Ict Enabled Innovations With Strategic Implications

Published Date: 02 Nov 2017

CONTENTS

INTRODUCTION

Marshall McLuhan, the Canadian philosopher and media theorist coined the term’the global village’ in 1962. Almost twenty years later, Theodore Levitt, in using the term ‘ globalization’ echoed the recognition of a worldwide phenomenon. He recognized that "A powerful force drives the world toward a converging commonality, and that force is technology. Almost everyone everywhere wants all the things they have heard about, seen, or experienced via the new technologies." (Levitt, 1983). Michael Porter (1985) in his discussion acknowledged an information revolution affecting businesses in three ways. It changes the structure of industries, creates competitive advantage by allowing companies to deliver value differently and it creates a host of opportunities for new businesses. Porter (1985) in assessing the strategic role of ICT, advised that businesses develop a plan for taking advantage of information technology since this can assist in the strategic implementation process. The common stream of thought from these gurus is that Information and communication technology (ICT), continues moreso today than ever, to affect businesses in the global business environment strategically and not just operationally .

In contrast to the views above, Car 2003, examined the relationship between IT and competitive advantage of a firm and concluded that the strategic role of IT decreases as accessibility and affordability increases. He credited IT’s role as a commodity referring to the ‘commodization of IT’. The concepts of proprietary versus infrastructural technology are identified with Carr supportive of IT as being the latter. Carr supported that IT mattered in this arena because it enabled more efficient business processes and operations which because of its embeddedness, resulted in cost savings and interoperability benefits instead of differentiation. Carr asserted that IT was more valuable when shared as opposed to use in isolation. It resulted in more market changes in the macro environment with the development of industry standards as competition intensified. Carr noted that Infrastructural Technology however was more at the end of its build out and the key role of IT management today should be one of cost and risk management as it relates to infrastructural technology

Carr (2003) sparked heated response to his position on the role and significance of IT from IT practitioners and researchers who wholeheartedly disagreed with Carr’s claims on the limited value of the strategic role of ICT in today’s global business environment . John Seely Brown (Former Chief Scientist, Xerox & John Hagel III (Management Consultant and Author) rebutted Carr’s argument by supporting the view that value from IT comes from innovations in business practices, these innovations are incremental and that the strategic impact of IT investment is cumulative. ‘Strategic differentiation from IT emerges over time and it is based more so on the ability to continue to innovate around IT’s evolving capabilities. Mc Farlan and Nolan in response to Carr, endorsed the transformation role that ICT played, reiterated that boundaries were being eroded and now being globally defined due to IT, and advocated that new technologies continued to give companies the chance to differentiate. One of the key focus of IT today was to create strategic advantage to firms and industries by increasing their competitiveness, relationships, networks and partnerships which was not restricted to a geographical domain. It provided new ‘IT based services’ that by extension added to the customer’s value proposition.

From the competing views above, clearly there are different positions regarding the role of ICT and the level of impact in the organization, the industry and globally. This paper therefore explores the strategic use of ICTs in today’s business environment and presents a literature review of ICT research along the following thematic areas:

ICT Enabled Innovations with Strategic Implications

IT Business Value

ICT Development and Small Economies

ICT Strategic Thinking and Management

IT Governance and IT Leadership

The underlying research question as each of the above thematic area is discussed is ‘what is the strategic role of ICT being highlighted by the researcher or researchers?’

ICT ENABLED INNOVATIONS WITH STRATEGIC IMPLICATIONS

The structure of organizations and business arrangements today have become nontraditional due to innovations in IT which is embedded in every aspect of business operations and processes. The global organization faces issues with efficiency, the multi-national with responsiveness, the International organizations with learning and the transnational enterprises, all of the above. To structure an organization to deal with globalization issues of efficiency, responsiveness and learnings, a virtual organization structure was recommended. (Boudreau, et al. 1998)

Businesses today operate in virtual networks of complex business relationships that transcend across geographical, industrial, cultural and social domains. IT applications that enable these virtual organizations environment are, Electronic Data Interchange (EDI), inter-organizational systems (IOS) and Electronic Commerce (E-commerce) using the internet. EDI systems link the systems of buyers and sellers facilitating efficiency and responsiveness. It however does not address learning needs because most systems do not capture historical information that may be relevant for trending and decision making. Inter-organizational Systems (IOS) connects and allows the smooth flow of information between companies allowing more efficient and responsive transactions. One prime example of the gains realized from IOSs is that of port operations. IOS integrates systems from government agencies, freight forwarders, shipping companies, and other relevant stakeholders in the value chain in bringing the product or service to the final customer.

On the direct business to customer front, electronic commerce via internet facilitates the buying process electronically by providing relevant information regarding products and services as well as capturing relevant information concerning the buyer and characteristics of the buying process. Amazon, ebay and other various forms of on line business clearly validates this. Porter (2001) advocated that businesses integrate internet technology and the traditional approach to business strategy in order to gain sustainable competitive advantage. He argued that the Internet Technology on its own cannot offer firms a distinctive advantage but was instead ‘an enabling technology’. This ‘digital market place’ therefore requires effective mechanisms for collecting, retaining, and retrieving key information for effective decision-making.

