Strategic Information Management

Today, there are few in senior management positions who can afford to ignore modern informa-
tion technology, and few individuals who would prefer to be without it. Modern IT is key to organ-
izational performance; yet we often assume the benefits will occur without forethought or effort.
As managerial tasks become more complex, so the nature of the required information systems
changes – from structured, routine support to ad hoc, unstructured, complex enquiries at the high-
est levels of management. If taken for granted, serious implications can arise for organizations.
This fifth edition of Strategic Information Management has been brought fully up to
date with recent developments in the management of information systems, including digital
transformation strategy, the issues surrounding big data and algorithmic decision-making.
The book provides a rich source of material reflecting recent thinking on the key issues facing
executives, drawing from a wide range of contemporary articles written by leading experts in
North America, Europe and Australia. Combining theory with practice, each section is fully
introduced, includes further reading and questions for further discussion.
Designed for MBA, master’s level students, and advanced undergraduate students tak-
ing courses in information systems management, it also provides a wealth of information and
references for researchers.

Robert D. Galliers is the University Distinguished Professor Emeritus, formerly Provost, at

Bentley University, USA; Professor Emeritus, formerly Dean, at Warwick Business School
and Honorary Visiting Professor at Loughborough University, UK. Previously, he was a
Professor and Research Director at the London School of Economics and Head of the School
of Information Systems at Curtin University, Australia.

Dorothy E. Leidner is the Randall W. and Sandra Ferguson Professor of Information Systems
at Baylor University, USA; a Senior Research Fellow at Lund University, Sweden, and a
Visiting Professor at the University of Mannheim, Germany. Previously she was an Associate
Professor at INSEAD, France and held Visiting Professorships at ITESM, Mexico and the
University of Caen, France.

Boyka Simeonova is an Assistant Professor at Loughborough University, the Director of

the Knowledge and the Digital Economy Network, the Deputy Director of the Centre for
Information Management, and a Fellow of the Higher Education Academy, UK.
“This fifth edition of Strategic Information Management updates and extends a unique selec-
tion of theories and valuable practice insights, established in the previous editions, and offers
a roadmap for executives navigating in the digital landscape and coping with the digitiza-
tion challenges associated with organizational transformation. The book has the right balance
of theoretical frameworks and practical insights. Taken together, the book reflects recent
thinking regarding many of the key issues facing executives in getting the most out of their
investments in information technology and digitalization initiatives, highlighting the complex
strategy, organizational and governance issues involved.”
– IOANNA CONSTANTIOU, Copenhagen Business School, Denmark

“I’m pleased the editors of Strategic Information Management have produced this fifth edi-
tion, which represents a major overhaul, including online supporting materials not available
with prior editions. Particularly valuable is the amplification of theory in this edition – not
theory for theory’s sake, but rather practice-guiding theory; the implication being that we are
all researchers and that complex matters demand research and unique approaches and solu-
tions. I strongly encourage students and practitioners to assume an evidence-based practice
perspective when reading and reflecting on these writings which, combined, provide a much-
needed stimulus for critical thinking on these complex matters in what are challenging times.”
– GUY GABLE, Queensland University of Technology, Australia

“The fifth edition of Strategic Information Management has great value in providing direc-
tions for practitioners and scholars towards an understanding of the strategic importance and
managerial challenges of digital transformation in today’s organizations. With inputs from
international scholars, the book offers really useful management frameworks and principles to
help in understanding how organizations and industries are transformed by disruptive digital
technologies.”
– CAROL HSU, Tongji University, China

“This fifth edition of Strategic Information Management updates and strengthens what has
long served as a vehicle through which current and future executives obtain a foundational
understanding as well as pragmatic insights regarding a host of strategic and managerial
issues associated with the digital transformation of organizations. As with the earlier editions,
the authors refuse to fall into the too-often-taken route of providing readers with a handbook
offering ‘one-size-fits-all’ practices and procedures – solutions which ultimately fail to align
with the situations faced by readers. Instead, the editors successfully provide readers with
exposures to critical themes and frameworks and to illustrations of how some of our brightest
executives are applying these in addressing digitalization initiatives and challenges – providing
readers with the capability to formulate workable solutions to many, if not most, of the situa-
tions they face in their digital transformation efforts.”
– ROBERT W. ZMUD, University of Oklahoma, USA
Strategic Information
Management

Theory and Practice

Fifth Edition

Edited by

Robert D. Galliers, Dorothy E. Leidner and

Boyka Simeonova
Fifth edition published 2020
by Routledge
52 Vanderbilt Avenue, New York, NY 10017
and by Routledge
2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2020 selection and editorial matter, Robert D. Galliers, Dorothy E. Leidner
and Boyka Simeonova; individual chapters, the contributors
The right of the Robert D. Galliers, Dorothy E. Leidner and Boyka Simeonova to
be identified as the authors of the editorial material, and of the authors for their
individual chapters, has been asserted in accordance with sections 77 and 78 of
the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilized in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in writing from the
publishers.
Trademark notice: Product or corporate names may be trademarks or registered
trademarks, and are used only for identification and explanation without intent
to infringe.
First edition published by Butterworth-Heinemann 1994
Fourth edition published by Routledge 2009
Library of Congress Cataloging-in-Publication Data
A catalog record has been requested for this book
ISBN: 978-0-367-25250-2 (hbk)
ISBN: 978-0-367-25251-9 (pbk)
ISBN: 978-0-429-28679-7 (ebk)
Typeset in Perpetua
by Swales & Willis, Exeter, Devon, UK
 Contents

Preface viii
Acknowledgments xii

PART I
Foundations to Information Systems Strategy and Strategizing 1

1 Michael Earl
approaches to information systems planning: experiences in
strategic information systems planning 5

2 Robert D. Galliers
conceptual developments in information systems strategy:
further reflections on information systems strategy 30

3 Robert D. Galliers
on confronting some of the common myths of information
systems strategy discourse 56

4 Robert D. Galliers
conceptual developments in information systems strategizing :
unpacking the concept  71

5 Anna Karpovsky and Robert D. Galliers

aligning in practice: from current cases to a new agenda 85
vi contents

PART II
Digital Strategy and Organizational Transformation 129

6 Ina M. Sebastian, Jeanne W. Ross, Cynthia Beath, Martin Mocker,

Kate G. Moloney and Nils O. Fonstad
how big old companies navigate digital transformation 133

7 Thomas Hess, Christian Matt, Alexander Benlian and Florian Wiesböck

options for formulating a digital transformation strategy 151

8 Omar A. El Sawy, Pernille Kræmmergaard, Henrik Amsinck and

Anders Lerbech Vinther
how lego built the foundations and enterprise
capabilities for digital leadership 174

9 Anna Singh and Thomas Hess

how chief digital officers promote the digital transformation
of their companies 202

10 Boyka Simeonova, Robert D. Galliers and Stan Karanasios

strategic information systems and organizational power
dynamics 221

PART III
Organizing and Governing the IS Function 239

11 Ritu Agarwal and V. Sambamurthy

principles and models for organizing the it function 243

12 Dorothy E. Leidner, Robert C. Beatty and Jane M. Mackay

how cios manage it during economic decline: surviving and
thriving amid uncertainty 261

13 David S. Preston, Dorothy E. Leidner and Daniel Chen

cio leadership profiles: implications of matching cio authority
and leadership capability on it impact 277

14 Sanja Tumbas, Nicholas Berente and Jan vom Brocke

three types of chief digital officers and the reasons
organizations adopt the role 292

15 Joe Peppard
rethinking the concept of the is organization 309

PART IV
Some Current and Emerging Challenges 337

16 João Baptista, Alexander D. Wilson, Robert D. Galliers

and Steve Bynghall
social media and the emergence of reflexiveness as a new
capability for open strategy 341
 contents vii

17 Dorothy E. Leidner, Ester Gonzalez, and Hope Koch

an affordance perspective of enterprise social media and
organizational socialization 364

18 Paolo Aversa, Laure Cabantous and Stefan Haefliger

when decision support systems fail: insights for strategic
i n f o r m a t i o n s y s t e m s f r o m f o r m u l a 1 403

19 Sue Newell and Marco Marabelli

strategic opportunities (and challenges) of algorithmic
decision-making: a call for action on the long-term societal
effects of ‘datification’ 430

20 Kirsten E. Martin
ethical issues in the big data industry 450

Index 472
 Preface

T his is the fifth edition of Strategic Information Management. First published in

1994, each of the editions deals with the challenges and strategies in manag-
ing information systems, as indicated by the subtitle of the first four editions. We
have changed the title of this edition slightly to Strategic Information Management:
Theory and Practice to better reflect the content of this edition of the book and
to reinforce Kurt Lewin’s (1943) maxim that, ‘There’s nothing as practical as a
good theory’. As before, we aim to present the many complex and inter-related
issues confronting those in management positions concerned with the management
of information systems with their organizations.
As previously, the primary audiences are MBA or other master’s level students
and senior undergraduate students taking courses in the management, organizational
and/or strategic implications of business information systems. Students embarking
on research in these areas should also find the book of help in providing a rich source
of material that reflects recent thinking regarding many of the key issues facing
executives in getting the most out of investments in information technology – whether
these issues relate to strategy processes or organizational and governance issues. For
research students in particular, prior editions of the book can also be referred to with
a view to obtaining a contemporaneous understanding of such issues and concerns
over the period of the last quarter century.
In line with this latter point, we have organized this edition of Strategic
Information Management into four sections; the first of which provides something
of an historical foundation to our treatment of information systems strategy, includ-
ing the processes and practices of information systems strategizing. We then move
on to more recent treatments of digital strategy and organizational transformation
in Part II, while Part III considers organizational and governance issues associated
with an organization’s information technology function. We end, in Part IV, with a
 p r e fa c e ix

Part Four: Some current and emerging challenges

Ch.16: Opening strategy through social media
Ch.17: Organizational socialization and social media
Ch.18: Decision support systems failures
Ch.19: The opportunities and challenges of datification
Ch.20: Ethical issues

Part Three: Organizing and governing the IS funcon

Ch 11: Principles and models
Ch.12: Managing in economic decline
Ch.13: CIO profiles
Ch.14: Alternative roles for chief digital officers
Ch.15: The IS organization

Part Two: Digital strategy and organizaonal transformaon

Ch.6: Navigating digital transformation
Ch.7: Formulating a digital strategy
Ch.8: Building digital capabilities
Ch.9: Chief digital officers
Ch.10: Organizational power dynamics

Part One: Foundaons to IS strategy and strategizing

Ch.1: Historical approaches
Ch.2: Further reflections
Ch.3: A critique
Ch.4: Conceptual developments
Ch.5: Aligning practices

Figure 0.1 Book structure and contents

consideration of some of the current and emerging challenges. The book’s structure
and content are summarized in Figure 0.1 above.
As with previous editions of Strategic Information Management, the book is
structured in such a way as to enable readers either to follow each chapter in the
sequence in which they are presented or to ‘dip into’ the book as they wish, depend-
ing on their needs or interests at the time. Additionally, and this may be of particu-
lar interest to those who wish to consider historical developments, readings taken
from previous editions of the book are recommended (cf. Galliers and Baker, 1994;
Galliers and Leidner, 2003, 2009; Galliers et al., 1999).
In many instances, the approach taken is to challenge taken-for-granted notions
that are often to be found in the mainstream or popular literature; you won’t find an
assumed ‘best practice’ solution, for example (cf. Swan et al., 1999; Wagner and
Newell, 2004; Wagner et al., 2006). The subject matter of strategic information
management is too complex for simple ‘solutions’. The American columnist H.L.
Mencken was one of the most quoted thinkers of the first half of the twentieth century
for good reason. One famous quotation of his is apposite in this context: ‘For every
x p r e fa c e

complex problem, there is a simple solution that is simple, neat, and wrong.’ Putting
it another way, the strategic information management problematique1 requires criti-
cal, reflexive thinking that takes account of the many aspects of the topic, consider-
ing them as mutually constituted and very much inter-related. We shall therefore
endeavor to refer to related chapters when considering any particular topic.
The individual chapters included in each part of the book will be briefly summa-
rized in the Introduction to each part, with related readings introduced. In preparing to
study each chapter, however – and this applies in particular for research students – it
might be helpful for the reader to consider the following generic questions:

•• The research question: what is the major research question being posed and
why is it important?
•• The assumptions: what are some of the primary assumptions guiding the study,
and are these valid in your context?
•• The method: what method was used to investigate the questions (e.g., case
study, survey) and how might the method have influenced, for better or worse,
the results (cf. Galliers et al., 2006)?
•• The results: what were the major findings; what was new, interesting or unex-
pected, and what are the implications for practice?

In addition, and following each chapter, we offer some questions that could serve
as points of departure/debate for classroom discussion or individual reflection. We
also recommend additional readings relevant to the chapters in the Introductions
to each Part. By doing so, we hope to have covered some of the important aspects
of each topic, while at the same time providing references to other important work.
Additionally, presentation slides for each chapter are available online.
We hope that, by adding new material in this edition, dealing with theoretical
considerations as well as practical implications and examples, we have been able to
build on the foundations provided in the first four editions of Strategic Information
Management. While our understanding – both theoretical and practical – of the topic
areas has developed over the years since the first edition was published, there are
clearly many complex issues and persistent problems requiring our attention if infor-
mation systems really are to contribute to organizational success and business value.
We trust that this new edition will contribute to enhanced understanding.
Robert D. Galliers, Dorothy E. Leidner and Boyka Simeonova

References
Galliers, R.D., Baker, B.S.H. (eds.) (1994). Strategic Information Management: Challenges
and Strategies in Managing Information Systems, Oxford: Butterworth-Heinemann.
Galliers, R.D., Leidner, D.E. (eds.) (2003). Strategic Information Management: Challenges
and Strategies in Managing Information Systems, 3rd edition, Oxford: Butterworth-
Heinemann.
Galliers, R.D., Leidner, D.E. (eds.) (2009). Strategic Information Management: Challenges
and Strategies in Managing Information Systems, 4th edition, New York: Routledge.
Galliers, R.D., Leidner, D.E., Baker, B.S.H. (eds.) (1999). Strategic Information
Management: Challenges and Strategies in Managing Information Systems, 2nd edi-
tion, Oxford: Butterworth-Heinemann.
 p r e fa c e xi

Galliers, R.D., Markus, M.L., Newell, S. (eds.) (2006). Exploring Information Systems
Research Approaches: Readings and Reflections, London & New York: Routledge.
Lewin, K. (1943). Psychology and the process of group living. Journal of Social
Psychology, 17, 113–131.
Swan, J., Newell, S., Robertson, M. (1999). The illusion of ‘best practice’ in information
systems for operations management, European Journal of Information Systems, 8(4),
284–293.
Wagner, E.L., Newell, S. (2004). ‘Best’ for whom? The tension between ‘best practice’
ERP packages and diverse epistemic cultures in a university context, The Journal of
Strategic Information Systems, 13(4), 305–328.
Wagner, E.L., Scott, S.V., Galliers, R.D. (2006). The creation of ‘best practice’ software:
myth, reality and ethics, Information & Organization, 16(3), 251–275.

Note
1 A nexus of inter-related problems.
 Acknowledgments

W e gratefully acknowledge all the many contributors to this book, not least
the authors of the chapters and the respective publishers who have so will-
ingly given their permission to use their material in this way. Special mention
should be made to Alexander Barsi Lopes for his willing support in enabling the
use of materials first published in MIS Quarterly Executive; to Laura Mesquita
and Laura Pritchard of Elsevier in doing likewise for materials first published in
The Journal of Strategic Information Systems and Long Range Planning; to Mary
Bergin-Cartwright for materials first published by Oxford University Press; and to
Jan DeGross for the chapter first published in MIS Quarterly.
We also wish to acknowledge Jess Harrison, Sophia Levine and Emmie Shand of Routledge
for all their encouragement and support at various times during the book’s development in
bringing this fifth edition of Strategic Information Management to publication.
Bob Galliers, Dorothy Leidner and Boyka Simeonova

The editors and the publisher would like to thank the following for permission to
reprint:

• MIS Quarterly

Chapter 1: M.J. Earl, 1993. Experiences in information systems planning (17:1), 1–24.

• Oxford University Press

Chapter 2: R.D. Galliers, 2004. Reflections on information systems strategizing, in

Social Study of Information and Communication Technology: Innovation, Actors,
and Contexts, C. Avgerou, C. Ciborra & F. Land, eds., 231–262.
 acknowledgments xiii

Chapter 3: R.D. Galliers, 2007. On confronting some of the common myths of

IS strategy discourse, in Oxford Handbook of Information and Communication
Technologies, R. Mansell, C. Avgerou, S. Quah & R. Silverstone, eds., 225–243.
Chapter 4: R.D. Galliers, 2011. Further developments in information systems strate-
gizing: unpacking the concept, in Oxford Handbook of Management Information
Systems: Critical Perspectives and New Directions, R.D. Galliers & W. Currie, eds.,
329–345.

• SAGE Publishing

Chapter 5: A. Karpovsky & R.D. Galliers, 2015. Aligning in Practice: from current
cases to a new agenda, Journal of Information Technology, (30:2), 136–160.

• MIS Quarterly Executive

Chapter 6: I.M. Sebastian, J.W. Ross, C. Beath, M. Mocker, K.G. Moloney & N.O.
Fonstad, 2017. How Big Old Companies Navigate Digital Transformation (16:3).
Chapter 7: T. Hess, C. Matt, A. Benlian & F.Wiesböck, 2016. Options for Formulating
a Digital Transformation Strategy, (15:2).

• MIS Quarterly Executive and the LEGO Group

Chapter 8: O. El Sawy, H. Amsinck, P. Kræmmergaard, & A. L. Vinther, 2016.

How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership
(15:2).
The LEGO co-authors of the MISQE paper, Henrik Amsinck and Anders Lerbech
Vinther, thank the following senior executives at the LEGO Group for their insights
and help in writing the article, Jakob Damkilde, Conny Kalcher and Eric Wolfe, and
also Charlotte Simonsen of LEGO Corporate Communications for her thoughtful
comments on the initial draft.

• MIS Quarterly Executive

Chapter 9: A. Singh & T. Hess, 2017. How Chief Digital Officers Promote the Digital
Transformation of their Companies (16:1).

• The authors

Chapter 10: B. Simeonova, R.D. Galliers, & S. Karanasios, 2020. Strategic

Information Systems and Organizational Power Dynamics (unpublished manuscript).

• MIS Quarterly Executive

Chapter 11: R.S. Agarwal & V. Sambamurthy, 2002. Principles and Models for
Organizing the IT Function (1:1).
xiv acknowledgments

Chapter 12: D.E. Leidner, R.C. Beatty & J.M. Mackay, 2003. How CIOs Manage IT
During Economic Decline: Surviving and Thriving Amid Uncertainty (2:1).
Chapter 13: D.S. Preston, D.E. Leidner & D. Chen, 2008. CIO Leadership Profiles:
Implications of Matching CIO Authority and Leadership Capability on IT Impact
(7:2).
Chapter 14: S. Tumbas, N. Berente & J. vom Brocke, 2017. Three Types of Chief
Digital Officers and the Reasons Organizations Adopt the Role (16:2).

• John Wiley and Sons

Chapter 15: J. Peppard, 2018. Rethinking the concept of the IS organization,

Information Systems Journal (28:1), 76–103.

• Elsevier

Chapter 16: J. Baptista, A. Wilson, R.D. Galliers & S. Bynghall, 2017. Social media
and the emergence of reflexiveness as a new capability for open strategy, Long Range
Planning, (50:3), 322–336.
Chapter 17: D.E. Leidner, E. Gonzalez & H. Koch, 2018. An Affordance Perspective
of Social Media and Organizational Socialization, The Journal of Strategic
Information Systems (27:2), 117–138.
Chapter 18: P. Aversa, L. Cabantous & S. Haefliger, 2018. When Decision Support
Systems fail: Insights for Strategic Information Systems from Formula 1, The
Journal of Strategic Information Systems, (27:3), 221–236.
Chapter 19: S. Newell & M. Marabelli, 2015. Strategic opportunities (and chal-
lenges) of algorithmic decision-making: a call for action on the long-term societal
effects of ‘datification’, The Journal of Strategic Information Systems, (24:1), 2–14.

• MIS Quarterly Executive

Chapter 20: K.E. Martin, 2015. Ethical Issues in the Big Data Industry (14:2).
PART I

Foundations to Information
Systems Strategy and
Strategizing

W e b e gin our discussion of key aspects of strategic information man-

agement by focusing on information systems (IS) planning and strategy making – the
bottom layer of Figure P1.1 below. We start with something of an historical focus on IS
planning approaches used by organizations and then reflect and provide a critique on some
of the popular, taken-for-granted notions before considering in greater depth key conceptual
underpinnings that arise from what we have learned on the topic over the years. We end with a
chapter with a consideration of the practices concerned with aligning IS considerations within
organizational strategies. Thus, as with the remainder of the book, we attempt to combine
theory with practice. Additionally, we provide something of a snapshot of our thinking on IS
strategizing over two decades and thereby provide a foundation for more recent treatments of
the subject matter in subsequent chapters.
In our search for articles that provide the necessary foundations, we decided to retain two
of the chapters from the fourth edition of Strategic Information Management – Chapters 2
and 3 – while introducing new material that provides both a critical reflection on the past and
a useful segue into the current and future. Thus, in Part I of the book, we set out to provide
greater clarity to what is a key aspect of strategic information management, as well as to
highlight the results of more recent thinking and practice.
As already noted, Chapter 1 is retained from the fourth edition of the book. It is written
by Michael Earl and considers different approaches to strategic IS planning that had been
developed and used by organizations in the 1990s. Based on a study of a number of compa-
nies’ actual experiences in IS planning, Earl found five different ‘styles’ of planning approach,
ranging, inter alia, from those that were clearly business strategy-driven, to those that were
very much focused on technological considerations, to those that focused on the organization
2 i n t r o d u c t i o n t o pa r t i

Part Four: Some current and emerging challenges

Ch.16: Opening strategy through social media
Ch.17: Organizational socialization and social media
Ch.18: Decision support systems failures
Ch.19: The opportunities and challenges of datification
Ch.20: Ethical issues

Part Three: Organizing and governing the IS funcon

Ch 11: Principles and models
Ch.12: Managing in economic decline
Ch.13: CIO profiles
Ch.14: Alternative roles for chief digital officers
Ch.15: The IS organization

Part Two: Digital strategy and organizaonal transformaon

Ch.6: Navigating digital transformation
Ch.7: Formulating a digital strategy
Ch.8: Building digital capabilities
Ch.9: Chief digital officers
Ch.10: Organizational power dynamics

Part One: Foundaons to IS strategy and strategizing

Ch.1: Historical approaches
Ch.2: Further reflections
Ch.3: A critique
Ch.4: Conceptual developments
Ch.5: Aligning practices

Figure P1.1 The focus of Part I: Foundations to Information Systems Strategy and Strategizing

of IS services. The framework that emerges from his study may be used as a diagnostic tool to
analyze and evaluate an organization’s experience with, and capability in, IS strategizing (cf.
Peppard and Ward, 2004).
Chapter 2, by Bob Galliers, is also retained from the fourth edition. In it, Galliers reflects
on developments in IS strategy – or more particularly on the processes of IS strategizing over
the years, but also on the almost total disregard for IS in the mainstream strategic manage-
ment and organizational behavior literature for much of the last decade of the 20th century
and the early years of the 21st. This is beginning to change thanks to the efforts of those who
are concerned with the opening of strategy and the use of IT in this regard (e.g., Morton et al.,
2019; Seidl et al., 2019; Whittington, 2014). See also Chapters 16 and 17 for considerations
of the role and use of social media in this regard.
As noted in the Chapter 2, the reflections are provided against the backdrop of something
of a hiatus in research on the topic in the IS literature at the time. The absence of research
in this topic area was somewhat surprising given that IS strategy was becoming increasingly
important, with flexible information infrastructures being a requirement for any organization
dealing with the kind of turbulent and dynamic competitive environments they are facing. Add
to this the emergence of algorithmic decision-making – so-called ‘big data’ – and the use of
 i n f o r m at i o n s y s t e m s s t r at e g y a n d s t r at e g i z i n g 3

artificial intelligence; it is of no surprise that the topic is regaining its preeminent place in the
IS universe (cf. Günther et al., 2017). The strategic opportunities and associated challenges
concerning algorithmic decision-making are topics covered extensively in Chapter 19.
Chapter 3 is also written by Galliers; as the title of the chapter suggests, the focus is on
confronting some of the common myths associated with topics in strategic IS that have been
prevalent over the past 30 years or so. The topics considered in this chapter are the competi-
tive advantage that can supposedly be derived from IT; knowledge management systems, and
issues associated with business – IT alignment. In line with our treatment of the topic of
strategic information management throughout the book, the chapter focuses more on the pro-
cesses of strategizing than on the outcome of the process – the strategy itself. As noted in the
introduction to the chapter, Galliers argues that benefit is to be gained from a more inclusive,
exploratory approach to strategizing (cf. Galliers, 1993). This perspective is set against the
common view, expressed widely at various times over the period, which is concerned more
with the exploitation of IT for organizational transformation. Note, for example, the tenor of
Hammer’s HBR article (Hammer, 1990). The arguments outlined in Chapter 3 are very much
in line with the notion of ambidexterity originally brought to prominence by Michael Tushman
(e.g., Tushman and O’Reilly, 1996). Implicit in them is the view that it is to be intellectually
bankrupt to accept such common myths as ‘self-evident truths’. Too often we are subjected to
hyperbole in the realm of strategic information management.
These arguments are extended in Chapter 4, which aims to unpack the concepts under-
lying the IS strategizing framework introduced in Chapter 2 by examining, in considerably
greater depth, the literature that has informed our thinking on the topic. As with the preceding
chapters, it focuses attention on the term ‘strategizing’, with a view to giving emphasis to the
processes and practices of strategy making. Importantly, the chapter views IS strategizing as
an integral aspect of business strategy rather than something apart that may require alignment
(see Chapter 5). The aim is to provide a theoretical rationale for the whole framework and its
constituent parts. In line with the rationale of the book to apply theory in practice, however,
it concludes with a consideration as to how the framework may be put to good practical use
in organizations.
Part I is brought to a close by a chapter that arises from a review of the literature on
alignment. Written by Anna Karpovsky and Bob Galliers, the chapter makes the point that,
despite the extensive literature on IT/IS-business alignment, the topic has tended to be treated
in a predominantly static manner. While they argue that the increasing interest in taking a
process perspective on alignment may well be a promising avenue to study the phenomenon’s
dynamic nature, it provides only a partial picture of organizational practice in this regard. The
authors point out that we still know very little about what it is that people in organizations
actually do, on a day-to-day basis, to align IS and related concerns with business imperatives.
Thus, in order to address the current gap in our understanding of the practices of aligning,
there is a need for research that goes beyond the abstract macro analysis of alignment pro-
cesses to that which considers the actual micro practices of aligning. This line of argument
mirrors the view of ‘practice’ scholars referred to earlier in this Introduction – see also the
special issue of JSIS on the topic (Peppard et al., 2014). The authors’ analysis of the litera-
ture on the topic leads to the identification and classification of aligning activities that are
being undertaken in practice. While the classification of aligning activities is partial, based as
it is on the extant literature only, it is argued that it may usefully form the basis for further
research of the actual practices that are being attempted. The classification can be added to
with further research and can be used in practice to compare and contrast with what is being
attempted in individual organizations.
4 i n t r o d u c t i o n t o pa r t i

Thus, Part I provides a strong foundation for consideration of the other key topics covered
in this book as part of the multi-faceted strategic information management problematique. It
deals with how our thinking and practice have developed over the years, provides examples
of the approaches that have been developed and used, and introduces frameworks that can be
applied in practice as analytical tools to assess IS capability and promote better management
of IT within and across organizations.

References

Galliers, R.D. (1993). IT strategies: Beyond competitive advantage, The Journal of Strategic
Information Systems, 2(4), 283–291.
Günther, W.A., Rezazade Mehrizi, M.A., Huysman, M., Feldberg, F. (2017). Debating big
data: A literature review on realizing value from big data, The Journal of Strategic
Information Systems, 26(3), 191–209.
Hammer, M. (1990). Reengineering work: Don’t automate, obliterate, Harvard Business
Review, 68(4), 104–113.
Morton, J., Wilson, A., Galliers, R.D., Marabelli, M. (2019). Open strategy and information
technology. Chapter 10 in Seidl et al. (eds.) 2019.
Peppard, J., Galliers, R.D., Thorogood, A. (2014). Information systems strategy as practice:
Micro strategy and strategizing for IS, The Journal of Strategic Information Systems,
23(1), 1–10.
Peppard, J., Ward, J. (2004). Beyond strategic information systems: Towards an IS capabil-
ity, The Journal of Strategic Information Systems, 13(2), 167–194.
Seidl, D., von Krogh, G., Whittington (eds.) (2019). The Cambridge Handbook of Open
Strategy, Cambridge: Cambridge University Press.
Tushman, M. L., O’Reilly, C.A. (1996). Ambidextrous organizations: Managing evolutionary
and revolutionary change, California Management Review, 38(4), 8–30.
Whittington, R. (2014). Information systems strategy and strategy-as-practice: A joint
agenda, The Journal of Strategic Information Systems, 23(1), 87–91.
Chapter 1

Michael Earl

APPROACHES TO INFORMATION
SYSTEMS PLANNING: EXPERIENCES
IN STRATEGIC INFORMATION
SYSTEMS PLANNING

F or man y i s e x e c u ti v e s strategic information systems planning (SISP)

continues to be a critical issue.1 It is also reportedly the top IS concern of chief execu-
tives (Moynihan, 1990). At the same time, it is almost axiomatic that information systems
management be based on SISP (Synott and Gruber, 1982). Furthermore, as investment
in information technology has been promoted to both support business strategy or create
­strategic options (Earl, 1988; Henderson and Venkatraman, 1989), an ‘industry’ of SISP
has grown as IT manufacturers and management consultants have developed methodologies
and techniques. Thus, SISP appears to be a rich and important activity for researchers. So
far, researchers have provided surveys of practice and problems, models and frameworks for
theory-building, and propositions and methods to put into action.2
The literature recommends that SISP target the following areas:

•• aligning investment in IS with business goals

•• exploiting IT for competitive advantage
•• directing efficient and effective management of IS resources
•• developing technology policies and architectures.

It has been suggested (Earl, 1989) that the first two areas are concerned with informa-
tion systems strategy, the third with information management strategy, and the fourth
with information technology strategy. In survey-based research to date, it is usually the
first two areas that dominate. Indeed, SISP has been defined in this light (Lederer and
Sethi, 1988) as ‘the process of deciding the objectives for organizational computing and
6 michael earl

identifying potential computer applications which the organization should implement’

(p. 445). This definition was used in our investigation of SISP activity in 27 United
Kingdom-based companies.
Calls have been made recently for better understanding of strategic planning in g­ eneral,
including SISP, and especially for studies of actual planning behavior in organizations
(Boynton and Zmud, 1987; Henderson and Sifonis, 1988). As doubts continue to be raised
about the pay-off of IT, it does seem important to examine the reality of generally accepted
IS management practices such as SISP. Thus, in this investigation we used field studies to
­capture the experiences of large companies that had attempted some degree of formal IS
planning.3
We were also interested as to whether any particular SISP techniques were more ­effective
than others. This question proved difficult to answer, as discussed below, and is perhaps
even irrelevant. Techniques were found to be only one element of SISP, with process and
implementation being equally important. Therefore, a more descriptive construct embody-
ing these three elements – the SISP approach – was examined. Five different approaches were
identified; the experience of the organizations studied suggests that one approach may be
more effective than the others.

Methodology

In 1988–89, a two-stage survey was conducted to discover the intents, outcomes, and
­experiences of SISP efforts. First, case studies captured the history of six companies previ-
ously studied by the author. These retrospective case histories were based on accounts of the
IS director and/or IS strategic planner and on internal documentation of these companies.
The cases suggested or confirmed questions to ask in the second stage. Undoubtedly, these
cases influenced the perspective of the researcher.
In the second stage, 21 different UK companies were investigated through field stud-
ies. All were large companies that were among the leaders in the banking, insurance,
transport, retailing, electronics, IT, automobile, aerospace, oil, chemical, services, and
food and drink industries. Annual revenues averaged £4.5 billion. They were all head-
quartered in the UK or had significant national or regional IS functions within multi-
national companies headquartered elsewhere. Their experience with formal SISP activi-
ties ranged from one to 20 years.4 The scope of SISP could be either at the business unit
level, the corporate level, or both. The results from this second stage are reported in this
chapter.
Within each firm, the author carried out in-depth interviews, typically lasting two to four
hours, with three ‘stakeholders’. A total of 63 executives were interviewed. The IS director
or IS strategic planner was interviewed first, followed by the CEO or a general manager, and
finally a senior line or user manager. Management prescriptions often state that SISP requires
a combination or coalition of line managers contributing application ideas or making system
requests, general managers setting direction and priorities, and IS professionals suggesting
what can be achieved technically. Additionally, interviewing these three stakeholders pro-
vides some triangulation, both as a check on the views of the IS function and as a useful, but
not perfect, cross-section of corporate memory.
Because the IS director selected the interviewees, there could have been some sample
bias. However, parameters were laid down on how to select interviewees, and the responses
did not indicate any prior collusion in aligning opinions. Respondents were supposed to be
the IS executives most involved with SISP (which may or may not be the CIO), the CEO or
 historical approaches 7

general manager most involved in strategic decisions on IS, and a ‘typical’ user line manager
who had contributed to SISP activities.
Interviews were conducted using questionnaires to ensure completeness and rep-
licability, but a mix of unstructured, semi-structured, and structured interrogation was
employed.5 Typically, a simple question was posed in an open manner (often requiring
enlargement to overcome differences in organizational language), and raw responses were
recorded. The same question was then asked in a closed manner, requesting quantitative
responses using scores, ranking, and Likert-type scales. Particular attention was paid to
anecdotes, tangents, and ‘asides’. In this way, it was hoped to collect data sets for both
qualitative and quantitative analysis. Interviews focused on intents, outcomes, and experi-
ences of SISP.
It was also attempted to record experiences with particular SISP methodologies and relate
their use to success, benefits, and problems. However, this aim proved to be inappropri-
ate (because firms often had employed a variety of techniques and procedures over time),
and later was jettisoned in favor of recording the variety and richness of planning behav-
ior the respondents recalled. This study is therefore exploratory, with a focus on theory
­development.6

Interests, Methods, and Outcomes

Data were collected on the stimuli, aims, benefits, success factors, problems, proce-
dures, and methods of SISP. These data have been statistically examined, but only a
minimum of results is presented here as a necessary context to the principal findings of
the study.7
Respondents were asked to state their firms’ current objectives for SISP. The dominant
objective was alignment of IS with business needs, with 69.8 percent of respondents rank-
ing it as most important and 93.7 percent ranking it in their top five objectives (Table 1.1).
Interview comments reinforced the importance of this objective. The search for competitive
advantage applications was ranked second, reflecting the increased strategic awareness of
IT in the late 1980s. Gaining top management commitment was third. The only difference
among the stakeholders was that IS directors placed top management commitment above the
competitive advantage goal, perhaps reflecting a desire for functional sponsorship and a clear
mandate.
Table 1.1 suggests that companies have more than one objective for SISP; narrative
responses usually identified two or three objectives spontaneously. Not surprisingly, the
respondents’ views on benefits were similar and also indicated a multidimensional picture
(Table 1.2). All respondents were able to select confidently from a structured list. Alignment
of IS again stood out, with 49 percent ranking it first and 78 percent ranking it in the top
five benefits. Top management support, better priority setting, competitive advantage appli-
cations, top management involvement, and user-management involvement were the other
prime benefits reported.
Respondents also evaluated their firm’s success with SISP. Success measures have been dis-
cussed elsewhere (Raghunathan and King, 1988). Most have relied upon satisfaction scores
(Galliers, 1987), absence of problems (Lederer and Sethi, 1988), or audit checklists (King,
1988). Respondents were given no criterion of success but were given scale anchors to help
them record a score from 1 (low) to 5 (high), as shown in Appendix B.
Ten percent of all respondents claimed their SISP had been ‘highly successful’, 59 per-
cent reported it had been ‘successful but there was room for improvement’, and 69 percent
8 michael earl

Table 1.1 Objectives of SISP

Rank Objective Respondents Primary Sum of Mean

order selecting (n = 63) frequency ranks rank
1 Aligning IS with business needs 59 44 276 4.38
2 Seek competitive advantage from IT 45 8 161 2.55
3 Gain top management commitment 36 6 115 1.83
4 Forecast IS resource requirements 35 1 80 1.27
5 Establish technology path and policies 30 2 77 1.22

rated SISP as worthwhile or better. Thirty-one percent were dissatisfied with their firm’s
SISP. There were differences between stakeholders; whereas 76 percent of IS directors
gave a score above 3, only 67 percent of general managers and 57 percent of user managers
were as content. Because the mean score by company was 3.73, and the modal company
score was 4, the typical experience can be described as worthwhile but in need of some
improvement.
A complementary question revealed a somewhat different picture. Interviewees were
asked in what ways SISP had been unsuccessful. Sixty-five different types of disappointment
were recorded. In such a long list none was dominant. Nevertheless, Table 1.3 summarizes
the five most commonly mentioned features contributing to dissatisfaction. We will hence-
forth refer to these as ‘concerns’.
It is apparent that concerns extend beyond technique or methodology, the focus of
several researchers, and the horizon of most suppliers. Accordingly we examined the 65
different concerns looking for a pattern. This inductive and subjective clustering produced
an interesting classification. The cited concerns could be grouped almost equally into
three distinct ­categories (assuming equal weighting to each concern): method, process,
and implementation, as shown in Table 1.4. The full list of concerns is reproduced in
Appendix C.
Method concerns centered on the SISP technique, procedure, or methodology employed.
Firms commonly had used proprietary methods, such as Method 1, BSP, or Information
Engineering, or applied generally available techniques, such as critical success factors or value
chain analysis. Others had invented their own methods, often customizing well-known tech-
niques. Among the stated concerns were lack of strategic thinking, excessive internal focus,
too much or too little attention to architecture, excessive time and resource requirements,
and ineffective resource allocation mechanisms. General managers especially emphasized
these concerns, perhaps because they have high expectations but find IS strategy making
­difficult.

Table 1.2 SISP benefits

Rank Benefit Respondents Primary Sum of Mean

order selecting (n = 63) frequency ranks rank
1 Aligning IS with business needs 49 31 208 3.30
2 Top management support 27 7 94 1.49
3 Better priority setting 35 3 75 1.19
4 Competitive advantage applications 21 4 67 1.06
5 Top management involvement 19 3 60 0.95
6 User/line management involvement 21 2 58 0.92
 historical approaches 9

Table 1.3 Unsuccessful features of SISP

Rank order Unsuccessful features

1 Resource constraints
2 Not fully implemented
3 Lack of top management acceptance

4 Length of time involved

5 Poor user-IS relationships

Implementation was a common concern. Even where SISP was judged to have been
successful, the resultant strategies or plans were not always followed up or fully imple-
mented. Even though clear directions might be set and commitments made to develop
new applications, projects often were not initiated and systems development did not pro-
ceed. This discovery supports the findings of earlier work (Lederer and Sethi, 1988).
Evidence from the interviews suggests that typically resources were not made available,
management was hesitant, technological constraints arose, or organizational resistance
emerged. Where plans were implemented, other concerns arose, including technical
quality, the time and cost involved, or the lack of benefits realized. Implementation con-
cerns were raised most by IS directors, perhaps because they are charged with delivery
or because they hoped SISP would provide hitherto elusive strategic direction of their
function. Of course, it can be claimed that a strategy that is not implemented or poorly
implemented is no strategy at all – a tendency not unknown in business strategy making
(Mintzberg, 1987). Indeed, implementation has been proposed as a measure of success in
SISP (Lederer and Sethi, 1988).
Process concerns included lack of line management participation, poor IS-user relation-
ships, inadequate user awareness and education, and low management ownership of the
­philosophy and practice of SISP. Line managers were particularly vocal about the manage-
ment and enactment of SISP methods and procedures and whether they fit the organizational
context.
Analysis of the reported concerns therefore suggests that method, process, and imple-
mentation are all necessary conditions for successful SISP (Figure 1.1). Indeed, when
respondents volunteered success factors for SISP based on their organization’s experience,
they conveyed this multiple perspective (see Table 1.5). The highest ranked factors of ‘top
management involvement’, and ‘top management support’ can be seen as process factors,
while ‘business strategy available’ and ‘study the business before technology’ have more to
do with method. ‘Good IS management’ partly relates to implementation. Past research

Table 1.4 SISP concerns by stakeholder

Total citations % IS directors General managers User managers

(n=21) (n=21) (n=21)
Citations % Citations % Citations %
Method 45 36 14 36 18 44 13 28
Process 39 31 9 23 11 27 19 41
Implementation    42    33 16    41 12    29 14    31
126 100 39 100 41 100 46 100
10 michael earl

Method Process

SISP

Implementation

Figure 1.1 Necessary conditions for successful SISP.

has identified similar concerns (Lederer and Mendelow, 1987), and the more prescrip-
tive literature has suggested some of these success factors (Synott and Gruber, 1982).
However, the experience of organizations in this study indicates that no single factor is
likely to lead to universal success in SISP. Instead, successful SISP is more probable when
organizations realize that method, process, and implementation are all necessary issue sets
to be managed.
In particular, consultants, managers, and researchers would seem well advised to look
beyond method alone in practicing SISP. Furthermore, researchers cannot assume that SISP
requires selection and use of just one method or one special planning exercise. Typically, it
seems that firms use several methods over time. An average of 2.3 methods (both proprietary
and in-house) had been employed by the 21 companies studied. Nine of them had tried three
or more. Retrospectively isolating and identifying the effect of a method therefore becomes
difficult for researchers. It may also be misleading because, as discovered in these interviews,
firms engage in a variety of strategic planning activities and behavior. This became apparent
when respondents were asked the open-ended question. ‘Please summarize the approach you
have adopted in developing your IS strategy (or identifying which IT applications to develop
in the long run)’. In reply they usually recounted a rich history of initiatives, events, crises,
techniques, organizational changes, successes, and failures all interwoven in a context of how
IS resources had been managed.
Prompted both by the list of concerns and narrative histories of planning-related events,
the focus of this study therefore shifted. The object of analysis became the SISP approach.
This we viewed as the interaction of method, process, and implementation, as well as the
variety of activities and behaviors upon which the respondents had reflected. The accounts
of interviewees, the ‘untutored’ responses to the semi-structured questions, the documents
supplied, and the ‘asides’ followed up by the interviewer all produced descriptive data on
each company’s approach. Once the salient features of SISP were compared across the 21
companies, five distinct approaches were identified. These were then used retrospectively to
classify the experiences of the six case study firms.

SISP Approaches

An approach is not a technique per se. Nor is it necessarily an explicit study or formal, codi-
fied routine so often implied in past accounts and studies of SISP. As in most forms of busi-
ness planning, it cannot often be captured by one event, a single procedure, or a particular
technique. An approach may comprise a mix of procedures, techniques, user-IS interactions,
 historical approaches 11

Table 1.5 Success factors in SISP

Rank Success factor Respondents Primary Sum of Mean

order Selecting frequency ranks rank
1 Top management involvement 42 15 160 2.55
2 Top management support 34 17 140 2.22
3 Business strategy available 26 9 99 1.57
4 Study business before technology 23 9 87 1.38
5 Good IS management 17 1 41 0.65

special analyses, and random discoveries. There are likely to be some formal activities and
some informal behavior. Sometimes IS planning is a special endeavor and sometimes it is part
of business planning at large. However, when members of the organization describe how
decisions on IS strategy are initiated and made, a coherent picture is gradually painted where
the underpinning philosophy, emphasis, and influences stand out. These are the principal
distinguishing features of an approach. The elements of an approach can be seen as the nature
and place of method, the attention to and style of process, and the focus on and probability
of implementation.
The five approaches are labeled as Business-Led, Method-Driven. Administrative,
Technological, and Organizational. They are delineated as ideal types in Table 1.6. Several
distinctors are apparent in each approach. Each represents a particular philosophy (either
explicit or implicit), displays its own dynamics, and has different strengths and weaknesses.
Whereas some factors for success are suggested by each approach, not all approaches seem
to be equally effective.

Business-Led Approach
The Business-Led Approach was adopted by four companies and two of the case study firms.
The underpinning ‘assumption’ of this approach is that current business direction or plans are
the only basis upon which IS plans can be built and that, therefore, business planning should
drive SISP. The emphasis is on the business leading IS and not the other way around. Business
plans or strategies are analyzed to identify where information systems are most required.
Often this linkage is an annual endeavor and is the responsibility of the IS director or IS stra-
tegic planner (or team). The IS strategic plan is later presented to the board for questioning,
approval, and priority setting.
General managers see this approach as simple, ‘business-like’, and a matter of common
sense. IS executives often see this form of SISP as their most critical task and welcome the
long overdue mandate from senior management. However, they soon discover that business
strategies are neither clear nor detailed enough to specify IS needs. Thus, interpretation and
further analysis become necessary. Documents have to be studied, managers interviewed,
meetings convened, working papers written, and tentative proposals on the IS implications
of business plans put forward. ‘Home-spun’ procedures are developed on a trial and error
basis to discover and propose the IT implications of business plans. It may be especially dif-
ficult to promote the notion that IT itself may offer some new strategic options. The IS plan-
ners often feel that they have to ‘take the lead’ to make any progress or indeed to engage the
business in the exercise. They also discover that some top executives may be more forceful
in their views and expectations than others.
Users and line managers are likely to be involved very little. The emphasis on top-level
input and business plans reduces the potential contribution of users and the visibility of
12 michael earl

local requirements. Users, perceiving SISP as remote, complain of inadequate involvement.

Because the IS strategy becomes the product of the IS function, user support is not guaranteed.
Top management, having substantially delegated SISP to the specialists, may be unsure of the
recommendations and be hesitant to commit resources, thus impairing implementation.
Nevertheless, some advantages can accrue. Information systems are seen as a strate-
gic resource, and the IS function receives greater legitimacy. Important strategic thrusts
that require IT support can be identified, and if the business strategy is clearly and fully
presented, the IS strategy can be well-aligned. Indeed, in one of the prior case study com-
panies that adopted this approach, a clear business plan for survival led to IT applications
that were admired by many industry watchers. However, despite this achievement, the
IS function is still perceived by all three sets of stakeholders as poorly integrated into the
business as a whole.

Method-Driven Approach
The Method-Driven Approach was present in two companies and two of the case study firms.
Adherents of this approach appear to assume that SISP is enhanced by, or depends on, use
of a formal technique or method. The IS director may believe that management will not
think about IS needs and opportunities without the use of a formal method or the interven-
tion of consultants. Indeed, recognition or anticipation of some of the frustrations typical of
the Business-Led Approach may prompt the desire for method. However, any method will
not do. There is typically a search for the ‘best method’, or at least one better than the last
method adopted.
Once again, business strategies may be found to be deficient for the purpose of SISP. The
introduction of a formal method rarely provides a remedy, however, because it is unlikely to
be a strong enough business strategy technique. Also, the method’s practitioners are unlikely
to be skilled or credible at such work. Furthermore, as formal methods are usually spon-
sored by the IS department, they may fail to win the support or involvement of the busi-
ness at large. Thus, a second or third method may be attempted while the IS department
tries to elicit or verify the business strategy and to encourage a wider set of stakeholders to
participate. Often, a vendor or consultant plays a significant role. As the challenges unfold,
stakeholders determine the ‘best’ method, often as a result of the qualities of the consultants
as much as the techniques themselves. The consultants often become the drivers of the SISP
exercise and therefore have substantial influence on the recommendations.
Users may judge Method-Driven exercises as ‘unreal’ and ‘high level’ and as having
excluded the managers who matter, namely themselves. General managers can see the studies
as ‘business strategy making in disguise’ and thus become somewhat resistant and not easily
persuaded of the priorities or options suggested by the application of the method. IS strategic
plans may then lose their credibility and never be fully initiated. The exercises and recom-
mendations may be forgotten. Often they are labeled the ‘xyz’ strategy, where ‘xyz’ is the
name of the consulting firm employed; in other words, these strategies are rarely ‘owned’ by
the business.
Formal methods do not always fail completely. Although a succession of methods achieved
little in the companies studied, managers judged that each method had been good in some
unanticipated way for the business or the IS department.8 For example, in one firm it showed
the need for business strategies, and in another it informed IS management about business
imperatives. In the former firm, IS directors were heard to say the experience had been
‘good for the company, showing up the gaps in strategic thinking!’ Nevertheless, formal
strategy studies could leave behind embryonic strategic thrusts, ideas waiting for the right
time, or new thinking that could be exploited or built upon later in unforeseen ways.
Table 1.6 SISP approaches

Business-Led Method-Driven Administrative Technological Organizational

Emphasis Business Technique Resources Model Learning
Basis Business plans Best method Procedure Rigor Partnership
Ends Plan Strategy Portfolio Architecture Themes
Methods Ours Best None Engineering Any way
Nature Business Top-down Bottom-up Blueprints Interactive
Infiuencer IS planner Consultants Committees Method Teams
Relation to business strategy Fix points Derive Criteria Objectives Look at business
Priority setting The board Method recommends Central committee Compromise Emerge
IS role Driver Initiator Bureaucrat Architect Team member
Metaphor It’s common sense It’s good for you Survival of the fittest We nearly aborted it Thinking IS all the time
14 michael earl

Administrative Approach
The Administrative Approach was found in five companies. The emphasis here is on resource
planning. The wider management planning and control procedures were expected to achieve
the aims of SISP through formal procedures for allocating IS resources. Typically, IS devel-
opment proposals were submitted by business units or departments to committees who
examined project viability, common system possibilities, and resource consequences. In
some cases, resource planners did the staff work as proposals ascended the annual hierar-
chical approval procedure. The Administrative Approach was the parallel of, or could be
attached to, the firm’s normal financial planning or capital budgeting routine. The outcome
of the approach was a one-year or multi-year development portfolio of approved projects.
Typically no application is developed until it is on the plan. A planning investment or steering
committee makes all decisions and agrees on any changes.
Respondents identified significant down sides to the Administrative Approach. It was seen
as not strategic, as being ‘bottom-up’ rather than ‘top-down’. Ideas for radical change were
not identified, strategic thinking was absent, inertia and ‘business-as-usual’ dominated, and
enterprise-level applications remained in the background. More emotional were the claims
about conflicts, dramas, and game playing – all perhaps inevitable in an essentially resource
allocation procedure. The emphasis on resource planning sometimes led to a resource-­
constrained outcome. For example, spending limits were often applied, and boards and
CEOs were accused of applying cuts to the IS budget, assuming that in doing so no damage
was being done to the business as a whole.
Some benefits of this approach were identified. Everybody knew about the procedure; it
was visible, and all users and units had the opportunity to submit proposals. Indeed, an SISP
procedure and timetable for SISP were commonly published as part of the company policy
and procedures manual. Users, who were encouraged to make application development
requests, did produce some ideas for building competitive advantage. Also, it seemed that
radical, transformational IT applications could arise in these companies despite the appar-
ently bottom-up, cautious procedure. The most radical applications emerged when the CEO
or finance director broke the administrative rules and informally proposed and sanctioned
an IS investment.
By emphasizing viability, project approval, and resource planning, the administrative
approach produced application development portfolios that were eventually implemented.
Not only financial criteria guided these choices. New strategic guidelines, such as customer
service or quality improvement, were also influential. Finally, the Administrative Approach
often fitted the planning and control style of the company. IS was managed in congruence
with other activities, which permitted complementary resources to be allocated in parallel.
Indeed, unless the IS function complied with procedures, no resources were forthcoming.

Technological Approach
The Technological Approach was adopted by four companies and two of the case study firms.
This approach is based on the assumption that an information systems-oriented model of the
business is a necessary outcome of SISP and, therefore, that analytical modeling methods are
appropriate. This approach is different from the Method-Driven Approach in two principal
characteristics. First, the end product is a business model (or series of models). Second, a
formal method is applied based on mapping the activities, processes, and data flows of the
business. The emphasis is on deriving architectures or blueprints for IT and IS, and often
Information Engineering terminology is used. Architectures for data, computing, commu-
nications, and applications might be produced, and computer-aided software engineering
 historical approaches 15

(CASE) might be among the tools employed. A proprietary technology-oriented method

might be used or adapted in-house. Both IS directors and general managers tend to emphasize
the objectives of rigorous analysis and of building a robust infrastructure.
This approach is demanding in terms of both effort and resource requirements. These also
tend to be high-profile activities. Stakeholders commented on the length of time involved in
the analysis and/or the implementation. User managers reacted negatively to the complexity
of the analysis and the outputs and reported a tendency for technical dependencies to dis-
place business priorities. In one case, management was unsure of the validity and meaning of
the blueprints generated and could not determine what proposals mattered most. A second
study of the same type, but using a different technological method, was commissioned. This
produced a different but equally unconvincing set of blueprints.
These characteristics could lead to declining top management support or even user rebel-
lion. In one firm, the users called for an enterprise modeling exercise to be aborted. In one of
the case study firms, development of the blueprint applications was axed by top management
three and a half years after initiation. In another, two generations of IS management departed
after organizational conflict concerning the validity of the technological model proposed.
Some success was claimed for the Technological Approach. Benefits were salvaged by
factoring down the approach into smaller exercises. In one case this produced a database defi-
nition, and in another it led to an IT architecture for the finance function. Some IS directors
claimed these outcomes were valuable in building better IT infrastructures.

Organizational Approach
The Organizational Approach was used in six companies and one of the case study firms. The
underpinning assumption here is quite different. It is that SISP is not a special or neat and tidy
endeavor but is based on IS decisions being made through continuous integration between
the IS function and the organization. The way IT applications are identified and selected is
described in much more multidimensional and subtle language. The approach is not without
method, but methods are employed as required and to fit a particular purpose. For exam-
ple, value analysis may be used, workshops arranged, business investigation projects set up,
and vendor visits organized. The emphasis, however, is on process, especially management
understanding and involvement. For some of these companies, a major SISP method had
been applied in the past, but in retrospect it was seen to have been as much a process enabler
as an analytical investigation. Executive teamwork and an understanding of how IT might
contribute to the business were often left behind by the method rather than specific recom-
mendations for IS investment. Organizational learning was important and evident in at least
three ways.
First, IS development concentrated on only one or two themes growing in scope over
several years as the organization began to appreciate the potential benefits. Examples of such
themes included a food company concentrating on providing high service levels to custom-
ers, an insurance company concentrating on low-cost administration, and a chemical com-
pany concentrating on product development performance. Second, special studies were
important. Often multidisciplinary senior executive project teams or full-time task forces
were assigned to tackle a business problem from which a major IS initiative would later
emerge. The presence of an IS executive in the multidisciplinary team was felt to be impor-
tant to the emergence of a strategic theme because this person could suggest why, where,
and how IT could help. Teamwork was the principal influence in IS strategy making. Third,
there was a focus on implementation. Themes were broken down into identifiable and fre-
quent deliverables. Conversely, occasional project cost and time overruns were acceptable if
they allowed evolving ideas to be incorporated. In some ways, IS strategies were discovered
16 michael earl

through implementation. These three learning characteristics can be seen collectively as a

preference for incremental strategy making.
The approach is therefore organizational because:

1 Collective learning across the organization is evident.

2 Organizational devices or instruments (teams, task forces, workshops, etc.) are used
to tackle business problems or pursue initiatives.
3 The IS function works in close partnership with the rest of the organization, especially
through having IS managers on management teams or placing IS executives on task
forces.
4 Devolution of some IS capability is common, not only to divisions, but also to func-
tions, factories, and departments.
5 In some companies SISP is neither special nor abnormal. It is part of the normal busi-
ness planning of the organization.
6 IS strategies often emerge from ongoing organizational activities, such as trial and
error changes to business practices, continuous and incremental enhancement of
existing applications, and occasional system initiatives and experiments within the
business.

In one of the companies, planning was ‘counter-cultural’. Nevertheless, in the character

described above, planning still happened. In another company there were no IS plans, just
business plans. In another, IS was enjoying a year or more of low profile until the company
discovered the next theme. In most of these firms, IS decisions were being made all the time
and at any time.
Respondents reported some disadvantages of this approach. Some IS directors wor-
ried about how the next theme would be generated. Also, because the approach is
somewhat fuzzy or soft, they were not always confident that it could be transplanted to
another part of the business. Indeed, a new CEO, management team, or management
style could erode the process without the effect being apparent for some time. One IS
director believed the incrementalism of the Organizational Approach led to creation of
inferior infrastructures.
The five approaches appear to be different in scope, character, and outcome. Table 1.7
differentiates them using the three characteristics that seem to help other organizations posi-
tion themselves. Also, slogans are offered to capture the essence of each approach. Strengths
and weaknesses of each approach are contained in Table 1.8.
It is also possible to indicate the apparent differences of each approach in terms of the
three factors suggested in Figure 1.1 as necessary for success: method, process, and imple-
mentation. Table 1.9 attempts a summary.
In the Business-Led Approach, method scores low because no formal technique is used;
process is rated low because the exercise is commonly IS dominated; but implementation is
medium because the boards tend to at least approve some projects. In the Method-Driven
Approach, method is high by definition, but process is largely ignored and implementa-
tion barely or rarely initiated. In the Administrative Approach, only a procedure exists as
method. However, its dependence on user inputs suggests a medium rating on process.
Because of its resource allocation emphasis, approved projects are generally implemented.
The Technological Approach is generally method-intensive and insensitive to process. It can,
however, lead to some specific implementation of an infrastructure. The Organizational
Approach uses any method or devices that fit the need; it explicitly invests in process and
emphasizes implementation.
Table 1.7 Five approaches summarized

Business-Led Method-Driven Administrative Technological Organizational

Underpinning Business plans and needs IS strategies will be SISP should follow and SISP is an exercise in SISP is a continuous
assumption should drive IS plans enhanced by use of a conform with the firm’s business and information decision-making activity
formal SISP method management planning modeling shared by the business and IS
and control procedures
Emphasis of Business leads IS and not Selection of the best Identification and Production of models and Organizational learning
Approach vice versa method allocation of IS resources blueprints about business problems and
to meet agreed needs opportunities and the IT
contribution
Major influence of IS planners Practitioners of the Resource planning and Modeling method Permanent and ad hoc teams of
outcomes method steering committees Employed key managers, including IS
Slogan Business drives IS Strategy needs method Follow the rules IS needs blueprints Themes with teams

Table 1.8 Strengths and weaknesses of SISP approaches

Business-Led Method-Driven Administrative Technological Organizational

Strengths Simple Provides a methodology System viability Rigor Becomes normal
Business first Plugs strategy gaps System synergies Focus on infrastructure Emphasis on implementation
Raises IS status Raises strategy profile Encourages user input Favors integrated tools Promotes IS-user partnership
Weaknesses Ad hoc method User involvement Non-strategic Lacks management Generation of new themes Soft
Lacks management Too influenced by Bureaucratic support Only partial methodology
commitment method implementation
Depends on quality of Implementation Resource-constrained Complexity Architecture becomes difficult
business strategy unlikely
18 michael earl

Table 1.9 SISP approaches vs. three conditions for success

Business-Led Method- Administrative Technological Organizational

Driven
Method Low High Low High Medium
Process Low Low Medium Low High
Implementation Medium Low High Medium High

Preliminary Evaluations

The five approaches were identified by comparing the events, experiences, and lessons
described by the interviewees. As the investigation proved to be exploratory, the classifica-
tion of approaches is descriptive and was derived by inductive interpretation of organiza-
tional experiences. Table 1.6, therefore, should be seen as an ideal model that caricatures
the approaches in order to aid theory development. One way of ‘validating’ the model is
to compare it with prior research in both IS and general management to assess whether the
approaches ‘ring true’.

Related Theories

Difficulties encountered in the Business-Led Approach have been noted by others. The
availability of formal business strategies for SISP cannot be assumed (Bowman et al., 1983;
Lederer and Mendelow, 1986). Nor can we assume that business strategies are communi-
cated to the organization at large, are clear and stable, or are valuable in identifying IS needs
(Earl, 1989; Lederer and Mendelow, 1989). Indeed, the quality of the process of business
planning itself may often be suspect (Lederer and Sethi, 1988) . In other words, while the
Business-Led Approach may be especially appealing to general managers, the challenges are
likely to be significant.
There is considerable literature on the top-down, more business-strategy-oriented SISP
methods implied by the Method-Driven Approach, but most of it is conjectural or normative.
Vendors can be very persuasive about the need for a methodology that explicitly connects IS
to business thinking (Bowman et al., 1983). Other researchers have argued that sometimes
the business strategy must be explicated first (King, 1978; Lederer and Mendelow, 1987).
This was a belief of the IS directors in the Method-Driven companies, but one general man-
ager complained that this was ‘business strategy making in disguise’. The Administrative
Approach reflects the prescriptions and practices of bureaucratic models of planning and
control. We must turn to the general management literature for insights into this approach.
Quinn (1977) has pointed out the strategy-making limitations of bottom-up planning proce-
dures. He argues that big change rarely originates in this way and that, furthermore, annual
planning processes rarely foster innovation. Both the political behavior stimulated by hierar-
chical resource allocation mechanisms and the business-as-usual inertia of budgetary planning
have been well-documented elsewhere (Bowers, 1970; Danziger, 1978).
The Technological Approach may be the extreme case of how the IT industry and its
professionals tend to apply computer science thinking to planning. The deficiencies of these
methods have been noted in accounts of the more extensive IS planning methods and, in
particular, of Information Engineering techniques. For instance, managers are often unhappy
with the time and cost involved (Goodhue et al., 1988; Moynihan, 1990). Others note that
IS priorities are by definition dependent on the sequence required for architecture building
 historical approaches 19

(Hackathorn and Karimi, 1988; Inmon, 1986). The voluminous data generated by this class
of method has also been reported (Bowman et al., 1983; Inmon, 1986).
The Organizational Approach does not fit easily with the technical and prescriptive IS
literature, but similar patterns have been observed by the more behavioral studies of busi-
ness strategy making. It is now known that organizations rarely use the rational-analytical
approaches touted in the planning literature when they make significant changes in strategy
(Quinn, 1978). Rather, strategies often evolve from fragmented, incremental, and largely
intuitive processes. Quinn believed this was the quite natural, proper way to cope with
the unknowable – proceeding flexibly and experimentally from broad concepts to specific
­commitments.
Mintzberg’s (1983) view of strategy making is similar. It emphasizes small project-based
multiskilled teams, cross-functional liaison devices, and selective decentralization. Indeed,
Mintzberg’s view succinctly summarizes the Organizational Approach. He argues that often
strategy is formed, rather than formulated, as actions converge into patterns and as analysis and
implementation merge into a fluid process of learning. Furthermore, Mintzberg sees strategy
making in reality as a mixture of the formal and informal and the analytical and emergent. Top
managers, he argues, should create a context in which strategic thinking and discovery mingle,
and then they should intervene where necessary to shape and support new ways forward.
In IS research, Henderson (1989) may have implicitly argued for the Organizational
Approach when he called for an iterative, ongoing IS planning process to build and sus-
tain partnership. He suggested partnership mechanisms such as task forces, cross-functional
teams, multi-tiered and cross-functional networks, and collaborative planning without plan-
ners. Henderson and Sifonis (1988) identify the importance of learning in SISP, and de Geus
(1988) sees all planning as learning and teamwork as central to organizational learning.
Goodhue et al. (1988) and Moynihan (1990) argue that SISP needs to deliver good enough
applications rather than optimal models. These propositions could be seen as recognition of
the need to learn by doing and to deliver benefits. There is therefore a literature to support
the Organizational Approach.

Data Assessment

The field data itself can be used to assess the suggested taxonomy of approaches. Questions
that arise are: do the approaches actually exist, and is it possible to clearly differentiate
between them? Analysis of variance tests on reported success scores indicated that differences
between approaches are significant, but differences between stakeholder sets are not.9 This
is one indication that approach is a distinct and meaningful way of analyzing SISP in action.
A second obvious question is whether any approaches are more effective than others. It is
perhaps premature to ask this question of a taxonomy suggested by the data. Caution would
advise further validation of the framework first, followed by carefully designed measurement
tests. However, this study provides an opportunity for an early, if tentative, evaluation of
this sort.
For example, as shown in Table 1.10, success scores can be correlated with SISP
approach. Overall mean scores are shown, as well as scores for each stakeholder set. No
approach differed widely from the mean score (3.73) across all companies. However, the
most intensive approach in terms of technique (Technological) earned the highest score, per-
haps because it represents what respondents thought an IS planning methodology should look
like. Conversely, the Business-Led Approach, which lacks formal methodologies, earned the
lowest scores. There are, of course, legitimate doubts about the meaning or reliability of
these success scores because respondents were so keen to discuss the unsuccessful features.
20 michael earl

Table 1.10 Mean success scores by approach

Business-Led Method-Driven Administrative Technological Organizational

Total means 3.25 3.83 3.60 4.00 3.94
IS directors 3.50 4.50 3.60 4.25 4.00
General managers 3.00 4.00 3.40 4.00 4.17
Line managers 3.25 3.00 3.80 3.75 3.66
Number of firms 4 2 5 4 6
Note: 5 = high; 1 = low

Accordingly, another available measure is to analyze the frequency of concerns reported

by firms, assuming each carries equal weight. Table 1.11 breaks out these data by method,
process, and implementation concerns. The Organizational Approach has the least concerns
attributed to it in total. The Business-Led Approach was characterized by high dissatisfac-
tion with method and implementation. The Method-Driven Approach was perceived to be
unsuccessful on process and, ironically, on method, while opinion was less harsh on imple-
mentation, perhaps because implementation experience itself is low. The Administrative
Approach, as might be predicted, is not well-regarded on method. These data are not widely
divergent from the qualitative analysis in Table 1.9.
Another measure is the potential of each approach for generating competitive advan-
tage applications. Respondents were asked to identify and describe such applications and
trace their histories. No attempt was made by the researcher to check the competitive
advantage claimed or to assess whether the applications deserved the label. Although only
14 percent of all such applications were reported to have been generated by a formal SISP
study, it is interesting to compare achievement rates of the firms in each approach (Table
1.12). Method-Driven and Technological Approaches do not appear promising. Little is
ever initiated in the Method-Driven Approach, while competitiveness is rarely the focus of
the Technological Approach. The Administrative Approach appears to be more conducive,
perhaps because user ideas receive a hearing. Forty-two percent of competitive advan-
tage applications discovered in all the firms originated from user requests. In the Business-
Led Approach, some obviously necessary applications are actioned. In the Organizational
Approach, most of the themes pursued were perceived to have produced a competitive
advantage.
These three qualitative measures can be combined to produce a multidimensional score.
Other scholars have suggested that a number of performance measures are required to
measure the effectiveness of SISP (Raghunathan and King, 1988). Table 1.13 ranks each
approach according to the three measures discussed above (where 1 = top and 5 = bottom).
In summing the ranks, the Organizational Approach appears to be substantially superior.
Furthermore, all the other approaches score relatively low on this basis.

Table 1.11 SISP concerns per firm

Business-Led Method-Driven Administrative Technological Organizational

Method 2.75 2.50 2.80 1.75 1.33
Process 0.75 3.00 1.60 2.50 2.16
Implementation 2.75 1.00 1.60 3.00 1.83
Total 6.25 6.50 6.00 7.25 5.32
Number of Firms 4 2 5 4 6
 historical approaches 21

Table 1.12 Competitive advantage propensity

Approach Competitive advantage application frequency

Business-Led 4.0 applications per firm
Method-Driven 1.5 applications per firm
Administrative 3.6 applications per firm
Technological 2.5 applications per firm
Organizational 4.8 applications per firm

Thus, both qualitative and quantitative evidence suggest that the Organizational Approach
is likely to be the best SISP approach to use and, thus, a candidate for further study. The
Organizational Approach is perhaps the least formal and structured. It also differs signifi-
cantly from conventional prescriptions in the literature and practice.

Implications for Research

Many prior studies of SISP have been based on the views of IS managers alone. A novel aspect
of this study was that the attitudes and experiences of general managers and users were
also examined. In reporting back the results to the respondents in the survey companies, an
interesting reaction occurred. The stakeholders were asked to select which approach best
described their experience with SISP. If only IS professionals were present, their conclusions
often differed from the final interpretative results. However, when all three stakeholders
were present, a lively discussion ensued and, eventually, unprompted, the group’s views
moved toward an interpretation consistent with both the data presented and the approach
attributed to the firm. This is another soft form of validation. More important, it indicates
that approach is not only a multidimensional construct but also captures a multi-stakeholder
perspective. This suggests that studies of IS management practice can be enriched if they look
beyond the boundaries of the IS department.
Another characteristic of prior work on SISP is the assumption that formal methods are
used and in principle are appropriate (Lederer and Sethi, 1988, 1991). A systematic link-
age to the organization’s business planning procedures is also commonly assumed (Boynton
and Zmud, 1987; Karimi, 1988). The findings of this study suggest that these may be false
assumptions and that, besides studying formal methods, researchers should continue to
investigate matters of process while also paying attention to implementation. Indeed, in the
field of business strategy, it was studies of the process of strategy making that led to the

Table 1.13 Multidimensional ranking of SISP approaches

Business-Led Method- Administrative Technological Organizational

Driven
Success score ranking 5 3 4 1 2
Least concerns ranking 2 3 4 5 1
Competitive advantage 2 5 3 4 1
potential ranking Sum of 9 11 11 10 4
ranks
Overall ranking 2 4 4 3 1
22 michael earl

‘alternative’ theories of the strategic management of the firm developed by Quinn (1978)
and Mintzberg (1987).
The Organizational Approach to SISP suggested by this study might also be seen as an
‘alternative’ school of thought. This particular approach, therefore, should be investigated
further to understand it in more detail, to assess its effectiveness more rigorously, and to
discover how to make it work.
Finally, additional studies are required to further validate and then perhaps develop these
findings. Some of the parameters suggested here to distinguish the approaches could be
taken as variables and investigated on larger samples to verify the classification. Researchers
could also explore whether different approaches fit, or work better in, different contexts.
Candidate situational factors include information intensity of the sector, environmental
uncertainty, the organization’s management planning and control style, and the maturity of
the organization’s IS management experience.

Implications for Practice

For practitioners, this study provides two general lessons. First, SISP requires a holistic or
interdependent view. Methods may be necessary, but they could fail if the process factors
receive no attention. It is also important to explicitly and positively incorporate implementa-
tion plans and decisions in the strategic planning cycle.
Second, successful SISP seems to require users and line managers working in partner-
ship with the IS function. This may not only generate relevant application ideas, but it will
tend to create ownership of both process and outcomes. The taxonomy of SISP approaches
emerging from this study might be interpreted for practice in at least four different ways.
First, it can be used as a diagnostic tool to position a firm’s current SISP efforts. The
strengths and weaknesses identified in the research then could suggest how the current
approach could be improved. We have found that frameworks used in this way are likely
to be more helpful if users and general managers as well as IS professionals join together
in the diagnosis.
Second, the taxonomy can be used to design a situation-specific (customized) approach
on a ‘mix-and-match’ basis. It may be possible to design a potentially more effective hybrid.
The author is aware of one company experimenting at building a combination of the
Organizational and Technological Approaches. One of the study companies that had adopted
the Organizational Approach to derive its IS strategy also sought some of the espoused
benefits of the Technological Approach by continuously formulating a shadow blueprint
for IT architecture. This may be one way of reconciling the apparent contradictions of the
Organizational and Technological Approaches.
Third, based on our current understanding it appears that the Organizational Approach is
more effective than others. Therefore, firms might seriously consider adopting it. This could
involve setting up mechanisms and responsibility structures to encourage IS-user partner-
ships, devolving IS planning and development capability, ensuring IS managers are members
of all permanent and ad hoc teams, recognizing IS strategic thinking as a continuous and peri-
odic activity, identifying and pursuing business themes, and accepting ‘good enough’ solu-
tions and building on them. Above all, firms might encourage any mechanisms that promote
organizational learning about the scope of IT.
Another interpretation is that the Organizational Approach describes how most IS strate-
gies actually are developed, despite the more formal and rational endeavors of IS managers
or management at large. The reality may be a continuous interaction of formal methods and
 historical approaches 23

informal behavior and of intended and unintended strategies. If so, SISP in practice should be
eclectic, selecting and trying methods and process initiatives to fit the needs of the time. One
consequence of this view might be recognition and acceptance that planning need not always
generate plans and that plans may arise without a formal planning process.
Finally, it can be revealing for an organization to recall the period when IS appeared to
be contributing most effectively to the business and to describe the SISP approach in use
(whether by design or not) at the time. This may then indicate which approach is most likely
to succeed for that organization. Often when a particularly successful IS project is recalled,
its history is seen to resemble the Organizational Approach.

Conclusions

This study evolved into a broad, behavioral exploration of experiences in large organizations.
The breadth of perspective led to the proposition that SISP is more than method or technique
alone. In addition, process issues and the question of implementation appear to be important.
These interdependent elements combine to form an approach. Five different SISP approaches
were identified, and one, the Organizational Approach, appears superior.
For practitioners, the taxonomy of SISP approaches provides a diagnostic tool to use in
evaluating the effectiveness of their SISP efforts and in learning from their own experiences.
Whether rethinking SISP or introducing it for the first time, firms may want to consider
adopting the Organizational Approach. Two reasons led to this recommendation. First,
among the companies explored, it seemed the most effective approach. Second, this study
casts doubt on several of the by now ‘traditional’ SISP practices that have been advocated and
developed in recent years.
The ‘approach’ construct presented in this chapter, the taxonomy of SISP approaches
derived, and the indication that the least formal and least analytical approach seems to be
most effective all offer new directions for SISP research and theory development.

Appendix A: Field study companies

Descriptive statistics for field study companies

Company Annual revenue (£B) Annual IS expenditure Years of SISP experience
(£M)
1 Banking 1.7* 450 4
2 Banking 1.9* 275 2
3 Retailing 4.2 80 4
4 Retailing 0.56 8 4
5 Insurance 2.8† 30 11
6 Insurance 0.9† 15 15
7 Travel 0.75 8 4
8 Electronics 1.35 25 3
9 Aerospace 4.1 120 17
10 Aerospace 2.1 54 20
11 IT 3.9 77 21
12 IT 0.6 18 11
13 Telecommunications 0.9 50 6
14 Automobile 0.5 14 9
(continued)
24 michael earl

Company Annual revenue (£B) Annual IS expenditure Years of SISP experience

(£M)
15 Food 4.5 40 1
16 Oil 55.0 1000 6
17 Chemicals 2.18 5 10
18 Food 1.4 20 8
19 Accountancy/ 0.55 1 5
Consultancy
20 Brewing 1.7 23 9
21 Food/Consumer 2.5 27 1

*Operating costs.
†Premium income.

Appendix B: Interview questionnaire

Structured (closed) questions

1 What prompted you to develop an IS/IT strategy? (RO)
3 What were the objectives in developing an IS/IT strategy? (RO)
4a What are the outputs of your IS/IT strategy development? (MC)
4b What are the content headings of your IS strategic plan or strategy? (MC)
5 What methods have you used in developing your IS strategy; when, why? (MC)
7 What have been the benefits of strategic information systems planning? (RO)
8 How successful has SISP been? (LS)
9 What have you found to be key success factors in SISP? (RO)
10 How is your SISP connected to other business planning processes? (MC)
11 How do you review your IS strategies? (MC)
12 What are the major problems you have encountered in SISP? (RO)

All these questions were asked using multiple-choice lists (MC), Likert-type scale (LS), or
rank-order lists (RO).

Example rank-order questions

3 What were the objectives in developing an IS/IT strategy?

Tick Rank
...... Align IS development with business needs ......
...... Revamp the IS/IT function ......
...... Seek competitive advantage from IT ......
...... Establish technology path and policies ......
...... Forecast IS requirements ......
...... Gain top management commitment ......
...... Other (specify) ......
 historical approaches 25

Example multiple-choice questions

5 What methods have you used in developing your IS strategy; when, why?

When Method Why

...... Critical success factors ......
...... Stages of growth ......
...... Business systems planning ......
...... Enterprise modeling ......
...... Information engineering ......
...... Method 3 ......
...... Other proprietary (specify) ......
...... In-house IS strategy ......
...... In-house business strategy ......
...... In-house application search techniques ......
...... Informal ......
...... Other (specify) ......

Example Likert-type scale question

8a How successful has SISP been on the following scale?

1 2 3 4 5

Failure Some benefits Been better Successful Highly

but didn’t than not but can successful
need SISP to doing it improve
achieve them

Semi-structured (open) questions

2a Please summarize the approach you have adopted in developing your IS strategy (or in
identifying and deciding which IT applications to develop in the long run).
2b What are the key elements of your IS strategy?
6a Have you developed any applications that have given competitive advantage in recent
years? If so, what?
6b How was each of these applications identified and developed?
8b In what ways has SISP been unsuccessful?
13 Can you describe any key turning points in your SISP experience, such as changes in
aims, approach, method, benefits, success factors or problems?

Appendix C: Concerns or unsuccessful features of SISP

Method concerns
1 It did not lead to management identifying applications supportable at a cost
2 No regeneration or review
26 michael earl

3 Failed to discover our competitors’ moves or understand their improvements

4 Not enough planning: too much emphasis on development and projects
5 It was not connected to business planning
6 It was too internally focused
7 Sensibly allocating resources to needs was a problem
8 Business needs were ignored or not identified
9 Not flexible or reactive enough
10 Not coordinated
11 Not enough consideration of architecture
12 Priority setting and resource allocation were questionable
13 The plans were soon out of date
14 Business direction and plans were inadequate
15 Not enough strategic thinking
16 The thinking was too functional and applications-oriented and not process-based
17 It was too technical and not business-based
18 It was overtheoretical and too complicated
19 It could have been done quicker; it took too long
20 It developed a bureaucracy of its own
21 We have not solved identification of corporate-wide needs
22 The architecture was questionable; people were not convinced by it
23 We still don’t know how to incorporate and meet short-term needs
24 We did not complete the company-entity model
25 We found it difficult justifying the benefits
26 It was too much about automating today’s operations
27 It was too ad hoc; insufficient method
28 Many of the recommendations did not meet user aspirations.

Process concerns
1 Some businesses were less good at, and less committed to, planning than others
2 The exercise was abrogated to the IS department
3 Inadequate understanding across all management
4 Line management involvement was unsatisfactory
5 Lack of senior management involvement
6 No top management buy-in
7 The strategy was not sold or communicated enough
8 We still have poor user-IS relationships
9 Too many IS people have not worked outside of IS
10 Poor IT understanding of customer and business needs
11 Line management buy-in was low
12 Little cross-divisional learning
13 IS management quality was below par
14 Senior executives were not made aware of the scale of change required
15 Users lacked understanding of IT and its methods
16 It was too user-driven in one period
17 We are still learning how to do planning studies
18 Planning almost never works; there are too many ‘dramas’
19 The culture has not changed enough
20 We oversold the plan
21 Too much conflict between organizational units.
 historical approaches 27

Implementation concerns
1 We have not broken the resource constraints
2 We have not implemented as much as we should
3 It was not carried through into resource planning
4 The necessary technology planning was not done
5 We have not achieved the system benefits
6 We made technical mistakes
7 Some of the needs are still unsatisfied
8 Appropriate hardware or software was not available
9 Cost and time budget returns
10 We were not good at specifying the detailed requirements
11 Defining staffing needs was a problem
12 We have not gotten anything off the ground yet
13 We had insufficient skilled development resources
14 Regulatory impediments
15 We were overambitious and tried to change too much
16 We still have to catch up technically.

Notes
1 See, for example, surveys by Dickson et al. (1984), Hartog and Herbert (1986), Brancheau and
Wetherbe (1987), and Niederman et al. (1991).
2 Propositions and methods include Zani’s (1970) early top-down proposal, King’s (1978) more
sophisticated linkage of the organization’s IS strategy set to the business strategy set, and focused
techniques such as critical success factors (Bullen and Rockart, 1981) and value chain analysis (Por-
ter and Millar, 1985). These are supplemented by product literature such as Andersen’s (1983)
Method 1 or IBM’s (1975) Business System Planning. The models and frameworks for developing a
theory of SISP include Boynton and Zmud (1987), Henderson and Sifonis (1988), and Henderson
and Venkatraman (1989). Empirical works include a survey of practice by Galliers (1987), analysis
of methods by Sullivan (1985), investigation of problems by Lederer and Sethi (1988), assessment
of success by Lederer and Mendelow (1987) and Raghunathan and King (1988), and evaluation of
particular techniques such as strategic data planning (Goodhue et al., 1992).
3 Prior work has tended to use mail questionnaires targeted at IS executives. However, researchers
have called for broader studies and for surveys of the experiences and perspectives of top managers, cor-
porate planners, and users (Lederer and Mendelow, 1989; Lederer and Sethi, 1988; Raghunathan and
King, 1988).
4 Characteristics of the sample companies are summarized in Appendix A.
5 Extracts from the interview questionnaires are shown in Appendix B.
6 This exploration through field studies was in the spirit of ‘grounded theory’ (Glaser and Strauss, 1967).
7 Fuller descriptive statistics can be seen in an early research report (Earl, 1990).
8 Methods employed included proprietary, generic, and customized techniques.
9 Differences between approaches are significant at the 10 percent level (f = 0.056). Differences
between stakeholder sets are not significant (f = 0.126). No interaction was discovered between the
two classifications.

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Questions for Discussion

1 Consider the success factors listed in Table 1.5. Is it worth undertaking SISP without
top management involvement and support?
2 Compare the author’s concept of SISP with more recent considerations of IS strategiz-
ing covered in Chapters 2–4. Does his treatment remain relevant?
3 Debate the strengths and weaknesses of the various SISP approaches introduced in
this chapter. Assuming time constraints prevent an ‘everything goes’ approach, which
approach might:
•• help improve IS credibility?
•• do the most to align IT with business strategy?
•• do the most to enable competitive uses of IT?
•• do the most to achieve an organization-wide vision?
•• best deal with management of change issues?
4 The author states that ‘successful SISP seems to require users and line managers work-
ing in partnership with the IS function’. Who should be involved in SISP and how
should those involved be determined according to the approach adopted?
5 How do the approaches that have been introduced in this chapter square with recent
developments in the opening of IS strategy?

Further Reading
The “Information systems strategy-as-practice” special issue of The Journal of Strategic Information Systems:
Peppard, J., Galliers, R.D. Thorogood, A. (eds.), Volume 23, Issue 1, March 2014, pp. 1–92.
https://www.sciencedirect.com/journal/the-journal-of-strategic-information-systems/
vol/23/issue/1
Chapter 2

Robert D. Galliers

CONCEPTUAL DEVELOPMENTS IN
INFORMATION SYSTEMS STRATEGY:
FURTHER REFLECTIONS ON
INFORMATION SYSTEMS STRATEGY

T his c h a pt e r h a s t h e aim of reflecting on developments in the area of

information systems strategy and, more particularly, on the process of information sys-
tems strategizing. It does so against the background of something of a hiatus in the treatment
of the topic in the Information Systems literature, especially since the heightened interest in
this area of research up to the early 1990s. A further motivation arises from the relative pau-
city of serious reflection on Information Systems issues in much of the Strategic Management
and Organizational Behavior literatures on strategy and strategizing (Orlikowski 2000 being a
notable exception). The chapter also aims to take account of key advances in the early twenty-
first century in information and communication technologies, knowledge m ­ anagement, and
the rapidly-changing nature of the business environment.
Surely, few would argue that the strategic management of data, information, and
knowledge—and associated ICT—represents a major strategic challenge and opportunity
for organizations in the twenty-first century. The market for ICT products and services
can be measured in tens of billions of dollars/euros. It has been estimated that companies
in the developed world spend something in the region of two percent of turnover annu-
ally on hardware and software alone (Willcocks 1992, 1999). This figure would no doubt
grow considerably if the costs associated with staff development, maintenance, and the
management of change associated with the implementation and ongoing operation of ICT-
based systems were taken into account. But we still talk glibly of the information age, of
the networked society, of globalization, of knowledge management—each in its own way
enabled and ­facilitated by ICT. It is therefore surprising how little we strategize about
these issues.
Although attitudes differ, there is little doubt that ICT is here to stay (Land 1996).
While some see the advent of this ‘brave new world’ as being nothing other than a boon,
others mutter their discontent at the spiraling costs involved, at ‘techies’ who fail to
 further reflections 31

understand the subtleties of organizational life, at the disruption created, at the invasion
of privacy, and so on (Galliers 1992). Notwithstanding, the impact of ICT is likely to be
felt increasingly as its power and reach continue to outstrip even the wildest predictions.
This impact is felt by individuals, organizations, national governments, and society as a
whole. What more need be said to argue that this is a topic worthy of our attention in any
strategy discourse?
Given the above, it would seem strange that information systems strategy barely rates
a mention in most business strategy courses. Strange that the topic most often appears as
an optional course, at best, in MBA curricula or in master’s courses in Management or
Organizational Behavior. Strange that many firms rush, lemming-like, to avoid the pain of
managing their information resource and the related technologies by outsourcing their ICT
or information services departments (Lacity and Willcocks 2000). Strange that we reel from
one bandwagon, one fad to the next with apparent abandon, often to rue the consequences
later.1 Strange that we simultaneously revel in, and yet revile, the industry that plies us with
one solution after the next—an industry that, nonetheless, appears not to ask what questions
its ‘solutions’ are meant to be answering.
The purpose of this chapter, then, is to counter these cavalier attitudes and provide a
serious commentary on some of the key issues associated with strategizing in the context of
managing organizational information and knowledge, and the related ICT. This will not be a
technologically oriented, nor indeed a technologically deterministic, treatment of the topic
although, inevitably, developments in ICT have had a profound effect on the scope and orien-
tation of information systems strategy. Rather, it will deal with developments in our thinking
and practice in Information Systems from a strategy—or, rather, strategizing—perspective.
Even more important, it will provide a critical commentary on some of the more trite treat-
ments of the topic that tend to appear in the popular media.
The chapter is organized as follows. First, an attempt is made to provide something
of a tutorial on developments in the theory and practice of information systems strategy
from the early days of commercial data processing (DP) up to the 1990s (e.g. Somogyi and
Galliers 1987, 2003). Secondly, it examines some of the key concepts and frameworks that
have underpinned much of information systems strategy theory during this period. We
then proceed to consider some of the more recent developments and new thinking in the
field that have emerged over the last decade or so, with a view to pointing out future direc-
tions and current concerns, culminating in a proposed inclusive framework for information
­systems strategizing.

