level of alignment and that revolutionary change does not always increase alignment. The chapter helps to challenge one to consider the question of whether managers can exercise strong control over alignment, or whether in fact alignment can ever be achieved in an ever-changing organizational climate.
It is interesting to note that many organizations created separate eBusiness units, rather than housing eBusiness initiatives under the IT organization. This was done partly out of a concern that an eBusiness unit reporting through IT would be unable to achieve rapid response to the demands of the market. One wonders whether chief executives did not feel IT could truly meet their strategic agendas in the area of eBusiness. In other companies, IT played and continues to play
a significant role in envisioning eBusiness strategies. Chapter 12 is an early article discussing electronic markets. By Lee and Clarke, this article offers many lessons on the conditions under which electronic markets will succeed. We believe this article provides lessons that are equally valuable today as when it first was published. This chapter provides us with an intriguing view of four cases where electronic market systems have been adopted: two successful, and two failed.
Noting the potential of IT in reducing transaction costs and increasing market efficiency, the authors demonstrate how economic benefits from such adoptions can be achieved. Conversely, adoption barriers are also identified ‘by analyzing transaction risks and resistance resulting from reengineering’. As a result of this analysis, the authors claim that successful deployment of electronic markets and redesign of market processes using electronic commerce solutions is less
about information technology per se, much more about understanding and managing the barriers and the projected economic benefits. For further classic readings on aspects of electronic commerce, see, for example, Rayport and Sviokla (1995); Benjamin and Wigand (1995), and Holland (1998). See also Elliott (2002).
Following Lee and Clarke’s presentation of two eBusiness success stories and two failures, we include the article recently published in the Harvard Business Review wherein Porter presents his well-known five forces model of industry structure and his model of the value chain in the context of the Internet. He identifies areas where eBusiness might rightfully have major impacts on industry structures and on the organizational value chain. While the article might have been
considered controversial had it been written several years earlier, few are likely to challenge the basic premises today: distorted market signals and the illusion of new rules of business led to gross exaggerations of the potential of the Internet to transform businesses, and to unwise investments. However, Porter does not argue that the eBusiness should be abandoned, but that companies should systematically consider eBusiness strategy in much the same way they develop
organizational strategy, by carefully reflecting upon the current and future nature of their respective industries and by carefully examining the strengths and weaknesses in their own value chains, in order to identify those areas in which eBusiness has the potential to offer the organization important competitive returns.
While the eBusiness era gave the impression that many were investing in IT with little consideration for the ultimate outcome, as the pace of change seemed to demand rapid IT
development and implementation, Chapter 14 offers a compelling example of how an organization can assess an IT proposal, even if the benefits are largely non-quantifiable. Irani and Love offer the story of a leading UK manufacturing organization during its adoption of a vendorsupplied Manufacturing Resource Planning (MRP) information system. Initially, led by a young, enthusiastic, but inexperienced management team, the company made an ‘act of faith’ decision to invest because they deemed the calculation of financial returns unachievable. The management team used a simplistic cost/benefit analysis where the perceived project costs and benefits were
listed, but no attempt to assign financial values to these costs and benefits were made.
Unfortunately for the team, the project ultimately ended in failure. Irani and Love caution against the argument that financial values cannot be assigned and counsel us not to make IT investments based solely on intuition.
The establishment of strong alignment between information technology (IT) and organizational objectives has consistently been reported as one of the key concerns of information systems managers. This chapter presents findings from a study which investigated the influence of several factors on the social dimension of alignment within ten business units in the Canadian life insurance industry. The social dimension of alignment refers to the state in which business and IT executives understand and are committed to the business and IT mission, objectives and plans.
The research model included four factors that would potentially influence alignment: (1) shared domain knowledge between business and IT executives,
(2) IT implementation success, (3) communication between business and IT executives, and (4) connections between business and IT planning processes.
The outcome, alignment, was operationalized in two ways: the degree of mutual understanding of current objectives (short-term alignment) and the
congruence of IT vision (long-term alignment) between business and IT executives.
A total of 57 semi-structured interviews were held with 45 informants.
Written business and IT strategic plans, minutes from IT steering committee meetings, and other strategy documents were collected and analyzed from each of the ten business units.
All four factors in the model (shared domain knowledge, IT implementation success, communication between business and IT executives, and connections between business and IT planning) were found to influence short-term alignment. Only shared domain knowledge was found to influence long-term alignment. A new factor, strategic business plans, was found to influence both short- and long-term alignment.
The findings suggest that both practitioners and researchers should direct significant effort toward understanding shared domain knowledge, the factor which had the strongest influence on the alignment between IT and business executives, There is also a call for further research into the creation of an IT vision.
Conclusions
Overall, substantial parts of the research model were corroborated for shortterm alignment, one element proved to be influential in creating long-term alignment, and one new construct, existence of a business direction, emerged from the data. In the next section, the findings are related back to previous research and new propositions are suggested. A discussion of the limitations of the study and implications for future research follows. The chapter concludes with recommendations for practitioners.