The challenge that all organizations face today is exploiting all the available information and dealing with the daily increase of this information. In light of this, businesses need to capitalize on the value from available information in order to stay competitive. Two key technologies recommended to meet this need is Knowledge Management and Business Intelligence. Knowledge Management refers to the process of identifying and using knowledge to help the organization to compete (Von Krog 1998). Business Intelligence focuses on ‘a systematic approach’ to data collection in one repository. It is concerned with data warehousing. Knowledge Management combines content management systems and the internet. It manages and analyses unstructured text information.

The key literature that supports the use of these two technologies, Knowledge Management and Business Intelligence technologies, is the resource based view of the firm (Penrose, 1959;Barney 1991) and the knowledge based view of the firm (Kogut and Zander, 1992; Grant, 1996). The basic assumption is that a firm’s competitiveness does not rely on the external environment as much as it does on the internal characteristics and internal environment. Differences in the performances of firms between organizations are as a result of the difference in knowledge and capabilities in using and developing this knowledge. The Absorptive Capacity Theory by Cohen and Levinthal (1990) clearly illustrated differences between knowledge and capabilities. They propagated that ‘an organization needs prior related knowledge to assimilate and use new knowledge’ and referred to this as a firm’s absorptive capacity. Zahra and George (2002) further extended this construct to include four areas where a firm needs to manage knowledge, 1) acquisition, 2) assimilation 3) transformation and 4) exploitation. The first two categories related to ‘potential absorptive capacity’ and the last two, ‘realized absorptive capacities’. According to Liao et al,(2003) absorptive capacity required information from the external environment but dissemination of knowledge within the firm’s internal environment. Empirically, potential absorptive capacity has been given less attention than realized absorptive capacity.

Emerging from the resource based view was the dynamic capabilities theory by Teece, Pisano and Shuen (1997). Dynamic capabilities refer to the firm’s abilities to consolidate, develop and rearrange based on its own specific needs, internal and external competencies in a changing business environment in order to secure sustainable competitive advantage. In other words, competitive advantage stemmed from capabilities inside the firm which are embodied in high performing routines that are part of the firm’s processes and shaped by its history. The firms which were able to demonstrate responsiveness and the ability to innovate rapidly due to flexibility together with management’s ability to coordinate these competencies (internal and external) were the ones that excel in the global market. Consequently having effective knowledge management practices and technologies became even more critical in the ‘dynamic’ business environment

From the discussion above, in the final analysis the assumption is that the management of knowledge impacts on the business performance of firms. However, there is a deficit of empirical work that examines such a relationship. Most of the literature consists of papers with theories and hypothetical relationships. Performance has also been operationalized differently across various studies. Many studies have also focused on knowledge processes as opposed to knowledge management practices (Andreeva and Kianto 2012). Knowledge processes naturally exist in the organization but knowledge management refers to deliberate and planned efforts and initiatives that support the management of knowledge for the benefit of the organization. These are of two types, one related to ICT initiatives and the other related to human resources management (HRM).

In one empirical study that examined the impact of knowledge management practices on company performance according to the two types identified above, HRM and ICT practices had a strong correlation with financial performance and competitiveness which was statistically significant. This finding provided some empirical support for the relationship between knowledge management and the firm’s financial performance. HRM practices also mediated the relationship between ICT knowledge management practices and financial performance. (Andreeva and Kianto 2012). It was interesting to note that when the relationship between ICT and performance was looked at alone, economic performance actually declined. Some explanations offered were the large outlays of IT Investment decreasing the economic results since these benefits are incremental over years and requires that employees to actually use the technologies before the benefits can be derived. (Devraj and Kohli 2003). One additional interesting factor to note in the success of knowledge management strategies is the role of management and leaders as being a critical success factor for knowledge management initiatives. (Pillania 2008). ICT enabled innovations and their strategic role continue to be a topic of research. Impact on competitiveness, range of product and services, delivering quality, creation of value is evident at both the strategic and operational levels.

IT AND BUSINESS VALUE

The next thematic area examines the relationship between IT and business value or ‘payoff’. Research in this field has been diverse in terms of methodologies (research designs), unit of analyses, contextual environment and operationalization of variables and constructs. The body of research can be divided into two distinct time periods, the mid-1980s to the mid-1990’s and after the mid-1990s. In the former time period, there were questions raised about what is commonly referred to as the ‘productivity paradox’ because of research findings that showed a negative relationship between IT investments and productivity (Brynjolfsson, The Productivity Paradox of Information Technology: Review and Assessment 1993). In the context of this study, this time period brought with it great expectations from the information revolution. The expectations were that investments in IT would automatically result in increased productivity. However, many organizations, institutions and research experienced frustrations and disappointment when large outlays did not churning out the promised rewards. Statements such as "No, computers do not boost productivity, at least not most of the time" (Economist, 1990) and "we see computers everywhere except in the productivity statistics." (Robert Solow), were being echoed in various forms.