Background History: From Data Processing to Competitive Advantage

There have, of course, been many developments in ICT since the earliest days of business
computing. In parallel with these innovations, and with an increasingly sophisticated under-
standing of the role of these technologies in organizations, our understanding of information
systems strategy has grown too during this period. Figure 2.1 provides a simplified frame-
work within which to situate some of these developments. It suggests that we might usefully
view such developments in four phases that have differed in terms of:

(a) the degree to which the information systems strategy might be viewed as a business-
driven, ‘top-down’ process—as against more technology-driven, ‘bottom-up’ con-
cerns; and
(b) the extent to which such strategies have been based on short-term problem-solving as
against more long-term strategic goal-setting.
32 robert d. galliers

Goal-seeking Prospective Proactive

(Strategy
formulation) Future Competitiveness
effectiveness

Issue-based Reactive Isolated

(Problem solving)
Current Efficency
effectiveness
Top-down Bottom-up
business-driven technology-driven

Figure 2.1 Tracing the developments in information systems strategizing.

Adapted from Galliers (1987: 226).

The model in Figure 2.1 suggests that the focus of information systems strategizing may be
seen to have gone through four phases, during which it has shifted away from— and back
to—ICT, and from matters of efficiency to matters of effectiveness and competitiveness.
This is clearly a highly stylized and overly simplistic view of developments, but the frame-
work helps to provide something of an overview of the changes that have taken place since
the 1960s. In some respects, we might suggest that current information systems strategizing
incorporates aspects of each of these phases. For example, there is evidence of what has come
to be been termed ‘storage resource planning’, characterized by a concern for the efficient
storage of data across an enterprise to improve current and future efficiency, effectiveness,
and competitiveness.
In the first phase, in the early days of commercial computing, information systems strat-
egy was predominantly concerned with issues of the day and the efficient utilization of the
technology for mainly operational purposes. From this perspective, information systems
strategy may be viewed as having been fairly isolated from the rest of the business. There
followed a period where more formal, ‘top-down’, business-driven strategies were com-
monplace, with the emphasis being for the most part on reactive effectiveness. Such strategies
took as read the existing business plans and objectives, and attempted to identify information
systems applications to meet those business needs. Over time, information systems strate-
gies became more forward-looking, bearing in mind the need to invest in technology that
would stand the test of time despite changing information requirements. Such strategies may
be seen as being essentially prospective in character. A move towards the proactive use of ICT
for competitive advantage emerged during the 1980s and 1990s, applying concepts for the
most part developed by Michael Porter and his Harvard Business School colleagues such as
Warren McFarlan (e.g. McFarlan 1984; Cash and Konsynski 1985; Porter and Millar 1985).
This was superseded by Business Process Redesign or Re-engineering (BPR), which aimed to
automate streamlined processes in line with customer requirements (e.g. Hammer, 1990).
The following subsections provide further detail of such developments, during each of these
phases.

Operational Efficiency: The Isolated Phase

In the first phase, during the early days of commercial data processing, hardly any strategic
thought was given by senior managers to the uses to which ICT could be put in their ­organization,
other than to think in terms of improving operational efficiency or attempting to cut costs.
 further reflections 33

Managers would leave it to their information systems colleagues to develop and implement
what was thought to be necessary in terms of computing systems. Targets for computerization
(automation by another word) were simple production processes and record keeping, such as
accounting systems. Little, if any, thought was given to the impact of the ‘new’ technology to
ongoing operations, little concern was expressed over the kinds of skills that might be required
to get the best out of the investment, and most developments or acquisitions were undertaken
on a piecemeal basis. What little management of information systems there was tended to be
considered the province of what we now call the Information Technology function, and its
management. In short, there was little planning for information systems, let alone strategizing.

Current Effectiveness: The Reactive Phase

Senior management increasingly became concerned that DP was not delivering the prom-
ised efficiency gains, nor focusing on key business concerns and imperatives. From the days
when DP was seen as almost entirely the province of the technologist, we gradually saw the
emergence of business-driven IS planning approaches. One such was IBM’s Business Systems
Planning (BSP) methodology (Zachman 1982), a service IBM provided to its customers that
was meant to identify not only how the organization could harness ICT to meet business
needs but also, of course, to demonstrate the need for more computing. In essence, BSP was
developed to identify key business processes and their associated information requirements.
A comparison with the data output from existing information systems would then lead to
the identification of additional required information systems applications—and additional
hardware and software too.
The idea that ICT and business needed to be aligned was first introduced during this
‘reactive’ era. Alignment is an issue that has remained with us ever since, as discussed later
in the chapter. At the time of this era, organizations had to rely on mainframe technology,
with so-called ‘dumb’ terminals on employees’ desks usually providing periodic output for
control purposes. This was commonly known as ‘batch processing’, as data were processed
in batches rather than on a continuous, real-time basis. For example, weekly or monthly
management reports—forming what were called management information systems (MIS)—
would be produced on reams of paper. This usually required much additional human analysis
to provide anything meaningful.

Future Effectiveness: The Prospective Phase

The advent of database systems in the late 1970s and 1980s not only led to the develop-
ment of executive information systems (EIS), where managers could ask the database for
answers to specific questions, but also to a major rethink of information systems strategy.
The thought here was that, rather than identifying particular information systems applica-
tions, organizations would simply have to identify the key data entities with which they were
dealing (e.g. customer; product) and their attributes (e.g. name, address; product code,
size). These could then be mapped to demonstrate their linkages, as a precursor to database
design. A champion of this approach was James Martin (1982). Something of a ‘garbage can’
model (see Cohen et al. 1972) for information systems strategy, with database technology
in mind, thus appeared on the scene. It was thought that organizations would no longer have
to concern themselves with issues of prioritizing information requirements associated with
particular functions, managers, or processes. Rather, the database would enable the delivery
of whatever information was required, wherever and whenever it was needed. In some cases,
the error in this line of reasoning was not realized until after the invoice had been received for
the massively increased computing power necessary to run the resultant database.
34 robert d. galliers

In some ways, this era may be seen to have spawned the so-called critical success factor
(CSF) approach (Rockart 1979). Under the guise of executives defining for themselves their
own critical data needs, the approach was rapidly appropriated by managers and consultants
alike, since it enabled prioritization to take place. The approach was also welcomed because
it brought an element of control back to harassed executives, who had seen their ICT budgets
expanding at a time when they were being promised increased computing power for their
limited financial resources—but nonetheless were becoming increasingly concerned with
budget overspends. In outline, the approach centered on the identification of key objectives
for the organization or strategic business unit (SBU) concerned, followed by the identification
of key management processes necessary to enable the achievement of the stated ­objectives.
CSFs associated with these processes were then pinpointed as a means of identifying the data
that had to be made available for executives to manage and control the processes within
their spheres of responsibility. The CSF concept was utilized by various approaches, such as
Process Quality Management (PQM)—another IBM methodology (Ward 1990)—and has
continued to be incorporated into management thinking to this day.2

Competitiveness: The Proactive Phase

As we moved into the 1980s, the concepts of Porter and colleagues at Harvard had an enor-
mous impact on thinking regarding the competitive advantages to be gained by firms from
the astute application of ICT. Utilizing such concepts as the ‘Five Forces’ and ‘Value Chain’
models, they demonstrated how ICT, and the information it produces, could: provide added
value to good and services; retard competition from both traditional rivals and new entrants;
and be used to leverage relationships with suppliers and customers alike (Porter 1980, 1985;
McFarlan 1984; Porter and Millar 1985). A considerable amount of consultancy activity
was spawned by this kind of thinking, and a great deal of literature was written on the topic
throughout the 1980s and into the 1990s.
In line with this style of thinking, there emerged in the 1990s another approach to the
strategic utilization of ICT, but this time focusing more on internal processes. The move-
ment was spawned by the likes of Michael Hammer and Tom Davenport and became known
as BPR (e.g. Davenport and Short 1990; Hammer 1990; Davenport 1993). A basis for their
argument was that the mere computerization of a messy situation will lead to nothing more
than a computerized mess. They argued for a clean slate approach that identified and stream-
lined the key business processes. The trick was then to identify which of these processes
could be automated, thereby improving efficiency and cutting costs. In addition, by focusing
on customer requirements, the processes would lead to improved effectiveness.
While success rates were reported as being quite low (e.g. Davenport 1996), and advocates
of the process were at pains to warn organizations of the risks involved, BPR was big business
and was attempted by most major corporations in the English-speaking world. For example, the
market for BPR services in 1995 was estimated to be in excess of $50 billion (ibid.). By 1996,
however, the bubble had begun to burst when one of the founding fathers of the movement,
Tom Davenport, finally recognized the loss of considerable organizational knowledge through
the swathes of redundancies brought about by the downsizing strategies that accompanied many
BPR efforts. BPR had become, in his words, ‘the fad that forgot people’ (ibid.: 70).
In some respects, then, we had come full circle. When we first began to think of information
systems planning and strategy, the focus was primarily on the technology itself, since managerial
concerns regarding the application of computing were mainly about matters of operational effi-
ciency. We then moved into an era during which business-driven approaches were prevalent,
with concern shifting to matters of effectiveness, and prioritization. As we entered the 1980s,
and then into the 1990s, the focus moved to ICT for competitive advantage, and subsequently
 further reflections 35

to BPR. In this era, attention shifted once more to a concern for how the technology could be
harnessed proactively to increase competitiveness, at first through an analysis of the competitive
environment and, later, by an analysis of internal processes. Throughout the whole ‘competi-
tive’ phase, however, approaches to information systems strategy might reasonably be charac-
terized as being based on a rational, deliberate paradigm, rather than the kind of emergence
discussed by Mintzberg (e.g. Mintzberg and Waters 1985), among others. Additionally, little
attention had been paid to more pluralistic and innovative strategizing.
This characterization of information systems strategy theory and practice as predominantly
rational, objective, and unitary is illustrated by Figure 2.2, which is based on Whittington’s
(1993) framework for mapping the developments in strategic thinking in the latter half of
the twentieth century. It soon becomes clear that much information systems strategizing
has been of the traditional school, with strategy formulation based on profit maximization
as the primary, if not sole, objective. What is more, there has been a tendency, certainly in
practice, to assume the equivalence of data, information, and knowledge. Latterly, however,
both tendencies have been brought into question, as we shall see later in the chapter. A con-
trast can be found with the traditional school of information systems strategizing in the soft
systems methodology (Checkland 1981; Galliers 1993a; Stowell 1995). Here, the outcome
of the analysis is not predetermined and an ICT ‘solution’ is by no means a foregone conclu-
sion. Additionally, alternative outcomes will be the subject of debate and further iteration.
The process of strategizing, with a view to gaining a shared appreciation of the context in
which this strategizing is taking place, is just as important, if not more so, than the decisions
made as a result. Thus, soft systems methodology might be seen as spanning the two quad-
rants in the lower portion of Figure 2.2.

From Localized Exploitation to Business Scope Redefinition

A somewhat different framework, but nonetheless one that also provides a perspective on the
changes in information systems strategic thinking, arose from a major research program con-
ducted during the late 1980s, coordinated at the Massachusetts Institute of Technology (MIT)

Outcomes
Unitary

Classical Evolutionary
- BSP
- CSF
- POM
- Competitive
- frameworks
- BPR
Processes Deliberate Emergent

Soft Systems Methodology

Systemic Processual

Pluralistic

Figure 2.2 Locating common information systems strategy approaches.

Adapted from Whittington (1993: 3).
36 robert d. galliers

under the title ‘Management in the 1990s’ (Scott Morton 1991). Funded by major corporations
from both sides of the Atlantic, it sought to uncover the means by which ICT could be har-
nessed to provide truly significant advances in terms of business performance. The framework
is reproduced here as Figure 2.3.
One conclusion drawn by the MIT research team was that many companies were obtain-
ing only relatively low business benefits from their investment in, and application of, ICT.
They argued that this was due mainly to the fact that a relatively low level of business trans-
formation had been attempted, with most companies operating at levels 1 and 2 of Figure
2.3. The researchers argued that such evolutionary approaches would not deliver the requi-
site order-of-magnitude improvements being sought after, which they deemed necessary in
highly-competitive markets. This, they argued, could occur only via revolutionary change of
the style proposed by the BPR advocates (level 3).
‘Don’t automate, obliterate’ was the uncompromising title of a famous Harvard Business
Review article by Hammer (1990). But, as we have seen, BPR focused for the most part on
internal process redesign. The MIT team extended the focus of BPR, in much the same way
as the Porterian school had done with the value-chain concept, to include what they termed
‘business network redesign’ (level 4). This extended the process analysis to ensure electronic
links provided along the value chain included suppliers and customers, in order to form
electronically-mediated strategic alliances (Rayport and Sviokla 1995). At one stage, this
would have involved utilizing electronic data interchange (EDI) technology. Nowadays, the
World Wide Web and the Internet would be used.
The MIT team concluded that truly significant business benefits would emerge only from
redefining the very scope of the business through the utilization of the full power of ICT to
create new products and services (level 5). Case examples that have entered the mythology
of strategic information systems include: the Apollo and Sabre airline reservation systems
of United and American Airlines; Thomson Holidays; Frito-Lay; Otis Elevators; American
Hospital Supply; and Mrs Field’s Cookies (Galliers 1993a). Senn (1992) and Ciborra (1994),
among others, have argued that these systems were introduced initially with a view to
increasing efficiency, but subsequently underwent various enhancements that—somewhat
serendipitously—provided the companies concerned with a competitive advantage.

HIGH

5. Business scope
redefinition
Revolutionary
4. Business network
redesign
Degree of 3. Business process
business redesign
transformation
2. Internal
integration

Evolutionary
1. Localized
LOW exploitation
LOW HIGH
Range of potential benefits

Figure 2.3 The MIT management in the 1990s program: ‘IT-based revolutionary change leads to
major benefits’.
Adapted from Venkatraman (1991: 127).
 further reflections 37

Information
intensity of HIGH Differentiate on ICT integral
value chain service
(The business
process) LOW Commodity Differentiate on
product
LOW HIGH
Information content of the product

Figure 2.4 Applying the Information Intensity Matrix.

Amended from Porter and Millar (1985).

While Figure 2.3 stresses only the revolutionary potential of ICT when used proactively,
it is clear that it is not always sensible to base one’s business strategy on such an aggressive use
of the technology. Indeed, Figure 2.3’s ‘range of potential benefits’ axis might reasonably be
re-labeled ‘degree of business risk’, given that revolutionary change can bring with it much
greater risks than would be the case with a more incremental approach (Galliers 1997). A
means of assisting in deciding whether there is a potential strategic advantage by providing
added-value services based on information and ICT is provided by the Information Intensity
Matrix (Porter and Millar 1985), which is depicted in Figure 2.4.
Figure 2.4 asks us to consider the extent to which information forms a critical part of the
value-chain activities and of the product itself. In situations where this ‘information intensity’
is high, it can be concluded that ICT is integral to the delivery of goods and services. Where
it is low, the potential use of ICT is more limited. Competing on the basis of providing addi-
tional information in terms of the product itself, or in relation to value-chain processes, can
thus be considered by using this framework.

Distinguishing the Components of Information Systems Strategies

Much of the MIT research—and indeed a great deal of mainstream thinking on information
systems strategy—suggests that the key issue is to align ICT with the business strategy, as
might be supposed from the earlier approaches such as BSP, CSF and PQM.3 However, there
is quite a conceptual gap between a business strategy and the necessary IT infrastructure to
support it. As illustrated in Figure 2.5, Earl (1989) makes a distinction between information

IS Strategy
- Business-driven
- Top-down
- Demand-oriented

WHAT?

IT infrastructure. Information and

applications, and information services
services requirements

IT Strategy
- Technology-focused
- Bottom-up
- Supply-oriented

HOW?

Figure 2.5 Earl’s distinction between information systems and information technology strategies.
Amended from Earl (1989: 63).
38 robert d. galliers

systems and information technology strategy, arguing that the former is essentially concerned
with the ‘What?’ of the information required, while the latter is concerned with the ‘How?’
questions about the use of ICT to provide that information.
Note that, as indicated in Figure 2.5, Earl proposes that the information systems strategy
is essentially business-led and demand-driven: it can be seen as a ‘top-down’ process, feed-
ing off the business strategy. He further argues that information systems strategy should be
the concern of the business executive—not the IT Director. Conversely, the information
technology strategy is seen as being driven more by technology and supply, in that it depends
to an extent at least on the existing technological infrastructure—on what is feasible from a
technological standpoint within the current planning horizon. This is much more within the
province of the IT Director.
Earl’s distinction also brings with it some implications for the concept of alignment. For
example, information systems strategy is viewed here as being about strategizing because it is
ongoing and process-based (‘processual’). Conversely, the information technology strategy
is relatively fixed. This makes alignment difficult, as explored later in the chapter. Earl devel-
oped this line of thinking further by adding another component to the information systems
and information technology strategy, namely the information management strategy. Having
asked the ‘What?’ and the ‘How?’ questions, the information management strategy, in Earl’s
(1989: 64) formulation, asks the question ‘Wherefore?’—to find answers to ‘Why?’ ques-
tions such as: ‘Why this particular strategy as against any other?’
The field of Information Systems is generally replete with terms that mean different things
to different people. For instance, ‘information technology’ and ‘information systems’ are
often used synonymously. The ‘information management’ term is another such example.
This can sometimes connote a much broader concept than in Earl’s amended model by
encompassing the general field associated with the management issues concerned with infor-
mation and ICT. Galliers (1991) noted this terminological confusion when building on the
earlier work of Earl to produce a more comprehensive framework for information systems
strategizing (see Figure 2.6). This framework included the questions related to ‘What?’ (in

Business strategy

WHY?

WHAT? Information strategy

WHO? HOW?
Information services Information technology
strategy strategy

Change management/
implementation strategy

Ongoing assessment and review

Figure 2.6 Components of information systems strategy.

Amended from Galliers (1991: 60, 1999: 230).
 further reflections 39

Earl’s terms, the information strategy) and ‘How?’ (information technology strategy), but added
the question ‘Who?’, relating to the information services strategy—the organizational arrange-
ments for the provision of IS-related services. It also included considerations associated with
the implementation of the strategy, with all its attendant management-of-change issues.
In terms of the ‘Who?’ question, the framework emphasizes the importance of developing
an integrated information services strategy. This would need to include the kind of information
systems staffing and skills needed to facilitate the strategy, including training requirements. In
particular, a key question to consider, as an integral aspect of information systems strategizing,
would be whether to outsource ICT provision—a topic that was particularly popular in the
1980s and 1990s. IT outsourcing refers to the ‘significant contribution by external vendors
in the physical and/or human resources associated with the entire or specific components of
the ICT infrastructure in the user organization’ (Loh and Venkatraman 1992). As Lacity and
Willcocks (2000) remind us, however, the appropriate question is not whether to outsource
per se, but what would be the appropriate sourcing arrangements.
Another additional element in the Figure 2.6 framework is the explicit recognition of the
importance of managing the change process associated with the implementation strategy.
Galliers had become very much aware from empirical research and consultancy assignments
that the outcome of many information systems strategy projects was what might be termed
‘shelfware’, as plans for such projects often collected dust on the office shelf because such
little information systems implementation occurred as a result of such projects.
It also appeared that few lessons had been learned from the mainstream literature on
strategizing. From the start, this was particularly the case in relation to the consideration of
implementation and change management issues (Wilson 1992). Other issues that required
attention included: the emergent quality of strategies and strategizing (Mintzberg and
Waters 1985); the unanticipated consequences of any ICT implementation (e.g. Brown and
Eisenhardt 1995; Robey and Boudreau 1999), and what Weick (2001) terms interpretative
flexibility. As a result—and also drawing on Systems Theory (e.g. Checkland 1981)—the
model depicted in Figure 2.6 incorporated features that demonstrated the need to moni-
tor and learn from the emergent features of strategic decisions. It also takes account of the
unintended consequences of these decisions, and the various interpretations of, and reactions
to, events and innovations expressed by different stakeholders. ‘Change management’ and
‘ongoing review and feedback’ were therefore incorporated into the model.
The framework can be used in analyzing information systems strategies in organizations
by considering the extent to which each of the components is in place. This may provide an
insight into the orientation of any particular organization towards information systems strat-
egy. For example, does the organization emphasize ICT strategy to the detriment of identify-
ing strategic information requirements? Or does the organization consider implementation
and change management issues as part of their strategizing?
In addition, however, it suggests that each component of the information systems strategy
is mutually dependent on each other component. For example, questions can be asked about
whether strategic decisions regarding the organization of information systems services (e.g.
whether they should be centralized or distributed; whether to outsource or not) are con-
sidered as an integral part of the information systems strategy, or whether—as is often the
case—they are considered in isolation. Similarly, questions can be asked not only in relation
to the extent to which required information is identified in line with the existing business
strategy, but also if information is available that can actually question whether the strategy is
appropriate or not, given changing business circumstances and as a consequence of the ongo-
ing assessment and review of outcomes. This is the ‘Why?’ question that appears in Figure
2.6. The framework therefore envisions information systems strategy to be more all-encom-
passing than the distinction between IS and IT strategies provided by Earl in Figure 2.5.
 40 robert d. galliers

Assessing Information Systems Capability

Deciding on an appropriate strategy depends, in part at least, on an organization’s ability to

carry out that strategy successfully. However, Figure 2.7 shows there are occasions when
it may well be advisable to follow a more conservative line, notwithstanding the arguments
of those who follow the ‘revolutionary change’ school of thought. For example, a more
evolutionary approach would appear to be called for if an analysis of the information inten-
sity (Figure 2.4) of an organization’s business processes and products and/or services found
that the opportunities for adding value through information are limited. Nevertheless, if
the opportunities are there but the capability is limited, then such an aggressive approach
may well present too great a risk without outside assistance, or the development of internal
human and technological resources.
The problem is that many organizations find themselves in the ‘Catch-22’ position of the
lower right-hand quadrant of Figure 2.7, where—in a sense—they are damned if they do
and they are damned if they don’t. In such circumstances, organizations have to beware of the
aggressive strategies of a competitor that might well have greater information systems capa-
bility than themselves. In response, an organization may well attempt a similar strategy itself,
but fail in the attempt due to a lack of internal information systems resources—human as
well as technical. Should the organization decide the risk is too great and do little in response,
it is likewise open to attack.
How, then, might an organization evaluate its current information systems capability?
One approach is to assess its current information systems strategy using the framework
illustrated in Figure 2.6. But this provides an overview only. A more detailed positioning
framework, which is explained below, is based on the so-called ‘Stages of Growth’ thesis
first enunciated by Nolan (Gibson and Nolan 1974; Nolan 1979) and on the well-known
‘7-S’ framework of McKinsey & Co. (Pascale and Athos 1981). Nolan’s Stages model has its
roots in Greiner’s (1972) earlier work, essentially positing that firms will grow in maturity
through recognizable ‘stages’ in terms of their management and use of ICT.
Nolan first formulated a four-stage model, but later extended this to six stages to take
account of the database technology that was becoming available at the time—a technology
that enabled firms to integrate their systems across functions and business units in a manner
that had previously been impossible (see the second ‘internal integration’ stage of the MIT

HIGH

Explore Attack
IS capability

Safe Beware

LOW
LOW HIGH
Strategic IS opportunity

Figure 2.7 When, and when not, to pursue an aggressive business strategy based on information
technology.
Amended from McLaughlin et al. (1983).
 further reflections 41

model in Figure 2.3). His six stages were (using Nolan’s numbering system, that I also adopt
below for a revised model):

I Initiation
II Contagion
III Control
IV Integration
V Data Administration
VI Maturity.

The story told through these stages unfolds as follows. At first, organizations are relatively
unaware of the capabilities and potential uses of new and emerging ICT (Stage I). But once
they have a few adherents, a kind of ‘me too’ mentality sweeps through the organization
and demands increases almost exponentially (Stage II). As a result, management becomes
increasingly concerned that things—especially budgets—are getting out of control, and they
therefore impose tighter controls on ICT expenditure (Stage III). As management becomes
increasingly aware that the looked-for business benefits from the ICT investment are escap-
ing them because of lack of compatibility between different systems and a lack of information
flow across processes and functions, further investment occurs in technologies that enable
greater systems integration (Stage IV). This stage leads into one during which greater efforts
are expended in ensuring the consistency of the data being shared across the organization,
for example in terms of definition and interpretation (Stage V). The final stage of maturity is
reached once integration is complete and compatibility is assured (Stage VI).
As is implied by the above, patterns of expenditure on ICT give a clue to which stage an
organization has reached. Expenditure accelerates during Stages II and IV/V and tapers off
in Stages III and VI—thus following a kind of double-S curve. While Nolan’s (1979) model
has been criticized in academic circles for its lack of conceptual underpinnings and its failure
to provide an accurate prediction of growth empirically (Benbasat et al. 1984; King and
Kraemer 1984), it was nonetheless highly popular and used extensively by many major cor-
porations in the English-speaking world. Indeed, it spawned a consultancy company—Nolan
Norton and Co.—which was eventually taken over by KPMG. Despite this popularity, it
clearly had its limitations, particularly in relation to its technological focus. An extended
Stages model was therefore developed by Galliers and Sutherland (1991), following case
study research in Europe and Australia. This model, shown here as Table 2.1, focused on
broader information management issues and borrowed the McKinsey 7-S framework that
was in widespread circulation at the time (see first column in Table 2.1).
The framework depicted by Table 2.1 may be difficult to take in at first glance, but it
essentially parallels the Nolan (1979) model in terms of the six stages of growth, which it
renames (keeping the same numbering system):

I Ad hocracy
II Starting the foundations
III Centralized dictatorship
IV Democratic dialectic and cooperation
V Entrepreneurial opportunity
VI Integrated harmonious relationships.

Referring to our account earlier in this chapter of the developments in thinking and practice
with respect to information systems strategy, we can trace this development through the
six stages of strategy growth. We can see, for example, that information systems strategy
Table 2.1 An extended Stages of Growth model

Stage: I II III IV V VI
Ad hocracy Starting the foundations Centralized dictatorship Democratic dialectic and Entrepreneurial opportunity Integrated harmonious
cooperation relationships
Element:Strategy Acquisition of IT Audit of IT provision Top-down analysis Integration, Competitive advantage Interactive planning,
(services) coordination collaboration
Structure Informal Finance controlled Centralized IS Information Center SBU coalition Coordinated solutions
department
Systems Ad hoc operational, Gaps/duplication, Uncontrolled enduser Decentralized Coordinated centralized Inter-organizational
accounting large backlog, heavy computing versus approach, some and decentralized IS, systems, IS/IT-based
maintenance centralized systems Executive Information some strategic IS products and services
Systems
Staff Programmers, Systems analysts, data IS planners, IS Business analysts, Business and IS planners IS/IT Director (Board
contractors manager manager, database information resource integrated level)
specialists manager
Style Unaware ‘Don’t bother me, Abrogation, Partnership, benefits Individualistic (product Multi-disciplinary teams
I’m too busy’ delegation management champions) (key themes)
Skills Individual, technical, Systems development IS awareness, project IS/business awareness Entrepreneurial Lateral thinking (IT/IS
low-level methodology, management marketing potential)
costbenefit analysis
Shared values Obfuscation Confusion Senior management Cooperation Opportunistic Strategy making and
concern, IS defense implementation
Amended from Galliers and Sutherland (1991: 111), with elements from Pascale and Athos (1981).
 further reflections 43

develops from what is little more than the acquisition of IS products and services on more or
less an ad hoc basis, through to top-down, business-led planning (see Earl’s model, Figure
2.5)—and on to competitive advantage. The sixth stage is characterized by a strategy that
integrates information systems considerations into the business strategy itself. Similarly, we
can trace developments in the kind of staff and skills that are available to the organization
(whether in-house or through a sourcing arrangement).
Managerial attitudes towards the strategic aspects of information systems can also be
traced. From the bewilderment and confusion of the early stages of growth (Stages I and
II), there has been a tendency for management to adopt the somewhat negative and adver-
sarial stance associated with Stage III. This has tended to be as a result of past disappoint-
ments and concerns over spiraling ICT expenditure—with sometimes little in the way of
perceived business benefits in return. The latter stages are characterized by a more positive,
but informed, perspective. More specifically, with growing cooperation and a realization
that greater integration across functions and SBUs is called for, a more concerted approach
towards integration is evident in Stage IV. A more outward-facing perspective characterizes
Stages V and VI, with an entrepreneurial and opportunistic stance being in evidence. A num-
ber of lessons emerged from the application of the Table 2.1 Stages of Growth framework,
including the following.
First, it should be noted that the model is no more than a model—it is a positioning frame-
work only. The foregoing discussion might unwittingly give the sense that all this develop-
ment is preordained and is followed in every instance. This is far from being the case. The
model has been found to be useful as a means of facilitating shared understanding as a result of
posing a series of questions in relation to aspects of information systems management, based
on the 7-S list. It certainly does not provide any answers. And shared understanding does not
necessarily mean consensus. It is a subjective measure, and opinions will sometimes diverge,
but it at least provides a kind of benchmark against which to assess matters, and to begin to
understand why certain views are held by some, but not others. The model is an aid to sense-
making (Weick 1990); used judiciously, it can be of assistance in gaining a shared apprecia-
tion of key information systems management issues on the part of management teams.
Second, there is no intrinsic right for organizations to move inexorably through the stages
towards Stage VI. Indeed, some companies have realized that they have occasionally moved
‘backwards’. A series of discussions as to why movement has or has not occurred may pro-
vide further insight. Third, different parts of the organization may each present a different
profile. As a result, assessments can be made as to whether these differences are harmful
and need to be dealt with—or that the company can live with them, or indeed, that they are
entirely appropriate. Fourth, organizations will not find themselves at a particular stage with
respect to all the elements, but will find that some of these will lag ‘behind’ while others
will be further ‘ahead’. Again, assessments can be made as to what these differences mean
in terms of strategic directions and imperatives. Further, it will seldom be the case that an
organization’s profile will fit neatly into the stages, as there will be elements that exhibit
characteristics of more than one stage. This is an imprecise ‘science’.
Fifth, it may prove useful to map the implied profile of a proposed strategy and contrast
this with the existing situation. If there is considerable distance between the two, an assess-
ment of the risks involved in attempting the proposed strategy can be made. Sixth, as a result
of these kinds of deliberations, the shared understanding reached should lead to the identi-
fication of change projects designed to move the organization to a desired position. Finally,
what constitutes ‘maturity’ (as referred to in the earlier Nolan models) will be changing
and contextual, so Stage VI should not be viewed as an end in itself. Other elements to the
model could also be incorporated; for example, an eighth ‘S’ might usefully be concerned
with security issues.
44 robert d. galliers

Information Systems Strategic Thinking in the 1990s4

As we have seen, the field of information systems strategy had come some distance in the
latter part of the twentieth century. From a relatively isolated, narrow, and technologically
oriented activity, it had become much more business-oriented and competitively minded.
There had been increasing realization, too, that the management of change and people issues
are a significant—perhaps the key—aspect of what is required.
In some respects, though, IS strategy had not come very far at all. It had reached a point
at which current thinking might reasonably be summarized by another framework from the
MIT Management in the 1990s Program (see Figure 2.8). For example, we had learnt our
lessons from the many BPR failures: IS strategy and change was more, much more, than
focusing on business processes and technology alone. People mattered, and their capabilities
and knowledge had to be nurtured. Information systems needed to be seen as social systems,
admittedly with an increasingly technological component—but not as technological systems
per se. While this model moves us well beyond the technological focus of earlier informa-
tion systems strategy approaches, it is also similar to Leavitt’s (1965) ‘diamond’ of the mid-
1960s. Leavitt argued that organizations could be viewed as complex systems, consisting
of four interacting variables: objectives, structure, technology, and people. These variables
clearly bear a remarkable resemblance to those identified in Figure 2.8.
Despite this, information systems strategy had indeed come a long way, but it also
had a very long way to go to catch up with other strategy discourses. This emphasizes the
point already made with regard to Figure 2.2, that builds on the framework developed by
Whittington (1993) for identifying different schools of thought relating to strategy and
strategizing. That point is also illustrated in the next section, which questions some prevail-
ing myths about the strategic potential of ICT.

Uncovering the Myths of Strategic ICT

There have, of course, been many developments in ICT in recent years. In this section, a
number of these recent developments will be considered in relation to the various strat-
egy issues. Specifically, it will be argued that—despite the developments in thinking about
­information systems strategy discussed earlier—many myths about ICT continue to be
promulgated: myths about how to develop ICT strategically, how to use ICT to support
knowledge management, and about ICT and competitive advantage.

Structure
(intra- and inter-
organizational)

Strategy Management Technology

processes

Individuals
(roles, values,
capabilities. etc.)
Social, economic,
technological environment

Figure 2.8 The MIT model of strategic change and fit.

Adapted from Scott Morton (1991: 20) and Sauer,Yetton, and Associates (1997: 281).
 further reflections 45

Myths about How to Develop ICT Strategically

There are essentially two related elements to the myth about ICT strategic developments.
The first is that ICT systems should align with the business strategy and the second is that ICT
systems should be rationally planned. As noted earlier, a central tenet of much of the theory
and practice of information systems strategy has been the concept of alignment. The notion
of alignment suggests that information systems strategy is a rational and deliberate activity.
Intuitively appealing, alignment has been a taken-for-granted concept that remained largely
unchallenged for many years. Earl’s (1989) distinction between information systems and
information technology (or ICT) strategies (Figure 2.5) is very helpful in terms of demarcat-
ing the two terms, as we have seen. However, it can too easily hide a key issue with respect
to alignment, concerning the fact that the information needs for the great majority of organi-
zations are in constant flux. Of course, there is a subset of information requirements that
remains reasonably constant over time but, with fast-changing competitive environments,
that subset is by no means representative of the totality.
Conversely, organizations are investing in ICT that will remain with them for quite some
time, and will have to serve the test of time. Additionally, the view we have put forward here
is that information systems strategy is ongoing and processual. ICT decisions, while they may
be cumulative, are nevertheless one-off. The question of alignment is therefore a vexed one,
as it is about changing requirements and (relatively) unchanging technology. There is often a
dynamic involved, with strategies falling in and out of alignment over time (Sabherwal et al.
2001). The introduction of Internet technology internally, in the form of ‘intranets’, has
assisted considerably in providing the requisite flexibility. However, most firms are having
to deal with significant problems in upgrading their so-called legacy systems—both in terms
of meeting changed information needs and of integrating them with new systems and tech-
nology. Enterprise Resource Planning (ERP) systems are sold partly on the basis of the need
to replace such legacy systems (CACM 2000). Presumably, however, in time, ERP systems
will themselves become legacy systems. Increasingly, too, alignment is required along the
‘virtual’ value chain—with electronic links to suppliers and customers alike (Rayport and
Sviokla 1995). The open nature of the Internet, with new customers and sources emerging
constantly, can complicate matters enormously. ‘Alignment with whom?’ becomes a more
significant and increasingly difficult question to answer.
The second ICT strategic development myth, as we have seen, is that most of the
approaches to information systems strategy suggest a rational analysis of ICT needs. For
example, the radical approach championed by the MIT Management in the 1990s team (Scott
Morton 1991), or as articulated by the advocates of the BPR approach, both start from the
premise that a rational analysis of business needs should be undertaken. Indeed, as we have
seen, the very notion of alignment suggests that information systems strategy is a rational and
deliberate activity. However, following Mintzberg (e.g. Mintzberg and Waters 1985), there
is an increasingly strong school of thought that talks of the ‘emergent’ nature of information
systems strategy and of strategic information systems (e.g. Ciborra 1994). Neither should
we forget the essentially political nature of most technological appropriations (Swan and
Clark 1992). Moreover, as mentioned previously, many of the successful ICT systems that
have been developed, and lauded as being ‘strategic’—for example, the Apollo and Sabre
airline reservation systems—have emerged though a process of gradual enhancement (Senn
1992) and improvisation (e.g. Ciborra 1994, Chapter 1 this volume; Galliers 1991, 1993b).
Ciborra uses terms like ‘bricolage’ and ‘tinkering’ to signify the bubbling up of innovative
ideas within organizations. This is in stark contrast to the kind of radical approach champi-
oned by the MIT team, or as articulated by the advocates of BPR (e.g. Davenport and Short
Hammer 1990, 1990).5
46 robert d. galliers

This analysis suggests that no amount of rational planning can ever hope to create an ICT
system that aligns with the business strategy, even in the short term. ICT system develop-
ment is thus best considered as an interactive process, constantly ongoing and emergent as
new information needs arise and new opportunities are identified. This conclusion is some-
what in line with the analysis of alignment conducted by Sabherwal et al. (2001), when they
talk of ‘punctuated equilibrium’.

Myths about How ICT Can Support and Enable Knowledge Management
Knowledge management is one of the latest fads to be adopted by management (e.g.
Abrahamson 1991). The emergence of this concept followed the recognition that
­knowledge is perhaps the key resource of organizations, allowing them to innovate and
compete. Ironically, perhaps, this recognition occurred at about the same time as the
BPR revolution, when much valuable knowledge was lost through companies’ back
doors, along with the legions of middle-ranking executives made redundant in the name
of efficiency—often as a direct result of BPR initiatives. The ERP systems subsequently
developed were claimed to be more in tune with the recognition of the importance of
capturing organizational knowledge. Such systems have been diffused and adopted widely
during the late 1990s and early 2000s, sold on the premise that they will assist to improve
efficiency by integrating knowledge about business processes that cut across functions in
SBUs and locations.
Efficiency and Innovation

Importantly, ERP is promoted as a means of helping to transfer ‘best practice’

knowledge. Thus, a key feature of an ERP system is that it has built-in pro-
cesses which force an organization using it to adapt itself and its processes to
the exigencies of the ERP software. These inbuilt processes are, supposedly,
based on ‘best practice’ industry models. In this instance, then, ICT can be
seen as a force for standardization, and therefore for speeding competitive
convergence, given that the models remain more or less constant irrespec-
tive of the organization implementing the system. The myth is thus created
that the adoption of an ERP system will enable an organization to transfer to
itself the ‘best practice’ industry knowledge of how best to organize various
processes.

Further, it is interesting to consider such systems in relation to the earlier discussion on align-
ment which explained how ERP systems are implemented partly to replace legacy systems—
but themselves eventually become a legacy. Moreover, by advocating the copying of ‘best
practices’ to improve efficiency, organizations are, potentially at least, running the risk of
reducing their capacity to create the new knowledge that is needed to innovate and creatively
respond to their ever-changing environment—a key concern of business strategy, surely.
Another way of putting this might be to think of the issue in terms of the long-standing
dilemma between efficiency and innovation, or between exploitation and exploration (Clark
and Staunton 1989; March 1991; McElroy 2000).
The above distinction between efficiency and innovation is important in attempting to
understand the role ICT can play in an information systems strategy that seeks to harness
the increasing power of the technology, while facilitating innovation and knowledge crea-
tion in organizations—especially those that operate on a global basis. Information systems
strategy, as we have seen, attempts to square the circle between efficiency, effectiveness, and
 further reflections 47

c­ ompetitiveness. The latter increasingly relies on constant innovation for it to be sustained. If

the Internet, ERP systems, and other ICT have been a force for competitive convergence, as
Porter (2001) argues, then how can we claim that ICT such as this provides firms with new
means of competing?
These problems and myths surrounding ERP systems can be related to more general
myths that have emerged about knowledge management and, more particularly, knowledge
management systems (KMS). Most importantly, the myth has been created that suggests
KMS can store and transfer knowledge, thus supporting and facilitating knowledge exploi-
tation (the reuse of knowledge across time and space, for example by the transfer of ‘best
practices’) and knowledge creation. The software solutions that were peddled as EIS or mere
database systems at the end of the last century have been metamorphosed by marketing exec-
utives into the KMS of the twenty-first century. Such systems are based on the view that
knowledge is ‘out there’, ready and available to be harvested or mined. A contrary perspec-
tive is provided here.
Data, Information, and Knowledge

To comprehend the argument here more fully, it is perhaps useful to go back

to basics and understand the distinction between data, information, and knowl-
edge—terms that tend to be used synonymously in everyday parlance. Data
become informative for a particular purpose to human beings by the way peo-
ple interpret the world about them through their own individual lenses, and
by applying their memory and personal knowledge to each new situation they
confront. This is how we innovate and adapt. Data are contextfree and can be
interpreted in many different ways for different purposes. For example, the
results of a government election in any country in the world will doubtless be
interpreted in different ways by the victor and the vanquished. So-called infor-
mation technology therefore processes data, not information. We should, as a
result, revert to the original name used for information systems in the 1960s and
1970s: data processing systems.
(Galliers and Newell 2003b)

Individuals inform themselves in order to undertake some particular task or make a par-
ticular decision. Information is therefore context dependent, and information systems have
to include human beings and the act of interpretation for the term to be at all meaningful.
Knowledge, on the other hand, is tacit and embedded. It resides within our brains, and ena-
bles us to make sense of the data we capture. Knowledge is individuals’ ‘justified belief’—a
belief that allows them to interpret and take purposive action in the world around them.6
The distinction between the terms is made clearer in Table 2.2, although the latter should be
interpreted with some care—given that the characteristics are provided merely to assist in
sense-making (see Weick 1990).
The above characterization of knowledge, or rather, ‘knowing’ (Blackler 1995) suggests
that knowledge sharing is facilitated through discourse and dialogue (von Krogh et al. 2000).
Thus, the emphasis is on developing communities of practice (Brown and Duguid 1991;
Lave and Wenger 1991) and project teams where individuals interact over time to develop
shared understandings that can lead to innovation and creativity. ICT systems can support
this dialogue, at least partially, but they cannot store or communicate knowledge as such.
ICT systems store and transfer data that can be interpreted in each context by individuals
who make sense of these data, for a particular purpose, based on their personal knowledge,
experiences, and predilections.7
48 robert d. galliers

Table 2.2 Key characteristics of data, information, and knowledge

Data Information Knowledge

Explicit Interpreted Tacit/embedded
Exploit Explore Create
Use Build/construct Rebuild/reconstruct
Accept Confirm ‘Disconfirm’
Follow old recipes Amend old recipes Develop new recipes
No learning Single-loop learning Double-loop learning
Direction Communication Sense-making
Prescriptive Adaptive Seminal
Efficiency Effectiveness Innovation/redundancy
Predetermined Constrained Flexible
Technical systems/networks Socio-technical systems/networks Social networks
Context-free Outer context Inner context
Reproduced from Galliers and Newell (2003a: 189, 2003b: 11).

Myths about ICT and Competitive Advantage

Undoubtedly, the growth and impact of the Internet has been the most noticeable ICT devel-
opment around the turn of the century, spawning the so-called dotcom companies and a
considerable degree of hyperbole concerning e-business. In a Harvard Business Review article,
Michael Porter (2001) argues that firms should view the Internet as a complement to, rather
than something that cannibalizes, more traditional forms of organization and organizational
ICT. He claimed that while some have argued that ‘the Internet renders strategy obsolete …
the opposite is true … it is more important than ever for companies to distinguish themselves
through strategy’ (Porter 2001: 63). His argument echoes what he was saying twenty years
before: it is not the technology itself (in this case, the Internet) that will create competitive
advantage, but the uses to which it is put that may do so. As ever, he sees the two funda-
mental factors that will ultimately determine profitability as being industry structure and
sustainable competitive advantage. The former determines the profitability of the average
competitor. The latter allows a firm to outperform the average competitor.
Porter goes on to argue that, although the Internet has created new companies and even
industries (e.g. online auctions and financial institutions), its impact will be felt most in ena-
bling ‘the reconfiguration of existing industries that had been constrained by high costs for
communicating, gathering information, or accomplishing transactions’ (ibid.: 66). He gives,
as examples, distance-learning programs, catalog retailers, and automated fulfillment cent-
ers, and contends that the Internet ‘only changes the front end of the process’ (ibid.: 66).
Porter maintained his belief in his Five Forces analysis (Porter and Millar 1985), stating
that these ‘still determine profitability even if suppliers, channels, substitutes, or competitors
change’ (ibid.: 66). However, because the impact of each force varies from industry to indus-
try, he argues that it would not be appropriate to attempt to draw any general conclusions
regarding the Internet’s impact on long-term profitability. He does point to some general
trends, though. For instance, he notes that ICT tends to: bolster buyer bargaining power by
providing easier access to information on products and services; reduce barriers to entry by
circumventing existing channels; and create substitute products and services. Rivalry intensi-
fies because of the open nature of the Internet and the resultant difficulties that firms confront
in retaining proprietary offerings. Rivalry also intensifies because of the global reach of the
new technology. Finally, he argues that the Internet’s tendency to reduce variable costs leads
to pressure to engage in price competition. He observes:
 further reflections 49

The great paradox of the Internet is that its very benefits—making information
widely available; reducing the difficulty of purchasing, marketing, and distribu-
tion; allowing buyers and sellers to find and attract business with one another
more easily—also make it more difficult for companies to capture those benefits
as profits.
(ibid: 66)

This analysis leads Porter to foresee greater competition due to increased numbers of
competitors and pressure on prices, exacerbated by growing customer power. With the
average profitability of most industries falling, the need for individual firms ‘to set them-
selves apart from the pack’ grows considerably. This leads to the conclusion that advantages
must be gained in terms of cost and price, through improved operational efficiency and effec-
tiveness, strategic positioning, and by doing things differently from the competition. He
notes (ibid.: 70): ‘The Internet affects operational effectiveness and strategic positioning in
very different ways. It makes it harder for companies to sustain competitive advantages, but
it opens new opportunities for achieving or strengthening a distinctive strategic positioning.’
It should be clear from the foregoing why Porter (ibid.: 78) argues that the Internet has
not altered the basic principles of competitive advantage:

In our quest to see how the Internet is different, we have failed to see how the
Internet is the same. While a new means of conducting business has become
available, the fundamentals of competition remain unchanged. The next stage of
the Internet’s evolution will involve a shift in thinking from e-business to busi-
ness, from e-strategy to strategy. Only by integrating the Internet into overall
strategy will this powerful new technology become an equally powerful force
for competitive advantage.

Porter sees competitive advantage as being gained by those companies that can integrate
uses of the Internet with traditional means of doing business. He contends that it is easier
for ­‘traditional’ companies to do this than for dotcoms to adopt and integrate traditional
approaches. But the traditional strengths of any company remain the same, with or without
the Internet, such as unique products, superior knowledge of products and customers, strong
personal service, and effective relationships.
Thus, we can raise serious concerns about ICT’s impact on firms’ long-term competitive
business strategy. In essence, perhaps, the problem is that in each instance companies are
utilizing new developments in ICT to promote efficiency. But, as already noted, in doing
this they are—potentially at least—running the risk of reducing the capacity to innovate
and to respond creatively to their ever-changing environment. Again, then, we return to
the dilemma between efficiency and innovation (e.g. Clark and Staunton 1989; March 1991;
McElroy 2000).

Synthesis: Towards an Inclusive Framework for Information Systems

Strategizing

Where is the argument followed in this chapter leading in terms of our reflections on the
concept of information systems strategy? One would hesitate to propose an all-encompassing
framework that captures the essence of the above—and, indeed, the very concept of such
a framework might well seem antithetical to the arguments immediately preceding this.
50 robert d. galliers

Having said that, and as Weick (1990) might argue, frameworks do help with respect to
sense-making, and do provide something of a benchmark against which informed debate
and communication might take place. It is in this spirit that the following is presented for
consideration.
Figure 2.9 builds on Figure 2.6, but is an attempt to incorporate some of the more recent
thinking that we have just introduced. For example, the concept of an information infra-
structure strategy—or what might be termed an information ‘architecture’—is adopted and
incorporated in an attempt to connote an enabling socio-technical environment for both the
exploitation of knowledge (efficiency) and the exploration of knowledge (innovation). The
debate was previously often couched in terms of exploration versus exploitation. Increasingly,
however, we see different ICT initiatives, such as ERP and KMS, being implemented in tan-
dem in an attempt to foster the simultaneous development of organizational efficiency and
flexibility (Newell et al. 2003).
The concept of an information infrastructure (or architecture) has developed in response
to the need for greater flexibility, given changing information requirements (Ciborra 2000).
In the 1980s and 1990s, the term information infrastructure usually connoted the standardi-
zation of corporate ICT, systems, and data, with a view to reconciling centralized processing
and distributed applications. Increasingly, however, Figure 2.9 depicts how the concept has
come to relate not just to data and ICT systems, but also to the human infrastructure (roles,
skills, capabilities, viewpoints, etc.)—and this is where knowledge creation, and sharing and
innovation, play a crucial role. Star and Ruhleder (1996) unbundled the concept still further
by talking of infrastructures in terms of, for example, their embeddedness, transparency,
reach, links with conventions of practice, and installed base. Infrastructures are thus seen as
being heterogeneous and socio-technical in nature.
As depicted here, then, information systems strategy, incorporating an information archi-
tecture strategy, is meant to be interpreted as being a part, albeit an increasingly important part,
of collaborative business strategizing. It is collaborative because the focus will not be related just

Collaborative business
strategy

Collaborative and
competitive
environment

Information
Infrastructure strategy
(Socio-technical environment)
Exploitation - IT, standards, data, architecture Exploration
strategy - Information services (sourcing) strategy
(Deliberate) - Human resources (skills, roles) (Emergent)
- Codilied ‘solutions’ - Communities of
e.g. ERP systems practice
- Standardized - Flexible project teams
procedures - Knowledge brokers,
- Rules sharing, and creation
- ‘Knowledge - Bricolage/inkering
Change
Management’
management
strategy

Ongoing learning
and review

Figure 2.9 Towards a more inclusive framework for information systems strategizing.
Reproduced in Galliers and Newell (2003a: 193).
 further reflections 51

to internal matters but will also, crucially, involve partner organizations, such as customers,
suppliers, and other organizations, for example those with whom sourcing arrangements are in
place. The implication here is that the very boundary of an organization will become increas-
ingly porous, debatable, and changing. Therefore, strategy needs to take this into account,
especially information systems strategizing, given the virtual nature of many collaborative
arrangements. This means that information systems strategizing has both a location and tempo-
ral dimension (Adam 1990)—the latter, in particular, being as yet under-researched.
Information systems strategy should also be seen as being ongoing and processual, cru-
cially dependent on learning from ‘below’, from tinkering and improvisation, and from
the emergent and unintended consequences of strategic decisions, as well as from the more
deliberate, designed, and codified ICT ‘solutions’ that have been implemented. Figure 2.9
attempts to incorporate the embedded, socio-technical characteristics of information archi-
tectures–architectures that provide the kind of environment in which knowledge sharing
and knowledge creation may be fostered, in tandem. Strategic information, therefore, not
only supports existing strategic processes, but also questions the kind of taken-for-granted
assumptions on which existing information systems strategies may be based. ICT is there
too: not as the answer, not as a ‘solution’, but as a means of capturing data that may be
interpreted in a purposeful manner, with which to make sense of phenomena in unique
circumstances.

Conclusions

This chapter has attempted to reflect on developments in the thinking and practice associ-
ated with information systems strategy and the process of strategizing. In so doing, and
in drawing on a fairly broad literature base, we have been able also to question some of
the more taken-for-granted concepts found in mainstream accounts of IS, and reflect on
the appropriate role of ICT in modern-day organizations. Concepts such as the alignment
of business and ICT strategies, ICT and competitive advantage, ‘best practice’, knowl-
edge management, and—more particularly—KMS have all been called into question in
what Robey and Boudreau (1999) term a ‘logic of opposition’. Indeed, the very nature of
information and knowledge have been examined in a fresh light. In addition, Information
Systems, as a field of study, may be seen to suffer from an element of faddishness, similar
to the world of practice and ICT-based ‘solutions’. By providing something of a historical
account, an attempt has been made to draw together lessons from the past into the kind
of cumulative account that has often continued to be missing from Information Systems
discourse (Keen 1990). It is hoped that such reflection may prove useful to those interested
in the social study of ICT, and not just those who share an interest in information systems
strategy itself.

Notes
1 Examples of recent fads include business process redesign and re-engineering, enterprise resource
planning, and knowledge management systems—concepts that will be introduced and discussed
later in the chapter.
2 PQM was a further refinement of the BSP and CSF approaches. Again, essential business processes
were identified in line with business objectives. These processes were assessed in terms of the num-
ber of CSFs impacting on them, and the quality and cost of IT-based systems in place to support
them. Further developments deemed to be necessary were identified on the basis of criticality (in
business terms) and performance (both business and technological, current and future).
52 robert d. galliers

3 A more considered approach to the question of alignment is provided in Sabherwal et al. (2001),
where they consider how ICT and business strategies move into, and out of, alignment over time.
4 A taxonomy of approaches to strategic information systems planning prevalent in the early 1990s is
provided by Earl (1993).
5 For critiques of the BPR approach, see for example: Davenport (1996); Sauer and Yetton (1997);
Galliers (1998); and Galliers and Swan (1999).
6 Nonaka and Takeuchi (1995), after Plato, talk of knowledge as ‘justified true belief ’. Given the
emphasis here on the process of applying knowledge to data in order to make informed judgements
about the world in which we live, the word ‘true’ has been dropped from the definition.
7 The contrast provided here is similar to the personalization—codification distinction of Hansen et
al. (1999), and the community-codification distinction made by Scarbrough et al. (1999).

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Questions for Discussion

1 This chapter suggests that there have been four phases in the development of the think-
ing and practice of IS strategizing (ISS): isolated; reactive; prospective, and proactive.
Do you agree with this analysis? If so, explain why and describe the approaches to ISS
that might fit in each phase. If not, then explain why not.
2 Do the four phases account for recent developments in ISS? How would you amend or
extend the framework?
3 Attempt to apply the components of the ISS framework to an organization with which
you are familiar. Is each component in place? Are the components linked in a coherent
manner? What does this tell you about the organization’s approach to ISS?
4 A number of myths are identified (see also Chapter 3) including those associated with
alignment, strategic IT, knowledge management and competitive advantage. Do you
agree with identifying these as myths? Why? Why not?

Further Reading
Picolli, G., Ives, B. (2005). IT-dependent strategic initiatives and sustained competitive advantage: A
review and synthesis of the literature. MIS Quarterly, 29(4), 747–776.
Zheng, W., Yang, B., McLean, G. N. (2010). Linking organizational culture, structure, strategy, and
organizational effectiveness: Mediating role of knowledge management, Journal of Business Research,
63(7), 763–771.
Chapter 3

Robert D. Galliers

ON CONFRONTING SOME OF THE

COMMON MYTHS OF INFORMATION
SYSTEMS STRATEGY DISCOURSE

I wonder if we could contrive … some magnificent myth that would in itself

carry conviction to our whole community
Plato: Republic, Bk 3; 414

I n the a b ov e qu otat i o n from Plato’s Republic, the word ‘myth’ is

­sometimes translated as ‘the noble lie’. Whether the myths – or – lies common in the
mainstream treatment of Information Systems (IS) strategy are noble or not, deliberate or
not, I am uncertain. Irrespective, these myths – let us call them misconceptions certainly –
need to be confronted. This is the purpose of my contribution to this collection.
Over the relatively short history of IS planning and strategy,1 a number of general prin-
ciples have arisen that are often taken as being axiomatic. Three such principles that have
appeared in the mainstream literature include:

•• alignment: information and communication technology (ICT) systems should align with
the business strategy;
•• competitive advantage: ICT systems can provide a firm with an advantage over its com-
petitors; and
•• knowledge management: ICT systems can and should be a repository of an organization’s
knowledge resources.

As with other management fields,2 IS has been subject to a faddishness that fails to answer
Keen’s (1981) challenge for a more cumulative tradition. The ‘holy grail’ of IS has taken a
number of different forms over the years. One can reasonably argue that the database was
the IS ‘solution’ of the 1970s, soon to be followed, later in the decade and into the 1980s,
by decision support systems. The competitive advantage to be gained from i­nformation
 a critique 57

t­ echnology (IT) took root as a key topic in the mid 1980s. The advent of the business process
re-engineering (BPR) movement in the early 1990s presaged a feeding frenzy in the main-
stream academic and popular literature. Later in the decade, perhaps as a result of the loss
of organizational knowledge that occurred as a result of the more extreme applications of
BPR, the concept of knowledge management and knowledge management systems appeared
on the scene. Since then, we have been subjected to enterprise systems and, latterly, the off-
shoring phenomenon.
Given the strategic focus of this contribution, I shall focus in this chapter on two key con-
siderations – one more prevalent in the 1980s, the other a focus of attention in the 1990s and
into the 21st century – namely, competitive advantage and knowledge management. The
third consideration – alignment – has been a major focus, and a source of some contention,
and I shall therefore incorporate this into my treatment of the subject matter.
Another admission before we begin: I am a self-confessed adherent to the transdiscipli-
nary school of thought in the field of IS. There are some who argue for disciplinary purity,
preferring our sole focus of attention to be on the IT artefact (for example, Benbasat and
Zmud 2003) and the design of IT-based IS. I do not; indeed, I go further. I do not perceive
IS as a discipline at all. I see it – like all organizational subjects – as a transdisciplinary
field of interest, possibly even a meta-discipline (for example, Galliers 2003c). And our
focus of attention – I argue – should be not simply the artefact ‘IT’, but the complex and
mutually constituted nature of IT use by human beings in and between organizations, and
in society.
Taking each in turn – alignment, competitive advantage and knowledge management – I
shall question these ‘self evident truths’ with a view to developing an alternative perspec-
tive on IS strategy. This perspective focuses more on the process of strategizing than on the
outcome of the process – the strategy itself. I argue that benefit is to be gained from a more
inclusive, exploratory approach to the strategy process. This perspective is set against the
common view, which is concerned more with exploiting the potential of ICT systems for
business gain. Implicit in my arguments is the view that is intellectually bankrupt to accept
these myths as ‘self evident truths’; that it is actually a dangerous game we play were we to do
so. Too often, our IT solutions are peddled without attention being paid to the questions they
are meant to ‘solve’, and certainly without an appreciation of their unintended consequences
(Robey and Boudreau 1999).
Having provided a critique of each of the myths, an attempt will be made at synthesizing
the arguments, utilizing concepts of, inter alia, architecture and infrastructure (for example,
Star and Ruhleder 1996) and of ‘ambidextrousness’ (Tushman and O’Reilly 1996), with a
view to refining a revised framework of IS strategizing, introduced in Galliers (2004). The
aim is to provide a more balanced perspective, a sense-making device (Weick 1995), that will
have an impact in both theory and practice.

Alignment

A central plank on which much of IS strategy theory and practice has been built is the concept
of alignment. For example, almost 30 years ago, McLean and Soden (1977) compared the
theoretical need for a ‘strong link’ between the business plan and the IS plan with the then
current practice. They found that in less than 50 per cent of cases in their US study was there
this strong link. A similar figure was reported by Earl (1983) in the UK. In later work, Earl
(1989) makes the important distinction between an information systems strategy and an infor-
mation technology strategy. He notes that the IS strategy should be concerned with identifying
58 robert d. galliers

what information is needed to support the business, and what information services need to
be provided. In other words, the IS strategy is demand-oriented. Conversely, he sees the
IT strategy as being supply-oriented. It demarcates what is and will be available in terms of
IT infrastructure, applications, and services. His argument is that these two aspects of IS/
IT strategy should be aligned. Other proponents of alignment include, for example, Parker
et al. (1988), MacDonald (1991), Baets (1992), Henderson and Venkatraman (1992,1999),
and Peppard and Ward (2004). These different perspectives on alignment make a telling
point: what is being aligned with what? The examples given here refer to alignment between
the business and IT strategies; between IS and IT strategies, between business performance
and IT acquisitions; between the internal and external environments, and between IS capabil-
ity and organizational performance.
While the alignment concept may be intuitively appealing, an issue that has remained
­relatively unchallenged and unquestioned is how to align ICT that is relatively fixed,
once implemented in an organization, with a business strategy and associated information
­requirements that are constantly in need of adjustment, in line with the dynamic nature of
the organization’s business imperatives.3 Despite the useful distinction made between IS and
IT strategies, Earl’s (1983) model, for example, is relatively static and does not account
adequately for the changing information requirements of organizations, in line with a chang-
ing business strategy. While a subset of those requirements will doubtless remain relatively
constant over time, the dynamic nature of the competitive, collaborative, and regulatory
environments in which organizations conduct their business dictates that constant and care-
ful attention should be paid to the ever-changing nature of information need. In addition,
and as I have pointed out elsewhere (Galliers 1993, 1999), information is needed to question
whether an existing strategy continues to remain appropriate, given the changing environ-
mental ­context – external considerations in other words – and lessons learned from the unin-
tended consequences of actions taken and IT systems implemented (Robey and Boudreau
1999) – the internal considerations.
This issue leads us to the conclusion that information itself is a medium through which
alignment might take place, and that this might usefully be perceived to be – at the very
least – a two-way process: ‘top-down’ and ‘bottom-up’. Indeed, this is implied by Earl’s
(1983) model. I say at the very least a two-way process because, as indicated above, alignment
between the internal and external environments is an additional dimension to be incorpo-
rated into the alignment debate. Note, however, that from the perspective that information
is the alignment medium, the focus is on such artifacts as technology, the strategic plan, and
bottom-line business benefit. There are, however, those whose approach is more focused
on exploration rather than exploitation (cf. March 1991). The former approach is otherwise
known as coming from the processual school (for example, Whittington 1993), being more
concerned with the process of strategizing than with the strategy itself.
This brings us to the issue of emergence – a topic of debate in the business strategy lit-
erature for the past 20 years or so (for example, Mintzberg and Waters 1985). In practice,
IS strategy approaches tend to be based on a rational analysis of need – either in response to
an extant business strategy, and/or an analysis of current ICT capability – or in a proactive
manner, based on a ‘clean slate’ approach. With respect to the latter, the argument was
essentially that revolutionary change would lead to ‘order-of-magnitude’ business benefits
(Davenport and Short 1990; Hammer 1990; Venkatraman 1991; Davenport 1993). The
approach was based on identifying and streamlining key business processes and key customer
requirements, and then on identifying how ICT might support (and often automate) these
processes and requirements, with a view to improving efficiency and effectiveness, and cut-
ting costs. The approach involved quite some risk (Galliers 1997) and often led to what was
euphemistically called ‘downsizing’, with many middle managers being required to leave
 a critique 59

the company. This had a consequent, unintended (cf. Robey and Boudreau 1999) deleteri-
ous effect on organizational memory and available expertise (Davenport 1996; Galliers and
Swan 1999).
But what of innovation and serendipity? As indicated above, there is a school of thought that
argues for the emergent nature of strategic processes. In the field of IS, Ciborra used terms
such as bricolage (after Levi-Strauss 1966), drift, and tinkering (Ciborra 1992, 2000, 2002) to
propose a more incremental, ad hoc approach to strategizing. He argued that even in situations
where strategic advantage had been gained from the astute application of ICT, the resultant
gain was by no means always expected and in no way pre-ordained. Rather, the organizations
concerned had benefited from creating an environment – or infrastructure – in which innova-
tion might emerge. The approach he advocated smacks of playfulness. Others see benefit in
combining incremental and radical change. Tushman and O’Reilly (1996), for example, speak
of ‘ambidextrous’ organizations, while He and Wong (2004) confirm this hypothesis in a study
of more than 200 manufacturing firms (see also Gibson and Birkinshaw 2004).
All in all then, the question of alignment is a vexed one. I posed the question ‘alignment
with what?’ earlier. There is the question of ‘alignment with whom?’ in addition. Given
the advent of inter-organizational systems, and more so, of the Internet, alignment is also
presumably required along the virtual value chain, with relationships with suppliers and cus-
tomers, for example, needing to be taken into account. It is in such circumstances that we
note the need for human interaction, rather than an almost total reliance on rational analysis
of organizational need or on ICT per se. As will be argued in the context of knowledge
management, there is a need for ‘boundary spanning’ (Tushman and Scanlan, 1981) activ-
ity, for understanding, and trust (Newell and Swan 2000), and the natural development of
‘communities of practice’ (Brown and Duguid 1991; Lave and Wenger 1991) – both within
organizations and externally – in order for new knowledge to emerge.
But let me conclude this discussion regarding the contentious issue of alignment, as a
means of providing something of a link between this discussion and the discussion that follows
on ICT and competitive advantage. We have seen that alignment has been considered from
different perspectives – alignment between ‘what’ and ‘whom’ are key questions. There is a
more basic point to consider here though, and that is the conceptual link that appears to be
missing between what is after all a conceptual business strategy and a physical, technological
artifact. I earlier pondered whether the missing ingredient might be information, and there
is certainly a reasonable argument here. In addition, however, it should be remembered that
organizations often comprise many technologies and many – often dispersed – individuals.4
Increasingly, these individuals are ‘organized’ on a project-by-project basis, thereby add-
ing increased dynamism to the mix, and compounding the issue of alignment still further.
Hansen talks of the need for weak ties across organizational sub-units. Gheradi and Nicolini
(2000) call for the establishment of safety for individuals to form communities of practice for
sharing understanding and knowledge. The processes of developing weak ties and safe com-
munities are learned – and these learning processes are as important as the content knowl-
edge itself (Newell et al. 2003).

Competitive Advantage

Considerable attention was paid in the 1980s and 1990s to what became something of a
Holy Grail of IS – the gaining and retention of competitive advantage from the astute and
proactive use of ICT in and by organizations. ICT ‘changes the way you compete’ noted
one venerable proponent of the cause (McFarlan 1984). Later, during the 1990s, and as
indicated above, radical business transformation on the back of business process change –
60 robert d. galliers

and enabled by ICT – was all the rage (Davenport and Short 1990; Hammer 1990;
Venkatraman 1991; Davenport 1993). But rage of a different kind soon ensued and the
bubble burst as the millennium dawned. Why was that? There are many answers to this
question of course, but let me highlight two of them. One relates to the purchase of so-
called ‘best practice’ solutions, such as enterprise systems, off-the-shelf. The other relates
the question of sustainability.
It was always the case that ICT in and of itself would not provide a firm with competi-
tive advantage, despite the more popular press claiming this to be the case. And this is
certainly even more the case these days with the commoditization of ICT. The advent of
the Internet and enterprise systems has seen to that. What is perhaps surprising is that
we are still treated to claims of ‘best practice’ solutions (sic.) as if there were no con-
tradiction between an advantage to be gained over others by the purchase of a ‘solution’
that could be obtained just as easily by those same competitors, from the same vendors!
Thus, vendors of off-the shelf ‘best practice’ enterprise systems make the implausible
claim that advantage will ensue with the purchase of a technology and services that are
equally available to one’s competitors.5 But there is more: this so-called ‘best practice’
technology – this readily implementable solution – also turns out to require on-going
support and consultancy.6
Even in the 1980s, it became clear that there was an issue of sustainability that had
to be addressed. While there may have been first mover advantage from the purchase of
new technology, the lead gained needed to be sustained over time (for example, Porter
1985; Ghemawat 1986; Hall 1993; Suarez and Lanzolla 2005). And it was Porter who
provided something of an answer to those who proclaimed advantage from the technology
alone (Porter and Millar 1985). The important point he raised at that time was that it was
the use made of the technology that mattered – it was information that could provide the
advantage, not the technology. Later, others joined the fray. Senn (1992), for example,
echoed the later thoughts of Ciborra and others in criticizing the very concept of strategic
IS, and later still, Land (1996) questioned the basic premises on which the BPR movement
was built.
What is perhaps both surprising and disappointing about the faddishness of much of the
literature on IS strategy is that many key lessons were soon forgotten as a new technology
or movement emerged. Thus, for example, Leavitt’s (1965) argument that organizations
could usefully be viewed as complex socio-technical systems, comprising four elements –
­objectives, structure, technology and people – seems to have become lost in the excitement,
the Zeitgeist, if you will. The focus in the age of BPR was primarily on ICT and processes, and
in the age of enterprise systems, it appears to be primarily on a technological architecture
that actually dictates how processes should be undertaken. Even one of the founding fathers
of the BPR movement proclaimed that it had become ‘the fad that forgot people’ (Davenport
1996) – of which more in the section on knowledge management.
With the emergence of the Internet and e-business, again we are confronted with consid-
erable hyperbole, notwithstanding the bursting of the dotcom bubble. Again, we have been
treated to many arguments that another new technology would fundamentally change the
basis of competition. In his compelling Harvard Business Review article, Porter (2001) refutes
any such suggestion. Porter sees the Internet as something that complements rather than
cannibalizes organizations and organizational ICT as we have come to know them. As I have
noted previously (Galliers 2004: 254), ‘while some have argued that “the Internet renders
strategy obsolete” … the opposite is true … it is more important than ever for companies to
distinguish themselves through strategy’ (Porter 2001: 63). While Porter sees the Internet
as just another means of doing business, opening up a new channel, he makes the point that
it is likely to increase competition and make it more difficult for companies to sustain their
 a critique 61

competitive advantage. Thus, in his view, ICT in and of itself, rather than being a force for
competitive advantage, becomes a force against competitive advantage. He goes on to argue
that ‘only by ­integrating the Internet into overall strategy will this powerful new technology
become an equally powerful force for competitive advantage’ (Porter 2001: 78).
To develop this argument further, competitive advantage may be gained by those companies
that can integrate uses of the Internet with their core competences (Prahalad and Hamel 1990).
Porter’s contention is that it may well be easier for ‘traditional’ companies to do this than for
dotcoms to adopt, develop, and integrate such competencies themselves. He argues that these
core competencies and traditional strengths are likely to remain the same, with or without the
Internet, and it is these that will provide competitive advantage, not the technology.
Thus, we might argue that ICT’s impact on competitiveness may well be negative rather
than the positive view most often expounded in the mainstream literature. In addition, we
have seen companies attempting to utilize ICT in an attempt to increase efficiency and reduce
costs. Having said that, and as noted in the discussion on BPR and enterprise systems, in
adopting this approach, companies run the risk of reducing their effectiveness, dexterity and
innovative capacity. Unless they can develop the ambidextrousness of which Tushman and
O’Reilly (1996) speak, they face the common dilemma of gaining efficiency at the expense
of innovation (Clark and Staunton 1989; March 1991; McElroy 2000). And they also run the
risk of losing their capacity for organizational learning – and knowing – as discussed in the
section that follows.

Knowledge Management

Knowledge is considered by many to be a key organizational resource, and the knowl-

edge management movement that followed the BPR era has encouraged organizations
to attempt to exploit more strategically their knowledge assets (for example, Kogut and
Zander 1992; Grant 1996).7 Companies are thus lured by the suggestion that they can
gain competitive advantage – that expression again! – by managing their knowledge assets
more astutely, and in particular, by transferring knowledge across individuals, groups,
and organizational units, using ICT to achieve this end. There is a knowledge management
aspect to the enterprise systems phenomenon, and I shall introduce this section by attack-
ing these myths before progressing to a consideration of knowledge management systems
(KMS) themselves. Incorporating knowledge management considerations into a discourse
on IS strategizing will be left to the final section of this chapter, but it is perhaps worth
noting the current relative lack of such considerations in mainstream IS strategy discourse.
This is somewhat surprising given the common view that knowledge is a strategic organi-
zational resource, and that ICT systems are means by which such knowledge can be trans-
ferred across time and space.
As already discussed, enterprise systems are often promoted as a means of transferring
‘best practice’ knowledge. An enterprise system’s built-in processes require the adopting
organization to adapt its existing processes to the exigencies of the software. The argument is
that, since these inbuilt processes are based on ‘best practice’ industry standards, the organi-
zation concerned will automatically benefit as a result.
But, as we have seen, vendors of enterprise systems make much of the consultancy
services they offer during and after implementation. Presumably, these services are
provided in order for the ‘best practice’ solution to become ‘better’, and the off-the
shelf ‘solution’ to be customized. Research undertaken by Wagner (Scott and Wagner
2003; Wagner and Newell 2006) demonstrates how these so-called best practices have
to be molded and adapted to the realpolitik of organizations, to some extent at least,
62 robert d. galliers

despite the services of the vendor. In addition, and in relation to the earlier discussion on
alignment, enterprise systems are often implemented to replace legacy systems, which
­presumably have drifted out of alignment – presumably, too, to become legacy systems
in their own right over time.
Moreover, by advocating copying best practices to improve efficiency, organizations
are, potentially at least, running the risk of actually reducing their ability to create the new
knowledge needed to innovate and respond creatively to changing imperatives. Given that
this is a key concern of business strategy, and that KMS are meant to support and inform
the process of strategizing, it appears we may have another problem here. ICT such as
enterprise systems and the Internet can be thus seen to be a force for standardization, thus
speeding competitive convergence, given that the technology is more or less common –
and increasingly commoditized – irrespective of the organization implementing it. But
there is more to this enigma, as presaged by the earlier comments on knowing as opposed
to knowledge.
The myth of KMS emerged in the 1990s. That is, ICT-based KMS can store and transfer
knowledge. Thus, existing knowledge can be collected and re-used, utilizing ICT. From this
perspective, knowledge is ‘out there’, ready to be mined, harvested. We thus return to the
mythology of ‘best practice’ that underpins much of this kind of thinking. Presumably, for
such knowledge to be worth re-using, knowledge of what is best practice is required.8 But,
let us consider some basic principles here. Checkland (1981) reminds us that, while ICT can
be exceptionally powerful and proficient in processing data, it is human beings who apply
meaning (their knowledge) to selected data in order to make sense (cf., Weick 1990) of
these data, for a specific purpose. Data may therefore be context-free, while information can
only be informative within a particular context. ICT systems are therefore data processing
systems – nothing more, nothing less. IS require the presence of human beings who apply
their knowledge to turn data into information. Knowledge is therefore tacit (cf. Polanyi
1966) and embedded. ‘It resides within our brains, and enables us to make sense of the data
we [choose to] capture’ (Galliers 2004: 253). It is also ‘sticky’ (Szulanski 1996; Szulanski
and Jensen; 2004) in that its contextual nature means that it is less easily transferred than the
KMS perspective might otherwise suggest.
Responsibility for the myth of codified knowledge that can be captured in ICT systems
can, partially at least, be laid at the doorstep of Nonaka (for example, Nonaka and Takeushi
1995). Their model depicts the transformation of tacit knowledge into codified knowledge
and is widely known and frequently cited in this context. An alternative perspective has
also appeared on the scene, however, one that is much more in line with the perspective
adopted in this essay. Blackler (1995), Boland and Tenkasi (1995), Tsoukas (1996), and
Cook and Brown (1999), among others, raise issues of knowledge transfer and knowing
rather than knowledge capture and codification. Individuals working with colleagues in
organizations learn (for example, Bogenreider and Nooteboom 2004) from their interac-
tions with each other and their interactions with formal (and informal) data processing
systems (cf. Land 1982). Similarly, Wenger (1998) talks of situated learning in the context
of communities of practice, while Sole and Edmondson (2002) develop the concept further
in relation to geographically dispersed teams. The contrast between these perspectives on
knowledge and knowing, on capture and creation, and on explicit and tacit knowledge
is similar to the personalization-codification distinction of Hansen et al. (1999), and the
community-codification distinction made by Swan and Preston (1999). In taking the more
processual perspective, I would argue that there is potentially considerably more to be
gained from the process of knowing, of knowledge creation, of learning and human interac-
tion – in the context of this essay, the process of strategizing9 – than the mere transfer of
‘knowledge’ per se.
 a critique 63

Synthesis: Towards a Revised Framework for IS Strategizing

An attempt is made in this final section to bring together aspects of the foregoing arguments
as a basis for the development of a revised framework for IS strategizing. Thus far, we have
considered the issues of alignment, competitive advantage, and knowledge management,
as they each relate to the development and use of ICT systems in and between organiza-
tions. An attempt has been made to raise serious doubts about some of the mythology that
has surrounded these concepts in the more popular, mainstream literature. With regard to
the topic of alignment, we have noted, inter alia, that there are vexed issues associated with
aligning dynamic information needs with a relatively static technology. Alignment with what
and with whom were issues that were also raised. Competitive advantage on the back of an
increasingly commoditized technology also presents us with something of a conundrum, with
the importance of ICT use and capability, core competence, and the key role of information
each being highlighted. In relation to knowledge management and KMS, questions were
raised as to whether ICT systems could in fact capture and transfer knowledge and, just as
importantly, the process of knowing and knowledge creation was privileged over knowledge
capture and transfer.
In attempting to synthesize these arguments, with a view to developing a revised, inte-
grated framework for IS strategizing, the socio-technical concept of an information archi-
tecture or infrastructure is a useful building block (for example, Star and Ruhleder 1996;
Monteiro 1998; Ciborra 2000; Hanseth 2004; ), as argued in Galliers (2004). In introducing
this framework, it was argued that organizations could be ambidextrous (cf. the arguments
introduced earlier, based on the work of Tushman and O’Reilly 1996) in combining an abil-
ity both to exploit current capability and to explore new possibilities. Modes of exploitation
and exploration, I argue, may be facilitated by an environment – an information infrastruc-
ture or architecture – that provides a supportive context for learning and interaction. I shall
take each of these components of the proposed framework in turn, as a means of refining the
framework and describing how it might be used as a sense-making (cf. Weick 1995) device
in organizations.
The process of exploitation adopted in the revised framework bears many of the hall-
marks of mainstream thinking on IS strategy. This is the deliberate – as compared to the
emergent – strategy of which Mintzberg speaks (Mintzberg and Waters 1985). A deliberate
attempt is made to identify and develop ICT applications that both support and question the
organization’s strategic vision, and current need for information and expertise. Here, we
find both the IS and IT strategies that Earl (1989) proposes. It is likely that enterprise sys-
tems and so-called KMS, and standardized procedures for adopting ICT products, hiring ICT
personnel, and developing customized applications will each contribute to this exploitation
strategy. And, in line with the models introduced in Galliers (1991, 1999), an aspect of this
strategy will relate to the organizational arrangements for IS/IT services, including sourcing
considerations (cf. Lacity and Willcocks 2000, for example). Policies on such issues as risk,
security, and confidentiality will also need to be considered in this context (for example,
Backhouse et al. 2005).
With respect to the exploration aspects of strategizing, here the emphasis is much more
on issues associated with situated learning, communities of practice, and cross-project
learning. Ciborra and colleagues (Ciborra 2000) talk of drift in this context – as against
control – but there is nonetheless a sense of direction and purpose associated with this
activity. I therefore prefer the term emergence in this regard, but there is certainly a sense
of bricolage (cf. Levi-Strauss 1966) and tinkering at play here, to return to terms favored
by Ciborra (1992). As noted, organizations are increasingly reliant on project teams whose
membership may well be in flux and distributed. Considerations of trust (Sambamurphy
64 robert d. galliers

and Jarvenpaa 2002) and learning from one project to another (for example, Scarbrough et
al. 2004) are key features at play here. The role of communities of practice (for example,
Wenger 1998) is crucial in knowledge creation as we have seen, as is the role of boundary
spanning individuals (Tushman and Scanlan 1981), or what we might term knowledge bro-
kers (see also, Lave and Wenger 1991; Hansen 1999).
While the concept of the ambidextrous organization has been postulated (Tushman and
O’Reilly 1996), and some empirical research has been conducted to test the thesis (for exam-
ple, He and Wong 2004), there remains little in the literature that might be of assistance to
organizations in providing an enabling, supportive environment that might foster this sought-
after ‘ambidexterity’. Relating concepts of infrastructure introduced earlier to the concept
of ambidexterity would appear to hold some promise in this regard.

In the 1980s and 1990s, the term information infrastructure usually connoted
the standardization of corporate ICT, systems, and data, with a view to reconcil-
ing centralized processing and distributed applications. Increasingly, however …
the concept has come to relate not just to data and ICT systems, but also the
human infrastructure.
(Galliers 2004: 256)

Thus, the kind of socio-technical environment proposed by Star and Ruhleder (1996),
Ciborra (2000), and Hanseth (2004), for example, would combine information and knowl-
edge sharing services – both electronic and human – that would facilitate both exploration
and exploitation of knowledge, and the kind of flexibility necessary to enable appropriate
responses to changing business imperatives. In some ways, this kind of infrastructure would
help circumvent the alignment issue that was introduced at the beginning of this chapter.
I have also stressed the importance of on-going learning and review, given the processual
view adopted here, the unintended consequences arising not only from ICT implementa-
tions (Robey and Boudreau 1999) and the dynamic nature of alignment (Sabherwal et al.
2001), but also the emergent nature of strategizing (Mintzberg and Waters 1985). The whole
process of strategizing is one of visioning, planning, taking action, and assessing outcomes,
all with an eye to changing circumstance and imperatives, and the actions of individuals and
groups outside, and notwithstanding, any formal strategy process. There are countless books
on breakthrough change management focusing on the role of ICT (for example, Lientz and
Rea 2004) and on so-called transformational leaders (for example, Anderson and Anderson
2001). The major features of this genre include prescriptive, deliberate approaches that sug-
gest guaranteed, order-of-magnitude gains. Organizational realities suggest an alternative,
incremental approach more akin to ‘muddling through’ (Lindblom 1959), however. The
incremental exploration of possibilities – the tinkering (Ciborra 1992) and bricolage (Levi-
Strauss 1966) – along with the more deliberate, analytical approaches that incorporate over-
sight of implementations and review of outcomes (for example, Willcocks 1999) is what is
envisaged here.
Bearing all this in mind, the following framework is an attempt to further refine the IS
strategizing framework introduced in Galliers (2004: 256). The framework is not meant to
be a prescriptive tool, nor a solution. It is a sense-making (cf. Weick 1995) device, meant
more as an aide memoir, to be used to raise questions and facilitate discussion concerning
the strategizing elements and connections that may or may not be in place in any particular
organization.
One final point in closing: the fact that I continue to refer to the strategizing frame-
work as one concerned with IS (as opposed to either ICT at one pole or knowledge sharing
and creation at the other) is deliberate. There are two primary reasons for this. The first
 a critique 65

Collaborative and Socio-political,

competitive Knowledge creation regulatory
environment and sharing environment
Infrastructure
(human and technical
Exploitation competencies) Exploration
strategy strategy
(Deliberate) (Emergent)
- Codified ‘solution s’ - Communities of
e.g. Enterprise systems, practice
‘Knowledg e management’ - Flexible project teams
systems - Knowledgebrokers,
- Standardised ‘bound aryspann ers’
procedures and rules; - Cross-project learning
formal systems - Bricolage/tinkering,
- Information services muddling through
(sourcing)

Change management
Strategy
incorporating on-going
learning and review

Figure 3.1 A revised IS strategizing framework

relates to the above discussion of the nature of data, information, and knowledge. The
socio-technical infrastructure depicted in Figure 3.1 comprises human beings who can make
sense of data provided by both formal and informal systems via the application of their
(situated) knowledge. In doing so, they turn data into purposeful information. The second
reason is to provide an otherwise missing link between the literatures on IS/IT strategy, on
knowledge management, and on organizational strategies for change – the transdisciplinary
perspective mentioned in the introduction. Too often viewed as discrete, an underlying
argument in this essay is that the concepts emerging from these literatures should be viewed
as complimentary and synergistic. If I may be permitted to misquote Porter (2001: 78), the
next stage of strategy evolution will involve a shift in thinking from business strategy and
knowledge strategy, to IS strategizing. By integrating IS considerations into the discourse
on business and knowledge strategy, the resultant thinking and practice will become mutu-
ally constituted and significantly more robust. In saying this, I realize that I may have unin-
tentionally constructed a new myth. Please accept though that my intentions – my ‘lies’ if
you will – are ‘noble’.