This chapter describes the information strategies of three major insurance companies in the Netherlands. A research model was developed as an aid to describe how managers nowadays deal with information strategy. We report on the linkages between information strategies and business strategies, the roles of the stakeholders involved, and how the results are perceived. We found that in all three companies the executive board, IT management and line management are heavily involved in the information strategy process. The main focus in the three companies is on adjusting IT to business goals and processes, with only some attention directed towards creating a competitive advantage with IT. With respect to the effects of information strategy, we found that none of the three companies systematically evaluate the effects of information strategies on an organizational or a business process level. More case study research is required to look into the evolutionary changes of information strategies within organizations, and the effects of information strategies on the business processes and the use of IT over time.
Over the past few years, various electronic market systems have been introduced by market-making firms to improve transaction effectiveness and efficiency within their markets. Although successful implementation of electronic marketplaces may be found in several industries, some systems have failed or their penetration pace is slower than was projected, indicating that significant barriers remain. This chapter analyzes the economic forces and barriers behind electronic market adoptions from the perspective of market process reengineering. Four cases of electronic market adoptions – two successful and two failed – are used for this analysis. Economic benefits are examined by investigating how the market process innovation enabled by information technology (IT) reduces transaction costs and increases market efficiency. Adoption barriers are identified by analyzing transaction risks and resistance resulting from the reengineering. Successful deployment of electronic market systems requires taking into account these barriers along with the economic benefits of adoption. The chapter presents suggestions based on these case studies, which are relevant to the analysis, design, and implementation of electronic market systems by market-making firms.
Conclusion
We expect the adoption of electronic commerce applications by existing or new market makers to grow rapidly as the cost of communicating information between firms decreases. We have investigated here the evolution of electronic market adoption by such market-making firms. The implementation of electronic markets is viewed as market process reengineering aimed at decoupling product flow from market transactions through on-line trading. We have taken a close look at how IT-enabled reengineering increases market efficiency as well as barriers.
Firms interested in redesigning market processes using electronic commerce solutions need to plan carefully to overcome adoption barriers that could cast a shadow over the benefits of the proposed new market processes.
By examining the barriers and facilitators of success in the case studies presented, market makers can be better prepared to design electronic markets that increase market efficiency and overcome barriers to adoptions.
The six principles of strategic positioning
To establish and maintain a distinctive strategic positioning, a company needs to follow six fundamental principles.
First, it must start with the right goal: superior long-term return on investment.
Only by grounding strategy in sustained profitability will real economic value be generated. Economic value is created when customers are willing to pay a price for a product or service that exceeds the cost of producing it. When goals are defined in terms of volume or market share leadership, with profits assumed to follow, poor strategies often result. The same is true when strategies are set to respond to the perceived desires of investors.
Second, a company’s strategy must enable it to deliver a value proposition, or set of benefits, different from those that competitors offer. Strategy, then, is neither a quest for the universally best way of competing nor an effort to be all things to every customer. It defines a way of competing that delivers unique value in a particular set of uses or for a particular set of customers.
Third, strategy needs to be reflected in a distinctive value chain. To establish a sustainable competitive advantage, a company must perform different activities than rivals or perform similar activities in different ways. A company must configure the way it conducts manufacturing, logistics, service delivery, marketing, human resource management, and so on differently from rivals and tailored to its unique value proposition. If a company focuses on adopting best practices, it will end up performing most activities similarly to competitors, making it hard to gain an advantage.
Fourth, robust strategies involve trade-offs. A company must abandon or forgo some product features, services, or activities in order to be unique at others. Such trade-offs, in the product and in the value chain, are what make a company truly distinctive. When improvements in the product or in the value chain do not require trade-offs, they often become new best practices that are imitated because competitors can do so with no sacrifice to their existing ways of competing.
Trying to be all things to all customers almost guarantees that a company will lack any advantage.
Fifth, strategy defines how all the elements of what a company does fit together. A strategy involves making choices throughout the value chain that are interdependent; all a company’s activities must be mutually reinforcing. A company’s product design, for example, should reinforce its approach to the manufacturing process, and both should leverage the way it conducts after-sales service. Fit not only increases competitive advantage but also makes a strategy harder to imitate. Rivals can copy one activity or product feature fairly easily, but will have much more difficulty duplicating a whole system of competing.
Without fit, discrete improvements in manufacturing, marketing, or distribution are quickly matched.
Finally, strategy involves continuity of direction. A company must define a distinctive value proposition that it will stand for, even if that means forgoing certain opportunities. Without continuity of direction, it is difficult for companies to develop unique skills and assets or build strong reputations with customers.
Frequent corporate ‘reinvention,’ then, is usually a sign of poor strategic thinking and a route to mediocrity. Continuous improvement is a necessity, but it must always be guided by a strategic direction.
