Information Technology Management Research: Trends and Challenges

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Trends and Challenges in Strategic Management of Information

Technology

Dr. Lazar RusuStockholm University/Royal Institute of Technology (KTH)

Department of Computer and Systems SciencesInformation Systems Laboratory (SYSLAB)

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Outline• Strategic Management of IT: Concepts

and Trends • Examples of Challenges in Strategic

Management of IT:• Strategic Alignment in Swedish Healthcare

Sector • IT Leadership in Swedish Leading

Multinational Corporations• Summary

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Strategic Management of IT: Concepts and Trends

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Strategic Management of IT-Definition

• Today in many organizations information technology (IT) is playing a strategic role and has become more important than it was before for the business strategy. Moreover aligning IT with business strategy is a major concern for many IT leaders.

• Strategic IT management is according to Bergeron et al. (2001) ”a multidmensional construct that characterizes the extent to which organizations are deemed to plan, implement and use information systems in a competitivly oriented manner”. The four dimensions of this construct are the followings: IT environment scanning (e.g. knowing the IT used by your competition), IT planning and control (e.g.strategic planning of IS in relation to the organization’s business objectives), IT acquition and implementation (e.g. choosing IT related to the strategic orientation of your firm) and strategic use of IT (e.g. use your IT to increase your firms’s profitability).

• Based on the above construct we have found in the research literature that Strategic Management of IT is mainly concerned with IT Strategic Planning (by including in this dimension the IT acquition and implementation dimension) and Strategic use of IT (by including in this dimension the IT environment scanning dimension).

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Systems Hierarchy

Source: (Pearlson and Saunders, 2009)

Management monitors overall performance, develops business requirements and business strategy and Information Systems/Information Technology needs to meet this strategy.

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The relationship among business, IS and IT-strategies

• Business strategy - sets the overall direction for the business.

• Information systems (IS) strategy - define what information, information systems and IT architecture are required to support the business.

• Information technology (IT) strategy - indicates how the infrastructure and services are to be delivered.

Source: (Ward and Peppard, 2002)

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The Strategy Triangle

• The Strategy Triangle shows that business strategy always drivesorganizational and information strategies. (Pearlson and Saunders, 2009).

• Successful firms’ have an overriding business strategy that drives both their organizational and IS strategies. In fact successful firms’ seek to balance these three strategies: business, organizational, and IS strategies.

• IS Strategy will affect and is affected by the other strategies a firm uses. Changes in IS strategy must be accompanied by constant adjustments in the other two strategies.

• IS strategy can have (sometimes unintentional) consequences on business and organizational strategies (therefore we have to consider business and organizational strategies when we design IS deployment).

• The success can only be achieved by specifically designing all three components of the strategy triangle.

Source: (Pearlson & Carol Saunders, 2009)

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IT Planning Process

Source: (Turban and Volonino, 2009)

• IT planning is the organized planning of IT resources done at various levels of the organization.

• The entire planning process begins with the creation of a strategic business plan.

• The IT strategic (long-range ) plan starts with the vision and strategy that defines what IT should do to achive the goals, objectives and strategic position and how this will be achived.

• The IT medium-tem plan identifies general project plans in terms of the specific requirements as sourcing of resources as well as the project portofolio.

• The IT tactical plan details budgets and schedules for current-year projects and activities.

• IT planning is a continuos process.

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Tools and Methodologies in IT Strategic Planning

The tools and methods that facilitate IT strategic planning are used to:

• help organizations align their business-IT strategies with the organizational strategies,

• identify opportunities to add value with IT or utilize IT for competitive advantage and

• analyze internal processes (Turban and Volonino, 2009).

Among these methods we have: • IT Dashboards• Balanced Scorecard • Critical Success Factors

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IT Dashboards

Business service management - Source: (Firescope, 2009)

• Business service management is an approach for linking key performance indicators (KPIs) of IT to business goals to determine impact on the business.• KPIs measure actual performance of critical aspects of IT such as projects, servers, networks against predefined goals such as growing revenue, lowering costs, reducing risk.• KPIs measure real-time performance or predict future results and also measures results of past activity.• Business service management tool delivers real-time dashboards views for tracking the KPIs at the executive, functional business areas, services and operations levels.