Notes
1 Early academic literature on these topics dates back to the work, e.g., of Young (1967); Kriebel
(1968); McFarlan (1971), and Lincoln (1975).
2 I take an organizational/managerial perspective in this chapter in providing a critique of the main-
stream literature, rather than a social science perspective.
3 Sabherwal et al. (2001) being an exception – these authors refer to the concept of punctuated equi-
librium in noting the natural tendency of organizations’ IS strategies and business strategies to fall in
and out of alignment over time.
4 Indeed, it is instructive in this context to recall that the Department of Organisation, Work and
Technology in the Lancaster University Management School was known formerly as the Department
of Behaviour in Organisations (my emphasis), rather than by the more usual term, Organisational
Behaviour.
5 For example: (i) ‘Oracle ROI Series studies document the quantifiable values and strategic benefits
of Oracle-enabled business transformations’, http://www.oracle.com/customers/index.html; (ii)
66 robert d. galliers

‘You’ve stretched every budget and trimmed every expense. Or have you? SAP solutions give you
real-time visibility across your entire enterprise, so you can streamline your supply chain, bring
products to market faster, get more out of procurement, and eliminate duplication of effort. SAP is
a world leader in business solutions, offering comprehensive software and services that can address
your unique needs’, http://www.sap.com/solutions/index.epx.
6 For example: (i) ‘Oracle Consulting builds creative solutions for modern businesses. Drawing on
industry best practices and specialized software expertise, Oracle consultants help you assess your
current infrastructure, create your enterprise computing strategy, and deploy new technology. With
Oracle’s flexible and innovative global blended delivery approach, we assemble the optimal team
for your organization by matching the right expertise, at the right time for the right cost in every
phase of your project. Whether you have a new Oracle implementation or a system upgrade, Oracle
Consulting helps you face today’s most complex technology challenges and increase the financial
return on your Oracle investment’, http://www.oracle.com/consulting/index.html; (ii) ‘Ensur-
ing the value of your SAP investment takes more than software. It takes SAP Consulting – and the
expertise and skill we’ve gained from 69,000 implementations over 30 years. With more than 9,000
consultants, plus a global network of 180,000 certified partners, SAP Consulting can provide the
depth and breadth of coverage your business demands’ (http://www.sap.com/services/consulting/
index.epx).
7 A special issue of the Journal of Strategic Information Systems is devoted to the issue of knowledge man-
agement and KMS (Leidner 2000).
8 Nonaka and Takeuchi (1995) define knowledge as ‘justified true belief’, following Plato. Given
adherence to the social construction of reality (cf., Berger and Luckman 1966), knowledge here
might better be interpreted as ‘justified belief’.
9 Building on the concept of alternative interpretations of the same data, and thus alternative futures,
or scenarios (cf., Galliers, 1993, 1995), Cummings and Angwin (2004) use the metaphor of the
chimera to discuss potential future developments in strategic thinking.

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70 robert d. galliers

Questions for Discussion

1 A number of myths are identified (see also Chapter 2) including those associated with
alignment, strategic IT, knowledge management and competitive advantage. Do you
agree with identifying these as myths? Why? Why not?
2 What more recent fads and fashions can you identify in the world of strategic informa-
tion management? What are the implications of a failure to treat new technologies and
innovations more reflexively bearing in mind the arguments raised in this and preced-
ing chapters?
3 Is there such a thing as best practice? Why? Why not? What are the implications of
accepting the notion in the context of strategic information management?
4 Consider the concepts of aligning versus alignment and knowing versus knowledge.
What distinguishes one from the other? Are the distinctions helpful when considering
the applications of these concepts in organizations. Why? Why not?
5 Consider an organization with which you are familiar. To what extent does the concept
of ambidexterity apply? What is the relative emphasis placed on exploitation versus
exploration? What do you infer from this in terms of revised strategic considerations?

Further Reading
Bloodgood, J. M., Salisbury, W. D. (2001). ‘Understanding the influence of organizational change strate-
gies on information technology and knowledge management strategies’. Decision Support Systems,
31(1), 55–69.
Henderson, J. C., Venkatraman, N. (1993). ‘Strategic alignment: Leveraging information technology for
transforming organizations’. IBM Systems Journal, 32(1), 472–484.
Chapter 4

Robert D. Galliers

CONCEPTUAL DEVELOPMENTS
IN INFORMATION SYSTEMS
STRATEGIZING: UNPACKING THE
CONCEPT

Prologue: Towards a Revised Framework for Information Systems

Strategizing

In previous work (in particular, Galliers, 2004, 2007), an attempt was made to collect together
aspects of recent thinking in organizational and information systems (IS) ­strategic thinking to
develop a framework that would aid the process of IS strategizing. The p­ roblematic nature of
key tenets of much of the mainstream IS strategy literature (i.e., issues of alignment, compet-
itive advantage, and so-called knowledge management systems or ‘best practice’ solutions)
was considered in the context of the development and strategic impact and use of informa-
tion and communication technology (ICT) systems in and between organizations. Inter alia,
it was noted that there are vexed issues associated with aligning dynamic information needs
with a relatively static technology (see also, Desouza, 2006), and harnessing an increasingly
commoditized technology to provide competitive advantage. This is at the heart of Carr’s
(2003, 2005) argument that ‘IT Doesn’t Matter’. But Carr misses the point. Crucially, it is
the use to which ICT is put by organizations, and their capability and competencies in this
regard, that are crucial, as is the key role that information can play in questioning, supporting
and informing the strategizing process. In relation to knowledge management and knowl-
edge management systems in particular, questions were raised as to whether ICT systems
could in fact capture and transfer knowledge, with the process of knowing and knowledge
creation (e.g., Boland & Tenkasi, 1995; Nonaka & Takeuchi, 1995; Cook & Brown, 1999;
von Krogh et al., 2000) being highlighted. This orientation was set against the capture and
transfer knowledge that is the focus of much of the mainstream literature on the topic, and
the knowledge-based theory of the firm (Grant, 1996; Spender, 1996).
In attempting to synthesize these arguments with a view to developing a more holistic
framework for IS strategizing, the socio-technical concept of an information architecture
72 robert d. galliers

or infrastructure (e.g., Star & Ruhleder, 1996; Monteiro, 1998; Ciborra, 2000; Hanseth,
2004) provided a useful building block. In addition, it was argued that organizations should
be ‘ambidextrous’ (Tushman & O’Reilly, 1996) in that they should combine an ability to
explore new opportunities as well as exploit current capabilities and technology. I argued that
this ambidexterity can be facilitated by an environment an information infrastructure or
architecture that provides a supportive context for learning and interaction. I introduced
each of these components in the context of a framework that is meant to be used as a sense-
making (cf. Weick, 1995) device, rather than a prescriptive tool.
Before proceeding to unpack the framework in greater detail than previously, I should first
clarify how the term information systems (IS) is used here. As I have argued elsewhere (see,
for example, Galliers, 2003, 2006b), I view IS as neither being focused on the IT artefact (a
technological perspective common in much of the literature) at one pole nor on knowledge
sharing and creation at the other. I view IS as incorporating both aspects as a socio-technical
construct in other words, mutually constituted. There are two primary reasons for this. The
first relates to the nature of data, information and knowledge (Galliers & Newell, 2003a,
2003b). The socio-technical infrastructure (e.g., Star & Ruhleder, 1996; Ciborra, 2000)
depicted in Figure 4.1 comprises human beings who can make sense of data provided by both
formal and informal systems via the application of their (situated) knowledge. In doing so,
they turn data into purposeful information (see also Chapter 19). The second reason is to
provide an otherwise missing link between the literatures on IS/IT strategy, on knowledge
management, and on organizational strategies for change. Too often viewed as discrete, an
underlying argument in this chapter is that the concepts emerging from these literatures
should be viewed as complimentary and synergistic, as argued by Porter (2001), for example

Collaborative and Socio-political,

competitive Knowledge creating regulatory
environment and sharing environment
infrastructure
(human and technical
capabilities; trust,
Exploitation Exploration
socialisation and
strategy strategy
(Deliberate) communication) (Emergent)

- Codified ‘solutions’ - Communities of

e.g. Enterprise systems, practice
‘Knowledge management’ - Flexible project teams
systems - Knowledge brokers,
- Standardised ‘boundary spanners’
procedures and rules - Cross-project learning
- Information services - Bricolage/tinkering
(sourcing)

Change management
and implementation
strategy
incorporating on-going
learning and review

Figure 4.1 A Revised Information Systems Strategizing Framework

 conceptual developments 73

(see also Galliers et al., 1997). I shall refer to these other literatures in the course of this
chapter in addition to providing a critical treatment of much of the IS strategy and planning
literature.
I should also note that aspects of the IS, IT and information management (IM) strategies
first articulated by Michael Earl (1989), and developed further in Galliers (1991, 1999) as
information, IT and information services strategies the combination forming the IS strategy
as a whole are incorporated into both the exploration and exploitation strategies of Figure
4.1. The exploration strategy takes more of an informal approach Ciborra (1992); Ciborra
(1994), after Levi-Strauss, 1966) would call this tinkering or bricolage as against the formal
approaches of the kind identified by Earl (1993). These include what Earl terms business-
led, method-driven, administrative (i.e., resource-focused) and technological approaches.
His study led to the conclusion that an organizational approach held most promise given its
emphasis on process, integration and, crucially, stakeholder involvement (see also, Codoba,
2009). The exploration strategy also takes into account the learning or knowledge that can
emerge from communities of practice, boundary spanning individuals and flexible project
teams (e.g., Tushman & Scanlan, 1981; Lave & Wenger, 1991; Wenger, 1998; Hansen et
al., 1999; Scheepers et al., 2004; Erden et al., 2008), including learning across projects
(e.g., Newell & Edelman, 2008). The exploitation strategy, as noted, is more formal in its
approach and focuses more on codified ‘solutions’, standardized procedures and standards. It
also incorporates issues of how the information services function should be organized, includ-
ing key sourcing issues (e.g., Lacity & Willcocks, 2000).
In this chapter, then, I shall attempt to unpack the concept of the IS strategizing framework
still further, by articulating, in greater depth, the literature that has informed its development.
The aim is to ground the framework in the extant literature, provide a rationale for the whole
and the component parts, and articulate what is meant by each aspect of the framework. The
framework, slightly revised from the 2007 version, is illustrated in Figure 4.1 below. Each
aspect will be considered in turn, commencing with the environment internal and external in
which the strategizing process is taking place. The chapter ends with a consideration as to how
the framework may be put to good use in organizations.

The Strategizing Environment

As indicated above, my treatment of the strategizing environment considers this aspect of

IS strategizing from two perspectives: internal as well as external. From the internal per-
spective the focus is on a balance between the formal and the informal; the technological
and the organizational; codified and tacit knowledge; the deliberate and the emergent, and
implementation and innovation, all with the aim of exploiting resources while exploring new
opportunities. Information transfer and sharing is at its core, very much in line with the
arguments of Michael Tushman and colleagues (e.g., Tushman & Nadler, 1978; Tushman
& Scanlan, 1981; Tushman & O’Reilly, 1996). In addition, and as argued by Newkirk et
al. (2003), a balance has also to be struck between too much planning and too little. Too
much planning may lead to delay and may impede implementation, while too little may lead
to implementation plans with insufficient detail (see also, Earl, 1993; Ward & Griffiths,
1996; Ward & Peppard, 2002). Room has to made for innovation and improvisation (Vera
& Crossan, 2005; Crossan & Sorrenti, 1997), as well as building the necessary capacity and
capability for change (Teece et al., 1997; Peppard & Ward, 2004) organizational character-
istics that ‘enable an organization to conceive, choose and implement strategies’ (Barney,
1991). This, too, is where the knowledge creating and sharing infrastructure plays a signifi-
cant role, as detailed below.
74 robert d. galliers

The external environment should take account of the institutional context (see Chapter
4) in which the organization operates including the socio-political and regulatory environ-
ment, and cultural nuances in different parts of the organization, especially in multinational
arrangements, for example (Finnegan & Longaigh, 2002; Mohdzain & Ward, 2007; David
et al., 2008). In relation to the latter, there has been increasing focus in the literature on
subsidiaries (e.g., Gupta & Govindarajan, 2000; O’Donnell, 2000), for example, given
growing globalization (e.g., Walsham, 2001; Sheth & Sisodia, 2007; Galliers, 2007b; Oshri
et al., 2008), with Finnegan and colleagues (2003) noting the impact of different cultures and
power relationships of external stakeholders, and Ives and colleagues (1993) highlighting the
potential of resistance from foreign subsidiaries and the disparity in the IT infrastructure and
available products in different parts of the world. The effects of trust in virtual communities
may also be significant (Jarvenpaa & Leidner, 1999; Ridings et al., 2002). Depending on par-
ticular circumstances, these are the kind of considerations that need to be taken into account.
Also of potential relevance is the work on issues associated with integrating IS after mergers
and acquisitions (McKiernan & Merali, 1993, 1995; Brown & Renwick, 1996; Giacomazzi
et al., 1997), with Wijnhoven and colleagues (2006) developing a variant of Henderson and
Venkatraman’s (1999) alignment model to take account of the extent of integration: from
complete integration to mere co-existence. All this is in addition to the analysis of the com-
petitive forces (e.g., Porter, 2001) and the cooperative or conflictual arrangements (e.g.,
Webster, 1995) at play.
One final point: in earlier work (Galliers, 1991, 1993, 1999 in particular), and as noted
above, I proposed an IS strategizing framework that was closely linked to a business strategy.
The business strategy was considered to exist outside the boundary of the IS strategy that is,
in its internal environment. The link, it was argued, should be a strong one, with the infor-
mation strategy feeding off, and feeding into, the business strategy.
The information strategy, in my terms, was concerned with the information needed
not only to support but also to question the business strategy. For example, are assumptions
that underpin the strategy being borne out? It should be noted that the business strategy is
absent from Figure 4.1, however. This is not an oversight. In line with Porter’s (2001: 78)
­argument, the revised IS strategy is a significant aspect of the overall business strategy, it
is integrated into it. In an earlier reflection on the subject (Galliers, 2007a; 238, emphasis
added), I re-interpreted a passage from Porter’s article, as follows:

The next stage of strategy evolution will involve a shift in thinking from business
strategy and knowledge strategy, to Information Systems strategising. By inte-
grating Information Systems considerations into the discourse on business and
knowledge strategy, the resultant thinking and practice will become mutually
constituted and significantly more robust.

It is with this in mind that the IS strategizing framework is presented without explicit ­mention
of the business strategy, and with which the knowledge creating and sharing infrastructure
is introduced to provide the oxygen needed for what should be seen as a dynamic, on-going
and iterative process.

The Knowledge Creating and Sharing Infrastructure

In a previous work, I described the knowledge creating and sharing infrastructure in terms
of an information architecture (Galliers, 2004; 255–6). This was meant to connote an ena-
bling socio-technical environment for both the exploitation of knowledge (efficiency) and the
 conceptual developments 75

e­ xploration of knowledge (innovation) in line with Tushman’s concept of ambidexterity

(Tushman & O’Reilly, 1996). There are elements here, too, of what Boland and Tenkasi
(1995) term communities of knowing. I shall unpack the exploitation and exploration strate-
gies that play an important role in the IS strategizing concept in the sections that follow, but it
is important to note at this stage that this socio-technical environment is meant to enable and
facilitate the strategizing process by ensuring that the necessary human and technical capabili-
ties are in place (cf., Peppard & Ward, 2004), not only within the organization but with key
partners, such as in sourcing arrangements (Beulen et al., 2005).
As noted previously (Galliers, 2004), the concept of an information infrastructure has
developed over time.
In the 1980s and 1990s, the term information infrastructure usually connoted the stand-
ardization of corporate ICT, systems and data, with a view to reconciling centralized pro-
cessing and distributed applications. So, the question would need to be asked whether the
necessary technologies are in place to support the enterprise moving forward. Increasingly,
however, the concept has come to relate to the human infrastructure in addition. For exam-
ple, what roles and skills are required, not just in terms of developing and delivering infor-
mation systems increasingly in a distributed environment (Kotlarsky & Oshri, 2005) but
also in their management (Galliers & Leidner, 2009)? Weill and Ross (2004) talk in terms
of IT g­ overnance in commenting on some of these issues. As already noted, trust plays an
important role here too (Kanawattanachai & Yoo, 2002; Sambamurthy & Jarvenpaa, 2002),
with a team atmosphere needing to be in place (Zarraga & Bonache, 2005). Additionally,
the means by which alternative stakeholder concerns are taken into account (Codoba, 2009)
is an important consideration, bearing in mind that implicit in many of the more formal
approaches to strategizing is the assumption that individuals can make stated organizational
objectives their own (Willmott, 1993), with questions of power (Foucault, 1984) often being
left unconsidered. As noted earlier, Star and Ruhleder (1996) talk of infrastructures in terms
of their embeddedness, transparency, reach, links with conventions of practice, and installed
base. An information infrastructure should thus be viewed as heterogeneous in nature.
The concept is further refined here by introducing ideas related to knowledge creating
and sharing, building on earlier work by Nonaka, von Krogh and colleagues (e.g., Nonaka,
1991, 1994; Nonaka et al., 1994, 2006; von Krogh et al., 2000; Nonaka & Toyama, 2003;
Nonaka & von Krogh, 2007; Erden et al., 2008), and to project learning (Kotnour, 1999;
Salas et al., 2000; Schindler & Epplerm, 2003; Scarbrough, et al., 2004) and cross-project
learning capability (Newell & Edelman, 2008), bearing in mind the ‘stickiness’ of knowledge
(von Hippel, 1994; Szulanski, 1996; Szulanski & Jensen, 2004), and the resultant need for
boundary spanning activity (Tushman & Scanlan, 1981). The creation of a dynamic capability
(Zollo & Winter, 2002; Winter, 2003) in this regard is key. According to Zollo and Winter
(2002: 340), dynamic capabilities are ‘a learned and stable pattern of collective activity
through which the organization systematically generates and modifies its operating routines
in pursuit of effectiveness’.
Previously, issues of exploration and exploitation have tended to be considered as being
in opposition to each other (March, 1991). Increasingly, however, we see different ICT
initiatives such as ERP and KM systems being implemented in tandem in an attempt fos-
ter the simultaneous development of organizational efficiency and flexibility (Newell et al.,
2003) hence the need to view the exploration and exploitation strategies as being mutually
constituted and reinforcing (cf., Cook & Brown, 1999). Formal ‘organization memory’ IS
(Nevo & Wand, 2005) will certainly have their place, but so will means by which knowing
is facilitated and by which knowledge can flow, even in distributed teams (Carmel, 1999;
Desouza & Evaristo, 2004) or in multinational locations (Gupta & Govindarajan, 2000; Oshri
et al., 2008).
76 robert d. galliers

The Exploitation Strategy

The process of exploitation bears many of the hallmarks of mainstream and earlier thinking
on IS strategy. For example, much of earlier and even recent practice follows what might be
termed a deterministic path of technology exploitation (cf., Earl, 1993). Thus, Lederer and
Sethi (1988), for example, speak of strategic information systems planning as ‘the ­process
whereby an organization determines a portfolio of computerbased applications to help it
achieve its business objectives’. In a later work, Lederer and colleagues (Newkirk et al.,
2003) build on the work of Mentzas (1997) in detailing such planning phases as strategic
awareness; situation analysis; strategy conception; strategy formulation, and strategy imple-
mentation. This is the deliberate as compared to the emergent strategy of which Mintzberg
speaks (Mintzberg & Waters, 1985). A deliberate attempt is made to identify and develop ICT
applications that both support and question the organization’s strategic vision, and current
need for information and expertise (Segars & Grover, 1999). Here, we find both the IS and
IT strategies that Earl (1989) proposes. It is likely that Enterprise Systems (e.g., Howcroft,
et al., 2004a) and so-called KMS (e.g., Leidner, 2000), and standardized ­procedures for
adopting ICT products, hiring ICT personnel, and developing customized applications will
each contribute to this exploitation strategy. Indeed, organizational routines can be a source
of connections and improved understandings according to Feldman and Rafaeli (2002). And
in line with the models introduced in Galliers (1991, 1999), an aspect of this strategy will
relate to the organizational arrangements for IS/IT services, including sourcing considera-
tions (cf. Lacity & Willcocks, 2000; Carmel & Agarwal, 2002, for example). Policies on such
issues as risk, security and confidentiality will also need to be considered in this context (e.g.,
Backhouse, et al., 2005).

The Exploration Strategy

With respect to the exploration aspects of IS strategizing, here the emphasis is much more
on issues associated with situated learning (Lave & Wenger, 1991), communities of prac-
tice (Wenger, 1998) and of knowing (Boland & Tenkasi, 1995), and cross-project learning
(Newell & Edelman, 2008), as noted in the above discussion on infrastructure. Ciborra and
colleagues (Ciborra, 2000) talk of drift in this context as against control but there is nonethe-
less a sense of direction and purpose associated with this activity. I therefore prefer the term
emergence in this regard, but there is certainly a sense of bricolage (cf. Levi-Strauss, 1966)
and tinkering at play here, to return to terms favored by Ciborra (1992). Elements of what
Lindblom (1959) termed ‘muddling through’ and of improvisation (Crossan & Sorrenti,
1997; Vera & Crossan, 2005) and innovation (Van der Gerben et al., 2002) play an impor-
tant part in addition. As noted, organizations are increasingly reliant on project teams whose
membership may well be in flux and distributed. Considerations of trust (Sambamurphy &
Jarvenpaa, 2002), socialization (Ahuja & Galvin, 2003), and learning from one project to
another (e.g., Scarbrough et al., 2004) are key features at play here. The role of communi-
ties of practice (e.g., Wenger, 1998) is crucial in knowledge creation as we have seen, as
is the role of boundary spanning individuals (Tushman & Scanlan, 1981), or what we might
term knowledge brokers (see also, Lave & Wenger, 1991; Hansen et al., 1999).
While the concept of the ambidextrous organization has been postulated (Tushman &
O’Reilly, 1996), and some empirical research has been conducted to test the thesis (e.g., He
& Wong, 2004), there remains little in the literature that might be of assistance to organiza-
tions in providing an enabling, supportive environment that might foster this sought-after
‘ambidexterity’. Relating concepts of infrastructure introduced earlier in this chapter to the
 conceptual developments 77

concept of ambidexterity would appear to hold some promise in this regard. Thus, the kind
of socio-technical environment proposed by Star and Ruhleder (1996), Ciborra (2000) and
Hanseth (2004), among others, would combine information and knowledge sharing ser-
vices both electronic and human that would facilitate both exploitation and exploration of
knowledge, together with the kind of flexibility necessary to enable appropriate responses
to changing business imperatives. The development of different scenarios can be helpful in
exploring alternative futures in this context (Galliers, 1993, 2006a).

The Change Management Strategy

As previously (Galliers, 2007; 236–7), I have attempted to stress the importance of on-
going learning and review in the strategizing process. Improved understanding can lead to
informed judgments being taken, with a view to further developments taking place in terms of
improved systems and processes (formal as well as informal) that may assist individual and col-
lective activity and decision-making, and organizational performance. On-going learning and
review are central to the processual view of IS strategizing adopted here, given the unintended
as well as the intended consequences arising from ICT implementations (Robey & Boudreau,
1999); the dynamic nature of alignment (Sabherwal et al., 2001) the need for agility therefore
(Desouza, 2006), and the emergent nature of strategizing (Mintzberg & Waters, 1985). Thus,
the process of strategizing is one of visioning, planning, taking action and assessing outcomes,
all with an eye to changing circumstance and imperatives, and the actions of individuals and
groups outside of, or irrespective of, any formal strategy process. Some means of measuring
the impact on firm performance is key in this regard (Rivard et al., 2006).
I noted in the earlier work (Galliers, 2007a) that there are a number of popular books on
breakthrough change management focusing on the role of ICT (e.g., Lientz & Rea, 2004) and
on so-called transformational leaders (e.g., Anderson & Anderson, 2001). The major features
of this genre include prescriptive, deliberate approaches that suggest guaranteed, order-of-
magnitude gains. Organizational realities suggest an alternative, incremental approach more
akin to ‘muddling through’ (Lindblom, 1959), however, as has been argued here. The incre-
mental exploration of possibilities the tinkering (Ciborra, 1992) and bricolage (Levi-Strauss,
1966) along with the more deliberate, analytical approaches that incorporate oversight of
implementations and review of outcomes (e.g., Willcocks, 2009) are what is envisaged here,
with improvements in organizational performance in mind (Rivard et al., 2006). Exploration
and exploitation (March, 1991; Tushman & O’Reilly, 1996) are therefore the name of the
game, as is providing the appropriate organizational architecture for change (Nadler et al.,
1992) to revert to terminology introduced earlier in this chapter.
There is not an insignificant literature on the review process. For example, Venkatraman
and Ramanujam (1987), Segars and Grover (1998), and Doherty and colleagues (1999) are
among those who have considered means by which IS strategy success may be measured.
Venkatraman and Ramanujam, for example, stress the need for success measures in on-going
evaluation as a means to improve planning capability. Seddon and colleagues (2002) consider
this in terms of organizational effectiveness, while Kearns (2004) proposes a multi-objective,
multi-criteria approach. Others, such as Kumar (1990) and Norris (1996), focus their atten-
tion on system evaluation, and others still call for emancipation as a key design principle
(Wilson, 1997). Whatever the focus, it should not be assumed that evaluation is an entirely
objective issue. For example, Gwillim and colleagues (2005) consider the politics of post-
implementation reviews, noting that few organizations undertake ex-post evaluation. As
Walsham (1997) notes, without a formal evaluation policy, IT and business executives alike
will act perfectly rationally in their own interests. The pre-eminence of individual interests
78 robert d. galliers

in organizations is a point made clear by the likes of Handy (1995) and Schein (1997). Thus,
Wagner and Newell (2007) emphasize the importance of participation in making further
refinements (in this case with respect to enterprise systems) during the post-implementation
period. Indeed, Matta and Ashkenas (2003) remind us that even good projects fail, par-
ticularly with respect to cross-functional projects. There is a danger in organizations failing
to learn from different project experiences and reinventing the wheel (Lyttinen & Robey,
1999; Kearns, 2004). This, in part, stems from formal project reviews that are documented
for others to consider at some future point in time (Schindler and Epplerm (2003), or at
­predetermined milestones (Kotnour, 1999). Drawing on this, Scarbrough and Swan (2001)
make the point that the emphasis has tended to be on the supply rather than the demand for
knowledge, and this is why Newell and Edelman (2008) emphasize the need to encourage
teams to reflect and tell stories about their learning experiences (cf., Boland & Tenkasi,
1995) in a way that comes alive and helps nurture a learning capability by providing context.

Applying the Framework

As I hope has been made abundantly clear, the framework presented in Figure 4.1 is not meant
to be a prescriptive tool: it does not and is not meant to provide some kind of solution. It is
presented as a sense-making (cf. Weick, 1995) devise, meant more as an aide memoir, to be
used to raise questions and facilitate discussion concerning the strategizing elements and con-
nections that may or may not be in place in any particular organization. As already mentioned,
the IS strategizing process envisaged here is a dynamic and iterative one based on learning and
questioning. Assumptions need to be tested and a range of viewpoints sought both from within
and outside the organization. The framework can be used to help in this process of enquiry.
Thus, questions can be posed that may surface the presence or absence of key features
that make up the framework. For example, is a knowledge creating and sharing infrastructure
in place? How supportive is it in terms of both the human as well as the technical capabili-
ties required to implement the strategy? Is there a greater emphasis on exploitation as against
exploration? And if so, what impact does this appear to have on organizational performance?
Do sourcing considerations form an integral part of the exploitation strategy process? Similarly,
does cross-project learning form an integral part of the exploration aspects of strategizing?
How does communication and understanding materialize in and between virtual teams? To
what extent does on-going learning and review take place as part of the change management
and implementation strategy? Are performance measures in place?
All these questions are merely illustrative of how the framework may be used in organi-
zations. Certain of them, and certain aspects of the framework itself, may be more or less
relevant and/or important depending on the differing circumstances in which different
organizations in different locations in the world, at different stages of growth (Penrose,
1959; Galliers & Sutherland, 1991), and different sectors of the economy find themselves.
An aspect of the framework’s application that should be consistent, no matter what the
circumstances, is its on-going deployment as a learning tool. As already noted, the process
of strategizing is an iterative one. While there may be a defined planning horizon, with par-
ticular targets being set for that particular time period, the questioning based on the frame-
work and its various components should continue, at least periodically. The framework
itself, and its component parts, may be adapted and developed in line with the particular
and changing nature of the context in which it is being applied, but its use as a sense-making
devise should continue with a view to improving organizational performance, exploiting
organizational and technological capabilities, exploring new opportunities, with a view to
continuous innovation.
 conceptual developments 79

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84 robert d. galliers

Questions for Discussion

1 Compare and contrast IS strategizing with IS strategy. What is the distinction? Do you
think that the distinction is important? Why? Why not?
2 Does IT matter strategically? Consider Carr’s Harvard Business Review and MIT Sloan
Management Review articles (Carr, 2003, 2005) and discuss the arguments pro and con.
3 In Chapter 3, you were asked to consider the concept of ambidexterity in the context
of an organization with which you are familiar. Given the additional ideas raised in
Chapter 4, go back to your answer and reflect further on the concept. Chapter 4 sug-
gests the ways in which the IS strategizing framework may be applied. What else is
uncovered when applying the framework in these ways?
4 Consider the strategizing environment notion. How might you combine analytical
approaches and exploitation with learning and exploration? You may wish to use the
example of the same organization as in the above when answering this question.
5 Strategies need to be feasible as well as desirable. When considering the change man-
agement and implementation aspects of the framework, how might you decide what
is feasible?

Further Reading
The “Digital business strategy” special issue of MIS Quarterly: Bharadwaj, A., El Sawy, O.A., Venkatraman,
N. (eds.), Volume 37, Issue 2, June 2013, pp. 471–633.
Chapter 5

Anna Karpovsky and Robert D. Galliers

ALIGNING IN PRACTICE: FROM

CURRENT CASES TO A NEW AGENDA

I T/IS- bu s i ne s s a l i g nm e n t 1 has been a topic of considerable attention in

the academic and practitioner literature for over three decades (e.g., McLean and Soden,
1977; Henderson and Venkatraman, 1992; Chan and Reich, 2007). This is unsurprising given
that alignment has been consistently rated as a top 10 IT management concern throughout
this time (e.g., Brancheau and Wetherbe, 1987; Luftman et al., 2013). Conceptually, align-
ment has been defined variously as the degree of fit and integration between an organization’s
business strategy; IS strategy (ISS), business structure (and/or business processes) and IT
infrastructure (Henderson and Venkatraman, 1993; Galliers, 2006a; Chan and Reich, 2007).
A common theme has been the argument that alignment leads to a more focused and strategic
use of IT (Chan et al., 2006) and that those organizations that are able to successfully align
their business and IS/IT strategies tend to perform better than their counterparts (e.g., Chan
et al., 1997; Kearns and Lederer, 2003).
More nuanced accounts of alignment have appeared in addition to the prominent lit-
erature on the topic. It has been argued that alignment is infeasible if the business strategy
is unclear, and the difficulty of matching a relatively fixed set of IT assets to constantly
changing business imperatives has also been noted (Galliers, 2004), with calls for increased
agility arising (Galliers, 2006b; Tallon and Pinsonneault, 2011). Others argue that IT
should challenge and transform the business, not simply align with it (e.g., Chan and
Reich, 2007). The alignment literature is also criticized for being too conceptual and not
reflecting actual practice (Ciborra, 1997). The more critical literature points to models
that are infeasible to apply, that are developed conceptually and that do not derive from
real world experience. Normative approaches are argued to not account for organizations
as organic, dynamic and ambiguous aggregates, with relationships that are parallel and
simultaneous (e.g., Tsoukas, 1994), requiring a refocusing on the practices and activities
of aligning as opposed to alignment per se (Wilson et al., 2013). Further, empirical results
are argued to be lacking in precision, with the resultant models being prone to subjectivity
(Avison et al., 2004).
86 anna karpovsky and robert d. galliers

Given the claimed significance (for both research and practice) of alignment to organi-
zational performance, we embarked on a detailed study of the extant literature. We aimed
to determine what we currently know about aligning practice with a view to developing a
framework that goes some way to describe the universe of actions that constitute aligning
with a future research agenda emerging from this foundation. Thus, and in line with calls
for research into the actual practices of strategizing (e.g., Jarzabkowski, 2005; Whittington,
2006), and especially with IS strategizing in mind (Peppard et al., 2014; Whittington, 2014),
we argue that alignment research requires greater focus on organizational actors’ day-to-day
aligning activities. To provide a foundation for further empirical research on alignment prac-
tices, we focused on published empirical cases with the aim to identify and classify aligning
activities. A contribution of this paper is thus a delineation of a set of aligning activities that
could serve as a base for future research, for researchers and practitioners, about the mecha-
nisms organizational actors use to align IS with ongoing processes and strategic imperatives.
The paper is structured to provide context for our study before discussing the research
method adopted and our findings. In the next section, we present a brief review of the extant
literature that views alignment as a dynamic process of aligning. In the subsequent section,
we provide a discussion of the method we employed in our analysis of those cases that report
on the actual activities associated with alignment. We go on to report on our findings and
conclude with a discussion of next steps, including a future research agenda.

An Overview of the Literature on Alignment as a Dynamic Process

In line with some earlier studies,2 we conceptualize alignment not as a static end-state but as a
continuous, ongoing process of aligning involving a series of activities resulting in adjustments
in various dimensions and across various organizational levels. Some of this prior research
suggests that the alignment process represents a continuous synchronization (Smaczny, 2001)
or integration by the organization of various technological, organizational and relational
dimensions (Fuchs et al., 2000). Rondinelli et al. (2001). suggest that organizations should
continuously readjust and realign four sets of strategic components: business strategy, mar-
ket penetration decisions, management processes and structures. For others (e.g., Sabherwal
et al., 2001), although the alignment process retains its dynamic nature, it is effectuated on
an ad hoc or punctuated rather than continuous basis, depending upon the evolutionary phases
experienced by the organization concerned as well as the evolution of its business environ-
ment: organizations may experience relatively long periods of minor, evolutionary strategic
change and relatively short periods of sweeping, revolutionary strategic change.
A number of process models of alignment have arisen from this line of research. For
example, the ‘Strategic Alignment Maturity Model’ (SAMM) (Luftman, 2000) posits that,
as organizations pursue the goal of strategic alignment, alignment moves through the follow-
ing process stages: (1) initial, ad hoc; (2) committed; (3) established, focused; (4) improved,
managed; and finally, (5) optimized. Luftman argues that the greatest benefit to an organiza-
tion is found when strategic alignment is an optimized process. Thus, the SAMM explores the
‘maturity’ of strategic alignment and focuses not on the goal of alignment, but on developing
processes that will enable ongoing alignment.3 Peppard and Breu (2003) propose a coev-
olutionary model to describe how IS strategies ‘co-adapt’ with business strategies, where
each is considered distinct yet mutually influencing. In addition, Hirschheim and Sabherwal
(2001) suggest that organizations seek alignment through incrementalism – changing one or
more components of alignment, then changing some other, and occasionally reversing ear-
lier changes. They identify three trajectories that can occur as a result: paradoxical decisions
(i.e., change of some components in one direction while changing other components in the
 aligning practices 87

opposite direction), excessive transformations (i.e., going too far in changing one or more
components) and uncertain turnarounds (i.e., reversing a change to go back to the original
configuration).
Several specific steps and sub-processes have been suggested to foster movement toward
alignment. These include evaluating the performance of senior executives, in part by noting
their innovative use of IT; allowing IT to provide innovative ideas that will shape the busi-
ness; embedding IT in multiple departments and business processes; using IT to p­ rovide
strategic flexibility to the business; giving the CIO visibility among the senior executives;
and encouraging IT executives to collaborate with business unit and regional managers
to develop new capabilities (Agarwal and Sambamurthy, 2002). In addition, Kearns and
Lederer (2003) ­propose two specific processes associated with key actors that contribute to
strategic a­ lignment: the CEO participating in IS/IT planning and the CIO participating in
business planning. Although the identification of these processes provides insight into means
of achieving alignment, it appears that while these processes are a necessary condition they
may not be sufficient. A comprehensive, multifaceted conceptualization of strategic align-
ment appears still to be missing.

From Macro Processes to Micro Practices

While we, thus, have a better understanding of alignment processes as a result of this line of
research, we nonetheless know little about what managers and other organizational actors
actually do in their day-to-day activities to achieve alignment (Campbell, 2005). In order
to fill this gap, we extend the conceptualization of alignment from not only something that
an organization attains to something that an organization does: as ‘a pattern in a stream of
goal-oriented activity over time’ (Jarzabkowski, 2005: 40). From this perspective, we dif-
ferentiate ourselves from the (macro) process perspective on alignment by focusing on micro
processes and practices (cf. Peppard et al., 2014; Whittington, 2014).4
While the process stream of research considers alignment at various levels of an organiza-
tion, it tends to focus primarily on the organizational level, with the associated unit of analy-
sis being the sequence of ‘high level’ organizational events that take place within a period of
adjustment. In contrast, we take an activity-based view of aligning practice where activity
is the unit of analysis and is associated with the actions of organizational actors. Our use of
the term ‘practice’ refers most closely to its meaning as action or execution, as opposed to
theory (Orlikowski, 2010). We make no assumptions concerning how common or estab-
lished aligning practice is, nor the extent to which it is habitually performed. That is, we
are not referring exclusively to praxis.5 Our definition of alignment further suggests that
we should not make theoretically informed a priori exclusions of certain classes of activities
(Law, 1994). Consequently, we view aligning practice broadly as all activities that may con-
tribute to tightening links between IT and business across an organization.
The perspective we adopt addresses ‘the detailed processes and practices which constitute
the day-to-day activities of organizational life’ (Johnson et al., 2003: 3). A broad defini-
tion of these activities is, ‘the day to day stuff of management. It is what managers do and
what they manage. It is also what organizational actors engage in more widely’ (ibid.: 15).
From an epistemological standpoint, our approach sees practice as providing greater real-
ism than formal theories populated by multivariate analyses of firm or industry-level factors
(Whittington, 1999). This perspective emphasizes the study of ‘alignment-in-the-making,’
rather than alignment as ‘readymade.’ For example, the implementation of any IT initia-
tive is dependent on making alliances with a range of actors and the cultivation of the social
capital needed for action (e.g., Waema and Walsham, 1990), not solely or so much on
intended plans or prescribed actions. We argue that, as a consequence, the consideration of
88 anna karpovsky and robert d. galliers

aligning practice allows for the identification of previously obscured enablers and inhibitors
of ­alignment. Taking this extended conceptualization of aligning practice, we reviewed the
alignment literature to derive a set of activities based on published cases. Before presenting
our findings, we discuss the research method employed.

Research Method

Alignment is a key consideration within the broader area of ISS.6 ISS is, in turn, a mature
research topic within the wider IS domain that focuses on strategic issues and methods con-
cerned with IT infrastructure, IT organization and personnel (Merali et al., 2012; Karpovsky
et al., 2014). An extensive body of research has contributed to the development of our think-
ing and practice in this topic area. To capture all the alignment articles that might not explic-
itly state alignment as a focus of the study but, nonetheless, do consider aligning activities, we
embarked on reviewing the ISS literature in its entirety. Searching solely on the basis of such
keywords as ‘IT/business alignment’ would potentially lead us to miss relevant articles since
other terminology might be used. In addition, searching using the keyword ‘alignment’ is
problematic as other fields use the term to refer to issues and topics that would be irrelevant
for the purposes of our review.
Using a structured methodology (Webster and Watson, 2002), we reviewed over 9000
articles from the IS, strategic management and management literatures concerned with
ISS and related topics (Karpovsky et al., 2014). We targeted articles that had been pub-
lished in peer-reviewed, English language journals. The journals initially selected were
those that make up the AIS senior scholar’s ‘basket’ of eight journals (http://ais.site-ym.
com/?SeniorScholarBasket) and those used in three recent related literature reviews: Chan
and Reich (2007) on IT alignment; Lacity et al. (2009) on IT outsourcing; and Chen et al.
(2010) on ISS. In addition, Information & Organization and Long Range Planning were included
following informal evaluation of other possible source journals. Naturally, there were also
articles relevant to our search published elsewhere. In order to identify these, a forward and
backward search was conducted (cf. Webster and Watson, 2002). While acknowledging
the importance of books and conference proceedings (cf. Galliers and Whitley, 2007), our
sources were limited to scientific journals, together with major practitioner journals, such
as Harvard Business Review, MIT Sloan Management Review and Communications of the ACM. The
resulting set of selected journals is presented in Appendix A.

Screening Articles
To narrow our search, we conducted screening of articles in three rounds. First, the article
titles (and the abstract if the title was not sufficiently descriptive) were read and a decision
was made whether or not the article in question appeared to bear some relation to ISS. In
unclear cases, the article was retained for the next round. This screening reduced the number
of articles by about 70%, leaving us with 2690 articles in the data set and was conducted by
one or other of the first two authors of Karpovsky et al. (2014), with advice being provided
by the third when in any doubt. In Round 2, the article title, abstract, and keywords were
read, and a decision was made as to whether the article was out of scope or relevant on a scale
from 1 to 3 (where 1 was considered out of scope and 3 denoted articles clearly addressing
ISS). This eliminated another 60% of the articles, with approximately 1000 articles that we
believed to have at least some relevance remaining (see Appendix B). This round and sub-
sequent rounds were conducted by each of the researchers individually, followed by group
discussion to gain consensus.
 aligning practices 89

In Round 3, each of the remaining articles was read and their relevance was further
assessed on a scale of 1 to 5 (where 1 was considered out of scope and 5 denoted the most
cited core ISS articles). The most cited articles were screened by all three researchers, first
individually and then as a group, to ensure that the categories and parameters against which
these articles were being evaluated were similarly understood by all. After this ‘synchroniza-
tion of thoughts,’ and apart from the 200 most cited articles (which were screened together),
Round 3 was again conducted by each researcher alone. We used the following criteria to
code the alignment articles: (1) the word ‘alignment’ appears in the title or keywords, or
(2) the body of the article discusses or mentions alignment related themes (e.g., alignment
level and types; alignment models and approaches; expressions such as link, fit, synchroniza-
tion, congruence between business and IT; such business considerations as roles, organiza-
tion structure and culture, and alignment maturity).
Having identified those ISS-related articles concerned with alignment, we then had the
task of identifying those that provided some account of the aligning activities involved. Our
selection process followed the inclusion and exclusion criteria recommendations of Yin and
Heald (1975) to ensure the academic quality of the material selected and to allow for in-
depth analysis of each case. The inclusion criteria were that: (1) the case reported an instance
of alignment; (2) it reported organizational actions and organizational actors’ activities; and
(3) the narrative provided a rich description of the events. A case was excluded even when
an alignment methodology was discussed but the activities involved in implementing that
methodology were omitted. In addition, while our initial literature of ISS included articles
from 1962 to 2010 (Karpovsky et al., 2014), for the purposes of this paper, we extended
the review to include articles published subsequently. Two articles published in 2011 were
added as a result of this extended search.

Findings

General Patterns of Alignment Case Research

In total, 142 articles on alignment were identified, with alignment being revealed as the dom-
inant ISS-related theme, having been discussed in over 15% of all the ISS articles reviewed
(see Appendix B). Of the 142 alignment articles, we identified 37 that discussed alignment
activities in some detail. As an article might provide descriptions of multiple case studies and
practices, in total these articles reported on 57 aligning episodes. Appendix C lists all the
case sources. The reviewed articles were published between 1992 and 2011; the peak year
was 2003, with five such publications. In fact, the period 2003–2007 accounted for approxi-
mately half these publications,7 suggesting an increased interest in aligning practice, paral-
leling similar research interest around the same time in the organization studies and strategy
fields more generally (e.g., Jarzabkowski, 2005; Whittington, 2006). The cases were widely
distributed amongst a range of journals although Journal of Information Systems Management,
Journal of Information Technology and The Journal of Strategic Information Systems published ten
articles (27%) of the total (11%, 8% and 8%, respectively). Table 5.1 lists the number of
articles appearing in each journal.
The cases show variation in terms of the sectors in which the organizations studied
operate; however, the public sector (22%) and manufacturing (24%) were the most
dominant (see Figure 5.1). In addition, six types of actor were identified: top manage-
ment, middle management, IS management, politicians, consultants and the researchers
themselves – the latter in cases adopting an action research approach (e.g., Salmela and
Ruohonen, 1992).
90 anna karpovsky and robert d. galliers

Table 5.1 List of journals

Journal name Number of articles

Journal of Information Systems Management 4
Journal of Information Technology 3
The Journal of Strategic Information Systems 3
Communications of the Association for Information Systems 2
European Journal of Information Systems 2
European Journal of Operational Research 2
European Management Journal 2
IBM Systems Journal 2
International Journal of Information Management 2
MIS Quarterly 2
California Management Review 1
Communications of the ACM 1
Engineering Management Journal 1
Information Systems Research 1
Information Technology & People 1
Journal of the Association for Information Systems 1
Journal of Cases of Information Technology 1
Journal of Information Technology and Application Research 1
MIS Quarterly Executive 1
Organization Science 1
Scandinavian Journal of Information Systems 1
Sloan Management Review 1
Journal of Computer Information Systems 1

Aligning Activities
An iterative analytical technique was used to develop the categorization of aligning activities.
First, preliminary working themes were constructed through a process of abstracting and
generalizing from the specific case by means of constant comparison, coding and memo-
ing procedures (Strauss, 1987). Coding took the form of a thematic content analysis of the
case materials (cf. Mostyn, 1985), which is a systematic and manual procedure carried out
in three steps: (1) specifying the unit of analysis – typically ranging from a few words to an
entire paragraph to which codes were attached; (2) attaching code – labeling ‘chunks’ of
data, which represent the theme or primary message of the section of text; and (3) categoriz-
ing themes – grouping the individual themes to produce the broad categories to which these
Number of articles

Figure 5.1 Sectors covered by research cases on aligning.

 aligning practices 91

themes relate to and can be reported on collectively. These categories were then interpreted
and reconstructed in light of existing alignment themes (e.g., De Haes and Van Grembergen,
2009; Valorinta, 2011). This coding methodology generally follows the logic of Burawoy’s
(1991) extended case method, in which a single, detailed case study is used to reconstruct
and extend existing theory. To summarize, the methodological strategy used in the study
aims at developing a descriptive framework of aligning that is useful in analyzing a broad
range of alignment activities by reinterpreting existing cases in light of our extended concep-
tualization of aligning practice.
We consider aligning activity to be any action that any particular organizational actor
takes in the process of finding and/or implementing IS that would potentially support
business needs. The only differences among the cases studied were the depth of the
description of a particular activity and the terms used to refer to these activities. For
example, one case might talk about centralization and decentralization of the IT function,
while another might describe a decrease in the number of IT employees, and changes in
the reporting structure within the IT organization. In either case, we coded these activi-
ties as ‘restructuring IT organization’ as both examples refer to changes in the way IT
function is organized.
As noted above, the coding process was iterative, using both the initial coding scheme and
open codes. We remained open to new codes and categories where appropriate, as recom-
mended by Miles and Huberman (1994). The final coding reports were recorded in a reposi-
tory database that was used in the data analysis. The final list of 32 coded aligning activities
and the eight categories are presented in Table 5.2. Illustrative quotes from the analyzed
cases are provided, as are metaphors, which result from our attempt to merge these activities
into a meaningful and parsimonious classification.
We found that two basic conceptual distinctions helped us to organize how the different
aspects of aligning have been considered in previous research – the focus and the purpose of
the aligning activity. In terms of focus, the alignment literature has widely acknowledged a
distinction between two dimensions of alignment: social and intellectual (Chan and Reich,
2007). The social dimension of alignment has been defined as ‘the state in which business
and IT executives within an organizational unit understand and are committed to the busi-
ness and IT mission, objectives, and plans’ (Reich and Benbasat, 2000: 82). The social
dimension refers to factors such as the choice of actors, their degree of involvement and
the methods and modes of communication and decision-making (ibid.). The focus is on the
actors and their actions and cognitions. The term actor refers to organizational members as
well as individuals outside the organization involved in the practices of aligning, such as:
top/middle/IS management, politicians, consultants and researchers. Conversely, intel-
lectual alignment refers to the degree to which the business strategy and plans, and the IS/
IT strategy and plans, are congruent (Kearns and Lederer, 2000; Preston and Karahanna,
2009). Intellectual alignment suggests that activities are focused on methodologies, tech-
niques, configurations, infrastructures, technology, strategies, plans, documents and data
used in the form(ul)ation of alignment (Horovitz, 1984). The focus is mainly on these
objects and the activity involves a set of tools. The term tool, as suggested in the discus-
sion above, is a generic label for frameworks, concepts, models, technologies or methods
(Jarzabkowski and Kaplan, 2014). To summarize, while the social dimension of alignment
concentrates on the perceptions and actions of organizational actors involved in alignment,
the intellectual dimension emphasizes the content of plans and planning methodologies,
thus focusing on the tools of alignment.
In terms of purpose, aligning actions can be both ends in themselves (emerged actions) and
means to some further ends (intended actions). Combining these two dimensions yields a 2x2
matrix that locates the four metaphors that can be used to describe aligning as: experience,
Table 5.2 Aligning activities: coding and categorization

Aligning activity code Aligning activity Illustration Metaphor

category
New governance structure RECONFIGURING The Board interpreted events as raising a new contingency, requiring a structure that would Aligning as translation
Transformation enable Aligning as managers to use the information the system now provided, and so in 1992
Turnaround they gave those managing the translation five geographical division greater autonomy (Boddy and
Restructuring IT organization Paton, 2005: 147).
Outsourcing To support the new direction for Information Systems, Johnson created three new organizational
Reward system structures. First, a group of senior executives and two independent external consultants met
Integration bimonthly as the Information Services Executive Committee. Although the CEO sponsored this
meeting, McKean chaired it. The Information Services Executive Committee’s purpose was to focus
on business issues and ensure that the top team was committed to and satisfied with the projects
delivered on their behalf (Thorogood et al., 2004: 131).SDMC applied IT applications to
production scheduling and mold designing, intending to reduce operational costs and improve new
product development capabilities (Wang et al., 2011: 424).
New system development DEVELOPING An analysis of RED transactions of a department yielded missing applications and application
Business-focused IT features … The BIOS committee, made up of the departmental directors and account managers,
now had objective information with which to prioritize the portfolio (Ramnath and Landsbergen,
2005: 62).
User/IT relationship STRENGTHENING Management interpreted key contingencies in the context as requiring them to plan and implement Aligning as Integration
IT-business communication Top a Aligning as system which would implement the founder’s strategic vision for an EPOS system.
management involvement CIO/ This closely matched Integration the manual procedures, and staff interpreted the change as
CEO relationship IS/business reinforcing the existing (effective) alignment between them and their work. It enabled centralization
partnership Culture change and allowed depot managers to concentrate on customers (Boddy and Paton, 2005: 146).
IT training Human resource Johnston brought in Chris James to develop relationships with strategic business partners
management/training and to act as the account manager, representing IS to the business. James was responsible for
Strengthening New position managing relationships with strategic partners, primarily Aspect Computing, and for managing
New appointment IT location relationships with other business units such as the laboratory and Water Services (Thorogood et
al., 2004: 131).Key personnel were sent to training seminars to learn and master the essence of
the balanced scorecard theory and techniques (Huang and Hu, 2007: 176).
 SIGNALING A few years before the project, the former president had retired, and a new one was employed
with the task of organizational and managerial restructuring and modernization of the entire
organization (Simonsen, 1999: 10).
The physical location of the IT division in isolation from the Retail division was symbolic of
the general estrangement in working relationships. The image that the business had of IT was
that ‘IT people don’t move around, they just sit in X’ (Managing Director, Retail Finance) and
they have different agendas and ‘just want to be told what needs to be done’ (Manager, Group
Development) (Coughlan et al., 2005: 311).
Success measures Reactive EVALUATING … many private firms and large international logistics firms entered the business area where Aligning as Adaptation
response Separation of AMY Aligning as operated after China’s accession into the WTO, which led to a more competitive
information/technology environment. The Adaptation oversupply of mechanical and electrical products strengthened the
management Clarifying bargaining power of customers and altered the industrial structure. In this environment, AMY’s
objectives Scanning emerging inefficient traditional sales management led to excessive overstock. In 1999, AMY lost over 40
technologies million RMB because of overstock (Wang et al., 2011: 423).
External factors Following a consulting firm’s report in 1993, the CEO and the other senior managers began
recognizing the need for major changes to respond to several international companies’ entry into
Australia (Hirschheim and Sabherwal, 2001: 95).
Review Prioritization NEGOTIATING Many customers placed orders without fulfilling their promise to make the payment, creating lots Aligning as Experience
Resistance to change Meetings of unpaid accounts receivable (Wang et al., 2011: 426).
One library visited was one of their largest single customers. They had only one or two booking
requests per day. In this situation, they viewed the telephone as the relevant technology for
ordering films and videos.
They would resist paying for equipment for an online connection and for the training of their
staff to use the booking system that the Film Board had in mind (Simonsen, 1999: 13).
Politics Learning the business LEARNING In the past few years, our sales income and profit went down sharply. We should find some ways
to stop this. We realized that we need good integrated computer systems, and we couldn’t follow
the way we walked along before (Wang et al., 2011: 424).
Organizational learning DECISION- … the value of IT was questioned by many academics and executives at that time. Some
Decision-making MAKING consultants and IT professionals suggested this B2B project be delayed because they thought the
investment was too high, while the chance of success was rather slim (Wang et al., 2011: 426).
94 anna karpovsky and robert d. galliers

Focus
Tools Actors
ALIGNING AS TRANSLATION ALIGNING AS INTEGRATION
Intended
Purpose

(developing; reconfiguring) (strengthening; signaling)

ALIGNING AS ADAPTATION ALIGNING AS EXPERIENCE
Emergent
(evaluating) (negotiating; decision-making;learning)

Figure 5.2 Aligning: an analytical framework.

integration, translation and adaptation (see Figure 5.2). Aligning as experience and aligning as
integration represent a set of activities primarily involving human dynamics: actions, interac-
tions and cognitions. However, while integration activities are characterized as deliberate
and instrumental in nature, aligning as experience suggests a set of evolving activities that
emerge from unplanned or unintended situations. Similarly, both aligning as translation and
aligning as adaptation suggest activities that involve generation and execution of plans, goals,
and other intellectual imperatives, but the purpose of these activities differs. While transla-
tion is anticipated action, adaptation is more unpredicted and evolving. The sections that fol-
low further expand on each of these types of activity and provide illustrative examples from
the analyzed case studies.

Aligning as Adaptation
We identified a number of activities as aspects of adaptation – of adjusting and attempting to
fit into a given (sometimes changed) environment. The process is emergent and evolves over
time – sometimes gradually, sometimes discontinuously – in response to interruptions (Tyre
and Orlikowski, 1994). Aligning becomes a practice where the role of organizational actors
is to monitor the changes in the organizational environment and to evaluate the conditions
as being favorable or threatening, assessing whether any changes need to be made due to the
new circumstances. These activities are mainly focused on tools as it necessary to determine
whether a new system needs to be implemented, or enhanced. Consequently, these actions
emerge as a result of the advent of new conditions that are not necessarily foreseeable or can
be easily planned for. Some form of improvisation might be evident here. The nature of these
activities is, therefore, emergent with a main focus on tools.
Given the need to be aware of the new conditions, such tools are applied in continuously
EVALUATING the environment and ascertaining how technology can support or enable
future operations. About half of the 37 articles in our final set report on some form of evalua-
tion of the internal and/or external environment. Evaluating practices are usually reported as
something that happens before aligning processes are themselves enacted. Examples include
when an organization evaluates its context or seeks to clarify its objectives or business focus
(e.g., Sillince and Frost, 1995; Simonsen, 1999), scans emerging technologies (e.g., Tarafdar
and Qrunfleh, 2009) or prioritizes applications and application features (e.g., Dutta, 1996;
Ramnath and Landsbergen, 2005) before any change process taking place. Further, evalua-
tion of the strategic focus might reveal contradictions in the overall organizational strategy
and might indicate new system needs (Simonsen, 1999).

Aligning as Translation
Achieving alignment has traditionally been seen as a part of a CIO’s duties, typically involv-
ing communication and strategy translation at executive levels (Sabherwal et al., 2001). A
number of studies suggest that business and IT ‘speak’ a different language (e.g., Bassellier
and Benbasat, 2004; Rosenkranz et al., 2013) and aligning would thus need to involve IT per-
 aligning practices 95

sonnel understanding business needs and rendering these into an IT solutions. These transla-
tions involve intentionality: clarifying existing strategies; prioritizing projects; formulating
and implement plans; applying a set of planning methodologies; and consequently, capturing,
though the use of tools, the intellectual dimension of alignment.
DEVELOPING a new system or an entirely new IT infrastructure is a common organiza-
tional activity that aims to find new IS solutions to align with what may often be a new stra-
tegic imperative. Developing is classified as a translating activity because it is tools-focused
and is based on intended approaches to system implementation. In certain cases, developing
entails the consolidation or rebuilding of systems or services rather than implementing a
completely new technology (e.g., Sauer and Willcocks, 2003). More than half of the final
articles describe the development of a new system. For example, Vayghan et al. (2007)
report that IBM developed and deployed data solutions for its customers as well within
IBM itself as part of their transformation. The case provides a thorough description of the
technical architecture for the IBM internal enterprise data architecture program designed
to bring service-oriented, information and event-driven architecture principles together
to provide information on demand. Further examples include Dutta (1996) and Ives et al.
(1993). Dutta reports on the creation of NovaRede – a new distribution network, with
small branches enabled by new IT infrastructure in a Portuguese bank, while Ives et al.
describe challenges of development of a worldwide financial reporting system, an inven-
tory management system and a new customer profitability analysis system in a multina-
tional company.
While these studies point to the development of new systems, the activities involved in
actually translating the business plans, objectives and ideas into IS developments are not well
described. Precisely how such developments arose – or were translated – from business
strategy to IS often remains unclear; they are presumed. For example, Wang et al. (2011)
indicate that the company received ‘financial support … from the local government and a
CIO was hired to oversee the system implementation’ (426). However, it is not clear what
role the newly hired CIO played in making sure the system aligned with the business’s new
strategy of low cost and growth. Neither is it clear what the level of involvement of the local
government was and what and how these actors contributed to the process. Similarly, Weiss
and Thorogood (2011) report on the use of business liaison personnel in IS development, but
the level of their involvement and their associated actions are not reported.
RECONFIGURING activities also classify as translation-related actions as they also
focus on intellectual aspects of aligning such as structures and arrangements and support the
changes needed to link business and IS strategies. Reconfiguring refers to activities related
to such organizational restructuring actions as a change in the governance and manage-
ment of IT including outsourcing. Such activities as these accounted for 27% of all the
aligning activities referred to in our literature set, and 70% of the articles mention at least
one of the reconfiguring activities identified (see Table D1 in Appendix D). Restructuring
governance and the IT function is the most commonly observed organizational action as
pertaining to aligning activities. For example, Sauer and Willcocks (2003) report on Oracle
changing country managing directors’ performance measures so that they would be more
cost conscious, with the IT function becoming centralized – as a corporate entity – rather
than being country-based as was the case previously. Similarly, Boddy and Paton (2005)
describe the introduction of divisions with profit responsibilities in a chain of roadside vehi-
cle repair depots. This restructuring resulted in managers’ gaining a new appreciation of
their organization’s IS capabilities. Outsourcing is also a major organizational action when
it comes to aligning.8 Dutta (1996) describes approaches adopted by two banks in their
attempts to align IT with the business. Outsourcing results in new management structures
internally. The organization that had outsourced its IT had to create a technical oversight
96 anna karpovsky and robert d. galliers

group and a 20-person team to coordinate with the vendors. Such reconfiguring activities as
these are dynamic, and an organization might go through a number of iterations of recon-
figuring. Hirschheim and Sabherwal (2001) describe a number of ‘trajectories’ of strategic
alignment, one being a reversal of structural changes and a move back toward the original
structural position.

Aligning as Integration
The alignment literature recognizes that open and effective exchanges and interactions
help IT and business work well together (Brown and Ross, 1996). We found a number of
planned and intended activities that focused on integrating IT/business planning by bring-
ing IT and business functions or tasks closer together to strengthen the communication,
understanding and perspectives between them. These activities revolve around actors and
the necessary steps needed to develop a unified entity in an effort to enable alignment to
take place.
We classified STRENGTHENING activities in terms of aligning as integration because,
similar to aligning as translation, these are actions stimulated by deliberate procedures. Unlike
aligning as translation, these activities are focused on bringing IT and business p­ eople together
and enabling a smoother process of mutual understanding and appreciation, invoking the
social dimension of alignment discussed earlier. Activities associated with strengthening
aligning form another common practice with around 60% of the reviewed articles describ-
ing such activities. Primarily, these involve the strengthening of relationships between
various organizational groups. To illustrate, some studies consider ‘joint’ language – to
improve the quality of communication between business and IS (e.g., Powell and Powell,
2004). Sauer and Willcocks (2003) suggest advocacy on the part of CIOs in helping their
senior business management colleagues to become more sensitive to the challenges associ-
ated with designing and managing technology platforms that are scalable; responsive to busi-
ness change, flexible of cost structure and fast to deploy. User participation has also been
reported as a means of strengthening aligning processes. Dutta (1996) describes how users
submitted new software development proposals to business groups who then channeled
these proposals to user committees. In general terms, Dutta concludes that a high level of
participation and involvement on the part of the business operatives and their management,
from the board down to front-line staff, contributed to improve alignment. Training, with
respect to both IT for non-IT personnel, and with respect to business issues for IT person-
nel, has also been reported as a practice that might strengthen ­alignment – both in terms of
the process and the outcome. For example, Chan (2002) reports on information sessions
and technology demonstrations. Coughlan et al. (2005) consider the acquisition of ‘hybrid
skills’ (cf. Earl and Skyrme, 1992) and Martinez (1995) highlights the skills necessary for
large project management.
Another set of activities classified as integration is SIGNALING. Signaling changes in the
role of IS in an organization through various organizational practices has been noted. These
activities are people-focused since they might affect and reshape organizational actors’ views or
attitudes and might involve changes in roles. For example, a number of cases highlight the
establishment of a new position (e.g., Grant, 2003; Thorogood et al., 2004; Chen et al.,
2008) or, more commonly (refer to Appendix D), a new appointment to an existing position
(e.g., Johnston and Yetton, 1996; Thorogood et al., 2004). To illustrate, Sabherwal et al.
(2001) report on the establishment of a new IS director position at an equipment sales com-
pany. The position was created to signal the strategic role of IS, however, was discontinued
later as the perceived importance of IS diminished a – further signal. The location of the IT
division has also been found to be symbolic of working relationships and, ultimately, (mis)
 aligning practices 97

alignment between IT and organizational priorities. Coughlan et al. (2005) report on the
physical isolation of an IT division, which impacted the image that the business had of IT, and
that had an impact on the IT division’s (un)willingness to align IT functions with the rest of
the business.

Aligning as Experience
A number of reported activities focused specifically on individuals and their actions. These
actions are indicative of the emergent nature of organizing practice. NEGOTIATING –
political activities in general – are commonplace in organizational life, and aligning is no
different in this regard. A number of studies touch on the issue of organizational politics
and external political pressures. For example, Sillince and Frost (1995) describe the evo-
lution of business strategies and IS strategies in the UK public services sector. IS-related
reforms in primary care were pushed through to head off political opposition by the
medical profession, and to show that something could be done within a short timeframe.
However, the IS element was poorly developed and poorly supported – leading to poor
alignment. This case was contrasted with another concerned with the work of the national
police force. Here, Sillince and Frost note that politicians did not want to be ‘saddled’
with a reputation for having shaped the police force – not wanting ‘to be remembered as
having reinforced European federalism’ (ibid.: 113). They make the point that, in a dif-
ferent political situation, different organizational practices would likely be apparent. The
reduced – or absent – pressure impacted aligning practice as the police force was able to
be more flexible in making IS-related decisions and thus – potentially at least – to be in a
better position to align its practices.
Illustrations of negotiating can also be found in the private sector. For example, Dutta
(1996) reports on an instance of negotiating when a list of proposed IS projects for the year
was assembled from a number of user groups. Conflicts arose as the IT users’ committee had
to determine relative priorities of, and whether any redundancies would arise from, the pro-
posals. Interestingly, the case reports that these conflicts were resolved as a result of informal
meetings held between members of the IT users’ committee and concerned users.
Given the dynamic perspective we take, a process of LEARNING is inherent in aligning
practices: by gaining understanding from past experiences and from the practices associated
with familiarization with the current environment. We considered those learning activities
that are organizational actor-focused and address the process of intuiting and interpreting.
This process is emergent and distinctive from the strengthening activities associated with
training, which are intended and instrumental in nature. Learning concerns, for example,
the creation of novel insights; building actions based on experience, and developing business
awareness (Bontis et al., 2002), which are evolving. Around 20% of the articles reviewed
(Appendix D) refer to some form of ongoing learning practice. Salmela and Ruohonen
(1992) present an action research study concerned with the alignment of decision support
system (DSS) and ongoing business developments. They observed learning to be the single
most important aspect of aligning, where organizational members continuously learn to
focus on IS as an opportunity for organizational change. Conversely, it has been reported
that IT personnel should learn more about the business per se to facilitate alignment. Chen
et al. (2008) provide the example of IT staff expending considerable effort to understand
the manufacturing process of a semiconductor company. Ramnath and Landsbergen (2005),
in their account of a city government’s strategic planning process, suggest using a short and
interleaved planning approach and delivery cycles in aligning, since immediate customer
feedback might be used to identify new or additional requirements in readiness for the next
planning next cycle.
98 anna karpovsky and robert d. galliers

Aligning will ultimately involve decisions that organizational actors must make concerning
IS/IT and business functions. DECISION-MAKING is a social activity undertaken by indi-
viduals within organizations. Such activities are also emergent in nature and occur throughout
aligning practice as decisions need to be made on issues such as resource allocation and com-
mitments as and when they arise. Only about 10% of the articles in our final set consider
decision-making, however (refer to Appendix D). Of the limited examples in the literature,
one is provided by Hirschheim and Sabherwal (2001). They observed decisions being made
in three different companies. In one, they describe how a new CEO makes a decision to
shift centralized IS to a more distributed form in a company that changed its strategy to one
focusing more on efficiency. This apparently paradoxical decision was highlighted since a
decentralized structure might be thought more likely to improve IS service quality but not
efficiency. Mehta and Hirschheim (2007) consider a merger and acquisition and report on
the absence of the CIOs in pre-merger discussions. This decision-making dynamic resulted in
the enforcement of the acquirer’s systems on the acquired organization – something that was
justified by considerations of alignment.
A number of studies report specifically on decisions made by the CEO, with or with-
out discussion or agreement with those responsible for IT (e.g., Dutta, 1996; Sabherwal
et al., 2001; Sauer and Willcocks, 2003). Wang et al. (2011) describe the decision-­
making related to investment in a new system, providing some understanding of the
decision-making dynamic – the parties involved and the type of decisions made. The key
role played by top management in deciding to pursue an IT project is highlighted given
their belief in IT’s potential and their innovative and risk tolerant disposition. Wang and
colleagues show how conservatism and culture can have an impact on the decisions made.
Similarly, Weiss and Thorogood (2011) point to the decision to spin off a company that
solely focused on a new initiative as part of its aligning process in light of the existing
organizational culture. Overall and as previously noted, we found few cases of decision-
making practices.

In Summary
Our findings suggest that aligning happens in practice through a set of activities, which we
have classified into 32 categories and four metaphors. There is a clear distinction in terms of
how researchers have focused on aligning activities with these activities falling into two main
categories: a consideration of tools (aligning as translation and adaptation) and actors (align-
ing as integration and experience).
A consideration of the tools of aligning has been the main focus of the research to date.
One set of activities revolving around tools is concerned with translating business plans and
strategies into IS/IT plans and strategies (and in rare cases, the other way around). Such
translation involves some form of reconfiguring, with the emergence of new governance
structures or processes, changes in reward systems or a formation of a new IT organiza-
tion, occasionally resulting in outsourcing. Translation also happens in a form of a system
development, where incorporating a new technology into existing operations has been the
main aligning activity. The focus on tools is also apparent in activities that aim to evaluate the
external and internal environment so as to anticipate and react to the changes. This adaptation
happens through evaluating activities where emerging technologies might be continuously or
occasionally scanned and reviewed; objectives clarified, prioritized or adjusted; and business
performance measured.
In terms of actors, aligning can be seen as integration among units within an organization.
Here, aligning involves activities concerned with the notion of strengthening ties among
organizational actors through building relationships among users, top management, IT and
 aligning practices 99

business personnel, and often specifically, the CEO and the CIO. Building such ­relationships
might be a product of top management involvement, improved communication, culture
change or training. Managerial changes are also commonly reported, with new appointments
or the creation of new positions (e.g., CIO), signaling an organization’s commitment to
change that embraces IT. Other cases focus on individual actors describing aligning as experi-
ence. Examples include negotiating between actors, learning that happens on a more indi-
vidual cognitive level then actual training and decision-making processes where activities
revolve around actual actors making decisions.

Limitations
The 32 aligning practices identified from our review, clustered under the four
­metaphors – aligning as: adaptation, translation, integration and experience – provide
an anthology of how aligning happens in practice, at least in terms of the manner in
which practice has been reported. We should note, however, that the activities associ-
ated with aligning as experience have received the least attention to date. We should
also note that the categories of aligning practices arise from the authors’ interpretation
of the relevant case material and can by no means be seen as being exhaustive or fully
representative of all possible practices. In addition, the 32 aligning practices identi-
fied arise from our analysis of the cases found in the review of the ISS literature; other
relevant fields, such as project management (e.g., Jenkin and Chan, 2010), might well
provide another relevant source. Further, our review considered peer-reviewed jour-
nals alone; however, dissertations and conference papers can also offer a wealth of cases
(Galliers and Whitley, 2007). Notwithstanding, we believe that our categorization can
be a useful aid to researchers and practitioners. Its purpose is to provide a foundation
for further developing our understanding of aligning practices and, thus, provides a
steppingstone for future work in this important research arena. We suggest that future
research could usefully develop the current categorization further, thereby expanding
our understanding of aligning practices – amending and adding to the categories as we
learn more about what actually takes place in aligning practice. We consider this future
agenda in greater detail in the following.

Discussion: A Research Agenda for Aligning in Practice

Our extension of prior conceptualizations of alignment as aligning practice, comprising

aligning activities, allows for a more holistic treatment of alignment: at multiple organiza-
tional levels and across multiple dimensions, as called for by Chan and Reich (2007). Such a
conceptualization allows alignment research to move away from studies that focus solely on
the antecedents, enablers and inhibitors of alignment, to research that focuses on the activi-
ties of aligning where actors do ‘aligning.’ Our findings suggest that there is a set of common
activities that form aligning practice. Such a refocusing facilitates the study of a broad set
of organizational micro processes that go beyond operational-level processes (e.g., Tallon,
2007). It enables the consideration of organizational actors as they do ‘aligning work’ rather
than focusing attention at the level of the organization and its state of alignment. When align-
ment is thought of primarily as an outcome or a macro-level process, consisting of phases and
stages, knowledge of the rich and complex ways in which actors translate, adapt, integrate,
experience and thus ‘make’ alignment happen, is limited.
A contribution of this paper has been the development of a framework (Figure 5.2),
which shifts alignment discourse away from characterizations of alignment or misalignment
100 anna karpovsky and robert d. galliers

toward an understanding of how organizational actors are engaged in the practice of aligning
and what types of activities are involved in that practice. The categorization of activities that
emerges is a resource to guide future empirical research. We do not claim that our list of
aligning activities is exhaustive; rather, it represents an illustration of what is known or what
can be inferred from current research. We anticipate that future research will reveal and
explicate other relevant activities.

Suggestions for Future Research

As noted, alignment has been studied extensively over the years, and researchers have
­produced a significant body of literature on the topic. However, we conclude that the
majority of the literature considers the alignment process as following prescribed meth-
odologies, assuming rational decision-making and is often sequential in nature. A focus
on activities suggests instead that organizational practice is more organic in nature, being
subject to political and interpretive influences (Jarzabkowski, 2005). One implication of
this view is that studying processes and actors independently may be less analytically useful
than has been assumed. While aligning as adaptation and translation presumes intellectual-
level activities materializing at the level of plans, strategies, goals and objectives, it is
through the individual use and creation of these tools, and amidst individual actions of
actors that aligning happens. Conversely, while aligning as integration and experience
both involve the social practice of individual actions and interactions, it is the actions and
interactions that also occur in relation to the usage of tools that constrain and/or enable
these actions. As such, aligning activities are interrelated and inseparable in practice. If
one considers activities inherent in the practices of aligning around strategies and plans,
one needs to acknowledge the role of social actors and their actions. Thus, in order to
understand and facilitate aligning, examination is needed not only of specific tools or
actors, but also the rich interactions within which people and things are engaged in doing
‘alignment work.’
Taking a practice perspective allows us to unite the social and intellectual dimensions
of alignment. In particular, a consideration of the recursive loops between the social and
the intellectual provides an integrated understanding of how organizational actors mobilize
tools and how tools can assemble actors to attain alignment outcomes. One such avenue
of research might be to study the use of alignment tools in practice. While we know about
the tools available in aligning practice – the methodologies and approaches used in ‘transla-
tions’ – we do not yet know the precise nature of the ‘tools’ the practitioners actually use,
nor how they use them. For example, while such tools as balanced scorecards (Huang and
Hu, 2007); Andersen Consulting’s Method-1 (Lederer and Gardiner, 1992); IBM’s Business
Systems Planning (Zachman, 1982); Information Engineering (Martin and Leben, 1989) and
Total Information Systems Management (Osterle et al., 1993) have been introduced, stud-
ies suggest that practitioners ignore or modify them, or develop their own methodologies
(e.g., Teubner, 2007). Potential research questions would relate to, for example: (1) How
are alignment tools applied in practice? (2) Which tools are utilized and in which context?
(3) Are they used in ways in which they were intended? (4) Are the plans and strategies fol-
lowed mechanistically or used as a guideline in practice? (5) Do tools evolve over the period
of aligning and, if so, how do they evolve?
In addition, the strategy-as-practice literature uncovers various impacts of common-or-
garden tools such as PowerPoint presentations (e.g., Kaplan, 2011) and social media (e.g.,
Huang et al., 2013) on strategy formation. Can the use of such tools also be observed in
aligning practice? Do aligning practices differ from other organizational practices previ-
ously studied? From the literature we have analyzed, it becomes clear that, while we are
 aligning practices 101

starting to understand something of the activities involved in the process and practices
of aligning, what is still missing are studies on this ‘internal life of a process’ (Brown and
Duguid, 2000: 94).
The lack of focus on micro processes is evident from the relative scarcity of literature on,
for example, negotiating, learning and decision-making practices (see Table D1 in Appendix
D). Organizational actors make various decisions in relation to business processes and associ-
ated IS, and therefore, decision-making becomes central to aligning. Decisional factors such
as the motivating reason(s) behind the drive toward achieving strategic alignment can shape
the process of its achievement (Negoita et al., 2013). Decision-making plays such a central
part in managerial work that some authors consider it almost synonymous with manage-
ment. Drucker (1955: 115), for example, argues that, ‘Whatever a manager does he does
it through … making decisions.’ Over the following five decades, others have subscribed to
this view of decision-making as being the central focus of management (e.g., Simon, 1979;
Koontz, 1980). However, there is little discussion of decision-making in the practices associ-
ated with aligning. Understanding these practices is crucial in helping practitioners deal with
the challenges associated with aligning. The extant alignment literature usually considers
the decisions made ‘in terms of actions taken, the resources committed, or precedents set’
(Mintzberg et al., 1976: 246) but not how these decisions emerge or what the implications
might be. Further, we know from prior research that decision-making is infused with politics
(Eisenhardt and Bourgeois, 1988); however, the alignment literature rarely considers the
contestation and dialog involved. It goes without saying that negotiating is part of organiza-
tional life – and this includes aligning activity, given that it involves multiple organizational
members with a variety of personal as well as collective agendas.
The framework that emerges from our literature review may prove to be a useful starting
point on which to base such investigations, with new sets of organizational activities emerg-
ing as a result. We argue for going beyond simply explaining organizational activities that are
considered to be part of aligning by also focusing simultaneously on activities at multiple levels
beyond the level of the organization. As can be observed from Table D2 in Appendix D, which
lists all the articles considered in order of the number of categories of activities observed, only
a few studies have captured the full set of proposed categories. We argue that it is through the
focus on day-to-day activities that we will better be able to present a more comprehensive pic-
ture of aligning practice. Once we have this better understanding of aligning activities, and the
actors involved, we would be in a better position to consider micro processes of aligning, the
tools used in aligning and the unconscious actions9 that are performed by ‘alignment actors.’
In other words, we could begin to unpack aligning practice and reveal ‘the social, material and
embodied ways of doing’ alignment (Jarzabkowski and Spee, 2009).
Therefore, another suggestion for future research is to direct attention away from a focus
on whether alignment is achieved or not, or on factors that enable successful alignment
toward the study of outcomes related to the micro processes of aligning such as settlement on
a decision, learning experience and contestation in aligning. These micro processes can play
an unexpected role in aligning activity and, potentially, might have an impact on the extent
and characteristics of alignment that is achieved. The introduction of an aligning-as-practice
view does not replace the existing views of alignment: it expands its conceptualization by
adding the dimension of practice, allowing for the study of routines and day-to-day activities
of organizational actors.
An expanded range of research methods is necessary to pursue this research agenda.10
Our view of aligning-as-practice suggests different units of analysis for research. That is,
alignment scholars would not only center on the organization as a uniform whole, but also
consider decisions, individuals, groups, projects and tools. To undertake this program of
research, a wider range of research methods may need to be employed. Current work in
102 anna karpovsky and robert d. galliers

the strategy-as-practice domain is dominated by observational field studies (e.g., Kaplan and
Orlikowski, 2013). If our intention is to comprehend practices, there is little or no substitute
for spending time in the field observing organizational actors engaged in their daily work-
related activities (Jarzabkowski and Kaplan, 2014). A difficulty in undertaking such research,
however, is that it is challenging to determine, a priori, which of the activities and interac-
tions are related to aligning practice (Bechky, 2008). Consequently, going into the field to
observe how organizational actors ‘do’ aligning work requires being in the right context and
at the right time (Jarzabkowski and Kaplan, 2014). To capture aligning as it unfolds doubtless
requires longitudinal study (e.g., Pettigrew, 1990). In addition, combining approaches might
be valuable to alignment research. Different approaches focus attention on different aspects
of the object of study, thereby providing a richer, more complete picture (Mingers, 2003).
Interviews and surveys are valuable supplements (Jarzabkowski and Kaplan, 2014).
In sum, we posit that the proposed categories of aligning practices can provide a founda-
tion for researchers in studying a greater number of units of analysis, using a broader range
of research methods than has been typically the case in alignment research heretofore. The
utilization of a wider range of approaches is, we contend, likely to produce a more dynamic
and nuanced understanding of how aligning happens – in practice.
There are a number of potential extensions to our findings that could be explored in
future research in addition. These include examining the different implications of other align-
ing activities that may be surfaced and studying a broader range of contexts, actors and their
aligning activities.
Our focus in this study has been on those aligning activities that have been reported in
existing, published cases in the academic literature. We might suppose, however, that there
are activities and actors that have not thus far been reported upon that might well reflect
additional aligning practices. For example, while Grant (2003) reports on such aligning
activities as restructuring, hiring and outsourcing, who was involved and how they went
about these tasks remains unclear. Similarly, Roepke et al. (2000) present an account of
3M’s alignment initiatives, and in particular, their IT management development programs.
However, the case fails to account for the manner in which employees’ attitudes changed
over time. Such cases as these provide some insight into what organizations do in their
attempts to align IS with the business; however, they fail to describe the day-to-day prac-
tices of the organizational members involved. In many cases, we are yet to know who
are the ‘alignment practitioners’ and what they actually do to align organizational pro-
cesses, structures and functions. It should be clear from our analysis that organizational
actors appear to be involved in all four types of aligning practice, at least to some degree.
However, most alignment research to date has focused on aggregate classes of actors (e.g.,
‘top management’; ‘IS management’; ‘middle management’), and has attributed specific
activities to these archetypes. Consequently, the description of activities performed by
these aggregate actor classes becomes abstracted, and somewhat distant from the everyday
activities of any individual actor. We suggest a research agenda that focuses on a wider
range of individual actors and their everyday work practices in interaction with others. We
further suggest that ‘external’ actors (i.e., those outside of the organization concerned),
with whom ‘internal’ alignment practitioners interact, should also be studied in ongoing
studies of aligning practice. We found only a very few external groups to have been con-
sidered thus far. For example and as noted, Sillince and Frost (1995) incorporate the role
of politicians with respect to the organizational aligning practices of public sector organiza-
tions. Consultants and researchers – the latter partially playing the role of consultants as
well in action research studies – have been considered in certain studies (e.g., Salmela and
Ruohonen, 1992; Powell and Powell, 2004). In addition, the strategy literature indicates
 aligning practices 103

that ‘strategy gurus’ and business media actors play important roles in organizational activi-
ties (e.g., Clark and Greatbatch, 2002).
Future research could also usefully consider a wider range of contexts (cf. Figure 5.1).
For example, not-for-profit organizations (charity or service organizations) might have a
different set of approaches to goal specification and assessment (Newman and Wallender,
1978), methods of performance measurement (Kanter and Summers, 1987) and marketing
and competitive practices (Rangan et al., 1996). Consequently, this sector could provide a
fruitful setting for comparing the set of aligning activities taking place. Studying these and
other related settings and novel sets of actor groups might hold promise.

Implications for Managers

While it may be premature to draw implications for managers from this preliminary (lit-
erature) review of aligning practice, in the spirit of establishing an agenda for research and
practice, we offer the following. Alignment research has provided managers with a number
of methodologies (e.g., Zachman, 1982; Lederer and Gardiner, 1992; Huang and Hu, 2007)
to help in achieving and sustaining competitive advantage on the back of IT. However, it has
been argued that such tools should not be mechanistically applied in practice, but rather used
as means for surfacing assumptions, questioning and aligning interests across the organization
(e.g., Galliers and Sutherland, 1991; Galliers, 2011). Methods are often talked of in terms of
the ‘instrumental mode’ (Astley and Zammuto, 1992: 453) of contributing managerial tech-
niques, often associated with the notion of ‘best practices’ (cf. Wagner and Newell, 2004 for
a critique). Yet, in practice, methods are not operationalized precisely as they are designed.
For example, IS/IT plans do not typically describe how IT and business personnel have to
interact to put these plans into action, and formal conventions often play only a minor part
in the interactions between business and IT (Chan, 2002). Recognizing the range of aligning
activities involved in practice, such as the ones identified in our study, should allow managers
to realize and prepare themselves for unforeseen challenges in alignment.

