Information systems strategy
What is Information systems strategy?
Information systems (IS) is a broad concept that covers the technical components and human activities within the organization, as well as describes the process of managing the life cycle of organizational IS practices [1]. IS strategy can on this basis be defined as an organizational perspective on the investment in, deployment, and management of IS [2].
In reviewing the use of the concept in leading IS journals, Chen et al. [2] identified three conceptions of IS strategy employed in the literature:
- IS strategy as the use of IS to support business strategy
- IS strategy as the master plan of the IS function
- IS strategy as the shared view of the IS role within the organization.
A variety of terms have been employed to represent similar constructs, like IT strategy, IS/IT strategy or information strategy. Recent years the term digital strategy has been applied to reflect and emphasize the fusion of IS strategy and business strategy. Bharadwaj et al. [3], define digital strategy as an organizational strategy formulated and executed by leveraging digital resources to create differential value. Building on this, the concept of digital transformation strategy has been introduced based on the objective of gaining insights about how such organization-wide digital strategy might be developed and implemented [4].
Why is Information systems strategy important?
As information technology now “is ubiquitous, does matter; and matters a lot” [5], strategic investments in ICT are instrumental to organizations’ long-term survival. According to Arvidsson et al. [6], the strategic role of ICT increasingly shifts from supporting organizational practices to enabling bold organizational change, and Kane et al. [7] describe how the strength of digital technologies depend on how organizations integrate them to transform their business and how they work, and argue that a clear strategy is instrumental to achieve this.
Understanding the strategic value of IS has not only been the top goal of many practitioners for a long time [8], but researchers have also conducted numerous investigations in this domain over the past decades [2]. Leidner et al. [9], for example, found that firms with defined IS strategies performed better than those without defined IS strategies, and that organizations without a clearly defined IS strategy actually experienced a negative relationship with firm performance. The many studies published on this topic contain important insights that are relevant and valuable to practitioners.
Practical advice
A summary of advice based on a selection of research articles is given below (with references and links to internal article reviews where available):
- Consistency between IT investments and strategic objectives
- The degree to which investments in IT lead to improved performance is influenced by the IS strategic emphasis of organizations. It is therefore important that decisions regarding IT investments are based on organizations’ IS strategies, and that organizations make sure that their portfolio of IT applications is consistent with their strategic purpose [10].
- Aral and Weill show that strategic, transactional, informational, and infrastructural IT investments have different effects on market valuation, profitability, cost, and innovation. Organizations should therefore make IT investments based on their strategic objectives [11].
- All types of IT investments should also be accompanied with development of organizational competencies and routines that strengthen and broaden the performance impacts of IT assets [11].
- The degree to which investments in IT lead to improved performance is influenced by the IS strategic emphasis of organizations. It is therefore important that decisions regarding IT investments are based on organizations’ IS strategies, and that organizations make sure that their portfolio of IT applications is consistent with their strategic purpose [10].
- Alignment between IS strategy and business strategy [Business - IT alignment]
- Organizations should pursue structural/formal and social alignment simultaneously.
- This involves emphasizing the fit between IT-infrastructures/processes and business structure/processes, and social integration among employees in IT departments and business units. To achieve this, cross-domain competence building is important (i.e. improve IT competence of business employees and business competence of IT employees) [12].
- Organizations should be aware of the potential negative effects (i.e. inertia) of formal alignment, and foster informal mechanisms and communication channels/structures that increase social alignment between business and IT executives [13].
- The degree to which the content of the business strategy matches the content of the IT strategy influences performance. To achieve such alignment, organizations should focus on their IT governance mechanisms – e.g. decision-making structures of IT prioritizations, measures to achieve consistency between IT policies and business needs, and formal structures for ensuring strategic IT emphasis [14].
- Organizations should focus on developing flexible technology assets and seek to increase IT staff’s understanding of business situations. This may increase the alignment of information systems with required strategic decision support and operational support [15].
