Module 2: An Analytical Framework for Strategic IT Initiatives

An IT Strategic Framework: To achieve the efficiency required of the Department in

the areas of IT infrastructure and management, consistency in approach and
understanding across the Department must be a prerequisite.

In the environment that was described, it was understood that common areas of
agreement were going to be achieved. Through this structured strategic decision making
process and through the activities of devising and agreeing upon a strategic framework,
some common agreement areas were found.

This common understanding and the process used to achieve these agreements are major
contributors to the future implementation of the IT strategy. As this strategic framework
is deployed throughout the IT Program and in subsequent IT initiatives and IT planning
efforts, it will become a standard operating aspect to the Department as a whole.

Evaluation: emerging problems

Taking a management perspective, evaluation is about establishing by quantitative and/or

qualitative means the worth of IT to the organization.
Evaluation brings into play notions of costs, benefits, risk and value. It also implies an
organizational process by which these factors are assessed.

The major problems in evaluation:

• inappropriate measures
• budgeting practice conceals full costs
• understating human and organizational costs
• understating knock-on costs
• overstating costs
• neglecting ‘intangible’ benefits
• not fully investigating risk
• failure to devote evaluation time and effort to a major capital asset
• failure to take into account time-scale of likely benefits.

Strategy and information systems

The organizational investment climate has a key bearing on how investment is organized
and conducted, and what priorities are assigned to different IT investment proposals. This
is affected by:
• the financial health and market position of the organization
• industry sector pressures
• the organizational business strategy and direction
• the management and decision-making culture.

As an example of the second, 1989–90 research by Data solve showed IT investment

priorities in the retail sector focusing mainly on achieving more timely information, in

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financial services around better quality service to customers, and in manufacturing on
more complete information for decision-making. As to decision-making culture, senior
management attitude to risk can range from conservative to innovative, their decision-
making styles from directive to consensus-driven. As one example, conservative on
sensus-driven management would tend to take a relatively slow, incremental approach,
with large-scale IT investment being unlikely.
The third factor will be focused on here, that is creating a strategic climate in which IT
investments can be related to organizational direction.
Shaping the context in which IT evaluation is conducted is a necessary, frequently
neglected prelude to then applying appropriate evaluation techniques and approaches.
This section focuses on a few valuable pointers and approaches that work in practice to
facilitate IT investment decisions that add value to the organization.

Alignment
A fundamental starting point is the need for alignment of business/organizational needs,
what is done with IT, and plans for human resources, organizational structures and
processes. A simpler approach is to suggest that the word ‘strategy’ should be used only
when these different plans are aligned. There is much evidence to suggest that such
alignment rarely exists. Detailed research also shows lack of alignment to be a
common problem in public sector informatization.

IT Strategic grid
The McFarlan and McKenney (1983) grid is a much-travelled, but useful framework for
focusing management attention on the IT evaluation question:

where does and will IT give us added value?

Multiple methodology
Earl (1989) wisely opts for a multiple methodology approach to IS strategy formulation.
This again helps us in the aim of relating IT investment more closely with the strategic
aims and direction of the organization and its key needs. One element here is a top-down
approach. Thus a critical success factors analysis might be used to establish key business

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objectives, decompose these into critical success factors, then establish the IS needs that
will drive these CSFs. A bottom-up evaluation would start with an evaluation of current
systems. This may reveal gaps in the coverage by systems, for example in the marketing
function or in terms of degree of integration of systems across functions. Evaluation may
also find gaps in the technical quality of systems and in their business value. This permits
decisions on renewing, removing, maintaining or enhancing current sysems. The final leg
of Earl’s multiple methodology is ‘inside-out innovation’. The purpose here is to
‘identify opportunities afforded by IT which may yield competitive advantage or create
new strategic options’. The purpose of the whole threefold methodology is, through an
internal and external analysis of needs and opportunities, to relate the development of IS
applications to business/organizational need and strategy.

Information systems management and strategy formulation: applying and

extending the ‘stages of growth’ concept
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

it is based on the premise that the organizations pass through a number of identifiable
growth phases in utilizing and managing IT. These ‘stages of growth’ are then used to
identify the organization’s level of maturity in this context, with a view to identifying key
issues associated with further IT development.

There are four major growth processes that can be analysed to identify the organization’s
stage of maturity with respect to IT use.

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1 The scope of the application portfolio throughout the organization (moving from
mainly financial and accounting systems to wider-ranging operational systems, to
management information systems).