The basic tool for understanding the influence of information technology on companies is the value chain – the set of activities through which a product or service is created and delivered to customers. When a company competes in any industry, it performs a number of discrete but interconnected value-creating activities, such as operating a sales force, fabricating a component, or delivering products, and these activities have points of connection with the activities of suppliers, channels, and customers. The value chain is a framework for identifying all these activities and analyzing how they affect both a company’s costs and the value delivered to buyers.
Because every activity involves the creation, processing, and communication of information, information technology has a pervasive influence on the value chain. The special advantage of the Internet is the ability to link one activity with others and make real-time data created in one activity widely available, both within the company and with outside suppliers, channels, and customers. By incorporating a common, open set of communication protocols, Internet technology provides a standardized infrastructure, an intuitive browser interface for information access and delivery, bidirectional communication, and ease of connectivity – all at much lower cost than private networks and electronic data interchange, or EDI.
Many of the most prominent applications of the Internet in the value chain are shown in Figure 13.2. Some involve moving physical activities on-line, while others involve making physical activities more cost effective.
But for all its power, the Internet does not represent a break from the past; rather, it is the latest stage in the ongoing evolution of information technology.1
Indeed, the technological possibilities available today derive not just from the Internet architecture but also from complementary technological advances such as scanning, object-oriented programming, relational databases, and wireless communications.
To see how these technological improvements will ultimately affect the value chain, some historical perspective is illuminating.2 The evolution of information technology in business can be thought of in terms of five overlapping stages, each of which evolved out of constraints presented by the previous generation. The earliest IT systems automated discrete transactions such as order entry and accounting. The next stage involved the fuller automation and functional enhancement of individual activities such as human resource management, sales force operations, and product design. The third stage, which is being accelerated by the Internet, involves cross-activity integration, such as linking sales activities with order processing. Multiple activities are being linked together through such tools as customer relationship management (CRM), supply chain management (SCM), and enterprise resource planning (ERP) systems. The fourth stage, which is just beginning, enables the integration of the value chain and entire value
system, that is, the set of value chains in an entire industry, encompassing those of tiers of suppliers, channels, and customers. SCM and CRM are starting to merge, as end-to-end applications involving customers, channels, and suppliers link orders to, for example, manufacturing, procurement, and service delivery.
Soon to be integrated is product development, which has been largely separate.
Complex product models will be exchanged among parties, and Internet procurement will move from standard commodities to engineered items.
In the upcoming fifth stage, information technology will be used not only to connect the various activities and players in the value system but to optimize its workings in real time. Choices will be made based on information from multiple activities and corporate entities. Production decisions, for example, will automatically factor in the capacity available at multiple facilities and the inventory available at multiple suppliers. While early fifth-stage applications will involve relatively simple optimization of sourcing, production, logistical, and servicing transactions, the deeper levels of optimization will involve the product design itself. For example, product design will be optimized and customized based on input not only from factories and suppliers but also from customers.
The power of the Internet in the value chain, however, must be kept in perspective. While Internet applications have an important influence on the cost and quality of activities, they are neither the only nor the dominant influence.
Conventional factors such as scale, the skills of personnel, product and process technology, and investments in physical assets also play prominent roles. The Internet is transformational in some respects, but many traditional sources of competitive advantage remain intact.
Strategic imperatives for dot-coms and established companies
At this critical juncture in the evolution of Internet technology, dot-coms and established companies face different strategic imperatives. Dot-coms must develop real strategies that create economic value. They must recognize that current ways of competing are destructive and futile and benefit neither themselves nor, in the end, customers. Established companies, in turn, must stop deploying the Internet on a stand-alone basis and instead use it to enhance the distinctiveness of their strategies.
The most successful dot-coms will focus on creating benefits that customers will pay for, rather than pursuing advertising and click-through revenues from third parties. To be competitive, they will often need to widen their value chains to encompass other activities besides those conducted over the Internet and to develop other assets, including physical ones. Many are already doing so. Some on-line retailers, for example, distributed paper catalogs for the 2000 holiday season as an added convenience to their shoppers. Others are introducing proprietary products under their own brand names, which not only boosts margins but provides real differentiation. It is such new activities in the value chain, not minor differences in Web sites, that hold the key to whether dot-coms gain competitive advantages. AOL, the Internet pioneer, recognized these principles. It charged for its services even in the face of free competitors. And not resting on initial advantages gained from its Web site and Internet technologies (such as instant messaging), it moved early to develop or acquire proprietary content.
Yet dot-coms must not fall into the trap of imitating established companies.
Simply adding conventional activities is a me-too strategy that will not provide a competitive advantage. Instead, dot-coms need to create strategies that involve new, hybrid value chains, bringing together virtual and physical activities in unique configurations. For example, E*Trade is planning to install stand-alone kiosks, which will not require full-time staffs, on the sites of some corporate customers. Virtual Bank, an on-line bank, is cobranding with corporations to create in-house credit unions. Juniper, another on-line bank, allows customers to deposit checks at Mail Box Etc. locations. While none of these approaches is certain to be successful, the strategic thinking behind them is sound.