After the mid-1990s, some research findings offered more optimistic results from IT investments and its impact on business values measured in terms of output, labor and productivity. (Brynjolfsson and Hitt 1995), (Loukis and Sapounas 2004). It was during this time period that Nicholar Carr offered his contributions of the value of IT which sparked debate in this field discussed earlier. Devraj and Kohli 2000 in their study extended the variables in this IT investment and business value relationship by recognizing the contribution of internal factors (reflecting the Resource based view) which when combined with the IT investments can possibly lead to increased positive results in business performance. In a later study, Devraj and Kohli (2003) looked microscopically at factors in the internal environment and identified ‘actual usage’ as possibly a missing key ingredient of past research initiatives in examining the IT investment and business performance relationship. Findings of this study supported positive results between these two variables however noting that the longitiudinal nature of the study enabled the discovery of such findings. This supported the position that IT payoffs may not be immediately realized but incremental over periods of time and the relationship may be mediated by other factors which need to be considered instead of focusing on the direct relationship between IT investments and business value.

Another interesting contribution to the IT investment-business value relationship was that of Weill 1992 where the moderating factor of ‘conversion effectiveness’ was examined in a six year longititudinal study of valve manufacturing firms. Conversion effectiveness referred to a firm’s ability to convert IT assets into organizational performance and was found to be statistically significant in moderating the relationship.Melville, Kraemer and Gurbaxani (2004) in looking at this relationship developed a theoretical model based on the resource based view which consisted of three dimensions, 1) the firm 2) the competitive environment and 3) the macro environment. The impact of each domain on organizational performance is proposed. The domain of the ‘firm’ is composed of IT resource, business processes, business process performance and organizational performance.

From the above discussion thus far, the IT business value studies mainly focused on IT developments in first world or developed nations. General themes of research in the context of developing nations focused on ‘the development of information systems’ (Braa, Monteiro and Sahay 2004), enhancing IT knowledge base, (Puri 2007), information systems interaction with traditional systems (Miscione 2007) and cultural aspects of socio-cultural change. (Avgerou and McGrath 2007) . IT business value studies in developing economies focused to a large extent on the ‘diffusion’ of IT resources and trying to understand how to derive value from IT investments as opposed to determining the impact of IT investment on business value. The performance focus of businesses in the context of developing economies was mainly productivity and operational efficiencies (Prasad and Heales 2010). From this deficit of research in developing economies, Prasad and Heales 2010 presented a complementary model of IT business value. This model focused on gaining value not from isolated IT investments but by complementary investment in related resources to derive value. The synergy of the total stock of IT and complementary investments would help improve business processes (process level efficiency and effectiveness) and ultimately overall firm level performance. One of the limitations of this study though was the generic measures of process and firm level performance which did not consider differences across industries.

The relationship between IT and organizational performance continues to be of utmost concern to top management and executives today. In pursuit of sustainable competitive advantage, corporate strategists want to ensure that heavy IT outlays live up to expectations. The integrative model (Melville, Kraemer and Gurbaxani 2004) founded on the research based view is one that considered both the internal and external IT environment of the firm. This is definitely a contribution to the body of research. However, the study fell short of application and empirical testing. The limitations with Devraj and Kohli (2003) was the examination of one technological element. In an environment where there are several technological elements enabling and intervening in processes, the effects may be more challenging to isolate. This is certainly a reality of most organizations today. The framework identifying perceptions or attitudes towards technologies, usage of the technologies and the impact on individual and organizational impact was clearly valuable contribution to the body of IT research. While the study showed evidence of the impact of usage on firm’s performance, a further study on perceptions and attitudes towards the technologies may be the next step in understanding what people’s attitudes are and the reason for frequency of use or non-use in order to allow exploitation and optimization of the investment.

ICT DEVELOPMENT AND SMALL ECONOMIES

In light of discussions of ICT in developing countries, ICT has undoubtedly contributed to the development of poorer nations and societies, but it also brought with it some threats. One such phenomenon is ‘the digital divide’ or ‘digital poverty’. This denotes the exclusion of various groups from the current electronic world that exists today. In essence, it is the level of access to ICT infrastructure, specifically the internet and furthermore implementation and use of it. Today it is argued that such a gap is wide and there is concern as to whether or not this can be effectively addressed via the ‘e-inclusion movement’ which is aimed at ensuring that everyone has access to relevant ICT infrastructure and services. (Molina 2003). Samuelson 2002, however questioned the reality of the existence of this phenomenon claiming increased access to infrastructure and ICT commodities. He acknowledged if it did exist then it must be on the decline. Nevertheless those who doubt the existence of such are in the minority.

The United Nations Millennium Development Goals (MDGs) were eight goals aimed at international development identified by the United Nations in 2000 with goal one being the eradication of ‘extreme poverty and hunger by 2015. Partnership agreements between developed and developing nations would seek to support fair trade, debt eradication, ensure access to affordable medicines and encourage the transfer technology. In support of the expectations that ICT can assist in poverty reduction globally, Gersten and Zimmerman (2005) asserted that given certain conditions, ICT can positively impact social and economic development as it relates to health care, education, employment, agriculture and trade. They further contend that ICT can enhance local culture, provide access to relevant information, reduce production and transaction costs, improve communication, aid in e-government services and ultimately strengthen the voice of the poor. Panos (1998) reiterated the position of the poor from the information revolution. The Economic Commission for Africa (1999) cited an ‘information exclusion’ group in society mainly consisting of the poor. Individuals belonging to this class in society rarely have the skills or capacities to access or use ICT ultimately widening the digital divide.

