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.
Figure 8.1: IT strategic grid
Source: adapted from Cash et al
‘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.