Another strategy for dot-coms is to seek out trade-offs, concentrating exclusively on segments where an internet-only model offers real advantages.
Instead of attempting to force the Internet model on the entire market, dot-coms can pursue customers that do not have a strong need for functions delivered outside the Internet – even if such customers represent only a modest portion of the overall industry. In such segments, the challenge will be to find a value proposition for the company that will distinguish it from other Internet rivals and address low entry barriers.
Successful dot-coms will share the following characteristics:
• Strong capabilities in Internet technology
• A distinctive strategy vis-`a-vis established companies and other dot-coms, resting on a clear focus and meaningful advantages
• Emphasis on creating customer value and charging for it directly, rather than relying on ancillary forms of revenue
• Distinctive ways of performing physical functions and assembling non-Internet assets that complement their strategic positions
• Deep industry knowledge to allow proprietary skills, information, and relationships to be established
Established companies, for the most part, need not be afraid of the Internet – the predictions of their demise at the hands of dot-coms were greatly exaggerated. Established companies possess traditional competitive advantages that will often continue to prevail; they also have inherent strengths in deploying Internet technology.
The greatest threat to an established company lies in either failing to deploy the Internet or failing to deploy it strategically. Every company needs an aggressive program to deploy the Internet throughout its value chain, using the technology to reinforce traditional competitive advantages and complement existing ways of competing. The key is not to imitate rivals but to tailor Internet applications to a company’s overall strategy in ways that extend its competitive advantages and make them more sustainable. Schwab’s expansion of its brick-and-mortar branches by one-third since it started on-line trading, for example, is extending its advantages over internet-only competitors. The Internet, when used properly, can support greater strategic focus and a more tightly integrated activity system.
Edward Jones, a leading brokerage firm, is a good example of tailoring the Internet to strategy. Its strategy is to provide conservative, personalized advice to investors who value asset preservation and seek trusted, individualized guidance in investing. Target customers include retirees and small-business owners.
Edward Jones does not offer commodities, futures, options, or other risky forms of investment. Instead, the company stresses a buy-and-hold approach to investing involving mutual funds, bonds, and blue-chip equities. Edward Jones operates a network of about 7,000 small offices, which are located conveniently to customers and are designed to encourage personal relationships with brokers.
Edward Jones has embraced the Internet for internal management functions, recruiting (25% of all job inquiries come via the Internet), and for providing account statements and other information to customers. However, it has no plan to offer on-line trading, as its competitors do. Self-directed, on-line trading does not fit Jones’s strategy nor the value it aims to deliver to its customers. Jones, then, has tailored the use of the Internet to its strategy rather than imitated rivals.
The company is thriving, outperforming rivals whose me-too internet deployments have reduced their distinctiveness.
The established companies that will be most successful will be those that use Internet technology to make traditional activities better and those that find and implement new combinations of virtual and physical activities that were not previously possible.
The management of Information Technology (IT) and Information Systems (IS) is considered a complex exercise by academics and practitioners alike.
The reason for this is that there are ubiquitous portfolios of tangible and intangible benefits that are offered to an organization following the adoption of IT/IS that, in turn, all need managing to ensure realization. Organization also have to take into account the direct and often larger indirect costs that are typically associated with IT/IS deployments. To provide managers with a critical insight into the management of new technology, this chapter uses a case study research strategy to examine the technology management
experiences of a leading UK manufacturing organization during its adoption of a vendor-supplied Manufacturing Resource Planning (MRPII) information system. Following the lack of attention given to human and organizational technology management factors while implementing MRPII, the vendorbased information system was later abandoned and deemed a failure. In addressing those technology management factors that were later identified as important, it was found that key employees were able to overcome a number of organizational barriers and develop and implement a bespoke MRPII system that significantly improved the organization’s competitive position.
Technology management taxonomies that contributed to the failure and later successful implementation of MRPII are identified and discussed. The organization’s experiences in solving the problems associated with the implementation of their IS offers a learning opportunity for those companies that are seeking a competitive advantage through technology management.
Conclusions
The increased scope of new technology has not only provided organizations with enablers for change but also prompted companies to reassess the way they evaluate, manage, and exploit technology. The empirical results reported in this chapter have identified a case where traditional modes of investment appraisal were inappropriate when accounting for the implications of the investment, and as a result, did not support the efficient and effective deployment of new technology. Therefore, the strategy adopted by the case study when evaluating the MRPII investment was an ‘act of faith,’ and thus ad hoc in nature. This subsequently resulted in the system being considered a ‘failure’ as human and organizational factors were neglected during the evaluation and technology management process. The main reason for Company V’s ad hoc approach to investment decision-making was that many of the benefits resulting from their investment were considered intangible and nonfinancial. Consequently, they could not be accommodated within traditional evaluation and management frameworks, which had been previously used for the justification of capital manufacturing equipment. The relatively new and inexperienced management team further complicated the justification process, as a result of their lack of knowledge on how to identify and manage IT/IS-related benefits and costs. There are also serious implications connected with the poor project management, which in part was exacerbated by indecisive and inconsistent leadership, thus questioning the appropriate positioning of project managers within the organizational structure. With management under increasing pressure to produce short-term financial savings through improved productivity, managers need to ensure that those projects with long-term strategic focuses were not excluded on the basis of their intangible and nonfinancial benefits. The case study points to the significance of human and organizational factors, and exemplifies the need to take account of such issues within any robust evaluation criteria, thus heightening the significance of the proposed technology management taxonomies.
