The implementation of information system strategies in UK companies - aims and barriers to success
T.D. Wilson, Ph.D.
Head of the Department of Information StudiesUniversity of Sheffield, UK.
AbstractA survey of the Times 500 companies together with 47 financial services companies was carried out in 1988 to determine the extent to which the idea of 'information system strategies' was recognized in these organizations, how strategies, where they existed, were related to business aims, the elements of which strategies were composed, and the nature of barriers to design and implementation.
Introduction
Building on Porter's (1985) definition of strategy as, ' . . . the route to competitive advantage that will determine . . . performance', we can define an ISS as the analysis of the role that information systems can play in helping business units or companies to define a route to competitive strategy.The literature on information system strategies is extensive: much of it anecdotal in character, or exhorting managers or chief executives in British industry to make more use of information technology. The claim is made, repeatedly, that unless Britain can keep up with Japan, the USA, and the major European competitors in the rate of application of information technology, economic decline is inevitable. The most persuasive argument of this kind has been spelled out by Mackintosh (1987). Some writers, however, go beyond exhortation to try to identify the ways in which information technology may have long-term strategic value for companies, or to show how information technology can have an impact upon profitability. The key names in this respect are Michael E. Porter, who devotes a significant part of his Competitive advantage: creating and sustaining superior performance (1985) to the ways in which technology in general, and information technology in particular, can have an impact upon competitive advantage; and Paul Strassman ( 1985), who develops the concept of management productivity in his Information pay-off: the transformation of work in the electronics age and who has used the PIMS database of key indicators to advise companies on appropriate investment in IT.
The work reported here resulted from an interest shared by the author and Arthur Andersen & Co.: the overall objective of the study was to discover the extent to which major UK companies had adopted a strategic view of information systems development. In addition to this main objective there were a number of subsidiary aims. For companies that claimed to have a strategy we wished to know:
- How the link to business strategy was maintained.
- The organizational level at which strategy was initiated.
- How the effectiveness of a strategy was monitored.
- What aspects of information systems development featured in existing strategies, and what were future plans for investment.
- How successful strategies were deemed to have been, and what barriers to the establishment and implementation of strategy had been experienced.
- How far the idea of competitive advantage was incorporated in strategy, and what particular competitive ends were pursued.
An information systems strategy brings together the business aims of the company, an understanding of the information needed to support those aims, and the implementation of computer systems to provide that information. It is a plan for the development of systems towards some future vision of the role of information systems in the organization.
In this paper only the results relating to companies with a strategy are reported.
Of the questionnaires returned, 75 per cent were from companies which claimed to have an information systems strategy as defined above, suggesting that the idea of an information system strategy has been widely adopted. Some caution is necessary, however: first, there is a difference between companies in the financial sector and those in the Times 500 group - 86 per cent of the former and only 73 per cent of the latter report having a strategy (Table 1). This distribution is statistically significant, i.e., in general, financial services companies are more likely to have adopted information system strategies than are other industrial firms.
Strategy?
Yes / % / No / % / Row total
Times 500 / 115 / 73.2 / 42 / 26.8 / 152
Financial / 25 / 86.2 / 4 / 13.8 / 28
Column total / 140 / — / 46 — / 186
Column per cent / 75.3 / — / 24.7 / — / 100.0
Note: The chi-squared test shows that this distribution is statistically significant at the 0.08 level.
Table 1. Possession of a strategy by companies in the two major groups
Furthermore, 6.4 per cent of strategic companies claim that the ISS is a function of individual departments, which is at odds with the organization-wide focus of the definition given in the questionnaire.
Finally, the ISS was said to be 'formal, documented part of business strategy' by fewer than half (47.5 per cent) of those claiming to have a strategy. Further responses suggesting that ISSs are less well developed than the basic figures suggest are: that 12 per cent say that competitive advantage does not figure in the strategy, and 22.5 per cent derive information for management only as a by-product of transaction processing, rather than as a consequence of more sophisticated analyses of management information needs, suggesting an operational aim rather than a strategic aim for information systems.