- Organizations should seek to improve their abilities to renew their portfolio of IT applications. This is particularly important for organizations pursuing differentiation strategies (i.e. emphasizing product leadership and customer relations) [16].
- Organizations should pursue structural/formal and social alignment simultaneously.
- Strategy-as-practice
- Organizations need to emphasize the practice basis of IS strategizing (in addition to planning and implementation of IS). This means that the ways in which strategic IS becomes embedded in organizational practice should be emphasized, as the success of IS - i.e. realization of strategic intent - may depend on organizational changes and new work practices that may be difficult to achieve [6].
References / sources
- Power, rationality, and the art of living through socio-technical change.
Avgerou, C. & McGrath, K. (2007). Management Information Systems Quarterly, 31(2). - Information systems strategy: Reconceptualization, measurement, and implications.
Chen, D.Q., Mocker, M., Preston, D.S. & Teubner, A. (2010). Management Information Systems Quarterly, 34(2) - Digital business strategy: Toward a next generation of insights.
Bharadwaj, A., El Sawy, O.A., Pavlou, P.A. & Venkatraman, N. (2013). Management Information Systems Quarterly, 37(2) - Digital transformation strategy making in pre-digital organizations: The case of a financial services provider.
Chanias, S., Myers, M.D. & Hess, T. (2019). The Journal of Strategic Information Systems, 28(1). - Ubiquitous IT: The case of the Boeing 787 and implications for strategic IT research.
Noland, R.L. (2012). The Journal of Strategic Information Systems, 21(2). - Information systems use as strategy practice: A multi-dimensional view of strategic information system implementation and use.
Arvidsson, V., Holmström, J. & Lyytinen, K. (2014). The Journal of Strategic Information Systems, 23(1). - Strategy, not technology, drives digital transformation.
Kane, G.C., Palmer, D., Phillips, A.N., Kiron, D. & Buckley, N. (2015). MIT Sloan Management Review and Deloitte University Press. - A review of the practical relevance of IS strategy scholarly research.
Moeini, M., Rahrovani, Y. & Chan, Y.E. (2019). The Journal of Strategic Information Systems, 28(2). - An empirical investigation of the relationship of IS strategy with firm performance.
Leidner, D.E., Lo, J. & Preston, D. (2011). The Journal of Strategic Information Systems, 20(4). - How information technology strategy and investments influence firm performance: Conjecture and empirical evidence.
Mithas, S. & Rust, R.T. (2016). Management Information Systems Quarterly, 40(1). - IT assets, organizational capabilities, and firm performance: How resource allocations and organizational differences explain performance variation.
Aral, S. & Weill, P. (2007). Organization Science, 18(5). - Understanding employee competence, operational IS alignment, and organizational agility – An ambidexterity perspective.
Zhou, J., Bi, G., Liu, H., Fang, Y. & Hua, Z. (2018). Information & Management, 55(6). - Unraveling the alignment paradox: How does business—IT alignment shape organizational agility?
Liang, H., Wang, N., Xue, Y. & Ge, S. (2017). Information Systems Research, 28(4). - How information technology governance mechanisms and strategic alignment influence organizational performance: Insights from a matched survey of business and IT managers.
Wu, S.P-J., Straub, D.W. & Liang, T-P. (2015). Management Information Systems Quarterly, 39(2) - A study of IS assets, IS ambidexterity, and IS alignment: The dynamic managerial capability perspective.
Tai, J.C.F., Wang, E.T.G. & Yeh, H-Y. (2019). Information & Management, 56(1). - The role of IT application orchestration capability in improving agility and performance.
Queiroz, M., Tallon, P.P., Sharma, R. & Coltman, T. (2018). The Journal of Strategic Information Systems, 27(1)
Other external resources for practitioners
Philip Evans talks about the relationship between strategy, data and technology. See also article From deconstruction to big data: How technology is reshaping the corporation from the book Reinventing the Company in the Digital Age.
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