Concluding Remarks

The intention of this review has been to serve as a catalyst for a broader and richer agenda for
alignment research. We believe, as do others (Henderson and Venkatraman, 1993; Queiroz
et al., 2012), that this is an important research topic, as it goes to the very essence of the stra-
tegic value of IT in organizations and develops a link between business and IT-related issues.
The categories of aligning activities that have been described here are somewhat nuanced,
but introduce a new departure for research in this domain. Specifically, we propose a subtle
shift of focus from the alignment process to aligning practice, with emphasis being placed
on day-to-day activities rather than abstract phases. As a result, we propose an agenda that
evolves from a (macro) focus on organizations and methodologies that has been common to
date, to micro-process research that focuses on organizational actors and their day-to-day
interactions and activities that shape aligning practice. While appreciating the contributions
of prior research, we argue for a new point of departure that can help alignment research to
become more relevant to practice, as called for by Avison and Malaurent (2014) and to prac-
titioners – the people who ‘do’ aligning. The research agenda we outline recognizes trends
in other fields, such as in strategic management (cf. Whittington, 2014), and encourages IS
researchers to respond by increasing their theoretical and empirical efforts with respect to
aligning practice.
Appendix A

Table A1 Journals included in the review of the ISS literature

Journals Senior scholars Lacity et al: Chan and Reich Chen et al: Added by Backward/forward Initial keywords Final set of relevant
‘basket’ (2009) (2007) (2010) authors search search results targeted articles
Academy of Management Executive x 18 0
Academy of Management Journal x 67 2
Academy of Management Review x x 58 1
American Review of Public x 1 1
Administration
Annals of Cases on Information x 0 0
Technology
Behaviour and Information x 17 7
Technology
BT Technology Journal x 124 0
California Management Review x x 173 6
Communications of the ACM x 234 15
Communications of the AIS x x 164 23
Computers and Automation x 0 0
Computer & Operations Research x 650 2
Database for Advances in Information x 78 9
Systems (ACM SIGMIS)
Datamation x 0 0
Decision Sciences x x 73 23
Decision Support Systems x 396 7
Engineering Management Journal x 23 0
Engineering Management, IEEE x 0 0
Transactions
European Journal of Information x x x 173 39
Systems
European Journal of Operational x 49 6
Research
European Management Journal x x 30 11
Foreign Affairs x 4 0
Global Journal of Flexible Systems x 0 0
Management
Harvard Business Review x x 127 32
IBM Systems Journal x 193 21
IEEE Computer x 0 0
IEEE Transactions on Engineering x x 0 0
Management
Industrial Management + Data x x 569 14
Systems
Industry & Innovation x 21 2
INFOR x 10 4
Information & Management x x 247 74
Information and Organization x 20 2
Information and Software x 209 7
Technology
Information Management x 0 0
Information Management & x 127 6
Computer Security
Information Resources Management x 109 17
Journal
Information Systems Frontiers x 78 5
Information Systems Journal x x 82 18
Information Systems Management x 289 39
Information Systems Research x x x 123 20
Information Technology & People x x 79 5
Information Technology and x 66 4
Management
International Journal of Computer x 0 0
Applications in Technology
International Journal of E-Business x 26 2
Research
(continued)
Table A1 (Continued )

Journals Senior scholars Lacity et al: Chan and Reich Chen et al: Added by Backward/forward Initial keywords Final set of relevant
‘basket’ (2009) (2007) (2010) authors search search results targeted articles
International Journal of Healthcare x 13 3
Management and Technology
International Journal of Information x x 407 51
Management
International Journal of Logistics x 9 0
Management
International Journal of x 22 2
Management
International Journal of x 4 0
Management Science
International Journal of x 0 0
Organizational Analysis
International Journal of Technology x 0 0
Management
International Journal of Value- x 2 1
Based Management
International Review of Law, x 6 1
Computers & Technology
Ivey Business Journal x 6 2
Journal of AIS x x 69 1
Journal of Applied Behavioral Science x 4 0
Journal of Applied Business Research x 21 1
Journal of Cases on Information x 70 5
Technology
Journal of Computer Information x 188 8
Systems
Journal of Electronic Commerce in x 26 1
Organizations
Journal of End User Computing x 0 0
Journal of Enterprise Information x 346 8
Management
Journal of Global Information x 76 5
Management
Journal of Global Information x 63 4
Technology Management
Journal of High Technology x 133 3
Management Research
Journal of Information Science x 0 0
Journal of Information Systems x 88 3
Journal of Information Systems x 618 50
Management
Journal of Information Technology x x x 175 46
Journal of Information Technology x 71 12
Case and Application Research
Journal of Information Technology x 0 0
Theory and Applications
Journal of International x 9 0
Management Studies
Journal of Management x 4 0
Journal of Management x 19 0
Development
Journal of Management Information x x x 203 46
Systems
Journal of the Operational Research x 0 0
Society
Journal of Operations Management x 24 0
Journal of Purchasing & Supply x 2 0
Management
Journal of Services Research x 0 0
Journal of Small Business and x 1 0
Entrepreneurship
Journal of Strategic Information x x x 182 86
Systems
(continued)
Table A1 (Continued )

Journals Senior scholars Lacity et al: Chan and Reich Chen et al: Added by Backward/forward Initial keywords Final set of relevant
‘basket’ (2009) (2007) (2010) authors search search results targeted articles
Journal of Systems and Software x 253 5
Journal of Systems Management x 256 27
Long Range Planning x 67 28
Management Datamatics x 0 0
Management Decision x 60 4
Management Science x 46 2
MIS Quarterly x x 350 82
MIS Quarterly Executive x x x 44 18
Model, Strategy & Leadership x x 0 0
Omega x 63 17
Organization Science x x x 19 3
Organization Studies 0 0
Organizational Behavior and x 0 0
Human Decision Processes
Organization Development Journal x 0 0
Public Personnel Management x 8 0
S.A.M. Advanced Management x 14 2
Journal
Scandinavian Journal of x x 8 5
Information Systems
Sloan Management Review x 380 53
South African Computer Journal 0 0
Strategic Management Journal x 22 1
Strategic Outsourcing: An x x 38 5
International Journal
Strategy & Leadership x 71 3
Technology Analysis & Strategic x 25 5
Management
Technovation x 44 3
Total 9336 1020
Appendix B

Table B1 ISS literature review: number of articles in each category

Category description Number of articles Percentage

Core IS strategizing Alignment 506 53%
articles Remaining Competitive advantage 142 47%
articles (IS strategizing-
related articles) Sourcing 69
Capability 64
Change management 55
Investment 27
Governance 28
Inter-organizational collaboration 21
Knowledge management 20
13
Total 945 100%
Appendix C

Table C1 Case sources

Author(s) Journal Year Title

Salmela, H Finland European Journal of Operational Research 1992 Aligning DSS development with organization development
Ruohonen, M Finland
Ives, B USA IBM Systems Journal 1993 Global business drivers: Aligning information technology to global
Jarvenpaa, SL USA business strategy
Mason, RO USA
Sillince, JAA UK European Journal of Information Systems 1995 Operational, environmental and managerial factors in non-alignment of
Frost, CEB UK business strategies and IS strategies for the police service in England and
Wales
Martinez, EV USA Sloan Management Review 1995 Successful reengineering demands IS/Business partnerships
Dutta, S France European Management Journal 1996 Linking IT and business strategy: The role and responsibility of senior
management
Johnston, KD Australia The Journal of Strategic Information 1996 Integrating information technology divisions in a bank merger: Fit,
Yetton, PW Australia Systems compatibility and models of change
Brown, CV USA Information Systems Research 1997 Examining the emergence of hybrid IS governance solutions: Evidence
from a single case site
McKenney, JL USA MIS Quarterly 1997 Bank of America: The crest and trough of technological leadership
Mason, RO USA
Copeland, DG USA
Hackney, R UK European Journal of Information Systems 1999 Opportunistic strategy formulation for IS/IT planning
Little, S UK
Simonsen, J Denmark Scandinavian Journal of Information 1999 How do we take care of strategic alignment? Constructing a design
Systems approach
Roepke, R. USA MIS Quarterly 2000 Aligning the IT human resources with business vision: The leadership
Agarwal, R. US initiative at 3M
Ferratt, TW US
Feurer, R Information Systems Management 2000 Aligning strategies, processes, and IT: A case study
UK
Chaharbaghi, K
UK
Weber, M
Germany
Wargin, J
Germany
Hirschheim, R California Management Review 2001 Detours in the path toward strategic information systems alignment
USA
Sabherwal, R
US
Sabherwal, R Organization Science 2001 The dynamics of alignment: Insights from a punctuated equilibrium model
USA
Hirscheim, R.
USA
Goles, T
USA
Chan, YE MIS Quarterly Executive 2002 Why haven’t we mastered alignment?
Canada
Sauer, C European Management Journal 2003 Establishing the business of the future: The role of organizational
UK architecture and information technologies
Willcocks, LP
UK
(continued)
Table C1 (Continued )

Author(s) Journal Year Title

Grant, GG Journal of Information Technology 2003 Strategic alignment and enterprise systems implementation: The case of
Canada Metalco
Van Grembergen, W Journal of Information Technology and 2003 Linking the IT balanced scorecard to the business objectives at a major
Belgium Application Research Canadian financial group: Research note
Sauli, R
Belgium
De Haes, S
Belgium
Peak, D The Journal of Computer Information 2003a The IT alignment planning process
USA Systems
Guynes, SC
USA
Peak, D The Journal of Information Systems 2003b Improving information quality through IT alignment planning: A case
USA Management study
Guynes, SC
USA
Avison, D The Journal of Strategic Information 2004 Using and validating the strategic alignment model
France Systems
Jones, JAustralia
Powell, P
UK
Wilson, D
Australia
Powell, J European Journal of Operational Research 2004 Scenario networks to align and specify strategic information systems:
UK A case-based study
Powell, P Journal of Information Technology 2004 Raise your glasses – the water’s magic! Strategic IT at SA Water: A case
UK study in alignment, outsourcing and governance
Thorogood, A
Australia
Yetton, PW
Australia
Vlasic, A
Australia
Ramnath, R Communications of the ACM 2005 IT-enabled sense-and-respond strategies in complex public organizations
USA
Landsbergen, D
USA
Sledgianowski, D Journal of Cases of Information 2005 IT-Business strategic alignment maturity: A case study
USA Technology
Luftman, J
USA
Boddy, D Journal of Information Technology 2005 Maintaining alignment over the long-term: Lessons from the evolution of
UK an electronic point of sale system
Paton, R
UK
Coughlan, J International Journal of Information 2005 Understanding the business-IT relationship
UK Management
Lycett, M
UK
Macredie, RD
UK (continued)
Table C1 (Continued )

Author(s) Journal Year Title

Hu, Q Communications of the Association for 2006 Using the balanced scorecard to achieve sustained IT-business alignment:
US Information Systems A case study
Huang, D
USA
Wijnhoven, F The Journal of Strategic Information 2006 Post-merger IT integration strategies: An IT alignment perspective
The Netherlands Systems
Spil, T
The Netherlands
Tegwee, R
The Netherlands
Fa, R; Tjang A
The Netherlands
Vayghan, J IBM Systems Journal 2007 The internal information transformation of IBM
USA
Gar3nkle, S
USA
Walenta, C
USA
Healy, D
USA
Valentin, Z Information Technology & People 2007 Enterprise architectures: Enablers of business strategy and IS/IT
USA alignment in government
Gregor, S
Australia Journal of AIS 2007 Strategic alignment in mergers and acquisitions: Theorizing IS integration
Hart, D decision making
Australia
Martin, N
Australia
Mehta, M
Australia
Hirschheim, R
USA
Huang, DC The Journal of Information Systems 2007 Achieving IT-Business strategic alignment via enterprise-wide
USA Management implementation of balanced scorecards
Hu, Q
USA
Chen, R International Journal of Information 2008 Aligning information technology and business strategy with a
Taiwan Management dynamic capabilities perspective: A longitudinal study of a Taiwanese
Sun, C Semiconductor Company
Taiwan
Helms, MM
USA
Wen-Jang
USA
Tarafdar, M The Journal of Information Systems 2009 IT-business alignment: A two-level analysis
USA Management
Qrun3eh, S
USA
(continued)
Table C1 (Continued )

Author(s) Journal Year Title

Weiss, JW Engineering Management Journal 2011 Information Technology (IT)/Business alignment as a strategic weapon: A
USA diagnostic tool
Thorogood, A
Australia
Wang, N Communications of the Association for 2011 The road to business-IT alignment: A case study of two Chinese
China Information Systems companies
Xue, Y
USA
Liang, H
USA
Ge, S
China
Appendix D

Table D1 List of aligning activities3

Aligning activity category Number of articles Aligning activity subcategory (%) Number of occurrencesa Frequency of occurrence (%)
RECONFIGURING 26(70%) New governance structure 20 9.7
Transformation 1 0.5
Turnaround 1 0.5
Restructuring IT organization 17 8.6
Outsourcing 8 3.8
Reward system 1 0.5
Integration 6 3.2
DEVELOPING 25(68%) New system development 21 9.7
Business-focused IT 8 3.8
STRENGTHENING 22(60%) User/IT relationship (user participation) 5 2.7
IT-business communication 5 2.2
Top management involvement 12 4.9
CIO/CEO relationship 1 0.5
IS/business partnership 5 2.7
Culture change 11 4.3
IT training 8 3.8
Human resource management/training 4 2.2
Reinforcing 2 1.1
Strengthening 1 0.5
(continued)
Table D1 (Continued )

Aligning activity category Number of articles Aligning activity subcategory (%) Number of occurrencesa Frequency of occurrence (%)
EVALUATING 21(57%) Success measures 2 1.1
Reactive response 1 0.5
Separation of information/technology 3 1.6
management 10 4.9
Clarifying objectives 1 0.5
Scanning emerging technologies 2 0.5
External factors 7 2.7
Review 6 2.2
Prioritization
SIGNALING 15(41%) New position 6 3.2
New appointment 13 5.9
IT location 1 0.5
NEGOTIATING 8(22%) Resistance to change 2 0.5
Meetings 1 0.5
Politics 8 4.3
LEARNING 8(22%) Learning the business 5 2.7
Organizational learning 4 1.6
DECISION-MAKING 3(8%) Decision-making 3 1.1
a
 he numbers appearing in this table are indicative of our findings and do not represent any precise measure of occurrence of these activities in practice. The numbers give us some sense
T
of gaps and relative proportions of the themes covered by researchers in their analysis of the cases.
Table D2 Topic coverage in the cases

Article reconfiguring decision‒ negotiating signaling evaluating strengthening learning developing topics
making covered
McKenney et al. (1997) x x x x x x x x 8
Coughlan et al. (2005) x x x x x x x 7
Wang et al. (2011) x x x x x x x 7
Dutta (1996) x x x x x x 6
Mehta and Hirschheim (2007) x x x x x x 6
Sillince and Frost (1995) x x x x x 5
Chen et al. (2008) x x x x x 5
Martinez (1995) x x x x x 5
Johnston and Yetton (1996) x x x x x 5
Weiss and Thorogood (2011) x x x x x 5
Ramnath and Landsbergen (2005) x x x x 4
Salmela and Ruohonen (1992) x x x x 4
Gregor et al. (2007) x x x x 4
Thorogood et al. (2004) x x x x 4
Chan (2002) x x x x 4
Simonsen (1999) x x x x 4
Tarafdar and Qrunfleh (2009) x x x x 4
Hirschheim and Sabherwal (2001) x x x 3
Huang and Hu (2007) x x x 3
Powell and Powell (2004) x x x 3
Sauer and Willcocks (2003) x x x 3
Vayghan et al. (2007) x x x 3
Ives et al. (1993) x x x 3
Sledgianowski and Luftman (2005) x x x 3
(continued)
Table D2 (Continued )

Article reconfiguring decision‒ negotiating signaling evaluating strengthening learning developing topics
making covered
Van Grembergen et al. (2003) x x x 3
Sabherwal et al. (2001) x x x 3
Huang and Hu (2007) x x x 3
Peak and Guynes (2003b) x x x 3
Avison et al. (2004) x x 2
Boddy and Paton (2005) x x 2
Grant (2003) x x 2
Roepke et al. (2000) x x 2
Peak and Guynes (2003a) x x 2
Feurer et al. (2000) x x 2
Hackney and Little (1999) x 1
Brown (1997) x 1
Wijnhoven et al. (2006) x 1
 aligning practices 121

Notes
1 Herein after, we shall use the simple term ‘alignment’.
2 Examples of prior process-oriented studies include: MacDonald (1991); Baets (1996); Broadbent
and Weill (1993); Henderson and Venkatraman (1993); Galliers and Baets (1998); Papp (1999);
Rondinelli et al. (2001); Hirschheim and Sabherwal (2001); Sabherwal et al. (2001); Kearns and
Lederer (2003); Peppard and Ward (2004); Benbya and McKelvey (2006).
3 The SAMM echoes earlier research that presents various forms of maturity model. See, for example,
Galliers and Sutherland (1991) for an early review, and more recently, Paulk (2002) for an overview
of the Software Engineering Institute’s Capability Maturity Model (CMM). Latterly, the Innovation
Value Institute has developed a more broadly based IT Capability Maturity Framework (http://ivi.
nuim.ie/it-cmf).
4 See also, for example, Arvidsson et al. (2014) and Huang et al. (2014) for illustrations of practice-
based studies in IS.
5 We do not limit our use of the term to activities linked to established professions, clearly defined
roles, or social contexts, as seems to be the standard definition employed in the communities-of-
practice tradition. For instance, Cook and Brown (1999: 386–387) define practice as ‘the coordi-
nated activities of individuals and groups in doing their “real work” as it is informed by a particu-
lar organizational or group context’. Similarly, Brown and Duguid (2001: 203) define practice as
‘undertaking or engaging fully in a task, job, or profession’.
6 Strategic Information Systems Planning and MIS planning are common terms in use, especially in the
earlier years.
7 Eighteen articles out of the total of 37 identified.
8 For a review of the sourcing literature as it relates to practice, see Lacity et al. (2009).
9 Unconscious actions are defined as ‘something that is constitutive of acting within the world’ accord-
ing to Jarzabkowski and Spee (2009: 82).
10 cf. Galliers and Land (1987) for a taxonomy of IS research approaches and Mingers (2003) for mixed
method research.

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Questions for Discussion

1 It is suggested that aligning practices can be grouped under the headings, aligning as:
•• translation
•• adaptation
•• integration
•• experience.
2 Consider each and discuss how helpful these headings are in explaining aligning prac-
tices. How might you amend or extend this typology?
3 Apply each of the headings to an organization with which you are familiar. What prac-
tices can you identify and how do these compare with those listed in the chapter?
 aligning practices 127

4 Consider the findings from this review in light of the subject matter of the previous
strategies. How does the concept of aligning fit with the information systems planning
approaches identified in Chapter 1 and the reflections on information systems strate-
gizing in Chapters 2–4? What do you conclude from this?

The chapter is based on a review of the literature at the time of publication in 2015. How
have things changed since then? Consider in particular the advent of digital strategy.

Further Reading
Chan, Y. E., Reich, B. (2007). IT alignment: What have we learned? Journal of Information Technology,
22(4), 297–315.
Horner Reich, B., Benbasat, I. (2000). Factors that influence the social dimension of alignment between
business and information technology objectives. MIS Quarterly, 24(1), 81–113.
PART II

Digital Strategy
and Organizational
Transformation

W e be ga n o ur d i s cu s s i o n with the foundation of information sys-

tems (IS), Strategy and Strategizing in Part I by focusing on IS planning, IS strategy
and strategizing, aligning and further developments of IS strategizing. In Part II we focus on
current aspects and issues of digital strategy and transformation, digital leadership and capa-
bilities, chief digital officers and issues of power dynamics, IS, and strategy. The contents of
Part II are listed in the second-from-bottom layer of Figure P2.1.
The current digital economy is affecting the workplace and society with the use of social
media; cloud computing; big data, and artificial intelligence. Navigating through this digi-
tal transformation might be considered a daunting experience, where people’s roles require
adjustment (Sandeep and Ravishankar, 2018; Wagg et al., 2019) and organizations require
clear strategies (Bharadwaj et al., 2013). New forms of capabilities and leadership such as
Chief Digital Officers (Weill and Woerner, 2013) emerge and understanding the issues of
power and strategy (Marabelli and Galliers, 2017), and power and IS (Simeonova, 2018;
Simeonova et al., 2018) gain further significance. Indeed, the importance of power dynamics
has recently been recognized and emphasized in a Special Issue on Power Dynamics of the
Information Systems Journal (Simeonova et al., 2017).
Part II examines the “what”, the “how” and the “who” of digital transformation and
digital transformation strategy. The “what” of digital transformation and digital transforma-
tion strategy are considered in Chapters 6 and 7, while the role of power, and how it affects
IS and strategy, is considered in Chapter 10. The “how”—in terms of how to navigate digital
transformation and formulate digital transformation strategy—is also dealt with in Chapters
6 and 7, while the “who” is considered in Chapters 8 and 9, in terms of the role of leadership
and CDOs in promoting digital transformation.
130 i n t r o d u c t i o n t o pa r t i i

Part Four: Some current and emerging challenges

Ch.16: Opening strategy through social media
Ch.17: Organizational socialization and social media
Ch.18: Decision support systems failures
Ch.19: The opportunities and challenges of datification
Ch.20: Ethical issues

Part Three: Organizing and governing the IS funcon

Ch 11: Principles and models
Ch.12: Managing in economic decline
Ch.13: CIO profiles
Ch.14: Alternative roles for chief digital officers
Ch.15: The IS Organization

Part Two: Digital strategy and organizaonal transformaon

Ch.6: Navigating digital transformation
Ch.7: Formulating a digital strategy
Ch.8: Building digital capabilities
Ch.9: Chief digital officers
Ch.10: Organizational power dynamics

Part One: Foundaons to IS strategy and strategizing

Ch.1: Historical approaches
Ch.2: Further reflec ons
Ch.3: A cri que
Ch.4: Conceptual developments
Ch.5: Aligning prac ces

Figure P2.1 The focus of Part II: Digital strategy and organizational transformation

In Chapter 6, Ina Sebastian, Jeanne Ross, Cynthia Beath, Martin Mocker, Kate
Moloney and Nils Fonstad outline the elements of successful digital transformation through
sampling the practices of twenty-five “big old” companies. The authors explain that the
elements of successful digital transformation include a digital strategy that defines the
SMACIT (social, mobile, analytics, cloud, and internet of things) inspired value proposi-
tion; an operational backbone that facilitates operational excellence, and a digital services
platform that enables rapid innovation and responsiveness to new market opportunities.
The chapter differentiates between two business strategies: a customer engagement strat-
egy and a digitized solutions strategy. The authors outline two technology-enabled assets
for the successful execution of digital strategies. These are an operational backbone and a
digital services platform. These assets, they argue, enable business capabilities, which in
turn lead to digital business success. How to formulate a digital transformation strategy is
examined in Chapter 7.
In Chapter 7, Thomas Hess, Christian Matt, Alexander Benlian, and Florian Wiesböck
outline guidelines to help managers formulate business transformation strategies, emphasizing
the balance between exploitation and exploration of resources to achieve organizational agility
d i g i ta l s t r at e g y a n d o r g a n i z at i o n a l t r a n s f o r m at i o n 131

and competitive advantage. The chapter outlines four key dimensions of digital transforma-
tion: use of technologies; changes in value creation; structural changes, and financial aspects.
The authors develop guidelines for managers regarding how to approach and implement digital
transformation strategies and they illustrate this through three case studies. The chapter for-
mulates strategic questions managers need to tackle when embarking on digital transforma-
tion. The authors’ conclusions outline why it is essential for managers to know what questions
to ask for successful digital transformation.
In Chapter 8, Omar El Sawy, Pernille Kræmmergaard, Henrik Amsinck and Anders
Lerbech Vinther outline the need for defining and enhancing enterprise capabilities in digital
leadership for successful digitalization. The authors illustrate that, for a successful digitali-
zation strategy, six aspects require consideration and change. These are: business strategy;
business models; enterprise platform integration; the mindset and skill set; the corporate IT
function, and the workplace. Their research was undertaken at the LEGO Group where lev-
eraging digitalization has been a core strategic pillar. To do so, the LEGO Group have used
three lenses: products, marketing and enterprise in order to build the foundations of digital
leadership. Based on LEGO’s success, the authors formulate lessons learned for digital lead-
ership to help companies achieve strategic success of digitalization and digital leadership.
The lessons focus on aspects of enterprise digitalization, platforms and the digital workforce
and are designed to help other companies in other contexts to develop their digital leadership
capabilities.
In Chapter 9, Anna Singh and Thomas Hess examine the roles of CDOs in establish-
ing themselves as top managers in organizations embarking digital transformation. The task
of CDOs is to orchestrate digital transformation in their organizations, help formulate and
execute the digital transformation strategy, and help to digitize resources and gain value
from these digital assets. The authors outline the emerging role of CDOs through six cases.
Notwithstanding, the authors are able to summarize three roles for CDOs arising from their
research, that of: the entrepreneur, the digital evangelist, and the coordinator. Key skills and
competencies associated with each of these roles are identified. Entrepreneurial CDOs require
digital pioneering skills, digital evangelists require skills that inspire, as well as resilience and
IT competency, and coordinator CDOs require change management skills.
In Chapter 10, Boyka Simeonova, Bob Galliers and Stan Karanasios outline the impor-
tance of power dynamics considerations in organizations, IS and strategy. The chapter out-
lines a new analytical framework on power—the Power Matrix. The framework differentiates
between episodic and systemic forms of power, the role of actors and the role of IS and their
links to strategy. The matrix includes four quadrants: power as possession; power as control;
power as practice, and power as facilitation. Power as possession is viewed in terms of being
hierarchical, authoritative and often legitimate, based on knowledge, resource access and
often self-interest, linking to a strategy of exploitation, direction/goal setting, and imposition
of change. Power as control is more concerned with rules; norms; monitoring; surveillance;
discipline; compliance, and digitalization, with strategy being linked to exploitation, perfor-
mance measurement, and routinizing change. Power as practice is described more in terms of
shared goals/interests; communities of practice; social capital; trust; collaboration; networks;
empowerment, and knowing, with strategy being linked to exploration; experimentation; inno-
vation, and instilling change. Power as facilitation features transparency; autonomy; mul-
tivocality; empowerment; discourse; decision-making, and an organizational culture linking
to strategy built on exploration and innovation, institutionalizing change). The framework
outlines the importance of power dynamics in organizations and paves the way for studying
different forms of power, IS and strategy.
132 i n t r o d u c t i o n t o pa r t i i

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on Information Systems, San Francisco. https://aisel.aisnet.org/icis2018/.
Wagg, S., Cooke, L., Simeonova, B. (2019). Digital inclusion and Women’s Health and Well-
Being in Rural Communities, In Yates, S. and Rice, R. (Eds) The Oxford Handbook of
Digital Technology and Society, Oxford: Oxford University Press.
Weill, P., Woerner, S. L. (2013). The future of the CIO in a digital economy. MIS Quarterly
Executive, 12(2), 65–75.
Chapter 6

Ina M. Sebastian, Jeanne W.

Ross, Cynthia Beath, Martin
Mocker, Kate G. Moloney and
Nils O. Fonstad

HOW BIG OLD COMPANIES NAVIGATE

DIGITAL TRANSFORMATION

Elements of Successful Digital Transformation

N ew dig i tal t e c h no l o g i e s, particularly what we refer to as SMACIT1

(social, mobile, analytics, cloud and Internet of things [IoT]) technologies, present
both game-changing opportunities and existential threats to big old companies. GE’s “indus-
trial internet” and Philips’ digital platform for personalized healthcare information represent
bets made by big old companies attempting to cash in on opportunities offered by digital
technologies.2 LEGO is developing an engagement platform to supplement its enterprise
systems with the ability to interact with customers and innovate rapidly.3 These big old com-
panies are rethinking how they will compete in the digital economy, and they are investing in
new technologies and new capabilities to reposition themselves as digital leaders.
In recent years, “born digital” pioneers (such as Amazon, Facebook and Google) have
grown into powerful behemoths, while companies that had long dominated their industries
found their traditional value propositions under threat. Most leaders of big old companies
believe their companies can retain leadership positions by taking advantage of both their
existing strengths and the capabilities offered by digital technologies. But what must they do
to succeed? That is the question we set out to answer in a study of 25 large, successful com-
panies initiating digital transformations. Most of these companies were “big” (with a mean
size of 82,297 employees), and most were “old” (with a mean age of 104 years). Our research
method and sample are described in the Appendix.
Most big old companies’ digital transformations are at an early stage—in most industries,
the vast majority of established companies’ revenues still come from traditional products and
services.4 Thus. research on successful digital transformation is currently limited to identify-
ing trends that signal improved capabilities to apply SMACIT and related technologies, and
134 ina m. sebastian et al.

to the growing accessibility of electronic data to enrich products, services and customer
relationships.
Our study revealed three essential elements for a successful digital transformation:

1 A digital strategy that defines a SMACITinspired value proposition

2 An operational backbone that facilitates operational excellence
3 A digital services platform that enables rapid innovation and responsiveness to new
market opportunities.

In this article, we explain how these three elements position big old companies for success
in the digital era. We describe the digital initiatives of several companies in our study and
offer evidence that shows how these efforts will contribute to long-term digital success.5 We
conclude with recommendations for leaders of companies that are ready to embark—or have
already embarked—on their digital transformation journeys.

Two Digital Strategies

As leaders in big old companies recognize the opportunities created by new digital tech-
nologies to integrate their existing business capabilities with new capabilities made possible
by SMACIT technologies, they are defining their companies’ digital strategies.6 These are
not merely technology strategies. Rather, they are business strategies that incorporate the
opportunities that the digital economy presents.7 We define a digital strategy as: A business
strategy, inspired by the capabilities of powerful, readily accessible technologies (like SMACIT), intent
on delivering unique, integrated business capabilities in ways that are responsive to constantly changing
market conditions. A digital strategy guides leaders’ efforts to create new value propositions
by combining their companies’ existing capabilities with capabilities enabled by SMACIT and
other digital technologies.
We found that company leaders who recognize the opportunities presented by new digital
technologies articulate one of two types of digital strategy: customer engagement or digitized
solutions. In our sample of 25 companies, eight were pursuing a customer engagement strat-
egy, and 13 were pursuing a digitized solutions strategy. The remaining four were experi-
menting with applications of digital technologies but had not yet formulated a clear digital
strategy and thus had not embarked on a transformation journey.

Customer Engagement Strategy

Just as Amazon’s introduction of customer recommendations and user-friendly online inter-
actions created a passionate base of loyal customers, a company pursuing a customer engage-
ment digital strategy seeks to build customer loyalty and trust by providing superior, innova-
tive, personalized and integrated customer experiences. A customer engagement strategy
typically aims to create a seamless, omnichannel experience that makes it easy for customers
to order, inquire, pay and receive support in a consistent way from any channel at any time.
Such a strategy relies on analytics applied to a growing repository of customer data, to better
understand and anticipate varying customer demands. In addition, this type of digital strategy
facilitates ongoing communications between a company and its customers and, where appro-
priate, with a larger community.
An example of a company pursuing a customer engagement strategy is Kaiser Permanente,
a U.S. non-profit integrated healthcare organization. Healthcare in the United States is shifting
from volume-based to value-based care, with a focus on increasing access while also cutting
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 135

costs. Kaiser Permanente is attempting to reduce costs and improve individual patient health by
facilitating both preventive and traditional care. This involves shifting from a hospital-centric
view of healthcare to a patient-centric view. EVP and CIO Richard Daniels explains:

We need to make it easy for people to get access to care anytime and anywhere,
preferably from any device, so that they can reach us. They can have access to
their care team, and we want to provide them [with] leading-edge technology,
like video [consultation] with your doctor from your smartphone.

Kaiser Permanente is capitalizing on opportunities created by SMACIT technologies in at

least three ways:

1 Offering increased opportunities for patient interaction with care delivery teams by
supplementing visits and calls with channels like video, text and email
2 Investing in data analytics to identify needs for—and most effective approaches to—
personalized outreach, particularly when it encourages patient adherence to medical
regimens
3 Leveraging social media to develop communities of patients who have similar interests
and to create care circles that engage patients and their families with care providers.

Ten years ago Kaiser Permanente was criticized for inconsistent customer service.8 As
it delivers on its customer engagement strategy, it is earning the healthcare industry’s high-
est “net promoter” scores.9 Seventy percent of Kaiser Permanente’s members are actively
engaged online, and studies conducted by the company reveal that actively engaged members
are healthier, adhere more to prescribed medications, are more satisfied and are twice as
likely to stay with the organization. Like other big old companies pursuing customer engage-
ment digital strategies, Kaiser Permanente is leveraging digital technology to build customer
loyalty, which, in turn, is building competitive advantage.

Digitized Solutions Strategy

A digitized solutions strategy aims to reformulate a company’s value proposition by integrat-
ing a combination of products, services and data. This type of digital strategy is driven by
R&D efforts that seek to anticipate—rather than respond to—customer needs. Just as Steve
Jobs trusted his instincts (rather than customer input) to guide product innovation at Apple, a
company pursuing a digitized solutions strategy tries to imagine what it could do for custom-
ers by combining existing competencies with the capabilities offered by digital technologies.
An effective digitized solutions strategy invariably involves collecting and using additional
data—often gathered through sensors. In many cases, digitized solutions may shift company
revenues from the sale of products to recurring revenue from ongoing services.10 An example
of such a shift is GE’s expectation of subscription revenue from its asset performance man-
agement offering, delivered via its Predix platform-as-a-service (PaaS).
One company in our study that is pursuing a digitized solutions strategy is the Schindler
Group, a global provider of elevators, escalators and related services. The elevator and esca-
lator industry is highly competitive, which severely constrains profit margins. Schindler has
set out to create digitized solutions with the aim of establishing a unique space in the industry.
Its products move one billion people a day—all within buildings in urban areas. Management
thought that Schindler’s competency in moving people, combined with digital technologies,
would position it to provide mobility solutions beyond buildings. Schindler has therefore
embraced a strategy called “urban mobility solutions” for experimenting with a much wider
136 ina m. sebastian et al.

range of products and services. The first innovation that went into production involved using
its PORT technology11 and sensor equipped elevators to grant access to registered guests at a
building and direct them to their hosts.

When you have our PORT technology on your phone, the building will rec-
ognize you and know where you want to go, so you don t need your badge. If
you’re a visitor, we send you a message on your smartphone, and then you can
flow into the building without signing in at the reception desk.
Michael Nilles, Chief Digital Officer, Schindler Group

As part of its digitized solutions strategy, Schindler applies analytics to enhanced sensor data
to develop both predictive maintenance models and smart algorithms that optimize routes
to any destination in buildings and assign elevators. Like other big old companies pursuing
a digitized solutions strategy, Schindler is leveraging digital technologies to offer integrated
products and services that distinguish it from competitors.

Choosing a Digital Strategy

A digital strategy is valuable only if it drives resource allocation and capital investments.
Many business leaders are reluctant to commit to one digital strategy, in part because they
believe that digital success involves both customer engagement and digitized solutions. But
our research found that the best strategies guided both strategic choices and operational deci-
sions, and that committing to one strategy paid off. Companies like Kaiser Permanente,
LEGO and USAA (a U.S. financial services company) that were pursuing a customer engage-
ment strategy achieved greater customer satisfaction and loyalty. Companies like Schindler
and Schneider Electric that were pursuing a digitized solutions strategy gained new sources
of revenue. The value of strategic focus is well established, but the more noteworthy finding
from our study may be that success with the chosen strategy eventually also led to outcomes
associated with the other strategy.
At USAA, for example, seamless channel integration not only generated member
delight and loyalty (at USAA customers are referred to as members), but led to increased
product integration. USAA’s responsiveness to members’ needs led it to change its web-
site so that its financial products were listed according to a member’s life events. This
new arrangement was helpful, but it quickly became clear that members would find it
even more helpful if those products were actually integrated. That led USAA to create
integrated solutions like AutoCircle—a one-stop shop for buying, insuring and financing
an automobile.
Similarly, Schindler’s pursuit of digitized solutions meant the company had to engage with
customers to convince them of the benefits of those solutions. This led Schindler to design
customer engagement tools that communicate the status of Schindler’s (and some partners’)
equipment to customers (usually facility managers).
In short, our study reveals that there is a natural synergy between the two digital strat-
egies. Despite this synergy, however, our research suggests that it is essential to commit
to one digital strategy or the other. Committing to one strategy helps leaders make tough
choices related to resource allocation. Moreover, digital technologies present so many
opportunities that, without clear investment criteria, leaders will find themselves reacting to
immediate one-off opportunities rather than proactively designing their business for digital
success. In particular, they will find it difficult—or even impossible—to develop and use two
technology-enabled assets that our research found are essential for executing a company’s
digital strategy.
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 137

Two Technology-enabled Assets are Essential to Executing

a Digital Strategy

The companies we studied found it easier to articulate a digital strategy than to execute it.
In fact, all the companies we studied (and we specifically sought out proactive companies
for this research) are still at early stages of their digital transformations. (Indeed, we cannot
declare that any of the companies we studied have successfully completed a digital transfor-
mation.)
We observed enormous variation in companies’ abilities to deliver new digital services,
such as a seamless omnichannel customer experience or a well-integrated IoT-based service.
To consistently deliver new digital services, our research revealed, a company needs two
technology-enabled assets: an operational backbone and a digital services platform.
The operational backbone supports efficiency and operational excellence, while the digi-
tal services platform supports business agility and rapid innovation. Both the operational
backbone and digital services platform depend on a base of technology, but what makes them
powerful is the business capabilities that the technology enables. Our research on business
transformation initiatives suggests that these capabilities are the critical enablers of digital
business success.

An Operational Backbone Enables Operational Excellence

To compete in the digital economy, companies must, at a minimum, be able to flawlessly
execute transactions and provide access to critical operational data. To accomplish this, they
need a strong and scalable operational backbone (also referred to as a digitized process plat-
form).12 We define an operational backbone as the technology and business capabilities that ensure
the efficiency, scalability, reliability, quality and predictability of core operations.
Companies have been building operational backbones since the late 1990s, when imple-
mentations of ERP and customer relationship management (CRM) systems targeted the ben-
efits of standardized and integrated systems and processes.13 Each company’s operational
backbone is focused on its own unique strategic requirements, but the most common ele-
ments include:

•• A “single source of truth” for critical data (e.g., customer, order and product data)
•• Seamless and transparent transaction processing
•• Standardized back office shared services.

Although many businesses have been building operational backbones for many years, only 15
companies in our sample had operational backbones that supported their digital strategies.
The other ten had managed to survive without wiring in operational excellence.14 Without
an operational backbone, however, they lacked seamless operations. As a result, they did not
have the basic competencies needed to execute a digital strategy.
Companies with operational backbones were increasingly able to automate repetitive
processes, thus enhancing speed and accuracy. Moreover, the reliability provided by the
operational backbone allowed management to focus on strategic issues rather than fight-
ing fires. LEGO and Kaiser Permanente offer examples of how powerful operational
backbones give companies the operational excellence critical to executing their digital
strategies.
LEGO’s Operational Backbone. In 2004, LEGO (renowned for construction kits
using the iconic LEGO brick) could not reliably and cost-effectively deliver its products
to retailers. Its supply chain problems were so severe at the time that LEGO was facing
138 ina m. sebastian et al.

b­ ankruptcy.15 Jørgen Vig Knudstorp, LEGO’s CEO, recognized that fixing the supply chain
was essential to business success:

One of the things that dawned on me when I arrived at the LEGO Group was
that basically you have an allocation problem. You are producing 100,000 com-
ponents every minute, 24 hours a day, 365 days a year. And you have to allocate
them in optimal quantities at different sites, so that you can deliver a set of
finished products at Walmart in Arkansas on Tuesday at 5:00 p. m. (and not
5:00 a. m.) in optimal order quantity, optimal transportation quantity, optimal
manufacturing batches and so on.

LEGO addressed its crisis by leveraging an under-used ERP system to get its supply chain
processes under control. That effort was sufficient to turn the company around, but leader-
ship recognized that other processes were still creating costly inefficiencies. To address these
problems, LEGO followed its supply chain management initiative with programs that stand-
ardized processes related to HR management, manufacturing and product lifecycle manage-
ment. By 2012, these efforts had provided efficient, reliable core processes and transpar-
ent master data, and had improved customer satisfaction. With the operational backbone in
place, management could now focus on defining and pursuing a digital strategy—one that
focused on developing the builders of tomorrow.
Kaiser Permanente’s Operational Backbone. The operational backbone at Kaiser
Permanente is built around the electronic health record (EHR). U.S. healthcare providers
generate a great deal of data about patients, but as patients interact with multiple caregivers,
the data relating to an individual tends to be poorly integrated. Poorly integrated systems and
data lead to frustrated patients and clinicians, who must cope with incomplete information,
delays in follow-up actions, inaccurate billing and even medical errors. By taking a disciplined
approach to managing its EHR processes and patient data, Kaiser Permanente introduced an
extraordinary level of operational excellence. In turn, operational excellence positions the
company to pursue a digital strategy centered on enhanced collaboration between healthcare
providers, patients and their families.
Challenges and Benefits of Operational Backbones. For big old companies, devel-
oping an operational backbone is a long, expensive and transformative journey. Our study
revealed that even companies with powerful operational backbones need to continuously
invest in improvements and extensions. Many leaders told us that their operational back-
bones provided a slew of operational and strategic benefits, including cost savings, reliability
that generated profits and customer satisfaction, scalability following the launch of new prod-
ucts and markets, and the ability to integrate new acquisitions. These types of benefit have
helped companies compete for many years. The new—and critically important—benefit of
an operational backbone is that it also establishes a strong and stable foundation for introduc-
ing new digital products and features. It frees up management attention to pursue digital
innovations and ensures that existing business capabilities can be integrated, as needed, with
new digitally enabled capabilities.
In our study, we also learned that while an operational backbone is necessary, it is not suf-
ficient for successfully executing a digital strategy. A digital services platform is also needed.

A Digital Services Platform Enables Rapid Innovation

Because an operational backbone is designed for reliability and efficiency, it does not offer
the speed and flexibility that companies need for rapid digital innovation. Thus, in addition
to an operational backbone, companies also need a digital services platform, which we define
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 139

as the technology and business capabilities that facilitate rapid development and implementation of
digital innovations.
The architecture of a digital services platform must facilitate experimentation and provide
reusable technology and digital services. Common characteristics of digital services platforms
include:

•• Digital components that enable a variety of technical and business services (e.g., bio-
metric authentication, customer alerts)
•• Platform-as-a-service (PaaS)—a cloud-based hosting environment for storing and
accessing loosely connected services
•• Repositories for massive amounts of data, whether from public sources (e.g., from
social media), purchased or derived from sensors
•• Analytics engines for converting data into meaningful insights
•• Connections to data and processes that reside in the company’s operational backbone.

Recognizing that their operational backbones were not designed for rapid digital innovation,
leaders in our study were beginning to design and build digital services platforms.
Kaiser Permanente’s Digital Services Platform. Kaiser Permanente launched its
“Generation 2 Platform” in June 2014. This platform supports technology components for
developing clinical and operational services that can be assembled via a cloud-based self-
service portal (21 services at the time of our study, with many more planned). As of 2016,
the portal had delivered more than 1,000 systems—all within one day of a request. New
systems enable Kaiser Permanente to create new opportunities for caregivers and patients to
share data, consult, commiserate and learn. The Generation 2 platform, along with the IT
services management model, has greatly improved Kaiser Permanente’s capacity to produce
digital innovations across clinical and operational departments.

Our vision is really simple: it’s to be as easy as Amazon. You can go to their
website; you get recommendations, you know what you can order—you don’t
need training to use their website. You can click on how much it’s going to
cost, you can have a payment transaction, and then there’s almost perfection
in their logistics. Your package is tracked. You get alerts. It’s all self-service,
self-enabled.
Mike Sutten, Senior Vice President and Chief Technology Officer, Kaiser Permanente

LEGO’s Digital Services Platform. LEGO is building an “engagement platform” that

supports experimentation and rapid introduction (and, as necessary, elimination) of func-
tionality. The engagement platform will allow the company to continuously adapt its digital
interface according to the preferences of individual customers, thus providing a personalized
digital experience. For LEGO toys with digital capabilities, the platform will facilitate rapid
software updates, so that even older kits will provide new experiences. Finally, the platform
will provide an environment for working with digital partners on joint product development
and for giving approved partners access to LEGO functionality.
Risks of Not Having a Digital Services Platform. A company that fails to design
and build a well-defined digital services platform risks falling behind competitors that can
rapidly act on digital opportunities. Developers can build digital functionality without
a digital services platform but will likely generate a messy collection of individual ser-
vices (i.e., APIs) that create new risks and hinder reuse. If instead they choose to build
digital services on their operational backbone, development will be slow and expensive.
Because operational backbones are built to ensure the integrity of transactions and master
140 ina m. sebastian et al.

data, companies carefully manage releases for maintenance, upgrades and enhancements.
However, when applied to digital services, this approach will severely limit innovation
and, ultimately, competitiveness.

How Big Old Companies Accommodate Both an Operational

Backbone and a Digital Services Platform

Regardless of whether a big old company chooses a customer engagement or digitized solu-
tions digital strategy, the most proactive companies in our research needed both an opera-
tional backbone and a digital services platform to deliver the efficiency. reliability, speed
and agility that the competitive environment demands. Although these two assets support
very different business capabilities, they are complementary. Digital services invariably have
to link up with the operational backbone. Consider, for example, a company that collects
IoT sensor data to help its customers manage the performance of their assets (such as GE’s
aircraft engines or Schneider Electric’s connected energy management products). The digital
service will rely on an operational backbone to provide customer data, invoicing and related
transaction processing services. Similarly, operational backbones will be of limited value in a
digital economy if they prevent companies from bringing innovative new services to market
rapidly. Thus, big old companies that successfully transform will be those that can build and
leverage both of these technology-enabled assets.
Given the history of technology, one might expect that an important distinction between
an operational backbone and a digital services platform would be the technology on which
each is built. However, we found that the important distinction is not technological. All 12
companies in our research that had implemented a digital services platform were relying
on the cloud—most often a public cloud. And, although most of the 15 companies with an
operational backbone had built it on mainframe technologies, these backbones increasingly
ran, at least in part, on some form of cloud services.
For example, Ferrovial (a Spanish multinational that builds, manages and operates infra-
structure projects and related services) found it could accelerate development of its opera-
tional backbone by using software as a service (SaaS) offerings. With this shift to the cloud,
Ferrovial’s 70,000 employees adopted new standardized HR and purchasing processes in
six months. Similarly, Schneider Electric installed a cloud-based CRM system to facilitate
cross-selling in its diverse businesses.16 In 18 months, this system was adopted by 25,000
employees in 100-plus countries, and cross-selling increased by 20%. We expect that many
more companies will turn to SaaS to accelerate development of their operational backbones.
Thus, technology differences between operational backbones and digital services plat-
forms are beginning to disappear. Nevertheless, we found that the different characteristics
of these two assets give rise to two very different sets of management practices. Table 6.1
summarizes these contrasting requirements.
Companies have different objectives for the two technology-enabled assets. Reliability
and efficiency are essential requirements for an operational backbone. Henrik Amsinck,
LEGO’s CIO, explains that his enterprise platform runs “beneath the human interaction”
and is “the IT below all the business processes that run the LEGO Group end to end—all the
software and hardware and wiring.”
In contrast, Jørgen Vig Knudstorp, LEGO’s CEO. highlighted that a digital services plat-
form must facilitate rapid innovation:

There are new spaces where software development is still at the edge and revo-
lutionary—areas like consumer interaction and new products. What is the next
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 141

Table 6.1 O
 perational Backbones and Digital Services Platforms Require Fundamentally
Different Management Practices

Operational Backbone Digital Services Platform

Management Objective Business efficiency and Business agility and rapid
technology reliability innovation
Architecture Principles Standardized end-to-end business Plug-and-play business and
processes; transparency into technology components
systems; data access
Data Single source of truth for Massive repositories of sensor/
transactional data social media/purchased data
Key Processes Roadmaps; architecture reviews Cross-functional development;
user-centered design
Delivery Method Fast waterfall/regular software Agile and DevOps;17 use
releases/SaaS adoption of MVP (minimum viable
product) concepts and constant
enhancements
Funding Major project/program Continuous funding by business
investments owners

upcoming disruptive gaming or consumer-engaging technology that could really

impact our business and our business model? That evolution is unlikely to take
place anywhere near our [enterprise platform] development center.

Companies pursue these two different objectives by applying different architectural princi-
ples to the two technology-enabled assets. Roadmaps and traditional architecture reviews
guide the development of an operational backbone’s standardized business processes and
controlled access to enterprise data. In contrast, a digital services platform relies on cross-
functional development teams that apply user-centered design techniques to develop and
assemble reusable plug-and-play business and technology components.
In turn, the different goals and design principles lead to two different approaches to devel-
opment.
Most companies still use traditional development methods to build their operational
­backbones—although some interviewees mentioned that their traditional waterfall approach
is evolving to a more collaborative, scaled-down “fast waterfall.” Even using SaaS to build an
operational backbone requires each new enterprise process to be deliberately developed and
implemented.
In contrast, companies rely on agile development to deliver new services via their digital
services platforms. Small cross-functional teams use iterative, agile methods to build and
test new services with minimum viable products. Kaiser Permanente has implemented a
DevOps model, which requires near-continuous deployment of new code to dramatically
reduce cycle times for launching innovations. Amazon introduces new code onto its digital
services platform every 11 seconds.18 It appears that, over time, DevOps capabilities will
become a competitive necessity.
The objectives for digital services platforms are also causing traditional funding models
to be disrupted. Traditional project funding approval is just too slow for continuous deliv-
ery of digital services—hence the rising popularity of pay-for-use models (similar to cloud
and vendor servicing models). In several of the companies in our study, funding is shifting
to discrete purchases by business units, on an as-needed basis. Kaiser Permanente allows
142 ina m. sebastian et al.

clinical and administrative departments to purchase technology services on its Generation 2

platform directly from the IT organization. Departments are billed monthly and can acquire
or discard services depending on their needs and budgets. Most established companies have
been building, enhancing and leveraging their operational backbones for many years, so most
participants in our research were experienced with the management practices in the left-hand
column of Table 6.1. Practices in the right-hand column were newer, however. In general,
the business and IT leaders we interviewed were just starting to recognize the need for—and
then to adopt—these new practices.

The Impact of Digital Transformation on the IT Unit

As companies build new technology-enabled business capabilities, they introduce fundamen-

tal business changes. At most of the companies we studied, these changes had first—and most
profoundly—affected the IT unit.
Kaiser Permanente transformed its IT organization by adopting a service-centric operat-
ing model. It now designs standard assemblies for IT services chosen by its business users. As
part of Schindler’s IT transformation, the company created Schindler Digital Business AG,
which comprises teams focused on the operational backbone and teams specifically charged
with digital innovation by building and maintaining digital services.

We have put them together as a new organization, fully focusing on this digital
innovation part of the company. We need to have these people understanding
that this is [their primary role], so when waking up in the morning they should
think about digital business and not something else. That was super important:
having this clear commitment.
Michael Nilles, Chief Digital Officer, Schindler Group

To enable new requirements for integration across vertical business units, some IT units are
serving as integrators. At Schneider Electric, for example, the CIO deployed two architects
just to facilitate changes involving multiple parts of the company so that the company could
implement its digitized solutions strategy:

I needed to work more as an orchestrator. The business leaders need to design

their operating models, but we need some central thinking about how the design
of all those businesses would impact Schneider on the whole and how we could
purposefully create commonalities across the business to gain more scale.
Herve Coureil, CIO, Schneider Electric

As companies create integrated customer experiences and digitized solutions, many are
reorganizing their IT units around services. Kaiser Permanente’s Chief Technology Officer
described the IT services management model as a great shift—from allocating funds to a few
high-value projects to funding many small transactions:

It [the IT services management model] reduces the barrier to entry, so the risk
of failure—of it not being successful—is greatly minimized, and the cost to
enter is also much lower. You can scale it very, very quickly for huge success.
By doing that, we enable a lot more creativity and innovation, and we enable
medium-sized projects to go ahead … In the past you’d have to consult with
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 143

everybody because if it didn’t work, then your department just blew $50,000,
and someone else’s pet project didn’t get funded.
Mike Sutten, Senior Vice President and Chief Technology Officer, Kaiser Permanente

Although the IT unit was usually the first part of a company to transform, participants in our
research also anticipated that changes in the IT unit would eventually be reflected throughout
the entire company. At Kaiser Permanente, for example, new digital services enabled more
rapid innovations in delivering healthcare. Initially, the company incrementally introduced
these changes, but redesign of the larger organization was expected to facilitate more dra-
matic—and important—changes to healthcare delivery over time. We anticipate that many
of the changes our interviewees described will cascade across the entire enterprise. At some
companies, that transformation is already underway.

Recommendations for Digital Transformation at Big Old Companies

SMACIT and other digital technologies have created a moment of truth for big old compa-
nies: they bring new customer expectations, younger, more nimble competitors and revo-
lutionary managerial approaches. Since past success does not ensure future success, older
companies will need to transform to take advantage of digital era opportunities.
Figure 6.1 summarizes our research findings on the digital transformation journeys big
old companies will have to undertake. They must choose either a customer engagement
or digitized solutions strategy, and this choice will shape priorities for building two essen-
tial technology-enabled assets: an operational backbone and a digital services platform. The
operational backbone will ensure efficiencies of scale for critical transactional and decision-
making capabilities. The digital services platform will ensure rapid innovation of critical digi-
tal offerings for customers. These two assets allow a company to execute its chosen digital
strategy and, ultimately, to deliver both customer engagement and digitized solutions.
It is not easy for big old companies to let go of legacy systems, processes and cultures. To
transform themselves to digital businesses, they must embark on a protracted journey. From
our research, we provide five recommendations for mapping a successful journey.

Rapid Innovation

Digital Services
Platform

Customer Digitized
Engagement Solutions

Operational
Backbone
Operational
Excellence
Figure 6.1 Elements of Digital Transformation at a Big Old Company
144 ina m. sebastian et al.

Define a Digital Strategy

By articulating a digital strategy (whether customer engagement or digitized solutions)
a company’s leaders can focus employees on clear objectives. With clear direction,
a company can start building integrated, difficult-to-replicate capabilities to deliver on
that strategy.

Act Now to Invest in an Operational Backbone

Today, investing in an operational backbone is a necessary prerequisite for success in the
digital economy. Without such a backbone, a company will lack the foundational capabili-
ties that are needed to enable its digital services platform to provide transaction transpar-
ency (e.g., the supply chain) and access to customer data, and to support standardized
business processes (e.g., customer account opening, secure access, orders, payments). Just
reaching agreement on which operational capabilities are most critical is an extraordinary
leadership challenge. To get started in a meaningful way, senior managers should focus
on building just one capability critical to the company’s digital strategy, such as a well-
designed customer database or a supply chain management system. A company without
an operational backbone should seek help from cloud providers, vendors, business process
outsourcers—anyone who can accelerate the delivery of reusable, efficient and reliable
operational capabilities.

Architect a Digital Services Platform

IT leaders can begin to define the architecture for a digital services platform by focusing on a
small set of digital innovations they believe will be critical to business success. Once a com-
pany has established the data requirements for a small set of critical business components and
has set up APIs for accessing the needed data, it can then build (or technology partners can
help it build) the infrastructure needed to protect, connect, analyze and support innovative
digital services.

Design the Digital Services Platform with Partners in Mind

Our study suggests that effective leaders recognize that customers, suppliers and other stake-
holders will want to develop innovative business services or front-end apps that also become
integrated capabilities (or common business services). The digital services platform should
therefore be designed with those extensions in mind.

Adopt a Services Culture

Business and IT teams will jointly define, design, deliver, price, prioritize, implement,
enhance and discard new business services. Companies are beginning to structure themselves
around the services they provide. They are empowering service owners to deliver the inno-
vations and efficiency that customers and employees expect. This transition is difficult, so
it is prudent for the IT organization to start learning how to manage services—i.e., how to
define and deliver IT services to business and IT partners. Organizations that have adopted
the ITIL framework (a set of practices for IT service management that focuses on aligning IT
services with the needs of business) have long embraced this approach to IT management.
Over time, we believe, designing around business services will become the way most com-
panies do business.
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 145

Concluding Comments

In an old-school divide-and-conquer approach, managers focused on optimizing the perfor-

mance of their business unit or function. However, a divide-and-conquer mindset is not well
suited to digital transformation. The most exciting SMACIT opportunities integrate prod-
ucts and services across functional, organizational and geographic boundaries. To succeed
digitally, big old companies need to embrace new organizational structures and processes
that empower their people to collaboratively experiment with technologies and deliver inte-
grated products and services to their customers.
Companies that fail to adopt new technologies and fail to heed the need for digital trans-
formation are likely to be left trailing behind in the dust.

Appendix: Research Methodology

We solicited participants for our study by approaching CIOs in the 85 companies that
sponsor the MIT Sloan Center for Information Systems Research (CISR), as well as CIOs
in another four companies that we knew were becoming more digital. Boston Consulting
Group also invited CIOs from companies that its consultants knew were in the midst of digital
transformations.
We asked prospective study participants if they would like to participate in research on
how companies were redesigning for the digital economy. While many responded that they
were too early in their transformation journeys to participate in the study, and a few were
concerned about the confidentiality of their digital initiatives, 25 companies agreed to par-
ticipate. As shown in the table below, the companies came from a variety of industries. Most
were big companies (thousands of employees) and old (only one was less than 25 years old).19
Between June 2014 and October 2016, we interviewed three senior executives at each of
the 25 participating companies—at least one from the IT organization and at least one from
a business function. The interviews were semi-structured and conducted by video or phone,
with each taking about an hour. The interviews explored:

1 How the company assesses digital technology opportunities and how its industry is
changing
2 The business strategies that the company’s leaders were formulating to address digital
opportunities
3 Organizational design changes (if any) that the company was implementing to execute
its digital strategy.

Research Sample Company Demographics

Company Industry Number of Employees Year Founded

1 Heavy Manufacturing 50,000 99,999 Before 1900
2 Heavy Manufacturing > 300,000 Before 1900
3 Heavy Manufacturing 50,000 99,999 Before 1900
4 Heavy Manufacturing 10,000 49,999 Before 1900
5 Heavy Manufacturing 10,000 49,999 1950 1999
6 Other Manufacturing > 300,000 1900 1949
7 Other Manufacturing 100,000 300,000 Before 1900
(continued)
146 ina m. sebastian et al.

Company Industry Number of Employees Year Founded

8 Other Manufacturing 100,000 300,000 Before 1900
9 Other Manufacturing 100,000 300,000 Before 1900
10 Other Manufacturing 10,000 49,999 1900 1949
11 Other Manufacturing 10,000 49,999 1900 1949
12 Pharmaceuticals 10,000 49,999 1950 1999
13 Civil Engineering 50,000 99,999 1950 1999
14 Financial Services 100,000 300,000 Before 1900
15 Financial Services 10,000 49,999 1900 1949
16 Financial Services 10,000 49,999 Before 1900
17 Life and Health Insurance < 10,000 Before 1900
18 Software/IT Services 100,000 300,000 1950 1999
19 Software/IT Services < 10,000 1950 1999
20 Software/IT Services 10,000 49,999 1950 1999
21 Information Services < 10,000 1950 1999
22 Information Services < 10,000 Before 1900
23 Healthcare 100,000 300,000 1900 1949
24 Department Stores < 10,000 1900 1949
25 Government 10,000 49,999 1900 1949

We recorded and transcribed each interview. After coding the transcripts (manually or
using the NVivo qualitative data analysis software), we prepared cases or shorter vignettes.
For two companies, we conducted additional interviews and wrote full case studies. For the
other companies, we summarized the interviews in vignettes written using a standard tem-
plate (background, strategic context, business model changes, design changes).
We asked each company for permission to publish the case study or vignette. In addition
to the two full case studies, nine companies approved their vignettes for publication. The
following case studies and vignettes can be downloaded from CISR’s website (http://cisr.
mit.edu/publications-and-tools/publication-search/five-ways-to-face-digital-disruption/):

•• Andersen, P. and Ross, J. W Transforming the LEGO Group for the Digital Economy, MIT
Sloan CISR Working Paper No. 407, March 2016.
•• Beath, C. M., Moloney, K. G. and Ross, J. W. The Principal: Benefiting from a
ServiceOriented Architecture, MIT Sloan CISR Working Paper No. 413, April 2016.
•• Beath, C. M. and Ross, J. W. USAA: Defining a Digital Experience, MIT Sloan CISR
Working Paper No. 410, April 2016.
•• Betancourt, P., Mooney, J. and Ross, J. W. Digital Innovation at Toyota Motor North America:
Revamping the Role of IT, MIT Sloan CISR Working Paper No. 403, September 2015.
•• Fonstad, N. O. and Ross, J. W. Ferrovial: Leveraging Internal and External Resources to
Innovate Competitively, MIT Sloan CISR Working Paper No. 409, April 2016.
•• Kagan, M. H., Sebastian, I. M. and Ross, J. W. Kaiser Permanente: Executing a Consumer
Digital Strategy, MIT Sloan CISR Working Paper No. 408, March 2016.
•• Scantlebury, S. and Ross, J. W. Schneider Electric: Redesigning Schneider Electric’s Operating
Model, MIT Sloan CISR Working Paper No. 412, April 2016.
•• Sebastian, I. M., and Ross, J. W. The Schindler Group: Driving Innovative Services and
Integration with Schindler Digital Business AG, MIT Sloan CISR Working Paper No. 411,
April 2016.

After preparing the cases and vignettes, we conducted a cross-case analysis. We recorded
the qualitative codes about business model changes, design changes and various other themes
in an Excel spreadsheet.
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 147

The following table details the status of the companies in our study, in terms of their digi-
tal strategy and whether they were building an operational backbone and/or a digital services
platform. Companies fall into four groups: 1) Those that had built both an operational back-
bone and a digital services platform, 2) Those that have an operational backbone, but have
not yet started to define a digital services platform, 3) Those that only have a digital services
platform and 4) Those with neither (not included in the table). Differential shading in the
table highlights differences according to each company’s digital strategy (customer engage-
ment, digitized solutions or no digital strategy articulated).
Most digital services platforms are still under construction or in the design phase. In our
study, 12 of the 25 companies had created, or were in the process of designing, a digital ser-
vices platform. In most cases (the ten companies in Group 1), the operational backbone was
developed before the digital services platform. The two digital strategy types were equally
represented in Group 1 (five companies per strategy type), suggesting that both technology-
enabled assets (an operational backbone and a digital services platform) are essential, regard-
less of whether the digital strategy focuses on digitized solutions or customer engagement.
Group 4, comprising eight companies (4, 8, 14, 17, 18, 21, 22 and 25), had neither an operational backbone
nor a digital services platform. This group is not included in the table.

Digital Strategies and Characteristics of the Technology-enabled Assets

Company Strategy Operational Backbone Characteristics Digital Services Platform Characteristics

Group 1
1 DS Global standardized operational Proactive and predictive monitoring
processes (packaged software) with sensor data
3 DS Global standardized operational Telematics and performance
processes (packaged software) management with sensor data
7 DS Standardized shared customer Proactive and predictive monitoring
relationship management (cloud) with sensor data
9 DS Enterprise-wide standardized Aggregation and analysis of health,
operational processes—mostly lifestyle, clinical data from sensors,
cloud devices, EHRs
13 DS Standardized shared CRM; Digital platform for innovation (in
business process outsourcing progress)
(cloud)
6 CE Standardized operational Customer experience platform with
processes; central customer telematics and analytics
database (mostly cloud)
11 CE Global standardized operational Customer engagement platform
processes (mostly packaged) focused on real-time community (in
progress)
15 CE Centralized customer database Personalized, flexible customer
(home grown) experience within a topic area (in
progress)
16 CE Centralized customer database and Continually adjusted customer
reusable SOA components (home experience with analytics and
grown) behavioral economics (in progress)
(continued)
148 ina m. sebastian et al.

Company Strategy Operational Backbone Characteristics Digital Services Platform Characteristics

24 CE Enterprise-wide EHR system Same-day delivery of technology
(packaged software) services to clinical and operational
departments
Group 2
20 DS Standardized key business N/A
processes and organizational
management system (home
grown)
26 CE Enterprise-wide standardized N/A
operational processes (home
grown)
5 N/A Global standardized operational N/A
processes (packaged software)
10 N/A Global standardized operational N/A
processes (packaged software)
12 N/A Global standardized operational N/A
processes (home grown)
Group 3
2 DS N/A Performance management with
sensor data
19 DS N/A Knowledge, data, real-time
community services with analytics,
facilitation of interactions
DS = digitized solutions strategy CE = customer engagement strategy
N/A indicates that the company did not articulate a digital strategy during our interviews

The five companies in Group 2 had built their operational backbone but had not yet defined a
digital services platform, although we believe they were close to doing so. Three of these companies
were likely held back by difficulties they were experiencing in choosing a digital strategy. In the other
two, opportunities arising from new digital technologies were only beginning to come into focus in
their industries; customer expectations had not yet begun to change, so pressure to change was low.
The two companies in Group 3, both with digitized solutions strategies, were each building
a digital services platform but had not developed a strong operational backbone. One of these
companies, in the software/IT services field, and comparatively young and small in terms of our
sample, can be classified as “born digital.” Born digital companies invariably build digital services
platforms before they build operational backbones because they don’t need to manage the scale
of a large company. The other company, a manufacturing business, was developing new, innova-
tive solutions that focused on collecting, analyzing and providing insights about equipment. It had
decided to move more aggressively on building a digital services platform, which is key to its new
business model, than on building an operational backbone. In a way, this company was taking a
start-up approach to its new digital solutions.
Seven of the eight companies in Group 4 with neither an operational backbone nor a digital
services platform had selected a digital strategy but were struggling to execute on it and to start
their digital transformation. Leaders in Group 4 were only beginning to articulate the charac-
teristics of the two technology-enabled assets they would need. Most of these businesses were
constrained by their silo structures both in business operations and IT management.
 n av i g at i n g d i g i ta l t r a n s f o r m at i o n 149

Questions for Discussion

1 What opportunities and threats are presented by digital technologies? How might
companies navigate digital transformation?
2 How would you characterize the need for digital transformation in the digital econ-
omy? What is the role of digital innovation for competitive advantage? How might
companies achieve and leverage digital innovation?
3 What are the implications of digital transformation to organizations? Consider small
businesses; large organizations; MNCs; public sector; ‘old’ companies, and emerging
businesses?
4 How could big old companies compete in the digital economy and establish themselves
as market and digital leaders?
5 What companies would consider a customer engagement strategy or a digital solu-
tions strategy for their digital transformation? Should companies follow one strategy
or a combination of strategies? Could success in one strategy lead to success in other
strategies?
6 What is required for a smooth execution of digital strategy and transformation? How
might companies develop the needed capabilities?

Notes
1 This acronym is pronounced “smack it”—as in, score a digital strategy home run when you SMACIT
out of the baseball park. There are more digital technologies than implied by this acronym, including
artificial intelligence, blockchain, robotics and virtual reality. SMACIT is intended as shorthand for
the entire set of powerful, readily accessible digital technologies.
2 For more information about these companies’ digital innovations and their leaders’ expectations, see
https://www.ge.com/digital/indus-trial-internet and http://www.usa.philips.com/healthcare/
innovation/about-health-suite.
3 El Sawy, O. A., Kræmmergaard, P., Amsinck, H. and Vinther, A. L. “How LEGO Built the Founda-
tion and Enterprise Capabilities for Digital Leadership,” MIS Quarterly Executive (15:2), June 2016,
pp. 143-166.
4 The annual reports of successful, well-established companies like BNY Mellon, Kaiser Permanente,
Aetna, GE, Schneider Electric, Philips and the Schindler Group highlight their continued depend-
ence on traditional sources of revenue even as they make significant investments in digital initiatives.
5 In this article, we reference initiatives at Kaiser Permanente, Schindler Group, LEGO Group, Sch-
neider Electric, Ferrovial and USAA. The Appendix includes links to our published case studies and
shorter vignettes for these and other companies included in our study.
6 For more on developing digital strategies, see Ross, J. W., Sebastian, I. M. and Beath, C. M. “How
to Develop a Great Digital Strategy,” MIT Sloan Management Review, November 8, 2016, available at
http://sloanreview.mit.edu/article/how-to-develop-a-great-digital-strategy/.
7 We distinguish digital strategies from more traditional IT strategies—a digital strategy being the
company’s high-level business strategy, while an IT strategy is set to enable a business strategy. This
distinction is also made in Bharadwaj, A., El Sawy, O. A., Pavlou, P. A. and Venkatraman, A. “Digital
Business Strategy: Towards a Next Generation of Insights,” MIS Quarterly (37:2), June 2013, pp.
471482. IT strategies are thoroughly reviewed in Peppard, J. and Ward, J. “Beyond Strategic Infor-
mation Systems: Towards an IS Capability,” Journal of Strategic Information Systems (13:2), July 2004,
pp. 167194. For a broad review of different types of technology-related strategies, see Chen, D. Q.,
Mocker, M., Preston, D. S. and Teubner, A. “Information Systems Strategy: Reconceptualization,
Measurement, and Implications,” MIS Quarterly (34:2), June 2010, pp. 233-259.
8 See Goldsmith, J. “An Interview with George Halvorson. The Kaiser Permanente Renaissance, and
Health Reform’s Unfinished Business,” Health Affairs, September 30, 2014, available at http://www.
healthaffairs.org/blog/2014/09/30/an-interview-with-georgehalvorson-the-kaiser-permanente-
renaissance-and-health-reformsunfinished-business/.
150 ina m. sebastian et al.

9 At many companies we studied, net promoter score (NPS) is the key metric used to track customer
satisfaction. Information on Kaiser Permanente’s 2016 NPS can be found in “Kaiser Permanente
Again Ranks No. 1 in Customer Loyalty”, Kaiser Permanente Feature Story, June 29, 2016, available at
https://share.kaiserpermanente.org/article/kaiser-permanente-ranks-no-1-customer-loyalty/
10 For more on how digital technologies are transforming companies and competition, see Porter, M.
E. and Heppelmann, J. E. “How Smart, Connected Products are Transforming Companies,” Har-
vard Business Review (93:10), October 2015, pp. 96-114; and Porter, M. E. and Heppelmann, J. E.
“How Smart, Connected Products are Transforming Competition,” Harvard Business Review (92:11),
November 2014, pp. 64-88.
11 For more information, see http://www.schindlerportna.com/
12 For more information on digitized process platforms, see Ross, J.W.,Weill, P. and Robertson, D. Enter-
prise Architecture as Strategy: Creating a Foundation for Business Execution, Harvard Business Press,
2006.
13 For more on how standardization and integration of processes has paid off, see Bradley, R., Pratt,
R., Byrd, T. A. and Simmons, L. “The Role of Enterprise Architecture in the Quest for IT Value,” MIS
Quarterly Executive (10:2), June 2011 pp. 19-27; Tamm, T., Seddon, P. B., Shanks, G., Reynolds, R.
and Frampton, K. “How an Australian Retailer Enabled Business Transformation Through Enterprise
Architecture,” MIS Quarterly Executive (14:4), December 2015, pp. 181-193; and Venkatesh, V., Bala,
H.,Venkatraman, S. and Bates, J. “Enterprise Architecture Maturity:The Story of the Veterans Health
Administration,” MIS Quarterly Executive (6:2), June 2007, pp. 79-90.
14 The fact that 60% of the companies in our sample have a value-adding operational backbone suggests
that we were successful in recruiting technologically mature companies for our study. Our recent
survey of 171 senior IT leaders found that only 28% of established companies have value-adding
operational backbones. See Ross, J. W., Sebastian, I. M and Jha, L., and the Technology Advantage
Practice of The Boston Consulting Group, Designing Digital Organizations—Summary of Survey Find-
ings, MIT CISR Working Paper No. 415, February 2017, available at http://cisr.mit.edu/blog/
documents/2017/02/28/mitcisrwp415ddosurveyreportrosssebastianbeathjhabcg.pdf/.
15 For details on LEGO’s business turnaround, see Robertson, D. C. Brick by Brick, Crown Business
Books, 2013.
16 See Karunakaran, A., Mooney, J. and Ross, J. W. Accelerating Global Digital Platform Deployment Using
the Cloud: A Case Study of Schneider Electric’s “Bridge Front Office” Program, MIT Sloan CISR Working Paper
No. 399, January 2015.
17 DevOps, a compound of “development” and “operations,” is a software development and deliv-
ery approach designed for high velocity. One company’s overview of DevOps can be reviewed at
https://aws.amazon.com/devops/what-is-devops/.
18 This number was reported in Bort, J. “Former EMC exec: Google’s cloud efforts against Amazon are
like ‘a Microsoft phone’—too little too late,” Business Insider, August 11, 2016, available at http://
www.businessinsider.com/google-vs-amazon-in-cloud-is-like-a-microsoft-phone-tech-exec-
says-2016-8. It may be more frequent by now.
19 We have used broad ranges in the table to protect company confidentiality. Most companies in our
sample were old. The mean and median ages were 104 years and 107 years, respectively. Only one
company was founded after 1990. The youngest was 18 years old; the oldest was 184 years old. Most
of them were big companies, with mean and median number of employees of 82,297 and 27,900
respectively. Only four had less than 10,000 employees. The smallest had over 7,500 employees, and
the largest had over 344,000.

Further Reading
Chanias, S., Myers, M. D., Hess, T. (2019). Digital transformation strategy making in pre-digital organi-
zations: The case of a financial services provider. The Journal of Strategic Information Systems, 28(1),
17–33.
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. The Journal of
Strategic Information Systems, 28(1), 118–144.
Chapter 7

Thomas Hess, Christian

Matt, Alexander Benlian and
Florian Wiesböck

OPTIONS FOR FORMULATING

A DIGITAL TRANSFORMATION
STRATEGY

Digital Transformation Is a High-Priority Management Challenge

I ntegrat i n g a n d e x p l o it i n g new digital technologies is one of the big-

gest challenges that companies currently face. No sector or organization is immune to
the effects of digital transformation. The market-changing potential of digital technologies is
often wider than products, business processes, sales channels or supply chains—entire busi-
ness models are being reshaped and frequently overturned.1
As a result, digital transformation has become a high priority on leadership agendas, with
nearly 90% of business leaders in the U.S. and U.K. expecting IT and digital technologies
to make an increasing strategic contribution to their overall business in the coming decade.2
The question is no longer when companies need to make digital transformation a strategic
priority—this tipping point has passed—but how to embrace it and use it as a competitive
advantage.
Faced with the digital transformation challenge and the need to remain competitive in their
industries, business leaders must formulate and execute strategies that embrace the impli-
cations of digital transformation and drive better operational performance. Unfortunately,
there are many recent examples of organizations that have been unable to keep pace with the
new digital reality. Prominent examples include the bankruptcy of the movie-rental com-
pany Blockbuster and the sale of the Washington Post to Jeff Bezos, founder of Amazon—
largely resulting from those firms’ inability to rapidly develop and implement new digitally
based business models.
Digital transformation is concerned with the changes digital technologies can bring about
in a company’s business model, which result in changed products or organizational structures
or in the automation of processes. These changes can be observed in the rising demand for
152 thomas hess et al.

Internet-based media, which has led to changes of entire business models (for example in the
music industry).
Digital transformation is a complex issue that affects many or all segments within a com-
pany. Managers have to simultaneously balance the exploration and exploitation of their
firms’ resources to achieve organizational agility3—a necessary condition for the successful
transformation of their businesses. At present, managers often lack clarity about the differ-
ent options and elements they need to consider in their digital transformation endeavors. As
a consequence, they risk failing to consider important elements of digital transformation or
disregarding solutions that are more favorable to their firms’ specific situations, which could
have unintended adverse consequences.
Recent work in academia has been largely concerned with providing guidance on certain
aspects of digital transformation; it has not addressed a holistic approach to the development
of a company-wide digital transformation strategy.4 However, the Digital Transformation
Framework (DTF) represents a first step in this direction.5 This conceptual framework for
formulating a digital transformation strategy identifies the four key dimensions of every digi-
tal transformation endeavor:

1 The use of technologies reflects a firm’s approach and capability to explore and exploit
new digital technologies.
2 Changes in value creation reflects the influence of digital transformation on a firm’s
value creation.
3 Structural changes refer to the modifications in organizational structures, processes
and skill sets that are necessary to cope with and exploit new technologies.
4 The financial aspects dimension relates to both a firm’s need for action in response
to a struggling core business as well as its ability to finance a digital transformation
endeavor.

While the building blocks of a digital transformation strategy are known, clearly specified
guidelines for managers on how to approach digital transformation and implement a well-
defined digital transformation strategy are lacking. The purpose of this article is to provide
those guidelines. Based on insights from three case studies of firms that have recently under-
gone successful digital transformation endeavors, we have derived 11 strategic questions that
CIOs and other managers responsible for the digital transformation of their businesses must
ask themselves. We have grouped these questions along the four dimensions of the DTF
and provide possible answers for each of them through descriptions of the case study firms’
actions and their reasoning for adopting a particular option.
The guidance offered in this article seeks to prevent managers from missing any critical
decision and to assist them in selecting the most effective options to successfully conduct
digital transformation and prepare their firms for the digital future.

The Distinctive Nature of Digital Transformation Strategy

The purpose of the journey toward digital transformation is to reap the benefits of digital
technologies, such as productivity improvements, cost reductions and innovation. A clear
strategy for deploying and exploiting digital technologies is crucial for future business suc-
cess. There is, however, disagreement on the relationship between digital strategy and busi-
ness and IT strategies. Some argue that a digital strategy should be formulated and imple-
mented as a part of a firm’s IT strategy. In the context of digital transformation, the argument
is that a firm’s IT strategy can evolve from a functional strategy (which traditionally has been
 f o r m u l at i n g a d i g i ta l s t r at e g y 153

subordinate to business strategy) to an organizational strategy that leverages a firm’s digital

resources to create differential value.6
Others take the view that such an important and challenging strategic issue as digital
transformation demands a standalone strategy that is not part of another organizational or
functional strategy. For them, a digitally enriched IT strategy is not the right answer to the
problem:

Everyone thinks they have a digital strategy these days. But while your company
may have a business or IT strategy that incorporates digital technology, an IT
strategy does not equal a digital strategy. Why? Because most IT strategies treat
technology in isolation7

IT strategies typically concentrate on the efficient management of IT infrastructure and

application systems. What they often lack is the transformational, business-centric orienta-
tion that is needed to realize the potential within a company’s business model, products, pro-
cesses and organizational structures made possible by the advent of new digital technologies.
The necessary coordination and alignment of a firm’s many strategies in the light of digi-
tal transformation has led some researchers to argue for a digital business strategy that com-
bines IT and business strategy.8 However, while a digital business strategy may indicate a
firm’s vision for future digital business models, it typically does not provide guidelines on the
actual transformational steps. On the other hand, a digital transformation strategy signposts the
way toward digital transformation and guides managers through the transformation process
resulting from the integration and use of digital technologies. A digital transformation strat-
egy impacts a company more comprehensively than an IT strategy and addresses potential
effects on interactions across company borders with clients, competitors and suppliers. Thus,
we argue that firms need a standalone digital transformation strategy. Unfortunately, the
accumulated knowledge from previous research and best practice on IT strategies cannot be
simply transferred to digital transformation strategies.
To ensure they capture the business value of digital transformation, companies should
carefully formulate a digital transformation strategy that coordinates the many independent
threads of digital transformation and helps them navigate the complexity and ambiguity of
identifying their own digital “sweet spots.” Such a digital agenda has to be aligned with other
operational or functional strategies and can act as a unifying concept for integrating all coor-
dination, prioritization and implementation efforts of a firm’s digital transformation efforts.
To illustrate the concepts of formulating and executing a digital transformation strategy,
we describe how three German media companies have approached digital transformation.
(See the Appendix for an overview of the research methodology and the interviews con-
ducted.)

The Three Case Companies

The three German media companies we chose for the case studies of digital transforma-
tion are:

•• ProSiebenSat.1 Media SE (referred to as “P7S1”), a large TV broadcaster with a turno-

ver of €2.6 billion in 2014 ($2.95 billion)9 and more than 3,500 employees. It is one
of the leading TV enterprises in Europe. Munich-based P7S1 operates in 12 countries
and owns 15 TV stations, which reach more than 42 million households. P7S1 was
founded in 2000 and originated from the former Kirch Group, which established itself
154 thomas hess et al.

as one of two large TV companies in Germany after regulators opened up the market
to private TV stations.
•• Mittelbayerische Verlag AG (Mittelbayerische) is a small print publisher based in
Regensburg, Germany. Its main product is the regional daily newspaper Mittelbayerische
Zeitung, which has a strong focus on regional content and offerings. Mittelbayerische
was founded in 1945 and currently employs about 500 people. With an average daily
circulation in 2014 of approximately 110,000, Mittelbayerische Zeitung is the most pop-
ular newspaper in the area surrounding Regensburg.
•• Ravensburger AG, which was founded in 1883, is a mid-sized games publisher that is
headquartered in Ravensburg, Germany. Ravensburger remains a family-owned busi-
ness with about 1,600 employees and a turnover of approximately €359 million in 2013.
In addition to the “leisure and promotion service” division and a fairly new “digital prod-
ucts” division, the company has two main divisions: “games, puzzles and arts/crafts”
(€286 million turnover) and “children’s and youth books” (€9 million turnover). Brand
awareness of Ravensburger is high in the Western European games and puzzles market.

Each of these companies has, within the last decade, systematically approached digital trans-
formation and has achieved success in its efforts. At present, over 20% of P7S1’s revenues
derive from digital business models. At Ravensburger, hybrid products that enrich traditional
analog or physical products with digital content have successfully stabilized its core busi-
nesses: board games and print publishing. The CEO of Mittelbayerische claims that it owes
its leading market position to the decision to actively embrace digital technologies. However,
digital transformation in each company is ongoing and will likely occupy them over the next
few years. Table 7.1 provides an overview of the three case companies.

Table 7.1 Overview of the Three Cases

P7S1 Mittelbayerische Ravensburger

Core business TV broadcaster News publisher Board games and print
publisher
Size 4,200 employees $2.9 500 employees 110,000 1,600 employees €359
billion (2014) units per day (2014) million (2013)
Headquarters Munich (Germany) Regensburg (Germany) Ravensburg (Germany)
Founded 200010 1945 1883
Market focus Europe Regional Europe, U.S.
Digital From linear TV From print to digital From analog to digitally
transformation broadcasting to video- publishing enhanced products
overview on-demand and online (books, puzzles and
gaming, and mergers & games)
acquisitions
Start of digital 2011 2010 2009
transformation
Digital 20% of revenues Defense of market Digitally enriched
transformation through digital business leadership through products successfully
success digital enrichment of stabilized core business
analog core product
Organizational Company-wide Mostly products Products and processes
scope of digital
transformation
 f o r m u l at i n g a d i g i ta l s t r at e g y 155

The selection of these three companies reflects our aim to cover a wide portion of the
media industry in terms of size (a large international corporation vs. mid-cap vs. small) and
value focus (print and broadcasting representing two of the media industry’s classic major
business segments and gaming representing a specialist field). We regard size and value focus
as crucial dimensions when investigating digital transformation. Size affects every type of
transformation. Moreover, a firm’s main product line will most likely play a crucial role
in its digital transformation, because the integration of digital technologies into products is
one of the key aspects of digital transformation. Although the chosen case companies differ
significantly in, for example, how capital requirements or how digital technologies can alter
their core products, their breadth allows us to explore a more comprehensive set of options
and requirements for digital transformation.
We chose to study media companies because this industry has been a bellwether of the
digital revolution and one of the pioneering industries that has undergone dramatic—if not
existence-threatening—changes caused by the advent of digital technologies. Further, we
decided to focus on media companies with an emphasis on content aggregation, which is one
of the classic functions of media companies.

Digital Transformation Strategy at P7S1

Business Drivers for Digital Transformation

P7S1’s roots lie in the TV business. When the company’s managers first considered the
opportunities and threats arising from new digital technologies, the core business was thriv-
ing and highly profitable. Thus, the need for immediate action was not as strong as in other
branches of the media industry. Nevertheless, managers recognized the potential of digital
technologies—both for P7S1’s current activities and for new business opportunities. This led
to the decision to pursue a two-pronged approach to exploring and exploiting new technolo-
gies. One was to digitally enrich the company’s TV portfolio. The other was to actively seek
out new digitally enabled business models to diversify its business.

Digital Transformation Outcome: Developing New Business Areas

Ten years ago, digital technologies primarily had a supporting function at P7S1 and were
mainly used to optimize business processes and provide an efficient infrastructure. Now,
however, P7S1 perceives digital technologies as enablers of innovative products and services.
To foster the transformation of ideas into new products and services, a dedicated innovation
lab was established in 2012. Thus far, though, P7S1 has not sought to be a technology leader
but has focused its digital activities on branding and customer interaction via established
technologies.
The impact of digital technologies has been mainly on P7S1’s products and services, espe-
cially its TV business, where digital transformation has led to, for example, video-on-demand
or gaming content related to TV content. Production processes have also become increasingly
digital. In 2013, P7S1 earned €484 million from digital products and services, approximately
19% of its total turnover. In addition to digitally enhanced broadcast offerings, P7S1 is also
active in business segments that are not directly related to content, such as e-commerce. These
activities include websites that supplement linear TV programing (from online text to mobile
offerings), content platforms (“video-on-demand”) such as maxdome and MyVideo, and
online games portals such as SevenGames.de. Another area of digital investments is in online
travel services. In this area, P7S1 generates earnings through revenue sharing and advertising.
156 thomas hess et al.

P7S1 generates revenues from its digital products and services both indirectly via advertis-
ing and directly via paid content, the sales of virtual goods within online games, or through
“freemium” models (providing a free version with a basic functional scope and a paid version
that creates additional value; an example is the music video streaming platform AMPYA).
Synergies between digital and traditional offerings are actively fostered. For instance, con-
tent from traditional TV channels is reused in digital offerings, users are referred from tra-
ditional to digital products and vice versa, and cross-media advertising campaigns are con-
ducted. The latter, for example, has been used for the casting format of “Germany’s Next
Topmodel,” a reality TV show, which is complemented by content platforms, web services
and corresponding events.
P7S1’s main focus, however, remains on content creation, aggregation and distribution
(via its TV business). Additionally, though, it strives to expand its revenues from the manage-
ment of content platforms and e-commerce. Digital activities are expected to become the
second pillar of P7S1 in addition to its traditional TV business.
P7S1’s pure digital business unit is led by a board member and is supported strongly by
the CEO. Most of P7S1’s digital activities are organized within a separate business unit called
“Digital & Adjacent.” P7S1 establishes a new business internally (if necessary, in the form
of a joint venture) or takes over startups at an early stage. For the latter, the company has
launched a dedicated incubator (“ProSiebenSat.1 Accelerator”), which offers incentives to
startups, often in the form of free advertising time on P7S1’s TV channels in exchange for
equity participation (“media-for-equity-program”).
Because P7S1 sees its digital activities becoming a second pillar, complementing its TV
business, a large share of corporate investments is made within the digital area. These invest-
ments are financed internally. The primary focus of the investments has been and remains on
mergers and acquisitions activities where P7S1 acquires and develops digital businesses that
complement P7S1’s traditional TV business.