2 The focus of the DP organization (moving from a centralized, ‘closed.

3 The focus of the DP planning and control activity (moving from a primarily internal
focus in the first three stages to an external focus in the latter stages), and

4 The level of user awareness [moving from a primarily reactive stance (reactive, that is,
to centralized DP initiatives) in the first two stages, to being a driving force for change in
the middle stages, through to a partnership in maturity). shop’ in the early stages to data
resource management in maturity).

Nolan argues that the information systems management focus is very much concerned
with technology per se during the earlier stages of growth, with a transformation point
occurring at the completion of stage three, after which the focus is on managing the
organization’s data resources, utilizing database technology and methods.

As indicated earlier, the model has been criticized because it has not proved possible to
substantiate its claims to represent reality, either as a means to describe the phases
through which organizations pass when utilizing IT,
In addition, its focus on database technology clearly dates the model. Earl (1989), for
example, argues that organizations will pass through a number of different learning
curves with respect to different ITs, as illustrated in Figure 2.3. In addition, it is now clear
that different parts of a single organization may well be at different stages of growth with
respect to a particular IT.

Multiple learning curves (amended from Earl,

The Earl model

Unlike Nolan’s model, Earl’s concentrates attention on the stages through which
organizations pass in planning their information systems.
Earl illustrates the changing agenda for information systems planning by concentrating

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attention on what is seen as the primary task of the process: its major objective, the
driving forces of the planning process (in terms of those involved), the methodological
emphasis, and the context within which the planning takes place. Following research on
current information systems planning practice, and an additional factor, concerning the
focus of the planning effort.

Earl’s argument is essentially that organizations begin their planning efforts by the first
attempting to assess the current ‘state of play’ with respect to information systems
coverage and IT utilization. Increasingly, the focus shifts

The Bhabuta model

Bhabuta (1988) developed a model which attempts to map the progress towards formal
strategic planning of information systems. This is illustrated in Table 2.2.
Underpinning Bhabuta’s argument is the contention that strategies based on productivity
improvement (and the information systems needed to support them) ‘will become the
dominant paradigm in the turbulent and fiercely competitive markets of the next decade’
(Bhabuta, 1988, p.1.72). His model is more widely focused than either the Nolan or Earl
models, in that it attempts to bring together elements of, for example, strategy
formulation, information systems, and the mechanisms by which the information systems
function is managed. The value systems associated with each phase of the model are also
Identified.
In interpreting the Bhabuta model, it should be noted that the categories used are not
distinct nor absolute. With the maturing of IT utilization, and managerial sophistication
with respect to IT, it can be expected that some of the attributes associated with, for
example, Phase 3 and 4 organizations will emerge within Phase 1 and 2 organizations.
This point takes account of some of the criticism of the Nolan model (Benbasat et al.,
1984), which is itself based on earlier work by Greiner (1972), regarding the
discontinuities that organizations experience in growth.

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The Hirschheim et al. model
Hirschheim and his colleagues contend that in companies where top management had
begun to realize that information systems are vital to their business, organizations move
through three evolutionary phases in their management of the IS/IT function. The three
phases are labelled ‘delivery’, ‘reorientation’ and ‘reorganization’.

The ‘delivery’ phase is characterized by top management concern about the ability of the
IS/IT function to ‘deliver the goods’. Senior executives have begun to take the subject
very seriously, but there is often dissatisfaction with the quality of the available
information systems and the efficiency of the IS/IT function, together with mounting
concern regarding IT expenditure and the consistency of hardware and infrastructure
policies. It would appear that often this phase is initiated by replacing the DP manager
with an external recruit with a good track record and substantial computing experience.

The emphasis in this phase is on the ‘delivery’ of information systems and, accordingly,
the newly appointed IS executive spends most of the time on matters internal to the IS
department. The primary role is to restore credibility to the function and/or to create
confidence in user/top management that the function really is supporting current needs
and is run efficiently. During this phase, IS education is sparse, but where it is provided,
it is targeted on DP personnel with a view to improving skills, techniques and project
management.