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Balanced Scorecard

Source: (Kaplan and Norton, 1992)

Balanced Scorecard applied to IT departments Source: (Pearlson and Saunders, 2009)

Balanced Scorecard (Kaplan and Norton, 1992)

The Balanced Scorecard has been created by Kaplan and Norton (1992) by focusing attention on the organization’s value drivers. Companies use it to asses the full impact on their corporate strategies, on their customer and workforce and their financial performance.

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Critical Succes Factors

Critical success factors-basic processes Source: (Ward and Pepper, 2002)

The Critical Success Factors (CSFs) are “the limited number of areas in which satisfactory results will ensure a successful competitive performance for the individual, department or organization” (Rockart and Van Bullen, 1986).

- What objectives are central to organization?- What are the CSFs for meeting the objectives?-What information can be used in achieving those CSFs considered?-How information systems/information technology help to achieve the CSFs?

CSFs are areas of activity that should receive constant attention from the management.

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IT- Business Alignment or Strategic Alignment

• IT-business alignment is according to Luftman (2000) concerning on the “applying of IT in an appropriate and timely way in harmony with business strategy, goals and needs”.

• The alignment of IT with the business strategies is also named strategic alignment (Chan 2002; Moody 2003).

• IT-business alignment is still today a top management concern (Luftman et al. 2006; Luftman and Kempaiah 2008), but no comprehensive model of the construct is commonly used.

• A number of models of IT-business alignment have been proposed till now like are Henderson and Venkatraman (1993), Luftman (2000), Maes et al. (2000) and Reich and Benbasat (2000) to mention only a few of them.

• The research findings of Luftman and Kempaiah (2007) are mentioning that there is a positive correlation between the maturity of IT-business alignment, IT organizational structure, CIO reporting structure and firm performance.

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IT Governance• IT governance is considered to be ”an integral part of enterprise

governance and have potential to provide mechanisms for leadership and organizational structures and processes that ensure the organization’s IT sustains and extends the organization’s strategies and objectives” (ITGI, 2003).

• “An effective IT governance structure is the single most important predictor of getting value from IT” (Weill and Woodham, 2002)

• The difference between IT management and IT governance is in opinion of Wilbanks (2008) the following: “If a company wants to grow and be successful, it must not only manage its IT resources, but also use those resources throughout the company as part of the governance structure”.

• The successful application of IT Governance can provide the mechanisms to increase the effectiveness of IT. "Firms with superior IT Governance have at least 20% higher profits than firms with poor governance, given the same strategic objectives" (Weill & Ross, 2004)

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IT Leadership• According to Karahanna and Watson (2006) IS leadership “sets directions,

creates commitment, mobilizes institutional, political, psychological and others resources, facilitates action and adapts the IS unit to fit a changing environment such that it adds value and achieved shared objectives”.

• Leadership is the primary role and skill required for a CIO position and this could be an explanation of why many CIOs fail.

• In opinion of Smaltz et al. (2006) “the most effective CIOs should have business and strategic IT knowledge, know how to communicate interpersonally, and posses the political savviness to catalyze and stimulate IT-based innovation and change.

• “CIOs are effective when they are members of the top management team and develop trusting relationships” (Smaltz et al., 2006).

• The importance on focusing the research on the CIO and the development of a theory of IS Strategic Leadership is coming from both theoretical and pragmatic reasons (Karahanna and Watson 2006).

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Key IT capabilities that enable Sustainable Competitive Advantage

According to Applegate et al. (2009) the key IT capabilities that enable sustainable competitive advantage are:

• Highly competent IT leaders and staff• An agile IT infrastructure• A strong partenership relationship with

business• A strong governance system for managing IT

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Trends coming out from IT Management Concerns

The table above presents the major findings based on the surveys received from 291 organizations and done by the Society for Information Management (SIM) in order to help IT leaders around the globe to understand the important issues and trends in IT management.