Digital Transformation Strategy at Mittelbayerische

Business Drivers for Digital Transformation

According to Mittelbayerische’s CEO, decreasing newspaper sales and the resulting finan-
cial pressure forced the entire management team to recognize the threats and opportunities
from the ongoing digital revolution and the need for action. As a consequence, management
decided to follow a careful, deliberate path into the digital world. In addition to introducing
of an e-paper and an app, and including digital topics among the newspaper’s leading themes,
the company developed an Internet-based map service (following the idea of Google Maps)
centered around Regensburg, where it is based. The map includes location-specific informa-
tion such as kindergartens, gas stations, playgrounds and Wi-Fi hot spots.

Digital Transformation Outcome: Exploiting Selected Digital Opportunities

Mittelbayerische’s underlying motivation in its approach to digital transformation was to
defend its position as the region’s No. 1 provider of local news and information. Hence, it
decided to maintain its business focus on content creation, accompanied by selected digital
add-ons. In general, this newspaper publisher has taken a pragmatic approach to digital tech-
nologies. It does not have a department focused on innovation; instead, it introduces estab-
lished technologies that complement its existing product portfolio. Management regards the
role of digital technologies as supporting existing products and services or as a resource to
reengineer processes.
 f o r m u l at i n g a d i g i ta l s t r at e g y 157

To date, Mittelbayerische’s digitally enabled diversifications have been rather limited.

After introducing online sales channels for its print products, its only diversification into the
digital world was to make its classic analog products available via digital channels. These digi-
tal activities were fully integrated into the firm’s core business and affect mostly production
processes and, to some extent, product and service offerings. To date, Mittelbayerische’s
digital offerings comprise an e-paper and app version of the newspaper and a device-adaptive
website. At present, between 10% and 20% of revenues come from digital products and
services. Revenues from digital products complement revenues from the print business.
Mittelbayerische continues to target traditional publishing revenues from advertising and
paid content, with revenue from advertising strongly driven by local offerings.
Mittelbayerische believes that the competencies needed for digital transformation should
come from within the company and has established a thorough personal development pro-
gram that helps foster the necessary digital mindset and skill set among existing staff. The
company has also established trainee programs and an integrated university degree program
in various business units to attract graduates, young professionals and, above all, “digital
natives.”
Mittelbayerische’s CEO made selective digital transformation a strategic priority and
is responsible for the publisher’s digital transformation strategy. However, the company
has very limited ability to allocate financial resources to the program. Traditionally low
margins in the print business constrain the firm’s options in this dimension of the Digital
Transformation Framework.

Digital Transformation Strategy at Ravensburger

Business Drivers for Digital Transformation

Two decades ago, Ravensburger had already made its first, and admittedly very early,
attempt to digitally transform its business. Ravensburger Interactive was launched in the
1990s to develop new digital products and services across all of Ravensburger’s business
segments. However, it was shut down after ten years because its activities in this area were
too early and were unsuccessful. However, since the 1990s, consumer digital technologies
in general and mobile technologies in particular have become ubiquitous, especially among
Ravensburger’s main target group: children.
At present, Ravensburger’s core business (analog games and books) is still profitable and
appears to be stable. Nevertheless, the company has begun to follow its customers, who are
moving toward digital offerings. In addition to introducing electronic sales channels for its
products, Ravensburger has entered the e-book and online gaming markets. Additionally,
the publisher has begun to develop complementary digital products that enrich its existing
analog products.

Digital Transformation Outcome: Smartly Enriching the Core Business

Ravensburger displays a differentiated view on digital technologies. Although IT remains a
support function for its core business activities, IT is regarded as a main driver of innovation
within the company’s digital business unit. This unit has specialists in digital gaming and
digital books whose role is to ensure the business remains at the forefront of technologi-
cal development by identifying emerging digital technologies at an early stage of develop-
ment that are relevant to the company’s core business. These specialists then discuss the
opportunities and risks posed by these technologies with the relevant managers in regular
workshops.
158 thomas hess et al.

Thus far, Ravensburger has largely refrained from deploying digital technologies on non-
content related business segments and instead has focused on enriching analog products with
digital content. The most popular innovation is “tiptoi®,” a digital pen that offers additional
audio information when touching selected areas of a book or educational game. This pen was
developed as a proprietary solution by Ravensburger and exemplifies the liberal attitude of
the company toward new technologies and IT development. Ravensburger also offers some
digital content, such as online gaming. It has also digitized its production processes for books
and offers e-books.
In the future, Ravensburger plans to create, aggregate and publish content (primarily
books and games). At the core of Ravensburger’s current efforts to generate revenues from
digital technologies are online “hybrid products,” such as the tiptoi pen, which provide digital
content for the firm’s most important analog products (books and games). Approximately
20% of Ravensburger’s digital revenues are generated by these products. As well as develop-
ing hybrid products, Ravensburger focuses its digital transformation activities on providing
broader support for business processes in the gaming and books segments. The implementa-
tion of ERP and CRM systems has been followed by the introduction of a modern content-
management system.
Organizationally, Ravensburger’s hybrid products are located in the two core business
units: books and games. New digital products and services that are less closely related to
the core business are organized in a dedicated subsidiary called “Ravensburger Digital.” This
business unit was established in 2009, employs 20 to 25 people and has a yearly turnover of
approximately €1 million. Ravensburger Digital has been deliberately separated from the
core business and is physically separated from the headquarters to make it more appealing
to applicants with different skill sets and to foster innovation. Ravensburger Digital largely
develops online games that are not related to any of the company’s traditional games. The
CEOs of Ravensburger Digital and the core business orchestrate all digital activities. The top
priority in managing Ravensburger’s cash flow is to stabilize its core business. A substantial
proportion of any internal surplus is invested in the company’s digital initiatives.

Guidelines for Formulating a Digital Transformation Strategy

Each of the three German media companies have chosen a different approach to digital trans-
formation, depending on their individual business models and strategic visions for digital
technologies. Together, these three cases provide a rich picture of the different options for
formulating a digital transformation strategy.
Based on insights from these cases, we have derived guidelines for managers in the form
of the strategic questions they have to address when embarking on digital transformation.
We have grouped the questions along the four dimensions of the Digital Transformation
Framework described earlier: use of technologies, changes in value creation, structural changes and
financial aspects. For each dimension, we list the strategic questions about digital transforma-
tion that management must address and provide a set of strategic options from which man-
agement can choose as they answer the questions.11 In combination, these questions cover all
relevant aspects of a digital transformation strategy.

Use of Technologies Dimension

Digital transformation is driven by the advent of digital technologies. Thus, a company’s
approach to using new digital technologies is an essential dimension of a digital transforma-
tion strategy. This dimension requires that managers assess the role of their IT departments
Table 7.2 Strategic Questions about the Use of New Technologies

Strategic Question Strategic Options Description P7S1 MB RB Impetus for the Digital Transformation Outcome
How significant is your firm’s IT Enabler IT is an enabler of strategic x x • P7S1 regards IT as a core function and
to achieving strategic goals? goals understands the potential of digital
technologies for business success.
• Ravensburger actively follows its customers
into the digital world and generates
new customer experiences through the
combination of analog and digital content.
Supporter IT is seen as a support function x • Mittelbayerische’s core business focus remains
to reach strategic goals on the production and distribution of local
news. Technology is merely a means for
efficient processes.
Innovator The firm is at the forefront of
innovating new technologies
How ambitious is your firm’s Early adopter The firm actively looks for (x) x • Through its mergers and acquisitions
approach to new digital opportunities to implement activities, P7S1 engages with early-stage
technologies? new technologies technologies.
• Ravensburger introduces early-stage
technologies to foster the development of
innovative, digitally enriched content.
Follower The firm relies on well- x x • P7S1 and Mittelbayerische emphasize process
established solutions stability and seek to minimize risks following
the implementation of new technologies.
160 thomas hess et al.

and how proactive and innovative they are in their approach toward new technologies. Table
7.2 summarizes the options available when answering these questions and describes how and
why the three media companies have chosen the options.
Question 1: How Significant is Your Firm’s IT to Achieving Strategic Goals?
Emerging digital technologies can create new opportunities for firms and may be crucial for
securing a competitive advantage. Nevertheless, the significance of IT and its strategic role
varies substantially across companies.
The cases reveal that some firms regard IT as an enabler of new business opportunities.
Others, however, use IT to support and fulfill defined business requirements and improve-
ments. Thus, in some firms the initial driver of change is a new digital technology, whereas in
others business issues drive the change process, and a suitable technology must be identified
to support the change.
An example of the use of IT as an enabler of new opportunities is a cutting-edge content-
management system that provides media companies with the ability to easily deliver content
via different channels and across countries. Companies with an enabling perspective of IT
must carefully monitor digital technologies and identify their potential to boost current busi-
ness operations or enable the creation of new products and services. In companies with a
supporting perspective, digital technologies could assist in functional business operations or
in ensuring compliance with regulatory requirements. For instance, determining and verify-
ing a user’s location is necessary to ensure that content is available only in licensed regions.
Question 2: How Ambitious is Your Firm’s Approach to New Digital
Technologies? Regardless of the strategic role of IT, companies can take different
approaches to the process of diffusing new digital technologies. More conservative firms
may adopt established and widely used technology solutions, while others may deploy new
technology solutions at the early stages of their development. A more aggressive approach is
to act as an innovator and create and introduce new technology solutions into markets.
The cases suggest that a firm’s digital technology ambition is largely determined by its
unique context. However, when assessing where they should ideally be in the technology
ambition spectrum, firms should consider their existing technological competence, the
extent of their technology spending and their size.
Many media companies have traditionally been followers in terms of their technology
ambitions, but new Internet-based technologies have created opportunities, and likewise the
need for them to act more rapidly to remain ahead of the curve. For example, creating con-
tent platforms can reveal new market potential across countries. Similarly, new digital tech-
nologies can be used to build strong business ecosystems and to develop proprietary stand-
ards, which can be a means of restricting competitors’ access to customers. Acting too late
may make it difficult to catch up with competitors and establish a company’s own standards.
However, not all media companies have the technological competencies required to become
leaders in technology development or use—nor do they need to do so. Instead, they should
carefully assess their technological ambitions and align them with IT investment decisions.

Changes in Value Creation Dimension

Changes in value creation derive from the way in which digital technologies alter a firm’s busi-
ness model. At media companies, changes in value creation relate mainly to the degree to which
a company has already diversified its business into the digital world, how it plans to generate
revenues from digital technologies and to its main business focus after a digital transformation.
Table 7.3 summarizes the three strategic questions that managers must ask about the changes
in value creation dimension and the strategic options available when answering these questions,
and describes how and why the three media companies have chosen a particular option.
Table 7.3 Strategic Questions about Changes in Value Creation

Strategic Question Strategic Options Description P7S1 MB RB Impetus for the Digital Transformation Outcome
How “digital” is Electronic sales channels Distribution of analog x x • Both Mittelbayerische and Ravensburger have recognized
your interface to products over digital the importance of e-commerce for the sales of their
the customer? channels analog products (e.g., print newspapers or analog games).
Cross-media Extension of the classic x x x • While the extension to digital channels at P7S1 and
product to digital channels Ravensburger represented a step toward even more digital
business models, Mittelbayerische’s intention to keep its
focus on print content demanded only a limited extension
into digital business models (i.e., cross-media offerings).
Enriched media Digital enrichment of the x x • Both Ravensburger and P7S1 have understood the
classic product opportunities of digital technologies to create new
business areas through complementary products based on
the enrichment of their classic products (TV and board
games, and print, respectively).
Content platforms New content-based x • P7S1 has decided to benefit from its know-how in content
offerings creation, aggregation and distribution and to engage in the
management of content platforms.
Extended business New offerings without x • Given the opportunities provided by digital technologies,
direct relation to content P7S1 has decided to further leverage its competencies and
(analog/digital) enter adjacent markets.
Paid content Revenues from the user x x x • All three companies have decided to keep their existing
for access to or the use of (i.e., pre-digital transformation) revenue streams through
content paid content.
Strategic Question Strategic Options Description P7S1 MB RB Impetus for the Digital Transformation Outcome
How will Freemium Revenues from add-ons x • Through its mergers and acquisitions activities, P7S1
you create based on a free basic product engages in the management of content platforms.
revenue from Advertising Selling of attention x x • P7S1 and Mittelbayerische have decided to sustain existing
future business (i.e., pre-digital-transformation) revenue streams through
operations? advertising.
Selling complementary Revenues from products x x • P7S1 selectively uses complementary digital products to
products complementary to the core increase the attractiveness of its core business (sales of
business merchandise complementing TV shows).
• Ravensburger has decided to introduce digital
products that are complementary to the core business
to meet customer demand for digital products and,
simultaneously, strengthen analog products.
What will your Content creation Creation of content x x x • All three companies have decided to continue to create,
future business (analog or digital) aggregate and distribute content (i.e., continue their
scope be? “pre-digital transformation” activities).
Content aggregation Aggregation of content x x x
(analog or digital)
Content distribution Distribution of content x x x
(analog or digital)
Content platforms Management of content x • P7S1’s management has decided to leverage the firm’s
platforms core competency (the management of content) and
engage in the emerging market for content platforms.
Other Other business models x • P7S1 engages in strategic mergers & acquisitions (both
as financial investments and to obtain access to new
technologies/competencies).
 f o r m u l at i n g a d i g i ta l s t r at e g y 163

Electronic
platforms

Pressure
from New
Technologies

Distance from the Core Business

Figure 7.1 Levels of Digital Diversification at Media Companies

Question 3: How “Digital” is Your Interface to the Customer? Instead of sim-

ply transforming previously analog products and services into the digital world, many firms
want or need to exploit the possibilities of digital technologies and enter new business areas.
Managers have to consider the extent to which their firm should diversify its business into
the digital world. For a media company, this means considering how far away it should oper-
ate from its traditional core business (see Figure 7.1). The levels of diversification shown
in Figure 7.1 allow a media company to assess both its current level of digital transforma-
tion and the levels for possible future digital transformation endeavors. The optimal level of
diversification is determined by a company’s financial background and size.
In the three cases, P7S1 shows the highest level of diversification (having reached Level
4—“Extended business”). Ravensburger’s and Mittelbayerische’s diversification ends at
“Enrichedmedia” (Level 2) and “Cross-media” (Level 1), respectively.
Hence, the cases imply that company size is a major determinate of the level of digi-
tal diversification that can be achieved. P7S1, a large corporation, has diversified its tradi-
tional business and actively leverages the many possibilities offered by digital technologies
in a consumer-centric market. Smaller and medium-sized firms such as Ravensburger or
Mittelbayerische have emphasized the stability of their core businesses in their digital trans-
formation efforts.
Question 4: How Will You Create Revenue from Future Business Operations?
Finding new sources of revenue is crucial for future business success and therefore an indis-
pensable element of a digital transformation strategy. When designing new digital products
and services, companies must consider how they can create value and therefore generate
revenue. In the media industry, for example, even if a company’s physical and digital prod-
ucts or services are not significantly different, new revenue models may be needed to remain
competitive in the online world. For instance, when newspapers were made available in a
digital format, most publishers found they could not charge customers similar amounts to
those charged for the print versions.
All three cases (as well as many other companies in the media industry) generate revenues
from digital business models primarily through advertising and paid content. However, the
characteristics of advertising are different in the online world, where advertising is currently
dominated by powerful Internet search engines. In addition, the widespread adoption of
mobile devices with small screens places additional pressure on advertising revenues.
164 thomas hess et al.

Some media companies have tried to overcome these constraints by extending their value-
chain activities and generating transaction revenues. These companies not only seek to pro-
vide paid content but also encourage product purchases linked to their content. Every time a
product is sold, the media company receives a commission. In addition, digital technologies
have further simplified the differentiation between pricing tariffs, with the “freemium” rev-
enue model being increasingly adopted by media companies.
Question 5: What Will Your Future Business Scope Be? Media companies’ busi-
ness activities traditionally center on content creation, aggregation and distribution. But
digital technologies have affected the media industry much more severely than many other
industries. Recent examples, such as customers’ reluctance to pay for online news or digi-
tally distributed music, demonstrate that digital technologies may require media companies
to rethink the scope of their businesses.
The cases demonstrate that media companies generally maintain their focus on content
creation and aggregation while they attempt to exploit the opportunities offered by digital
transformation and engage in the management of content platforms. Content platforms are a
technology-enabled option for media companies to establish new services. But despite their
dominant business focus on content, most traditional media companies have thus far missed
the opportunity to establish and operate their content platforms in a way that creates valu-
able assets, as social media platforms do. The major assets of social media platforms derive
from establishing connections between users and profiting from users’ content to keep the
platforms interesting.
In contrast, there are media companies that deliberately shift their product and service
portfolios to business areas that are less fundamentally affected by ongoing digital transfor-
mation.

Structural Changes Dimension

Digital transformation, as any other type of business transformation, impacts a company’s
organizational structures. The structural dimension of the Digital Transformation Framework
is concerned with who will be in charge of the transformation endeavor. Additionally, man-
agement has to decide whether new digitally enabled operations should be integrated into
existing structures or be located in independent entities that are separated from the com-
pany’s core business. The company may also have to acquire specialized know-how or new
competencies. Finally, managers must consider what types of operational changes to expect
as they explore and exploit digital technologies. Table 7.4 summarizes the four strategic
questions that managers must ask about the structural changes dimension and the strategic
options available when answering these questions, and describes how and why the three
media companies have chosen a particular option.
Question 6: Who is in Charge of the Digital Transformation Endeavor? In
many organizations, the success of a digital transformation strategy depends on two factors:
top management support and the commitment of the necessary people to the strategy.
The three cases imply that, ideally, the CEO is fully responsible for and adds authority to
the digital transformation strategy. The execution of such a strategy is often delegated to a
senior manager who could either be the manager of the business unit that is responsible for
large portions of the digital business or of the business unit that is most affected by the digital
transformation. The CIO may also manage the transformation, which is typically the case if
the focus is on business processes. However, companies whose digital focus is on the interface
with customers often appoint a chief digital officer (CDO) to work alongside the CIO.12 The
CIO typically focuses on the IT infrastructure and the internal business processes, whereas
the CDO primarily addresses digital technologies that involve digital products and services
Table 7.4 Strategic Questions about Structural Changes

Strategic Question Strategic Options Description Description MB RB Impetus for the Digital Transformation Outcome
Who is in charge of the Group CEO The group’s chief executive x x x • All three companies have recognized the
digital transformation officer complexity of digital transformation and made
endeavor? it a top strategic priority of the group CEO.
CEO of business The CEO of the business x x • Once a firm’s size moves beyond a certain
unit unit that tackles the digital threshold, it is important to involve senior
transformation endeavor managers other than the group CEO in the
digital transformation program. This applies
for P7S1 and Ravensburger.
Group CDO The group’s chief digital officer
Group CIO The group’s chief information
officer
Do you plan to integrate Integrated Digital operations are fully x x • Mittelbayerische wants the digital
new operations into integrated into an organization’s transformation to happen in close
existing structures or current structures
create separate entities? Separated Digital operations are x x • P7S1 does not want digital initiatives to be
implemented separately from influenced by the existing business.
the core business • Ravensburger separates its activities that go
beyond mere complementary products (e.g.,
online games).
• All three companies have decided to use
digital technologies to generate new customer
experiences through digital products and services
(e.g., P7S1’s maxdome video-on-demand
platform or Ravensburger’s tiptoi pen).
Strategic Question Strategic Options Description Description MB RB Impetus for the Digital Transformation Outcome
What types of operational Products and Changed products and services x x x
changes do you expect? services
Business Improvement of business x x x • All three companies have decided to use
processes processes digital technologies to optimize their business
processes (e.g., big data support in TV
program planning).
Skills A new set of skills based on x x • Through its mergers and acquisitions activities,
digital technologies P7S1 automatically acquires new skill sets.
• Ravensburger wants to attract and develop a
new set of skills to make its separate digital
business unit a success.
Do you need to acquire Internally Rely on the resources that x x x • All three companies believe that they need
new competencies? If Partnerships already exist Foster partnerships to develop their current workforce in new,
so, how do you plan to digital technologies.
acquire them? Takeovers Accumulate know-how via x (x) • Mergers and acquisitions activities give P7S1
External takeovers Source additional an alternative channel to accumulate digital
sourcing know-how from outside competencies.
• Mittelbayerische has realized that it needs to
attract “digital natives” for a successful digital
transformation.
 f o r m u l at i n g a d i g i ta l s t r at e g y 167

at the customer interface. Needless to say, the CIO and CDO should actively communicate
with one another and closely coordinate their strategies and initiatives.
Question 7: Do You Plan to Integrate New Operations into Existing Structures
or Create Separate Entities? Because digital transformation can redefine a firm’s business
model, one key concern for companies is where to position new digital business activities
in the organizational structure. They must decide whether to integrate new operations into
their current operations or to organize them as distinct, separate units (perhaps as a newly
formed subsidiary).
The three cases illustrate both approaches, each of which has advantages and disadvantages.
Integration into the existing corporate structure typically requires less extensive restructuring
efforts. The integration approach may be preferred if close coordination between traditional
and new digital businesses will be necessary. In this situation, it is important to examine
whether synergies between traditional areas and new digital activities can be exploited.
In contrast, organizing new digital activities in separate structures makes it easier for firms
to explicitly separate (physically and ideologically) their old and new operations. They can
also develop from scratch appropriate structures for new digital activities, which typically are
more innovative and provide an increased level of flexibility.
Thus far, it has not been clear whether separation or integration is the preferred approach.
However, theory and practice suggest that the greater the distance between digital trans-
formation efforts and a firm’s current core activities, the stronger the boundary between
new and old operations should be. Thus, for gradual, core-business-related transformations,
integration into existing structures should be preferred, but only if the change processes are
strongly supported by top management. But digital transformation initiatives often involve
significant innovation and change efforts, as well as a willingness to take risks, all of which
may be difficult to accommodate within existing organizational structures.
Question 8: What Types of Operational Changes Do You Expect? Depending on
the scope of the organization’s business and the specific future digital transformation plans,
a digital transformation strategy can require different types of operational changes. First,
new technologies can significantly change the current products and services delivered to
customers. Second, digital technologies can enable changes to business processes. Business
processes can be classified as operational, support and management, but the typical focus of
digital transformation initiatives is on operational processes. For instance, digital technolo-
gies can accelerate the execution of business processes, involve different staff, require differ-
ent resources or fully automate certain steps.
Reengineering business processes can be complex because they often span divisions or
even companies. A company must therefore fully define their processes and assess which of
them will be affected by digital transformation initiatives and what the potential impacts will
be. The three cases show that digital transformation at media companies can occur internally
(through business processes) or at the customer interface (through products and services).
Question 9: Do You Need to Acquire New Competencies? If so, How Do You
Plan to Acquire Them? The necessary changes in products, services and business processes
to digitally transform an organization, and the maintenance of ongoing operations, will likely
require new skills. Managers must carefully assess the firm’s existing technology capabilities
and identify the new competencies that will be needed.
These three cases indicate that competencies can be acquired in different ways. The best
option will largely be determined by the existing capabilities and financial resources of the
firm and the scheduled timescale for the digital initiatives. The first option is for firms to
build on their current capabilities and acquire the required competencies themselves (e.g.,
by either training current staff or hiring new employees). However, this approach typically
takes time. Another option, therefore, is to partner with other companies that may already
168 thomas hess et al.

have the specific knowledge to facilitate integration processes. This approach reduces the
risk of failure. If the jointly shared activities are of high strategic importance, acquiring the
partner company may be an option for ensuring that the common resources and knowledge
will be retained in-house.
If the technological processes required for digital transformation are well structured and
not overly complex, outsourcing these processes is another option. Compared to creating
the required competencies internally, both the partnership and outsourcing options can have
advantages in terms of lower initial investments and of distributing the risks more widely.
The disadvantage of these two options, however, is that they increase the risk both of losing
a required competency and of becoming dependent on a third party. Retaining the processes
and knowledge required for digital transformation in-house means a company can be better
positioned to gain a competitive advantage from future digital transformation initiatives.

Financial Aspects Dimension

The financial dimension of the Digital Transformation Framework is also a significant aspect
of digital transformation endeavors. Increasing financial pressure on the current core busi-
ness might be the trigger that convinces management of the need for action. And financial
resources will be necessary to carry out transformational initiatives. Table 7.5 summarizes
the two strategic questions that managers must ask about the financial dimension and the
strategic options available when answering these questions, and describes how and why the
three media companies have chosen the options.
Question 10. How Strong is the Financial Pressure on Your Current Core
Business? The willingness of top management to undertake the necessary efforts for, and
accept the ensuing risks of, digital transformation endeavors often depends on the competi-
tiveness of the current core business. If the core business continues to create sufficient prof-
its, managers may not see the urgency for embarking on digital transformation efforts or be
willing to take the risks.
History, however, has shown that markets can change quickly and that acting too late can
be fatal for companies. Several well-known retailers that once dominated domestic markets
missed the opportunity to react to e-commerce-driven changes in a timely manner, resulting
ultimately in business failure. We urge all companies to take digital transformation seriously
and address its potential effects and take necessary measures immediately rather than waiting
for the anticipated tectonic shifts to occur in the way profits are generated in their industries.
Question 11. How Will You Finance the Digital Transformation Endeavor?
Digital transformation strategies seek to maximize value creation and, thus, future revenues
and profits. To finance their digital transformation endeavors, firms can choose either inter-
nal or external financing options. Successfully financing a transformation endeavor depends
on a firm’s current well-being and its future prospects. Investors of any kind must have faith
that the digital transformation is beneficial to the firm and that their investments will there-
fore pay off. Thus, if a company is already financially struggling, its options for financing
digital transformations will be severely limited.

Key Decisions in Formulating a Digital Transformation Strategy

Managers can use the 11 questions identified above and their respective answers as guidelines
for formulating their digital transformation strategy. Table 7.6 summarizes these 11 ques-
tions and provides an overview of the possible management options. Again, we have struc-
tured the questions along the four dimensions of the Digital Transformation Framework.
Together, these questions and answers cover the most important decisions that have to be
made when formulating a digital transformation strategy.
Table 7.5 Strategic Questions about the Financial Dimension of Digital Transformation

Strategic Question Strategic Options Description P7S1 MB RB Impetus for the Digital Transformation Outcome
How strong is Low Margins in the core business x x • At P7S1 (TV) and Ravensburger (board games
remain mostly unaffected by and books), margins from the core business
digital technologies remain strong.
the financial pressure Medium Digital technologies affect core x • Mittelbayerische’s print publishing market suffers
on your current core business margins, but the core from market share losses to digital substitutes.
business? business remains profitable
High Digital technologies erode
margins
How will you finance the Internal Finance digital transformation x x x • At all three companies, cash flow is sufficient to
digital transformation through internal funds finance the digital transformation program.
endeavor? External External financing necessary to
finance digital transformation
Table 7.6 Key Decisions for a Digital Transformation Strategy

Use of technologies
1. Strategic role of IT? Enabler Supporter
2. Technological ambition? Innovator Early adopter Follower
Changes in value creation
3. Degree of digital diversification? Electronic sales Cross-media Enriched media Content platforms Extended business
channels
4. Revenue creation? Paid content Freemium Advertising Complementary products
5. Future main business scope? Content creation Content aggregation Content Management of content Other
distribution platforms
Structural changes
6. Responsibility for digital Group CEO CEO of business unit Group CDO Group CIO
transformation strategy?
7. Organizational positioning of Integrated Separated
new activities?
8. Focus of operational changes? Products and services Business processes Skills
9. Building of competencies? Internally Partnerships Company takeovers External sourcing
Financial aspects
10. Financial pressure on current Low Medium High
core business?
11. Financing of new activities? Internal External
 f o r m u l at i n g a d i g i ta l s t r at e g y 171

Although this analysis is based on the media industry, we believe that, apart from the
questions directly related to a firm’s value creation, the findings can be transferred to other
customer-oriented industries. The value creation dimension usually varies significantly across
industries and business models.
For the media industry, we found that digital transformation can lead to new sources of
revenue or even to new business models (e.g., the management of content platforms). Many
other industries have also embraced the business opportunities offered through digital tech-
nologies. For example, the automotive industry has introduced digitally enriched products
(such as the “connected car”) and new business models (such as free-floating car sharing).
Even so, a major benefit of digital transformation within the automotive industry is in the
ongoing automation of product development and production processes (e.g., 3D-modeling).
Another example is the insurance industry, where many firms have already implemented dig-
ital sales channels and started to adopt digital business models (e.g., online direct insurance).
But a fundamental change of an insurer’s business model seems unlikely in the near future.
Hence, when applying the Digital Transformation Framework and using the set of 11
strategic questions and answers we offered to formulate a digital transformation strategy,
managers will likely need to customize the value creation dimension so it corresponds to the
specific requirements of their industries or business models.

Concluding Comments

Digital transformation is a highly complex, company-wide endeavor. A systematic approach

to formulating a digital transformation strategy is crucial for success. Moreover, a firm’s
first steps toward digital business models are characterized by a high level of uncertainty. To
help managers address the challenge more systematically, we have extended previous work
on digital transformation strategies through the lessons learned from three companies in the
German media industry.
Our research has identified a set of strategic questions that managers responsible for digi-
tal transformation have to consider. Unfortunately, there are no universal, definitive answers
to these questions. Nevertheless, for each question we have offered a set of possible answers
and describe how and why the three case firms chose a particular option.
We believe that the most important thing for managers charged with formulating their
firms’ digital transformation strategies is to know the right questions to ask. By drawing on
the successful approaches adopted by the three case firms, answering these questions within
their own business contexts will provide managers with a comprehensive and structured
approach to digital transformation that will enable them to cut through the complexity of
digital transformation strategies.

Notes
1 An article that calls for a new view of disruptive technologies and presents strategic principles for
addressing the challenges stemming from disruptive technologies is Downes, L. and Nunes, P. F. “Big
Bang Disruption,” Harvard Business Review (91:3), 2013, pp. 44–56.
2 Bonnet, D., Ferraris, P., Westerman, G. and McAfee, A. “Talking ’bout a Revolution,” Digital Transfor-
mation Review (2:1), 2012, pp. 17–33.
3 See Lee, O. K., Sambamurthy, V., Lim, K. H. and Wei, K. K. “How does IT Ambidexterity Impact
Organizational Agility?,” Information Systems Research (26:2), 2015, pp. 398–417; and Gregory R.
W., Keil, M., Muntermann, J. and Mahring, M. “Paradoxes and the Nature of Ambidexterity in IT
Transformation Programs,” Information Systems Research (26:1), 2015, pp. 57–80.
172 thomas hess et al.

4 An example that concentrates on the digital transformation of a firm’s retail channels is Hansen,
R. and Sia, S. K. “Hummel’s Digital Transformation Toward Omnichannel Retailing: Key Lessons
Learned,” MIS Quarterly Executive (14:2), 2015, pp. 51–66.
5 Matt, C., Hess, T. and Benlian, A. “Digital Transformation Strategies,” Business and Information Systems
Engineering (57:5), 2015, pp. 339–343.
6 Bharadwaj, A., El Sawy, O. A., Pavlou, P. A. and Venkatraman, N. “Digital Business Strategy: Toward
a Next Generation of Insights,” MIS Quarterly (37:2), 2013, pp. 471–482.
7 McDonald, M. P “Digital Strategy Does Not Equal IT Strategy,” HBR Blog Network, November 2012,
available at https://hbr.org/2012/11/digital-strategy-does-not-equa.
8 Academic groundwork that argues for the fusion of IT and business strategy in light of digital trans-
formation is Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., and Venkatraman, N., op. cit., 2013.
9 As of April 2016, €1 = $1.13
10 P7S1 originated from the former Kirch Group, which was founded in 1955.
11 In addition to the three firms’ specific digital transformation journeys, the interviewees provided
other possible answers to the strategic questions that they considered viable options when designing
their digital transformation strategies.
12 Horlacher, A. and Hess, T “What Does A Chief Digital Officer Do? Managerial Tasks and Roles of a
new C-Level Position in the Context of Digital Transformation,” Proceedings of the 49th Hawaii Inter-
national Conference on System Sciences (HICSS 2016), Hawaii, 2016.

Appendix: Research Methodology

We conducted two rounds of interviews with industry experts and representatives of each of
the three case companies. When analyzing the interviews, we carefully scanned for common-
alities and differences in these firms’ strategies. To verify the statements from the interviews,
we also used secondary data sources (e.g., financial statements, company presentations and
data from general and professional media).
The first round of interviews was conducted in May and June 2013. It included seven inter-
views with senior industry experts and decision makers who were responsible for recent digi-
tal transformation programs at the German media companies. These interviews included open
questions on the firms’ motivations for their transformation efforts, their visions and goals and
their current capabilities and challenges. The first round interviewees are listed below.

First Round Interviewees

Interviewee Function Industry Segment Date

Industry Expert Consulting May 2013
Industry Expert Consulting May 2013
Head of Business Publishing May 2013
Development
Chief Operating Officer Publishing May 2013
Chief Executive Officer Publishing May 2013
Head of Advisory Board Publishing May 2013
Chief Executive Officer Publishing June 2013

In the second round, we conducted two interviews in July 2013 and one in May 2015. The
interviewees in this round—one from each of the case companies—are listed below. These
interviews formed the basis for our case analysis.
 f o r m u l at i n g a d i g i ta l s t r at e g y 173

Second Round Interviewees

Interviewee Function Industry Segment Date
Executive Vice President, ProSiebenSat.1 Media SE July 2013
Strategy and Operations
CEO Ravensburger Ravensburger July 2013
Digital AG
Group CEO Mittelbayerische Verlag AG May 2015

Questions for Discussion

1 How can companies deal with challenges posed by digital technologies? How do you
envision the development of digital technologies and their effects on organizations?
2 What would you recommend to companies struggling to embark on digital transfor-
mation?
3 How could digital transformation help balance exploitation and exploration? What
resources and capabilities might organizations require?
4 Using the digital transformation strategies outlined in Chapter 6, analyze the three
case studies presented. What strategies have these organizations utilized? What are the
similarities and the differences? How might you advise these companies on their strate-
gies using the terminology of Chapter 6?
5 Using the Digital Transformation Framework outlined in the chapter, analyze the
examples of the digital transformation companies presented in Chapter 6.
6 Referring to Part I of the book, discuss IS strategy and digital strategy. Are these dis-
tinct strategies?

Further Reading
Sia, S. K., Soh, C., Weill, P. (2016). How DBS bank pursued a digital business strategy. MIS Quarterly
Executive, 15(2), 106–121.
Yeow, A., Soh, C., Hansen, R. (2018). Aligning with new digital strategy: A dynamic capabilities
approach. The Journal of Strategic Information Systems, 27(1), 43–58.
Chapter 8

Omar A. El Sawy, Pernille

Kræmmergaard, Henrik Amsinck
and Anders Lerbech Vinther

HOW LEGO BUILT THE FOUNDATIONS

AND ENTERPRISE CAPABILITIES FOR
DIGITAL LEADERSHIP

DEFINING DIGITAL LEADERSHIP

MK c i n se y & C o m pan y has observed that while companies are rushing

headlong to become more digital, executives have very diverse perspectives as what
“going digital” really means.1 These perspectives range from a focus on technology, to digital
customer engagement, to new digital business models and more. The lack of clarity often
results in piecemeal initiatives, missed opportunities and false starts in the digitalization of
the enterprise.
The term digitalization goes beyond an organization taking advantage of digital platforms,
but rather reflects the way that digital media and platforms influence the restructuring of the
economy, society and culture.2 In a corporate context, Gartner uses the term to describe the
process of moving to a digital business and the use of digital technologies to change business
models and value-producing opportunities. Gartner also sees digitalization as a new era for
enterprise IT, in which business innovation and IT innovation are more integrated and where
corporate IT switches from a legacy perspective to a digital perspective‒suggesting that
there is a critical need for digital leadership.3
Similarly, a 2015 survey of 4,800 U.S. management professionals confirmed that the keys
to successful digital transformation (the North American term for digitalization) are con-
cerned more with strategy, culture and talent development than with technology issues.4
That survey also showed that respondents were apprehensive about whether business leaders
had the capabilities to lead their organizations in a digital environment.
Clearly, there is a need for clarity on what is meant by effective digital leadership, what
enterprise capabilities it requires and how the foundations of digital leadership can be built
and reinforced. We define digital leadership as “Doing the right things for the strategic s­ uccess
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 175

of digitalization for the enterprise and its business ecosystem.”5 This definition reflects the
difference between leadership and management highlighted by leadership scholar Warren
Bennis: “Leadership is about doing the right thing for the success of the organization, while
management is about doing the thing right.”6 We have included “business ecosystem” in the
definition because in today’s connected world it is not possible to achieve strategic success
independently of the business ecosystem.7
There is, as yet, no common consensus on the operational aspects of digital leadership.
However, there are six foundational building blocks of strategy and organization that will
have to change when implementing a successful digitalization strategy:

1 A different kind of business strategy: Digital technologies are becoming fused into the very
fabric of the business,8 which means the concept of business strategy should be enlarged
to include digitalization. The prevailing view of a functional-level IT strategy aligned
to an enterprise’s chosen business strategy but always subordinate to it needs to be
replaced with an enterprise-wide digital view that reflects the fusion between digital
strategy with business strategy. This view is sometimes termed “digital business strat-
egy.”9 Furthermore, business development often occurs in collaboration with partners
that leverage ecosystem platforms to co-create value around products and services.10
2 Different kinds of business models: An integrated digital business strategy and collaborative
ecosystem platforms enable new digital business models for creating business value.
These models often have different value propositions and different revenue sharing
modes. They often also bring together both physical and digital features of products
and services.11
3 A different kind of enterprise platform integration: Intensive interactive digital connectivity
to the outside requires integration between the outside and inside of the enterprise
that goes beyond the traditional ERP and supply chain management integration para-
digm. The upcoming era of adaptive and dynamically responsive digital platforms12 and
accompanying organizational arrangements requires a new kind of platform integration.
4 A different kind of people mindset and skill set: All the above will require a different mind-
set at all levels of the organization. Top management and all employees will need to
be more adaptive and willing to experiment and innovate while occasionally failing.13
Everyone throughout the enterprise will need to have an appropriate adaptive skill set
and digital know-how.
5 A different kind of corporate IT function: The organizational changes required for
digital leadership and a digital business strategy will require rethinking the roles of the
corporate IT function and the CIO.
6 A different kind of workplace: As more “born digital” younger employees enter the work-
force with different values, they will have different expectations of the workplace in
terms of flexibility of location and working hours, sophistication of mobile online
access, and the extent to which the workplace environment is “humanized.”14 Creating
such a workplace as digitalization increases is especially a key priority in Scandinavia.

To illustrate the kinds of changes that a digitalization strategy entails, this article describes
the LEGO Group’s decade-long digitalization journey.

LEGO Group Background

Founded in 1932 by Ole Kirk Kristiansen, a carpenter who made wooden toys, the LEGO
Group (referred to as LEGO in the rest of the article) is a private company (still owned by
176 o m a r a . e l s aw y e t a l .

the Kristiansen family) with headquarters in Billund, Denmark, and main offices in the U.S.,
U.K., China and Singapore. Renowned for the iconic LEGO brick, LEGO products are sold
in more than 140 countries. It has more than 17,000 employees worldwide and factories in
Billund, Hungary, the Czech Republic, Mexico and China. 2015 revenues were 35.8 billion
Danish krone (over $5 billion). Net profit was 9.2 billion krone (over $1 billion). To date,
more than 760 billion LEGO elements have been manufactured. In 2014, about two thirds
of revenues were from new products that did not exist the year before.
The company is committed to the development of children and aims to inspire and develop
the “builders of tomorrow” through creative play and learning. The company’s main goal is
to “inspire and develop children to think creatively, reason systematically and exploit their
potential to create their own future and thus exploit man’s infinite possibilities.”

Organizational Structure
LEGO depicts its organizational structure as a “wheel” (see Figure 8.1). This structure
reduces silos and emphasizes communication and sharing of knowledge and insights as
well as making decisions in plenary groups. In addition to an external Board of Directors,
top management consists of a Management Board of the CEO and four Executive VPs,
and a Corporate Management team of 21 people at Senior VP level.15 The four core busi-
ness areas—Operations, Market Management and Development, Product and Marketing
Development, and Business Enabling—are represented in the Management Board. The CIO,
who is the Senior VP for Corporate IT, is part of the Business Enabling area covering group/
corporate functions. As Figure 8.1 depicts, members of the Management Board and the
Corporate Management team comprising the wheel run the company, and they often com-
municate across areas as part of the transparent communication culture. They also all meet
together regularly.

Values and Culture

The LEGO culture is based on openness and trust, and core values are creativity, imagina-
tion, fun, learning, quality and care.16 Since the company was founded, LEGO’s top manag-
ers have consistently expressed concern for maintaining the values and beliefs for which the
brand stands. The founder’s motto of “only the best is good enough” is still applied in all
aspects of LEGO’s operations. Playfulness is an important element of LEGO’s business and
management. As LEGO CEO Jørgen Vig Knudstorp likes to say: “We don’t stop playing
because we grow old. We grow old because we stop playing.”

Near-Death Experience and the Start of the Transformation Journey

Although LEGO is now a thriving business, in the early 2000s it verged on defaulting on its
debt.17 Manufacturing was in Europe and the U.S., while competitors were manufactur-
ing in Asia at much lower cost. The toy market had become more fickle with the advent of
new electronic games. LEGO had diversified too quickly into adjacent markets: amusement
parks, video games, toys for infants, clothing and others that it had little experience in. It
almost seemed like the company “lost faith in the brick” and its identity as a company
As LEGO’s press officer articulated in 2014:

We were a little bit complacent, thinking that we knew what we were doing as
a company and we knew best. Second, we were not focusing much on our cus-
tomers. And thirdly, there was a lack of flow of information inside the company.
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 177

orate Management (C
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Figure 8.1 The LEGO Group Organizational Wheel

© The LEGO Group

A major organizational transformation and a new business strategy were needed to save what
some had called a “burning platform.” The starting point for the transformation was the
replacement of the CEO in October 2004 when 35-year-old Jørgen Vig Knudstorp, who had
initially joined LEGO as a business strategist in 2001 from McKinsey & Company, became
CEO. Since 2004, LEGO has enjoyed almost a decade of consecutive growth.
The new CEO’s initial focus was on survival, and he instigated a two-pronged strategy
based on reducing production costs and closing nonprofitable product lines, and on a clearer
focus on the core brand and identity.
The emphasis in 2005–2007 was on creating a defensible core of products. Product lines
that were neither profitable nor core were shut down, and the capital structure was rebal-
anced. LEGOLAND parks were sold to Merlin entertainment. The company downsized from
8,500 to 5,000 employees. Open communication about problems was encouraged and prac-
ticed. Refocusing on the LEGO core (the brick) was key, while also pursuing complementary
digital opportunities that reinforced that focus and did not wander into adjacent markets.
In 2008, the strategy shifted from stability to growth and the focus was on building sus-
tainable platforms for growth while continuing to improve the core business. Although the
178 o m a r a . e l s aw y e t a l .

Figure 8.2 The LEGO Strategy

© The LEGO Group

Corporate IT department had been supporting the recovery, stability and growth of the com-
pany through enterprise systems, there was a realization of the growing importance of digital
platforms for the LEGO Group.

LEGO Group Strategy

The LEGO Group has a long-term corporate strategy toward 2032 consisting of four stra-
tegic priorities—one of them being “leverage digitalization” (see Figure 8.2). When it was
establishing the strategy, LEGO decided that it would look to respond to the external adap-
tive challenge of digitalization by purposefully “evolving” its existing business model to inte-
grate digital into everything it does. LEGO consciously decided that it would not have a
separate digital products business unit.
Jørgen Vig Knudstorp has an often repeated quote: “You do not think your way into new
ways of acting—you act your way into new ways of thinking.” It is in that spirit that LEGO
has developed the capabilities for digital leadership by attempting multiple (but focused)
digitalization moves and learning through the experience. We describe some of these moves
below.

Digitalization at the LEGO Group

LEGO used three lenses for leveraging digitalization: a “Products” lens, which centered
around product innovation and the product ecosystem; a “Marketing” lens for digital mar-
keting; and an “Enterprise” lens, which centered around enterprise platforms and integra-
tion of the outside and the inside of the enterprise. Since 2009, LEGO has undertaken
several product and marketing digitalization moves, which have necessitated associated
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 179

d­ igitalization moves in the enterprise IT platforms. We describe a representative selection

of all three types of moves below.

Product Digitalization Moves

The first hybrid digital/physical LEGO experience was LEGO MINDSTORMS®, launched
in 1998. MINDSTORMS is a robotics platform created in collaboration with MIT’s Media
Lab and was targeted at an older segment. A month after its launch, LEGO discovered that
the proprietary operating system had been hacked. This was a major surprise to the com-
pany, which traditionally was tightly closed, with a culture of close control over every aspect
of the LEGO experience. However, LEGO realized that opening up could create a much
stronger community of users and become a source of additional value. Instead of prosecuting
the hackers, it talked to them and found they were LEGO fans who wanted to build their
own creations. As a result, LEGO developed a process-based solution that addressed the real
needs of the company and its customers, and the first platform for community interaction
was launched.
Since then, LEGO has launched numerous digital platforms to strengthen its connections
to the large communities of LEGO fans and strengthen the collaboration and involvement
of passionate builders in the development and design process of new models. Additionally,
after LEGO MINDSTORMS, numerous product lines combining physical and digital play
have been launched, and LEGO now operates an R&D Future Lab to study, improve and
nurture those experiences. For example, LEGO Fusion was launched in 2013 and combined
real builds with bricks with virtual games: users build something with the bricks and scan
the shape with a downloadable app into a smartphone or tablet and watch their creation
become part of a virtual game. LEGO Dimensions was launched in late September 2015.
This is an action-adventure video game for popular consoles (Sony PlayStation, Nintendo
Wii, Microsoft Xbox) that includes many characters from 14 different LEGO franchises. It
combines the physical and digital in that the player has LEGO figures and a gateway built with
bricks that can be played within the game.
Another product digitalization move involved crowdsourcing innovation and developing
LEGO community platforms. LEGO has always designed its products together with chil-
dren to try to ensure that they are loveable products, and the advent of digital platforms
has strengthened this.18 In 2008, the company launched LEGO Ideas (https://ideas.lego.
com), a website where amateur designers share their ideas for new LEGO sets, and fans vote
on them and give them “likes.” This website has about half a million visits per month and
over 100,000 registered users. Any project proposal with more than 10,000 votes goes to a
LEGO review board. A chosen project will be developed in collaboration with the project
creator, who receives 1% of net sales if the product is launched. Crowdsourced LEGO sets
(for example, The Big Bang Theory Apartment set) do as well in the market as standard sets.
Crowdsourcing product ideas in this way has added thousands of designers to the 200 in-
house product designers.
The LEGO Ideas website can monitor trends and changing interests among LEGO set
builders and fans. It also mobilizes communities for user-designed projects as well as deepen-
ing the connection between users and the company.
The LEGO Group has also created several community platforms for children. LEGO®
Club has five million registered users and offers content and tools to stimulate the creativ-
ity of children aged four to 13. My LEGO Network (www.mln.lego.com) is a safe social
networking site for children, where they can share their LEGO creations. ReBrick (www.
rebrick.lego.com) is a sharing platform designed for users aged 13+, known as Teen Fans
180 o m a r a . e l s aw y e t a l .

of LEGO (TFOL). Projects are created outside of brand-implemented tools and published
on independent platforms such as blogs or Flickr. There is also a growing number of Adult
LEGO User Communities (AFOLs, or Adult Fans of LEGO) that have their own websites,
blogs and discussion forums. The 220+ LEGO user community groups each have a rep-
resentative who is part of the LEGO Ambassador Network, which serves to nurture the
relationship with the LEGO Group. All of these initiatives further the digitalization of the
company around product design and community building for the future.

Marketing Digitalization Moves

There is a lot of overlap between marketing and managing the product experience in a digital
environment, because the digital experience is part of the product. Furthermore, in an age
of social media, chatter, public critique of products, website interaction and customer com-
munities, marketing has become a pull activity and is more about engagement and interaction
with customer communities than a push activity for product information. LEGO divides its
market constituencies into customers (retailers such as Target, Walmart and Amazon), shoppers
(adults such as parents and grandparents who buy LEGO products for children), consumers
(those who play and learn with LEGO products, mostly children) and fans (adult and teen-
age fans who are both shoppers and consumers). The marketing digitalization moves have
addressed all four constituencies in different ways. We highlight three of the moves below.
1. The Omnichannel Marketing Move. Reaching out to customers in a digital
environment requires omnichannel marketing—i.e., using different kinds of digital chan-
nels as well as physical channels. LEGO products have physical presence in the company’s
own stores and retail stores, and brand presence created by several LEGOLAND parks and
LEGOLAND Discovery Centers, and very active “Brick” conventions around the world (the
conventions are often arranged by AFOLs, not by the LEGO Group.).
In its marketing digitalization efforts, LEGO increased the use of various digital channels,
such as social media, the main LEGO website and websites specially designed for fan groups.
It has also started using interactive story telling within “trailer” online games to engage with
children around new characters in LEGO sets. The company has also created an augmented
reality product catalog. A product box can be scanned with a downloadable mobile app, and
an animation of the construction set being assembled is instantly displayed. LEGO has also
realized that cycle times are very fast for producing interactive digital content for marketing.
Although it has an internal ad agency, it has partnered with external digital ad agencies to
speed up marketing digitalization efforts.
In addition, LEGO has partnered with Warner Animation, which released The LEGO
Movie® (www.thelegomovie.com) in 2014. This is an animated adventure comedy film
based on LEGO construction toys and became a $486 million global blockbuster The com-
pany received royalties for the use of its brand and the film’s intellectual property rights,
but most importantly, the construction sets launched in conjunction with the movie were
extremely successful both in terms of revenue and of greatly increasing brand affinity with
families. Two sequels have been announced, for 2017 and 2018.
2. Increased Digital Engagement with LEGO Communities. Increased engage-
ment with a customer community drives innovation and revenue growth, and LEGO has
committed considerable resources to maintaining a culture of engagement around its com-
munity platforms. The affinity pyramid (see Figure 8.3) suggests that the more digitally and
directly connected members of a community are with an organization and other community
members, the more likely they are to engage in providing information, in having two-way
dialogues, in collaborating with each other and in co-creating products. Moreover, the more
customers move up the affinity pyramid through digital engagement, the more e­ ffective
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 181

Passionate advocates who want to

Lead co-create and have a two-way dialogue
Users with us and among themselves

LEGO Users with details registered in

1.1 Community our database so it’s possible to have
a dialogue with us

LEGO Users who participate directly

Connected Community with us, but are not registered in our
database so it’s not possible to contact
them directly

Have bought or received a LEGO

Active Households in the past 12 months

At least one LEGO set

Covered Households in household

All G4 Households with Children

Figure 8.3 The Affinity Pyramid Engagement Map

© The LEGO Group

p­ersonalized micromarketing becomes. LEGO has used micromarketing data to better

understand the path to purchase for its digitally connected customers and fans.
The company also continuously measures customer experience through a Net Promoter
Score, a program that asks customers to rate their experience in real time on the web.
3. Globalizing Digital Assets. LEGO has continuously increased its intellectual
property for new characters and franchises that have been hits, such as Chima and Ninjago,
balancing its own IP with externally licensed IP rather than resorting to licensing deals.
Furthermore, as combined physical and digital play has increased, the number of digital
assets that the company has created to promote its products has also increased. For exam-
ple, “trailer” online games mentioned above may need to be deployed to multiple major
markets around the world, with multiple languages. The LEGO Group has sought to glo-
balize these digital assets and to take advantage of economies of scale and scope. This has
presented challenges in global governance and has highlighted a new dimension of market-
ing digitalization that the LEGO Group is learning about through the global deployment
of its digital assets.

Enterprise Platform Digitalization Moves

The product and marketing digitalization moves have involved ecosystem partners and have
put new demands on enterprise systems and platforms and on LEGO’s Corporate IT func-
tion. The moves have created requests for applications and IT functionality that have grown
from 5% to 30% of the IT portfolio, and that growth is expected to continue. Digitalization
moves have also prompted the Corporate IT function to rethink the architecture of its enter-
prise platforms to meet the new business demands from customers and partners who want
more responsive digital engagement. New features and capabilities have been continuously
added to the enterprise platform to make it more responsive to digitalization, and its com-
plexity has grown, prompting the need for two different enterprise platforms: a traditional
182 o m a r a . e l s aw y e t a l .

one for transactions and a second-generation one for interactions and customer engagement.
We describe five of the most significant enterprise platform digitalization moves.
1. Bolstering the Enterprise IT Platform. Developing and bolstering the existing
LEGO enterprise IT platform began as long ago as 1999, when the company wanted to
consolidate and increase the efficiency of business processes and formulated a “one com-
pany, one system” mission. A company-wide ERP project was launched with four princi-
ples: simple, global, consistent and standardized work processes. In late 2001, LEGO had
a global enterprise-wide ERP system based on these principles and that supported the basic
core processes. In 2002, a new IT plan was formulated based on the company’s corporate
strategy and the needs of the business units and business partners. The plan identified areas
for providing business units with better IT systems support.19 Despite the implementation
of standardized processes globally, in 2004, the flow of information inside the company was
inadequate. The LEGO Group had many silos and lacked visibility into which areas were
running inefficiently and which were losing money. Consistent with the new CEO’s action
plan, the period 2004–2007 was characterized by continuously improving the enterprise IT
platform, stabilizing the organization, streamlining processes and improving data sharing and
business intelligence capabilities to create transparency and visibility about operations. When
Henrik Amsinck joined the LEGO Group as CIO in 2007, he was pleasantly surprised by the
robust state of the ERP platform. But, as he quickly discovered, there was still much work
to be done in the ensuing years as the company’s digitalization moves started to have major
impacts on enterprise IT platform requirements.
From 2007, there were continual efforts to bolster the enterprise platform in many ways
to support operational excellence, including knowledge sharing, collaboration and supply
chain management. LEGO continued to enhance its business process management capabili-
ties and its capabilities for sharing knowledge about processes “the LEGO way.”
However, there were other factors that influenced the evolution of LEGO’s enterprise
platform, driven by changing employee expectations as digitalization progressed. The “con-
sumerization” of enterprise IT started to take hold as the experiences of employees as con-
sumers influenced their expectations of ease of use of applications, friendly intuitive graphical
user interfaces and simplicity. Just about everyone had a smartphone and was downloading
apps, and employees wanted more than the standard cluttered ERP interfaces. As a conse-
quence, LEGO’s Corporate IT function augmented the enterprise platform with personal-
ized end-to-end app experiences for employees, with simple graphical interfaces. Employees
only got the apps they needed for their work tasks. In this way, Corporate IT managed to
deliver personalized ERP functionality on employees’ smartphones. Its philosophy was “what
you see is what you need” rather than “what you see is what you get,” and each app served its
own individualized use.
To meet these employee demands, LEGO changed its application development process to
have 100% user involvement before development, using collaborative prototyping tools with
visualization, such as iRise. The benefits of involving users are shown in Figure 8.4.
Increased connectivity with customers, whether through the LEGO website, online shops,
community groups, LEGO fan clubs or social media, has also put many new demands on
the enterprise platform. Similarly, product and marketing digitalization moves have placed
further demands on both the IT organization and the enterprise platform. The enterprise
platform was growing in multiple directions and now had started to become like a gigantic
aircraft carrier that housed all applications, whether they related to operations and transac-
tions or to consumer digital engagement and interaction.
As time went on, there was a growing realization that developing digitalization applica-
tions was very different from traditional enterprise applications development. The business
priorities with traditional enterprise platforms are first cost, then quality, then reliability
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 183

Figure 8.4 Benefits of Involving Users in Augmenting the Enterprise Platform through App
Development
© The LEGO Group

and then time. With digitalization platforms the business priorities are different. Time is the
highest priority because the ability to release new business functionality becomes a competi-
tive advantage. Reliability is a close second because in a digitalization environment (such as
an online store) a technology failure cannot be compensated for by manual workarounds of
processes (as in a physical store). The third priority is quality, which is still a key requirement
in areas such as security but becomes less important in the presentation layer as users become
part of the testing and prototyping process. Cost is the lowest priority.
Furthermore, development practices for digitalization platforms are much more fluid,
and there are fewer established industrial-strength development practices than there are for
enterprise platforms. Moreover, the required delivery model and characteristics are also
very different. Eventually, it became clear to LEGO that it needed a separate enterprise
engagement platform.
2. Designing a Complementary Engagement Platform. LEGO identified the need
for an engagement platform that would complement the enterprise platform, with the two
co-existing. By 2015, API (application programming interface) technology was sufficiently
advanced to enable the two platforms to be loosely and dynamically connected, even though
the engagement platform would change rapidly.
LEGO’s enterprise platform is rock solid, carefully designed and thoroughly tested.
Its purpose is to handle transactions and records, and its architecture is tightly integrated.
Platform requirements are carefully specified ahead of time. It is not easy to add functionality
quickly and in an ad hoc manner, and its integrity is guarded like the crown jewels because
all enterprise operations depend on it.
However, new customer and partner demands from digitalization moves have a very dif-
ferent set of platform requirements: digital interaction, 24/7 availability even as changes are
made, user-driven experience, experimentation, quickly added functionality that is “good
enough” and a two-way real-time dialogue with users through a simple intuitive interface. It
was clear to LEGO that it needed a different engagement platform and that the two p­ latforms
could not be tightly coupled but had to co-exist. It was also clear that open ­architecture,
184 o m a r a . e l s aw y e t a l .

OUTSIDE FOCUS
Digital Consumer / Shopper / Customers
+ –

Engagement
Platform

LEVEL OF GOVERNANCE
(Interaction / Dialog)
SPEED OF CHANGE

Enterprise
Platform
(Record / Transaction)

+
–

INSIDE FOCUS
Digital Workforce

Figure 8.5 Enterprise and Engagement Platforms

© The LEGO Group

micro-services and APIs would drive the architecture of the engagement platform and that it
would have loose-tight connectivity to the enterprise platform. At the time of writing (August
2015), the engagement platform and its governance mechanisms were at an advanced stage
of design. The conceptual idea behind the engagement platform is shown in Figure 8.5 and
contrasted with the enterprise platform.
The key dimensions in the figure are the extent of architecture governance exercised and
the speed of platform change. LEGO’s expectation is that this new design will result in a 75%
decrease in time for delivering functionality and a three-fold increase in development staff
productivity (based on function point calculations using scrum/agile development methods).
The engagement platform is designed to handle customers’ digital interactions and is essen-
tial if digitalization is to be effective.
3. Restructuring the Corporate IT Organization for Business Responsiveness.
LEGO’s rapid revenue growth and the strategic need for increased digitalization has resulted
in the Corporate IT organization expanding its staff base by close to 20% year on year for the
last three to now approximately 600 full-time regulars. Historically, most IT employees have
been located at LEGO headquarters in Billund and at the Enfield hub in the U.S.20 However,
now that LEGO has established new major office hubs in London, Singapore and Shanghai, IT
employees are also being located at these locations. This transition started in January 2015,
and Corporate IT (CIT) expects there to be more than 50 new colleagues at these three new
hubs before the end of 2016.
CIT will keep the competencies for developing the core enterprise platform compo-
nents in-house at Billund and Enfield. But locating other IT people alongside the rest of the
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 185

Corporate IT

CIT Strategic
Development

CIT Technology & CIT CIT CIT

Security Business Enabling Marketing Operations

Infrastructure Business oriented

operations application areas

Figure 8.6 Configuring Corporate IT for Business Responsiveness

© The LEGO Group

o­ rganization helps them appreciate, understand and share their colleagues’ business chal-
lenges. Even their office space reinforces that they are LEGO employees first and IT employ-
ees second—they are surrounded by assembled LEGO products that range from Ninjago
Master Wu Dragon sets to Star Wars Millennium Falcon displays to LEGO brick model
replicas of the Sydney Opera House. They may be working on digital platforms, but they
should never forget the core focus of the company—LEGO bricks.
With rapidly increasing digitalization, and changing needs from customers and the lines
of business, CIT is under constant pressure to be agile and responsive to the business. CIT
has therefore been restructured to mesh more closely with the business (see Figure 8.6).
It is now organized into five functions, three of which work directly and very closely with
the business: CIT Business Enabling, CIT Marketing and CIT Operations. CIT Technology
& Security is more internally oriented and manages infrastructure and operations. The fifth
function, CIT Strategic Business Development, was established on January 1, 2015, in the
Office of the CIO to drive IT business planning and to create the ideas driving the need for
new architectures for enterprise platforms and the development of the digital workforce.
Each of the three business-oriented functions has its own business CIO, and the technol-
ogy-oriented Technology & Security function has a chief technology officer (CTO). This
allows CIT to be led by one Executive CIO who can then spend more time focusing on
long-term strategy and digitalization, together with the Director of CIT Strategic Business
Development.
As well as delivering IT solutions, CIT Business Enabling’s responsibilities include inter-
nal user experience management, business intelligence solutions, data warehousing, business
process management, vendor management and portfolio management. CIT Marketing, which
supports the product development, marketing and sales arms of the business, is responsible for
CRM, e-commerce, digital marketing and customer front-end management. CIT Operations
supports manufacturing, engineering and supply chain management. CIT Technology &
Security is focused on the security of the enterprise architecture, core systems, infrastructure
and hosting, and is also responsible for the global service desk and local end-user support.
There is a high degree of cross-functional collaboration within CIT and between it and
the business. CIT has made a conscious effort to move from the traditional “plan-build-run”
requirements-focused model of systems development to a joint collaboration model for find-
ing solutions together with the business units. It has also realized that a very rapid and agile
186 o m a r a . e l s aw y e t a l .

response is typically needed. CIT has also increased collaboration with external partners that
bring special expertise, especially for products that have a digital component and for digital
games.
4. Orchestrating Distributed Digital Innovation with Multiple Digital
Officers. As more businesses offer products and services through digital platforms, they are
appointing chief digital officers (CDOs) in addition to CIOs.21 The CDO is typically closer to
the business’ customer offerings than the CIO and manages the customer engagement part of
the platform as well as the generation of value from the digital product platform. For exam-
ple, a digital entertainment company might have a CIO to manage its enterprise platform and
a CDO to manage the content platform, creating value from it and managing how customers
search for and consume digital entertainment content. The CDO will also monitor and man-
age the introduction of new technology innovations relating to the content platform.
LEGO, however, has taken a different approach to managing digital innovation: it has
appointed a digital officer for each business area. LEGO’s CIO and his team realized that digital
innovation and technological advances that impacted the different business areas were becom-
ing too numerous and overwhelming for CIT to manage by itself. Thus, LEGO is creating
digital officers in a growing number of business areas (see Figure 8.7). For example, it has a
Digital Games Officer in the marketing area who monitors and manages digital innovations and
solutions for digital (online) games, then works with CIT to implement platform solutions for
digital games. Having function-specific digital officers increases the digital savvy and proactive
digitalization moves of the business units and their ownership of the resultant digital solutions.
The appointment of multiple digital officers is also changing the way that digital innova-
tion occurs at LEGO because the innovation process is now distributed and is closer to the
point of business expertise (see Figure 8.8). As a result, the innovation process is now more
effective. In the past, the CIO and CIT managers were order-takers; a business unit brought
its requirements for a system to CIT, and CIT provided the solution, the platform and tech-
nology innovation. Now, the business unit proactively discovers a digital innovation in its
area, picks a solution and then discusses it with CIT as a partner. CIT then helps to integrate
the solution into the existing enterprise platform (and in the future into the engagement
platform as appropriate). The CIO and CIT are now solution-takers, partners and platform-
integrators. Distributed digital innovation is a more effective approach in the dynamic and
hectic environment of digitalization in the midst of organizational transformation.

Figure 8.7 The Rise of Multiple Digital Officers across the LEGO Group
© The LEGO Group
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 187

Figure 8.8 Multiple Digital Officers Enable the Digital Innovation Process to be Distributed between
Corporate IT and Business Units
© The LEGO Group

5. Building up the Digital Workforce and the Work Environment in Corporate

IT. An effective digitalization initiative requires a conscious effort to build up the skill set and
change mindsets in both the corporate IT workforce and the entire workforce. Achieving this
is especially challenging for a legacy bricks-and-mortar company like LEGO, where there are
both traditional long-term employees and born digital younger employees who are continu-
ally joining the company.
The dynamic demand for new product and marketing digitalization moves (which resulted
in the need for an engagement platform) is changing the mix of work for LEGO’s CIT
employees. They now spend more time with the business units, devising IT solutions, prepar-
ing specifications and prototyping, rather than on traditional development and programming.
Not only is the work itself changing, but the mindset within CIT is now one of being more
willing to experiment, learn and take risks, and of having an external orientation. There has
been a conscious effort to create a mindset that fits with dynamic digitalization. Together
with coaching from CIT managers, the new mindset has started to change the work culture.
There has also been a conscious effort to encourage CIT employees in particular and
LEGO employees in general to collaborate with the many external partners that provide
complementary expertise. In 2015, informal “chatter” from partners was suggesting that
collaborating with LEGO is a pleasant experience because of the “playfulness” of the LEGO
culture.
CIT has changed its hiring policies so it can develop the flexibility needed for dynamic dig-
italization. Previously, CIT hired for narrowly specified positions and often recruited highly
specialized people. Since 2011, new recruits have been hired for a career at LEGO rather
than for a specialized job in CIT. There has been a preference for people who can adapt to
task and position changes, whether in CIT or other parts of the enterprise. Every year, about
50 CIT employees are redeployed within the company. This has resulted in CIT people get-
ting greater exposure in the wider organization, their knowledge and expertise being spread
more broadly and the internal hiring process having access to a supply of digital talent.
CIT has also put a lot of effort into creating a motivating and exciting workplace. It has
taken various initiatives to blend CIT employee development with workplace excitement.
In 2013, for example, it ran a two-day digitalization boot camp for young and recently hired
graduates, with participation from CIT management and some mid-level CIT employees.
The boot camp was facilitated by a prominent consulting firm and covered new digital trends
188 o m a r a . e l s aw y e t a l .

as well as the organizational, cultural, ecosystem, partnering and customer challenges of

digitalization.
CIT’s efforts to build up the digital workforce and the work environment have paid off. In
2014, LEGO ranked second to Google as being the most popular IT workplace in Denmark
among IT graduates.22 Three years before, LEGO was not even in the top 100. Among IT
people with five years’ experience, LEGO CIT now ranks in the top five in Denmark.

Business Impacts of Digitalization at LEGO

As described above, the LEGO ecosystem of customers, partners and employees has been
transformed through its digitalization moves, resulting in innovative products, new processes
and new types of relationships. In combination, the moves have helped LEGO in its multi-
year transformation. The pain and critical problems that plagued the group in 2004 after its
near-death experience were complacency, excessive diversification into areas in which the
company had little experience, losing focus on the bricks, not focusing enough on the cus-
tomer, lack of flow of information and knowledge silos. LEGO and its ecosystem are better
off thanks to digitalization. The group is now on a healthy growth path of increasing revenues
and profits.
Focus on the customer has soared during the multi-year transformation. In 2015, LEGO
was rated as the most powerful global brand. That cannot be attributed solely to digitaliza-
tion, but many of the product and marketing moves described above have helped to build
brand affinity and enormously enriched digital engagement and interaction with the cus-
tomer ecosystem in numerous ways. The company, its partners—and most importantly its
customers, consumers, shoppers and fans—are all appreciating and enjoying the enhance-
ments that digitalization has brought about.

LEGO’s Journey Toward Digital Leadership

Figure 8.9 shows how LEGO depicts its progression toward enterprise digital leadership.
Digitalization is primarily a process (and a continual one), but it is also a state, and there
can be different levels of digitalization. At first, digitalization efforts are typically ad hoc and
disjointed. Next, some enterprises will execute increasingly enterprise-wide digitalization
and become committed to it. This is an inflection point at which it is possible to accelerate
up the curve. Businesses become more successful at building the foundations and capabilities
for enterprise digital leadership. LEGO’s digitalization moves and the new ways of thinking
about enterprise-wide digitalization indicate that the company is beyond the inflection point
and has been building those capabilities, and is climbing the curve to increasingly higher levels
of enterprise digital leadership.
The LEGO case shows that it is favorably poised for digital leadership. It is clear that the
company, from the CEO and top management team downwards, has a deep commitment
to enterprise-wide digitalization, and there are many examples that indicate its capabilities
for digital leadership have been enhanced. One is the development of the new separate (but
coupled) engagement platform. The design of this platform would not have been possible
without the platform capabilities built over the years that allow LEGO to simultaneously take
advantage of software-as-a-service (SaaS) applications and APIs in a well-structured open
three-layered architecture, while also solidly operating core enterprise platform components
such as Oracle ATG and SAP. It would not have been possible to design a full-governance
framework and operating model for dynamic adaptive development of applications and new
functionalities for the engagement platform without CIT’s workforce capabilities that have
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 189

Increasing Level
of Enterprise
Digital Leadership

Enterprise-Wide
Digitalization

Disjointed
Digitalization Building the Foundations
of Enterprise Digital Leadership

Figure 8.9 The Path to Enterprise Digital Leadership

been developed for digitalization applications over the years. The user experience focus of
the engagement platform would not have been possible without the enterprise-wide digitali-
zation capabilities that have developed over the years.
Some of LEGO’s early digitalization moves were painful and only partly successful, which
caused the company to rethink the approach to building platforms for digitalization and led
to the twin platform model. All the learning that was gained from multiple aspects of enter-
prise-wide digitalization through the years is being built into the new engagement platform
so it can serve the digitalization needs of LEGO’s business ecosystem of customers, partners
and employees in a more agile and resilient way.
LEGO has enhanced its enterprise capabilities through digitalization and has moved fur-
ther along the path toward digital leadership. It is poised to continue this journey and is much
better equipped to handle future digital leadership challenges.
To assist other organizations in their digital leadership journeys, we have constructed
Tables 8.1–8.6, one for each of the six foundational building blocks of digital leader-
ship—business strategy, business models, enterprise platforms, people mindset and
skill set, the corporate IT function and a humanized workplace. Each table describes
the characteristics of the particular building block and the enterprise capabilities needed
for that building block. Based on LEGO’s journey toward digital leadership, the right-
hand column of each table lists some of the possible mechanisms for enhancing enterprise
capability for a particular characteristic. These tables are not comprehensive because, to
avoid overloading readers, we have selected only three distinctive characteristics for each
foundational building block.

Lessons for Digital Leadership

LEGO’s various digitalization moves have resulted in learning throughout the company. The
lessons have resulted in new ways of thinking about the strategic success of digitalization
and the requirements for digital leadership and will be of value for other organizations. We
describe these lessons under three headings: new ways of thinking about enterprise digitaliza-
tion, new ways of thinking about platforms and new ways of thinking about the digital work-
force. In each of these areas, the lessons have changed both the lens through which LEGO
views digitalization, and the vocabulary and culture relating to digitalization. In combination,
these lessons and the new ways of thinking have had a transformational impact at LEGO in
terms of building better foundations for digital leadership and enhancing its capabilities for
digital leadership.
190 o m a r a . e l s aw y e t a l .

Table 8.1 Distinctive Characteristics of Business Strategy for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing Enterprise
Capability
A Fused
Business
The strategy
is executed
Top management
team has the
•• Get the CEO to disseminate
the digitalization vision to all
Strategy that through organizational employees
is Executed enterprise-wide capability to
Digitally digitalization, devise and
rather than implement business •• Ensure top management
articulates its commitment
through a strategy through
business strategy a digitalization to leveraging digitalization
that has an extra mindset. as a critical priority for the
digital layer, ­enterprise
with deep top
management •• Base the organizational
commitment to s­ tructure on visibility and
digitalization. transparency

•• Organize the corporate IT

function so it is close (proxi-
mate) to business units
A Business
Strategy that
The strategy
recognizes that
Top management
recognizes the need
•• Understand and focus on the
enterprise’s core distinctive
Boosts Core digital platforms to closely integrate competence
Distinctive
Competences
and digital
media can pull
digitalization into
strategy rather than
•• Learn how to partner with
other companies that bring
through companies loosely couple it. complementary skills in the
Digitalization into too many digital and media space
adjacent markets
or areas where
they do not
have distinctive
competences.
A Business
Strategy that
The strategy
is based on
The enterprise
has the capability
•• Manage visibility and transpar-
ency across porous boundaries
Leverages the
Ecosystem of
collaboration
with partners
to work well
with different
•• Embed
teams
partners in enterprise

Partners for rather than

Complementary viewing them as
types of partners
across enterprise
•• Work with dynamic partners
that can scale up and down
Digitalization vendors or going boundaries and in quickly in digitalization projects
Competences it alone. different types of
markets.
•• Work with partners with niche
digital expertise when needed
Table 8.2 Distinctive Characteristics of Business Models for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing Enterprise Capability

Business Models for Products Self-explanatory. Business unit teams and partners have •• Launch new products and services with
and Services that Take the organizational and digital platform both physical and digital components
Advantage of both the capability to design, modify and assess •• Launch initiatives with partners that bring
Physical and Digital World as digital business models and hybrid special technology or media expertise
Appropriate business models on all their dimensions
(value proposition, interface, platform,
partnering processes, revenue sharing).
Business Models for Products The business model recognizes the The enterprise has the capability •• Use crowdsourcing for new product or
and Services that Co-Create strategic value of leveraging partners to manage porous boundaries with service design ideas
Value with Customers and and customers in digital business customers and partners. •• Launch online community groups
Communities ecosystems with high connectivity. •• Move customers up the affinity pyramid
to increase engagement
•• Launch omnichannel marketing initiatives
Launch new products and services with
•• ecosystem partners
Business Models that Assess The business model encourages The enterprise and corporate IT has Use social media for business applications
the capability to harness consumer-
SMAC Technologies through a the use of social media for business
•• Launch mobile apps enterprise func-
discovery, mobile apps for consumer grade technologies within enterprise
Digitalization Value Lens
•• tions consistent withfor“what you see is
enterprise applications, analytics applications and business units. what you need”
for insight and cloud services for •• Develop analytics competency centers
reducing complexity. within business units for micromarketing
•• Experiment with multiple cloud provid-
ers and SaaS applications
Table 8.3 Distinctive Characteristics of Enterprise Platforms for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing Enterprise

Capability
A Rock Solid Enterprise Platform A carefully specified, designed and Capability of corporate IT to develop: •• Enhance core enterprise platform
that is Consumer-grade-friendly tested enterprise platform, often Applications using the team capabilities and keep them
to Employees based on ERP systems. Digitalization, ••
plan-build-run paradigm. ­in-house
however, requires consumer-grade Consumer-grade apps within the •• Launch mobile apps in enterprise
applications that help make the ••
enterprise platform environment. platform environment
enterprise more efficient and spread •• Work with external partners only
digitalization more easily. on non-essential enterprise tasks
An Engagement Platform that A platform that enables dynamic digital Capability of corporate IT to: •• Use digitalization requests from cus-
Responds Very Quickly to interaction with customers and partners Undertake agile development. tomers, partners and business units
Dynamic Demands for New in the ecosystem and that allows rapidly ••
Deliver “good enough” solutions and to enhance the ability to deliver
Functionalities changing functionalities to be added ••
iterate. •• Develop orientation programs
quickly. With such a platform the order Maintain 24/7 availability even (inspired, for example, by SMAC
of business priorities changes to time, ••
when changes are made. technologies) to progress the
reliability, quality and cost. Operate continuously in beta mode. engagement platform concept
••
A Loose-Tight Coupling of The enterprise and engagement Capability of corporate IT to: •• Use social media for business
Enterprise and Engagement platforms are architected so they can be Be ambidextrous and have the dual ­applications
Platforms that Place a High simultaneously managed yet give high ••
mindset needed to manage both •• Launch mobile apps for enterprise
Priority on User Experience priority for the user experience needed platforms simultaneously. Create functions consistent with “what you
for digitalization. strong governance frameworks see is what you need”
and operating models for both •• Develop analytics competency
­platforms. ­centers within business units for
micromarketing
•• Experiment with multiple cloud
providers and SaaS applications
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 193

Table 8.4 Distinctive Characteristics of People Mindset and Skill Set for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing

Enterprise Capability
An
Experimenting
Propensity of
individuals and
Capability to manage
transparently and
•• Carry out experiments
and prototypes
and Iterating-to-
Success Mindset
groups to “act
their way into new
accept failures. •• Train employees to
accept failures and have
Capability to
ways of thinking” take risks on new mechanisms for sharing
and to iterate to initiatives. and learning from them
success through
experimenting, Capability to operate
•• Encourage a culture
of collaboration and
failing and trying continuously in beta experimentation
mode.
again. •• Encourage and deploy
flat hierarchies, where
decision authority is
delegated
Digital Generalist
and Collaboration
People with the
skillset to move
Ability to move
people between
•• Rotate people through
business units and jobs
Skill Sets that
can Be Deployed
between tasks and
jobs across business
business units. •• Integrate diverse
employees, and part-
Ability of the
across Porous units rather than HR department ners, through shared
Boundaries rigid technical to have fluid job purpose and meaning
specialists who just
want to work in
specifications. •• Provide opportuni-
ties for employees to
corporate IT. constantly develop new
skills and seek new
opportunities
The Mindset
and Skills that
People with the
flexibility to meet
Same as above. •• Be prepared to “give
up” a good employee
Make People challenges and in your business unit
Comfortable with opportunities as they when there is a critical
Changing Tasks arise, and with an need elsewhere in the
and Assignments external focus. enterprise
Quickly and
Flexibly

New Ways of Thinking about Enterprise Digitalization

Lesson 1. Execute Business Strategy Digitally. In late June 2015, a few days before
most Danes go on their annual July summer holiday, Jørgen Vig Knudstorp, LEGO’s CEO,
posted an internal company blog to all employees wishing them a great summer, with the
subject line “No more digital strategy—executing strategy digitally.” What he meant was
that there was no longer a separate digital strategy that was aligned with business strategy,
but that the corporate business strategy, itself was executed through digitalization. He used
several examples to illustrate LEGO’s new way of thinking. He likened it to the differ-
ence between an established taxi company’s cab-hailing app and Uber, where digitalization
has transformed the entire business model and the corporate strategy. He also likened it to
designing an e-book with interactivity and personalization and other unique digitally ena-
bled features that cannot be compared to anything that was available in hard copy form. His
words from the blog say it best: “We need to bring the digital technology to bear in a very
Table 8.5 Distinctive Characteristics of the Corporate IT Function for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing Enterprise Capability

A Corporate IT Function The IT organization is a solution- Corporate IT function has the •• Restructure the IT organization to improve
that is Meshed Closely with taker, partner and platform capability to collaborate closely its proximity to business units and the
Business Units and Partners, integrator. It needs to mesh well with multiple functional areas and e­ nterprise at all levels to increase the level
and is Close to the Business with business units and external different business units. It also has of collaboration, mutual understanding and
on Multiple Proximity partners from the ecosystem. It the capability to collaborate closely ­visibility of the IT function
Dimensions needs to understand the multiple and work with many changing agile •• Assign a CTO to manage the plan-build-run
dimensions of proximity and partners that are comfortable with way of organizing IT
operationalize them for its own not having clearly defined work •• Promote an “Enterprise first, IT Second”
cultural context. packages. mentality
•• Embed partners in corporate IT teams
A Corporate IT Function Digital officers in business units Same as above. •• Appoint digital officers in the business units
thatDistributes the work closely with corporate IT. •• Emphasize communication and knowledge
Ownership of Digital Responsibility for digital innovation sharing about digital solutions
Innovation throughout the is thus distributed, not centralized •• Practice shared-solution finding while
Enterprise with a chief digital officer. ­realizing that a very rapid and agile response
is needed
A CIO Who is Equally The CIO spends time focusing on The enterprise has the capability •• Interact and collaborate frequently with top
Comfortable Running enterprise-wide digitalization and for transparency and information management team
Corporate IT and inspires the corporate IT workforce sharing at the top management level. •• Evangelize the digitalization message and
Overseeing Digitalization to have an outside-in mentality. He It also has the capability to build a ­philosophy to the CEO and board
in the Enterprise or she will also need to drive ideas corporate IT platform that takes an •• Educate corporate IT employees
for new enterprise platforms. enterprise-wide view. •• on digitalization philosophies
•• Create a strategic business development
function within corporate IT
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 195

Table 8.6 Distinctive Characteristics of a Humanized Workplace for Digital Leadership

Characteristic Description Enterprise Capability Mechanisms for Enhancing

Enterprise Capability
A Workplace
that Offers Easy
The workplace
provides employees
Ability of corporate
IT to work with
•• Provide user-friendly
enterprise applications/
and Accessible with personalized, employees to apps for the workplace
Digital
Experiences
mobile and
consumer-grade
co-create (develop,
test and build)
•• Develop applications/
apps that are personalized
digital experiences personalized for employee tasks
(including on
the enterprise
consumer-grade
mobile apps.
•• Implement a “bring your
own device” policy
platform). These
experiences provide
consistency in
private and business
use of technology
and user interfaces.
A Workplace
that Encourages
The workplace
provides digital
Same as above. •• Launch platforms for col-
laboration and knowledge
and Prioritizes savvy employees, sharing
Ubiquitous
Learning and
who require a
higher purpose
•• Practice knowledge shar-
ing and open information
Knowledge for their work, exchange
Sharing with continual
opportunities to
•• Engage employees in
enterprise-wide digitaliza-
develop themselves tion events
and learn.
A Workplace
that Thrives on
The workplace
accommodates
Capability of HR
and the enterprise
•• Allow employees to
decide how and when to
Location and employees’ different to empathize work
Time Flexibility needs and priorities
for working hours
with employees’
lives, families
•• Invest in digital platform
capabilities for remote
and where to work. and personal work
The born digital
generation’s desired
preferences while
still preserving
•• Provided 24/7 technology
support services
mode is “working
in the moment of
productivity. •• Make information avail-
able wherever employees
need” rather than are, via multiple and
“working when mobile devices
requested.”

f­undamental and business model changing way, it is not a layer or a way of distributing con-
tent—it is the thing itself.” In that summer send-off message, the CEO was telling the entire
company what was now the new way of thinking about digitalization at the top management
level. LEGO has recognized that digital leadership entails communicating a clear vision from
the top and a true commitment to execution.
196 o m a r a . e l s aw y e t a l .

Lesson 2. Use Digitalization to Bolster Business Strategy around Your Core

Distinctive Competence. Digitalization has been one LEGO’s four strategic priorities
since 2009, resulting in a continuously increasing percentage of hybrid products that com-
bine physical and digital play, and many partnerships with companies in the media and digi-
tal industries. However, despite all the digitalization moves, LEGO has stayed focused on
bricks—its core distinctive competence. LEGO has learned the lessons from its early forays
into too many adjacent markets and has learned to keep the core business strategy focused
on the brick while leveraging digitalization. Organization’s should not be seduced by Apple’s
success in moving into adjacent markets through digital platforms as it moved from comput-
ers to music to mobile phones and more. In all these moves, Apple has transferred its distinc-
tive competencies in software development, hardware design, user-friendly interfaces and
supply chain management. For most organizations that is not the case, and they need to be
very careful that digitalization neither deflects nor diffuses their core business strategy away
from their core distinctive competencies. All C-level executives (including CIOs) need to be
acutely aware of that as they co-drive digitalization demands from their companies and their
business ecosystems.
Lesson 3. Position the Corporate IT Function Close to the Business to Enable
Responsive Digitalization. The LEGO Group restructured its CIT organization for busi-
ness responsiveness, with more IT people located in the major business hubs. However, it
learned that co-location is one of many proximity dimensions. There is also a collaboration
proximity dimension, and CIT learned that joint collaboration for solution finding with the
business units is much more effective than the “plan-build-run” requirements-focused sys-
tems development model used for enterprise platforms. Then there is the business area prox-
imity, where each business area has an associated CIT unit with a CIO who directly engages
with and intimately understands that area’s issues. There is also cultural proximity; at LEGO,
the strong corporate culture precedes and trumps the IT culture. To achieve responsive digi-
talization in a dynamic business environment, organizations need to understand the multiple
dimensions of proximity and how best to operationalize them in their own context. Effective
digitalization requires positioning corporate IT close to the business on all these proximity
dimensions.
Lesson 4. Create Multiple Digital Officers to Distribute Digital Innovation
across the Enterprise. LEGO’s CIT learned that creating digital officers in each business
area is a much more effective way of orchestrating digital innovation. This arrangement has
resulted in more effective digitalization because the business areas are more proactive solu-
tion-providers, and the role of the IT function is more of a solution-taker, partner and global
platform integrator LEGO’s approach is quite different from the emerging wisdom of having
a CDO in addition to the CIO and very different from the idea that increased digitalization
and the rise of CDOs will mean there is less need for CIOs. In the case of LEGO, there is one
Executive CIO and multiple digital officers throughout the business areas. We believe that
creating multiple DOs is applicable to all industries and is a prerequisite for effective digital
leadership.
Lesson 5. Leverage the Ecosystem of Partners for Complementary
Digitalization Competencies. LEGO learned that it is best to leverage the ecosystem
of partners for complementary digitalization competencies rather than get involved in an
area that deflects from the company’s core skills and competencies. In a dynamic digitaliza-
tion context, leveraging partners with complementary competencies is not only helpful—it
is crucial. It is also an effective way of minimizing organizational complexity because it can
be hard to establish a critical mass of competencies within some narrow areas of functional
expertise.
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 197

Lesson 6. Iterate to Success in Digitalization. In a company-wide blog, LEGO’s

CEO emphasized that effective digitalization and digital leadership require a different mind-
set that nurtures the capability to experiment, learn and iterate:

Working digitally is also a learning curve for us. It takes an ability to focus on
getting the minimum loveable experience out there. To live in beta mode, to
involve users in making it better. To constantly be behind in upgrading plat-
forms and systems because they move so fast …

This new way of thinking comes from the learning gained from the many iterations of
LEGO’s digitalization moves—where there have been failures as well as successes. Digital
leadership means embedding this way of thinking across the enterprise. Experimenting and
iterating is the new normal for designing processes and platform developments.

