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IT strategic grid

IT strategic grid

First, it is important to decide what sort of contribution IT makes to the organization’s strategy. This enables the senior management team to gauge how much and what sort of attention the development and running of IT systems should be given by themselves and by others.

To make this decision it is necessary to look at two factors: strategic impact of application development and strategic impact of existing systems. For some organizations, the development of new innovative IT systems has a significant strategic impact; for others, they are more focused on installing off the shelf packages to enhance some aspect of internal performance. Similarly, some organizations are 100 per cent dependent on IT to maintain operational performance, such as manufacturing organizations. For others, it might take quite a period of time before a disruption in IT services would create a significant performance dip.

The grid in Figure 8.1 is useful for assessing the organization’s current IT strategic position and thus deciding how much senior management attention needs to be spent on IT issues, and how IT should be managed. It is worth noting that the organization may change its position on the grid over a number of years.

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Figure 8.1: IT strategic grid
Source: adapted from Cash et al (1992)

‘Support’ organizations may spend a lot of money on IT, but they are not totally dependent on IT systems for operational success day to day, minute to minute. Neither do they gain strategic advantage from innovative application developments. A doctor’s surgery would qualify here. In this case, senior management can be quite distant from the IT planning process.

‘Factory’ organizations are completely dependent on the smooth running of their IT systems. For instance, a manufacturing unit might grind to a halt if the IT systems were to fail. However, with this type of organization, innovative applications developments, although important, are not crucial to the organization’s ability to be competitive, except when its performance starts to lag behind competitors, and a move to the ‘strategic’ quadrant occurs.

‘Turnaround’ organizations are those in which innovative applications developments are crucial to the firm’s strategic success, but the day-to-day running of IT systems is not so critical. This might for example be an organization developing e-learning packages. The other classic examples are DHL, UPS and Fedex, who all offered customers the ability to go online and check the status of packages that were being dispatched. This gave them tremendous strategic advantage. In this case IT planning needs substantial effort, and needs to be linked closely to organizational strategy.

‘Strategic’ organizations such as banks and insurance companies are those in which innovative applications development brings significant competitive advantage and day-to-day processes are highly dependent on the smooth running of IT systems. In these types of organization, there is a very tight link between business strategy and IT strategy, and the head of IT normally sits on the board of directors.

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