Galperin and Mariscal (2007) developed a conceptual framework of digital poverty. A digitally poor individual is someone who is deficient in ICT because of a paucity in knowledge and capability or income considerations. This therefore includes those who can afford the technology but lack capabilities because they fall within the generational gap and are technology averse. They also proposed a typology of levels of digital poverty which included the following classifications: a) digitally wealthy, b) Connected c) Digitally poor and d) Extremely digitally poor. From their study of measuring digital poverty in Peruvian households, some conclusions were that individuals with higher level of education proved to be more digitally wealthy and individuals with lower digital wealth were older.

In examining the possible relationship between ICT, development and poverty reduction. Franklin 2006 in his commentary examined the relationship between the access and use of ICT technologies and income levels showing that a positive relationship existed. The commentary proposed a theoretical framework of ICT comprising firstly of two variables-1) technology and 2) information. Second, it included two components-1) Processes and 2) people who perform the processes and thirdly, the environment- specifically the political/economic, socio-technical and technical-legal. Included in this environment was the contribution of Small and Micro Enterprises (SMEs). SMEs were recognized as a medium for the poor to generate income. Poverty was also operationalized not only on income level but also intangible elements of 1) powerlessness, 2) voicelessness, 3) vulnerability and 4) fear. The findings of the secondary data cited confirmed the relationship with ICT penetration and development in terms of wealth but studies from developing nations were inconclusive and despite all intentions and efforts the problems still persist. The article advocated an approach to development initiatives via ICT. This involved firstly a development strategy, an information plan and finally, a technology plan.

It is believed that the following could make a significant difference in reducing the gap of the digital divide 1) a change in mindset about poverty as an opportunity to innovate as opposed to a setback for development 2) recognition that poverty is in the interest of no one, 3) a humanitarian approach 4) this being an era where there is an end to ‘deep ideological divisions of social systems’ and 5) network technology which facilitates change through quicker spreading of information and concerns. Molina (2003) identifies actions that should be pursued: 1) continual initiation of e-inclusion initiatives and actions, 2) continual awareness of the issue, 3) continue to make demands from the more advanced countries to open their markets to developing countries and encourage sharing of programs for e-inclusion. An example of such e-inclusion initiative is the use of Hyperstories ICT application for learning and development of blind children in Chile.

ICT STRATEGIC THINKING AND MANAGEMENT

In any discussion of the strategic value of IT, Carr’s (2003) controversial position about the strategic role of IT would most likely be cited. This triggered many executives to raise concerns about the strategic value of IT.’ The term ‘strategic value’ needs to be clarified and conceptualized for the context of this paper. It is one construct that is used in a casual manner with the assumption that its meaning is obvious. This is hardly likely the case. ‘Strategic Value’ is commonly used to refer to competitive advantage (Porter and Millar 1985). In others words, strategic value as it relates to IT is accrued when the firm can deliver either a new or better product, better service, or lower costs. This is the traditional and more common conceptualization.

With regards to the notion of ‘sustainable competitive advantage’ and IT, Mata, Fuerst and Barney (1995), developed a model based on the resource base view that clarifies when IT can and cannot be a source of a firm enjoying sustainable competitive advantage. Competitive advantage literature has identified as stated before, some bases for competitiveness such as cost position, differentiation and cooperation in strategic alliances. The derived value from these variables according to Mata, Fuerst and Barney (1995) however, is not enough to sustain competitive advantage. Four possible states of competitive advantage were identified: 1) competitive disadvantage-i.e. when it is pursuing a strategy that is not adding value in the form of or example reducing costs or increasing values 2) competitive parity -when resources are distributed across competing firms. 3) temporary competitive advantage – when resources are imperfectly mobile and 4) sustained competitive advantage.

The resource based view rests on the 2 assumptions of resource heterogeneity (resources and capabilities differ among competitors) and resource immobility (differences are long lasting). It is the presence of these two factors that contribute to sustainable competitive advantage. Three factors contributing to resource immobility in this contribution were history, causal ambiguity and social complexity.

A summary of identified 5 attributes that contributed to sustainable competitive advantage are as follows, 1) Access to capital, 2) proprietary technology 3) Technical IT skills 4) Managerial IT skills, 5) and switching costs. Extending the RBV model to the 5 IT attributes, argument was that only IT managerial skills can be considered as a source of sustained competitive advantage. (Mata, Fuerst and Barney 1995)

Given the dynamics of the current business environment, heterogeneity and immobility is always threatened by IT itself and the rapid changes and evolution of new products and services which IT itself enables. Hence what is proposed in this model as the main contributor to sustainable competitive advantage is questionable. The proposed model is more of an assessment criteria or screening approach (triage) as to what contributes to sustainable advantage and what does not.