New Ways of Thinking about Digital Platforms

Lesson 7. Recognize that User Experience Drives IT Architecture, Not Vice
Versa. This lesson derives from the efforts LEGO made in bolstering the enterprise platform
to accommodate the significantly growing demands for new applications and functionalities
arising from the company’s product and marketing digitalization moves. It also results from
LEGO’s realization that there was a need for a complementary engagement platform whose
architecture was more suited to digital interaction and that would provide a more “wow”
user experience and allow functionality to be added quickly. Through its enterprise platform,
LEGO CIT had for years provided employees with classic SAP ERP interfaces but realized it
could increase end-user and process efficiency by offering consumer-grade applications. User
experience is a fundamental part of IT solutions.
Because the engagement platform will focus on the external digital audience, user experi-
ence is a fundamental part of IT solutions on this platform. In the past, LEGO first designed
the enterprise IT architecture for integrity and then added the user interface and user experi-
ence on top of that—living with whatever constraints that provided for user experience. For
dynamic digitalization where the user experience is critical and key, that approach no longer
works. Now, LEGO needs to first think through what the user experience requirements are
and then build an IT architecture that is suited to that.
Lesson 8. Recognize that Dynamic Engagement Platforms for Digitalization
Invert Business Priorities and Generate a New Level of Complexity. LEGO’s CIT
organization learned that digitalization moves invert the typical business priorities for tradi-
tional enterprise platforms (cost then quality then reliability then time). Digitalization requires
a dynamic engagement platform where the priorities are time then reliability then quality then
cost. This change in priorities requires IT organizations to adopt an “ambidextrous” mindset
where they can simultaneously manage both types of platforms, which generates a new level
of technical and managerial complexity for corporate IT departments. They must provide
a flexible and open engagement platform while also reducing complexity and maintaining
security in the enterprise platform. The explosion of demand for new functionalities result-
ing from increased digitalization will further increase complexity in terms of scale and scope.
Managing the ambidextrous nature of IT requirements and the growing complexity is a top
priority for corporate IT leaders when designing and managing dynamic digital platforms.
Lesson 9. Collaborate with Technology Vendor Partners to Create Dynamic
Digital Platforms. LEGO’s CIT organization has had to collaborate and partner with
many new technology vendors to deal with all the requirements of the various product and
198 o m a r a . e l s aw y e t a l .

marketing digitalization moves and with the dynamic changes needed in platform function-
alities. It has learned that there is a need for technology vendors that work as partners, are
agile and are comfortable working without clearly defined work packages. CIT moved from
working with a few big partners to working with many diverse partners, some of which are
niche players in their specific areas, and it learned how to manage the relationship with those
types as well. CIT also realized that as vendors become true partners, they are increasingly
embedded in CIT teams, and boundaries become more blurred. Thus, any company that is
embarking on digitalization in dynamic business environments will need to think through
how to manage its relationships and boundaries with new types of vendor partners.
Lesson 10. View SMAC Technologies Through a Digitalization Value Lens.
The term SMAC (social, mobile, analytics, cloud) has been used to concisely express the four
key technologies that are driving digital innovation—i.e., digitalization. LEGO learned from
its digitalization moves the importance of social media in business and their value in discover-
ing customers’ concerns and needs. It learned from changing employee expectations and the
consumerization of enterprise IT that people expect the same type of user experience in their
enterprise applications as they get from mobile apps. It learned the importance of analytics/
big data in generating valuable insights from micromarketing and increased digital engage-
ment. It learned the value of the cloud in delivering new applications easily from using SaaS
technologies for many corporate applications and that cloud computing creates much value
as a “complexity reliever” rather than just as a cost saver. Thus, viewing SMAC technologies
through a digitalization value lens provides a different perspective: social media in business
creates value from discovering things; mobile technologies create value through using con-
venient apps; analytics creates value through real-time insights and personalization of mar-
keting and products; and cloud services create value through reducing complexity. Assessing
SMAC technologies through a value lens will lead to more astute use of the technologies for
effective digitalization.

New Ways of Thinking about the Digital Workforce

Lesson 11. Hire Digital Generalists Rather than Just Technical Specialists.
An often repeated mantra is “Hire for a Career not a Job.” LEGO’s CIT organization has
recruited more technical staff to meet the company’s new digitalization needs and learned
that it is best to hire flexible, dynamic and adaptable employees who can cope with task and
position changes and can work on digitalization anywhere in the enterprise. Any company
seeking to develop digital leadership capabilities and trying to boost its digital workforce
should hire technical people for a digitalization career in the company rather than for a spe-
cialized job in IT. To augment their enterprises’ capabilities for digital leadership, CIOs need
to rethink their hiring criteria for corporate IT.
Lesson 12. Create an Attractive Workplace for Digitally Savvy People.
LEGO’s culture has always nurtured playfulness at work and creating a fun, collaborative
environment. It has also realized that the new born digital generation has different work-
place expectations in terms of flexible working hours and mobility, information sharing and
consumer-grade technology capabilities and access. LEGO’s CIT organization has therefore
deliberately set out to create a more humanized workplace with more interesting and mean-
ingful work. As the extent of digitalization increases and more born digital employees enter
the workforce, the need to provide an attractive workplace will become more critical.
Lesson 13. Improve and Monitor the Digital Quotient23 of the Workforce. As
a legacy bricks-and-mortar company, LEGO has a mix of longstanding traditional employees
and an increasing number of born digital millennials. As well as digital savvy employees, the
digitalization culture requires adaptable and resilient people with the ability to thrive in a
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 199

fast-changing environment. With such a heterogeneous workforce, LEGO has realized that
not everyone can be at the same level of digitalization readiness and has accepted that some
employees will never achieve a high level of readiness. Even so, these employees can still
have valuable roles in digitalization moves. Companies seeking to develop their workforce
for digitalization should measure their digital quotient, seek ways to improve it and monitor
it over time. There are various emerging methods and instruments for measuring an organi-
zation’s digital quotient. These tools have culture and workforce components.

Concluding Comments

This article has described key aspects of LEGO’s digitalization experiences and the lessons
learned. The LEGO case indicates that digitalization and digital leadership will require six
foundational building blocks: a different kind of business strategy, different kinds of busi-
ness models, a different kind of humanized digital workplace, a different kind of enterprise
platform integration, a different kind of people mindset and skill set, and a different kind of
corporate IT function. The case has provided a better understanding of the distinctive charac-
teristics of each of these foundations of digital leadership and how enterprise capabilities for
digital leadership can be developed.
We believe that digital leadership is a critical issue for organizations around the world in
both developed and emerging economies, and in all industries, and for traditional bricks-and-
mortar companies as well as born digital companies. The insights from the LEGO case will
help CIOs and CXOs in other organizations aspiring to become digital leaders. Our aim has
been to present the foundations and capabilities required for digital leadership in way that
makes it simpler for others to operationalize them and take advantage of them. Achieving
digital leadership will, however, require stamina to stay the course because effective digitali-
zation is a long-term effort and involves deep organizational change.
We believe that LEGO’s digitalization experiences and learning helps to advance under-
standing of how to more effectively lay the foundations and build the capabilities needed for
digital leadership. We also hope that this article will stimulate more researchers to develop
theories of digital leadership—theories that can be applied in practice so that digitalization
can make significant business impacts.
Finally, in the spirit of the LEGO experiential learning philosophy, the collaboration we
used in writing this article has enabled us to act our way into a new way of thinking. In par-
ticular, we found the collaboration between academics and practitioners both energizing and
useful for us all. We believe this collaboration has helped us to develop a better understand-
ing of digital leadership. The energizing song lyric from the LEGO movie continues to play in
our heads: “Everything is awesome. Everything is cool when you’re part of a team!”24

Notes
1 Dorner, K. and Edelman, D. “What ‘digital’ really means,” McKinsey & Company, July 2015, avail-
able at http://www.mckinsey. com/industries/high-tech/our-insights/what-digital-really-means.
2 Castells, M. “The Rise of the Network Society,” Wiley-Blackwell, 2009.
3 http://www.gartner.com/technology/cio/cioagenda.jsp.
4 Kane, G. C., Palmer, D., Phillips, A. N. and Kiron, D. “Is Your Business Ready for a Digital Future,”
MIT Sloan Management Review, Summer 2015.
5 There are different levels of ambition in defining digitalization. Most commonly, it is viewed as the
process of transforming the structure, processes, people skills and culture of the entire organiza-
tion so it can use digital technologies to create and offer products, services and experiences that
200 o m a r a . e l s aw y e t a l .

c­ ustomers, employees and partners find valuable. At LEGO, the definition is more ambitious and
goes beyond enhancing current processes and services, and is about doing new things through digi-
talization that could not be done before.
6 Bennis, W. On Becoming a Leader, Addison-Wesley, 1989.
7 Iansiti, M. and Levien, R. “Strategy as Ecology,” Harvard Business Review, March 2004.
8 El Sawy, O. A. “The 3 Faces of IS Identity: Connection, Immersion, and Fusion,” Communications of the
AIS (12), November 2003.
9 Bharadwaj, A., El Sawy, O. A., Pavlou, P. and Venkatraman, N. “Digital Business Strategy: Towards a
Next Generation of Insights,” MIS Quarterly, June 2013.
10 Keen, P. G.W. andWilliams, R. O. The Value Path: Embedding Innovation in Everyday Business When the
Customer Makes the Rules,” Business Futures Press, 2012.
11 El Sawy, O. A. and Pereira, F. Business Modeling in the Dynamic Digital Space, Springer Books, 2012.
12 Simons, P. The Age of the Platform, Motion Publishing, 2011.
13 Vitalari, N. and Shaughnessy, H. The Elastic Enterprise, Telemachus Press, 2012.
14 For information on the “humanized” workplace, see “How to Humanize your Workplace™” on
http://www.lynntaylorconsulting.com/blog/?p=32
15 http://www.lego.com/en-us/aboutus/lego-group/management.
16 http://www.lego.com/da-dk/careers/our-culture.
17 See, for example, “LEGO CEO Jørgen Vig Knudstorp on leading through survival and growth,” Har-
vard Business Review, January 2009; Robertson, D. and Breen, B. Brick by Brick: How LEGO Rewrote the
Rules of Innovation and Conquered the Global Toy Industry, Crown Business Books, 2013; and We Lost the
Focus on the Bricks, available at http://www.internationaltradenews.com/interviews/we-lost-the-
focus-on-the-bricks
18 Antorini,Y., Muniz, A. and Askildsen, T. “Collaborating With Customer Communities: Lessons from
the LEGO Group, MIT Sloan Management Review, Spring 2012.
19 Some of this history up to 2004 is in Rikhardsson, P., Møller, C. and Kræmmergaard, P. ERP: Danish
Experiences with Implementation and Use, in Danish, Børsens Forlag, 2004.
20 LEGO has outsourced application maintenance for less business-facing tasks to HCL in India. As
a strategic partner to LEGO, HCL operates the LEGO-specific Offshore Delivery Center with
approximately 200 full-time external consultants.
21 See, for example, Barr, S. What it takes to build your Digital Quotient, McKinsey & Company, June 2015,
available at www.mckinsey.com/insights/organization/what-it-takes-to-build-your-digital-quotient.
22 “LEGO overhaler Microsoft: Sadan indfanger vi Danmarks bedste it-folk [LEGO overtakes Micro-
soft: How we capture Denmark’s best IT people],” ComputerworldDenmark, available at http://www-
computerworld.dk/art/231176/lego-overhaler-microsoft-saadan-indfanger-vi-danmarks-bedste-
it-folk#Re0jq1AFYWqlwwas.99.
23 A company’s digital quotient is a simple metric for its digital maturity. For more information, see
Catlin, T., Scanlan, J. and Wilmott, P. “Raising Your Digital Quotient,” McKinsey Quarterly, June 2015.
24 https://www.youtube.com/watch?v=StTqXEQ2l-Y; this rendering has been viewed over 45 mil-
lion times.

Questions for Discussion

1 Have companies go designated digital leadership? Who manages organizations’ digital

transformation?
2 How do companies take culture, economy and society and talent development into
account in their digital transformation? Are these considered important?
3 Is digital leadership a new form of leadership requiring new capabilities and founda-
tions? How would these skills and capabilities get acquired?
4 What is the importance of a business ecosystem?
5 Evaluate the role of CDOs in digital transformation. Does the success of digital trans-
formation depend on the CDO?
6 The LEGO Group example outlines three strands of digital transformation: prod-
uct, marketing and enterprise. Are these equally important? Suggest other important
strands for digitalization. Explain and provide examples.
 b u i l d i n g d i g i t a l c a pa b i l i t i e s 201

Further Reading
Leidner, D. E., Mackay, J. M. (2007). How incoming CIOs transition into their new jobs. MIS Quarterly
Executive, 6(1): 17–28.
Preston, D. S., Leidner, D. E., Chen, D. (2008). CIO leadership profiles: Implications of matching CIO
authority and leadership capability on IT impact. MIS Quarterly Executive, 7(2): 57–68.
Chapter 9

Anna Singh and Thomas Hess

HOW CHIEF DIGITAL OFFICERS

PROMOTE THE DIGITAL
TRANSFORMATION OF THEIR
COMPANIES

THE EMERGENCE OF CHIEF DIGITAL OFFICERS

E mbrac in g t h e o p p o rt u ni t i e s p r e s e nt e d by new digital

technologies is one of the most urgent challenges companies face today. Yet, 63% of
executives and managers find that “the pace of technology change in their organization is too slow.”1
Companies obviously need to address this issue.
Until recently, chief information officers (CIOs) were mainly held responsible for digital
innovation. For several years, companies have expected their CIOs to extend their roles
from pure technologists to business strategists. This means they need “to spend less time manag-
ing IT services and more time delivering broader business value. If they don’t, CEOs may appoint other
executives to drive that value.”2 These new responsibilities have been placing pressures on CIOs,
and many have had difficulties in embracing them.3
To identify the reasons for these difficulties, it’s necessary to examine the nature and
purpose of digital transformation. A company undergoing a digital transformation uses new
digital technologies such as social media, mobile access, analytics or embedded devices to
enable major business improvements like enhancing customer experience, streamlining
operations or creating new business models.4 The term “transformation” (as opposed to
“change,” for instance) expresses the comprehensiveness of the actions that need to be taken
when organizations are faced with these new technologies. Thus, a digital transformation
typically involves a company-wide digital (transformation) strategy,5 which goes beyond
functional thinking and holistically addresses the opportunities and risks that originate from
digital technologies. A digital transformation strategy guides the organization in its journey
toward being digitally transformed.6
The responsibilities associated with digital transformation have such a high level of com-
plexity that it is immensely challenging for the CEO or just one senior executive to manage
 chief digital officers 203

them in addition to his or her original responsibilities. For example, the original responsibili-
ties of a CIO are to manage the operation of the IT infrastructure and the evolution of plat-
forms. Digital transformation, however, goes beyond merely digitizing resources and results
in value and revenues being created from digital assets.7 Moreover, new digital technologies
“demand different mindsets and skill sets than previous waves of transformative technology,”8 which
might be another reason why CIOs are often not necessarily best equipped to take charge of
digital transformation.
Increasingly, companies are establishing an additional position at top management level:
the chief digital officer (CDO). The CDO role can be centralized at the group level or decen-
tralized at the subsidiary level. Regardless of positioning, CDOs are employed to make digi-
tal transformation a strategic priority in their companies. MTV Networks was the first to hire
a CDO, back in 2005. Since then, the number of CDOs has roughly doubled each year. The
CDO is one of the fastest-growing C-level positions, and although 88% of CDOs have been
hired in the U.S., the role is a global phenomenon.9
But what exactly do CDOs do, and how do they differ from their CxO colleagues? And is
the CDO a temporary role that will disappear in the future? Although many CDO positions
have already been established, there is still confusion about what exactly CDOs are expected
to achieve and what their main responsibilities are. The purpose of this article is to provide
answers to these questions. Companies need to understand the roles a CDO can play and
the skills they should look for in a CDO. Based on six in-depth case studies,10 we identify
the skills and characteristics a CDO should have and offer insights into how the CDO role is
performed.

What Chief Digital Officers Are and What They Are Not

To understand the nature and role of CDO positions, it is necessary to distinguish the CDO
from adjacent C-level executive positions that might at first glance have similar responsibil-
ities—i.e., the CIO, chief data officer, chief innovation officer and chief strategy officer.
The most important distinction is between CDOs and CIOs. Unlike CIOs, who are the
most senior IT executives in an organization,11 CDOs have no functional IT responsibility.
Most often, they have no profit and loss responsibility, and their overall corporate perspec-
tive is broader than CIOs’. Even if a firm’s CIO does deliver digital business innovation and
broader strategic business value, the CDO additionally focuses on fostering cross-functional
collaboration, mobilizing the whole company across hierarchy levels and stimulating cor-
porate action to digitally transform the whole company. While the CIO takes the role of
the strategic IT specialist, the CDO is the company’s digital transformation specialist. This is the
distinguishing factor between CDOs and CIOs: transformation is at the core of the CDO’s
role, not a responsibility in addition to others.
CDOs also differ from chief data officers, who are their organizations’ data specialists,
focusing on data management and data analytics. Chief data officers put data on the business
agenda and, instead of treating data merely as a by-product of running the business, they
devise strategies for exploiting the business’s data.12 Chief data officers thus focus on just
one organizational capability within the digital realm: big data. Although big data obviously
also plays a role in the work of CDOs, the scope of the CDO role is much broader and not
confined to this one specific area of digital transformation.
Even though CDOs’ responsibilities include digital innovation, they do not replace
chief innovation officers, who are the corporate innovation specialists and who lead an organi-
zation’s broader innovation efforts.13 Chief innovation officers create an environment that
204 anna singh and thomas hess

fosters innovation and provides the organizational structure to support the development
of new products and services. Their role involves exploiting ideas from both internal and
external sources, for instance in the form of crowdsourcing and cross-company collabora-
tion. As such, the underlying goals of CDOs and chief innovation officers are different.
The latter redefine technologies, company structures and day-to-day practices, without
having a dedicated digital focus, while CDOs focus on the digital overhaul of the whole
company.
Obviously, digital transformation has strategic importance for a company. Typically,
a company’s chief strategy officer (CSO)14 focuses on strategic issues and acts as the
corporate strategist. But the CSO doesn’t have a specific focus on digital transformation.
A CSO typically lacks both the specialized knowledge about digital business models
and the experience to handle projects in this field. These tasks are the responsibility of
the CDO.

Definition of the CDO Role

To clearly distinguish CDOs from these other C-level executives, we offer the following
description of the CDO role: The CDO orchestrates the digital transformation of a com-
pany. The CDO role thus includes supporting top management in formulating and executing
a dedicated digital transformation strategy.15 By stimulating and leading corporate action,
the CDO embraces the full spectrum of opportunities presented by new digital technologies
and thus aims to bring the company to the forefront of the digital evolution taking place.
Internally, the CDO fosters cross-functional collaboration and mobilizes the whole company
across hierarchy levels. It is important to recognize that CDOs have a wider role than heads
of individual digital business units; CDOs assume cross-department authority for digital ini-
tiatives and aim to transform the company as a whole.
Table 9.1 summarizes the key responsibilities, strategic perspectives and strategic roles of
CDOs and the related C-level positions. Keeping the differences in mind is important for a
full understanding of what the CDO role entails.

Table 9.1 Comparison of CDO and Other CxO Positions

Chief Digital Officer Chief Information Chief Data Chief Innovation Chief Strategy
Officer Officer Officer Officer
Key
Responsibilities
•• Digital mobili- •• Strategic IT •• Data man- •• Structured •• Management
zation of whole deployment agement corporate of strategy
company •• IT support •• lytics
Data ana- innovation process
•• digital initia-
Initiation of •• focus on •• Strategy
No specific
execution
tives digital ini-
•• Companywide
collaboration
tiatives

Strategic Digital IT Strategy Data Strategy Innovation Corporate

Perspective Transformation Strategy Strategy
Strategy
Specialist Role Digital Strategic IT Data Specialist Corporate Corporate
Transformation Specialist Innovation Strategist
Specialist Specialist
 chief digital officers 205

Table 9.2 Overview of the Six Case Organizations

Case Industry Annual Employees Positioning of Most Senior Chief Strategy Officer
Revenues(€) per the CDO IT Executive
Year(a)
1 Retail 20–30bn. 60–70K Group CIO •• Oct. 2015 (CDO)
•• Nov. 2015 (CIO)
2 Tourism 1–5bn. 1–5K Subsidiary CIO •• March 2014 (CDO)
3 Education 500mn–1bn 1–5K Subsidiary CIO •• April 2014 (CDO)
4 Market
Research
100–250mn 500–1,000 Subsidiary CIO •• Nov. 2015
(CDO) Dec.
2015 (CTO) Jan.
2016 (Managing
Director)
5 Financial
Services
100–250mn 500–1,000 Subsidiary Head of IT •• Dec. 2015 (CDO)
Dec. 2015 (Head
of IT)
6 Publishing 1–100mn 100–500 Group CDO (b) •• Jan. 2016 (CDO)

(a) The wide range of annual revenues and employees is deliberate to preserve the anonymity of the case
organizations.
(b) In case 6, the same person holds both the CDO and CIO positions.

Six Cases Illustrating the CDO Role

In the following sections, we describe the experiences of six companies that employ a CDO to
illustrate how CDOs perform their roles in a range of industries (retail, tourism, education, mar-
ket research, financial services and publishing). Table 9.2 provides an overview of the six cases.

Case 1: A CDO in the Retail Industry

With turnover in the range of €20 to €30 billion16, with 60,000 to 70,000 employees, Case 1
is the largest retailer in Europe within its business sector. The company operates in 15 coun-
tries, and the CDO, along with the CIO, is employed at corporate group level.
Scope of the Digital Transformation. The digital transformation has three major
components:

1 Customer experience enhancement: An omni-channel strategy that involves the creation of

a seamless customer experience across all touch points.
2 Business operations: Focusing on (in the CDO’s words) “efficiency through automation”
to gain more time for enhancing the customer experience.
3 New business opportunities: Monitoring potential business opportunities created through
the use of digital technologies.

Reason for Creating the CDO Role. According to the CDO, he was employed to trans-
form the company toward a “digitally empowered and customer driven” organization. His mandate
is to use state-of-the-art technologies to make the company more efficient and to offer cus-
tomers personalized experiences.
206 anna singh and thomas hess

Positioning of the CDO and CIO. Both the CDO and CIO report directly to the
CEO, who is also personally involved in the digital transformation efforts. The CDO and
CIO participate in the fortnightly strategic board meetings, thus demonstrating the close
working relationships between the CDO, CIO and CEO.
CDO Tasks. The CDO defines the digital strategy and is responsible for digital innova-
tion across the group. He uses new digital technologies to enhance the customer experience
across all customer touch points and fully integrate the offline and online points of sale.
Examples include cross-device online shopping carts and smartphone apps with integrated
state-of-the-art technology, such as location-based services and augmented reality. By equip-
ping the retail stores with tablet PCs, he enables the sales employees to quickly retrieve data
and respond better to customers’ needs.
To continuously keep track of emerging opportunities, the CDO constantly monitors
digital trends and digitally savvy start-up companies. His trial-and-error culture means that
he can try out new developments to see if they are appropriate for adoption. Although the
CDO has a dedicated budget, he has no profit responsibility; such responsibility might hinder
his ability to innovate.
The CDO works closely with operational colleagues, develops ideas in cooperation with
the company’s subsidiaries and conducts pilot projects. If proof-of-concepts are successful,
they are rolled out across other subsidiaries. As part of his role in fostering company-wide
collaboration and the exchange of ideas, the CDO initiated an annual Digital Campus for the
group and all its subsidiaries. At these events, successful digital initiatives are presented to
participants and they can experience new technologies hands-on.
Cooperation with the CIO. The CDO and CIO work closely together. In our inter-
views, both confirmed that the CDO is mainly responsible for the conception and planning
of the digital transformation, whereas the CIO is mainly responsible for implementing the
corresponding IT solutions.

Case 2: A CDO in the Tourism Industry

This company is a national subsidiary of one of the largest global travel companies. The sub-
sidiary has a turnover in the range of €1 to €5 billion, with 1,000 to 5,000 employees, and
has its own CIO. The CDO we interviewed has counterparts in other group subsidiaries.
Scope of the Digital Transformation. Originally, the company had a very traditional
business model: it assembled travel packages, which were then sold via travel agencies. It did
not have any direct interaction with customers. Today, however, growth in the travel business
is driven by pure-play online platforms. When the company decided to employ a CDO, its
online market share was only 4%. Although it had a subsidiary that was responsible for all of
its digital business, the digital activities were characterized by a marked silo mentality because
they were decoupled from the core business. The digital transformation now underway will
remove the organizational silos by bundling all digital activities together and transforming the
whole organization to become a more customer-centric, digitally savvy enterprise.
Reason for Creating the CDO Role. A dedicated CDO position was created to pro-
actively drive the company’s digital transformation and be the driving force behind the new
digital initiatives.
Positioning of the CDO and CIO. The CDO and CIO report directly to the subsidi-
ary’s CEO. As the CDO noted, it is critical to her success that the CEO supports her digital
initiatives and that she can collaborate with the CIO, who implements the digital initiatives.
CDO Tasks. The CDO is tasked with creating a “360 degree” customer experience across
all customer touch points and with massively growing the company’s online and mobile
business. The CDO’s main focus is therefore on customer relationship, social media and
 chief digital officers 207

­ ultichannel management. Overall, her job is split 50/50 into digital strategy implemen-
m
tation and management of ongoing business operations. Initially, the CDO’s job consisted
mainly of project-based work. After creating a digital growth strategy, she held many work-
shops, developed a business plan and a road map, and presented her concepts to the decision
makers at the corporate holding company. When implementing the projects and programs,
the CDO needed to mobilize the whole company [the subsidiary], particularly the project
managers who were put in place. A corporate program was created to interlink all stakehold-
ers, particularly decision makers involved in social media, customer relationship manage-
ment, marketing and multichannel projects.
At the time we interviewed the CDO, a new sub-unit responsible specifically for digital
media had already been created. However, the CDO told us that to achieve “one single view
of a customer” and optimize the customer experience, customer data needed to be organized.
Hence, the CDO initiated the creation of a master data management platform. This platform
pools the various data sources and uses insights gained from the pooled data at the various
customer touch points.
Cooperation with the CIO. The subsidiary’s CEO created the CDO and CIO posi-
tions at the same time, recognizing that both are needed to progress the digital transforma-
tion. The CDO develops IT requirements iteratively and in close collaboration with the CIO.
But the CIO has full responsibility for implementing what has been defined.

Case 3: A CDO in the Education Industry

Case 3 is the global operating company of what was originally a traditional publishing house.
It provides students, teachers and institutions with educational content, and has revenues
in the range of €500 million to €1 billion, with 1,000 to 5,000 employees. The company is
currently transforming itself from a pure print publisher to a “modern education company” that
offers sophisticated e-learning courses. The CDO is employed at subsidiary level, while a
CTO is employed at group level.
Scope of the Digital Transformation. While the company’s traditional business
model was based on educational text books, the digital transformation will offer new oppor-
tunities in three areas:

1 Adaptive learning: Without a teacher who delivers course material, personalized online
courses focus on each student’s individual weaknesses in an automated way.
2 Efficacy management: The effectiveness of an online course can be systematically
evaluated because each student’s learning outcomes can be tracked and measured.
Moreover, the company’s marketing and sales executives can use this information to
promote the successes of their users.
3 Data-driven publishing: Because the efficacy of the online courses is directly measured,
the need to rely on improvement suggestions from teachers becomes obsolete. Instead,
decision making is informed purely by data analytics. Should most students of a cohort
fail at certain sections of an online course, product developers can promptly publish
an improved version.

Reason for Creating the CDO Role. The CDO told us that his position was created
to transition the business from a “pure print publisher to a modern education company.” The
primary role of the CDO is therefore to conceive new digital products and drive their
implementation.
Positioning of the CDO and Chief Technology Officer (CTO). The CDO reports
directly to the subsidiary’s CEO, while the CTO role is centralized at the group level.
208 anna singh and thomas hess

CDO Tasks. Initially, the company had no plan for life after printed educational text
books. The CDO therefore created a digital vision for the company, defined a cross-­functional
digital strategy and conceived new digital products.
The CDO sees himself as a strategist rather than a technologist because he focuses primar-
ily on digital product development that is based on current customer needs. He collaborates
closely with development partners, who are potential customers, to better identify current
customer needs and adjust product development accordingly.
However, highly interactive digital products like online courses cannot simply be created
directly from traditional text books, because the interactions and activities involved with
online courses need to be modelled on an IT platform. The CDO therefore initiated the
implementation of the Learning Management System. Teachers are supposed to log on to
this platform, assign tasks to students and track their progress. At the core of this company’s
digital strategy is the combination of digital content and data analytics. Data analytics tech-
niques are used to measure the performance of students and teachers individually and, at an
aggregated level, across classes.
The digital transformation is replacing printed books with sophisticated online courses
as the company’s core offering. The transformation requires product development to be
redefined and expanded because the company now requires employees with completely new
skills and capabilities. Many business functions have been affected by the process of creating
online courses, which is why the CDO became involved in activities across business units and
needed to spread information across the company to convince all decision makers of the need
for digital transformation.
Cooperation with the CTO. Technology platforms are essential for the production
and distribution of the online courses. The CDO collaborates with the corporate group’s
CTO on issues concerning the technology infrastructure, but it is the CTO who is responsi-
ble for implementing the digital initiatives. However, the CDO works closely with software
developers during product implementation.

Case 4: A CDO in the Market Research Industry

Case 4 is a renowned market research and marketing consultancy with revenues in the
range of €100 to €250 million, with 500 to 1,000 employees. The company offers business-
to-­business (B2B) services across industries, and its main customers are corporate market
researchers and marketers. It has both a CDO and a CTO, and is a national subsidiary of one
of the largest research agencies worldwide. Each national subsidiary has its own CDO.
Scope of the Digital Transformation. The digital transformation has two primary
components:

1 Technology-enabled research, which focuses on optimizing customer solutions through

integrating digital technologies. Traditionally, the company focused on the collec-
tion of primary data when conducting its market research, and its main capability
was statistical analyses. With the emergence of data from social media and search
engines, the company is increasingly supplementing, or even replacing, its pri-
mary data collection with data from these new sources. This new kind of data also
enables the company to provide predictive modelling and generate early warning
indicators.
2 Integrated marketing, which is based on new digital touch points, such as social media,
that have been changing the marketing activities of its customers. The company is
also adjusting its marketing consultancy services to take account of these new touch
points.
 chief digital officers 209

Reason for Creating the CDO Role. The CDO was appointed to support and drive
the above-mentioned digital transformation projects throughout the subsidiary and to consult
the customer-facing managers.
Positioning of the CDO and CTO. The CDO and CTO both report directly to the
CEO. They are also members of the company’s highest level strategy board, which focuses
on digital transformation and is the forum where the CDO brings forward his ideas for dis-
cussion and decision taking.
CDO Tasks. To progress the company’s digital journey and to raise awareness, the
CDO regularly informs employees and managers about his current digital initiatives. At the
employee level, he speaks at staff meetings; at the management level, he is involved in leader-
ship town-hall meetings. The CDO initiates new ideas and projects and gives fresh impetus to
the company’s digital transformation journey on an ongoing basis. For instance, he recently
conducted a multinational study with a special focus on marketing and e-commerce to inves-
tigate customers’ perspectives of digital transformation. The insights from this study serve as
a decision making tool and support the company in its consultancy activities.
In the area of technology-enabled research, the CDO addresses strategic questions con-
cerning the use of data from social media and search engines—i.e., how the data can be
incorporated into market research studies to offer true added value for customers. According
to the CDO, “this is a cultural shift, which is at least such a daunting task as the technological shift”
because customers often do not immediately understand the added value of the new solu-
tions.
Cooperation with the CTO. Throughout the digital transformation journey, the CDO
collaborates closely with the company’s CTO. While, according to the CTO, the CDO
“listens in to customer needs and takes these insights into the company,” the CTO is responsible for
implementing the digital projects.

Case 5: A CDO in the Financial Services Industry

Case 5 is the private banking subsidiary of the national branch of a European financial institu-
tion. The subsidiary generates revenues in the range of €100 to €250 million, with 500 to
1,000 employees. This company is at the very early stages of digital transformation and has
appointed a CDO who leads the digital transformation unit jointly with the Head of IT.
Scope of the Digital Transformation. The private banking industry is highly con-
servative, with security and confidentiality being major concerns. The digital transformation
is therefore proceeding with great caution and the company is, according to the CDO, “care-
fully innovative.” As a consequence, the scope of the digital transformation currently focuses
just on changing the internal mindset and introducing basic digital tools and devices.
Reason for Creating the CDO Role. The CDO position was initiated bottom-up by
the now-CDO herself, who has been with the company for several years as an online com-
munication specialist. When she had introduced the company’s first online channels, she
had collaborated closely with the Head of IT. Jointly, they put forward the idea of creating a
Digital Office to take the business in a new direction and proactively drive digital initiatives
throughout the business. Due to this bottom-up approach, however, no specific targets for
digital transformation have, as yet, been set by top management.
Positioning of the CDO and Head of IT. The digital transformation is not yet on
the agenda of the top management team. The Digital Office reports to the communication
department, which, in turn, reports to the CEO. Thus, so far there has been no direct input
from the top management team on the purpose and aims of digital transformation. As a con-
sequence, it is the CDO and the Head of IT who play a focal role in progressing any digital
initiatives brought forward.
210 anna singh and thomas hess

CDO Tasks. The CDO’s current priority is on changing the mindset within the top
management team and among employees before being able to proceed with specific digital
initiatives. In her own words, she tries “to offer new perspectives” and to establish a more
proactive attitude within the company by illustrating the up-coming changes in the market
and putting forward innovative solutions. To get a feel for the opportunities presented by
digital transformation, the CDO conducted interviews with representatives of firms from
different industries that were already at an advanced stage of their digital transformations.
She then collated the insights gained from the survey into a digital strategy for her own
company.
Although operating in a separate unit, the CDO works closely with different stakehold-
ers, particularly with the internal communication department and the customer consultants.
Since the CDO’s main goal is to offer customers a better service through the use of digital
tools, the customer consultants have already been equipped with tablet computers. She also
advises other company subsidiaries on their respective digital strategies.
Cooperation with the Head of IT. The CDO and the Head of IT work closely
together to enable digital transformation. Having expertise in complementary fields, they
distribute their responsibilities accordingly: the Head of IT takes charge of technology, while
the CDO is responsible for communicating the technology benefits across the company.

Case 6: A CDO in the Publishing Industry

This company is an international publishing group with 100 to 500 employees and a focus on
specialist psychological books and trade journals. It also provides testing systems for psycho-
logical diagnostics. The company has revenues in the range of €1 million to €100 million. The
CDO, who is also the CIO, is employed at corporate group level.
Scope of the Digital Transformation. The digital transformation comprises four
strategic initiatives:

1 E-assessment, which focuses on digitizing the company’s psychological testing diagnos-

tics
2 One portal, which bundles together content, databases and interactive products, and
tailors the bundles to customer needs
3 One web, which is aimed at increasing the volume and efficiency of the company’s
e-commerce business
4 One IT, which deals with infrastructure and workplace IT and focuses on a common
group infrastructure and common tools for communicating and cooperating more effi-
ciently.

Reason for Creating the CDO Role. The CDO position was created to increase ­revenues
from digital products. The CDO is also the CIO and is therefore also responsible for the IT
infrastructure and for implementing IT-enabled business processes and applications aimed at
enhancing process efficiency. It is important to note, however, that the CDO in this company
clearly distanced himself from the “typical CDO.” He stated that usually the CDO and CIO
coexist, with the CIO servicing infrastructure and applications, and the CDO contributing to
a strong customer perspective of the digital transformation.
Positioning of CDO. Because the digital transformation is on the strategic agenda of
the top management team, the CDO reports directly to the group CEO. The CDO has the
explicit task of informing and consulting the top management team, so he has a close relation-
ship with the CEO. He is part of the group’s strategic board, which involves regular meetings
with the top management team and fosters close collaboration.
 chief digital officers 211

CDO Tasks. The CDO defines and implements the company’s overall e-business strat-
egy. His tasks involve advising the top management team, managing the digital business
models and digital product development, and supporting and coordinating the organizational
units in specific digital initiatives. His tasks are cross-functional, encompassing the product,
e-commerce, IT and online marketing units. Hence, disseminating information and mobiliz-
ing employees are high on his agenda.
At the top management level, the CDO disseminates business-critical information across
the publishing group and informs top management on current trends and developments in
the market. He says his role here is to “show and make plausible how fundamental the digital trans-
formation is and how much the company’s current business models are threatened if no actions are taken.”
At the employee level, the CDO organizes workshops and training sessions to inform about
the digital strategy and the progress of its implementation, and to train employees.
The CDO works at both the operational and strategic levels. He spends one-third of his
time on communicating and exchanging ideas with the company’s subsidiaries. He incorpo-
rates good ideas into the group strategy and manages the strategy implementation programs.
He spends the rest of his time in steering committees or working on specific projects as a
project sponsor.

Summary of the Six Cases

Table 9.3 summarizes the six cases in terms of the focus of the digital transformation, the task
focus of the CDO and the relationship between the CDO and the most senior IT executive.

The Three Role Types of CDOs

Although the CDOs in the six case companies operate in diverse industries and companies,
we were able to identify three main types of roles they play—the Entrepreneur, the Digital
Evangelist and the cross-functional Coordinator.

The Entrepreneur Role

We observed a lot of entrepreneurial spirit in the CDOs across the cases. As the CIO in
Case 1 put it: “Our CDO is kind of an innovator, thought leader and consultant for our top manage-
ment,” Entrepreneur CDOs explore IT-enabled innovations, establish a digital transforma-
tion strategy and help their companies innovate through the use of new digital technologies.
They initiate and design the controlled shift of their companies toward becoming digitally
empowered organizations that strategically exploit the opportunities presented by new digi-
tal technologies. These CDOs point the way for their companies in a fast-paced technological
environment and sometimes even adapt whole business models. Their responsiveness to the
market is of particular importance in this context, which is why Entrepreneur CDOs have a
strong customer focus.

The Digital Evangelist Role

The managing director in Case 4 described his CDO as “the supreme evangelist. It is his task to
inspire the people in the organization and to get them enthusiastic about digital topics.” To success-
fully inspire people, a corporate culture shift is usually needed because the traditional way of
doing business is deeply entrenched in managers and employees. A crucial part of the Digital
Evangelist’s job is therefore to convince the workforce across all departments and hierarchy
Table 9.3 Overview of the Case Study Findings

Case 1: Case 2: Case 3 Case 4 Case 5 Case 6

Retail Tourism Education Market Research Financial Services Publishing
Focus of Digital Enhancing customer Growing the online Introducing Optimizing customer Enhancing customer Fostering
Transformation experience and mobile business sophisticated solutions service
e-learning courses
Task Focus of CDO Digital innovation Integration of online Development of Support of market Introduction of digital Increasing digital
and traditional digital business model managers tools and devices revenues
business and digital products
Relationship Between Close collaboration: Close collaboration ••CDO delegates Close collaboration: Close collaboration: CDO assumes both
CDO and Most CDO takes charge and iterative technical aspects roles
Senior IT Executive •• requirements to the CTO at •• CDO takes cus- •• CDO focuses on
of strategy tomer perspective communication
definition: group level
••CIO takes charge •• CIO delivers cor- tasks
of IT implementa- CDO
•• takes busi- ••CDO has addi- responding IT
ness perspective tional software •• CIO takes on tech-
tion nology perspective
CIO takes IT per- developers
spective
 chief digital officers 213

levels to pull together. In the words of the CDO in Case 5, “CDOs need to offer new perspectives
… and educate people to look and think ahead.”
As Digital Evangelists, CDOs communicate their digital strategies across their compa-
nies and across departmental boundaries to ensure the whole company is “signed up” to the
digital journey. Employee training is an important part of the Digital Evangelist role because
employees need to cope with many challenges and corporate changes in the process of digital
transformation. In all of the cases we found that, although IT is an important part in CDOs
roles, is not the primary challenge they face. According to the managing director in Case 4,
“Changing a whole organization is the true challenge.”

The Coordinator Role

As well as inspiring all stakeholders, CDOs are responsible for actively stimulating the
immense changes that are necessary to successfully execute their companies’ digital transfor-
mation strategies. As a consequence, CDOs initiate and design the controlled organizational
shift from decoupled silo functions to cross-functional cooperation. The CDOs in the case
companies emphasized that digital transformation is not an isolated process, but affects many
parts and stakeholders of the company, including IT, product development, HR, market-
ing and sales. It’s clear that digital transformation requires strong coordination of different
functional areas, leaving no space for previous silo approaches and mentalities. However,
functional managers, with their focus on their own departments, are often unwilling to pull
together. CDOs therefore need to work across organizational silos because digital transfor-
mation requires the alignment of executives across functions. The CDO in Case 2 empha-
sized that “digital transformation cannot take place in a single subsidiary.” CDOs are responsible
for interlinking the whole company and acting as coordinators of the digital transformation.

Determinants of the Primary CDO Role

We found that all three CDO roles are important in the work of each CDO in the case com-
panies but that the primary role played by a CDO depends on many factors. (Table 9.4 lists
the primary role played by each of the six CDOs in our study.) These factors include the digi-
tal transformation maturity of the company, the digital mindset of the workforce, company
size and the reporting relationships of the CDO (and thus the CDO’s influence within the
company). The expectations of the CDO role, both from the perspective of the top manage-
ment team and the CDO, is also an important determinant of the primary role.
In Case 5, for instance, the company does not yet have a digital transformation strat-
egy, and the digital mindset of the top management team is not yet sufficiently developed.
Moreover, the CDO has no direct reporting relationship to the CEO. As a consequence, the
CDO does not yet have enough influence to implement any profound changes and focuses
primarily on the Digital Evangelist role.

Table 9.4 Primary CDO Role Type by Case Company

Entrepreneur Digital Evangelist Coordinator

•• Case 1 (Retail) •• Case 4 (Market Research) •• Case 2 (Tourism)

•• Case 3 (Education) •• Case 5 (Financial Services) •• Case 6 (Publishing)
214 anna singh and thomas hess

The CDO in Case 2 had the very specific assignment to massively grow the company’s
online and mobile business. First and foremost, this required her to manage and coordinate
all digital activities, which is why she primarily acts as a Coordinator. The CDO in Case 1,
however, has a high level of freedom from the top management team to innovate, enhance
the customer experience and look out for new business opportunities. As a result, he acts
primarily as an Entrepreneur.

Key CDO Skills and Competencies

From our analysis of the CDO roles in the six case companies, we have identified five skills
and competencies companies should look for in a CDO.

IT Competency
First and foremost, CDOs need IT competency, as emphasized by the CDO in Case 1: “It is
absolutely necessary that the CDO position is filled by someone who completely feels at ease in the digital
world.” New digital products and services are based on IT, so CDOs need to have an under-
standing of IT applications and the underlying infrastructures, as well as knowledge on how
they can be upgraded and modified. Moreover, most CDOs collaborate closely with CIOs,
who are responsible for the implementation of infrastructures and the evolution of platforms
and IT systems. Thus, CDOs need a degree of IT competency in order to formulate IT
requirements and iteratively develop new digital products and services in collaboration with
CIOs. If CDOs do not have IT expertise, they will not be able to define and communicate
the IT requirements for new digital-product and service ideas. As the CDO in Case 3 put it,
“If a CDO does not have a basic understanding of IT, then she or he is the wrong person for this job.”

Change Management Skills

As well as IT competency, CDOs need business acumen. Profound and specific know-how
on strategy, transformation and change management are crucial in this context. While the
main focus of CIOs is on IT, CDOs need to understand what new digital technologies mean
for their businesses and their customers. Not only do they need to understand the nuts and
bolts of the business, such as business models, business processes and customer needs, but
also the workings of different business functions, such as finance, marketing, sales, HR and
others. Having an understanding of all these different aspects of the business enables CDOs
to analyze and understand their companies’ businesses comprehensively. As the CDO in
Case 3 put it, “I need to be able to take part in conversations of all kinds and in all areas.” Thus, the
CDO’s job is both highly cross-functional and interdisciplinary, and requires highly devel-
oped change management skills.

Inspiration Skills
The successful execution of a digital transformation requires the ability to inspire others. As
the driver of digital transformation, the CDO needs to transmit business-critical information
company-wide and across all organizational hierarchy levels. He or she also needs to be able
to convince all internal decision makers and employees of the need to digitally transform and
to demonstrate the benefits that will come from the transformation. In this context, CDOs
need the ability to successfully overcome the resistance and barriers that often stem from tra-
ditional corporate cultures. Accordingly, as emphasized by the CDO in Case 6, CDOs need
 chief digital officers 215

to “have a profound knowledge of the corporate culture and the handling of employees who find them-
selves in the middle of transformational processes.” CDOs should be able to readily recognize the
needs of employees and help them overcome barriers that arise during digital transformation.
With the skill to inspire others, CDOs not only act as consultants to the top management
team, but also act as effective motivators of the whole workforce and thus enable the digital
transformation in the first place.

Digital Pioneering Skills

A significant aspect of inspiring and motivating an organization to embark on a digital trans-
formation is that the CDO needs to create a cohesive digital vision for the company. CDOs
thus need to act as digital pioneers, which requires them to have a high level of visionary
thinking capabilities. Accordingly, CDOs need the ability to look beyond existing strategies
and previous procedures and envision the digital future of their companies. Being a success-
ful digital pioneer and conceiving an appropriate digital vision requires CDOs to look at the
current and prospective business situations from many different perspectives. As the CDO in
Case 4 put it, CDOs need to be “both outward and inward looking.”

Resilience
Another key characteristic of a successful CDO is resilience, which will be needed to com-
plete the digital transformation journey. Resilience is even more important in “traditional”
companies because digital transformation will require substantial changes. In such compa-
nies, colleagues of CDOs, both at managerial and at staff levels, won’t always embrace the
profound changes required for digital transformation.
Case 3 provides a good example of the importance of resilience. This company’s transfor-
mation was particularly challenging for the CDO, as it moved from a pure print publisher to
a modern online education company. The CDO faced internal resistance from many skeptical
stakeholders. But, two years after devising a new digital strategy and developing new digital
products and services, the development partners (who were also key customers of the com-
pany) were highly satisfied with the results. The resilience of the CDO had more than paid off.
The CDO in Case 1 highlighted another essential aspect of resilience: “[CDOs need] to
acknowledge failures and to learn from them.” Setbacks are common when companies fundamen-
tally transform their businesses and processes.

CDO Skills and Competencies by Role Type

Although all of the above skills and competencies are needed by any CDO, different CDO
role types will need some of them more than others (see Table 9.5). Based on our analysis
of the case studies, Digital Evangelists need particularly well developed inspiration and digital
pioneering skills to enable them to effectively advocate the need for digital transformation.
Change management skills are valuable for Coordinators, who need to understand all of the
many and diverse aspects of a business to effectively coordinate the digital transformation
across functions. Finally, the Entrepreneur role is easier to fulfill if CDOs have profound digital
pioneering skills that help them explore IT-enabled innovation and create a cohesive digital
vision for their companies.
All CDOs require IT competency to accomplish their tasks, and this competency is there-
fore not specific to any CDO role type. While the importance of resilience depends very
much on the mindset of the workforce and willingness to transform, CDOs in any role type
can strongly benefit from this characteristic.
216 anna singh and thomas hess

Table 9.5 Most Important Skills and Competencies by CDO Role Type

Entrepreneur Digital Evangelist Coordinator

Digital Pioneering Skills •• Inspiration Skills Change Management Skills
•• Digital Pioneering Skills
IT Competency
Resilience

High
CDO Recommended
Case 3 Case 1
Education Retail

Case 4 Case 2
Market Research Tourism
Case 6
Internal:
CDO Can Be Helpful Publishing
Complexity of
Coordinang
Digital Case 5
Transformaon Financial Services
Acvies

CDO Not Needed

Low External: High

Market Pressures to Digitally Transform

Figure 9.1 Relevance of Chief Digital Officers

When and Why to Establish a CDO Position

Our analysis of the cases shows that companies have established CDO positions to drive
their digital transformations in a comprehensive way. We found that CDOs devise and exe-
cute digital strategies as Entrepreneurs, serve as catalysts for change by mobilizing the whole
company in their roles as Digital Evangelists and coordinate digital transformation efforts as
Coordinators. We have also identified the five essential skills and competencies needed by a
successful CDO. But does every organization need a CDO to drive its digital transformation?
Across the six case companies, there were two main factors that drove the establishment
of CDO positions: (1) there were high levels of external market pressures to digitally trans-
form and (2) there was great internal complexity in the task of coordinating transformation
activities across the company. Figure 9.1 positions the six case companies vis-a-vis these two
factors.
The CDO is the only position in a company that is exclusively dedicated to digital trans-
formation. Hence, the higher the pressure for digital transformation is, the greater the ben-
efits, from having a CDO. For instance, the CDO in Case 6 confirmed how important it is in
 chief digital officers 217

his job to “show and make plausible how fundamental the digital transformation is and how much
the company’s current business models are threatened if no actions are taken.” Each of the six
case companies faced some level of market pressures to digitally transform. For instance, the CDO in Case
2 told us he had been given “very ambitious goals … to generate a massive growth in the online business,
which the company wasn’t able to achieve so far.”
It is no coincidence that the very first CDO was installed in a media group, MTV
Networks. The media industry was the first to be disrupted by new digital technologies.
For media companies, employing a CDO creates a dedicated position to mobilize the whole
company and make clear to everybody what kinds of challenges new digital technologies pose
and what opportunities they offer CDOs can help transform an organization by motivating
employees and demonstrating why the status quo cannot continue. As the CDO in Case 4 put
it, “I do believe that it makes sense to have this role so that somebody can really push this topic, mobilize
everybody and continuously give new impulses.”
A CDO position is also beneficial if there is not an ingrained culture of cross-functional
collaboration, which means the company faces an urgent need to better coordinate its digital
transformation activities. In the words of the managing director in Case 4, the CDO is “the
conductor of the concert” and coordinates the controlled transformation of the whole company.
For instance, the CDO in Case 1 told us: “I believe that due to the high velocity in which these
changes take place, a CDO is needed: someone who has horizontal responsibility, who coordinates and
drives these changes. Otherwise, many parts of the company might drop the changes again.” The CDO
in Case 2 confirmed this view by suggesting that “a digital transformation does not take place in
a single department” in her company, “many silos need to be removed” and “a dedicated position was
necessary to serve as a driving force and bundle all digital activities.” Thus, in the words of the CDO
in Case 3, a CDO should be able “to rethink the whole company in all areas” and “join in any
kinds of conversions in each single department.”
In particular, we recommend that a business in which the coordination of digital trans-
formation activities across the organization is very complex should create a CDO position.
Coordination complexity will be greater in larger companies and in companies with a decen-
tralized structure or a large amount of organizational dependencies between products, pro-
cesses and IT systems.

Lessons Learned

We have derived four key lessons from the analysis of the six cases. The first lesson addresses
and informs organizations, the second is relevant to CDOs, the third applies to CIOs, and the
fourth relates to whether CIO positions are a temporary phenomenon.

Top Management Should Ensure CDOs Have Sufficient Authority

Our analysis shows that CDOs assume cross-company authority for digital initiatives to over-
come the slow pace of digital transformation in organizations. For far too long, inertia has
held back digital transformation initiatives in many industries and companies. These indus-
tries and companies now need to adjust rapidly to modified market conditions and customer
demands. Organizational dependencies may also have delayed a timely adjustment. Five of
the six CDOs in our study have successfully conceived digital transformation strategies and
implemented the associated digital initiatives in a timely manner. The striking exception is
the CDO in Case 5, who was the only one not reporting directly to the CEO and who did
not have a seat at the top management team meetings. This CDO is positioned at business
unit level (as part of the communication department) and seems to lack the authority needed
218 anna singh and thomas hess

to effectively pursue company-wide digital initiatives. This situation results primarily from
insufficient top management commitment to digital transformation, which, however, seems
to be a critical success factor for the business.

CDOs Should Hone the Skills Required for Their Primary CDO
Role(s) and Address the Challenges Caused by Internal Resistance
While all the skills and competencies we identified are highly beneficial for any CDO, CDOs
should specifically hone the skills most required by their current primary role type (see Table
9.5). While any CDO role type needs IT competency, Digital Evangelists benefit particularly
from highly developed inspiration and digital pioneering skills. Change management skills
are especially valuable for Coordinators, while Entrepreneurs benefit most from well-developed
digital pioneering skills. Awareness of the relationships between roles types and skills will
enable CDOs to hone and employ the skills they require.
Regardless of how skillfully CDOs perform their primary role type during digital trans-
formation, they will inevitably face internal resistance to the transformation process. CDOs
therefore also need high levels of resilience and perseverance. They must be aware of poten-
tial resistance from colleagues and the organization as a whole and must not shy away from
the associated challenges that lie ahead in the digital transformation journey.

Appointment of a CDO Offers Opportunities for the CIO

Some CIOs may fear that they might be replaced by a newly appointed CDO or relegated
to a secondary position in the digital transformation journey. At first glance, this fear might
be justified, but we believe the contrary is true. CDOs not only act as Digital Evangelists for
the digital transformation of their companies, but also as advocates for the IT function itself.
Many CIOs still struggle to get a seat at the top management table, but there is evidence
that appointing a CDO strengthens the authority and reputation of the CIO. In each of the
cases where the CDO reported directly to the CEO, the CIO was also a direct report of the
CEO. While we do not know if there is a causal link behind this observation, we can certainly
say that the CIOs in these cases had a high reputation and that their CEOs and top manage-
ment teams regarded them as valuable for the digital transformation. CIOs should therefore
embrace the opportunities that the appointment of a CDO offers them and make the most of
the visibility they can gain through collaborating extensively with CDOs.

CDO Positions May Be a Temporary Phenomenon

Many commentators and researchers on IT management practices regard the CDO position
as a temporary phenomenon. Indeed, many of our interviewees held this view. As the CDO
in Case 4 put it, “At the end of the day, this is a position that will disappear as soon as the company
has become digital.” Others, however, propose that CDOs might become the next CEOs.
We cannot, as yet, take a final position on this issue because CDOs are still a fairly recent
phenomenon. It will be interesting to monitor the future development of the CDO position.

Concluding Comments

To help managers understand why CDO positions have been established and how CDOs can
be successfully installed to guide organizations through their digital transformation journeys,
 chief digital officers 219

this article has presented six case studies of CDOs and described how they fulfill their posi-
tions. Based on these cases, we have identified two main factors that drive the creation of
CDO positions: high market pressures to digitally transform, and the complexity of coordi-
nating digital transformation activities across a company. We have also identified three role
types that CDOs can play (the Entrepreneur, the Digital Evangelist and the Coordinator) and five
types of skills and competencies CDOs should have. While each CDO should possess IT
competency and resilience, the significance of change management skills, inspiration skills
and digital pioneering skills depends on each CDO’s primary role type. From our analysis
of the case companies, we have derived four key lessons that will ensure businesses equip
their CDOs with the skills to successfully navigate them through their digital transformation
journeys.

Notes
1 From the 2013 digital transformation global executive study and research project in Fitzgerald, M.,
Kruschwitz, N., Bonnet, D. and Welch, M. “Embracing Digital Technology. A New Strategic Impera-
tive,” MIT Sloan Management Review (55:2), 2013, pp. 1–12.
2 Weill, P. and Woerner, S. L. “The Future of the CIO in a Digital Economy,” MIS Quarterly Executive
(12:2), 2013, pp. 65–75.
3 See Peppard, J., Edwards, C. and Lambert, R. “Clarifying the Ambiguous Role of the CIO,” MIS
Quarterly Executive (10:1), 2011, pp. 31–44; and Westerman, W. and Weill, P. “What Makes an Effec-
tive CIO? The Perspective of Non-IT Executives,” Center for Information Systems Research, MIT
Sloan Management Review (4:3C), 2005.
4 Fitzgerald, M., Kruschwitz, N., Bonnet, D. and Welch, M., 2013, op. cit.
5 We use the terms “digital transformation strategy” and “digital strategy” synonymously in this article.
6 For an extensive account of digital transformation strategies and how companies can formulate
them, see, e.g., Hess, T., Matt, C., Benlian, A. and Wiesböck, F. “Options for Formulating a Digital
Transformation Strategy,” MIS Quarterly Executive (15:2), 2016, pp. 103–119.
7 See McDonald, M.P. and Rowsell-Jones, A. The Digital Edge: Exploiting Information & Technology for
Business Advantage, Gartner, Inc., 2012.
8 Fitzgerald, M., Kruschwitz, N., Bonnet, D. and Welch, M., 2013, op. cit.
9 For the latest updates on CDO numbers, see http://cdoclub.com.
10 The Appendix describes the research methodology and the interviews conducted.
11 In some companies, the most senior IT position might be labelled differently, e.g., Chief Technology
Officer or Head of IT. We use the term “CIO” to cover all these titles.
12 For a comprehensive description of the chief data officer role, see Lee, Y., Madnick, S., Wang, R.,
Wang, F. and Zhang, H. “A Cubic Framework for the Chief Data Officer: Succeeding in a World of
Big Data,” MIS Quarterly Executive (13:1), 2014, pp. 1–13.
13 For a comprehensive account on chief innovation officers, see Di Fiore, A. “A Chief Innovation Offic-
er’s Actual Responsibilities” Harvard Business Review, 2014, available at https://hbr.org/2014/11/a-
chief-innovation-officers-actual-responsibilities.
14 For more information on the role of the chief strategy officer, refer to Menz, M. and Scheef, C.
“Chief strategy officers: Contingency analysis of their presence in top management teams,” Strategic
Management Journal (35:3), 2014, pp. 461–471.
15 For more information on digital transformation strategies, see Matt, C., Hess,T. and Benlian, A. “Digi-
tal Transformation Strategies,” Business & Information Systems Engineering (57:5), 2015, pp. 339–343.
16 As of January 2017, €1 = $1.05.

Appendix: Research Methodology

To explore the CDO role in detail, we investigated six companies and conducted at least
one interview in each organization. In total, we conducted ten interviews. These interviews
were semi-structured and comprised open-ended questions on topics such as the companies’
220 anna singh and thomas hess

motivations to install a CDO, the CDOs’ tasks and the challenges CDOs face. If necessary,
we further probed the interviewees via e-mail to seek clarification. All interviews were audio
taped and subsequently transcribed. When analyzing the interviews, we carefully scanned for
similarities and differences in the companies’ digital transformations and the CDOs’ tasks.
To verify the statements from the interviews, we used secondary data sources (e.g., com-
pany presentations, internal documents and publicly available press).

Questions for Discussion

1 CDOs are considered business strategists. How do CDOs align with the business strat-
egy and the other c-level roles? Do you perceive any conflicts or other issues?
2 Analyzing the six cases presented, would argue for the role of CDOs? What seniority
level do you think CDOs need to have? Does the level of seniority affect the success of
digital transformation? Consider power dynamics as presented in Chapter 10.
3 The cases in the chapter outline a clear distinction between role type and each case
assumes only one role. Could CDOs assume multiple types of roles as part of the
organizations’ digital transformation?
4 How might CDOs transition between the different roles depending on the needs of the
organization? Link your discussion to Chapters 13 and 14.

Further Reading
Leidner, D. E., Beatty, R. C., Mackay, J. M. (2008). How CIOs manage IT during economic decline:
Surviving and thriving amid uncertainty. MIS Quarterly Executive, 2(1): 1–14.
Tumbas, S., Berente, N., vom Brocke, J. (2017). Three Types of Chief Digital Officers and the Reasons
Organizations Adopt the Role. MIS Quarterly Executive, 16(2), 121–134.
Chapter 10

Boyka Simeonova, Robert D. Galliers

and Stan Karanasios

STRATEGIC INFORMATION SYSTEMS

AND ORGANIZATIONAL POWER
DYNAMICS

T h i s c h a p t e r e x a m i n e s power dynamics in organizations and their

implications for the study of strategic Information Systems (IS). While power can be
manifest in various forms and has a multitude of connotations and definitions (Jasperson
et al. 2002; Lawrence et al. 2012) the definition1 of power followed here is, “the dimension
of relationships through which the behaviors, attitudes, or opportunities of an actor are affected by
another actor, system, or technology” (Lawrence et al. 2012, p. 105). Within IS research, such
issues are typically accounted for in studies of conflicts, politics, surveillance and resistance
(e.g., Doolin 2004; Hussain and Cornelius 2009; Markus 1983; Zuboff 1988). However,
as noted by several scholars, power dynamics are mostly relegated to the periphery of
research on IS (e.g., Willcocks 2004; Willcocks and Lioliou 2011). Introna (2003) observed
how power/knowledge issues in IS are often perceived as “nuisances”, arguing that such
­nuisances actually constitute the very community and field of IS. As a result, power dynam-
ics are largely under-theorized or avoided within IS research (Blackler 2011; Marabelli and
Galliers 2017; McBride 2013; Silva 2007; Willcocks and Lioliou 2011). This is particularly
evident within the literature on strategic IS studies, even though power dynamics are likely
to be prominent in strategic management decisions. For example, the digital transforma-
tion of an organization and strategizing more generally are likely to be infused with conflicts
and tensions. To highlight these issues as important concerns for strategic IS, this chapter
explores the links between power, IS and IS strategy and develops a new analytical frame-
work of power.
Scholars have noted that the field of IS endures epistemological and theoretical challenges
which can obstruct how power may be studied (Silva 2007). In his review of dominant
222 b o y k a s i m e o n o va e t a l .

theories used to study IS namely Phenomenology, Critical Theory and Structuration Theory
Silva (2007) identified several limitations to unraveling power. Others have made similar
arguments concerning other “grand” theories applied in IS (e.g., Simeonova et al. 2018a,
2018b). Silva (2007, p. 166) argues that, “given the hidden nature of power and politics …
an epistemological approach that emphasizes the interpretations of meanings, intentions and actions
would be most suitable for making sense of such a complex phenomenon”. The need for up-to-date
theoretical foundation for studying power is recognized by Fleming and Spicer (2014, p. 38)
explaining that, “as with any analytical concept, the swiftly changing world of organizational life
requires theories of power that are up-to-date and current with the emerging trends shaping business
and society”.
In addition to the theoretical challenges of investigating power, studies examining power
often follow a one-dimensional (Dhillon et al. 2011) and functionalist (Cendon and Jarvenpaa
2001; Fleming and Spicer 2014) view of power. Most commonly, such examples represent
a negative view of power (Ravishankar et al. 2013; Fleming and Spicer 2014). Fleming and
Spicer (2014, p. 38) explain that, “while it is widely recognized that power is a central part of
organizations, there is no doubt that it still has rather negative connotations, something that is perhaps
derived from popular perceptions about its nature and effects of power”.
To expand on this narrow view of power we use the notion of “episodic” and “systemic”
power following Lawrence and colleagues’ (2012) conceptualization. We use this framing
because of its emphasis on individual and collective actors, behaviors, attuites, relationship,
social systems and technologies. Such a view expands the framing of power dynamics in
organizations and permits scholars to tease out different types of power.
The remainder of this chapter outlines existing frameworks on power and how these
have been utilized in IS and IS strategy research. Importantly, the chapter emphasizes the
multitude of connotations of power and examines the interplay between the different types
of power (i.e., episodic and systemic power), and their effect on IS and IS strategy. The
chapter outlines a new analytical framework of power examining the interplay of different
types of power (episodic and systemic), the role of actors and the role of IS. The framework
is presented as a matrix differentiating between “power as possession”, “power as practice”,
“power as control” and “power as facilitation”. The framework is designed to help explicate
power dynamics in organizations and its interlinkages with IS and strategy and lead to the
development of a research agenda on power, IS and strategy.

Perspectives on Power Used in IS

In recognition of the difficulty of accounting for power, scholars have adopted a range of
theories and frameworks. Within IS studies four dominant2 perspectives have been utilized;
these are outlined and discussed below. Following a discussion and summary of these views,
we theorize the episodic and systemic perspective as useful in teasing out different types of
power and we conceptualize the existing literature using this perspective.

Foucauldian Perspective
Perhaps the most popular perspective adopted by scholars is the Foucauldian perspective
(e.g., Young et al. 2012; Doolin 2004; Heizmann 2011). Foucault (1977) outlines power as
constitutive and exercised through micro-strategies, maneuvers and dispositions. Foucault
(1979, 1980) makes the point that power should be considered as something produced
and evolving through social relationships as opposed to as a resource, and that power and
 o r g a n i z at i o n a l p o w e r dy n a m i c s 223

knowledge are mutually constituted. Hence, power is not understood as a resource that an
actor possesses and uses to influence another actor; rather, it is understood as something
constituted through the interactions among these actors and is visible through its effects
(Clegg et al. 2006). Such conceptualizations of power have been considered in studies of
knowledge processes (e.g., Heizmann 2011; Heizmann and Olsson 2015; Marshall and
Rollinson 2004; Sewell 2005), IS and strategy (e.g., Ezzamel and Willmott 2008; Hardy
and Thomas 2014; McCabe 2010; Webster 1995; Zuboff 1988). The Foucauldian concep-
tualization of power has dominated IS studies emphasizing the use of IS for surveillance or
forms of an electronic “panopticon” (e.g., Doolin 2004; Orlikowski 1991; Webster 1995;
Zuboff 1988). Doolin (2004) utilized the Foucauldian perspective to examine disciplinary
power exercised by surveillance. Allen et al. (2013) refer to a “panoptic gaze” for using a
tele-medicine system to defer decisions. Walsham (2001) acknowledges the importance
of Foucault’s work on understanding the inseparability of power/knowledge. In particu-
lar he argues that its techniques and procedures specify legitimate accounts of truth via
“regimes of truth” (Foucault 1980), and the importance of surveillance as a form of control
(Foucault 1977; Knights et al. 1993) for example, in organizational monitoring processes
(Lyon 1993).
Scholars have argued that the Foucauldian perspective underestimates domination, legiti-
mation, authority, historic structures, and power struggles which are explained as being
essential to society and as forming different interests (Clegg et al. 2006). It has also been
argued that a Foucauldian analysis privileges a negative view of power, where power is shown
as a restrictive and oppressing force (Habermas 1990), as opposed to a productive force
(Deleuze 1988). Along these lines Fairclough (1992) has argued that Foucault’s conceptu-
alization of power fails to present practical examples of power relations in action, thereby
making it difficult to study power.

Circuits of Power
Clegg (1989) introduced the circuits of power framework to represent modalities through
which power flows in an organizational context accounting for organizational structure,
legitimate power, agency and resistance. The circuits of power framework integrates inter-
related concepts: episodic circuits of power, social integration and system integration
(Backhouse et al. 2006; Clegg 1989; Silva and Backhouse 2003). The episodic circuit of
power is described as causal power, when one actor gets another actor to do something the
latter would otherwise not do. Episodic power circuits are defined by agency and the inter-
ests of these agencies (Clegg et al. 2006). Power relations are configured by these agents
so that they achieve preferential outcomes. These outcomes could subsequently affect the
social and system integration circuits (Clegg et al. 2006). The social integration circuit
is described as dispositional power linked to the rules of meaning and membership, and
conditions of exercising power, providing the conditions for one actor to exercise power
over another actor (Backhouse et al. 2006; Clegg 1989). Hence the episodic outcomes
lead to changes in rules, social relationships at the social circuit. Subsequently, the changes
in rules and social relationships at the social circuit could lead to restriction or facilitation
of disciplinary and productive power, which subsequently empowers/disempowers social
relations. The system integration circuit, described as techniques of production and disci-
pline, is linked to dominance, electronic panopticon, facilitating the compliance of actors
and discipline, following the Foucauldian perspective (Backhouse et al. 2006; Clegg 1989;
Silva and Backhouse 2003). Therefore, IS could be regarded as an instrument for control,
compliance and discipline, which seem to retain negative connotations of power. Adopting
224 b o y k a s i m e o n o va e t a l .

this framing of power has helped scholars to understand the setting, institutionalization of
IS (Silva and Backhouse 2003), institutionalization of standards and resistance to standards
compliance (Backhouse et al. 2006; Smith et al. 2010).
Silva and Backhouse (2003) utilize the episodic circuit of power to identify and understand
the positions occupied by actors, their strategies, the resources they have access to, their
actions in implementing the system and the struggles in resisting the using of the system.
Hence, the episodic circuit of power concentrates on causal power and helps to identify who
the champions of implementing and advocating for the system are and who the resistors are.
The social circuit concentrates on dispositional power linked to rules, meaning capacity and
position of actors to exercise power. Dispositional power is explained to be a type of power
where actors influence the behavior of other actors that might be against the interests of the
latter. In the context of institutionalization of IS, the social circuit of power helps identify
what the rules and norms are, what the capacity and the positions of the actors are, how the
system affects these rules, norms, positions and capacities, and how the new systems are
interpreted (Silva and Backhouse 2003). The systemic circuit considers power as facilita-
tive in the achievement of goals. Whilst a positive notion is implied, the circuit is linked to
subordination of actors to achieve goals that are achieved through compliance, surveillance,
control over employees and disciplining actors. As Clegg (1989, p. 191) has explained, dis-
ciplinary practices exist in different forms of control over employees: “supervision, routiniza-
tion, formalization, mechanization and legislation, which seek to effect increasing control of employees’
behavior, dispositions and embodiment, precisely because they are organizational members”. Regarding
the institutionalization of IS, the system circuit of power tackles questions around moni-
toring actors’ compliance and instilling discipline (Silva and Backhouse 2003). Hence, the
circuits of power imply negative connotations of power. Similar connotations of the circuits
of power are displayed in the institutionalization of standards compliance (Backhouse et al.
2006; Smith et al. 2010).

Power and Empowerment

A number of studies have utilized the framework on power by Hardy and Leiba-O’Sullivan
(1998) (e.g., Dhillon et al. 2011; Hekkala and Urquhart 2013). Hardy and Leiba-O’Sullivan’s
(1998) framework outlines four dimensions of power: (i) power as a resource/power over
resources where a dominant actor prevails over subordinate actors through resource depend-
encies in influencing decision-making; (ii) controlling decision-making processes through
limited access and the exclusion of the less powerful; (iii) managing meaning and prevent-
ing conflict through the hierarchy and respecting the status quo; (iv) disciplinary action for
those non-conforming, which is borrowed from Foucault. Hardy and Leiba-O’Sullivan
(1998) examine the probability of empowerment of the subordinate actor and explain that
the latter loses out to the dominant actor in all dimensions. For the empowerment of the
subordinate actor, the following are required: acquisition of resources and the capacity for
mobilizing these, access to and influence in the decision-making process, understanding of
political actions and creation of will to resist, radical metamorphosis of the system, or oth-
erwise freedom from power effects is not possible. Hence, similarly to the circuits of power
framework and the Foucauldian perspective, the connotations of power appear negative.
In their study, Dhillon et al. (2011) examine the interaction of intentionality and power in
IS implementation utilizing Hardy and Leiba-O’Sullivan (1998) framework and conclude
that intentions affect power, which in turn affects IS implementation, which consequently
affects intentions. Dhillon et al. (2011) demonstrate complex relationships between power,
intentions and IS implementation; however, they have not differentiated between different
 o r g a n i z at i o n a l p o w e r dy n a m i c s 225

types of power. Hekkala and Urquhart (2013) utilized Hardy and Leiba-O’Sullivan’s (1998)
framework to investigate power in inter-organizational IS projects. A key finding from their
study is the role of legitimate/authority power to implement IS projects when informal links
between organizations are absent.

Episodic (Power Over) and Systemic (Power To) Perspective on Power

Episodic power is defined as the acts of self-interested actors, where one actor influences
or forces another actor to do something which they might otherwise not do (Lawrence
et al. 2012); thus the term “power over”. The episodic view of power considers power as
a capacity as well as something that is exercised in relationships. From the episodic per-
spective, power is considered as unevenly distributed within organizations and is regarded
as a personal or positional resource used to serve self-interest (Kärreman 2010; Lawrence
et al. 2012). Therefore, power can be perceived as authority, legitimacy, control, coercion,
and resource dependency (Clegg 1989; Gohler 2009). The episodic perspective represents
power over, which is characterized by domination, control and self-interest (Clegg et al.
2006; Gohler 2009).
Systemic forms of power are described as “vested in social and cultural systems, rather than in
individual actors” (Lawrence et al. 2012, p. 106). From this perspective, power can be seen as
systemic in that it is embedded in social relations as well as in technical, cultural and bureau-
cratic systems and practices (Lawrence et al. 2012). The systemic perspective represents
“power to”, which is characterized as capacity, property, ability and empowerment (Gohler
2009). Therefore, systemic power can be identified through “situations in which the behaviours,
beliefs, or opportunities of actors shift in response to changes in the rules (formal or informal) of mean-
ing and membership, or changes in the technologies of discipline and production (including social and
material technologies)” (Lawrence et al. 2012, p. 106).
However, the effects of power over/episodic and power to/systemic are contingent:
“one person’s ‘power to’ may involve asserting ‘power over’ many other people; the effects of power
as productive or negative are strictly contingent, so for some people the effect may be positive while
for others it will be negative” (Clegg et al. 2006, p. 191). Power “over” or “to” depends
on the situation and position of the agents. Power exists in the complex contingent
tension of extending or restricting the freedom of others (Clegg et al. 2006). Hence,
to understand the interplay between episodic/power over and systemic/power to it is
necessary to understand power in organizations and how it is inscribed in strategic IS.
As outlined earlier, studies tend to adopt a one-dimensional view (Dhillon et al. 2011)
and few studies in IS examine power from different perspectives and even fewer have
demonstrated the interlinks between these different forms of power (Jasperson et al.
2002). The following examples present attempts to investigate power from the episodic
and systemic perspective.
Utilizing the episodic and systemic power conceptualization, Lawrence et al. (2012)
identify mechanisms to trigger and institutionalize radical change, where this is viewed as
“transformations in professional service firms from traditional professional partnerships into managed
professional businesses” (p. 102). The authors find that radical change is initiated through epi-
sodic power based on authority and interested actors, and systemic power is needed to insti-
tutionalize the triggered radical change through embedding systems and structures as part of
practices, identities and rules.
In a study of configurable technologies, Pozzebon and Pinsonneault (2012) provide
an alternate framework for examining the interlinkages of different types of knowledge
and power. Their framework differentiates between the possession and practice views of
226 b o y k a s i m e o n o va e t a l .

knowledge and power. From the possession view (Cook and Brown 1999), knowledge is
considered as a codified entity that can be possessed and transferred. Hence, “knowledge
can thus be captured, codified and digitalized” (Pozzebon and Pinsonneault 2012, p. 38).
Power from a possession view is outlined as a resource that can be possessed, a capacity
and property of individuals (i.e., episodic power). From a practice perspective knowledge
is conceptualized as a dynamic, negotiated, provisional, and socially situated (Cook and
Brown 1999; Pozzebon and Pinsonneault 2012) and hence it is referred as “knowing”
(Carlile 2002; Orlikowski 2002). From the practice perspective knowledge and power
are considered as being intertwined in action outlined as dynamic, invested in practice,
relations and maneuvers, and hence power could be considered systemic (Pozzebon and
Pinsonneault 2012). Their findings show that the possession view of knowledge and
power is key at the IS project launch phase where the objectives and initial decisions are
set and resources allocated. These might get negotiated, reinforced, transformed through
combination of possession and practice views, which may lead to emergent or planned
knowing/powering mechanisms when implementing configurable technology (Pozzebon
and Pinsonneault 2012).
In a study of strategizing and IS, Marabelli and Galliers (2017) explore the interplay
between different forms of power and differentiate between a “diffusion” and “translation”
model of power. The diffusion model is linked to hierarchical power and exploitation,
where the exercising of hierarchical power involves the exploitation of a dominant position.
The translation model is linked to exploration and performative power, where the systems
are molded and appropriated through the practices of the users. Similar to Lawrence et al.
(2012), the effects of the different forms of power on IS strategizing show that hierarchical
power (i.e., episodic power) helps launch the strategizing initiative, and performance power
(i.e., systemic power) leads to the institutionalization of these strategic changes (Marabelli
and Galliers 2017). However, it was also found that resistance to these changes exists which
leads to emerging practices and workarounds. Hence, Marabelli and Galliers (2017) con-
clude that (i) hierarchical power/diffusion model/exploitation has limited effects in instilling
change but is necessary to define the strategic objectives; (ii) performative power/translation
model/exploration is needed to instill change through practices and co-production of out-
comes. Thus, it is important to examine different types of power and their interplay as these
could lead to different outcomes.
A summary of these four perspectives on power along with their assumptions and applica-
tions in the literature is presented in Table 10.1.
The summary of the four perspectives of power demonstrates a predominant negative
connotation of power in Foucault, circuits of power, and power and empowerment frame-
works.
The summary suggests that diverse perspectives on power are required where positive
and negative effects are accounted for. Hence, we adopt the episodic and systemic perspective on
power and we utilize the framework to understand the effects and interplay of different forms
of power.

Episodic and Systemic Power and Implications for Strategic IS

Having established episodic and systemic power as useful lens to study power in IS, here
we review and discuss this view further to demonstrate how it may help to uncover hid-
den effects of power in IS and organizations. We draw on studies from IS, IS Strategy,
Organization Studies, General Management, and Knowledge Management to support our
argument. While drawing on these fields, the studies are focused on the use of IS, what
Table 10.1 Summary of the four perspectives of power

Perspective on power Assumptions Examples References Implications for studying strategic IS

Foucauldian perspective Power considered as produced The use of IS for surveillance Orlikowski 1991; Webster Emphasis on surveillance, one-
and evolving through social or forms of electronic 1995; Zuboff 1988; Doolin dimensional predominantly
relationships; “panopticon” 2004 negative view. Diverse
Power and knowledge are perspectives required.
mutually constituted.
Circuits of Power Episodic circuit causal power; Institutionalization of IS Silva and Backhouse 2003 IS regarded as an instrument for
(Clegg 1989) Social circuit dispositional Institutionalization of standards Backhouse et al. 2006; Smith control, compliance, discipline.
power; Systemic circuit and resistance to standards et al. 2010 Predominantly negative
techniques of production and compliance connotations of power.
discipline. Diverse perspectives required.
Hardy and Leiba-O’Sullivan Power as a resource; Intentionality and power in IS Dhillon et al. 2011 Limited possibility for
(1998) Controlling decision-making; implementation Hekkala and Urquhart 2013 empowerment of subordinate
Managing meaning and Power in inter-organizational actors, mainly negative
preventing conflict; IS projects connotation of power.
Disciplinary action for the Diverse perspectives required.
non-conforming.
Episodic/power over Episodic power possession, Organizational radical change Lawrence et al. 2012 Pozzebon Allows for the understanding of
and systemic/power to resource used to serve self- Knowledge and power and Pinsonneault 2012 different forms of power, their
perspective interest, authority, control, IS strategizing Knowledge Marabelli and Galliers 2017 interplay and their effects in
domination, legitimacy, sharing Simeonova 2018, 2015 organizations, IS and strategy.
coercion, resource allocation
Systemic power practice,
relational, empowerment,
capacity.
228 b o y k a s i m e o n o va e t a l .

IS allow people to do; how IS are used to share information and knowledge; how power
distribution affects the use of IS; how IS are used from different hierarchical levels, and
how they empower these (i.e., the consequences of the implementation of IS and change
in practices and their reflection in terms of power dynamics; how power dynamics affect
IS strategy). The effects of the different forms of power in organizations (following the
episodic and systemic power perspective) and links to IS and IS strategy are summarized
in Table 10.2.
Table 10.2 presents the different manifestations of power following the episodic and sys-
temic conceptualization. The episodic manifestations of power (i.e., hierarchical, authorita-
tive, legitimate, knowledge as power, resource dependence, power asymmetries, surveil-
lance, resistance, self-interest, etc.) appear to be the predominant forms of power, exhibiting
negative effects on use of IS, strategy, knowledge processes, organizational relationships, and
inter-organizational collaborations. Some systemic traits of power have also been observed
in shared goals, empowerment, organizational culture, transparency, autonomy, trust,

Table 10.2 Power in Organizations

Forms of power Perceived effects of power Example references

Episodic: Negative effect as people occupying Galinsky et al. 2008;
hierarchical, higher hierarchical levels have access to
authoritative, more resources and have the freedom to
legitimate power. act as they deem appropriate.
Management ban the use of Web 2.0 Simeonova 2018
technologies for communication and
knowledge sharing.
The self-interest of these authoritative Raman and Bharadwaj 2012;
higher-power people dominates over
the interests of the lower-power
people and over the organizational
interests.
Use of knowledge management systems Michailova and Husted 2003
to increase managers’ control and Gray 2001
reduce employees’ power.
Possessors of high power and status Avison et al. 1999
influence others as well as policy and IS
strategy.
Episodic: knowledge Perception that by sharing knowledge Lawrence et al. 2005
as power people give away their power, or lose
their competitive position and advantage
in the organization.
Losing ownership of knowledge when Wang and Noe 2010
sharing using technology.
Episodic: equal Limited opportunity for people Bunderson and Reagans 2011;
consideration from lower levels have to voice their Heizmann 2011
opinions; not giving consideration to
ideas stemming from the lower levels.
 o r g a n i z at i o n a l p o w e r dy n a m i c s 229

Forms of power Perceived effects of power Example references

Episodic: resource Organizations depending on key Muthusamy and White 2005
dependence employees.
Dependency between organizational
branches; between alliance members;
between subsidiaries based in different
countries.
Power, ascribed in hidden political Audzeyeva and Hudson 2016
agendas, self-interests, conflicts,
insufficient resource allocation, affects
the strategic benefits of business
intelligence.
Episodic: resistance IS as power instruments in eliciting McBride 2013 Markus 1983
clashes with existing power structures Hussain and Cornelius 2009
which leads to resistance. Doolin 2004
Resistance to power affected by the
powerful individuals
Episodic: procedural Procedures, governing rules, prescribed Blackler 2011
Systemic: OC norms of behavior. Organizational
culture (OC), “unobtrusive” norms and
ways of representing, talking or working.
Systemic: goals, Shared goals, alignment with Contu 2013; Willem and
social aspects organizational goals, transparency, Scarbrough 2006
communities of practice, social capital.
Systemic: Removing resource constraints, Chuang et al. 2016
empowerment participating in decision-making,
reduced administrative obstacles.
IS to neutralize power asymmetries Habermas 1990
through exchange of ideas.
Systemic: Technology provides the opportunity Leonardi et al. 2013; McAfee
transparency, to avow multiple voices without 2006
multiple voices, privileging one’s opinions and
communication expressions over others.
Providing transparency and facilitating Alavi and Leidner 2001
communication and interaction between
people from different hierarchical
levels. Knowledge management systems
to facilitate knowledge management
processes.
Episodic power: IS implementation shapes power Dhillon et al. 2011
power residing in the relations, power relations shape how IS
system gets implemented. Power has an impact
on individual intensions which shape IS
implementation.
The introduction of IS could lead to Silva and Hirschheim 2007
redistribution to power such that power
is concentrated in the higher authorities
which may be a cause for resistance to
change.
230 b o y k a s i m e o n o va e t a l .

