Strategic Information Systems Knowledge IST Rationale

Author: Acumen Insights Version: 0.1 Date Published: 11-Jan-2009 http://www.acumen-insights.com

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Strategic Information Systems Knowledge IST Rationale

Introduction
In this paper, the main elements that comprise the rationale behind an Information Systems and Technology (IST) strategy will be discussed. Whichever approach or particular model to Strategic Information Systems Planning (SISP) is taken, the IST strategy needs to deliver value to the organisation through investment into IST and other resources (Earl, 1992).

Discussion
Underlying the development of any IST strategy or strategic initiative will be the rationale of why the strategy is being devised i.e. what are we trying to achieve? In the early years of IST knowledge the focus (taken from a Computer Science perspective) was mainly on the technical aspects of IST planning. As the impact of IT evolved and organisations embraced technology, the focus moved towards IST in an organisational setting and thus a more business perspective developed within the literature. Many surveys have been conducted over the years that present the key prescriptions of IST strategy development (for example, see Lederer and Sethi, 1992 and 1996). Such prescriptions include the importance of the fit between IST capabilities and the business, the need to plan adequately, the need to plan implementation and the overall focus in delivering business applications. Less important prescriptions include concerns with data architecture, not meeting SISP objectives and the linkage between architecture and business objectives (Lederer and Sethi, 1996). However, what lies behind these prescriptions is the rationale and justification for the chosen strategic activity. Key ideas and theories have been utilised to conceptualise the area of concern. Undoubtedly, the industrial analysis perspective has been the most influential over the years. In order to understand the rationale behind IST strategy development in organisations, previous knowledge has tended to borrow from other disciplines especially business strategy. Key ideas and theories have been utilised to conceptualise the area of concern. Undoubtedly, the industrial analysis perspective has been the most influential over the years (Ciborra, 1994), which incorporates ideas from authors such as Porter (1985) and McFarlan et al (1983). Although there is evidence of other perspectives being adopted (such as the competence perspective), they have not been as widely adopted as the industrial analysis perspective. For this reason, this paper will focus mainly on the industrial analysis perspective of IST strategy development. The industrial analysis perspective of IST strategy has emerged from the general business strategy field that in turn has been influenced by the organisational economics school of thought. It is beyond the scope of this review to provide a detailed account of the organisational economics school. For detailed insights see for example Mcfarlan (1984). What is important is the huge influence of this area on the IST strategy field with many of the concepts and theories being simply translated into the IST strategy domain. In fact: Conventional wisdom says that if youre looking to develop and IT strategy, you start with the business strategy and go from there. Gomolski (2004: 31) Porters work throughout the late 1970s and the 1980s on competitive advantage not only helped shape the general strategy field but has had a major influence on the IST strategy field as well. Porters work throughout the late 1970s and the 1980s on competitive advantage not only helped shape the general strategy field but has had a major influence on the IST strategy field as well. By adopting an industrial analysis approach to strategy development, Porter argued that organisations are able to develop their strategy by focusing on a number of key areas such as the external industry and the internal value chain. The essence of Porters work focuses on using a number of strategic models that help to structure the strategy debate taking place within an organisation, by providing tools to analyse an organisations environment and then adapt the internal capabilities to adopt either a low-cost or differentiation strategic stance. Since the publication of the models in the 1970s and 1980s, they have been adopted within the IST strategy field and IST is seen to have many capabilities that can assist in delivering a generic strategy. By determining the current situation, opportunities and threats,

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Strategic Information Systems Knowledge IST Rationale

strategists are able to determine whether IST can build barriers to industry entry, can change the balance of power with the suppliers, can build in switching costs with suppliers and customers, can generate new products or can change the basis of competition within their markets (Robson, 1997), as illustrated in Table 1.

Generic Strategy Cost Leadership

Characteristics IST seeks to reduce the costs of producing and selling products/services. IST enhances the ability to reduce costs. IST adds new unique features to the product/service. IST enhances the ability to differentiate. Using IST to identify and create niches directly in the marketplace. IST enhances the ability to create niches in the marketplace.

Differentiation

Focus

Table 1: Generic Strategies (Adapted from Robson, 1997)

The competitive advantage stems from the discrete activities within an organisations value chain (and value system). Therefore, by focusing on these activities and their interactions, an organisation is able to utilise IST to gain a competitive advantage by performing the strategically important activities more cheaply or better than its competitors. Importantly, as argued by Glasser (2004), the strategic rationale declared with the business strategy must match the rationale declared in the IST strategy. As technology became more widespread and proprietary IST (early 1980s), the focus was on not only gaining a competitive advantage, but the necessity to have a competitive advantage was paramount. Clarke (1994) documented the changing strategic role and impact of IST (from an industrial analysis perspective) within organisations over the last three decades, as follows. Following the early publications of Porters insights (in the late 1970s), the concern was with using IST to deliver a competitive advantage. As technology became more widespread and proprietary IST (early 1980s), the focus was on not only gaining a competitive advantage, but the necessity to have a competitive advantage was paramount. As technologies matured and became easily adopted the focus then changed to gaining a second mover advantage (1990s). Although technology was widespread, the costs involved to develop bespoke systems out-weighed the benefits gained. Therefore competitors were able to copy the systems (at a lower cost) and reap the advantages. As the field of enquiry matured, the focus then moved on to ensuring that not only was a competitive advantage gained but that advantage could be sustained over a long period of time to ensure business value will be delivered by the technology. For McFarlan et al (1983), the role of IST and its impact can be postulated in a two-bytwo matrix model called the Strategic Grid. The model (illustrated in figure 2.5.) can be used to classify and determine the direction and role of IST in organisations by considering both the existing and future IST capabilities within the business context. For organisations in the factory quadrant, their business currently depends on IST for a competitive advantage but will not be dependent on it in the future. In the support quadrant, current and future IST is not competitively important. Whilst in turnaround, the future competitive position of the business will depend on IST. Finally, in the strategic quadrant, the business depends on IST for its competitive position. The use of this model is important in that: This model provides a valuable tool in ensuring that IS strategies reflect real business value. Knowing where an organisation or systems sits on this matrix gives an indicator of an appropriate IS strategy. Robson (1997: 123)