Following on the research question about the strategic value of IT, Ross, Beath and Goodhue (1996) investigated the relationship between a firm’s IT investment and its competitive advantage. The study propagated that three factors, 1) a skilled IT Team, 2) the IT infrastructural base and 3) relationships, contribute to building the distinctive IT competence of a firm. It is this IT competence which determines business value. Once again , this research is founded and supported by the Resource Based view which contended that developing capabilities consistently impacts a firm’s competitiveness. With regards to the IT team, they must be technically strong, have an excellent of the business and its environment and empowered to work with stakeholders. The IT infrastructural base must be relevant and ‘solid’ with clear roles and responsibilities for effective management and supported by industry standards which promotes faster speed, cost effective support and simplification of systems. Relationships founded on trust and mutual respect between IT and clients resulting in joint actions, cooperation and collaboration are enduring elements further add to the intrinsic and inimitable competence. The authors developed an assessment criteria for IT assets identifying four states and respective strategic actions. Sinking (start bailing), Drifting (grabing a towline), Tacking (come about-ie focus on capabilities to overcome the threat) and Crusing (full speed ahead)

While this contribution seemed plausible on the onset, the methodology is questionable and raises concerns about the reliability of the findings. Three different researchers were used and given that the data was of a qualitative nature, subjectivity of interpretation and recording is dubious. There was uncertainty about the composition of the companies or the industry background of the study. The development of an assessment grid was a contribution to knowledge but more work is needed to develop a quantitative and objective criterion for categorization.

Bannister and Remenyi (2005), in their commentary on Carr’s controversial article, extended the concept of Strategic IT Value and conceptually proposed six dimensions of technology strategic value which is quite comprehensive and lends itself to empirical testing. The dimensions are as follows:

Creates competitive advantage for the firm (this can be quantum or incremental)

Fundamental to the business

Creates long term value

Is a platform for change

Is a platform for innovation

Is necessary for survival

Their simplification of the construct of Strategic IT Value adds context and domain to Carr’s arguments and even the responses to Carr’s position. Bannister and Remenyi 2005 suggest that Carr may be correct in the context of his arguments being based on the traditional conceptualization of strategic value through competitive advantage via differention strategies. However if ‘technology strategic value’ is looked at through the lens of the above dimensions, then Carr’s position may be different and he may have recognized that IT can be a platform for sustainable competitive advantage.

King and Teo 1994 looked at this strategic value of IT from a slightly lower level and more detailed perspective. They looked at what factors contributed and hindered the development of strategic applications of IT in firms. They explored the difference in perceptions of what was called ‘facilitators’ and ‘inhibitors’ between companies and among a group of companies who use IT in strategic decision making and those that do not. Facilitators were factors that affected a firm’s ability or competence to exploit information resources and those that impacted the firm’s decision to use information sources in a strategic manner. Inhibitors referred to whatever threatened the firm’s ability to use information sources and whatever hindered the firm in using the information sources to make strategic decisions. The study reviewed past literature combining an extensive list of facilitators and inhibitors categorized into three distinct groups, 1) Internal factors, 2) Perceived needs and 3) External factors.

The research findings were quite interesting. 1)‘Internal facilitators’ and ‘perceived needs’ have a stronger facilitating role than external factors both for organizations which have developed strategic systems and those that have not. 2) ‘Perceived needs’ were perceived to play a stronger facilitating role for those that had used strategic systems than for those organizations that did not. 3) Internal factors played a stronger inhibiting role than ‘perceived needs’ and ‘external factors’ for both groups. 4) The SIS Group (those which used IT for strategic purposes) emphasized more on IT concerns as important facilitators while the non SIS groups focused more on management issues as important facilitators. 5) The ‘presence of Champion’ was perceived by the SIS group as an important factor which gave an added advantage in facilitating the strategic use of IT while the absence of a Champion was seen as a disadvantage and inhibiting the strategic use of IT applications. From this study, there was undoubtedly empirical support for the strategic value of IT. Firms now had a more detailed analysis and to what are the specific factors that are important and can therefore be guided by this in determining some degree of priority with regards to inhibitors and facilitators.

Luftman (2004) presented the findings of the Society for Information Management (SIM) survey which sought to discover the opinions of the members on three areas:1) key management concerns, 2) application and technology development and 3) IT business alignment. The top management concerns were:

1) IT and business alignment (consistent finding for the past twenty years) .

2) Attracting, developing and retaining IT professionals,

3) Security and privacy

4) IT strategic planning

5) Speed and agility.

The top six application and technology developments were;

1) Security technologies

2) business intelligence

3 )business process management

4) Web services

5) customer portals

6 ) data synchronization.

The survey also identified 4 inhibitors for IT and business alignment, 1) lack of senior executive support, 2) headquarters leadership, 3) communications with IT and 4) commitment of budgets for IT investments. For assessing the maturity of the business-IT alignment maturity, a condensed version of Luftman’s Strategic Alignment Maturity Assessment tool was used. It comprises of 6 elements. 1) Communications Maturity 2) Competency/value measurement maturity -the extent that the firm measures its own performance and the values derived 3) governance maturity- the extent to which IT supports and drives the business strategy 4) partnership maturity -5)Scope and architecture maturity and 6) Skills maturity. The findings classified firms according to 5 levels. Level 1) –Initial ad hoc process 2)-committed process 3) Established focused process 4) Improved/Managed process 5) Optimized process. Once again however contribution focused on firms within developed nations