Forms of power Perceived effects of power Example references

Episodic power: Gain power over others to the disdain Constantinides and Barrett
self-interest of others and gain access to different 2006 Azad and Faraj 2011
resources.
Inscribing interests using power and
politics. Power as a manifestation of
strategy and interests through IS.
Systemic power: Power shapes strategy through discourse Hardy and Thomas 2014
discourse and material practices.
Episodic power: Controlling resources, centralized Busquets 2010
Network Systemic decision-making, controlling strategic
power: network assets.
Building structural holes, building Busquets 2010
trust, actors’ autonomy and self-control
and the capacity of the network to
recombine resources, commitment,
co-creation.
Building trust, overcoming structural Ngwenyama and Nielsen 2014
power deficit (i.e. authority, resources).
Learning through a network: evening Moe et al. 2017
out power imbalances.
Episodic power: Power and IT governance: power of top Bradley et al. 2012
structural Systemic management to control strategy.
power: structural Inter-organizational structural power: Son et al. 2005
source of influence of powerful Cendon and Jarvenpaa 2001
organizations over less powerful ones,
dependency. Cooperative power,
willingness to cooperate, communicate,
focus on the community interests,
empowerment.
Episodic power: Negative behavioral tactics: coercion, Cendon and Jarvenpaa 2001
behavioral Systemic manipulation, resistance, self-interests.
power: behavioral Positive behavioral tactics: obtaining
external resources, creating alliances
and partnerships, help build an
infrastructure.
Episodic power: Tools: surveillance, monitoring, Simeonova et al. 2018a
network of activities control, resistance (episodic power); Simeonova et al. 2018b
and context Systemic transparency, autonomy, multiple
power: network of voices (systemic power).
activities and context Rules: procedures, rules and norms
(episodic power); organizational
culture (episodic/systemic power).
Community: social relationships, trust,
social capital, networks (systemic
power).
Division of labor: hierarchy, position,
control, coercion (episodic power);
empowerment (systemic power).
 o r g a n i z at i o n a l p o w e r dy n a m i c s 231

Forms of power Perceived effects of power Example references

Episodic power: Power imbalances between vendor and Ravishankar et al. 2013;
asymmetries of client in offshore relationships. Ravishankar 2015
power Power imbalances between Eastern and Levina and Vaast 2008
Western countries and cultures.
Offshore managers’ lack of seniority and
access to information.
Supply-chain domination of large Webster 1995
and powerful organizations over less
powerful ones.
Power imbalance between large Power and Gruner 2017
organizations and SMEs where the latter
lack power, resources and planned IS
strategy.

networks, cooperation. These systemic manifestations of power have productive effects

on knowledge processes, use of IS, strategy, organizational and inter-organizational rela-
tionships and collaborations. The review also displays the limited research on the interlinks
between episodic and systemic power.
Hence, in order to explicate the different forms of power and their interlinks as well as
to account for these in research, we develop an analytical framework of power The Power
Matrix which is presented as Figure 10.1. The Power Matrix outlines the interplay of dif-
ferent types of power, actors, and IS. It presents the manifestations of power in organiza-
tions along two axes: power (episodic power, systemic power) and locus (role of actors,
role of IS).
The Power Matrix outlines four quadrants of different types of power differentiating
between episodic and systemic power, the role of actors and the role of IS. Power from
the episodic and actor perspective is defined as power as possession. The manifestations
of power as possession in organizations are: hierarchical, authoritative, legitimate, knowl-
edge, resource access, self-interest. Power from the episodic and IS perspective is described
as power as control. The manifestations of power as control in organizations are: rules,
norms, monitoring, surveillance, discipline, compliance, digitalization. Power from the systemic
and actor perspective is outlined as power as practice. The manifestations of power as
practice in organizations are: shared goals/interests, communities of practice, social capital,
trust, collaboration, network, empowerment, knowing. Power from systemic and IS perspec-
tive is characterized as power as facilitation. The manifestations of power as facilitation
in organizations are: transparency, autonomy, multi-vocality, empowerment, discourse, decision-
making, organizational culture.
The literature typically outlines examples of uni-directional effects (e.g., power as posses-
sion leads to the use of IS as power as control), while power as practice leads to the enabling
of IS as facilitation. However, the interactions between the four quadrants have been subject
to limited research. Therefore, the Power Matrix allows to go beyond the uni-directional
effects and demonstrate complex interlinkages of power as possession, practice, control and
facilitation.
We posit that power in organizations is dynamic and contingent; hence, power as pos-
session could lead to instances of power as practice, power as facilitation and power as
232 b o y k a s i m e o n o va e t a l .

Locus
Role of actors Role of IS

POWER AS POSSESSION POWER AS CONTROL

Manifestations: hierarchical, Manifestations: rules, norms,
Episodic

authoritative, legitimate, knowledge, monitoring, surveillance, discipline,

resource access, self-interest compliance, digitalization
Strategy: exploitation, direction/goal Strategy: exploitation, performance
setting, imposition of change measurement, routinization of change

POWER AS PRACTICE POWER AS FACILITATION

Manifestations: shared goals/interests, Manifestations: transparency,
communities of practice, social capital, autonomy, multivocality,
Systemic

trust, collaboration, network, empowerment, discourse, decision-

empowerment, knowing making, organizational culture
Strategy: exploration, experimentation, Strategy: exploration, innovation,
innovation, instilling change institutionalizing change

Figure 10.1 The Power Matrix

control, not just power as control as predominantly outlined in the literature. For exam-
ple, strict hierarchy could be maneuvered through informal practices, networks and use
of IS (Malaurent and Avison 2016; Simeonova 2014). Similarly, power as practice could
lead to instances of power as possession, power as control, and power as facilitation. For
example, an informal leader or community of practice could gain resources and legitimate
power (Simeonova 2014). The role of IS predominantly depends on the role of actors and
the strategy utilizing its facilitative or restrictive characteristics. However, implementa-
tion and use of IS could also challenge the status quo, current practices and redistribu-
tions of power. For example, the use of social media could enable multivocality and lead
to empowerment (Huang et al. 2013). IS from a power as control could also limit the role
of actors as outlined in an example of the use of Decision Support Systems and big data,
where the system outputs have limited the power of the actors in strategic decision-making
(Aversa et al. 2018). The increasing digitalization and the exploitation of digital technolo-
gies (power and strategy as control) could affect strategic decision-making (power as facilita-
tion), collaboration, practice, exploration (power and strategy as practice) and also hierarchy
and authority (power as possession). Digitalization and big data in organizations and society
is pervasive, and accounting for the power dynamics are one (neglected) dimension in
the evaluation of these technologies. Digital technologies are increasingly used for per-
formance management and decision-making (Simeonova et al. 2018c). Using the Power
Matrix we illustrate recursive links between power as possession, power as control, power
as practice, and power as facilitation, explicating the interplay between different types of
power, strategy, actors and IS.
Regarding strategy, the framework identifies links between power as possession and a
type of IS strategy which is used by actors for exploitation and imposition of change but it also
can help the direction/goals setting and the triggering of change (Lawrence et al. 2012; Marabelli
and Galliers 2017). The strategic use of IS from the power as control perspective is mani-
 o r g a n i z at i o n a l p o w e r dy n a m i c s 233

fested in exploitation of technology, performance management and routinization of change. Strategy

from the power as practice and actors perspective is described as exploration, experimentation,
instilling change, and innovation. It has been argued that crossing knowledge and political
boundaries enables movement from knowledge re-use to creativity and innovation (Carlile
2004). In similar fashion, crossing the power and strategy boundaries may be an important
avenue for research. Additionally, while research on the importance of achieving a balance
of exploitation and exploration in ambidextrous organization is on-going (e.g., Cao et al.
2009; Lavie et al. 2010; March 1991; O’Reilly and Tushman 2013), links to power are
lacking. Hence the framework could help consider different forms of power and issues in
achieving ambidexterity.

Conclusion and Future Research

This chapter began by arguing that power dynamics are an important consideration for
the study of strategic IS. Several dominant approaches to studying power were discussed,
namely: the Foucauldian perspective, circuits of power, power and empowerment, episodic
and systemic power. We argued that the episodic and systemic power perspective is a use-
ful means of studying power because it helps to unpack the effects and interplay of different
forms of power as well as integrating important considerations from the other approaches.
An analytical framework has been proposed that accounts for the role of actors and IS as well
as the episodic and systemic power dimensions. Future research could build on the ideas dis-
cussed and outlined in this chapter by (i) empirically demonstrating how power dynamics are
infused within organizations, IS and strategy; (ii) considering different forms of power, their
manifestations and their interplay as outlined in the Power Matrix framework; (iii) using the
Power Matrix as a sensitizing lens for making sense of power issues, and (iv) continuing the
discourse on power dynamics and raising such issues to the surface so that they can be better
accounted for in strategic IS studies.

Notes
1 Refer to Jasperson et al. 2002; Bradshaw-Camball and Murray 1991 for variety of definitions of
power.
2 For additional perspectives on power, e.g. philosophical foundations such as Lukes and Habermas,
and such aspects as culture and discourse, refer to Clegg (1989), Clegg et al. (2006), Clegg and
Haugaard (2009).

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Questions for Discussion

1 Why is it important to consider different forms of power along with the role of actors
and IS?
2 Why are power dynamics under-researched and largely ignored in the field of IS? Do
you consider power dynamics as an important aspect of organizations, IS and strategy?
3 What are the connections between the different power quadrants in the framework
outlined in this chapter? How can power move from one quadrant to another through
the implementation of IS and strategy?
4 Use the framework to evaluate the digital transformation examples and the roles of
the Chief Digital Officers (CDOs) provided in chapters 6, 7, 8, and 9. How could the
framework be used to explain the power of CDOs?
5 How might digital technology be described in terms of a power perspective? What are
the interlinkages between the four forms of power in the framework and digital leader-
ship, digital technology and digital transformation?
6 Given the growing importance of digital technology and the phenomenon of digital
transformation, such theoretical tools as the framework presented in this chapter could
enable greater understanding of power dynamics. Which aspects of the framework are
most helpful in understanding power in digital transformations?

Further Reading
Marabelli, M., Galliers, R. D. (2017). A reflection on information systems strategizing: The role of
power and everyday practices. Information Systems Journal, 27, 347–366.
Simeonova, B. (2018). Transactive memory systems and Web 2.0 in knowledge sharing: A conceptual
model based on activity theory and critical realism. Information Systems Journal, 28(4), 592–611.
PART III

Organizing and Governing the

IS Function

H aving c o ns i d e r e d f o un d at i o ns in IS strategy and strategizing,

and new developments in the domain of digital strategy and organizational transforma-
tion, we now turn to the perennial issues of organizing and governing the IS function. Because
decisions concerning investments in information technology occur regularly and because
investments in technology need to be astutely managed to derive full value, organizations need
sound principles for organizing and governing the IS function. The full contents of Part III are
summarized in the second-from-top layer of Figure P3.1.
The first reading in this chapter is a highly cited MIS Quarterly Executive paper titled
“Principles and Models for Organizing the IT Function” by Ritu Agarwal and V. Sambamurthy.
The authors conducted a two-year study of how leading-edge firms organized their IT function
with a view towards encouraging innovation and enabling superior business performance. The
paper discusses three models of organizing: the Partner Model in which IT is an active partner
in business innovation, the Platform Model in which IT provides the resources for business
innovation, and the Scalable Model in which IT provides flexible and scalable resources for
the business.
Given the cyclical nature of the economy, no CIO can expect to manage exclusively during
periods of prosperity. The second reading examines different methods for managing the IT
function during challenging economic times. The reading, titled “How CIOs Manage IT during
Economic Decline: Surviving and Thriving amid Uncertainty” is authored by Dorothy Leidner,
Robert Beatty, and Jane Mackay. Based on interviews with 20 CIOs of firms ranging in size
from approximately $800 million to $ 10 billion, the authors identify four approaches to
managing IT during economic decline: maintain the legacy, clean house, extend the lifecycle,
and bulletproof the infrastructure. The four approaches vary depending on whether the CIO
wishes to retain versus rethink the existing strategic plan and whether the CIO takes a short- or
long-term perspective of IT. We believe the lessons learned in this paper extend across time
240 i n t r o d u c t i o n t o pa r t i i i

Part Four: Some current and emerging challenges

Ch.16: Opening strategy through social media
Ch.17: Organizational socialization and social media
Ch.18: Decision support systems failures
Ch.19: The opportunities and challenges of datification
Ch.20: Ethical issues

Part Three: Organizing and governing the IS funcon

Ch 11: Principles and models
Ch.12: Managing in economic decline
Ch.13: CIO profiles
Ch.14: Alternative roles for chief digital officers
Ch.15: The IS Organization

Part Two: Digital strategy and organizaonal transformaon

Ch.6: Navigating digital transformation
Ch.7: Formulating a digital strategy
Ch.8: Building digital capabilities
Ch.9: Chief digital officers
Ch.10: Organizational power dynamics

Part One: Foundaons to IS strategy and strategizing

Ch.1: Historical approaches
Ch.2: Further reflec ons
Ch.3: A cri que
Ch.4: Conceptual developments
Ch.5: Aligning prac ces

Figure P3.1 The focus of Part III: Organizing and governing the IS function

and place. Regardless of the trigger for economic decline, CIOs have choices to make when
managing IT and this reading helps synthesize the options.
An objective of effective governance of IT is to improve organizational performance.
IT is critical to helping organizations operate efficiently and helping organizations create
value. The third reading considers the important role by the CIO in contributing to firm per-
formance. Titled “CIO Leadership Profiles: Implications of Matching CIO Authority and
Leadership Capability on IT Impact”, this reading is authored by David Preston, Dorothy
Leidner, and Daniel Chen. The authors develop a taxonomy of four CIO leadership profiles –
the IT mechanic, the IT laggard, the IT advisor, and the IT orchestrator – that vary based on
the dual dimensions of CIO leadership quality and CIO decision-making authority. The impact
of IT on firm contribution is highest for the IT orchestrator CIO types and lowest for the IT
mechanic CIO types. There may be times when an organization needs a good IT mechanic and
times when it needs a skilled IT orchestrator. The reading offers guidelines for CIOs on actions
to take to transition across the profiles.
 organizing and governing the is function 241

In recent years, a new c-level position has been created in many organizations, that of the
Chief Digital Officer (CDO). With digital innovation impacting virtually every industry, many
organizations have been chosen to have a dedicated position to oversee digital innovation.
Because of the close relationship between digital innovation and IT innovation, one might well
wonder how this role differs from that of the CIO. The fourth reading in this chapter address
this issue. Titled “Three Types of Chief Digital Officers and the Reasons Organizations Adopt
the Role”, this reading is authored by Sanja Tumbas, Nicholas Berente, and Jan vom Brocke.
Based on interviews with 35 CDOs from various sectors, the authors describe three specific
domains in which CDOs must be skilled in order to be highly effective as CDOs: digital inno-
vation, data analytics, and customer engagement. In keeping with the previous readings that
identify profiles of different approaches to the same role, the authors identify three types of
CDOs and their accompanying characteristics.
The final reading in this chapter, “Rethinking the concept of the IS organization” by Joe
Peppard, encourages managers to consider the option of not treating the IS organization as
a sub-unit to be separately managed, but as a node in a social and knowledge network that is
impacted by, and impacts, other nodes. Only then, argues the author, can IT generate sustained
business value. Three organizing modes for generating value through IT: functional, partner-
ship, and pervasive. The author suggests that there is no decidedly clear description as to what
the IS organization should be. Less effort should be spent on attempting to optimize the IT unit
per se (and the CIO’s role per se) and more should be spent on coordinating and integrating
relevant knowledge that is located organizational-wide. From this perspective, the business-
IT “gap” or misalignment is much more of a knowledge gap manifested in relational issues.
Chapter 11

Ritu Agarwal and V. Sambamurthy

PRINCIPLES AND MODELS FOR

ORGANIZING THE IT FUNCTION

HOW SHOULD FIRMS ORGANIZE THEIR IT FUNCTION?

H ow sh o ul d c o n t em p o r a r y f i r m s organize their IT function?

Despite more than 20 years of experience and insights, this question continues to
dominate the attention and interest of CIOs and senior business executives. During the 1970s
and 1980s, firms alternated between centralized models (where authority for the majority
of IT decisions was located in the corporate IT group) and decentralized models (where the
authority for most IT decisions was located in the divisional or functional IT units).
During the 1990s, many firms gravitated toward the federal organizational model,
which dispersed control and authority for IT decisions. Corporate IS groups were vested
with authority for IT infrastructure decisions while divisional units had the authority for
decisions about strategic deployment of IT.1 Researchers have concluded that this model
of distributed governance and decision-authority is particularly appropriate for large, mul-
tidivisional firms because it balances enterprise priorities for scale and IT standardization
with divisional priorities for IT innovation in their products, services, or customer relation-
ships.2
However, the federal model and its distributed governance might not adequately address
the strategic, organizational, and technological realities facing today’s IT executives, for two
reasons.
First, IT now plays a more prominent role in corporate agility, enabling rapid and con-
tinual business innovation in products, services, channels, and supply and demand chain man-
agement.3 Hence, firms are investing heavily in enterprise digital platforms (such as enter-
prise resource planning, customer relationship management, supply chain management, and
wireless technologies) to support innovations in their “ecosystems,” that is, their business
partnerships with customers, suppliers, and other specialist firms (such as contract manufac-
turers).4 Decisions about business innovations require significant levels of collaboration and
partnership between IT and business executives.
244 r i t u a g a r wa l a n d v . s a m b a m ur t h y

In their case study of Marshall Industries (now Avnet), El Sawy and his colleagues
described how the IT function was organized for continuous IT-based innovation. Teams of
IT and business executives responsible for innovation focused on drivers of business success,
such as supply chain management and customer order capture.5 Meanwhile, a small group
managed the common IT infrastructure. This structure retains the fundamental characteris-
tics of the federal model, but it emphasizes far greater collaboration between business and
IT executives.
Second, today’s accelerated rates of technological change and obsolescence in the IT mar-
ket require organizational models that pay close attention to human capital and relationships
with vendors and consultants.6
In their case study of Bell Atlantic (now Verizon), Clark and colleagues described an
organizational model, called the Centers of Excellence, to develop and leverage human capi-
tal.7 This model has three components:

1 Units called skillcenters focus on developing valued IT skills; IT professionals are

assigned to these units to be trained and developed in those skills,
2 Account managers are IT professionals responsible for nurturing strategic ideas about
IT use,
3 Temporary project teams are staffed with IT professionals from the skillcenters and
are responsible for rapid applications delivery using the specifications created by the
account managers.

While this centers of excellence model subscribes to the federal logic, it emphasizes greater
centralization than the pure federal model, because most of the IT developers are centralized
within the IT skillcenters.
Similarly, Cross and colleagues described British Petroleum’s (now BP) IT organizational
model that used multisourcing agreements to garner cost economy and flexibility.8 In this
model, the firm partnered with multiple external vendors and systems integrators to manage
its IT infrastructure, utility services (e.g., helpdesk), and solutions delivery. Even though
the model is consistent with the federal logic, it primarily aims to leverage external partners
through a small corporate IS group; a limited number of IS professionals are located in divi-
sions.
As these examples illustrate, novel IT organizational models are emerging. Yet, there has
been no systematic effort to document them and examine where each might be appropriate.
The field needs fresh thinking on the following questions:

•• What principles should be applied to organizing the IT function?

•• What IT organizational models are viable today?

In collaboration with the Advanced Practices Council of SIM International, we recently

conducted a two-year study to discover answers to these two questions.9 After interviewing
CIOs and senior IT executives from nearly 30 firms, and conducting in-depth case studies of
seven firms in different sectors of the economy, we identified new principles and organiza-
tional models for the IT function.
The principles explain how executives can think about organizing the IT function (see
Table 11.1) to boost business innovation. When used to foster different roles for the IT
function, they result in three different organizational models (see Table 11.2). Each model
subscribes to the general principles, but combines them in distinct ways to support different
value propositions and roles for IT.
 principles and models 245

Table 11.1 Organizing Principles for the IT Function

Guiding Principle Recommended Managerial Actions

Organize IT to encourage
co-evolution with the rest of
• Design reporting relationships for key IT executives that
focus on strategic business drivers.
the business.
• Engage IT executives in experimenting with new
IT-enabled business models and business practices through
Organize IT to nurture
relationship networks for appropriate incentives.
visioning, innovation, and
sourcing.
• Nurture visioning, innovation, and sourcing networks
through:
Organize IT function to 1. Internal coordination mechanisms, including executive
explicitly manage eight value- councils, IT management councils, divisional steering
creating processes. councils, IT standing teams, account managers, divisional
information officers, service level agreements, and
informal relationship building.
2. External partnering tactics, such as multisourcing
agreements, strategic alliances and joint ventures.
• Adopt a modular approach to selecting optimal organizing
options for individual value-creating IT processes.

Table 11.2 Features of the Three Organizational Models

The Partner Model The Platform Model The Scalable Model

Strategic IT is an active partner IT provides the assets, IT provides flexible
Positioning of IT in business innovation services, and resources and scalable resources
for business innovation for the business
across the enterprise
Distinguishing
Characteristics of
• Business leadership
in IT innovation
• Corporate IT as the
factory: delivery of
• Centralized IT
organization for
the Model through divisional scaleable, seamless, leveragability
information officers and flexible
° Cross-unit asset
• Corporate IT
catalyzes innovation
infrastructure utilization

through strategic
° Enterprise-wide
platform and ° Centers of
Excellence
consulting capabilities structures for
• Explicit focus on • Business ownership human capital
three types of costs of IT innovation • Strong IT presence
° Business ° Senior executives in business units
applications costs in business units • Multisourcing
° Infrastructure ° relationship with arrangements
Dotted line
costs
CIO
• Scaling for variable
° Utility costs resource needs
• Dual, matrixed • Account managers as
liaisons between IT
reporting
and business units
(continued)
246 r i t u a g a r wa l a n d v . s a m b a m ur t h y

The Partner Model The Platform Model The Scalable Model

Where does this
Model Work?
• A need to promote
business innovation
• Global businesses
in multiple lines of
• Global businesses
in related lines of
through IT business business
• Business executives
lack a deep
° Unique IT needs
across units
• Cyclical industries

understanding of IT • Strong level of IT

• Organizations with
multiple related
knowledge among
business managers
businesses
° High-tech sectors
• Strong IT leadership
with a history of
trust and credibility

First we describe the organizing principles, then the three organizational models. Our
goal is to assist senior IT and business executives in assessing the appropriateness of their cur-
rent IT organizational model and in perhaps determining a more appropriate model. Also,
these descriptions respond to researchers’ need for fresh insights about organizing the IT
function.10

Principles for Organizing the IT Function

Three principles underlie new ways to organize the IT function (See Table 11.1):

Principle 1: Organize IT to Foster Co-evolution between the Business and the

IT Function
The strategic role of IT is to enable innovative business strategies and processes. In the past,
IT executives have focused on aligning their function with the business. But alignment can be
too static for today’s fast pace. A better goal is “co-evolution.”
Co-evolution means that the capabilities of the IT function and the rest of the business
develop iteratively and reciprocally over time. For example, firms that have developed busi-
ness capabilities for “direct to the customer” order capture and fulfillment have invested
in information technologies that allow customers to access their product databases through
portals, configure their orders, and observe the progress on their order through the manu-
facturing and logistics processes. At the same time, newer technologies, such as personaliza-
tion, enable companies to develop better business capabilities to customize their relationships
with customers. For instance, they can capture and store customer profiles, differentiate
customers’ various levels of business with the firm, and offer customized pricing and services
to individual or clusters of customers. Hence, the IT and business capabilities for customer
relationship management intertwine, and develop iteratively over time.
The IT organizational structure must facilitate such natural occurrences of co-evolution.
Although most firms have generally sought to align their IT capabilities with their business
capabilities, the IT function’s structure must also assist the firm in exploiting such IT-enabled
opportunities as virtual integration, direct access to customers, and cross-divisional or busi-
ness unit integration.11
 principles and models 247

For example, the executive management team at a large telecommunications firm in our
study considered customer advocacy and customer relationships to be the strategic drivers
of its business model. Therefore, management focused on facilitating co-evolution of IT and
customer-centric capabilities by: (i) having the CIO report to the senior executive respon-
sible for customer advocacy, and (ii) linking business and IT executives’ compensation to
customer-centric innovation utilizing IT.
Generally, emphasizing co-evolution extends a firm’s existing emphasis on strategic align-
ment, where the IT function is already organized to support business strategies and capabilities.
However, co-evolution requires going beyond the alignment model by emphasizing a two-way
relationship between the development of business capabilities and IT capabilities. The align-
ment models have been criticized for placing IT management into a “lag” role which prevents
IT investments and capabilities from potentially shaping business strategy.12 Alignment think-
ing precludes our first principle: organizing to foster co-evolution of IT and the business.

Principle 2: Organize IT to Nurture Relationship Networks for Visioning,

Innovation, and Sourcing
Generally, IT decision-making authority has been dispersed. This is not the most effective
organizational structure, though, because it does not explicitly foster collaboration among the
four stakeholders vital to successful management and use of IT: executive management, business
management, IT management, and external vendors (Figure 11.1). IT’s organizational structure
must facilitate collaboration among these four to blend their knowledge and influence. We
believe that three kinds of “relationship networks” are important for organizing IT activities to
foster such collaboration: visioning networks, innovation networks, and sourcing networks.
Visioning networks are relationship networks among senior management and senior
IT executives (e.g., the CIO and some of the CIO’s direct reports). Their purpose is to foster
collaboration among these executives for creating and articulating strategic vision about the
role and value of IT in the firm. Visioning networks help top management teams describe
their perspectives on the role of IT, their strategic priorities for IT use, and the links they see
between IT and drivers of the business strategy.
The primary mechanism for establishing a visioning network is to have the CIO as a formal
member of the top management team. Additionally, Rockart and colleagues have noted the
trend toward using IT executive councils as a mechanism for visioning networks.13 These
councils include the CEO, COO, CIO, and other senior business executives as members.
They devote time to developing, articulating, and maintaining the strategic vision of the use
of IT in the firm.
Schein describes four perspectives of the strategic role of IT: automation, informating
up to enhance command and control, informating down to promote decentralization and
empowerment, and transformation, that is, using IT to reshape competition or the nature of
the industry.14 Visioning networks foster the sharing of such perspectives.
In our study, a large telecommunications firm considered customer relationships to be
its strategic value-creating activity; therefore, the strategic role of IT is to enable and shape
customer relationships. The visioning network mechanism they used was the CIO’s formal
membership in the top management team.
Table 11.1 shows a variety of mechanisms for all three relationship networks.
Innovation networks are relationship networks between business and IT executives.
Their purpose is to foster collaboration between these executives when they are conceptual-
izing and implementing IT applications specifically applications that aim to enhance the firm’s
agility and innovation in customer relationships, manufacturing, product development or
supply chain management. Innovation networks can utilize such coordination mechanisms as
248 r i t u a g a r wa l a n d v . s a m b a m ur t h y

Senior Executive Leadership

• Vision
• Value drivers

IT Management
Business Management • Infrastructure
• Value innovation • Services
• Technical skills

IT Vendors and Consultants

• New knowledge
• Services and skills

Figure 11.1 Key Stakeholders in The IT Relational Networks

executive councils, IT management councils, divisional steering councils, IT standing teams,

account managers, and divisional information officers.
So whereas visioning networks engage top management to shape overall enterprise per-
spectives about the strategic role and value of IT, innovation networks focus on specific
innovations and strategic IT applications.
In their study of about 40 firms, Brown and Sambamurthy found that innovation net-
works develop both through collaborations between business and IT executives and through
collaborations among IT executives dispersed across the enterprise.15 They also found that
firms must use combinations of coordination mechanisms to nurture innovation.16 Other IS
researchers have found that the use of coordination mechanisms increases the likelihood of
IT innovation occurring.17
Sourcing networks are relationship networks between IT executives and external
partners. Their purpose is to foster collaboration between these internal and external parties
when they are negotiating and managing efficient, cost-effective, and innovative uses of IT
assets and services through multisourcing arrangements, joint ventures, or strategic alliances.
DiRomualdo and Gurbaxani demonstrate that sourcing networks can help companies not
only lower their IT costs but also augment their IT capabilities and business thinking about
innovative uses of IT.18 Lacity and colleagues have also emphasized the importance of using
specific organizational design mechanisms to leverage sourcing networks to achieve more
effective management and use of IT.19

Principle 3: Organize IT to Explicitly Manage Eight Value-Creating

Processes
In the past, the IT function had been viewed as a monolithic structure, and organizational
design has focused primarily on finding the best options to manage infrastructure and deliver
strategic IT applications. However, this approach proves to be limiting because IT func-
tions in most modern firms perform a wider range of activities. As information technologies
become a strategic differentiator, it is better to think of the IT function as a portfolio of eight
value-creating processes each of which needs to be organized for its own best contribution
and leverage. These eight form three sets of processes (See Figure 11.2 and Table 11.3),
called foundation processes, primary processes, and secondary processes.
 principles and models 249

Secondary
Strategic Planning
Processes
Financial Management

Primary Value Solutions Services

Processes Innovation Delivery Provisioning

Foundation Infrastructure Human Capital Relationship

Processes Management Management Management

Figure 11.2 Organizational Building Blocks: Creating Value Processes

Table 11.3 Value-Creating Processes in the IT Function

Process Description Example Organizing Options

Infrastructure Building and managing the • Centralized
management blueprint for investing in
computing, networking,
• Outsourced

database, object-base, and other • Leased

key infrastructure technologies.
Includes establishment and
management of IT infrastructure
standards.
Human capital
management
Identifying the know-how the
IT function needs to possess,
• Centers of excellence

with respect to technology,

business, and strategy. Acquiring,
developing, and retaining IT
talent.
Relationship
management
Partnering with internal clients,
external vendors, and business
• Formal councils and
crossfunctional teams
peers to develop a shared
understanding of IT’s vision and
• Job rotation

role. Managing expectations across • Alliance management teams

stakeholder groups. • Informal one-on-one
relationships
Value-innovation Strategic analysis of IT-based
business opportunities and creative
• Centralized, with account
managers for individual units
conceptualizations of ways in
which IT can be used to strengthen
• Centralized, with mirror
image units for individual
business competencies, customer businesses
relationships, and business partner
networks. • Decentralized
• Federal
(continued)
250 r i t u a g a r wa l a n d v . s a m b a m ur t h y

Process Description Example Organizing Options

Solutions delivery Analysis of business needs for IT, • Centralized
conceptualizing of IT applications,
and delivery of applications either
• Federal

through internal development, • Outsourced

external contracting, or • Independent IT subsidiary
integration of packaged software.
Services provisioning The provisioning of utilities, such • Centralized
as the data center, and services,
such as helpdesks and desktop
• Decentralized

management, for users across the • Outsourced

corporation.
Strategic planning Enterprise-wide activities aimed • Centralized
at establishing strategic business
thrusts and determining how
• Federal

strategic IT thrusts will support the

business.
Financial management The structuring of service
level agreements, tracking and
• Centralized

benchmarking the costs of IT

services, and developing the
business case and ROI analyses
of IT infrastructure investment
proposals.

Foundation processes relate to creating and managing three fundamental IT capabili-

ties: (1) IT infrastructure, (2) IT human capital, and (3) IT relationships (specifically, part-
nering with business executives and partnering with vendors and systems integrators). These
IT capabilities are at the heart of how IT functions help their business partners differentiate
their strategies and nurture continuous innovation through IT.20
Primary processes are those that must be managed in every IT function, to convert
foundation IT capabilities into business applications and services. Three primary processes
are (4) value-innovation (that is, conceptualizing strategic IT needs and opportunities in the
form of applications), (5) solutions delivery (building IT applications), and (6) services pro-
visioning (i.e., providing helpdesk, desktop configuration, and other support IT services).
They are like the front office of IT or the touch points through which business clients perceive
the quality, contributions, and effectiveness of the IT function.
Secondary processes are those important to the wellbeing of an IT function. Their
contribution is exhibited by how well they support the foundation and primary processes.
These two processes are (7) strategic planning and (8) financial management.
We recommend that IT management think modularly by selecting the best organizing
option for each of the eight value-creating processes.21 For example, in most firms, it is
appropriate to manage the IT infrastructure through a centralized IT unit, to outsource spe-
cific infrastructure services (such as, web hosting), and to lease desktops for a faster technol-
ogy refresh (for example, every two years). Such organization permits more rapid changes
than decentralized IT or complete in-house sourcing of infrastructure services. Similarly,
when it comes to organizing solutions delivery, possible choices include a corporate IT unit,
divisional IT units, or strategic partnerships with third-party solutions developers.
 principles and models 251

Based on our research, Table 11.3 shows some of the appropriate choices for organizing
each of the eight value-creating processes in today’s firms. By thinking modularly, manage-
ment chooses an option for each, and manages them all as a portfolio of activities within the
IT function.
Modular thinking promotes flexibility in organizing the IT function. When changes in
the business, technology, or the firm require attention to a specific value-creating process,
IT functions that employ modular thinking can change the organizing option for just that
process. For example, relying on packaged solutions rather than in-house coding can shift a
firm’s reliance from large internal applications development groups (either at corporate or
in divisions) to sourcing relationships with systems integrators. If IT then needs to modify
its solutions delivery process to adjust to, say, an organizational change, it can do so without
significantly altering the IT function’s overall structure. Similarly, companies can emphasize
human capital management by recentralizing IT staff or creating centers of excellence, each
focusing on specific systems. These structural shifts can be localized to human capital man-
agement only, and not require significant changes to other IT functions.
Taken together, these three principles represent fresh thinking about organizational design
of the IT function, emphasizing co-evolution rather than alignment, emphasizing relationship
networks that foster collaboration rather than dispersing IT decision-making authority, and
emphasizing modularity in the IT function around value-creating processes rather than creat-
ing monolithic organizational architectures.

Three Organizational Models for the IT Function

In our research, we uncovered three viable IT organizational models. All draw upon the
principles, yet have distinct goals.
The Partner Model, the first model, primarily aims to ensure that the IT function is an active
and direct participant in collaborating with business executives to make business innovation
through IT a reality.
The Platform Model, the second model, primarily aims to ensure that the IT function pro-
vides the assets, services, and resources for business innovation across the enterprise. Thus,
the IT function acts as an enabler of innovation rather than as a direct catalyst for innovation,
as in the Partner Model.
The Scalable Model, the third model, primarily aims for maximum flexibility in its people
resources, so that the IT function can expand and contract in concert with business cycles. A
salient aspect of this model, in contrast with the other two models, is that it makes extensive
use of sourcing relationships with vendors and systems integrators to achieve flexibility in IT
resources. This model seeks to facilitate IT-based business innovation without committing
significant organizational investments to in-house IT resources.

The Partner Model: Being a Catalyst for Innovation

In this organizational model, IT is a proactive partner in the innovation process. It stimulates,
catalyzes, and “seeds” thinking about strategic uses of IT. In particular, this model facilitates
co-evolution through vigorous collaboration between business and IS executives, in both
devising IT-enabled business capabilities and in setting the direction and timing of future IT
capabilities.
The Partner Model focuses on innovation networks (from Principle 2) and emphasizes
three value-creating processes in designing the IT function: value-innovation, relationship
management, and financial management (in Principle 3).
252 r i t u a g a r wa l a n d v . s a m b a m ur t h y

Figure 11.3 The Partner Model

A large hospitality firm. A primary example of the Partner Model in practice is at a

large hospitality firm.
Principle 1: Co-evolution. When the current CIO arrived at this firm, IT was adequately
aligned with the business strategy and adequately supported it. However, responding to the
Internet, globalization, and competitive rivalry would require greater attention to business
innovation and agility through IT. Corporate management expected IT to shape value-added
services and relationships with customers and enhance brand equity. At the same time, to
further develop customer relationships and heighten brand management, the firm became
interested in using personalization, data mining, and wireless mobility technologies. In short,
the firm realized it needed to transform IT from an alignment to a co-evolution mindset.
Furthermore, the CIO realized that the critical success factor for IT would be the effec-
tiveness of the innovation network: how well IT and business executives would collaborate
in generating a stream of innovative IT applications and in making IT investment choices.
Finally, the CIO realized that success of his organizational model would hinge on the quality
of the value-innovation process and how well this process blended IT and business capabilities
and resources.
Principle 2: Relationship networks. Figure 11.3 shows the organizational model of the IT
function at this hospitality firm. To sustain co-evolutionary thinking and strengthen the role
of IT as a strategic differentiator, the CIO reported to the CEO and became a member of
the senior executive leadership team. As illustrated in Figure 11.3, his membership in the
top management team built the visioning network. The group recognized the transformative
power of IT for their customer relationships, so they could provide the vision for directing
IT innovation in customer-facing activities.
The firm’s innovation network is promoted through interactions among Divisional
Information Officers (DIOs) and their business peers in the lines of business. In addition, a
limited set of partnerships with external vendors exists, providing sourcing networks, even
though sourcing networks are not as salient at this firm as the other two types of relationship
networks.
 principles and models 253

Three specific characteristics of this firm’s organizational model warrant mention.

First, the divisional information officers are located in business units to strengthen the
innovation networks.
They report both to the CIO and the president of their business unit. They collaborate
with their business peers on two value-creating processes: value-innovation and solutions
delivery. As members of their divisional executive team, they stimulate IT innovation in
their division’s business. They also belong to the IT management council (which comprises
all senior IT executives and the CIO), so they share their division’s IT needs, priorities, and
issues with the rest of IT management. These interactions are important in shaping IT invest-
ments and priorities.
Second, to further strengthen value-innovation, a small strategic consulting group within
corporate IS proactively seeds strategic thinking and innovation across the enterprise. This
group of business and IT consultants works with the divisional information officers and exec-
utive teams in applying strategic thinking to IT-enabled opportunities and threats. The firm’s
business and IT executives attribute the success of their IT innovation activities to this stra-
tegic consulting group.
Third, the CIO and senior IT executives recognized that partnerships would be less effec-
tive if the business units did not fully understand IT costs. Therefore, the organizational
model focuses on three types of IT costs: business applications costs, infrastructure and utility
costs, and overhead costs. Management of costs can be seen as relating to the management of
value-creating processes, Principle 3.
Principle 3: Value-creating processes. Business divisions own their own business applications
costs because their executives develop the business cases for projects and provide the neces-
sary funding. The division information officers assist the business executives in developing
the business justification for projects and managing solutions delivery costs. Thus, applica-
tions costs are fully vested within the divisions.
Infrastructure and utility costs are managed as shared services and apportioned to divisions
through chargebacks, which are negotiated annually with the divisions. The firm periodically
benchmarks these utility and infrastructure costs to reassure division management of their
low-cost competitiveness. IT management also uses the chargebacks as a partnership-building
mechanism. Overall, their success is consistent with the observations of Ross and colleagues,
who found that the biggest promise of chargebacks lies in fostering harmonious and trustful
partnerships between IT and business units.22
Finally, overhead costs reflect the value-creating processes of strategic planning, financial
management, and human capital management. The costs are incurred by the Office of the
CIO and are managed as corporate headquarters costs.
Overall, by distinguishing among the costs of applications, infrastructure and utilities, and
overhead, the hospitality firm’s IT organizational model contributes significantly to creating
enduring and amicable partner relationships.
Summary. This Partner Model is most appropriate for firms that want to promote busi-
ness innovation through IT, but whose business executives lack a deep understanding of IT.
The model provides pathways for business and IT executives to collaborate in innovation
activities. This model is also appropriate for multidivisional firms that operate in related
lines of business and seek to exploit cross-divisional synergies through IT-based innovations.
Examples of such synergies include common customer relationship management, supplier
management systems, and cross-business “bundled” offerings of products or services. Finally,
this model works in firms that have strong IT leadership, and a history of trust and credibility
between IT and the business. Harmonious and vibrant business-IT partnerships are likely to
form and sustain IT innovation in these firms because the business managers are likely to be
receptive to IT “seeding” ideas for IT innovation.
254 r i t u a g a r wa l a n d v . s a m b a m ur t h y

The Platform Model: Providing the Resources for Global Innovation

This model is appropriate for organizations where IT is primarily expected to provide infra-
structure and tools to enable current and future business innovations in products, services,
processes, or channels. The IT function excels in delivering a global infrastructure and ser-
vices, and in rapidly delivering IT solutions. The IT function’s primary goal is to “be a busi-
ness within the business of the firm,” delivering a scalable, seamless, and flexible infrastruc-
ture, productivity tools for knowledge workers, and technologies and applications for global
team collaboration.
In contrast with the Partner Model, IT is not expected to be an active collaborator in ini-
tiating business innovations. Instead, it focuses on developing an enter-prise-wide platform
and capabilities, which can be consistently and repeatedly leveraged in strategic IT applica-
tions.
Within this model, the principle of co-evolution occurs through the actions of account
managers, who act as liaisons between the IT function and the business units. They collabo-
rate with business unit executives in directing IT capabilities toward developing and main-
taining business unit capabilities. At the same time, they identify IT capabilities needed for
future business opportunities or growth, and they sensitize corporate IT to future business
needs for IT enablement.
The Platform Model utilizes both innovation and sourcing networks. Account managers
facilitate the value-innovation process in the business units. At the same time, the manag-
ers for the other value-creating processes particularly infrastructure management, solutions
delivery, and services provisioning develop the needed IT capabilities in their areas so that
they will be the preferred provider of choice to the business units.
A large high-tech firm. The IT function of a large, multidivisional high-tech firm,
which is a market leader in semiconductors and telecommunications, illustrates this Platform
Model (Figure 11.4). Its business executives are quite knowledgeable about IT and are there-
fore willing to lead IT innovation. Even though IT provides “seed” ideas for innovation, the
organizational philosophy and the IT savviness of the business executives make IT’s primary

Figure 11.4 The Platform Model

 principles and models 255

role one of enabling and facilitating innovation through a world-class IT infrastructure and
rapid applications delivery. In contrast with the hospitality firm, IT is not expected to be an
active collaborator in innovation. However, it is expected to be world-class in managing IT:
controlling interaction costs, providing IT infrastructure services and applications delivery,
and being effective in anticipating and responding to the business unit IT needs.
Principle 1: Co-evolution. At this high-tech firm, account managers and line-of-business
executives are responsible for co-evolution of business and IT capabilities (Figure 11.4). The
line executives apply IT in developing business capabilities, collaborating with the account
managers. The account managers also inform the rest of the IT function about needed future
IT capabilities.
Principle 2: Partnership networks. The Platform Model focuses on innovation and sourcing
networks, and less so on visioning networks. At this firm, innovation networks are nurtured
through interactions between the account managers and the line executives.
Principle 3: Value-creating processes. While the account managers report to the CIO, they
are viewed as advocating the value-innovation process in the business units. In addition,
the IT function is organized around the value-creating processes of infrastructure manage-
ment, solutions delivery, services provisioning, financial management, strategic planning,
and human capital management. The CIO’s direct reports manage each of these processes
and are accountable for their excellence.
This firm draws on three significant characteristics of organizing via value-creating pro-
cesses. First, account managers are viewed as facilitators of the value-innovation process,
even though the business unit executives are in charge of the process.
In their role as facilitators, the account managers seek to understand their business cli-
ents’ needs. They then plan product or service roadmaps to meet those IT needs. Where
mandated, they must follow corporate IT infrastructure standards. Elsewhere, they can offer
optional IT infrastructure services as either tiered or as pay-per-view services. They can also
develop new IT products and services by collaborating with the IT executives responsible
for the other value-creating processes. Finally, they coordinate delivery of IT services to the
business units. Thus, they provide the “one-face window” into IT, they own the end-to-end
client experience, and they are the ones responsible for assuring satisfaction with the IT
services.
Second, the other value-creating processes are managed to enable innovation in the busi-
ness units. The IT executives who manage infrastructure management, solutions delivery,
and services provisioning, in particular, are accountable for world-class excellence and for
being the provider of choice to the business units.
Account managers have the discretion to procure services from these internal sources or
from external vendors. Therefore, the executives for IT’s internal value-creating processes
face outside competition and pressures to be efficient, economical, and effective service
providers. Their revenue comes from the business units and is generated by the account
managers. Generating revenue is part of the account managers’ IT job. On the other hand,
the other IT value-creating processes financial management, strategic planning, and human
capital management “manage the business of IT.”
Third, the account managers (because they are the IT executives responsible for the value-
innovation process), along with the leaders of the other value-creating processes and the CIO
collectively manage the IT function. They form the global IT management council and shape
IT strategies, policies, and tactics. They meet semiannually to discuss client-related, strategic
and operational, and short-term and long-term issues facing the IT business.
Summary. The Platform Model is most appropriate for global multidivisional firms that
operate several distinct lines of business in which the business units have unique IT innova-
tion needs. Following this model allows the IT function to respond in customized ways to the
256 r i t u a g a r wa l a n d v . s a m b a m ur t h y

business units from a common base of IT assets, skills, and investments. Thus, the firms can
reap IT economies of scale even though the individual units use IT in unique ways.
The model is also appropriate for firms with IT-savvy business executives because it posi-
tions the IT function as the partner of choice in delivering solutions to the business execu-
tives’ innovation ideas. Thus, the Platform Model is particularly appropriate for high-tech
firms those with a CEO or business executives with information technology backgrounds
because these business executives are most likely to take responsibility for the value-innova-
tion process.

The Scalable Model: Using Sourcing to Be Flexible

This organizational model is appropriate where IT is viewed as a strategic differentiator and
an important element of business innovation, and corporate strategy is built around strategic
flexibility that is, being able to quickly acquire resources when a market opportunity appears
and, conversely, quickly shed resources when an opportunity becomes unprofitable. Firms
that operate in a cyclical business environment also want the least fixed costs and committed
resources, so they can expand and contract in response to their business environment. The
Scalable Model is designed to enable flexible staffing and to enhance the IT function’s ability
to scale up and down along with business growth and contraction while continuing to nurture
business innovation.
In this model, co-evolution relates to strategic flexibility: IT capabilities are used to build
business capabilities that enable the firm to quickly seize new business opportunities or exit
unprofitable ones. For example, the IT function can contribute to evolution by developing
standardized IT-enabled processes and codified knowledge, which the business can then use
to replicate itself in other parts of the world and more quickly enter new markets. The busi-
ness can contribute to evolution by learning from current business activities and anticipat-
ing future business opportunities, thereby influencing development of new IT capabilities.
Co-evolution occurs through collaboration of senior IT executives with managers of business
units, processes, and geographical regions.

Figure 11.5 The Scalable Model

 principles and models 257

The Scalable Model emphasizes sourcing networks to leverage external partners, particularly
for two IT value-creating processes, solutions delivery and services provisioning. Creative
sourcing relationships permit the IT function to control IT costs while changing staff size in
response to cyclical business conditions.
A large chemical firm. A large chemical firm that sells to businesses and aims to be
the low-cost leader uses the Scalable Model (Figure 11.5) to leverage common business pro-
cesses across its businesses and global markets. Given the vagaries of its cyclical industry, the
firm values strategic flexibility so that it can contain costs in downturns and expand resources
during growth times. IT has emerged as a strategic differentiator; its role is to facilitate low-
cost leadership and strategic flexibility.
Principle 1: Co-evolution. Senior IT executives are located in processes, businesses, and
geographic regions, and are responsible for the IT activities in their area. They have a dual
reporting relationship to the CIO as well as their process owner, business unit head, or
geographic region head. They belong to the CIO’s global IT council and thereby provide
links between the IT unit and the individual processes, businesses, or regions. This struc-
ture facilitates co-evolution by allowing the business capabilities to be shaped through
IT capabilities, while ensuring that IT investments are influenced by business capability
needs.
These senior IT executives are encouraged and rewarded for value-innovation, which
requires them to understand what their business clients need. The firm uses a variety of
formal methodologies to foster value-innovation including opportunity analysis, value assess-
ment, and balanced scorecards.
Principle 2: Relationship networks. Solutions delivery is managed through relationships with
external partners. In a cyclical industry, this chemical firm needed an innovative way to man-
age demand for IT applications. Periods of rapid growth would accelerate demand for skilled
IT developers, while periods of business contraction led to IT staff reductions. To better
manage demand for IT staff, the firm formed a consulting alliance to garner a “variable sourc-
ing strategy for solutions delivery.” The firm has a small in-house application development
staff and obtains the rest from its consulting partner. It commits to pay for a minimum num-
ber of the consulting partners’ people. When it needs more people, the consulting partner
provides them at additional cost.
An alliance management office, with representatives from both parties, assigns the IT
developers to individual projects. Another group, called the program management office,
also with representatives from both sides, keeps track of the status of the various projects and
the skills likely to be needed on future projects. These two bodies the alliance management
office and the program management office are the firm’s main sourcing-network mechanism,
to manage their relationship with the external solutions delivery partner. Similarly, the firm
utilizes external partners for infrastructure management, particularly desktop and telecom-
munications management.
Principle 3: Value-creating processes. Services provisioning is managed by a unit within cor-
porate IT, even though its members are geographically dispersed and co-located with pro-
cesses, businesses, and geographic regions. Human capital is nurtured through skill centers
that focus on specific IT skills. These skill sets are identified by the program management
office. Thus, the firm’s value-creating processes are managed separately, sometimes utilizing
external partners.
Summary. Global firms in related lines of business can benefit from the Scalable Model
because its structure allows the IT organization to efficiently identify opportunities for
value-innovation and exploit enterprise-wide synergies. Aligning IT executives with multi-
ple horizontal views of the firm (i.e., processes and geographic areas) and vertical views of
the firm (businesses) ensures that the IT function is tightly woven into the business. The IT
258 r i t u a g a r wa l a n d v . s a m b a m ur t h y

Management Council then brings these executives together to share ideas and insights, pro-
viding a business-based view of the enterprise as a whole.
When value is created through connectivity and standards, as is typically the case with
global businesses with “similar” products, the Scalable Model explicitly directs managerial
attention to these standards, through its emphasis on centralized procurement of services and
centralized management of IT competencies.
In addition, the Scalable Model allows firms in cyclical industries to maintain flexibility.
Through creative sourcing arrangements that permit speedy commitment to and divestiture
of human capital, the model insulates the IT function from potential criticisms of being a cost
drain on the business when the industry is in a recessionary cycle.

Conclusion

The purpose of creating principles and models for organizing IT is to facilitate executive
thinking about positioning IT as a strategic differentiator. Our findings suggest that there
is no single “best” IT organizational structure or governance arrangement because IT needs
to respond to the unique environments within which it exists. We offer three models as
benchmarks or archetypes for CIOs to consider in reassessing their organization’s design. We
further recommend a simple, four-step redesign process.
First, enumerate IT’s value propositions. Using a visioning network, as described earlier,
develop consensus with your business partners on IT’s value propositions. These proposi-
tions need to embed senior management’s views about the role of IT, articulate the ways in
which IT delivers business value, and serve as the crucial foundation for organizing IT.
Second, determine which model comes closest to your situation. Juxtapose your IT value
propositions, the nature of your business, your industry environment, and the IT sophisti-
cation and knowledge in your business units. This combination should point to one of the
three models as the most appropriate, because, as noted, each model requires executives to
focus on a different set of value-creating processes and relationship networks. Furthermore,
each model highlights different strengths of coupling between IT and the rest of the business.
Once these needs are understood, you can select the appropriate organizing options (i.e.,
governance and sourcing arrangements) for each value-creating process.
Third, manage the organizational transformation associated with the new design. This
transition includes communicating the vision and rationale underlying the design, actually
implementing the new organization, and initiating an assessment process.
Fourth, continue to reassess and adapt the organization design to ensure its continued
relevance. Organizational designs will not be static. Fortunately, thinking modularly about
value-creating processes (Principle 3) limits the potentially disruptive ripple effects that
structural changes can cause.
Hopefully the organizing principles and models described here will stimulate CIOs and
academic researchers to think about alternative approaches for organizing IT activities to
meet today’s business demands.

Notes
1 von Simson, E., “The ‘Centrally’ Decentralized IS Organization,” Harvard Business Review, July-August
1990, pp. 158–162.
2 Brown, C.V. and Magill, S.L., “Alignment of the IS function with the Enterprise: Towards a Model
of Antecedents,” MIS Quarterly (18:4), December 1994, pp. 371–403; Sambamurthy, V. and Zmud,
 principles and models 259

R.W., “Factors Influencing Information Technology Management Architectures in Organizations: A

Theory of Multiple Contingencies,” MIS Quarterly, (23:2), June 1999, pp. 261–290.
3 Goldman, S.L., Nagel, R.N., and Preiss, K., Agile Competitors and Virtual Organization: Strategies for
Enriching the Customer, New York, NY, Van Nostrand Reinhold, 1995; Sambamurthy, V., “Business
Strategy in Hypercompetitive Environments: Re-thinking the Role of IT Differentiation,” in R.W.
Zmud (Ed.) Framing the Domains of IT Management Research: Glimpsing the Future through the Past, Pinnaf-
lex Press, 2000; Venkatraman, N and Henderson, J., “Real Strategies for Virtual Organizing,” Sloan
Management Review (40:1), Fall 1998, pp. 33–48.
4 Barua, A., Konana, P., Whinston, A., Yin, F., “Driving E-Business Excellence,” Sloan Management
Review (43:1), Fall 2001, pp. 3644.
5 El Sawy, O., Malhotra, A., Gosain, S., and Young, K., “IT-intensive Value Innovation in the Electronic
Economy: Insights from Marshall Industries,” MIS Quarterly (23:3), September 1999, pp. 305–335.
6 Agarwal, R. and Ferratt, T.W., “Crafting an HR Strategy to Meet the Need for IT Workers,” Com-
munications of the ACM (44:7), 2001, pp. 59–64; DiRomualdo, A. and Gurbaxani, V., “Strategic Intent
for IT Outsourcing,” Sloan Management Review (39:4), Summer 1998, pp. 67–80.
7 Clark, C., Cavanaugh, N., Brown, C.V., and Sambamurthy, V., “Building Change Readiness Capabili-
ties in the IS Organization: Insights from the Bell Atlantic Experience,” MIS Quarterly (21:4), Decem-
ber, 1997, pp. 425–454.
8 Cross, J., Earl, M., and Sampler, J., “Transformation of the IT Function at British Petroleum,” MIS
Quarterly (21:4), December 1997, pp. 401–423.
9 Our study included in-depth telephone interviews with CIOs of 30 large firms in a variety of indus-
tries (manufacturing, financial services, high-tech, retail, and hospitality) and detailed case studies
of seven firms. All of these firms are in leadership positions in their respective industries. Further,
their peers and the trade press (Fortune, CIO, Information Week, etc.) regard them as being successful
in business innovation through IT and in their ability to manage the IT challenges related to speedy
delivery of projects, development and retention of IT human capital, and effective management of
IT assets and external relationships.
10 Sambamurthy, V. and Zmud, R.W., “The Organizing Logic for an Enterprise’s IT Activities in the
Digital Era A Prognosis of Practice and a Call for Research,” Information Systems Research (11:2) June
2000, pp. 105–111.
11 Venkatraman, N., “IT-Induced Business Reconfiguration,” in M.S. Scott Morton (Ed.) The Corporation
of the 1990s: Information Technology and Organizational Transformation, Oxford Press, 1991, pp. 122–158;
Venkatraman and Henderson, ibid.
12 Henderson, J. and Venkatraman, N., “Strategic Alignment: A Framework for Strategic Information
Technology Management,” in T. Kochan and M. Useem (Eds.) Transforming Organizations, Oxford
Press, New York, NY, 1992, pp. 97–117; Burn, J.M., “A Professional Balancing Act – Walking the
Tightrope of Strategic Alignment,” in C. Sauer and P. Yetton (Eds.), Steps to the Future: Fresh Thinking
on the Dynamics on IT-based Organizational Transformation, Jossey-Bass, 1996, pp. 55–80.
13 Rockart, J.F., Earl, M.J., and Ross, J.W., “Eight Imperatives for the New IT Organization,” Sloan
Management Review (38:1), Fall 1996, pp. 43–56.
14 Schein, E.H., “The Role of the CEO in the Management of Change: The Case of Information Tech-
nology,” In T.A. Kochan and M. Useem (Eds.), Transforming Organizations, Oxford University Press,
1992; Armstrong, C.P. and Sambamurthy, V., “Information Technology Assimilation in Firms: The
Influence of Senior Leadership and IT Infrastructures,” Information Systems Research (10:4), December
1999, pp. 304–327.
15 Brown, C.V. and Sambamurthy, V., “Coordination Theory in the Context of the IT Function: Linking
the Logic of Governance and Coordination Mechanisms,” University of Maryland Working Paper,
2002.
16 Brown and Sambamurthy, ibid.
17 Nambisan, S., Agarwal, R., and Tanniru, M., “Organizational Mechanisms for Enhancing User Inno-
vation in Information Technology,”MIS Quarterly (23:3), September 1999, pp. 365–395; Lind, M.R.
and Zmud, R.W., “Improving Interorganizational Effectiveness Through Voice Mail Facilitation of
Peer-to-peer Relationships,” Organization Science (6:4), 1995, pp. 445–461.
18 DiRomualdo and Gurbaxani, ibid.
19 Lacity, M.C., and Willcocks, L.P, “An Empirical Investigation of Information Technology Sourcing
Practices: Lessons from Experience,”MIS Quarterly (22:3), 1998, pp. 363–408.
20 Ross, J.W., Beath, C.M., Goodhue, D.L., “Develop Long-term Competitiveness Through IT Assets,”
Sloan Management Review (38:1), 1996, pp. 31–45; Bharadwaj, A., “A Resource-Based Perspective on
260 r i t u a g a r wa l a n d v . s a m b a m ur t h y

Information Technology Capability and Firm Performance: An Empirical Investigation,” MIS Quar-
terly (24:1), March 2000, pp. 169196; Bharadwaj, A., Sambamurthy,V., and Zmud, R.W., “Firmwide
IT Capability: An Empirical Examination of the Construct and its Links to Performance,” University
of Maryland Working Paper, 2002; Feeny, D.F.and Wilcocks, L.P., “Core IS Capabilities for Exploit-
ing Information Technology,” Sloan Management Review (39:3), Spring 1998, pp. 9–21; and Marchand,
D.A., Kettinger, W.J., and Rollins, J.D., “Information Orientation: People, Technology, and the Bot-
tom Line,” Sloan Management Review (41:4), Summer 2000, pp. 69–80.
21 Agarwal, R. and Sambamurthy,V., “Modus Operandi,” CIO Insight (1:8), December, 2001, pp. 27–32.
22 Ross, J.W.,Vitale, M.R., and Beath, C.M., “The Untapped Potential of IT Chargeback,” MIS Quarterly
(23:2), June 1999, pp. 215–237.

Questions for Discussion

1 Why does the current landscape demand the reexamination of organizing the IT func-
tion?
2 How can alignment and coevolution of the IT function and business be differentiated,
and which is more important?
3 Can any or all of the relationship networks overlap, or exchange roles, to organize the
IT function?
4 How can modular thinking help organize the IT function and associated value-creating
processes?
5 Is outsourcing an efficient way to build a partner model?
6 How does the platform model support coevolution, partnership networks, and value
creating processes?
7 What kind of value generation activities does the scalable model support?

Further Reading
Weill, P. (2004). Don’t just lead, govern: how top-performing firms govern IT. MIS Quarterly Executive,
3(1), 1–17.
Wu, S.P., Straub, D., Liang, T. (2015). How information technology governance mechanisms and stra-
tegic alignment influence organizational performance: insights from a matched survey of business
and IT managers. MIS Quarterly, 39(2), 497–518.
Chapter 12

Dorothy E. Leidner, Robert C. Beatty

and Jane M. Mackay

HOW CIOS MANAGE IT DURING

ECONOMIC DECLINE: SURVIVING AND
THRIVING AMID UNCERTAINTY

The Economic Downturn Has Affected IT Budgets

P rior to t h e y e a r 2000, when the U.S. economy was strong and enterprise-
wide systems were readily justifiable, many firms undertook large information technol-
ogy (IT) initiatives. But in 2000, after almost a decade of high growth and low employment,
the U.S. economy began to decline in most sectors. The e-commerce bubble burst and many
high-flying IT and telecom companies began to decline rapidly. Some sought to contain or
reduce costs through consolidation (see note 1). Concurrently, companies in many industries
began questioning large IT initiatives, such as ERP (Enterprise Resource Planning) and CRM
(Customer Relationship Management), because the reported failure rates were quite high.1,2
Since 2001, many IT budgets have inched up, at a declining rate. Overall, IT budgets
increased about 8 percent in 2001,3 but only .1 percent in 2002.4 Even these essentially flat IT
budgets in 2002, though, disguise how substantially some firms have cut back on IT spending.
It is predicted that even if IT spending improves slightly in 2003, the increase will not clear
out application backlogs.

The Research: Interviewing 20 CIOs

To uncover how CIOs manage during times of economic decline, we conducted inter-
views with 20 CIOs from across a range of industries—construction, financial retailing,
general services, health services, insurance, IT consulting, manufacturing, retail, tech-
nology, and transportation. Thirteen of the organizations were headquartered in Dallas,
Texas; five in Fort Worth, Texas; one in Houston, Texas; and one in California.
262 dorothy e. leidner et al.

One retailer had revenue of $22B; the others had revenues between $818M and
$9.8B. Company data was unavailable for five of the firms: four that were privately held
and one that was a subsidiary.
Of the 20 CIOs, only five had occupied their current position for more than three
years. Of the other 15, five had served between two and three years, six had served
between one and two years, and four had served for less than one year.
Conducted between December 2001 and July 2002, most of the interviews were
done in person over an hour and a half. A few of the interviews took place via conference
calls. All the CIOs interviewed had a great deal of experience in the IT field and based on
their experience both within their current organizations and at prior organizations, we
have confidence that they were all highly competent, effective CIOs. Hence, we were
in no position to compare or contrast the effectiveness of the CIOs. Rather, the inter-
views enabled us to discern four distinct approaches for IT management during economic
decline.

In a December 2002 poll, 87 percent of Chief Information Officers (CIOs) stated

that their application and project backlogs were putting their organizations’ operability
and competitive advantage at risk.5 So while the economic downturn leads to pressures
to reduce IT investments, demands for short-term profitability and long-term growth
apply pressure to sustain IT investments.6 As a result, CIOs have found themselves in the
pressure-filled situation of facing, on the one hand, tightening budgets and skepticism
about returns on large IT project investments, yet, on the other hand, the need to con-
tinue to convince top management of the importance of continuing to make substantial
IT investments.
One piece of popular prescriptive advice to CIOs has been to outsource as much IT infra-
structure as possible.7 But many CIOs are reluctant to relinquish control, even though some
outsourcers appear to be faring well in this downturn. For example, EDS recently signed a
ten-year $4.5B agreement to re-engineer and manage Bank of America’s voice and data net-
works.8 Likewise, the City of Minneapolis selected Unisys to manage its IT infrastructure for
$56M. The city expects to save $20M.9
When the economy changes as dramatically as it has over the past three years, CIOs face
important decisions. Yet, there is little guidance on how they should best manage IT during
such times. We know that the business environment influences organizational strategy and
decision-making.10 And we know that the environment can influence the value of informa-
tion.11 But we do not know how an economic decline influences the management of IT.
Thus, we seek to answer the question: How do CIOs manage IT during economic decline?

Four Approaches to Managing IT During Economic Decline

We discerned four approaches for managing IT during economic decline, as shown in

Figure 12.1. They vary along two dimensions: the perspective for determining IT’s value
(short-term vs. long-term) and the attitude toward the existing IT plan (retain vs. rethink).
Each approach is characterized by a decision-making principle: Extend the Lifecycle,
Bulletproof the Infrastructure, Clean House, or Maintain the Legacy.
 managing in economic decline 263

IT Strategic Plan: Retain

Maintain the Extend

Legacy the Lifecycle

IT Perspective: IT Perspective:
Short-term Long-term

Clean House Bulletproof

the Infrastructure

IT Strategic Plan: Rethink

Figure 12.1 Approaches to Managing IT During Economic Decline

In describing their management approach, the CIOs typically spoke of “we,” meaning
themselves and the firm’s senior management team. The CIOs developed their IT plan for
coping with the economic decline, then the senior management team discussed the plan and
approved it.

Extend the Lifecycle Approach

CIOs using the Extend the Lifecycle approach take a long-term perspective on IT investments
during an economic decline and choose to lengthen the timeframe of the current strategic IT
plan, rather than cancel or re-evaluate it; see Table 12.1. As one CIO told us, “We have a strong
commitment to our five-year plan, but we are not opposed to stretching it out.” Showing con-
fidence in the ultimate value of the IT plan, CIOs taking this approach aim to make steady, but
slower, progress. Even when commitment to the plan is strong, though, the CIOs we inter-
viewed believe it is wise to review the plan once or twice a year, and adjust project start dates
when necessary. To conserve financial resources further, CIOs following this approach reduce
or eliminate contractors on non-critical IT projects. At the same time, they make every effort
to keep full-time staff and maintain the operational continuity of the department.
Senior managers who adopt this approach view IT investments as important to the firm’s
competitive success. Investments during prosperous times are conservative, following the
dictum “we manage in the good times for the bad times.” During downturns, the executives
maintain confidence that previously funded IT projects continue to align with business plans,
and thus are still appropriate.
The CIOs we interviewed believe it is important to avoid two extreme reactions during
a decline: on the one end, “not cutting fast enough as revenues go away” and on the other,
“abandoning IT initiatives so quickly that the future is mortgaged.” The concern over these
two extremes is that if an organization does not make budget cuts quickly enough, the firm’s
stock price will take a larger-than-necessary hit. However, if the organization makes budget
cuts too quickly, then the future value of the firm will suffer.
Senior managers adopting the Extend the Lifecycle approach will spend resources on pro-
jects that have no immediate return, when these projects are strategic, not tactical or short-
term. Hence, senior management commitment to IT is critical. As one CIO said, “You’d bet-
ter communicate, you’d better leverage solutions, leverage resources, [and] leverage support
or else you’re not going to succeed in IT.”
264 dorothy e. leidner et al.

Table 12.1 Summary of the Extend the Lifecycle Approach

Approach Extend the Lifecycle

Description Senior managers maintain commitment to building systems in their

strategic plan but stretch out the timeline for development and
implementation
Objective Reduce development costs while continuing to move forward with
important applications
Strengths Focuses on the future
Keeps the organization at the forefront of technological development
Weaknesses IT “Tunnel Vision”—The organization may be so focused on completing
existing IT projects that it ignores opportunities that could provide a
strong competitive advantage coming out of the downturn
CIO Challenges Properly managing the cost-effective and timely completion of IT
projects over an extended development period while continually
initiating new projects that could give competitive advantage

The CIO at a manufacturing firm who takes the Extend the Lifecycle approach explains
how his value is evaluated:

The predominant piece of my rating is still around driving change, and the
effectiveness and efficiency of the organization. [It is about] taking cost out and
improving delivery at the same time. It is not just about running a great depart-
ment; it is morphing and changing the business model [by] taking cost out of the
process while improving delivery.

The strengths of this approach center around its commitment to future plans; the weak-
ness centers around the potential loss of short-term competitive advantage.
Strength: There are no radical changes. This approach does not radically alter the composition
of the IT department nor the existing project portfolio. Hence, when the economy begins
to recover, the IT organization should have little difficulty increasing the speed of project
delivery to pre-decline levels. However, IT does need to be perceived as adding value to the
organization. Warns the CIO of a major manufacturing firm, “When you have turmoil and
economic pressures, you’d sure better be able to show top management how you are gener-
ating revenue or saving costs.”
Strength: Support for IT initiatives continues. Organizations that adopt this approach focus
on adhering to the IT strategic plan and on the future value of IT projects. In fact, senior
managers often view IT investments as less risky during a downturn than other investments,
such as business acquisitions. Said the CIO of a major manufacturing company, “We [top
management] really have to find investments that give us a good return, and in our case,
these IT projects have fabulous returns…better than the bank and better than debt right
now.”
Weakness: Tunnel vision. While the Extend the Lifecycle approach aims to eventually com-
plete the organization’s most important strategic projects, it may lead to “tunnel vision” –i.e.,
it might limit the organization’s ability to adapt to technological changes and obtain a short-
term return or possibly a short-term competitive advantage. Moreover, if the organization is
forced to adjust its strategic plan, its IT plan could lose relevance.
 managing in economic decline 265

Bulletproof the Infrastructure Approach

CIOs using the Bulletproof the Infrastructure approach focus primarily on infrastructure pro-
jects; see Table 12.2. They take a long-term perspective believing that success in the next
economic growth phase will come from having an infrastructure that permits the IT organiza-
tion to plug-and-play both independent and integrated applications.

Table 12.2 Summary of the Bulletproof the Infrastructure Approach

Approach Bulletproof the Infrastructure

Description CIOs reconsider the existing IT plan and focus on projects designed to
build the infrastructure
Objective Prepare the IT infrastructure for the next growth phase so that
applications can be quickly implemented and integrated
Strengths Prepares for the future: paves the way for a breakaway
Commits to an enterprise-wide IT infrastructure
Weaknesses Assumes an extended infrastructure development time
CIO Challenges Convincing top management that putting in place an excellent
infrastructure will be key to rapid recovery and growth

The major aim of this approach is to create a foundation for integration. As one CIO
notes, “I want to integrate these systems a little better so that I can run my systems cleaner
and a lot more effectively.” This approach involves rethinking the existing IT plan and rep-
rioritizing projects. Hence, some approved projects are placed on indefinite hold during a
downturn. “The wish list went away as we began to focus on the fundamental needs and
requirements of the organization,” says one CIO.
The Bulletproof the Infrastructure approach replaces customized homemade applications
with “vanilla applications,” notes one CIO (meaning standard off the shelf packages) or “off
the shelf open system architecture programs,” in the words of another. Due to the high
cost and long development time of customized IT projects, firms following the Bulletproof
the Infrastructure approach are willing to purchase reasonably priced packages that quickly
address most of their users’ requirements. For example, rather than invest significant time
and money on a fully integrated, multi-module CRM system (that would require extensive
tailoring and customization to meet all requirements), the CIO is more likely to recom-
mend purchasing an inexpensive and standardized CRM module to address a distinct busi-
ness need, such as partner relationship management. This approach trades lower system
functionality for lower cost and faster implementation. But an added benefit is that standard
IT applications are heavily discounted in a depressed IT market. Standard products also cost
less to maintain. So this approach reduces the costs of maintaining the infrastructure in the
future.
Organizations adopting the Bulletproof the Infrastructure approach have done so because
they had embarked on a wide variety of systems when the economy was strong to remain
competitive. Some systems were built in-house and some were externally developed, with-
out a disciplined planning process. When the downturn hit, these IT departments had dif-
ficulty maintaining a consistent and reliable IT infrastructure because there were so many
projects underway. As the CIO of a major technology company says,
266 dorothy e. leidner et al.

During the period of rapid growth, we did not implement our applications with
a good architectural view of how they were all going to work together. So we
ended up with a lot of disjointed systems. [Even] databases outside a core area.
have become so fragmented that it is now difficult to build new applications that
require integrating all these apps we built the last several years.

When economic growth stagnated, management became concerned that not having a
disciplined IT operating environment was leading to a state of disarray. Hence, when the
economy begins to grow again, applications will be expensive and time-consuming to imple-
ment, placing the organization at a competitive disadvantage. In short, the absence of an
enterprise-wide IT technology planning process during the economic growth of the 1990s
has resulted in an IT infrastructure problem at these firms.
The challenge facing CIOs who adopt the Bulletproof the Infrastructure approach is to
convince top management that the organization’s future competitive success is directly tied
to supporting business-critical IT projects—and these projects need a solid infrastructure.
The importance of this reasoning is illustrated by the CIO at a transportation firm when he
compares infrastructure planning to the shape of a pyramid, saying,

[Let’s] look at the pyramid [approach] again. If you have a weakness in your core
base, that’s where you should be spending your time in years of recession. Build
the base so that when the economy recovers, you can quickly scale and recover.
That’s what we are doing here. We are building the base, getting a solid footing,
and then we will be positioned to drive innovation. Driving innovation will be a
lot easier if we are not doing a lot of retrofitting and patching with baling wire
down to the base.

This same sentiment is articulated by the CIO of a retailing firm:

I am going to kind of bulletproof my infrastructure and I am going to make it

industrial strength because I know that this downturn is not going to last for-
ever. When the economy does come back up.I am going to be a bit more pre-
pared for the upswing. I was caught off guard the first time. So lesson learned.
And I am prepared now.

Strengths and Weaknesses of the Bulletproof the Infrastructure Approach.

The strengths of this approach center around its preparation for the future; the weakness,
around the assumption that the decline will allow sufficient time to complete infrastructure
changes.
Strength: There is commitment to an enterprise-wide IT infrastructure. This approach allows
the CIO to justify infrastructure projects on the grounds that a stable and integrated IT
infrastructure will be a competitive weapon, once the organization again experiences rapid
growth. Given the pressures during high-growth periods to build projects that link important
business processes among business units, infrastructure projects can get sidelined. Times of
economic downturn, and the subsequent reduction in IT funding, provide an opportunity
to re-focus IT spending on much needed projects that will stabilize the organization’s IT
infrastructure.
Strength: It paves the way for a breakaway. This approach also frees a firm to envision applica-
tions that support future growth. While funding is being allocated to infrastructure projects,
planning attention can be directed toward applications that differentiate the company from
its competitors, once the economy revives.
 managing in economic decline 267

The CIO at a major technology company quotes his CEO as saying, “Let’s invest more
aggressively in systems that will differentiate us from our competition and help lead the
breakaway [when the economic slowdown lessens].” Another CIO at a retailing firm states,
“Our competition is not backing off one iota. What we better not do is really pull in and
make serious cuts, and then come out of the cycle to find we are out of the ball game.”
Weakness: It assumes a long period of decline. A major weakness of the Bulletproof the
Infrastructure approach, though, is that it assumes the IT department will have a long time
to create a stable, scalable, flexible, and fully integrated IT infrastructure anywhere from six
months to two years.
If a firm launches into a number of long-term infrastructure projects assuming that it has a
“two-year window” to complete these projects, and the economy “rebounds” in six months,
then the firm is faced with deciding either to complete the existing infrastructure projects or
divert IT resources to new projects that will provide competitive advantage. Management teams
typically dislike spending scarce IT resources on projects that will not provide direct business
benefits (such as, infrastructure projects), so they will likely apply immediate pressure on the IT
department to work on new projects once the economy turns around. This pressure may result
in infrastructure projects not being fully completed before new applications development begins.

The Clean House Approach

CIOs using the Clean House approach take a short-term view of IT, seeking applications
with quick returns. They focus on re-assessing their IT plan, eliminating systems that do not
support the organization’s strategy, and developing a new, short-term-focused portfolio of
systems for development; see Table 12.3. Convinced that proper IT investments are impor-
tant to overall organizational success, these CIOs believe their current IT strategy must be
overhauled to support the organization’s current business plan.
Firms that have adopted the Clean House approach have done so to impose discipline.
During the late 1990s, they had ready availability of money, so they rapidly implemented an
unprecedented number of applications but lost discipline in making IT investment decisions.
Senior managers recognized that the unbridled development of new IT systems was spiraling
out of control, but they could do little to prevent well-financed business units from looking
elsewhere for development whenever the IT department declined to undertake the project.
The downturn has given the IT organization the opportunity to regain control.

Table 12.3 Summary of the Clean House Approach

Approach Clean House

Description The firm uses the downturn to re-evaluate existing and planned applications
Objective To regain control over application development and implementation and
ensure that systems being built are consistent with the firm’s goals
Strengths Eliminates projects the firm believes should not have been commenced in
the first place
Gives IT a greater role in determining what systems are necessary and on
what platforms
Weaknesses Heavy time consumption
Might leave some business units frustrated with the IT group for not
continuing to implement systems previously approved by the business unit
CIO Challenges Building credibility in the IT group’s decisions regarding which applications
to build and which to scrap
268 dorothy e. leidner et al.

One software company CIO says the downturn finally allows IT to “take an inventory
on projects” and, with the support of senior management, require owners of planned-but-
not-yet-developed systems to cost-justify those systems. “This is a healthy time for us,” he
says. “The growth and excessiveness of our budget in the 90s actually fueled us to do things
that were not healthy for our business long-term.” By re-evaluating the IT plan, the firm is
eliminating many unnecessary projects and “trimming the budget so we can invest.” A major
challenge of this approach, though, is that CIOs must implement cost-saving measures as they
develop a new strategy to use current IT resources better.
The Clean House approach thus allows CIOs to start over and develop an IT strategy for
the organization’s most important business needs. However, the CIOs must also convince
top management that new IT planning policies are needed, so that business units spend their
money on projects that meet enterprise-wide business objectives. Hence the enterprise-
wide IT strategic model must closely align with the needs of the business units, by being
based on their input. As one CIO notes, “What we have tried to do here is to map our IT
investment back to [our] business strategies because IT is very much an enabler of those
strategies.”
To regain credibility with business unit managers, CIOs using the Clean House approach
need to focus IT resources on short-term, highly visible projects that will provide tangible
financial benefits to key operational business functions. By rapidly demonstrating the busi-
ness value of IT, these CIOs can begin to re-establish the importance of the IT function to the
organization. One CIO adopting this approach states that the best way he can re-establish the
value of IT within the organization is to implement a new IT strategy that effectively mixes
on-going infrastructure “foundation” work with IT projects that provide immediate financial
returns or “quick wins” during the current business year.
Strengths and Weaknesses of the Clean House Approach. The strengths of the
Clean House approach center around its reassessment of the alignment of IT projects to
organizational strategy; the weaknesses center around the potential loss of credibility facing
the IT organization.
Strength: IT strategy is customized. One advantage is that the organization takes the time to
evaluate IT and scrutinize how well it is helping achieve short-term and long-term business
objectives. From internal evaluation, the IT organization can better develop an enterprise-
wide IT strategy that mirrors the business strategy, goals, and objectives.
One CIO describes his firm’s old and new IT strategy development processes by analogy,
saying,

We used to drive down the freeway at midnight with no headlights. The way
we saw where we were going was [by] shining a flashlight out the back window.
But now we have turned on the headlights. We are learning to drive faster than
a couple of miles an hour, but we still don’t have a GPS system. We’re working
on getting that with some analytics.

Strength: Top management is committed to the IT strategy. To develop and implement a new
IT strategy that meets the organization’s needs, the top business managers must actively par-
ticipate in the strategy development process. In so doing, their commitment to the final IT
business model should be high, making implementation more likely.
Weakness: The process is time-consuming and expensive. The Clean House approach involves
re-assessing the role of the IT function. Although this approach garners top management’s
commitment, it also consumes their limited time because they are expected to participate
in strategy development. Given that the business units themselves likely face cost pressures
 managing in economic decline 269

from the downturn, the unit managers are unlikely to welcome additional time demands
from the IT department. They have their own strategic re-evaluations to perform.
Weakness: Weakens organizational confidence in IT leadership. A primary CIO role is that of
IT visionary. In eliminating some previously approved projects and requiring business units
to justify other projects, CIOs might send the unintended message that the IT department is
unable to manage growth. This perception might decrease unit leaders’ confidence in the IT
organization in the future.

Maintain the Legacy Approach

CIOs using the Maintain the Legacy approach (see Table 12.4) adopt the short-term per-
spective of just surviving the downturn by prolonging the life of the legacy to last through
the decline. There is little or no future planning. Infrastructure improvements are shelved
to be revisited when the economic decline ends. The application portfolio is not rethought
or re-assessed; it is simply canceled until more prosperous times. Only investments that
can demonstrate a quick return are considered. It is not uncommon to hear CIOs using this
approach speak of a six-month or even three-month return on investment. Says one CIO,
“In a good economy, an ROI of two to three years is okay. In a bad economy, less than one
year is essential. In fact, if you can’t get business value in six months, you should chuck the
project.”
Pressures to reduce IT expenditures force some CIOs to adopt this approach because they
are only given enough financial resources to continue operating essential legacy systems. As
one CIO states,

A year ago, [we] focused very much on building an environment to integrate all
the new systems we were going to need to support increased business. Now,
the difference is, we are exploiting the same integration effort to extend the life
of the legacy.

In adopting the Maintain the Legacy approach, CIOs need to develop standard ways of
monitoring the legacy systems to receive “health alerts.” Moreover, they need to find ways to
improve business processes “without touching the legacy.” One approach is to reduce tech-
nical personnel costs by converting to a people-less “dark” operations floor. The operations
staff who maintain and manage the legacy systems are replaced by an integrated monitoring
and alarm system. A “lights out” data center can save money and improve management of IT
resources.
To “keep some of that back-room stuff going a long time,” CIOs also must learn to “add
things and change the business process by changing the interface to the system,” rather than
change the legacy system itself. For example, the IT department may convert the user inter-
face of a mainframe-based decision support system from text-based to graphics-based. Says
one CIO, “Instead of focusing on clever things, we just focus on what I would call traditional
‘bread and butter’ [projects].”
A significant challenge of the Maintain the Legacy Approach is how to handle layoffs.
Because the old systems are running the business, these CIOs “can’t get rid of the COBOL
programmers” and are thus “forced to mortgage the future” by laying off the younger employ-
ees skilled in object-oriented programming, Java, and other current technologies. Therefore,
it becomes important for the CIO to find ways to motivate the remaining older employees
to develop new skills in current technologies. In one company, the average age of the IT
workforce after layoffs was 47 years.
270 dorothy e. leidner et al.

Table 12.4 Summary of the Maintain the Legacy Approach

Approach Maintain the Legacy

Description CIOs put a hold on the existing IT plan, assuming it can be continued
when the economy starts recovering
CIOs focus on continuing the life of legacy systems in the short term
Objective Use the fewest resources possible to maintain current service levels
until funding is available to move forward with planned applications
Strengths Focus on ROI
Focus on Cost Optimization (Cost Minimizer)
Weaknesses Potential loss of most advanced designers and programmers whose skills
are not needed on legacy systems
CIO Challenges Maintaining internal morale as programmers are released
Convincing senior management that outsourcing critical IT operations
would be detrimental over the long term

Strengths and Weaknesses of the Maintain the Legacy Approach. Its strengths
come from its “now” focus. Its weaknesses stem from its preservation of the past.
Strength: It focuses on IT return of investment. Most IT funding goes to maintain the legacy.
Remaining funds are only invested in small projects that yield quick returns. So the approach
forces a fast-return ROI discipline.
Strength: It focuses on optimizing current systems. The challenge facing CIOs who adopt this
approach is to find new ways to provide business value from IT with equal or fewer financial
resources than in the past. With limited resources, these CIOs focus almost exclusively on
projects to refine and optimize the operation of existing business systems. For example, an
organization may choose to analyze a critical business process to reduce its costs and improve
its operation. The analysis may recommend replacing the sales department’s manual “paper-
based” order taking process with an on-line data entry system. Such a new interface would
streamline this critical business process and would ultimately save the company money by
eliminating unnecessary and time-consuming tasks.
Weakness: It jeopardizes the organization’s competitive future. By focusing IT resources only on
tactical (short-term) and operational (day-to-day) IT initiatives, an organization chooses to
ignore emerging IT applications and technologies that may improve the firm’s competitive-
ness in the future. Competitors that take a different approach may gain competitive advan-
tage by implementing new technologies sooner—leaving the Maintain the Legacy CIOs to
play technological “catch-up” to stay competitive
Weakness: It inhibits development of IT professionals. While short-term thinking might have
a positive effect on identifying projects to develop, it is a weakness in IT staffing. The dis-
advantage of this approach is that the organization loses the IT employees needed to build
future systems. One CIO confidently states that she will be able to rehire these people when
the economy recovers, saying, “Let’s face it, where are they going to get work right now?”
Nevertheless, there is no guarantee that Maintain the Legacy organizations have the environ-
ment that will attract IT developers with the latest skills.

Movement Among the Approaches

Of the 20 firms in the study, nine use the Extend the Lifecycle approach; five, the Bulletproof
the Infrastructure approach; three, the Clean House approach; and three, the Maintain the
 managing in economic decline 271

Figure 12.2 Incidences and Patterns in the Approaches to Managing of IT During Decline

Legacy approach (see Figure 12.2). Although we conducted interviews at a single point in
time, we could discern some movement among the four approaches. In fact, we found the
approaches not necessarily binding. Some CIOs began with a less disruptive approach—
such as the Extend the Lifecycle approach—and moved to progressively more disruptive
approaches when more drastic cost-cutting measures became necessary.
Specifically, we saw firms moving from Extend the Lifecycle to Clean House to Maintain
the Legacy. We also noted firms moving in the opposite direction, from Clean House, to
Bulletproof the Infrastructure, to Extend the Lifecycle. These moves (depicted in Figure 12.2
as arrows), as well as the apparent preference for the Extend the Lifecycle approach, are dis-
cussed below.

Extend the Lifecycle Is the Most Popular Approach

As shown in Figure 12.2, nine of the 20 firms have adopted the Extend the Lifecycle approach
to managing IT during the decline. There is no pattern discernible in terms of industry,
organization size, or CIO tenure. What does seem common in these organizations, though,
is their optimism that the decline will be ephemeral. If they can simply extend the current
plan for a short while, they believe they can ride out the decline with few major changes to
the application portfolio, development processes, or how IT decisions are made.
A second common aspect across these organizations is that they do not feel a large, immedi-
ate impact from the decline. Perhaps they are in a state of denial, or the effects have yet to rip-
ple through the organization. In any case, if the economic decline continues through 2003, we
believe several Extend the Lifecycle firms will be forced to take a more disruptive approach.