Throughout the 1980s there was a tremendous emphasis on business strategy.
Many organizations developed sophisticated strategies with scant attention given to their ability and capability to deliver these strategies. Over the past few years a tremendous amount has been written about the organization of the 1990s, its characteristics and the key enabling role of information technology.
While this presents us with a destination in general terms, little attention is given in how to get there. This chapter addresses this concern, beginning by reviewing six perspectives which best represent current thinking on new ways of organizing and outlines their characteristics. Having identified their key characteristics, three key issues which now dominate the management agenda are proposed. The vision: where do we want to be in terms of our organizational form? Gap analysis and planning: how do we get there? and Managing the migration: how do we manage this process of reaching our destination? Extending the traditional information systems/information technology
strategic planning model, a framework is presented which addresses these concerns. This framework is structured around the triumvirate of vision, planning and delivery with considerable iteration between planning and delivery to ensure the required form is met.
Conclusions
The traditional organization has been criticized by many writers on organization. Alternatives have been proposed but these merely represent a destination without a clear road map setting the direction rather than presenting a map and route to negotiate the obstacles to be encountered along the way.
In this chapter we have presented a framework to help organizations in planning and implementing their journey. This framework is constructed around the triumvirate of vision, planning and delivery with considerable iteration between all stages. This helps with the management of uncertainty and reconfirms the destination.
Crucial in the visioning stage are the critical success factors of the new organizational form which define the requirements of critical issues such as culture, teamwork, people, skills, structure, reward systems and information needs. This provided the basis for the gap analysis highlighting the nature of the journey to be undertaken and the subsequent delivery initiatives of HR, organization design and IS/IT. Central to our framework are the interactions between HR, organization design and IS/IT in a way that enables the delivery of the new organization form with its CSFs.
Fundamentally, we believe that managing the migration to the new organization form will require a significant amount of senior management time, energy and initiative. If this is not forthcoming because management is ‘too busy’, the likelihood of success is minimal. This must be the first paradigm to be broken.
This chapter sets forth a theory of the effects that computer-assisted communication and decision-aiding technologies have on organizational design, intelligence, and decision making. Several components of the theory are controversial and in need of critical empirical investigation. The chapter focuses on those technology-prompted changes in organizational design that affect the quality and timeliness of intelligence and decision making, as contrasted with those that affect the production of goods and services.
Summary and recommendations
In the form of propositions and their corollaries, this chapter sets forth a theory concerning the effects that computer-assisted communication and decision-aiding technologies have on organizational design, intelligence, and decision making. Subsequently, the propositions were connected with constructs and concepts, and from these a more conceptual theory was developed.
Some boundaries on the original theory (here called the theory) were delineated early in the chapter. The theory is, nevertheless, a candidate for elaboration and expansion. For example, it was not possible, within the space available, to extend the scope of the theory to include propositions having to do with the effects of advanced information technologies on the distribution of influence in organizational decision making (see Zmud, in press). Examination of some relevant literature makes clear that numerous propositions would be necessary because (a) the technologies may vary in their usefulness for generating the particular types of information used by decision participants having different sources of influence, (b) the technologies may vary in their usefulness for enhancing the image or status of participants having different organizational roles, and (c) the technologies may vary in their usefulness to different types of participants as aids in the building of decision-determining coalitions. Certainly, the theory is a candidate for elaboration and expansion, just as it is a candidate for empirical testing and consequent revision.
The process used to generate the propositions comprising the theory included drawing on components of established organization theory and on findings from communication and information systems research. Specific suggestions were made, with respect to many of the propositions, about matters in need of empirical investigation. In addition to these specific suggestions, three somewhat more global recommendations are in order. The first is directed to any researchers exploring the effects of advanced information technologies. In this chapter, different forms of advanced information technology were discussed by name (e.g. electronic mail) yet the propositions were stated in general terms. This latter fact should not obscure the need to specify more precisely the particular technology of interest when developing hypotheses to be tested empirically. As more is learned about the effects of computer-assisted communication and decision-support technologies, it may be found that even subtle differences count (cf. the discussion by
Markus and Robey, 1988). Even if this is not so, as researchers communicate about these matters among themselves and with administrators, it behooves them to be clear and precise about what it is that they are discussing.