Source: Luftman et al., Key Issues for IT Executives, MIS Quarterly Executive, Vol. 8, No. 3, p. 152, Sep 2009

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Examples of Challenges in Strategic Management of IT

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Example 1Strategic Alignment in Swedish

Healthcare Sector

Lazar Rusu, Yu Hunag, Ali Turab Rizvi, “Strategic IT Alignment in Swedish Public Healthcare System”, Lecture Notes in Artificial Intelligence, 5288, pp.

105-113, Springer-Verlag, Berlin Heidelberg, 2008

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Research objective and methodology

• Research Objective: – The objective is to analyze the path to strategic

alignment in the healthcare sector in Sweden. • Research Methodology

– Using “The Four C’s” model (2004) for analyzing the path to strategic alignment.

– Qualitative (through interviews in organizationsfrom Stockholm healthcare sector) and quantitative (survey in 234 organizations acting in Swedish healthcare sector, documents, reports regarding e-health strategy in Sweden).

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The four C’s model (Weiss and Anderson (2004) Model)

Weiss, J. W. and Anderson, D. (2004) Aligning Technology and Business Strategy: Issues & Frameworks, A Field Study of 15 Companies, Proceedings of the 37th Annual Hawaii International Conference on System Sciences IEEE Computer Society

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The actors of the Swedish public healthcare sector

Sweden has a decentralized healthcare sector with 20 county councils and 290 municipal councils as principals and care providers. Their responsibilities as principals includes the provision of adequate care services and the requirement to develop quality assurances and finance of all care activities.

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Business Strategy• The business strategy in the helthcare sector is

presented in the National strategy for e-health in Sweden (2006).

• Goal - The overall goal is to provide adequate health and medical care services.

• Objective - The principal actors in the medical and healthcare sector must take up a common position on strategic issues crucial to the continued development, renewal and improved efficiency of Sweden’s healthcare services. IT should be used as a strategic tool at all levels in the healthcare sector.

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IT Strategy

• The key issues of the IT Strategy in healthcare sector according to National strategy for e-health in Sweden (2006) are:– Bringing laws and regulations into line with extended use of ICT.– Creating a common information structure.– Creating a common technical infrastructure.– Facilitating interoperable, supportive ICT systems.– Facilitating access to information across organisational

boundaries.– Making information and services easily accessible to citizens.

• In aligning the IT strategy with business strategy the main role is played by Carlink which is an organization for national cooperation and coordintaion concerning the development of IT and use of IT in Swedish healthcare sector.

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Strategic Alignment Analysis -Results

The results of the interviews and online survey using the “4C’s” model has shown the followings:

• IT has a clear direction stated in the national e-healthcare strategy in which Carelink is playing a coordination role of IT projects development and IT strategy implementation. There are also IT standards that are emerging cross functions within the organization.

• The connections between IT strategy and Business Planning are looking more to achive operational excellence rather than a partner that can create value. On the other hand the IT managers from Carelink are committed to have good liaisons and good partnership with people from different departments of Swedish healthcare organizations.

• The communications inside the organizations from healthcare sector are looking to build relationships as partners. Moreover there is a knowledge transfer between these organizations through different training initiatives.

• Regarding cross functional integration we have noticed that there is a willing for change of organization’s business processes. Furthermore the level of IT innovation is encouraged mostly internally but also externally with the partners and customers.

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Example 1 - ConclusionsIn summary the analysis of the path to strategic alignment using the 4C’s model has brought the following findings:

• The Swedish healthcare sector has a clear direction on using IT strategically.

• The officials have shown a good level of commitment to achieve this goal and the goal has been communicated well through out the organization.

• There is also a cross functional integration in the healthcare sector since the knowledge and information are shared among different departments and is a positive attitude concerning IT innovations.

• In achieving of a good level of strategic alignment Carelink has played and is still playing an important role for the strategic alignment of IT with the business strategy by acting in our perception like a Chief Information Officer in the healthcare sector.

• A challenge coming out of this research will be to analyze the cultural effects on strategic alignment in healthcare sector from Scandinavian countries.

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Example 2Information Techology Leadership in

Swedish Leading Multinational Corporations

Lazar Rusu, Mohamed El-Mekawy, Georg Hodosi, “Information Technology Leadership in Swedish Leading Multinational Corporations”, Lecture Notes in

Artificial Intelligence, 5736, pp.511-522, Springer-Verlag, Berlin Heidelberg, 2009

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• The research concerns the analysis of CIO’s role and profile in five Swedish leading multinational corporations.

