Term Paper: Strategic Planning in it Impact

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[. . .] , 2001). This shift is linked to better connectivity and cost-performance ratios in technology. It can also be tied to changes in applications: from data processing and management information systems, to individual and office support on PCs and office systems, and then on to electronic data interchange (EDI) and inter-organizational systems, platforms, and networks (Ward et al., 1990).

The ongoing convergence of computer and communications technologies, and the increasingly widespread use of databases, networks, and integrated systems requiring long-term planning perspectives, also stimulated interest in IT planning (Boynton and Zmud, 1987). Progressive hype and a follow-the-leader attitude have been sufficient to sustain a dramatic growth in IT expenditure in the early days of this technology revolution.

More recently, however, the large resource demands and the increasing dependence of organizational activity upon IT have focused managerial attention on cost-benefit calculations and rationally planned approaches to the use of IT.

Thus, the development of a sound IT strategy reflects a widespread concern with general strategic planning in organizations and businesses (Hoskin, 1990; Knights and Morgan, 1990; Mintzberg, 1994). A further impetus for change has been the growing understanding that the strategic use of IT can transform the competitive position of a company trying to succeed in a rapidly changing marketplace. These trends have pushed IT towards the center of strategic development and planning.

The assumed benefits of IT strategy formulation are better alignment with business needs, gaining of top management support and involvement, improved setting of priorities, more efficient budgeting and distribution of resources, and overall competitive advantage (Earl 1990; Ward et al., 1990). Many organizations claim to have their own approaches to the creation of business and IT strategies (Premkumar and King 1991).

Although the techniques used to articulate strategic plans vary in detail, the first step is significantly the identification of a firm's business objectives and corporate strategy (O'Connor, 1993).

For example, a basic principle of strategic information planning is "if the business objectives do not change then the data the organization needs to use and the functions it needs to carry out will not change... therefore we can model the enterprise" (Goldsmith, 1991, p. 70). If no strategy is apparent, corporate planners are advised to create one (Remenyi, 1991; Ward et al., 1990).

There is considerable disagreement in the literature about the history of strategic thinking and planning (Ansoff, 1965; Hoskin, 1990; Knights and Morgan, 1991; Steiner, 1963). However, its impact of strategic thinking and planning on IT has been relatively recent. While the value of information as a resource and its important connection with strategy were recognized in the 1970s (Mason, 1984), few of the business strategy planning approaches at that time paid any attention at all to IT.

Traditional information planning was a simple exercise in resource allocation among shopping lists that were generated from the lower levels of the organization. Basically, it was incremental and bottom up, and in no way was it linked to an overall business strategy. Real discussion of IT in terms of strategy planning was not launched until the 1980s, following Porter's (1980, 1985) several analyses of the nature of industry competition. He and others used the forces of industry competition, generic strategies (Parsons 1983; McFarlan 1984; Cash and Konsynski 1985), the value chain, and differences among industries in information intensity (Porter and Millar, 1985) to clarify the connections between IT and business strategy.

By the late 1980s, many companies had jumped on the bandwagon of using information systems strategically, and analytical frameworks mushroomed. The proliferation and popularity of these devices are a strong indication of just how much pent-up need there was in corporations in the 1980's for advice and information on IT strategy. The problem was a lack of understanding and awareness of the potential of IT on the part of senior management. The solution appears to be straightforward and rational analysis of the potential impact of IT on companies and their industries, the use of analytical tools and techniques, and good examples of the strategic use of information systems in similar companies.

The assumptions are that problems can be analyzed and broken down into their individual parts, with the outcome being the development of rational solutions that can be put in place in a company through top-down executive decisions. By the end of the 1980's, the idea that there could be measurable and sustainable competitive advantage from IT was subjected to growing skepticism (Clemons, 1986; Finlay, 1991; Scott-Morton 1991). About the time that the idea of an "information weapon" was being tossed around, it was becoming increasingly apparent that most strategic applications of IT were being quickly copied, and even improved upon, by competitors. The strategic advantages of the celebrated SABRE airline reservation system were even played down by its director (Hopper 1990).

In most cases, it eventually emerged that various strategic applications had actually been discovered by users and had evolved from mundane transaction processing systems, rather than from clever top-down analysis and planning (Andreu, et al. 1991; Cavaye and Cragg, 1993; Ciborra, 1991). Discussion also continued in the early 1990s about the so-called "productivity paradox," which was illustrated by the fact that despite major investment in IT, which was by then at least 50 per cent of all capital investment in the U.S.A. (Keen, 1991), U.S. white-collar productivity had actually gone down (Franke, 1989; Scott-Morton 1991).

At this point in time, attention began to be drawn to the need to make organizational and structural changes in order to realize true productivity gains (Thurow 1992). This extended, of course, to the strategic use of IT to change organizations (Malone, 1985; Rockart and Short, 1989). Although not an entirely original idea (Beer, 1974; Checkland and Scholes, 1990; Galbraith, 1973; Huber, 1990), the MIT Management in the 1990s research program helped to popularize the idea that IT could be utilized to deliver a leaner, empowered, and more customer-orientated organization, something which fickle markets and global competition clearly demand today.

And it has been indeed in the first half of the 1990s that we have seen some of the long-standing predictions about the 'impact' of IT on organizations coming to be realized, with the redundancy of thousands of workers at a time, including whole layers of middle management, in industries such as computing and financial services which have had long experience with IT and built up a large investment in infrastructure, and which have found themselves exposed to much more difficult market conditions (Bloomfield, et al., 2000, p. 31).

Strategic IT investments permit companies to alter their positioning in the marketplace, redefine themselves, or survive unforeseen competitive incursions into their market space. Strategic systems tend to change many various elements of the customer, cost, and competitive relationship mix simultaneously. They do not have an impact solely on revenues or costs. For example, Dayton Hudson Department Stores made strategic investments in IT just as its whole industry was shifting toward discount chains, malls, and high-volume specialty chains.

It is impossible to totally measure the losses that this IT investment saved Dayton Hudson as its traditional markets declined, or how much the same IT investments may have contributed to its move into the discount Target chain (Bailey and Quinn, 1997). Strategic IT investments also are often what allow companies to introduce new services, which may in turn require expanded personnel or capital bases, especially in the short-term. If competitors match these new services quickly, duplicated investments may make the overall industry productivity growth look small, or even negative.

It is fully possible that a company's competitive edge from an IT investment may last only a few months. For example, executives at Citicorp said they had invested nearly $100 million a year in order to maintain a timing advantage of only nine months over their competitors. However, just how much this positively affected their total yearly profitability is impossible to calculate. Information infrastructure investments in basic computer and communications facilities pose particular problems.

Companies can differ wildly in their assessments of the exact benefits they can and will derive from them. For some, infrastructures are simply considered to be a "cost of being in the business." It is no more feasible to be in the mail order business without a telephone, or in the stock brokerage business without a computer, than it is to be a carpenter without a hammer. Not making these IT investments could cost all the profits from the business. But no reasonable executive will claim that all of his or her company's profits could be said to result only from IT investments.

IT Impact on Service Industry Performance. During the 1980s, U.S. macroeconomic measures indicated that there was only a 0.7% productivity growth in services, despite a virtual doubling of IT investments during that decade to $750 billion.

If these measures are valid, the apparent disparity between IT input and service sector performance, that confusingly labeled "productivity paradox," has serious consequences for business and for the… [END OF PREVIEW]

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