In fact, if a very strict definition of a strategy-holder is adopted, the number of companies that can be said to have a strategy drops to only 24! The definition adopted in arriving at this figure is that:
The strategy should be formally documented, should be initiated by the Board, monitored by planned reviews, and should base information provision on key indicators, critical success factors, or on a detailed analysis of management information needs.
These 24 companies would constitute only 13 per cent of those replying to the survey, and only 17 per cent of those claiming to have a strategy. Six of the 24 are financial services companies (22 per cent of that group of respondents; and a further seven are found in the top 100 companies.
The formality of the strategic process
Relationship to the business strategy
The first question is Section A was: How is the information systems strategy related to the company's overall business strategy?, with the five alternatives shown in Table 2.Alternatives offered / % companies
The ISS is a formal, documented part of the business strategy / 47.5
There is no formal documentation, but the ISS is related to specific strategic aims / 41.8
The ISS is a departmental function, rather than a corporate function / 6.4
The ISS is not seen as related to the business strategy / 0.0
Other / 4.3
Table 2. Where the strategy is developed
Clearly, the formality with which the strategy is related to business aims is variable and throws some doubt on the extent to which, in many cases, the approach can be regarded as a 'strategy'. In particular, the fact that over 6 per cent regard strategy-setting as a departmental function, suggests that, in those companies, information system strategies are still not seen as central to corporate effectiveness.
The main reason for selecting 'Other' was the federal nature of many of the companies, that is, the firms were either subsidiary companies within a group of companies, or part of a holding company, or the headquarters of one or other of these two categories. In these circumstances information systems strategies tended to be a function of the individual business units rather than of the group or holding company.
The following comment was typical:
Group policy is that responsibility for IT is delegated to each operating subsidiary . . . [which] is required to prepare an ISS as part of their business strategy on a three-year cycle...
However, some groups had recognized the need for an overall corporate strategy, as the following response indicates:
As a large diverse corporation, IS strategy has tended to be dealt with at major grouping levels . . . Acquisitions have . . . carried on, or developed, independent strategies. A major review is currently in progress to determine the degree to which a corporate strategy is required.
Table 3 shows the distribution of results over the four industry groups. There are too many small value cells for significance tests to be used, but it is noticeable that firms in the financial group are more likely to have a formally-documented strategy than in the other groups.
Banking/
finance / Energy, oil,
gas, etc. / Distribution/
trading, etc. / Manufacturing, chemicals,
pharmaceuticals / Row total
Formal
document / 17
68.0 / 5
50.0 / 19
43.2 / 25
41.0 / 66
Related - no
document / 5
20.0 / 2
20.0 / 23
52.3 / 29
47.5 / 59
Department
function / 2
8.0 / 1 10.0 / –
– / 6
9.8 / 9
Other / 1
4.0 / 2
20.0 / 2
4.5 / 1
1.6 / 6
Column
total / 25
17.9 / 10
7.1 / 44
31.4 / 61
43.6 / 140
100.0
Note: Significance test inappropriate.
Table 3. ISS relation to business strategy by industry category
IT management and the Board
If an ISS is to be properly related to the business strategy, it is important that the Board should be closely involved. In 22 per cent of cases the person responsible for IT in the company was a Board member and, of the remaining cases, a further 87 per cent reported to a Board member.The relationship between Board membership and possession of a strategy is not statistically significant, as in 7 out of 42 (17 per cent) 'no strategy' companies the person responsible for IT was on the Board. Further evidence of Board involvement comes from the question on the level of the organization at which a strategy had been initiated, which gave the result shown in Table 4.
Initiated at... / %
Board level / 55
Corporate management services / 29
Information services department / 8
Department level / 1
Other / 6
Table 4. Where strategy is initiated
The involvement of the Board in the inception of information system strategies is to be expected, given that company business strategy is associated with information systems. However, previous surveys have suggested that acceptance of the idea is rather less widespread than revealed by these results.