In the ‘reorientation’ phase, top management (or the Director ultimately responsible for
IS) changes the focus of attention from the delivery of basic IS services to the

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exploitation of IT for competitive advantage. An attempt is made to align IS/IT
investment with business strategy. In short, it is in this ‘reorientation’ phase that ‘the
business is put into computing’. With this change of direction/emphasis, it is common to
appoint an IS executive over the DP Manager. The new post is filled, typically, by an
insider: a senior executive who has run a business unit or been active in a corporate role,
such as marketing or strategy formulation. They are likely to have only limited
experience of DP, but are respected by top management for an ability to bring about
change. The focus during this second phase is on the marketplace; on the external
environment of the enterprise; on using IT for competitive advantage, and in extending
the value chain through inter-organizational systems (cf. Cash and Konsynski, 1985).

In the ‘reorganization’ phase, the senior IS executive (by now the IT Director) is
concerned with managing the interfaces or relationships between the IS function and the
rest of the organization. Some areas will be strategically dependent on IS, others will be
looking to IS more in a support role. Some will have significant IT capability, particularly
with the advance of end-user computing, and some business executives will be driving IT
and IS development. Increasingly IS will be managed along ‘federal’ lines (Edwards et
al., 1989) with IS capability in the centre and in business units/functions.
These changed and changing relationships require careful management and often
‘reorganization’, and once again attention is focused on internal (organizational), as
opposed to external (marketplace), concerns.

Research model
The model used in this study focuses on four issues:
environment, process, form and content, and effects of information strategy. The four
components of the model are related to each other in several ways. The main relationship
is that the environment influences the process which produces the content (being the
output of the strategy process), which yields the effects, which change the environment
(the impact or outcome of the strategy) and so close the loop.
There is a fair amount of similarity between this model and the input –

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process – output (IPO) model of King (1988): the planning process (P) converts several
inputs (I) from the environment into a set (O) of mission,

objectives, strategies, goals, resource allocations, information architectures and strategic

programmes. The main difference is that the IPO model is more prescriptive (specifying
components and relationships that should exist in SISP) whereas our model is descriptive
and intended to provide structure to the collection of data from interviews and company
documents.

Implications for practice

For practitioners, this study provides two general lessons. First, SISP requires a holistic
or interdependent view. Methods may be necessary, but they could fail if the process
factors receive no attention. It is also important to explicitly and positively incorporate
implementation plans and decisions in the strategic planning cycle.

Second, successful SISP seems to require users and line managers working in partnership
with the IS function. This may not only generate relevant application ideas, but it will
tend to create ownership of both process and outcomes. The taxonomy of SISP
approaches emerging from this study might be interpreted for practice in at least four
different ways. First, it can be used as a diagnostic tool to position a firm’s current SISP
efforts. The strengths and weaknesses identified in the research then could suggest how
the current approach could be improved. We have found that frameworks used in this
way are likely to be more helpful if users and general managers as well as IS
professionals join together in the diagnosis.

Second, the taxonomy can be used to design a situation-specific (customized) approach

on a ‘mix-and-match’ basis. It may be possible to design a potentially more effective
hybrid. The author is aware of one company experimenting at building a combination of
the Organizational and Technological Approaches.
One of the study companies that had adopted the Organizational Approach to derive its IS
strategy also sought some of the espoused benefits of the Technological Approach by
continuously formulating a shadow blueprint for IT architecture. This may be one way of
reconciling the apparent contradictions of the Organizational and Technological
Approaches.

Third, based on our current understanding it appears that the Organizational Approach is
more effective than others. Therefore, firms might seriously consider adopting it. This
could involve setting up mechanisms and responsibility structures to encourage IS-user

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partnerships, devolving IS planning and development capability, ensuring IS managers
are members of all permanent and ad hoc teams, recognizing IS strategic thinking as a
continuous and periodic activity, identifying and pursuing business themes, and accepting
‘good enough’ solutions and building on them. Above all, firms might encourage any
mechanisms that promote organizational learning about the scope of IT.

Another interpretation is that the Organizational Approach describes how most IS

strategies actually are developed, despite the more formal and rational endeavors of IS
managers or management at large. The reality may be a continuous interaction of formal
methods and informal behavior and of intended and unintended strategies. If so, SISP in
practice should be eclectic, selecting and trying methods and process initiatives to fit the
needs of the time. One consequence of this view might be recognition and acceptance
that planning need not always generate plans and that plans may arise without a formal
planning process.

Finally, it can be revealing for an organization to recall the period when IS appeared to be
contributing most effectively to the business and to describe the SISP approach in use
(whether by design or not) at the time. This may then indicate which approach is most
likely to succeed for that organization. Often when a particularly successful IS project is
recalled, its history is seen to resemble the Organizational Approach.