The discussion of the Strategic value of IT has thus far focused on developed nations and it would be unjustified if this discussion is closed without some reference to developing nations. Technology has been referred to as an ‘engine of competitiveness’. According to Hendrickson 2009 on the topic of ‘SME Competitiveness in the Caribbean: Opportunities and Challenges.’ Dynamic SMEs within the region are aligning their business strategy with new technologies in the quest for sustainable competitiveness. With regards to the adoption of new technologies, the United Nations association has classified countries according to their Computer Industry Development Potential (CIDP). These classifications are advanced, operational and basic. Coincidentally, these categories with developed, developing and underdeveloped countries of the world. Palvia, Palvia and Zigli (1992) in their editorial book recognized and made mentioned of various studies conducted concerning IS issues. One finding was that IS issues relevant to advanced nations may not necessarily be relevant or given the same priority as those in developing or underdeveloped nations. It was concluded that in advanced nations the concerns were driven by strategic needs, in operational /developing nations, by operational needs and in the basic countries, infrastructural IT needs. From this it was infered that as countries progress from one stage of economic development and IT adoption and the relevance of issues would migrate from infrastructural or operational to strategic. At this point it suggested that a model similar to Nolan’s (1979) stage model for countries be developed that would look at the stages of IT adoption in the context of domestic, multinational and global dimensions. Nolan’s stage model looked at the various stages of adoption or growth of IT in an organization.

IT GOVERNANCE AND LEADERSHIP

IT governance falls within the framework of the larger business governance. Although the terminology is new, research into IT decision making has been a topic of interest in times past. Weill’s definition of IT governance stated that IT governance is concerned with decision making rights and accountability. It is not concerned with the specifics of what decisions are made but instead who makes the decisions and how the decision makers are accountable and responsible for such actions. Traditionally, board-level executives deferred key IT decisions to the company's IT professionals. With the advent of the Sarbanes-Oxley Act in the US, 2002, corporations were now forced to be more prudent in their accountability and business governance.

Interest in IT Governance has its roots as early as 1963 with Garity’s research which focused on returns from IT investment inquiring into a) who is responsible for IT investment activities, b) who provides the inputs and c) what controls are in place. Past research has mainly being conceptual in nature with fewer empirical studies. Brown and Grant (2005) reviewed over 200 articles covering the following topics 1) IS organizational structures, 2) centralization/decentralization, 3) IS loci of decision making 4) IT Governance Frameworks 5) General Business Governance Frameworks 6) IS organizational performance and 7) General IS/IT Research Commentaries. The conceptual framework for IT governance proposed by Brown and Grant (2005) consisted of two ‘streams’, IT Governance Forms and IT Governance Contingency Analysis. The first stream coverd topics 1 to 3 while the second stream covered topics 4 to 7. The former stream supported a direct association between the IT governance and organizational decision making structures. Essentially centralized and decentralized structures were inadvertently examined.

Expanded IT decision making structures were also considered. This highlighted vertical versus horizontal decision making structures spanning the entire organization. With the Vertical Expansion of the centralized/decentralized framework three primary methods were identified 1) Continuous classification along a spectrum of centralization and decentralization 2) Discrete classifications of Decentralised, Centralized and Federal (Zmud et al, 1986). It was here that the ‘Federal Governance Framework’ began to emerge modeling itself after the federal government country approach. There was centralization at the policy and guidelines but decentralization in operations. However, ‘explicit decision making authorities’ remained unclear. 3) Redefinition of Extremes-this included line managers assuming responsibility for the use of technology but core services as it relates to infrastructures, planning and operations remained with a centralized IS department

Horizontal expansion referred to decision making authority across IT functions (different types of IT decisions) as opposed to the entire organization). One study by Olson and Chervany (1980) looked at the centralized/decentralized structures across three IT service functions-system operations, systems development and system management and it was concluded that different IT governance structures were needed for different types of IT functions.

The second stream which was IT Governance Contingency Analysis dealt with the ‘how and why’. This stream advocated that there was no one right structure but this was ‘contingent’ on a variety of factors dependent on the business. Some studies focused on single contingencies specifically the organization and decision making structures, competitive and business strategy of the firm, industry, and firm size. Other studies focused on multiple contingencies ie a combination of factors. Brown and Magill identified 10 factors , vision, strategy structure, culture, strategic IT roles, Senior Management of IT, satisfaction with management of IT, satisfaction with use of IT , current and future applications, and locus of control. Further studies extended the vertical and horizontal forming complex analysis of this topic.

The contemporary framework for IT governance proposed by Weill and Ross (2004) identified 6 classifications of IT governance models and the respective decision making authority. These are:

Business Monarchy- Decisions by CxOs

IT Monarchy- Corporate IT professionals make the IT decisions

Feudal-Decision by autonomous Business Units

Federal - Hybrid DM

IT Duopoly- IT executives and one business group

Anarchy-Each small group makes decisions.

These were looked at spanning five areas of IT decision making:

IT Principles

IT architecture

IT Infrastructure Strategies

Business Application Needs, and

IT Investment and Prioritization

One of the major contributions of Weil and Ross was the merger of both streams of research (IT governance forms and contingency research) and extending of the IT governance classifications based on the political archetypes. The implications for firms seeking after the optimal fit for IT governance framework needs to carefully consider the contemporary framework which is a combination approach.