The second suggestion, directed to organizational researchers, is to believe (a) that information technology fits within the domain of organization theory and (b) that it will have a significant effect on organizational design, intelligence, and decision making. Organization researchers, in general (there are always welcome exceptions), may not believe that these technologies fit within the domain of organization theory. This would be an erroneous belief.
Organization theory has always been concerned with the processes of communication, coordination, and control and, as is apparent from the research of communication and information systems researchers (Culnan and Markus, 1987; Rice and Associates, 1984), the nature and effectiveness of these processes are changed when advanced information technologies are employed. Organizational researchers also may not have recognized that organizational designs are, at any point in time, constrained by the capability of the available communication technologies. Two of the infrequent exceptions to this important observation are cited by Culnan and Markus (1987):
Chandler (1977) for example, argues that the ability of the telegraph to facilitate coordination enabled the emergence of the large, centralized railroad firms that became the prototype of the modern industrial organization. Pool (1983) credits the telephone with the now traditional physical separation of management headquarters from field operations, and in particular with the development of the modern office skyscraper as the locus of administrative business activity. (p.421)
Also, Huber and McDaniel (1986) state that:
Without telephones, corporations could not have become as large as they have; without radios, military units would be constrained to structures and tactics different from those they now use; without computers, the processes for managing airline travel would be different from what they are. Any significant advance in information technology seems to lead eventually to recognition and implementation of new organizational design options, options that were not previously feasible, perhaps not even envisioned. (p.221)
Since information technologies affect processes that are central to organization theory, and since they also affect the potential nature of organization design (a principal application of organization theory), a corollary of this second global recommendation is added: Organizational researchers should study advanced information technology as (a) an intervention or jolt in the life of an organization that may have unanticipated consequences with respect to evolved organizational design, (b) a variable that can be used to enhance the quality (broadly defined) and timeliness of organizational intelligence and decision making, and (c) a variable that enables organizations to be designed differently than has heretofore been possible. (A review of recent discussions of emerging organizational and interorganizational forms (Borys and Jemison, 1989; Luke et al., 1989;
Miles and Snow, 1986; Nadler and Tushman, 1987) suggests that use of computer-assisted communication technologies can enhance the usefulness of such designs, requiring, as many will, communication among dispersed parties.)
The third global research recommendation is directed toward information systems researchers. It is straightforward. As is easily inferred by observing organizational practices, much information technology is intended to increase directly the efficiency with which goods and services are produced, for example, by replacing workers with computers or robots. But organizational effectiveness and efficiency are greatly determined by the quality and timeliness of organizational intelligence and decision making, and these, in turn, are directly affected by computer-assisted communication and decisionaiding technologies and are also indirectly affected through the impact of the technologies on organizational design. Therefore, it is likely that administrators will ask information systems researchers to help anticipate the effects of the technologies. In addition, builders and users of computer-assisted communication and decision-aiding technologies generally do not explicitly consider the effects that the technologies might have on organizational design, intelligence, or decision making. Thus, information systems researchers should arm themselves with the appropriate knowledge by increasing the amount of their research directed toward studying the effects that advanced information technologies have on organizational design, intelligence, and decision processes and outcomes.
Knowledge management initiatives to help organizations create and distribute internal knowledge have become important aspects to many organizations’ strategy. The knowledge-based theory of the firm suggests that knowledge is the organizational asset that enables sustainable competitive advantage in hypercompetitive markets. Systems designed to facilitate knowledge management (knowledge management systems) are being implemented in an attempt to increase the quality and speed of knowledge creation and distribution in organizations. However, such systems are often seen to clash with corporate culture and, as a result, have limited impact. This chapter introduces a
framework for assessing those aspects of organizational culture that are likely to be the source of implementation challenges. In so doing, it associates various organizational subunit cultures with different information cultures, and presents a series of propositions concerning the relationships among individual, organizational, and information cultures.
It can be argued that the first step in developing an implementation plan is understanding where barriers might be encountered and why. The above analysis is intended to help evaluate where and why such barriers might exist when implementing KMS. Several strategies for KMS implementation have been suggested: one strategy is to include information of high value such as corporate directories which make users comfortable with, and dependent upon, the corporate intranet. Another is education on the need and potential of such a system to improve individual productivity and customer service.
Another commonly used strategy is providing rewards and incentives, such as bonuses, based on the amount and quality of knowledge one contributes. The strategy used to implement KMS should be tied to the organizational subunit culture. For example, individuals in reward-oriented subunits might respond well to incentive systems, whereas individuals in process-oriented subunits might require greater education and training on the benefits of such a system.
Furthermore, changes in reward systems will do little to change the information culture; in which case, at most, we would expect that subunit cultures which foster a view of knowledge as a high individual asset (resultsoriented, professional-oriented subunits) will be able to encourage selective information sharing but not the full sharing of the most valuable of tacit knowledge. To obtain full sharing in subunits that are results oriented, closed, professional oriented, and job oriented, the change management plan might need to focus first on changing the culture and only secondly, on implementing the system. It would be misleading to think that the system would encourage full sharing in organizations where the information culture ran contrary to such sharing, just as it has been found that electronic mail systems do not encourage greater communication among subunits with infrequent, irregular communication (Vandenbosch and Ginzberg, 1997).