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Strategic Information Systems Knowledge IST Rationale

High

Strategic importance of planned IST

Turnaround

Strategic

Support Low Low

Factory

High Strategic importance of current IST

Figure 1: The Strategic Grid (McFarlan et al, 1983)

As a normative model, the strategic grid suggests what is expected to be the case with an organisations IST capabilities. However, the focus of this model is purely on business applications of IST and does not necessarily incorporate issues such as the strategic importance of the IST architecture and infrastructure (discussed later). More importantly this type of model leaves the strategic value of IST as something to be assessed after the position on the matrix has been determined (Robson, 1997). Finally, the simplification of real-world situations into 2x2 matrixes is always problematic in that reality is never that simple (Doyle, 1991). The use of models such as the strategic grid and Porters models have proved extremely useful in that they can be used as part of a tool-kit in organisations to assist them in developing their strategies. They have also led to the development of a common strategic language for both academics and practitioners. The use of models such as the strategic grid and Porters models have proved extremely useful in that they can be used as part of a tool-kit in organisations to assist them in developing their strategies. They have also led to the development of a common strategic language for both academics and practitioners. Determining the impact of the above models and concepts upon IST strategic development is still debatable and in reality strategists tend not to adopt such rational, formal approaches to IST strategy development (Galliers, 1991). Critically, the mass of literature and attention given to the delivery of a competitive advantage through IST is based only a selection of real world cases (Ciborra, 1994). These selected cases have led many years of debate and research into this area, leading to much of our thinking about IST strategy (Ciborra, 1994). As well as the strategic importance of IST, we must also consider its operational importance. Strategic decisions about IST must consider not only the strategic competitive position (e.g. its generic strategy) but also the business operations as well (Lacity et al 1996). Without useful business applications that support the business processes, the IST strategy will not deliver strategic or operational value. Although the arguments critiquing the concepts such as the strategic grid and generic strategies are great, one cannot deny the impact authors such as Porter and McFarlan have had on the field of IST strategy. The development and evolution of such models and concepts (also being extended by the work of authors such as Galliers, 1991) has allowed the field of IST strategy to move forward and a common language of debate has emerged as a backdrop to rationalising IST strategic moves. More importantly, more recent research highlights the true impact of IST on organisations: we draw attention to a significant and reframed role of IT as a digital generator in contemporary firms. Sambamurthy et al (2003: 237) With the advent of e-business technologies, we now see a more IST centric business model developing across organisations. This means that not only can IST lead to

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Strategic Information Systems Knowledge IST Rationale

improved efficiencies and deliver generic strategies but can in fact enable organisations to deliver strategic agility and open up new digital options (Sambamurthy et al, 2003). From this perspective the business needs do not just necessarily direct the IST strategic rationale but could in fact be influenced by technological capabilities.

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Strategic Information Systems Knowledge IST Rationale

References
Clarke, R., 1994, The Path of Development of Strategic Information Systems Theory, Xamax Consultancy, US. Ciborra, C. and Jelassi, T., 1994, Strategic Information Systems: A European Perspective, John Wiley and Sons, London. Doyle, J., 1991, Problems with Strategic Information Systems Framework, European Journal of Information Systems, No 4. Earl, M., 1992, Putting IT in its place: a polemic for the nineties, Journal of Information Technology ,pp 100-108, 7. Galliers, R., 1991, Strategic Information Systems Planning: myths, reality and guidelines for successful implementation, European Journal of Information Systems, pp 55-64, 1(1). Glasser, J., 2004, Using Vectors to Minmize the mystery if IT Strategy Development, Healthcare Financial Management, Mar, pp 94-98 Gomolski, B., 2004, Going Beyond Strategic Platitudes, ComputerWorld, Mar, pp 31-49 Lacity, M. and Willcocks, L., 2001, Global Information Technology Outsouring, John Wiley and Sons, England. Lederer, A. and Sethi, V., 1992, Root Causes of SISP Problems, Journal of Management Information Systems, Summer. Lederer, A. and Sethi, V., 1996, Key Presriptions for SISP, Journal of Management Information Systems, Summer. McFarlan, F. and McKenny, J., 1983, Corporate Information Management: The issues facing senior management, Irwin, US. Porter, M., 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Macmillan, USA. Robson, W., 1997, Strategic Management and Information Systems, 2nd Edition, Prentice Hall, London. Sambamurthy, V., Bharadwaj, A. and Grover., V., 2003, Shaping Agility Through Digitial Options: Reconceptualising The Role of Information Technology in Contempory Firms, MIS Quarterly, pp 237-263, Vol 27 No 2.

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