Business & Strategic Value of IT Flashcards
IT productivity paradox
Despite huge investments in IT, the technology has not yield
significant productivity gains —> paradox raised by studies that used production theory and tested correlation between IT expenditures and productivity. Which found no positive correlation, or that the costs exceeded the benefits
What is Information technology? and why is it hard to measure IT productivity?
It is hardware, software, telecommunications, and the services of
IT personnel, whether employed in-house or purchased
However, the only element which there are reliable government statistics in the US and other countries is about hardware. Obtaining the figures was practically impossible; spending on software, IT services, and telecommunications has not been collected and tabulated by government agencies or trade organizations in a consistent manner that aids productivity research without controversial
manipulation of the data –> focus on individual firms rather than the entire economy
Why does IT profitability vanish + mature technology?
In the economic cycle, economics profits are only possible at an
initial stage where the technology is used by a particular firm to a small number of businesses. At the end of the cycle no productivity gains accrue.
Mature technology: is one with which
workers have become comfortable and which they perceive as an integral part of their work environment. It has no innovation benefits.
Research challenges in measuring IT productivity (5)
Measuring IT productivity: IT has been adopted faster and has probably contributed more productivity in service than in manufacturing sectors. However, it is almost impossible to measure productivity gains in service sectors.
Measuring output: how do you measure gains in service units? On hours or on the n of customers ? But this could vary due to policy change rather than the technology used. It’s easier for physical products, however, even when products seem to be homogenous, there may still be some variations in the products due to different levels of quality.
Measuring input: usually “computering machine” is considered as the input variable. This must include computing hardware, telecommunications hardware and software, purchased software, software development, consulting services, and personnel training. Which is a mix of products and services. —> monetary values are very relatives (depends in when the item
where purchased). Usually a proxy for IT expenses can be the company’s total annual IT budget.
Quality issue: measuring only productivity gains distort the picture, Even if we do not gain more output, the output of new technology may be better than that of older technology (increase in quality!!).
Cycle of IT invention
- Adoption of IT: a new technology is adopted by firms, which may enjoy significant increase in productivity. If the adopter is also the developer, it will gain greater first mover benefits.
- Increased profit: for some firms the investment does not yield productivity gains and profits because of difficulties in adjusting to it. However, other companies experience increase in profit, especially if the technology is proprietary and cannot be easily copied.
- The new becomes standard: to stay competitive all firsts in the industry adopt the technology.
- Decreased prices: Firms transform much of their productivity gains into price cuts. They can now afford to offer their products and services for lower prices because the production cost per unit is lower. Now that the technology is mature, there may be no economic gains.
- Productivity disappears: if firms measure their productivity gains in cash, they may find that IT did not contribute any productivity growth. The sales (in monetary terms) may actually be lower than before IT adoption, simply because the price of each unit has decreased so much. However, productivity has increased, more units are produced at a lower price though.
RBV
Resource based view of firms —> RBV focuses on strategically exploiting existing capabilities and assets in stable market environments, dynamic capabilities refer to a firm’s ability to respond to and even create market change through integrating, reconfiguring, gaining and releasing resources in changing market situations
DCV
The dynamic capabilities perspective suggests that new forms of competitive advantage areachieved by creating new resources to obtain congruence with the changing environment. —> they depend on 3 factors:
A. Coordination/integration, learning and reconfiguration of organisational and managerial processes/routines
B. Firm-specific strategic position as defined by the firm’s asset structure and resource configurations
C. Firm history
They evolve over time. The evolution consists of three stages that begin with the founding stage, followed by the development stage and finally the maturity stage, where capabilities become more embedded within organisational routines.
Organizations with greater investment in IT capability tend to be more agile in response to environmental changes. —> IS can enhance organisational agility by developing digital options, helping firms to increase the pace of decision making, facilitate communication, and respond
quickly to changing conditions.
Process Framework
Information system adoption lifecycle= a temporal perspective that is divided into three phases of decision, implementation, and operation.
Process Framework: Decision
Grounding= firm’s ability to possess domain insights pertinent to its business. It enables the firm to identify IT investments that it may leverage to improve productivity. —> distinction between technical and business domain.
Visioning= the ability to ensure the strategic alignment of a firm’s IT motivations with its central business focus. This includes identifying the business focus and formulating actionable IT plans, so that the IT missions and objections are aligned with the business ones.
Sensitizing= a firm’s ability to have a renewed sense and interpretation of external trends to develop an informed response to external stimuli (which refers as changes in the external environment, change in regulations and stuff) Network connectivity: extent to which an organisations units and their respective databases are made accessible internally and externally via electronic linkages. —> This ultimately affects the level of visibility that could be afforded to partners and customers, which impacts coordination, efficiency and overall performance in myriad supply chain activities.
Process framework: implementation
Symbiotic Pivoting= a firm’s ability to manage an IT project while synchronously leveraging complementary resources to ensure the success of an IT conversion. the firm must not only identify relevant project resources that complement one another but also coordinate (synchronize) and then use these resources as a pivot (leverage) for mutual
progression in the IT conversion process.
- Moderating= The need to also ensure that the adopting firm is prepared to not only accept but also embrace the technical and non-technical changes that are induced by the newly adopted IT systems.
- Technical changes readiness: the firm’s ability to manage IT-induced technical change, such as infrastructural change
- Non-technical changes readiness: the firm’s ability to manage IT-induced non- technical change, such as work culture changes.
- Co-Adapting= the ability of an adopting firm to maximise external connectivity potential via information flexibility during implementation and forms the core focus at the external business scope level —> Flexibility refers to the ability to adapt the IS to new competitive environments. Ultimately, this will add value to the productivity- enabling asset conversion process, as it helps to maximise external connectivity. It is important that firms are able to connect with they partners and customers to facilitate information flow!
Process framework: Operation
Meliorating= a firm’s ability to pursue absorptive capacity to strengthen the versatility of IT as the underlying platform through which productivity benefits can be delivered. Main steps are:
- Information and knowledge absorption for business support
- Knowledge synthesis to extend IT’s locus of impact
Structure improvising= he deployed IT needs to be routinised into the daily operations of the firm to realise its purported productivity value. Regular monitoring is essentials well as the detection of opportunities for improvement
Catalysed synergising= is the external business level during the operation phase. Maximising a firm’s performance in its interactions with external partners and, especially, customers is important in the firm’s day-to-day operations —> IT can expedite the process of enhancing the firm’s services and can be achieved through actively synergising the firm’s existing IT.
How are leading organizations getting the most value from IT?
- Tempting solutions yield mediocre returns: innovating at scale is difficult. Rapid changes in its competitive landscape, consumer demands, and regulation have forced the company to quickly adopt new technology throughout the enterprise. Often, these technology decisions have been relegated to business unit, product, or geography heads. —> however connection and customisation in this fast times is necessary across the entire organisation
- Leaders scale innovation across more processes: Leaders reimagine multiple business processes so that they can scale the same innovative technology across all of them. They not only transform IT and customer experience processes but also new product and service development, including discovery and innovation, as well as business operations and change management.
- Leaders sequence technology adoption for paradigm change: leader companies position themselves for success by carefully considering the landscape of emerging technologies and identify the foundational and complementary technologies to adopt, and then they sequentially create systems that provide strategic agility and scale.
- Make the difficult, more rewarding choices: to move from average to exceptional, CEOs and their IT executives will need to sort through their technology investments and identify the places where they have succumbed to the siren call of seemingly good-enough solutions