Peterson (2004) highlighted various IT governance models starting with the Centralized Model where IT decision-making authority resided with corporate and senior level executives. In the decentralized model, while there was control at the business unit level, this resulted in varying standards and lower flexibility in some cases. The federal IT model was endorsed by the authors as the best of both worlds between centralization and decentralization. The main difference however between the IT centric and Business Centric federal models was that in the latter, business executives ‘take the lead in business application decisions’. The advantages of this model were, the synergies, standardization, specialization, business responsiveness, ownership and flexibility experienced.

Peterson (2004) in his contribution to the literature identified three IT governance value drivers: Service Infrastructure, Solution integration and strategic innovation. In designing an effective IT governance architecture, he recommended that there is the need for a formal process to assign responsibilities for IT decision making and the ‘coordination of the IT decision making expertise and influence (informal authority). Three distinct IT governance capabilities (structural, process and relational capabilities) were also identified as Horizontal Integration Capabilities (HICs) in light of the diminishing effect of the vertical hierarchical structure in today’s global and virtual environments. Structural capabilities referred to formal positions and roles. Process capabilities involved developing the business case and rationale for IT decisions and monitoring and evaluating the outcomes of the IT decisions made. Relational IT governance alluded to the interactions among corporate executives, IT management and business management. It also captured the shared dialogues and learnings among business and IT stakeholders.

With regards to monitoring and tracking, Peterson (2004) advocated an IT governance assessment model called IT Governance Assessment Process (ITGAP) Model which was a four stage procedure that assessed 1) IT governance value drivers 2) the differentiation of IT decision making authority, 3) the capabilities of IT governance and 4) IT Value realization. Peterson’s input to the field of IT governance adopted a simple methodology which considered the relational aspects of more specific elements in the internal environment. It was a comprehensive and detailed approach to IT governance.

Highly related to the area of IT governance is IT leadership. The pressures of accountability for billion dollar decisions became current concerns in light of bottom line figures which translated into business value. This plummeted IT governance as a very relevant concern with legislation to ensure that this was adhered to as stated before. Legislation was enacted due to numerous business scandals which did not allow the responsible executives to be held accountable in a tangible manner. This included scenarios such as Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. ‘These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets.’

Nolan and McFarlan (2005) put forward the viewpoint that there was a general lack of understanding among business executives, specifically board members, regarding the strategic importance of IT and likened the absence of IT governance to the absence of the auditing function within a firm. Undoubtedly, there is the argument for supervision over IT expenditure by the board but the model is subjective and should be based on factors such as the history of the company, the industry, the competitive situation, financial position and quality of IT management. Once the board realized their level of accountability they will accept responsibility to ensure critical systems and functions deliver according to expectations

Board involvement could be referred to as either defensive or offensive IT. Defensive IT concerns itself with reliability while offensive IT concerns itself with technology strategy, and normally requires a higher level of spending and risk. 4 modes were proposed on the IT Strategic Impact Grid: 1) Support 2) Factory 3)Turnaround and 4) Strategic modes. Firms operating with the Support mode (defensive) have low reliability needs, low strategic IT needs and do not believe in wasting money. Companies in the factory mode (defensive) have high reliability but low strategic needs and the philosophy was not cutting corners when it came to critical IT expenses. For the turnaround mode (offensive), there was low reliability but high strategic IT needs. IT investment and project implementation needed to be on schedule and as planned. The company could not afford to make mistakes. For the firms in strategic mode, there were high reliability and strategic IT needs. In this mode the company spent what is needed to be spent but meticulous monitoring was done.

In conducting an IT oversight the following was recommended: Have an inventory of all IT assets (for all modes), review security and reliability measures (factory and strategic), and avoid surprises so monitoring is important (factory, turnaround and strategic). The authors recommended an IT governance committee and an IT governance committee calendar with a schedule or checklist. The authors did not attempt to generalize a standard IT strategy but instead recognized the uniqueness of all organizations advising an appropriate IT strategy based on the factors associated with a specific firm.

IT governance was defined according to Shleifer and Vishny (1997) where it ‘deals with the ways in which suppliers of finance assure themselves of getting a return on investment.’

There were 3 basic questions asked which the authors claim can be answered by what is called the Balance Score Card.

How can top management get the CIOs and their IT organization to return some value to them

How does top management ensure the security of capital associated or supplied resulting from bad projects

How does top management control their CIO and the IT organization

The Balanced Score Card (BSC) was first introduced as a performance management system for firms and was not based on traditional financial measures of performance but included three dimensions specifically, customer satisfaction, business processes and a firm’s ability to innovate. This was based on the company’s mission, objectives and measures (Kaplan and Norton, 1992, 1993, 1996). In this article, the BSC was recommended for the IT function to ensure the cohesion between the business and IT strategy.

The standard IT BSC measured and evaluated 4 perspectives of IT: 1) The User orientation 2) The operational excellence 3) The future orientation and 4) The business contribution. Within this IT BSC, an important element was the cause and effect relationship which was a matrix of performance drivers and outcome measures. From the results of the cascade of BSCs, one could have determined the alignment of the IT/business process and the IT governance.