• The research serves in using a more up-to-date model to classify CIOs and secondly in highlighting paths of development for CIOs that allow them to become more aligned with the company’s IT strategy.

• Semi-structured interviews were performed with CIOs and IT decision makers from five Swedish leading multinational corporations (MNC).

• The data has been collected from the last consecutive three years 2006, 2007, 2008.

• Additional data has been used from internal reports and published case studies.

• The study has as limitation the fact that is reflecting the situation from the Swedish business environment.

Research methodology

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Companies ProfileCompany A Over 100 years old - over 100.000 employees – a high

percentage of the world market in one the brand and is a global leader in other areas. The company’s strengths are a high R&D budget; many patents and intellectual properties rights on their products.

Company B Newer than A - over 100.000 employees - innovative design of the products, own style, competitive prices, global presence around the world.

Company C Over 100 years old - about 40.000 employees - belongs to the largest European companies in their areas with a strong brand. R&D is their competitive edge.

Company D Over 100 years old - over 100.000 employees - high tech is their business area and is the global leader within several areas. The company has a high R&D and global presence.

Company E Near 100 years old - about 50.000 employees - a global leader in a business area. R&D and production are their competitive edge on a global market.

Case study analysis

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CIO RoleWe have evaluated the role of CIO using Sojer et al. (2006) that “it is striking that the CIO is seen as a highly valuable and strategic part of the company’s board”. The Sojer et al. (2006) model is based on McFarlan’s strategic grid (1983) and the authors argue that the role of CIO can be defined using two variables: strategic importance of running IT and the strategic importance of changing IT.

The results of the analysis of the CIO role in our case study has shown the followings:•Supporter: none of the CIOs.•Enabler: none of CIOs.•Cost Cutter/Project Manager: none of the CIOs.•Driver CIO & CTO: all five CIOs.

Case study analysis

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CIO Profile

1. it is relevant to all 5 CIOs.2. it is relevant to all 5 CIOs.3. it is relevant to all 5 CIOs regarding consultant/facilitator, good

communicator, able to achieve results through others but regarding IT knowledge, not for CIO of Company B, D and E and for CIO of companies A and C is relevant.

4. not for companies: B, D and E but relevant for companies A and C.

1. Behavior: is loyal to the organization, is open in management style and has integrity.

2. Motivation: is goal oriented, creative and encourage ideas, change agent.

3. Competencies: is a consultant/ facilitator, a good communicator, able to achieve results through others and has IT knowledge.

4. Experience: has had an IS development role.Regarding the above criteria we have found the following results in the case of the five Swedish companies:

Earl and Feeny (1994) have argued that is extremely important that a CIO is able to add value. According to Earl and Feeny (1994) the profile of the CIO who adds value has to fulfill the following criteria:

Case study analysis

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• In only two out of the five companies the CIO is adding value more precisely in case of companies A and C.

• In all the five companies the CIO is a driver and the strategic importance of running IT is high. The current and the future IT initiatives are of major strategic importance.

• In all the five companies the strategic importance of changing IT is high which is in according to King (2008) that have stated “to be effective in strategic business context, the CIOs must be strategic change agents”.

• A potential challenge coming out of this research could be in constructing a role model of the CIO in various industries in Sweden.

Example 2 - Conclusions

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Summary• Information technology (IT) has become today more important than it

was before for the business strategy.• For IT to be strategic and provide advantage, it must be tied to

business processes and aligned with business strategy. • Strategic alignment is still a top management concern and there are

still challenges that remain to be researched. • In achieving strategic alignment IT leadership is playing a key role. • The profile of the new IT leader should be one who has a strategic

role and is part of the top management team. • Adopting a strategic approach to measuring IT performance

supported by tools for strategic planning enables IT to better demonstrate how it’s contributing to business growth and success.

• In using IT for strategic purposes the evaluation of how IT supports business and organizational strategies and the continuously assessment of strategic alignment have to be considered in this perspective as the main two priorities by every IT executive leader.

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Thank you!