In 65 per cent of cases the strategy is monitored through planned, periodic performance reviews and in 23 per cent by ad hoc reports to the Board. The remainder reported a combination of planned and ad hoc reviews, or control by various kinds of committees, or subsidiary, or plant-based review.
One seemingly heartfelt response pointed to difficulties experienced in monitoring IS strategies:
With very great difficulty, especially in the area of systems that are designed to improve service and provide competitive edge...
Key features of strategy or IT implementation
The literature on ISSs identifies a number of elements which may be treated in strategies, and this study sought to discover the importance attached to a variety of these elements. Companies were asked to identify the importance of each element in their strategies on a scale 0 to 10, where 10 identified a major element in strategy. When the responses were ranked (Kendall's W), the order of importance shown in Table 5 resulted.Rank / Element
1 / Development of computer applications for business transactions, such as production, marketing, selling, etc.
2 / Development of management information systems for effective business control
3 / Planned introduction and use of computers and telecommunications
4 / Creation of an overall systems and standards architecture for technology, applications and data
5 / Development of information systems for business planning
6 / Improved productivity in information systems and computing
7 / Development of appropriate staff resources
8 / Development of internal support sysrems (payroll, personnel, pensions, etc.)
Table 5. Rank order of features of ISS
In the ranking, in relationship to item 3, some companies were at pains to point out that, for them, this meant the continued development of systems, rather than their introduction, and it seems likely that this was true for most.
Further information on the elements of strategy was revealed in the interviews. For example, one systems manager of an insurance company described the main elements of the company's strategy in the following way:
The central plank is the continuing evolution of a master set of operational systems for the office. It was the original development of [these] in the late seventies that first established IT as a strategic weapon for the office. And it is still seen by the management that those operational systems are the cornerstone of our IT strategy. Our primary additional objective this time round has been to replace our existing systems in an evolutionary fashion with systems which will cope with a much higher volume of business in an equally efficient manner and yet will allow rapid product introduction, evolution of product, evolution of organizational structure.
The second major plank ... is concentrating on the competitive edge, strategic advantage - what we call delivery systems. Much improved ways of delivering our product, our service, to the point of sale - beyond our own branch network, into the brokers office, into the building society office...
In another area, retail distribution, another interviewee identified the main planks as:
...We wanted to reduce the paperwork, we wanted to improve the communications... to produce online communications, to give people the timeliness of data... Another plank of the strategy, which had associations on the technical side, was that we agreed that our systems should be loosely coupled...: to split the operation across as many computers as we chose to do. But it would still appear transparent to the Company... And so even if one [of the machines] goes down we can still run all the others...
Barriers to strategy
Mintzberg (1987) suggests that strategy formation is a craft, rather than a science, and the process of crafting a strategy will involve negotiating various barriers. The barriers suggested in the literature include a number that affect any innovation, such as the hostile attitudes of management levels in a company, and the problem of recruiting appropriate staff. Some, such as the difficulty of measuring benefits, are more specific to IT implementation.Companies with a strategy were asked to identify the barriers either to setting up or implementing a strategy and to state whether the barrier had been major or minor. The results are shown in condensed form in Table 6. In Table 6, the ranking is based on the proportion of companies citing a barrier as a major impediment. It is interesting, however, to look at the ranking that emerges when the change in proportions citing a barrier as a problem at set-up and implementation is used. This can be seen in Table 6, but is also set out in Table 7 for ease of reference.
Rank / % response
Set-up / Impln. / Barrier / Set-up / Impln.