There is definitely a lack of accountability for poor performance in IT projects given the many examples of the early 1990s. More monitoring and control is needed to assist in organizations to ensure that there is continuous alignment of IT and business at all points of implementation of investment decisions. The balance score card performance is one tool that can assist. However, there may be the need to customize such a tool to meet the unique requirements of companies and industries. Tools therefore while having some form of generalized ingredient needs to also consider adaptation. Another challenge foreseen however, is getting the cooperation and ‘buy in’ of today’s ‘busy leaders to complete the cards and assigning this responsibility to a resource, be it internal or external at some cost.

With regards to executives and IT responsibility at the strategic corporate level, the CEO of today’s organization requires some degree of IT orientation. CEOs today cannot exist without it for a sustained period of time and be effective. Business strategy is so intertwined with IT that many high level discussions cannot progress without IT involvement. Accountability for all decisions lies ultimately with the CEOs due to the large expenditure in IT investments. It is in the CEO’s interest to attach priority to this subject matter since the future of CEOs in the organization together with their professional reputation are heavily dependent on the performance of their companies.

Earl and Feeny (2000) proposed a typology for CEOs based on religious metaphors based on their degree of IT orientation and behaviour: 1.The Hypocrite claims that IT is important but his actions do not support this. The Waverer reluctantly accepts the importance of IT to business development and survival but will not make it a personal priority. 2. The Atheist downplays IT as a strategic resource but publicly opposes contrary beliefs .3. The Zealot is convinced of the strategic value of IT and believes that he is an authority on IT. The agnostic concedes to the strategic value of IT but needs to be convinced by business cases. 4. The Monarch accepts strategic value of IT, appoints the best CIO and then takes a hands off approach. 5. The Believer believes in the strategic value of IT, develops a close relationship with the CIO and demonstrates belief by his own behaviour.

In diagnosing the ‘goodness of fit’ for CEOs in the information age, the following model was advocated. The CEO’s beliefs about IT business value impacts the quality of leadership practice mediated by daily living. The beliefs about IT is the ‘first order’. Believer CEOs believed in the ‘business-critical’ role of IT and looked to IT to strategically differentiate the business. 5 elements of ‘living’ were identified: 1) Creating context (for positive changes). With atheists, there was respect for well the tried and test wisdom of the industry and suspicion for new ideas. With agnostics, there was often a lack of leadership, 2) Setting Priorities 3) Signaling continuously and positively 4) Spending quality time 5) Working closely with the CIO. With regards to leadership practice in the information age, practicing included 5 behaviours: 1) scanning and understanding new technologies 2) Forming a vision of the future 3) sponsoring internal and external IT architectures 4) Embedding Information management processes and 5) Challenging the Supply side of IT.

For CEOs who were not believers, the authors dispelled the myths that CEOs should be 1) IT Literate and 2) have experience in IT. CEOs needed to be IT oriented. CEOs needed to look ahead and see what the future had in store for their business and executive involvement in an IT project was what could give very excellent insights. For existing CEOs, ensuring that successors have an IT orientation is critical in the information age. For non -believers wanting to ‘convert’, three approaches was recommended 1) study a business with a success story 2) associate with ‘believers’ 3) education and development.

Earl and Feeny (2001) acknowledged different levels of IT orientation and the religious analogy allowed remembering the classifications easy. It contained extensive relevant case examples which aided in understanding the classifications. The references however provided very subjective interpretations with no empirical validation to support the classifications. The viewpoint of the role of IT as an enabler and intertwined with business strategy has also been one subjected to much debate. There is no support from past theory for the classifications and viewpoints put forward. The contribution nevertheless was a good foundation conceptually for one to develop a measurement scale or instrument to categorize the type of CEO in the present information age. The impact model of CEO’s beliefs about IT business value impacting the quality of leadership practice mediated by daily living is one that can be further advanced in terms of empirical study.

CONCLUSION

The global business environment continues to have a dynamic pulse due to technological advancements. Subsequently, this has impacted expectations for improved products and services with higher levels of performance. ICT expenditure is normally quite substantial, with pay offs incremental over time and embedded in organizational-wide processes. Consequently, the derived value of the IT investment is oftentimes difficult to document or trace.

Through ICT, a firm can now make more effective decisions via technologies that allow the capture, storage and retrieval of information for key business strategies. The issue of its impact on a firm’s competitive advantage has been acknowledged and even disputed in the body of research by many valuable contributions. ICT has also been credited as a major factor in the development of many nations and economies do have distinct characteristics regarding the level of adoption and usage which correlates positively with their economic development. One current expectation from ICT is possibility of it eliminate extreme poverty by 2015 in developing and underdeveloped region of the world.

Due to the value of IT investments and in light of past unrealized expectations and corporate scandals in the early 1990s, greater accountability is required today from executives for shareholders investments. Previously, the deficit in IT governance left executives free to exploit or be negligent with the company’s spending with little or no consequences. Today higher priority is place on IT governance via the enactment of certain legislation and tighter organizational controls supported by structures and functions regarding investments.