However, in organizations with cultures that foster the attitude of tacit knowledge as primarily a corporate asset, it would be expected that KMS could be implemented with little resistance.
This chapter has taken the view that organizational effectiveness in the highly competitive global environment will depend largely on an organization’s capacity to manage individual employee knowledge. We have argued that knowledge management systems will be important computer-based information system components to such effectiveness, but that the success of these systems will depend on an appropriate match with organizational subunit and individual culture. We have offered propositions in an attempt to provide a framework for understanding where potential incongruity between these new IS and organizational culture might exist.
One way to consider the advances of information-based systems in organizations is to consider the dominant organizational theory underlying the assumptions of the need for information. The era of MIS can be thought to correspond to the organizational theory termed the ‘information processing view of the organization’. This view posited that organizations process information to reduce uncertainty – the absence of information, and to reduce equivocality – the existence of multiple and conflicting interpretations about an organizational situation (Daft and Lengel, 1986). According to this view, information systems are needed to help organizations understand the environment and make appropriate plans in response. As DSS and EIS came into vogue, so was the information-processing view of the firm replaced with the decision-making view of the firm espoused by Huber and McDaniel (1986) wherein decision making was seen as the most critical managerial activity. This view placed the primary purpose of IS as supporting organizational decision makers by providing tools, timely information, and ready access to important operational and financial information. More recently, it is being argued that the most critical organizational activity is creating, sharing, and utilizing the knowledge that resides in employees (Nonaka, 1994). To understand the potential organizational effect of systems designed to harness knowledge, it is argued that the traditional paradigms of structure and decision making are insufficient, but a perspective incorporating organizational culture is needed.
The major intent of this chapter has been to encourage thinking about the important topic of current IS and its relationship to organizational culture, rather than to offer a complete set of guidelines on implementing KMS or evaluating the effectiveness of KMS in given organizational cultures. It is hoped that the reader leaves with a framework for assessing the potential conflicts resulting from cultural factors that may arise with the implementation of knowledge management systems, and can use the frameworks proposed herein to guide thinking on potential implementation strategies.
Current literature on organizational learning tends to be theoretically fragmented, drawing on analogies to individual learning theory or simply using organizational learning as an umbrella concept for many different kinds of organizational change or adaptation. This chapter introduces a framework for the analysis of organizations as knowledge systems (Holzner and Marx, 1979) composed of a collection of knowledge processes: constructing, organizing, storing, distributing, and applying. The knowledge system framework draws heavily on the sociology of knowledge and emphasizes the social nature of each of these constitutive processes. The chapter uses the framework to analyze the case of a small engineering consulting company that implemented a new information system to automate one of its core business activities: energy audits of commercial buildings. Traditional approaches to organizational learning have emphasized the ways in which information systems can lower the costs and increase capacity for search, storage, and retrieval of information. The knowledge system framework suggests a deeper level of influence, whereby information systems can also affect the objects of
knowledge and the criteria for knowledge construction.
Conclusion
The preceding analysis suggests that many of the theoretical issues developed in the literature on organizational learning could be investigated as a system of knowledge processes (constructing, organizing, storing, distributing, and applying). In addition, by placing special emphasis on the social nature of the construction and distribution processes, this framework highlights the uniquely social dimension of the phenomenon that is often missing from literature that draws too heavily on the individual learning
metaphor. The advantage of this framework is that it decomposes the overall phenomenon into a set of smaller and more observable processes. Although these processes are distributed in time and space, they are readily identifiable and can be measured and monitored in various ways. Observability also gives rise to an important practical benefit: it lends itself to diagnosis of ineffective or dysfunctional systems. By breaking the overall phenomenon down into constituent parts, it should be easier to isolate problems and, hopefully, recommend practical improvements.
It would be a mistake, of course, to generalize too broadly from this example. The information system described here was specifically designed to embody technical knowledge and automate key aspects of a job that was generally performed by engineers. In many respects, the results reported here are understandable by-products of automating the work: the people doing the work were no longer in a position to fully comprehend or modify the tool they were using. Zuboff (1988) makes similar points concerning the work in the organizations she studied. In the extreme case, the very tool that was intended to encode the knowledge of the organization could have destroyed the organization’s capacity to learn by interfering with various knowledge processes. As it turns out, in this particular case, EnerSave seems to have maintained a strong engineering base (by diversifying into other areas besides auditing), and has maintained a strong connection to the larger knowledge system concerning energy use in commercial buildings.