1 / 3 / Measuring benefits / 30.5 / 32.6
2 / 2 / Nature of business / 27.7 / 34.8
3 / 1 / Difficulty in recruiting / 24.1 / 36.9
4 / 6 / Political conflicts / 23.4 / 19.9
5 / 5 / Existing IT investment / 22.0 / 24.8
6 / 4 / User-education resources / 17.0 / 29.1
7 / 11 / Doubts about benefits / 15.6 / 8.5
8 / 9 / Telecommunications issues / 10.6 / 11.3
9 / 7 / Middle management attitudes / 9.9 / 13.5
10 / 8 / Senior management attitudes / 9.2 / 9.2
11 / 10 / Technology lagging behind needs / 6.4 / 9.2
Table 6. Rank importance of barriers to strategy
Some of the changes shown in the table might be called logical shifts: for example, one might expect greater difficulty in recruitment when an organization actually needs to recruit, at the implementation stage; one might expect the lack of resources for user education to become more apparent when user education for the new systems needs to take place; and it is not surprising that technology lag makes itself felt after the initial optimism of the planning stage.
Rank / Barrier / % change
1 / Difficulty in recruiting / +12.8
2 / User-education resources / +12.1
3* / Nature of business / +7.1
3* / Doubts about benefits / -7.1
5 / Middle management attitudes / +3.7
6 / Political conflicts / -3.5
7* / Existing IT investment / +2.8
7* / Technology lagging behind needs / +2.8
9 / Measuring benefits / +2.1
10 / Telecommunications problems / +0.7
11 / Senior management attitudes / 0.0
* = Ties.
Table 7. Change in significance of barriers from set-up to implementation
Logical explanations for some of the changes are more difficult to find, however: the nature of the business (degree of diversification, rapidity of growth, etc.) is perceived as a major barrier initially and by an even greater proportion during implementation - what is the explanation for this? Perhaps it is that anticipated problems in this area actually materialize. Also, the attitudes of middle management assume a greater significance at implementation - this may be related to the lack of resources for user education and to the perception that technology lags behind needs, i.e., is failing to deliver anticipated benefits. Perhaps the smaller increase for senior management attitudes is related to the marked decline in the significance of political conflicts. The downward shift in political conflict may also be associated with the decline in doubts about benefits, although the difficulty of measuring benefits remains a problem.
When we examine the extent to which these factors are perceived to be either major or minor barriers, the picture shown in Table 8 emerges.
% response / Rank
Set-up / Impln / Set-up / Impln / Barrier
42.5 / 45.4 / 10 / 10 / Senior management attitudes
53.9 / 52.5 / 6 / 6 / Middle management attitudes
61.7 / 75.2 / 3 / 1 / Recruitment
51.8 / 48.2 / 7 / 8* / Doubts about benefits
63.8 / 63.8 / 2 / 4 / Measurement of benefits
49.0 / 49.6 / 9 / 7 / Existing IT investment
59.5 / 72.4 / 4 / 2 / User-education resources
58.2 / 59.6 / 5 / 5 / Political conflicts
66.7 / 67.4 / 1 / 3 / Nature of the business
49.6 / 48.2 / 8 / 8* / Telecommunications issues
39.7 / 41.8 / 11 / 11 / Technology lagging behind needs
Table 8. Significance of barriers as either major or minor
From these various rankings, the difficulties in recruiting appropriate staff, the lack of resources to engage in user education, the nature of the business, and the difficulties of measuring benefits, emerge as the key features of IT strategies that are likely to cause problems for companies.
Further details of barriers and problems surfaced in the interviews. Even companies with a strong commitment were not immune to blind spots. For example, one interviewee said that:
...while there is this very strong belief in information technology, the top management have not believed in end-user computing... The main drive... is coming from DP because we see opportunities for managers, professionals, to help themselves. But it is not something for which there is a strong demand, and it is something which top management has treated as, you know, 'Why do you want to play with that, why don't you get on with your real job?'
The same person highlighted another inhibiting factor:
...another aspect of corporate style - the attitude to cost. The organization will quite happily invest millions almost at the drop of a hat in large-scale technology for big operational systems. I can get authority to spend a million or two on new hardware to improve the system in a ten-minute meeting with the managing director. And yet the same man will say, 'I might find a PC on the desk quite useful, but how much does it cost? [and then] 'It's not worth spending £2500 for a piece of junk on my desk.'