The Strategic Management of Information Systems

Building a Digital Strategy

Joe Peppard, John Ward

• Publisher: Wiley
• Year: 2016
• ISBN:
  9781119215479
• Edition: 4
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

• A comprehensively updated revision of a book regarded by many as one the leading and authoritative titles for practitioners, academics and students in the domain of information systems and technology (IS/IT) strategy.
  
• Presents a structured framework with tools, techniques and ways of thinking which provide a practical approach to building a digital strategy, expressed primarily in the language of business and management.
• Brings together the implications of the significant advances in IT and the most useful current thinking, research, and experiences concerning the business impact and strategic opportunities created by IS/IT.
• Peppard and Ward discuss the key questions that managers have to grapple with of where, when and how to invest in IS/IT, which is why a IS/IT (or digital) strategy is required.

1
The Evolving Role of Information Systems and Technology in Organizations: A Strategic Perspective

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OUTLINE

• ♦ Information Systems (IS), Information Technology (IT) and ‘Digital’
• ♦ ‘Digital Disruption’: The Impact of IS/IT
• ♦ A Three-era Model of Evolving IT Application in Organizations
• ♦ A Classification of the Strategic Uses of IS/IT
• ♦ Success Factors in Strategic Information Systems
• ♦ A Portfolio Management Perspective on IS/IT Investments
• ♦ What Is an IS/IT or Digital Strategy?
• ♦ From Strategic Alignment to Strategy Co-evolution
• ♦ Digital Strategies for the 21st Century: Building a Dynamic Capability to Leverage IS/IT

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Most organizations in all sectors of industry, commerce, not-for-profit, and government are now fundamentally dependent on their information systems (IS) and information technology (IT). In industries such as telecommunications, media, entertainment, gambling and financial services, where the product is already, or is being increasingly, digitized, the very existence of an organization depends on the effective application of IS/IT. Since the commercialization of the Internet, the use of technology has become the expected way of conducting many aspects of business and some businesses exist purely online. Governments and public administrations have launched many digital services. The ubiquity of mobile devices and new forms of social media are raising consumer demands for immediacy of access and speed of response. The increasing pervasiveness of smart connected devices and ‘things’ of all kinds is opening up opportunities for new products and services, further operational efficiencies and new types of businesses and business models.

While organizations want to develop a more ‘strategic’ approach to harnessing and exploiting IS/IT, most have arrived at their current situation as a result of many short-term, ‘tactical’ decisions. Many would no doubt like to rethink their investments, or even begin again with a ‘clean sheet’, but unfortunately have a ‘legacy’ resulting from a less than strategic approach to IS/IT in the past; many organizations including banks, insurance companies and public administrations still depend on systems first developed over 30 years ago. Even investments that were once seen as ‘strategic’ eventually become part of a costly and complex legacy. Learning from previous experience – the successes and failures of the past – is perhaps one of the most important aspects of strategic management. Much of the learning about the capability of IT is experiential, and organizations tend to learn to manage IS/IT by doing, not appreciating the challenges until they have faced them.

However, few organizations are likely to have been exposed to the whole range of IS/IT experiences; nor is it likely that those experiences have been evaluated objectively. This chapter provides an overview and appraisal of the general evolution of IS/IT in organizations, from which lessons can be learned for its future strategic management. This evolution is considered from a number of viewpoints, using a variety of models, some of which are further developed and used later in the book, when considering the particular approaches required in thinking and planning strategically for IS/IT investments.

A number of forces affect the pace and effectiveness of progress in using IS/IT and in delivering operational and strategic benefits. The relative importance of each factor varies over time, and will also vary from one organization to another. These factors include:

• the capabilities of the technology and the applications that are feasible;
• the economics of acquiring provisioning, deploying and maintaining the technology: applications, services and infrastructure;
• the skills and abilities available, either in-house or from external sources, to design and implement the applications;
• the skills and competences within the organization to use the applications and information;
• the capability to manage any organizational changes accompanying technology deployments;
• the pressures on the particular organization or its industry to improve performance or adapt to changing circumstances, such as a new regulatory environment or ‘digital disruption’.

This list is not meant to be exhaustive and could be expressed in other terms – but it is presented in a deliberate sequence of increasing ‘stress’, as the complexity and criticality of management decision making becomes more strategic. Most assessments of the evolution of IS/IT in organizations tend to focus on one or two aspects of its development, such as organizational, applications, management of technology or planning, but in this chapter these various perspectives will be brought together, as much as possible.

Information Systems (IS), Information Technology (IT) and ‘Digital’

Before considering a strategic perspective, it is important to have a clear understanding of the terms information systems (IS) and information technology (IT) and how they are distinguished. While IS and IT are often used interchangeably or even casually, it is important to differentiate between them to create a meaningful dialogue between business staff and IS/IT specialists; this is essential if successful IS/IT strategies are to be developed. Recently the term ‘digital’ is being used more frequently in many organizations and in the practitioner and academic literature¹ – so how digital relates to IS/IT is also important to recognize.

Information systems (IS) existed in organizations long before the advent of information technology (IT) and, even today, there are still many ‘systems’ present in organizations with technology nowhere in sight. IT refers specifically to technology, essentially hardware, software and telecommunications networks, including devices of all kinds: computers, sensors, cables, satellites, servers, routers, PCs, phones, tablets; and all types of software: operating systems, data management, enterprise and social applications and personal productivity tools. IT facilitates the acquisition and collection, processing, storing, delivery, sharing and presentation of information and other digital content, such as video and voice. Sometimes the term Information and Communication Technologies (ICT) is used instead of IT to recognize the convergence of traditional computer technology and telecommunications.

Information systems (IS) are the means by which people and organizations, increasingly utilizing technology, gather, process, store, use and disseminate information.² The domain of interest for IS researchers includes the study of theories and practices related to the social and technological phenomena which determine the development, use and effects of information systems in organizations and society. It is thus concerned with the purposeful utilization of information technology, not the technology per se. IS is part of the wider domain of human language, cognition, behaviour and communication. Consequently, ‘IS will remain in a state of continual development and change in response both to technological innovation and to its mutual interaction with human society as a whole.’³

Some information systems are totally automated by IT. For example, airlines, comparison websites, banks and some public agencies have systems where no human intervention is required.⁴ Dell went further with its ‘build-to-order’ model for its PCs, including an element of ‘intelligence’ to help the customer in making decisions regarding the configuration of components, ensuring that ‘non-optimal’ configurations or configurations not technically possible are not selected. Once a customer order has been confirmed, purchase orders for components are automatically generated and electronically transmitted to suppliers. This enables Dell to achieve a stock turn of 30.7 times per year (competitor Lenovo has a stock turn of 22.2).⁵ Dell also feeds real-time data from technical support and manufacturing lines directly through to suppliers on a minute-by-minute basis. This ‘suite’ of interconnected information systems is underpinned by a variety of different technologies – servers, storage, software, routers, sensors ...