Nonetheless, this example illustrates clearly that introducing an information system can have more profound effects than merely altering the storage, or retrieval, or distribution, or richness, of information. These basic information processing enhancements are well known and should, in theory, affect organizational learning. But I would argue that information systems can also change the membership of an organization, the objects of its knowledge, and its criteria for truth. These are the basic elements of social epistemology; they are the core of any social knowledge system. They are held constant in most treatments of organizational learning, thus obscuring the possibility that information systems might change them. Whether or not all of these elements belong under the umbrella of ‘organizational learning,’ information systems can change them. In doing so, information systems change the fabric of social epistemology and the backdrop against which organizations construct, organize, store, distribute, and apply knowledge.
More broadly, the example suggests a kind of technological epistemology, where our ways of knowing are mediated through machines and their maintenance. Should we be satisfied with a knowledge system where debugging and finding workarounds are a dominant mode of learning? To the extent that we view the world through a technological lens (Barrett, 1979; Heidegger, 1962), this problem becomes increasingly important.
Ironically, technology may dull our senses, taking away the direct involvement, social interaction, and reflective conversation that has traditionally given rise to understanding (Rorty, 1979). The very systems that are meant to increase our information processing capabilities, thereby increasing understanding, may have the opposite effect by restricting the range of our inquiry and experience, effectively putting us in a kind of epistemological box. Whether information systems enhance or dull our senses is a difficult
question to answer, but it is clearly an important question to ask.
This chapter provides insights for redesigning IT-enabled customer support processes to meet the demanding requirements of the emerging electronic economy in which fast response, shared knowledge creation, and internetworked technologies are the dynamic enables of success. The chapter describes the implementation of the TechConnect support system at Storage Dimensions, a manufacturer of high-availability computer storage system products. TechConnect is a unique IT infrastructure for problem resolution that includes a customer support knowledge base whose structure is dynamically updated based on adaptive learning through customer interactions. The chapter assesses the impacts of TechConnect and its value in creating a learning organization. It then draws insights for redesigning knowledge-creating customer support processes for the business conditions of the electronic economy.
This chapter began by showing how customer support and service needs are driving IS priorities more than they ever have before. It also pointed out that this is happening in the business environment of an emerging electronic economy in which fast response, shared knowledge creation, and internetworked technologies are increasingly critical. The chapter has shown that there are new IT infrastructures and knowledge creation architectures that can make a difference and that perhaps the way that the customer support process is changing will trigger enterprise-wide change in redesigning IT-enabled knowledge-creating business processes. This also heralds new opportunities and new responsibilities for the ever-changing role of the CIO.
The number of business organizations that are fully participating in the electronic economy will soon reach a critical mass. Having robust internetworked IT-enabled knowledge-creating processes that learn quickly from customers (and employees, partners, and competitors) will not be a strategic choice: it will become a strategic necessity for success in the electronic economy. We hope that this chapter has provided a compelling example to show how that can be done and that it will stimulate both practitioners and academics to find new ways of using information technologies to expand the knowledge-creating capacity of business processes.
Despite the massive investments in Information Technology in the developed economies, the IT impact on productivity and business performance continues to be questioned. This chapter critically reviews this IT productivity paradox debate and finds that an important part, but by no means all, of the uncertainty about the IT payoff relates to weaknesses in measurement and evaluation practice. Based on extensive research by the authors and others, an integrated systems lifecycle approach is put forward as a long term way of improving evaluation practice in work organizations. The approach shows how to link business and IT/IS strategies with prioritizing investments in IT, and by setting up a set of interlinking measures, how IT costs and benefits may be evaluated and managed across the systems lifecycle, including consideration of potential uses of the external IT services market. An emphasis on a cultural change in evaluation from ‘control through numbers’ to a focus on quality improvement offers one of the better routes out of the productivity paradox.
Improved evaluation practice serves to demystify the paradox, but also links with and helps to stimulate improved planning for management and use of IT, thus also reducing the paradox in practical terms – through the creation of greater business value.
There are several ways out of the IT productivity paradox. Several of the more critical relate to improved ways of planning for, managing and using IT/IS.
However, part of the IT productivity paradox has been configured out of difficulties and limitations in measuring and accounting for IT/IS performance.
Bringing the so-called paradox into the more manageable and assessable organizational realm, it is clear that there is still, as at 1996, much indifferent IT/IS evaluation practice to be found in work organizations. In detailing an integrated lifecycle approach to IT/IS evaluation we have utilized the research findings of ourselves and others to suggest one way forward. The ‘cradle to grave’ framework is holistic and dynamic and relies on a judicious mixture of ‘the business case’, appropriate criteria and metrics, managerial and stakeholder judgement and processes, together with motivated evaluators.
Above all it signals a move from ‘control through numbers’ assessment culture to one focused on quality improvement. This would seem to offer one of the better routes out of the productivity paradox, not least in its ability to link up evaluation to improving approaches to planning for, managing and using IT. As such it may also serve to begin to demystify the ‘IT productivity paradox’, and reveal that it is as much about human as technology issues – and better cast anyway as the IT-management productivity paradox, perhaps?