Moving from Extend the Lifecycle to Maintain the Legacy

None of the firms began as Maintain the Legacy, but some did progress to this approach after
their other efforts to reduce IT expenditures did not suffice. When the economy began to
272 dorothy e. leidner et al.

decline the most common first step was to try to keep the current plan by stretching out the
deadlines, and hence, expenditures (i.e., the Extend the Lifecycle approach). Following this,
the next steps involved stopping initiatives and narrowing the horizon on expected benefits
of new systems (i.e., the Clean House approach). The result is implementation of smaller-
scale systems with shorter-term anticipated pay-off periods, as opposed to large systems with
future benefits. The next step has been to look for ways to lower costs, such as outsourcing
select parts of IT operations—for example, the desktop environment. It is only when the IT
budget must be further cut that the CIOs adopt the Maintain the Legacy approach.
Whereas CIOs taking the Extend the Lifecycle approach appear to assume a short period
of decline, those taking the Maintain the Legacy approach seem to hope for a short period of
decline. In essence, if the decline continues and the organization is not able to cut sufficient
costs by canceling new projects and maintaining the legacy, the only remaining option might
be outsourcing. As one CIO from a major manufacturing firm states, “If sales continue to go
down and you cannot afford the overhead of the business, you eventually have to consider
outsourcing.” However, none of the firms in our sample is currently considering a major
outsourcing endeavor.

Moving from Clean House to Bulletproof the Infrastructure to Extend the

Lifecycle
Although it might at first seem counter-intuitive, several firms did demonstrate a pattern of
moving from the Clean House approach to Bulletproof the Infrastructure approach to Extend
the Lifecycle approach. In fact, several of the firms currently in the Extend the Lifecycle
quadrant had, prior to the decline, already undergone a major revision to the IS plan where
they canceled many projects (i.e., Clean House approach) and a subsequent focus on building
the infrastructure. The impetus was the arrival of a new CIO from the outside who faced an
IT organization with a poor reputation for projects that had gone over budget and had failed
to deliver the anticipated results.
All of the Clean House firms saw the economic decline as coming at a fortuitous time
because they had lost control of their IT planning process and their application portfolio. It
was high time to rethink the planning process and the content. None of these firms intend
to remain in the Clean House state, though. Their goal is to use it to develop a new IT plan
aligned with the organization’s strategy, with a solid infrastructure that can support growth.
Hence, we see evidence of firms aspiring to move from Clean House to Bulletproof the
Infrastructure. But rather than simply initiate infrastructure projects, they believe it is impor-
tant to first lay out a new long-term IT strategy that envisions the applications that will run
on the new infrastructure. In effect, these firms are preparing themselves not only for growth
but also positioning themselves to weather the next decline. During that decline, we would
expect them to simply need to extend their lifecycle.

The Ups and Downs of Managing IT

Our research has addressed the question of how CIOs manage IT during economic decline.
We have described four approaches to managing IT during periods of economic decline. Our
interviews show a pattern of managing IT during periods of economic growth and decline
(see Figure 12.3).
Specifically, all the organizations in our study faced common issues during the 1990s
growth period. Rapid organizational growth fueled the need for new systems. Often, IT
was unable, or perceived by business units to be unable, to sustain the rapid growth. So the
 managing in economic decline 273

4. The organization has a wide

variety of applications built
on various platforms.
5. There is little integration among
the new systems.
6.The infrastructure has received
little attention over the past years.
7.The large systems have run over
budget and over time.
8. In a state of frustration with IS,
the organization may replace the CIO.

1.Rapid growth in organization fuels 9. The IT organization faces costconstraints.

the need for new applications. 10. The IT organization attempts to stretch out the
2.Business Units demand new development cycle without scratching plans.
systems, often going to outside Some IT organizations first take the opportunity to
providers if IT is unable to develop reconstruct the IT plan to ensure better alignment.
in a timely fashion. 11. The IT organization often focuses on infrastructure
3. IT focuses on large applications projects that were neglected during the growth
offering hopes of enabling cost-effective period.
organizational growth. 12. As the impact of the decline worsens, the IT
organization focuses primarily on projects with
short development times and quick returns.
13. If further budget cuts are required, IT might be forced
into a maintain the legacy environment.

Figure 12.3 The Ups and Downs of Managing IT

business units went to third-party developers. Meanwhile, IT focused on large systems (often
ERP) aimed at improving organizational efficiencies. With both inside and outside develop-
ment taking place, the organization ended up with a complex array of systems built on vari-
ous platforms and with little integration of data or systems. Moreover, the swift growth left
little time to focus on infrastructure issues. More often than not, the large systems went well
over budget and were late, leading to dissatisfaction with the IT department and, in some
cases, replacement of the CIO.
At the start of the economic decline in 2000, most of the IT organizations in the study
had a multitude of new systems, many on outdated infrastructure platforms. Some have
chosen to maintain that platform until the good times return; others have decided to rebuild
their infrastructure, anticipating good times ahead. On the applications side, some are using
the downturn to scrap and reconstruct their strategic plan. Others are lengthening their
plans.

Lessons from This Study

Given that economies move in cycles, can we draw lessons from the current cycle that CIOs
can use to manage during future growth-decline cycles? We think three lessons are enduring.

Lesson 1: Disciplined IT Decision-Making Evens Out IT Ups and Downs

When organizations follow a structured, disciplined approach to IT decision-making, regard-
less of the current financial situation, they even out demands on the IT organization. Business
demands and IT spending tend to move in concert with the economy. Employing a practical
and responsible approach to IT spending during periods of prosperity more likely ensures
that an organization’s IT strategy will not be drastically affected during periods of economic
decline.
274 dorothy e. leidner et al.

In the 1990s, some IT organizations chose to hire contract consultants and offshore
developers12 to help keep pace with the high demand for new IT systems. Organizations that
either ignored or abandoned their established IT project selection and approval practices dur-
ing those fat 1990s then found themselves left with numerous projects in various phases of
development when the economic growth began to decline and IT funding dwindled. Facing a
declining or static IT budget, organizations once again “re-instated” or formalized procedures
to ensure that funding only went to IT projects directly aligned with the organization’s busi-
ness strategy.
Many of the negative impacts from the economic downturn could have been moderated
if organizations had adhered to a rigorous, structured IT planning and strategic decision-
making process.

Lesson 2: Regular IT Strategic Reviews Build Business-Aligned Portfolios

Organizations that fail to perform a regular review of their projects compromise their sys-
tems development portfolio. It’s during periods of economic growth when organizations are
most likely to be so focused on staying competitive in their marketplace that they approve IT
projects regardless of their alignment with the organization’s business strategy. This laxity
can decrease the performance of the organization, almost immediately, because these pro-
jects take resources away from projects that have strategic value.
This misappropriation of IT resources may artificially extend the time to complete key IT
development projects. But it is not until the organization experiences a declining economy
that it discovers it has been supporting IT projects that are not aligned with its strategic plan.
That’s when top management typically reviews the IT project portfolio and weeds out pro-
jects that do not support current and future strategic goals—either placing them on hold or
canceling them.
Although it can be financially painful to absorb the costs of canceled IT projects, the exer-
cise can renew top management’s commitment to managing the alignment between business
and IT strategies.13 In truth, though, such reviews should take place no matter the economic
environment.

Lesson 3: Balanced IT Spending Yields Business Agility

Organizations need to balance their IT spending among new systems development, main-
tenance, IT infrastructure, and integration projects. Unfortunately, very few management
teams approve funding for IT infrastructure and integration when these projects conflict with
new development, even though the executives know they need a flexible, scalable, and fully
integrated enterprise-wide IT architecture. During periods of business prosperity, this unbal-
anced funding tendency is even more pronounced. The majority of IT funds are spent on new
development, in hopes of improving competitive performance.
The result is new kinds of hardware and software being continually added to the IT
infrastructure, with little consideration for how they will affect operating performance or
whether they can share information across platforms.
Only when the economy slows down do organizations realize their unbalanced spending
has led to an unstable IT infrastructure. To remedy this situation, management must allocate
a significant portion of the IT budget to IT infrastructure projects. New development pro-
jects that might provide competitive advantage in a down economy must be delayed until a
stable and fully integrated IT environment is in place.
Organizations that balance funding between new systems development and infrastructure
are better placed to take advantage of business cycles. They are more agile.
 managing in economic decline 275

Conclusion: CIOs Must Be Able to Facilitate Change as Their

Environment Changes

In conclusion, our study found that some CIOs change their approach to managing IT as
various economic and organizational changes occur. Such fluid movement through the four
approaches demonstrates that CIOs must have the flexibility to modify IT strategy to meet
changes in the business environment.
Continual change is now inherent in IT strategy development. Instead of developing an IT
strategy and “selling” it to management, CIOs now need to facilitate solutions and assist busi-
ness unit executives in locating the IT tools to integrate diverse solutions to form a cohesive
working organization. Only then will IT strategy align with business goals during both the
good times and the bad.

Notes
1 McCracken, B., “CRM – Failed Deployments … Frequent Autopsy Results,” September 13, 2002,
http://www.ecrmguide.com; and Hellweg, E., “CRM Success: Still the Exception, Not the Rule,”
Business 2.0, July 10, 2002.
2 For a discussion of the challenges of achieving benefits through CRM, see: Goodhue, D. L., Wixom,
B. H., and Watson, H. J., “Realizing Benefits through CRM: Hitting the Right Target in the Right
Way,” MISQ Executive, June 2002, pp. 79–94; and Swift, R. S., “CRM is Changing Our Eras, the
Information We Require, and Our Processes” MISQ Executive, June 2002, pp. 95–97.
3 Merian, L., “CIO Survey: 2001 Corporate IT Spending To Rise More Moderately Than in 2000,”
Computerworld, January 1, 2001.
4 “CIO Magazine Tech Poll,” CIO Magazine, December, 2002, http://www.cio.com, January 16,
2003.
5 Ibid.
6 Ross, J.W. and Beath, C.M., “New Approaches to IT Investment,” Sloan Management Review, 43:2,
2002, pp. 51–59.
7 Hagel III, J. and Brown, J.S., “Your Next IT Strategy,” Harvard Business Review, 79:9, 2001, pp. 105–
113.
8 “Bank of America and EDS Sign a 10-Year, $4.5 Billion Managed Network Outsourcing Agreement,”
News Releases, December 12, 2002. http://www.eds.com, January 17, 2003.
9 CIO.COM, Outsourcing Research Center, New Deals, December 2002, http://www.cio.com/
research/outsourcing/newdeals.html.
10 Lawrence, P. and Lorsch, J., Organization and Its Environment (Boston: Harvard University Press),
1967.
11 Choudhury, V. and Sampler, J.L. “Information Specificity and Environmental Scanning: An Economic
Perspective,” MIS Quarterly, 21:1, 1997, pp. 25–53.
12 For a discussion on getting the most out of offshore development, see Carmen, E. and Agarwal, R.,”
The Maturation of Offshore Sourcing of Information Technology Work, MISQ Executive, June 2002,
pp. 65–78.
13 For an excellent discussion on mastering strategic alignment, see Chan, Y., “Why Haven’t We Mas-
tered Alignment: the Importance of the Informal Organizational Structure,” MISQ Executive, June
2002, pp. 97–112.

Questions for Discussion

1 Can commitment to an IT plan have negative consequences in the long run?

2 Why is having a strong IT infrastructure important to remain efficient and competitive
in times of economic downturn?
3 Does the bulletproof approach restrict experimentation, and so innovation?
276 dorothy e. leidner et al.

4 How can the clean house approach overcome challenges associated with adoption and
adaptation of new routines/procedures?
5 How can organizations deal with disruptions in processes caused by stopping and
restarting IT applications in maintaining the legacy approach?
6 Which of the four approaches, or a combination of the same, are ideal for organizations
to adopt in order to remain competitive in times of economic downturn?

Further Reading
Xue, L., Ray, G., Bin, G. (2011). Environmental Uncertainty and IT Infrastructure Governance: A
Curvilinear Relationship. Information Systems Research, 22(2), 389–399.
Xue, L., Ray, G., Sambamurthy, V. (2012). Efficiency or innovation: how do industry environments
moderate the effects of firms’ IT asset portfolios. MIS Quarterly, 36(2), 497–518.
Chapter 13

David S. Preston, Dorothy E. Leidner

and Daniel Chen

CIO LEADERSHIP PROFILES:

IMPLICATIONS OF MATCHING CIO
AUTHORITY AND LEADERSHIP
CAPABILITY ON IT IMPACT

The Importance of CIO Leadership to the Modern Organization

O ver th e pa s t s e v e r a l decades, information technology (IT) has become

essential for organizations to increase operational efficiency and to obtain strategic
success.1 However, many organizations have experienced the “productivity paradox” – they
have not been able to observe business value that is directly linked with their investments in
IT. Savvy organizations have realized that they cannot derive business value by simply pour-
ing vast sums of money into IT; rather, the strategic leadership of IT is the key to maximizing
its potential benefits.
The chief information officer (CIO) plays a critical role in the ability of an organiza-
tion to derive business value from IT. Organizations that view the CIO as a strategic asset
are more likely to create business value through IT and thereby achieve superior business
­performance.2
However, not all firms need to include IT as an integral part of their business strategy.
We argue that the impact of IT within an organization depends on the fit between the CIO
and the strategic context of the organization. This article describes four distinct profiles
of CIO leadership. We examine the influence of these four profiles on IT’s contribution
to a firm’s performance and then assess the characteristics of each CIO leadership profile
within organizations. The primary focus of our research is to enable organizations to under-
stand how the fit between the CIO and the organizational context determines the benefits
derived from IT. Given the potential importance of the CIO within the modern organiza-
tion, as well as recent attention given to this topic, our findings provide criteria that enable
an organization to examine its current CIO leadership profile and balance its return on IT
investments.
278 d av i d s . p r e s t o n e t a l .

Classifying CIO Leadership Profiles

We have classified CIO leadership on two dimensions:

•• The CIO’s strategic decision-making authority within the organization.

•• The CIO’s strategic leadership capability.

The Decision-Making Authority Dimension

CIO strategic decision-making authority is the degree to which the CIO has the authority
to engage in strategic decision-making within the organization. Strategic decision-making is
distinguished from tactical or operational decision-making in that it concerns decisions that
will have a significant and lasting impact on organizational performance.
Given the pervasiveness of IT across functional groups and the intertwined nature of business
and technology in modern organizations, the CIO should have the decision-making authority
to lead strategic IT initiatives if IT is to contribute to the success of the organization. However,
despite the strategic importance of IT, some CIOs are still not granted the same strategic
decision-making authority as other business executives, and there are large differences in the
strategic decision-making authority of CIOs across organizations. For instance, Kaarst-Brown3
noted that “many IT executives are still not at the table because they are not viewed equal to
their business peers.” Other researchers have observed that, in many organizations, the CIO
plays a critical role not only in IT strategic planning, but in business strategic planning as well.4
These disparities in the roles of CIOs across organizations are supported by the following
statement from a CIO of a major Midwestern university, who was interviewed as part of our
study. He said:

In my years networking with various executives, I still find that many firms have
completely different views on the strategic role of the CIO. In some organiza-
tions the purpose of the CIO is purely operational – he is there to essentially fix
the pipes like a plumber. In other organizations, the CIO is considered to be a
true strategic leader. In many organizations, the CIO may be stuck somewhere
in the middle of this range.

The Leadership Capability Dimension

CIOs who have the authority to pursue strategic IT initiatives need to be capable leaders
to successfully execute strategic projects; otherwise, the consequences for the organization
could be problematic. Many CIOs are generally considered to be competent at managing the
technical aspects of IT, such as keeping key systems operational; however, many CIOs fail as
strategic leaders.5
This issue is of concern to organizations since it is through strategic leadership that CIOs
can most significantly influence the impact of IT on organizational performance. CIOs who
are effective strategic visionaries are well suited to select and champion strategic initiatives
that are designed to increase organizational performance. On the other hand, CIOs who are
not capable strategic leaders are likely to have a lower level of influence, or possibly even
a detrimental influence, on the contribution that IT makes to organizational performance.
The CIO of a large private hospital in our study supported the importance of a capable IT
leader to the organization. He said, “To truly make an impact, the CIO must have the ability
to personally make strategic decisions. However, if the CIO does not have the background
and experience to support the right decisions, the results can definitely be harmful.”
 cio profiles 279

The Four CIO Leadership Profiles

Using the two dimensions described above, we have constructed a 2x2 matrix that identifies
four IT leadership profiles (see Figure 13.1):

•• IT Orchestrator (high leadership capability, high decision-making authority).

•• IT Mechanic (low leadership capability, low decision-making authority).
•• IT Advisor (high leadership capability, low decision-making authority).
•• IT Laggard (low leadership capability, high decision-making authority).

Overview of Research Methodology and Findings

Our research findings are derived from six semi-structured interviews with industry CIOs
and pairs of survey responses (one from the CIO and at least one from a senior business
executive) from 174 diverse organizations from a range of industries. (Fuller details of the
research methodology and respondents are in the Appendix.6)
We assigned each of the 174 CIOs to one of the four CIO leadership profiles.7 The break-
down was as follows:

•• IT Orchestrators: 55 (32%)
•• IT Laggards: 32 (18%)
•• IT Advisors: 31 (18%)
•• IT Mechanics: 56 (32%)

Impact of CIO Leadership Profile on IT Contribution

For each of the profiles, we assessed the level of IT contribution to organizational performance
by using various statistical techniques8 to analyze the responses of the organizations’ CEOs
or other top business executives. We asked these business executives to assess the extent to
which IT had contributed to the following seven areas of organizational performance: return
on investment, sales revenue increase, market share increase, cost savings, operating effi-
ciency, process improvement, and customer satisfaction. For each area, they rated the IT
contribution level on a scale from 1 (IT contribution is minimal) to 5 (IT has ­contributed

High

IT Advisor IT Orchestrator

CIO
Leadership
Capability

IT Mechanic IT Laggard

Low
High
CIO Decision-making Authority

Figure 13.1 CIO Leadership Profiles

280 d av i d s . p r e s t o n e t a l .

Figure 13.2 CIO Leadership Profiles and IT Contribution

to a very great extent). Based on these responses. we averaged the seven components of IT
­contribution for each CIO leadership profile. The results are shown in Figure 13.2.
The data in Figure 13.2 clearly illustrates how the CIO leadership profile impacts the
level of contribution IT makes to organizational performance. We observed that the IT
contribution level is higher than the overall average in firms where the CIO is classified as
an IT Orchestrator or IT Advisor and lower than the average where the CIO is classified as
an IT Laggard or IT Mechanic.9 Firms with IT Orchestrators had the highest IT contribu-
tion level, while those with IT Mechanics had the lowest IT contribution level. Our analysis
shows that the CIO’s strategic decision-making authority and leadership capability collec-
tively have a highly statistically significant impact on the contribution of IT to an organiza-
tion’s performance.

Other Factors Differentiating the Four CIO Leadership Profiles

Previous research has identified several factors that may help to further explain the dif-
ferences between the IT contribution levels associated with each of the CIO leadership
profiles. However, our study found that a CIO’s age, gender, education level, business
and IT experience, and length of service with the organization or as its CIO did not vary
significantly across the four leadership profiles. But we did find significant differences in
three factors – CIO attributes, CIO integration with top management, and organizational
commitment to IT. The components of each of these factors are shown in Figure 13.3. Our

Figure 13.3 Factors Differentiating CIO Leadership Profiles

 cio profiles 281

study collected data on these six components so we could identify the distinguishing charac-
teristics of CIOs in each leadership profile.
We describe the characteristics of each of the four CIO leadership profiles below in terms
of “low,” “average,” or “high” ratings for each of these six components.10 CIO knowledge
(strategic knowledge and interpersonal skills) were rated by business executives on a scale of
1 (low) to 5 (high). CIOs used the same 1 to 5 scale to rate the level of IT resources. Business
executives rated the organization’s strategic IT vision (the degree to which IT is designed to
transform the organization) on a scale of 1 to 3, where 1 equates to an “automative” vision, 2
equates to an “informative” vision, and 3 equates to a “transformative” vision.11
We found that four of these six components (the CIO’s strategic knowledge, the
CIO’s interpersonal skills, the CIO’s membership of the top management team, and the
­organization’s strategic IT vision) directly influence the level of IT contribution within
the organization.
Because of this, we pay particular attention to these four components in the following
descriptions of each of the four CIO leadership profiles. For each profile, we also provide an
illustrative example of a CIO we encountered in our research who fits into that classification.

Profile of the IT Orchestrator

In our study, 32% of CIOs were classified as IT Orchestrators. This type of CIO is an effec-
tive strategic leader who is granted a great deal of freedom in making strategic decisions.
Such a CIO is empowered to influence organizational outcomes. We summarize the defining
characteristics of IT Orchestrator CIOs in Figure 13.4.
The knowledge level and interpersonal attributes of IT Orchestrators are considerably
higher than the overall average in our sample. Also, more of these CIOs report directly to
the CEO and are formal members of the top management team. IT Orchestrators benefit
from organizational support in the form of higher-than-average investments in IT. We posit
that CIOs who are IT Orchestrators have the leadership skills that enable them to secure
investments for IT. Alternatively an organization that invests highly in IT might actively seek
a capable IT leader to handle such strategic responsibilities. Both explanations are plausible,
and, in fact, some combination of the two may likely explain the higher-than-average invest-
ments in IT in these firms.
The CIO of a major electronics manufacturer provided insight into this phenomenon:

I am not exactly sure of all the aspects that are required to make sure that IT
delivers to the bottom line at the end of day. However, one thing I do know is

Figure 13.4 IT Orchestrator – Summary of Characteristics

282 d av i d s . p r e s t o n e t a l .

that I cannot perform – and as a result IT cannot deliver – if we [the IT depart-

ment] are not provided with the proper funding and staff to get the job done.

We also found that not only do firms with IT Orchestrator CIOs make large investments
in IT, they also generally espouse a vision that IT can strategically transform the organiza-
tion. A transformative vision is consistent with high IT investment levels, and such firms may
be ill-served without a CIO with the requisite strategic knowledge and interpersonal skills.
However, it has been noted that CIOs with these attributes are in short supply. To maximize
the impact on IT performance, such firms should employ a strategically capable CIO who is a
formal member of the top management team and promote a transformative IT vision within
the organization. Collectively, these practices can be taxing for the firm – but there are
considerable benefits in terms of improved organizational performance. As our research has
shown, organizations with an IT Orchestrator CIO obtain the greatest contribution from IT.

Illustrative Example of an IT Orchestrator CIO

“Midwestern General Hospital” (MGH) is a large general medical and surgical hospital with
approximately 3,000 employees located in an urban center in the Midwestern United States.
The contribution of IT to MGH’s organizational performance was rated very high (4.43),
well above the IT Orchestrator average of 3.54. MGH’s CIO is considered a highly capable
strategic leader (4.67) and is granted a high level of decision-making authority (4.60). All
of these ratings are higher than the average ratings for IT Orchestrators, so MGH can be
considered as a highly pronounced example of an organization with an IT Orchestrator CIO.
MGH’s CIO is well suited for this leadership profile. He has a very high level of strategic
knowledge and has developed complementary interpersonal skills. He is highly integrated
within the business – he reports directly to the CEO and is a formal member of the top
management team, which enables him to communicate ideas for strategic planning directly
to other senior executives. He indicated that he has forged strong relationships with other
members of the top management team. Such relationships are expected because a strategi-
cally capable and socially adept CIO with formal access to the top management team has the
forum and ability to develop a partnership with the upper echelon of the organization.
We observed that MGH has a strong commitment toward IT since it dedicates a large
amount of resources to IT and promotes a vision that the purpose of IT is to transform its
current business processes. We therefore infer that MGH includes IT as a central part of
its strategic mission and expects to yield commensurate benefits from its investments and
organizational efforts to capitalize on IT.
The current CIO appears to be a good fit for MGH’s organizational mission. This capable
executive has been with MGH for 23 years and served as CIO for 18 years. However, MGH
should consider grooming a replacement for this CIO since he is now in his mid-60s and may
soon retire. MGH should ensure that the potential replacement is a strong leader who can
meet the expectations for success set by MGH. However, IT leaders of this caliber are often
in short supply.

Profile of the IT Mechanic

At the other end of the spectrum and in stark contrast to IT Orchestrators, IT Mechanic CIOs
have a low level of both strategic effectiveness and strategic decision-making authority. We
summarize the defining characteristics of IT Mechanic CIOs in Figure 13.5.
 cio profiles 283

Figure 13.5 IT Mechanic – Summary of Characteristics

In our research, 32% of CIOs were classified as IT Mechanics. These CIOs generally had
the lowest levels of strategic knowledge and weaker interpersonal skills. In addition, a lower
percentage of these CIOs reported to the CEO than any of the other types of CIO. The CIO
of a non-profit organization who was interviewed as part of this study noted:

I can tell you first hand that the reporting level of the CIO is the indicator that
you should look at if you want to examine if the organization considers IT to be
strategically important. When I was a CIO in industry, I reported directly to
the CEO, which enabled me to play a key role in the corporate strategy. In my
current position, I report to an underling of the CEO, and I don’t have the same
influence to see that IT helps fuel the business.

Also, firms with an IT Mechanic CIO tend to have an IT vision that is more automation-
oriented than transformative. Based on these collective findings, it is not surprising that the
lowest contribution of IT to organizational performance was found in firms with IT Mechanic
CIOs. The average IT contribution rating of 2.49 (on a scale of 1 to 5) in these firms indicates
that IT does not contribute appreciably to the performance of the organization. However, it
is important to note that this low level of IT impact may be consistent with the organizational
goals of a firm. If a firm constrains its CIO’s strategic decision-making authority and employs
a CIO with only limited strategic leadership capability, it is a signal that IT is not viewed as a
strategic enabler within the organization.
In fact, the high percentage of our sample that was classified as IT Mechanic CIOs may
reflect an intentional decision on the part of top management teams to limit or neutral-
ize the risk of investing in IT resources and in developing a strategic CIO. As expected,
the contribution of IT to the performance of these organizations is not huge. At the
same time, the risk of over-investing in IT with disappointing benefits is very low. We
therefore consider employing an IT Mechanic CIO to be a risk-averse strategy aimed
at minimizing potential IT investment risks while maintaining a functioning operational
environment.

Illustrative Example of an IT Mechanic CIO

“Eastern General Hospital” (EGH) is a large general medical and surgical hospital with
approximately 1,900 employees in a suburban setting in the eastern United States. The con-
tribution of IT to organizational performance was rated as very low (1.81), well below the
284 d av i d s . p r e s t o n e t a l .

average of 2.49 for firms with IT Mechanic CIOs. EGH’s CIO is not considered a capable
strategic leader (2.33) and has a low level of decision-making authority (2.00).
EGH (unlike MGH – another general hospital) emphasizes neither the importance of the
CIO position nor a strategic focus on IT. We observed that the CIO appears to be more char-
acteristic of an operational manager than a true executive since he is not a formal member of
the top management team and reports to the chief medical officer rather than to the CEO.
EGH does not appear to have a strong strategic commitment to IT. Its vision is for IT to
merely automate current operational processes and reduce costs. Therefore IT does not play
a strategic role within EGH. However, it dedicates significant resources to IT, though they
are geared toward operational rather than strategic goals.
The current CIO appears to be an appropriate fit for this managerial role (rather than an exec-
utive role) since he does not have strong strategic knowledge or interpersonal skills. Although
he may have strong technical and managerial skills, he does not have the attributes needed by a
transformational leader. However, the EGH’s top executives appear to be satisfied with their
CIO’s current level of productivity and the status quo; the current CIO has been with EGH for
24 years and has served as CIO for 12 years despite his lack of leadership ability. His length of
tenure in this position indicates that he may also be satisfied within his IT Mechanic role.
The EGH and MGH cases illustrate that organizations in the same business can success-
fully have CIOs with different leadership profiles. The important thing is to ensure a good
level of fit between the CIO and the organizational context.

Profile of the IT Advisor

Organizations with an IT Advisor CIO (18% in our study) are of particular interest since
they obtain a moderately high IT contribution but require fewer resources and less strategic
commitment to IT than firms with an IT Orchestrator CIO. We use the label “IT Advisor”
since this type of CIO has limited decision-making authority but is a highly capable leader
with vast strategic knowledge who may be well suited to serve as a strategic advisor to the
top management team on IT issues. Although the impact of IT in firms with IT Advisor CIOs
is lower than in those with IT Orchestrator CIOs, it is higher than the overall average and
higher than firms with IT Laggard or IT Mechanic CIOs. Thus even when the CIO’s strategic
decision-making authority is relatively low, as it is for firms with an IT Advisor CIO, having
a capable leader in the CIO position helps IT contribute to organizational performance. This
observation underscores the importance of strategic leadership skills for CIOs. We summa-
rize the defining characteristics of this type of CIO in Figure 13.6.

Figure 13.6 IT Advisor – Summary of Characteristics

 cio profiles 285

Like IT Orchestrators, business executives consider IT Advisors to have strategic knowl-

edge and strong interpersonal skills. However, there are several key factors that distinguish
these two types of CIO. We observed that IT Advisor CIOs’ integration with top manage-
ment and their firms’ IT visions are near the overall average. In addition, we observed that,
even though firms with IT Advisor CIOs provide the lowest level of resources to the IT
department, they still obtain a relatively high level of IT impact. Despite minimizing their
IT investment and commitment. these firms are able to derive organizational benefits from
IT by employing a capable CIO. In essence, their approach is a “low cost alternative” com-
pared to firms with IT Orchestrator CIOs, which require substantial IT investments and
dedication to a transformative IT vision.

Profile of the IT Laggard

Firms with an IT Laggard CIO have a level of IT contribution that is lower than average
but higher than that of firms with IT Mechanic CIOs. IT Laggards are the inverse of IT
Advisors since they are provided with a relatively high level of decision-making authority.
but they do not have the requisite leadership skills to capitalize on the strategic author-
ity provided to them. We summarize the defining characteristics of IT Laggard CIOs in
Figure 13.7.
The strategic decision-making authority given to IT Laggard CIOs suggests that top man-
agement has high expectations for them to derive potential benefits from IT. However, it
is possible that IT Laggards’ leadership capability is hampered by a fairly conservative IT
vision. Without a more aggressive IT vision, IT Laggards may be unable to capitalize on their
decision-making authority and are consequently labeled as incapable leaders. We note that
despite firms with IT laggard CIOs making higher-than-average investments in IT resources,
they do not obtain the same level of impact as firms with more capable but underfunded IT
Advisor CIOs.
Our analysis showed that the IT contribution in firms with IT Laggard CIOs was slightly
higher than in those with IT Mechanic CIOs. This finding could indicate that IT Laggards are
able to use some of their decision-making authority to lead initiatives that potentially have a
moderate strategic impact and are within the scope of their abilities. It could also indicate that
Laggards eschew potentially more risky initiatives that would have greater strategic impact
but are outside of their “strategic comfort zone.” Firms with IT Laggard CIOs might still
target strategic IT initiatives but more likely under the guidance of the top management team
than the CIO.

Figure 13.7 IT Laggard – Summary of Characteristics

286 d av i d s . p r e s t o n e t a l .

Illustrative Example of an IT Advisor CIO

“Wholesaler Inc.” is a small to mid-sized wholesaler of recreational goods in the southeast of

the United States, with approximately 200 employees. The contribution of IT to organiza-
tional performance was rated as moderately high (3.3), which is on par with the typical firm
with an IT Advisor CIO. Wholesaler Inc.’s CIO is considered by business executives to be
a capable strategic leader (4.33) but is not granted a high level of decision-making authority
(2.60). Both of these ratings are close to the average for IT Advisor CIOs. This CIO is thus
a quintessential IT Advisor – a CIO who is a strong strategic leader but does not have the
authority to make strategic decisions independently.
The CIO’s integration with the top ranks of Wholesaler Inc.’s management is typical of
IT Advisors–he reports directly to the CEO but is not a formal member of the top manage-
ment team. Wholesaler Inc.’s strategic IT vision is also typical of firms with IT Advisor
CIOs. The most salient characteristic of Wholesaler Inc. is that it provides a low amount of
resources to IT (2.33). This indicates that the firm wishes to minimize its direct IT invest-
ments even though it has a CIO who is a capable strategic leader. The combination of a mini-
malist approach from the business side and a strategic CIO means that Wholesaler Inc. is able
to obtain a reasonably high level of IT contribution and a good “bang for the buck” from its IT
investments and commitment to IT.
We note that IT investments do not directly influence the contribution of IT on organiza-
tional performance; however, investments in initiatives that are in accordance with organiza-
tional objectives may indirectly influence organizational success.
The CIO indicated that he has formed a very strong partnership with the top manage-
ment team. This partnership may enable this knowledgeable and adept CIO to navigate the
decision-making environment dominated by the top management team and act as an advisor
for decisions on strategic IT initiatives.
Wholesaler Inc.’s CIO has been in this executive position for only three years. Therefore
it is unclear whether he is content with an advisory role and will stay with the firm in the
long run if he is not provided with the appropriate resources or decision-making authority to
enable him to exploit his strategic leadership capabilities.

Three Key Lessons on IT Leadership

Given that the strategic management of IT continues to be a key issue for organizations, we sum-
marize three key lessons based on our findings. We believe that these lessons provide insights for
both IT executives and business executives about the role of IT leadership within the organization.

Illustrative Example of an IT Laggard CIO

“Parts Manufacturer Inc.” (PMI) is a mid-sized U.S. parts manufacturer for several industry
sectors, with approximately 600 employees. The contribution of IT to organizational perfor-
mance is moderately low (2.71), which is on par with the IT Laggard average. Senior execu-
tives do not consider the CIO to be a capable strategic leader (2.67); however, this CIO is
granted a high level of strategic decision-making authority (4.30).
This firm has a moderate level of IT commitment since its IT resources and strategic
IT vision are on par with the average of firms with IT Laggard CIOs and with the overall
 cio profiles 287

a­ verage. In addition, the CIO’s integration with top management is average since he is not
a formal top management team member but does report directly to the CEO. We observed
that PMI’s CIO is in charge of a wide range of strategic decisions for IT; however, he does
not have the strategic knowledge or interpersonal skills necessary for a strategic leader in this
position. This accounts for PMI having a moderately low level of IT contribution, probably
due to the relatively unprepared IT leader acting as the key decision maker within a firm that
appears to seek only marginal gains from IT.
PMI’s CIO indicated that he has a strong partnership with the top management team.
Although he has the authority to make strategic decisions, he may choose to collaborate
with top executives who can compensate for any deficits in his strategic knowledge base.
However, the CIO’s weak interpersonal skills may cast doubt on his assertion that he can
foster such a relationship.
PMI provides its CIO with authority that, at present, he may not be equipped to handle.
However, we note that he has been the firm’s CIO for just two years. Perhaps he will acquire
greater knowledge and interpersonal skills should he remain in this role for a longer period.
To some degree, strategic knowledge, or the application of strategic knowledge, is company
specific. The CIO’s interpersonal skills may also further develop after he is able to under-
stand the behavior and goals of PMI’s top management.

Lesson 1: Know Thyself

CIOs will benefit from understanding their own leadership profile. Our findings clearly dem-
onstrate that IT’s contribution to organizational performance varies significantly across the
four CIO leadership profiles. CIOs who want to increase the level of IT contribution to their
organizations’ performance can gain an understanding of how to achieve this by assessing
their current profile.
Although organizations may not officially decree their CIOs’ level of strategic decision-
making authority, CIOs should assess their level of authority by evaluating their prior and
current experiences in leading initiatives within their organizations.12 However, CIOs must
keep in mind that not all organizations expect a high level of contribution from IT. It is
therefore also imperative for a CIO to understand the top management team’s vision for IT.
If that vision is transformative, the organization needs an IT Orchestrator CIO. If the vision
is automative, a CIO that matches the IT Mechanic profile is appropriate. In firms where the
vision is informative (i.e., the role of IT is to provide information to key decision-makers) an
IT Advisor CIO will likely be needed.
By understanding his or her current profile, as well as the profile needed to support the
top management team’s vision for IT, the CIO can make adjustments to better serve the
organization. Note, though, that the CIO’s leadership ability is based on the top management
team’s perception. The CIO characteristics most readily changeable and within the CIO’s
control are strategic IT and business knowledge, and interpersonal skills (i.e., the CIO attrib-
utes listed in Figure 13.3). CIOs who want – or need – to adjust their own profile will need
to begin with these attributes.
The other CIO characteristics (integration with top management and organizational com-
mitment to IT) are generally not under the direct control of the CIO. However, the CIO
can work to influence these characteristics by forging close relationships with the top man-
agement team, by ensuring that the IT function is a top performer on service-management
metrics, by tracking the value of IT projects, and by identifying projects that have delivered
on their business cases.
288 d av i d s . p r e s t o n e t a l .

Lesson 2: The Global Digital Economy Will Need More IT Orchestrators

Two of the four CIO leadership profiles (IT Orchestrator and IT Mechanic) have a good
match between the CIO’s strategic decision-making authority and leadership capability, and
two (IT Advisor and IT Laggard) have a mismatch. IT Orchestrator CIOs are well suited for
organizations that want to be at the forefront of IT innovation. However, not all organiza-
tions currently believe that an IT Orchestrator is necessary; an IT Mechanic may be ideal
for an organization that has only limited needs from IT and wishes to minimize IT costs. On
the other hand, there is untapped potential from IT in organizations with IT Advisor or IT
Laggard CIOs.
Although not all organizations see the need for an IT Orchestrator. the global digital
environment in which many firms now operate increasingly demands that IT is used to help
them achieve greater innovation and efficiency. Organizations operating in this environment
will need IT to support their business strategies and will be best served by IT Orchestrator
CIOs. IT Mechanics, IT Laggards, and IT Advisors may therefore have to evolve into IT
Orchestrators.
Moreover, current IT Orchestrator CIOs who wish to continue maximizing the potential
impact of IT will need to maintain a high level of decision-making authority and strategic lead-
ership capability as the organizational structure and business priorities change with time. These
CIOs need to ensure that they keep their strategic knowledge base current and their interper-
sonal skills polished. Since the top management team could be continually changing, the CIO
must also consistently work to build and maintain strong partnerships with these top execu-
tives and develop a uniform agreement that IT is key to the firm’s business strategy. Therefore
IT Orchestrator CIOs must continually monitor their attributes and strive to improve them.
All CIOs, regardless of their current leadership profile, need to be aware that future
trends will favor the appointment of IT Orchestrators. CIOs without the necessary attributes
for the IT Orchestrator profile should be prepared to adapt (see Lesson 3); if they don’t, they
may find themselves out of a job. IT Advisors, IT Laggards, and IT Mechanics should there-
fore prepare to methodically reshape themselves as IT Orchestrators.

Lesson 3: IT Advisors, IT Laggards, and IT Mechanics Can Transition Across

Profiles
Actions for IT Advisors. Our research has shown that an IT Advisor CIO can derive moder-
ately high benefits from IT with minimal commitment of resources within an organization
that generally has a moderate strategic IT vision. To transition to the IT Orchestrator profile,
an IT Advisor needs to focus on obtaining additional funding and strive to instill a vision
among top business executives that transformation through IT is fundamental to the firm’s
corporate strategy. To gain greater IT commitment from the organization, an IT Advisor
CIO should demonstrate a track record for IT to the top management team by providing
clear examples of how IT has delivered value to the business. An IT Advisor with strong
interpersonal skills has the political savvy and communication skills to formulate and present
business cases that show IT is critical to current and future operations and the business strat-
egy. Such business cases will increase the firm’s level of IT commitment and consequently
increase the CIO’s strategic decision-making authority.
Actions for IT Laggards. We found that IT Laggards’ leadership capabilities generally
fall short of what’s needed to achieve the firm’s strategic IT goals. IT Laggard CIOs should
immediately address their shortcomings and should lobby the top management team to
attend programs that will accelerate their personal development. These programs might be
advanced business classes (e.g., graduate-level classes in strategy, finance, etc.) designed to
 cio profiles 289

improve their strategic knowledge, or executive development programs designed to enhance

and refine IT Laggards’ “soft” skills.
Actions for IT Mechanics. IT Mechanics who want to develop into IT Orchestrators must
both improve their executive attributes and transform their organizations’ view of IT. We
recommend that IT Mechanic CIOs first focus on developing their leadership capabilities and
then subsequently work to extend their decision-making authority. In essence, we are rec-
ommending that IT Mechanic CIOs first work to transition themselves into IT Advisors and
subsequently work to transform themselves into IT Orchestrators.

Making Use of the CIO Leadership Profiles

The lessons learned from our study provide a lens through which CIOs and their senior busi-
ness colleagues can understand their current CIO leadership profiles. An organization and
its CIO can evaluate the current CIO leadership profile by focusing on the CIO’s attributes,
CIO integration within the firm, and the organization’s IT commitment. The top manage-
ment team can then assess if the profile meets the firm’s plans to derive benefits from IT. The
CIO can identify shortcomings in his or her own profile and take steps to remedy them so he
or she can better serve the organization as the need for IT Orchestrators comes to the fore.
We believe that the profiles developed for this study and the quantified findings from our
research will enable executives to directly influence the CIO leadership profile and the con-
tribution made by IT within their organizations. We also believe that this study will provide
a foundation for future research on the impact of CIOs on organizational practices and the
bottom line of their firms.

Appendix: Research Methodology

To conduct this empirical study, we collected data in 2006/2007 from CIOs and their cor-
responding top business executives via a survey. The CIO is defined as the highest-ranking
IT executive within the organization. Top business executives included the organization’s
CEO or business executives who are either formal members of the top management team or
reported directly to the CEO. Business executives responded to questions on the quality of
the CIO’s leadership capabilities, attributes, the organization’s strategic IT vision, and IT’s
contribution to organizational performance. CIOs responded to questions on their integra-
tion with top management and the resources provided to IT. Both the CIO and matched
CEO or other top business executives responded to questions on the CIO’s strategic deci-
sion-making authority, and the mean responses were used, after assessing the inter-rater
reliability (the degree of agreement among respondents).
Matched-pair surveys from 174 diverse U.S.-based organizations within multiple indus-
tries were returned, providing responses from both the CIO and at least one corresponding
top business executive. Among the 174 organizations, 78 (44.8%) were in the healthcare
industry, 18 (10.4%) were in the manufacturing industry, 16 (9.2%) were in the finance
industry, 15 (8.6%) were retailers or wholesalers, 15 (8.6%) were consulting firms, 8 (4.6%)
were in the construction/real estate development industry, 8 (4.6%) were educational insti-
tutions, and the remaining 16 (9.2%) were from miscellaneous industries. All the organiza-
tions had annual revenue of more than $650,000, and the average number of employees was
7,643. The average age of the CIOs was 49.6 years, and average tenure as the firm’s CIO was
8.8 years. Of the 174 CIOs, 35 (20.1%) were women and 139 (79.9%) were men.
290 d av i d s . p r e s t o n e t a l .

Notes
1 For more on the critical role of IT in obtaining both efficiencies and strategic success, see Sambamur-
thy, V, Bharadwaj, A., and Grover, V. “Shaping agility through digital options: Reconceptualizing the
role of information technology in contemporary firms,” MIS Quarterly (27:2), 2003, pp. 237–263.
2 For a comprehensive analysis of the organizational views of CIOs and IT performance, see Chatter-
jee, D., Richardson, V. J., and Zmud, R. W. “Examining the shareholder wealth effects of announce-
ments of newly created CIO positions,” MIS Quarterly (25:1), 2001, pp. 43–70.
3 Insights into the variations in authority given to CIOs across organizations can be found in Kaarst-
Brown, M. L. “Understanding an organization’s view of the CIO: The role of assumptions about IT,”
MIS Quarterly Executive (4:2), 2005, p. 287.
4 Leidner and Mackay found that some CIOs were not only leading IT strategy, but were also initiating
organizational strategy. See Leidner, D. E., and Mackay, J. M. “How Incoming CIOs Transition into
Their New Jobs,” MIS Quarterly Executive (6:1), 2007, pp. 17–28.
5 To obtain a valid and unbiased assessment of CIOs, it is necessary to get the viewpoint of business
executives, rather than CIOs themselves. One of the few studies to have done this is Smaltz, D. H.,
Sambamurthy, V., and Agarwal, R. “The antecedents of CIO role effectiveness in organizations: An
empirical study in the healthcare sector,” IEEE Transactions on Engineering Management (53:2), 2006,
pp. 207–222. For an in-depth look at CIOs and why they succeed, or fail, see Broadbent, M., and
Kitzis, E. S. The New CIO Leader, Harvard Business School Press, 2006.
6 For further information about this study, please contact David Preston ([email protected]).
7 We assigned the 174 CIOs to the four leadership profiles based on high and low levels (with respect
to the average value of the total sample) of decision-making authority and strategic leadership capa-
bility.We measured CIO decision-making authority as the degree to which the CIO has the authority
to make strategic decisions to meet the organization’s business needs, taking account of the following
issues: strategic options, strategic actions, courses of action, IT initiatives, and IT investments. CIO
strategic leadership capability was measured as the degree to which business executives rated the
CIO as an effective strategic leader, a strategic business planner, and a visionary.
8 Statistical analyses included both hierarchical regression and one-way analysis of variance (ANOVA).
9 The results of our statistical analysis indicate that the IT contribution levels of each of the four CIO
profiles are statistically different from the average. The IT contribution levels of Orchestrators and
Mechanics were found, respectively, to be significantly higher and lower than the average (0.01 level
of significance via a two-tailed t-test). Advisors were found to be significantly higher than average
(0.10 level of significance via a one-tailed t-test). Laggards were found to be significantly lower than
average (0.10 level of significance via a two-tailed t-test).
10 We tested the value of each component for each profile versus the average values across all CIOs via
an ANOVA test. In our statistical analysis, profiles that had a component value significantly below or
above the overall average were designated as “low” and “high,” respectively. Profiles with characteris-
tics that were not significantly different from the overall average were designated as “average.”
11 At one extreme, some organizations espouse an automative vision where the role of IT focuses on
replacing human labor and reducing operational costs. At the other extreme, some organizations
espouse a transformative vision where the role of IT is to transform the organization through new
products or business strategies. And some firms may have an informative vision, which can be con-
sidered as an intermediate level of transformation, where the role of IT is to provide information to
key decision makers and employees. For more information, see Schein, E. H. “The role of the CEO
in the management of change: The case of information technology” in Kochan, T. A., and Useem, M.
(eds.) Transforming Organizations, Oxford University Press, 1992.
12 Our survey results found that CIOs and top management team members have a high degree of
agreement on the CIO’s perceived level of strategic decision-making authority. Therefore CIOs can
generally accurately assess their level of decision-making authority in the organization.

Questions for Discussion

1 Why is it helpful to classify CIO leadership profiles?

2 Is strategy more suitable to a CIO role as compared to tactics? Discuss with respect to
the four types of CIO profiles.
 cio profiles 291

3 Is a large budget and investment in IT a prerequisite to having an effective IT

Orchestrator CIO?
4 Is it better to have no CIO than to have an IT Mechanic CIO?
5 Which ones of the four CIO profiles do you believe can be most effective for IT impact?
Is this dependent on the type of organization?
6 Can (and how can) CIO roles transition among the four CIO profiles?

Further Reading
Preston, D., Chen, D., Leidner, D. E. (2008). Examining the antecedents and consequences of CIO deci-
sion making authority. Decision Sciences, 39(4), 605–642.
Karahanna, E., Preston, D. (2013). The effect of social capital of the relationship between the CIO
and top management team on firm performance. Journal of Management Information Systems, 30(1),
15–56.
Chapter 14

Sanja Tumbas, Nicholas Berente and

Jan vom Brocke

THREE TYPES OF CHIEF DIGITAL

OFFICERS AND THE REASONS
ORGANIZATIONS ADOPT THE ROLE

The Rise of the Chief Digital Officer

T he c h i ef d i g i ta l o ffi c e r (CDO) role has emerged in recent years and

is attracting a great deal of attention.1 Digital innovation impacts every industry, and as
a response, many organizations have introduced this new leadership role in their C-suites.2
However, since the CDO role is still in its nascent stages and not well defined, the role means
different things to different organizations.
For example, some organizations leverage the role of the CDO to emphasize digital capa-
bilities at a strategic level. CDOs are often key evangelists in organizations for a general
entrepreneurial mindset and facilitators of enterprise-wide change associated with digital
transformation.3 In some organizations, CDO responsibilities are more tactical and involve
leading a variety of specific initiatives and projects that digitally enable units across the organ-
ization and its customers. In other organizations, CDOs are charged with leading product
and service innovation. Here, CDOs are often thought to exist at the intersection of different
functions—most commonly IT and marketing, but also product development, technology
strategy, communications, operations and others. Still other organizations address digital
innovation through existing executive roles, such as CIOs.
Overall, there is little guidance on whether an organization should adopt a CDO role. To
decide, organizations need answers to two particular questions: What, specifically, do CDOs do?
Why do different organizations establish the CDO role? This article sets out to provide answers to
these questions. We interviewed 35 CDOs across a wide variety of industry sectors to get
insight into when adopting the CDO role makes sense (see Table 14.1 on next page).
Our research shows that the core reason organizations appoint a CDO is to drive business
value from digital technologies. From our interviews (further information about the research
 a lt e r n a t i v e r o l e s f o r c h i e f d i g i t a l o f f i c e r s 293

Table 14.1 Overview of Respondents

Company6 Industry Sector Time in Position Country

(years)
FinancialServ 1 Banking and finance 0.25 U.S.
FinancialServ 2 Banking and finance 0.85 U.K.
InsuranceFirm Insurance 0.85 U.S.
HealthRelated Healthcare l Europe
RetailOrg Retail l.25 Australia
Manu&Retail Retail and manufacturing L U.S.
RetailCommunication Retail 3 Europe
Manufacturing 1 Custom part manufacturing 2 Europe
Manufacturing 2 Hard manufacturing 5.5 Canada
Manufacturing 3 Transportation vehicle 1.5 Europe
ArchitectureDesign Architecture, engineering 4 U.S.
and construction
SoftwareCom 1 Software 0.85 Europe
SoftwareCom 2 Software L U.S.
FinancialServ 3 Banking and finance 0.5 Europe
Media Publisher 1 News publishing 1.25 Europe
Media Publisher 2 News publishing 1.85 Europe
Media Publisher 3 Specialized publisher 2 Europe
Media Publisher 4 Specialized publisher 5.5 Europe
Media Publisher&TV 5 News publishing and 0.5 Europe
broadcasting
Media Film 6 Film producer education/ 4 Canada
non-profit
Media TV 7 TV broadcasting 3.5 U.S.
Media Advertising 8 Advertising 1 Europe
Media Advertising 9 Advertising 2 U.S.
Media Advertising 10 Advertising 1 South America
Media Advertising 11 Advertising 1 U.S.
GovInstitution Governmental/non-profit 0.5 Europe
Labor Union Association/non-profit 0.25 U.S.
EducationOrg 1 Education/non-profit 4 U.S.
CultureHouse 1 Culture/non-profit 1.5 U.S.
CultureHouse 2 Culture/non-profit 4 U.S.
DevelopSkill Leadership education/ L Europe
non-profit
EducationOrg 2 Education 2 U.S.
ConsumerGood 1 Consumer goods 1.5 U.S.
ConsumerGood 2 Consumer goods L U.S.
FinancialServ 4 Banking and finance 1 Europe

methodology is in the Appendix), we identified three focal domains where CDOs build digi-
tal capabilities to drive business value: digital innovation, data analytics and customer engage-
ment. Furthermore, we suggest there is a distinct type of CDO associated with each of these
digital capabilities—digital accelerator, digital marketer and digital harmonizer.
Based on these insights, we discuss the relationship between organizations’ traditional IT
functions and their emerging digital requirements, and describe how CDOs and CIOs can
complement each other. We reflect on the role of the CDO in relation to the established
role of the CIO—the executive most commonly charged with innovation with digital tech-
nologies.4 Many CIOs are actively embracing new opportunities in digital innovation,5 so the
relationship between the CDO and CIO is an important one.
294 s a n j a t um b a s e t a l .

Characteristics of a Successful CDO

In our interviews with CDOs, we explored their roles by asking open-ended questions,
including: Why did the organization create the CDO role? What are the tasks and responsi-
bilities of the CDO? What kind of outcomes do CDOs drive?
In general, CDOs help their organizations to use digital technologies to create business
value. They are engaged with developing digital capabilities in relevant domains and success-
fully using various classes of digital technologies to generate value. They need to continually
focus on seizing new opportunities. An organization’s CDO is responsible for questioning
the existing business model and evaluating customer-centeredness, using a variety of data
to gain insights. To cope with these business imperatives, the CDO must be well versed in
experimenting with, and applying, a variety of digital technologies.
Successful CDOs need to actively sense the environment for emerging digital tech-
nologies and then work to build digital capabilities in their organizations. To attain goals
associated with any digital capability, organizations must leverage various technologies,
such as mobile apps, social media, the Internet of Things or other emerging domains.
However, these emerging domains are ever-expanding. In our interviews, different CDOs
emphasized distinct areas. For example, some emphasized mobility and the importance
of mobile applications able to extend the digital experience to everyday interaction with
mobile devices. The CDO of a museum explained how mobile apps extend the museum
experience:

That [mobile apps] was probably the most fundamental way that we changed the organi-
zation … digital is really integrated into the experience while you’re in the institution,
as well as [allowing you] to experience it offline if you can’t come to the institution or
[allowing you] to … have more experiences [when you get home]… The apps … we built
[got] the museum outside the walls with the use of digital.
CDO, CultureHouse 1

In addition to mobility, many CDOs emphasized the role of social media. Intense interaction
with social media helps organizations to create a more precise profile of their customers and
to engage with them through various channels. For example, the CDO of a manufacturing
and retail organization described how his company had built capabilities around social media
by emphasizing the value of “non-paid” customer acquisition:

There is paid acquisition and non-paid. … Paid … includes channels such as Google
AdWords, display affiliates, … paid social media, organic search and [so on]. … Then
you’d have your unpaid channels within the acquisition bucket, ultimately driving traffic
to your websites and mobile products.
CDO, Manu&Retail

Overall, we found that all CDOs were very focused on building capabilities with a variety
of digital technologies. There were, however, three specific domains on which different
CDOs focused: digital innovation, data analytics and customer engagement. The relevant
capabilities for each domain are summarized in Table 14.2, and we describe each domain
below.
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Table 14.2 Digital Capabilities of CDOs

CDO’s Domain Relevant Capability Example Quotes

Digital Building digital “I think my largest problem is … how can you
Innovation capabilities for intense transform a business model from the print age… I
experimentation; pursuing think this is the hardest challenge: how do you do
strategic changes to that step-wise in a certain amount of years [while]
organizational processes, protecting the business you already have but also
products, services and building a new model.” CDO, Media Publisher 1
business models.
Data Analytics Building capabilities “With one of our design businesses—designing
for data analysis to gain hotels, resorts and such—we were able to look at …
insights into both internal Trip Advisor for … reviews of the facilities that we
and external data sources. designed. … We’re also looking at ways [of using]
something from Trip Advisor. What is public data,
what can we use from that and how do we do it?
Likewise with design forums or discussion groups and
[so on]. Those are the … non-structured data sets that
we’re interested in understanding: what’s the general
conversation, what’s the general pulse?” CDO,
ArchitectureDesign
Customer Establishing capabilities “In healthcare, our customers [are] pharmaceutical
Engagement for providing intense focus companies, doctors and patients. Their expectations
on relationships with the are changing from analog services to digital services.
organization’s customers; As a result, one of the things that I do is study my
delivering outstanding customers’ customers’ needs so that I can anticipate
customer experience by as a vendor what I should be supplying them with. In
also streamlining internal many ways, I’m studying patient needs and … doctor
processes. needs to figure out what pharmaceutical companies
are going to need so that we become the … next
generation supplier.” CDO, SoftwareCom 2

The Digital Innovation CDO Domain

CDOs need a strong focus on strategic changes to organizational processes, products, ­services
and business models. For example, a bank’s CDO described an intriguing way the bank is
challenging its existing business model and creating a separate “pure digital experience”:

In my role as CDO … I’m trying to get people to do something non-conventional that

normally happens in a conventional way: you go into a bank branch, you see somebody,
you shake their hand, you get a bank account, you get a mortgage. These are things that
are traditionally done in a more physical way.
CDO, FinancialServ 1

However, this CDO is not sure how this experiment will turn out, but that is fine. To­
­accomplish digital innovations, CDOs need to be comfortable with indeterminacy and with
continually experimenting. According to our interviewees, strong CDOs take an agile
approach to innovation and continually drive experimentation and iteration. The experimen-
tation approach involves creating a minimal viable digital product and developing it further
296 s a n j a t um b a s e t a l .

based on a pilot implementation and feedback. The CDO from a media company described
this way of working:

[We] are able to set up small meetings where we can test our minimal viable prod-
ucts… just looking at the opportunities that digital brings to reach people in your
target audience more times in the day, as well as to offer products to more people via
other platforms. … You build things very lightly, very agilely and very much focused
on speed and getting something out into the market and into the hands of consumers
as early as possible, and then start learning together with the consumer because of how
they interact with your product. [You] … look at that and then try and build …
capabilities from there.
CDO, Media Publisher 2

In all the interviews, a common theme for the foundation of a successful CDO was being
comfortable with indeterminacy, experimentation, learning and adaptation.

The Data Analytics CDO Domain

In the age of “big data,” our interviewees pointed out that strong CDOs develop or acquire
capabilities for data analysis so they can gain insights from both internal and external data
sources. Some CDOs explained how they had built up data analytics portfolios, which
involved them using both openly available data from forums or similar websites (see Table
14.2), and also internal data, to improve performance:

Those are the more … non-structured data sets that we’re interested in understanding:
what’s the general conversation, what’s the general pulse? [For example] in the hospitality
world, our hotel and resort client is the operator [of flagship chains]—Hilton, Regent,
etc. But to suddenly get feedback from the end user, the person or traveler checking into
[the hotel or resort] … gives us so much more information.
CDO, ArchitectureDesign

Not all CDOs need to be technical experts—they do not need to be able to analyze data
directly—but they do need to understand what data can do for their organizations and lead
the efforts to analyze data for new insights. It is important to note that it is not necessary for
CDOs to fully understand data analytics. Again, though, they should take an experimentation-
oriented approach to building analytics capabilities. Successful CDOs are comfortable with
learning as they go—as the ArchitectureDesign CDO indicated: “In data analytics, we’re still
trying to figure out what we need to do.” This was the case for virtually all the CDOs we
interviewed.

The Customer Engagement CDO Domain

CDOs also focus intensely on relationships with their organizations’ customers—under-
standing the customer experience and the role of digital technologies in this experience.
The end customer was the center of attention across our sample of CDOs. For example, the
CDO of a healthcare software vendor whose clients are pharmaceutical companies described
how he studies the needs of patients and doctors (the pharmaceutical companies’ customers).
The insights he gains from studying patients and doctors enables him to learn what health-
related companies will need in the future (see example in Table 14.2). Another organization,
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a training service provider, allows customers to access most of its offers before they subscribe
to its service:

As a university student or a company, you [used to] have to sign up on our website and pay
before you saw any types of opportunities or talent. The difference [and the value] now is
[you see all this right away]. … it is very much like a social network.
CDO, DevelopSkill

To be successful, it is becoming critical for CDOs to focus on their organizations’ end

customers:

[We are] looking at what type of content people are responding to really well. Where
is there room for opportunity? What posts are not working so well? … Social media [is
becoming more important] because a lot of our partners come to us for social media activa-
tion and campaigns.
CDO, DevelopSkill

According to the CDOs we spoke with, focusing on end customers is not always the key
priority for many functional units in an organization—particularly those units that service
other areas of the organization. Without exception, the CDOs we spoke to have a laser-like
focus on the end customer.
All three domains were relevant for all the CDOs we interviewed to a lesser or greater
extent. CDOs are responsible for questioning existing business models, evaluating customer-
centeredness and using a variety of data for gaining insights. To deal with these business
imperatives, CDOs must be well versed in experimenting with, and applying, a variety of
digital technologies. However, each of the CDOs we interviewed told us that one of the
domains was their primary focus in their explanations of their work. Next, we present the
three CDO types we identified and illustrate how the different types emphasized diverse
domains during the interviews.

Three Types of CDOs

The three types of CDO we identified are digital accelerators, digital marketers and digital
harmonizers.

Digital Accelerator CDOs

We classified 13 of the CDOs in our sample as digital accelerators. This type of CDO
spanned various industries, including financial services, manufacturing and retail. As
shown in Table 14.3, the common characteristic of digital accelerator CDOs is that they
drive digital innovation—typically complementing existing IT leaders who are predomi-
nantly involved with supporting operational and mission-critical activities. The existing
IT leadership in these organizations focused on maintaining and advancing the current IT
infrastructure and architecture, with a strong emphasis on reliability, performance and
security.
The 13 digital accelerator CDOs pointed out that their organizations needed a secondary
IT-related function freed from responsibilities of maintaining the existing IT infrastructure.
These CDOs have the freedom and flexibility to experiment intensely with a variety of digi-
298 s a n j a t um b a s e t a l .

Table 14.3 The Digital Accelerator CDO Approach

Dimension Characteristics Illustrative Quotes

Key Capability Digital innovation “My primary KPI [key performance indicator] that
I set for myself is to create a digital experience that
includes other things as well. [We are] a mobile bank,
we provision and sign up bank accounts, savings,
lines of credit only via the mobile phone. We have a
website as well, but there are no branches.” CDO,
FinancialServ 1
Primary Objective Experimentation and “[The IT department] had a very traditional approach,
implementation wanting to buy very expensive analytics packages …
have a two-year roll-out. I was not willing to take
that time. … I’m very careful to say we don’t do
education or training … we are not in the business of
training people in Google analytics or training people
very hands on.” CDO, EducationOrg 1
Reason for To adopt bimodal “In the old-fashioned way, [the IT function] worked
Establishing the IT, allowing the IT very [well]. I don’t know how much you are familiar
Role function to focus with this bimodal way of working [described by]
on the underlying Gartner … I think we are very good in this mode,
infrastructure mode one I think is the lower one … the [old IT]
processes in this company are not made for fast failure
and [trial] and error.” CDO, FinancialServ 3

tal technologies. According to many interviewees, the scope of the CDO is different from
that of IT executives in their organizations—less focused on operational reliability and more
focused on experimenting with new capabilities in novel areas:

You simply build something separate anew as if you were a start-up—[you] just build
a completely parallel, new infrastructure. By doing that, you remove a lot of the tension
between digital and IT and the need to transform the technology and the ways of working
that exist in IT.
CDO, FinancialServ 2

The CDO of a financial service organization explained that her role is needed to focus on
different forms of innovation because the CIO is taking care of the operations and mainte-
nance of existing IT activities. The CDO of an insurance company shared similar thinking.
He explained that “digital” cannot become the top priority of the traditional IT executive’s
agenda in every organization because there are so many other tasks involved in maintaining
existing systems:

Traditional IT leaders… [face] tremendous pressures to deliver and execute and support
the operational systems … Digital was always … going to be deprioritized because of
those pressures to deliver and execute the operational system.
CDO, InsuranceFirm

Digital accelerator CDOs therefore complement more conservative IT organizations by

focusing on rapid development and evaluation of digital technologies. This type of CDO
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is found in organizations with well-established structures where the IT functions operate

according to principles that require long planning cycles and slower execution. The role of
digital accelerator CDOs is to achieve fast results by facilitating continual experimentation
with minimal viable products of digital innovations.
The focus on experimentation allows for more flexibility without needing to align with
other ongoing IT-related activities. Continuous experimentation was a common charac-
teristic of the digital innovation approach followed by digital accelerator CDOs. Although
other types of CDOs also used experimental processes, experimentation was the defin-
ing characteristic of digital accelerator CDOs. In many ways, what they described was
more like a “skunk works” rather than the cross-organizational scope of other types of
CDOs. Digital accelerator CDOs reported being insulated from the demands of ongoing
operations, which allowed them to freely evaluate, test and learn about different digital
innovations.
A key principle for digital accelerator CDOs is that they reduce the cycle time required for
different areas to consider and incorporate digital innovations (see Table 14.3). According
to the CDO in a media organization, this requires a “we don’t need to build and create eve-
rything” mindset and seeking out available options, including social media, crowd sourcing
and other platforms.
Even though a digital accelerator CDO “owns” new digital innovation projects, it is still
necessary to align with existing IT initiatives. As the CDO of a manufacturing company
explained, it is important to learn to respect the existing IT landscape:

We need to be sure that the ‘second speed’ IT respects the major infrastructure. … We
don’t want to be cowboys … not respecting what we [already] have security-wise, tech-
nology-wise and stuff like that. It’s the right balance that we need to find. It wasn’t
evident [in] the last couple of years, but we’re almost there now.
CDO, Manufacturing 2

Digital accelerator CDOs are generalists—focusing on a variety of digital opportunities.

Note, however, that not all CDOs complement the IT function; some complement different
units such as marketing, as described below

Digital Marketer CDOs

This type of CDO guides the organization’s digital marketing efforts with an emphasis
on customer intimacy through technologies like social media and mobile computing, as
well as intensive analysis of customer data. We classified eight of our interviewees as
digital marketer CDOs whose roles had been established to streamline online and offline
marketing channels for engaging with the customers. These CDOs complement market-
ing efforts by deploying digital technologies that can enhance products, customer rela-
tionships and competitive position. Table 14.4 summarizes the digital marketer CDO
approach.
The CDO in a publishing organization described how IT people were moved out of the IT
function to assist the marketing department and how this eventually evolved into the CDO
role:

I had to hire people [who] had to think about products. We had to create a support team
… and gradually my role evolved from being the old-school IT manager to somebody
[who] was thinking along with the business. … [I] was appointed to a role [where I was]
300 s a n j a t um b a s e t a l .

responsible for product development…. The people in my department were more technical,
of course. In the last couple of years, [the] marketing [department] was more into doing
digital developments. [This] is what we call e-marketing in terms of making sure that we
have the correct profile of our customers … so we also had to think how digital marketing
could be [implemented].
CDO, Media Publisher 4

The CDO of a manufacturing company tasked with digitizing the customer-facing part of
the organization told us that it may be better for traditional marketing to report to the
CDO:

My role is actually … unique in … that I manage the brand as well. We’ve just [moved]
to a completely new re-branding process… If I was ever to leave the company and move to
a new CDO role, I would like those responsibilities as well, because I think … the CMO,
or senior marketing person, has to report into a CDO … I mean marketing itself; I don’t
think marketers have kept up with digital technology.
CDO, Manufacturing 1

Although this CDO’s view is not necessarily held by all CDOs, it does highlight the impor-
tance of digital innovation to current-practice marketing efforts. The digital marketer CDO
role is integral to the role of customer-facing units and is thus concerned with establish-
ing digital channels to the customer and mobile solutions, and with understanding user

Table 14.4 The Digital Marketer CDO Approach

Dimension Characteristics Illustrative Quotes

Key Capability Data analytics “Our clients are hotel chains like Hilton, the Regent,
… but [hotel users now participate in] online
communities about design, about the spaces that are
being built, etc. … We track these … sites looking
for [information]. We also look at … how [we] can
learn from [things] like Trip Advisor, … design
forums or discussion groups and [so on].” CDO,
ArchitectureDesign
Primary Objective Customer intimacy “He [the CMO] asked for some advice from someone
like me to … show him what was possible on a digital
front. I gave him some comparables of companies who,
in the consumer goods space, could demonstrate real
power of the brand, real strategic advantages [from]
… digital … and presented a new customer face that
was more in keeping with the millennial market and
the younger markets, which he wanted to attract.”
CDO, ConsumerGood 1
Reason for To create a consistent “Marketing falls within my responsibility but also
Establishing the Role customer experience internal marketing, external communications and so
across digital and non- on. Effectively, our customers or potential customers
digital channels have multiple different touchpoints [from which] they
can reach out to us. Effectively, I have to manage all
of those.” CDO Manufacturing 1
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experiences in leveraging digital capabilities. As one CDO indicated, she was hired to bring
digital competencies to her organization’s marketing practices:

Digital is very much about delivering, or having a direct-direct relationship with the end
customer. I was hired … to bring that skill level or experience to the company, where pre-
viously they were dealing with a business-to-business ­relationship. … Yes, marketing falls
within my responsibility, but also internal marketing, external communication and so on.
CDO, Manufacturing 1

Some of the digital marketer CDOs in our study run the digital side of marketing quite
independently and almost as a standalone unit. For example, the CDO of a consumer goods
company described her unit as a standalone startup with very specific goals that involved a
major project:

There’s a very clear goal to try and bring it all together. We started off in a very separate
fashion with the digital store (like an Apple app store), where you could buy content, and
an e-commerce store where you could buy the hard goods. Finally, last year, we managed
to bring it together [in] one store so that customers could have one [purchasing] experi-
ence.
CDO, ConsumerGood 2

In this company, the CDO’s unit will likely persist in its current standalone mode for a lim-
ited period of time. At some point, the major project may well be subsumed by pre-existing
functions, such as marketing and sales.
However, some digital marketer CDOs may take on responsibility for the marketing
function (see CDO of Manufacturing 1 in Table 14.4). The digital marketer role is therefore
often either temporary until the organization gets up to speed, when the role is subsumed
by the broader marketing organization—or the CDO becomes responsible for all marketing
activities.

Digital Harmonizer CDOs

In addition to complementing the IT or the marketing functions, some CDOs are brought
in to take an aggregate view of all ongoing digital initiatives. These are what we term digital
harmonizer CDOs. The 14 CDOs we classified as digital harmonizers were charged with
linking together a wide variety of digital initiatives in many different areas of their organi-
zations, a situation that was prevalent among media firms7 in our sample. The digital har-
monizer role is a way of bringing these initiatives under a single, typically more strategic,
umbrella. Digital harmonizers aggregate the disparate digital efforts distributed across the
organization into a single unit and coordinate them. They emphasize governance and the
need for transparency in digital projects. Table 14.5 summarizes the digital harmonizer
CDO approach.
The CDO of a pharmaceutical company vividly illustrated the digital harmonizer CDO
role:

The first thing I did was to establish a digital council, [which includes] our CIOs, [our]
CMOs, our top leadership of the organization. As digital evolves in a company, you see
a lot of things pop up in many places, but they [aren’t aware of] each other… A lot
of digital activity started before I was here. … There was so much … going on across
302 s a n j a t um b a s e t a l .

divisions, and teams and countries, that it really came bottom-up, and the top manage-
ment said, “Okay, we probably need to take all of this activity and put it into a strategic
approach.”
CDO, HealthRelated

In her effort to elevate digital innovation activities to a more strategic level, the CDO of a
museum explained how a lot of digital work had already been done in the organization, but
it still needed direction, which she aimed to provide:

It was really more about changing the culture and the approach, the strategic approach,
to doing the work they were already doing, but doing it in a much more thoughtful way
[so] that the whole institution was working in the same direction, as opposed to children
in parallel play doing their own thing, which was how it was before.
CDO, CultureHouse 2

This CDO also often emphasized the need to catch up with digital trends at a strategic level,
or to lead organization-wide digital transformation.

Table 14.5 The Digital Harmonizer CDO Approach

Dimension Characteristics Illustrative Quotes

Key Capability Customer “It’s a complete shift in the way we deliver customer value
engagement because we understood that … other organizations like
LinkedIn and other job postings [were] opening up their
doors for anyone to look and see without having a payroll.
We [asked ourselves] ‘How do we make our organization
more accessible to anyone?’” CDO, DevelopSkill
Primary Objective Enterprise “One of the things that I did was [to] build a digital
integration strategy and a strategic plan for the next 10 years and
… a road map. … [I] then worked with government, so
that instead of everyone doing their own individual digital
projects … there was a process in place where a group of
people … at the working level [would] look at [digital
ideas] and then … very senior [managers would] look at
[the ideas] and set priorities and continue to evolve those
priorities.” CDO, Culture House 2
Reason for When business silos “When we set up new programs or projects, we create
Establishing the are limiting the a team to work on [them]…. We call [these teams]
Role impact of digital ‘squads’ in the same way that Spotify uses that term.
innovation [Thus] we create [a] central team of skills from [within]
the organization. [For] example,… we put a couple
of developers, a solution architect, a user researcher
[together with] a data scientist and a designer [into
a squad]… so [we] have the data side very much
represented within the digital side as well. We make sure
that we cover all relevant areas. These cross-functional
teams [are] created from across … the different divisions,
including digital, data and technology.” CDO,
GovInstitution
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Digital harmonizer CDOs both manage digital initiatives across the organization and ele-
vate attention to these initiatives to a strategic level. Their organizations already have some
level of digital capabilities, and one mechanism for raising attention to digital innovation to
a strategic level is to add the CDO role to the C-suite. Digital harmonizers often described
how they need to create connections between existing and new digital capabilities. The basic
idea is to move digital innovation projects back to other functional groups after they have
been implemented:

Before having a digital [department], some organizations that were really innovation
orientated had somebody in charge of R&D innovation. Marketing, [HR, finance, etc.]
had their responsibilities, [but] digital changes [everything] because [its] scope … is
so vast, and it’s so transversal. … At [some] point, it’s [maybe] important to have
somebody covering all [the digital initiatives] and making the connections between eve-
rybody. … But then every specialist has to take the responsibility for his or her own field,
because at the end of the day, it’s going to be innovation in marketing, or innovation
in finance, etc.
CDO, RetailCommunication

The role of the digital harmonizer CDO is to constantly act as an intermediary and, by doing
so, achieve strategic visibility. However, this is not a pure top-down strategic role because
the CDO needs to consider existing capabilities. The digital harmonizer creates links to the
existing organization through a continuous flow of new ideas. Organizations with digital
harmonizer CDOs emphasize visibility, prioritization and coordination of digital efforts (see
Table 14.5).
In addition to their long-term and strategic focus, digital harmonizer CDOs indicated a
concern for reconciling existing organizational values with digital innovations. Transitioning
gradually toward a more digital organization is a long-term effort and can result in funda-
mental transformation.

Comparison of Three CDO Types

From our interviews, we saw that each CDO type focused mainly on one of the domains.8 As
shown in Table 14.6, each of the three CDO types focuses on building a distinct digital capa-
bility: the digital accelerator emphasizes shortening innovation cycles and experimentation;
the digital marketer is highly focused on the data analytics domain; and the digital harmonizer
aggregates existing digital initiatives to strategically engage with the customer and streamline
existing and new digital initiatives.

Table 14.6 Overview of the Three Types of CDOs and Their Key Characteristics

Dimension Digital Accelerator Digital Marketer Digital Harmonizer

Key Capability Digital innovation Data analytics Customer engagement
Primary Objective Experimentation and Customer intimacy Enterprise integration
implementation
Reason for To adopt bimodal To create a consistent When enterprise
Establishing the Role IT while allowing customer experience business silos are
the IT unit to focus across digital and non- limiting the impact of
on the underlying digital channels digital innovation
infrastructure
304 s a n j a t um b a s e t a l .

Bridging Traditional IT (CIO’s Domain) and Digital Innovation

(CDO’s Domain)

Having looked at the three types of CDOs and their key capabilities, we now turn to the
relationship between the CDO’s and CIO’s organizations. Over the years, the IT function in
many organizations has evolved from being a supporting unit to become a critical strategic
partner of other business units.9,10 This strategic focus was often accompanied by greater
attention to enterprise information systems (such as ERP and CRM) as critical enablers of
business operations.
However, the evolution has pigeon-holed some CIOs, in terms both of the opinions of
other business units and of the mindsets of CIOs themselves. Business units perceive CIOs
as technical specialists who focus on enterprise systems and infrastructural investments,
and are forced to conduct their processes through a standardized, centrally mandated archi-
tecture. Similarly, CIOs themselves often perceive their role as associated with enterprise
systems and the IT infrastructure. As a consequence, experiments with digital innovations
may not be high on a CIO’s agenda because he or she is focused on maintaining large-scale
mission-critical systems performance in a reliable and secure manner. Often, the CIO sim-
ply cannot add more responsibilities to her agenda, as illustrated by one of the CDOs we
interviewed:

The poor CIO is always worried about legacy systems, maintaining all of the right stuff
for legal matters, compliance, regulation and so forth. [Given] that,… how can we [the
organization] innovate [with IT]? Who [is thinking about]. what would we be doing [if
we didn’t have the boring email we’ve been using for 10 years]. How would we be tracking
conversations? You … need two positions. … You have [huge] amounts of information
that you need to maintain, and, suddenly, [the] person who’s responsible for that … no
longer [has] any more time in their schedule. They [CDOs] [are not constrained by] wor-
rying about existing hardware, and [it’s not their responsibility] if there’s an emergency
… or the power goes off or [a] cable is cut. They just keep focused on innovating.
CDO, ArchitectureDesign

The increasing demand from the business for digital innovation means that there are notori-
ous tensions in some organizations between business units and the IT function.11 Even where
there is no problem with alignment, IT departments often find themselves unable to keep
up with the increasing demands from the organization.12 As a result, user departments are
increasingly running their own digital initiatives.13 Doing this has become easier because of
the availability of various social media platforms, cloud solutions, freeware or beta versions
of software—technology that requires minimal up-front investment. Digital marketing strat-
egies, in particular, often require little in the way of dedicated technology investments.14
Similarly, modern HR units must now use digital recruitment.15
The challenges faced by large, preoccupied IT departments, the necessity of digital mar-
keting, and other units like marketing and HR initiating their own digital innovation projects
are all catalysts for adopting a CDO role.16 In many ways the CDO acts as a buffer between
the business and the IT unit. The CDO complements the IT unit, focusing on end customers
and integrating existing and new digital initiatives. As one of our interviewees (the CDO of a
media publisher) pointed out, the CDO role is vital for an organization’s strategy:

If you make it [the CDO role] a board-level function, there’s usually a strategy shift
which comes with it as well, and there’s no such thing as a digital strategy. You just have
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a [business] strategy … if [in] 2015 … you did not take into account that the world is
changing because of digital, then [you had] a bad [business] strategy.
CDO, Media Publisher 2

All CDOs are concerned with digital innovation and getting closer to the customer in the
digital space. They also need extensive knowledge of digital technologies and an aware-
ness of data analytics capabilities. In addition to building up their organizations’ digital
capabilities, CDOs primarily lead the digital strategy. Such a strategy might be to partner
with the “Googles and Watsons of this world,” as the CDO of a pharmaceutical company
explained:

We’re really scientific chemistry nerds, and we don’t have any ambition to be a technol-
ogy company. In order to survive, we have to be very good at p­ artnering with the top tech
partners. [Without] … advanced analytics and digital c­apabilities… it would be very
difficult to stay competitive [and developing those capabilities in-house would not be pos-
sible]. [But] if we partner with the Googles … or the Watson IBMs of this world, they
have to be the best because [if they aren’t] they’ll lose … customers.
CDO, HealthRelated

There are various reasons why an organization may decide to adopt a separate CDO role,
including:

•• The IT department is preoccupied with large-scale infrastructural projects or is in a

weak political position
•• The marketing department has a rigid focus on traditional marketing methods, and
there is no trusted relationship between IT and marketing
•• The organization has many local digital initiatives but lacks a strategic digital direction.

However, there are also many instances where the need for a CDO is not apparent—particu-
larly in organizations where CIOs have found a way to “ambidextrously” drive rapid-paced
digital innovation while simultaneously attending to the IT infrastructure.17 For example, the
CIO of Hilti, which manufactures premium power tools, points out how his IT function man-
ages to balance continuous experimentation with new technologies while still maintaining its
primary focus on enterprise-wide process management.18 The IT function’s experimentation
has led to a focus on application software for Hilti’s products, which has extended the reach
of IT beyond the company’s internal systems and processes.
There seems to be a similar shift occurring with other top-performing CIOs. A recent
survey suggests that CIOs of highly successful organizations pay close attention to external
customers and maintain a strong focus on innovation.19 These practices are consistent with
the activities of CDOs in our research.
It is also important to note that CIOs provide a solid foundation for CDOs to build digital
capabilities. Over the years, CIOs have established stable robust infrastructures that provide
the platform for what CDOs are able to accomplish. Without integrated processes, data
transparency and information management policies in place, CDOs would not have a good
basis for scaling their initiatives.
Thus, we conclude that a new executive role is needed to fill specific gaps in an organiza-
tion’s IT landscape. These gaps may be filled by existing executives (the CIO or the CMO)
or by new digital executives (the CDO), but the key is to clearly delineate the space that the
executive occupies. It is also important to define clear key performance indicators (KPIs) for
306 s a n j a t um b a s e t a l .

all executives driving digital innovation. By clearly defining the roles of executives involved
in digital innovations, it is possible to avoid situations where one person tries to navigate the
whole digital transformation:

Someone has hired someone to fill what they perceived to be a gap. That person [finds]
… it’s hard to make things really happen because [they] don’t have … the [authority]
to influence directly IT execution, operations, marketing or whatever. Put it this way, if
somebody was to offer me a job as CDO where there’s already a CIO, … an operations
person, … marketing, and my job is to try to integrate all of these things, I would run
for the hills.
CDO, InsuranceFirm

Typically, IT-related skills and titles change rapidly. Even though CIOs have been around
for decades, the role is still seen as ambiguous.20 Thus, over time, the title “CDO” might
evolve into other related roles, such as “chief innovation officer,” “director of emerging plat-
forms,” “director of digital technologies” or “head of digital innovation.”21 In some organiza-
tions, the CDO role may re-merge with the existing CIO role or with the marketing unit.
Nevertheless, all current evidence points to a future where “digital” will remain one of the
top priorities in organizations, and executive leadership for digital innovation will be needed
in one form or another.

Concluding Comments

We interviewed 35 CDOs from various industries. Our analysis is consistent with previ-
ous investigations that have found CDOs are central to innovative digital transformation
efforts.22 However, we have gone beyond previous work by reviewing a broader sample
of organizations and identifying three distinct types of CDOs: digital accelerators, digital
marketers and digital harmonizers. Digital accelerator CDOs mostly focus on establishing a
digital innovation and experimentation capability; digital marketers emphasize data analytics;
digital ­harmonizers focus on customer engagement. We categorized 13 of the 35 interviewed
CDOs as digital accelerators, eight as digital marketers and 14 as digital harmonizers.
To provide a reference point for future studies, we have characterized these CDO types
along three dimensions: key capabilities, objectives and reasons for establishing the role.
The three CDO types differ along these dimensions and have distinct focal domains in which
they build digital capabilities: digital innovation, data analytics and customer engagement.
The distinction between CDO types and digital capabilities provides a framing for the role
of future digital leaders, whatever their label might be. The CDO role is still emerging, and
more and more organizations may decide to adopt the role. Alternatively, the CDO role
may, in time, transform into other roles. At present, it is not possible to say which route
will be most popular. In the meantime, organizations should consider appointing a CDO as a
way to capitalize on the potential of digital innovation, and we believe this article can provide
guidance on deciding whether to adopt this executive role.

Appendix: Research Methodology

We conducted a series of exploratory interviews with CDOs from a sample designed to

include as wide a variety of industries as possible. To ensure we spoke with firms that were
first movers worldwide, we approached the founder of CDO Club (http://cdoclub.com),
 a lt e r n a t i v e r o l e s f o r c h i e f d i g i t a l o f f i c e r s 307

the company that established the first CDO network. We joined CDO Club on LinkedIn and
started approaching CDOs who were members of the group. The job titles of all informants
in our sample explicitly stated “Chief Digital Officer.”
As a result, we spoke with 35 CDOs from industries spanning automotive, financial ser-
vices, healthcare, software, publishing, governmental and not-for-profit organizations in a
variety of countries (see Table 14.1). The CDO role is fairly new, so most of our interview-
ees were in the first year or two in that position.
The data collection and analysis were iterative and emergent. After the first few interviews,
we analyzed and coded the data, and used the initial codes in later interviews to contrast and
compare further emerging themes. Since our study was exploratory, we aimed to find out what
“digital” means; rather than providing definitions a priori our goal was to learn what digital meant
from the CDO’s perspective.

Notes
1 Rickards, T., Smaje, K. and Sohoni, V. “Transformer in chief: The new chief digital officer,” McKinsey
& Company, 2015.
2 Grossman, R. and Rich, J. The Rise of the Chief Digital Officer, Russell Reynolds Associates, 2016.
3 Singh, A. and Hess,T. “How Chief Digital Officers Promote the Digital Transformation of their Com-
panies,” MIS Quarterly Executive (16:1), March 2017, pp. 1–17.
4 Peppard, J., Edwards, C. and Lambert, R. “Clarifying the ambiguous role of the CIO,” MIS Quarterly
Executive (10:2), June 2011, pp. 115–117.
5 Weill, P. and Woerner, L. S. Top-Performing CIOs in the Digital Era, MIT Sloan CISR Research Breifing,
Vol XVI, Number 5, May, 2016
6 Pseudonyms have been used for each of the companies.
7 Grossman, R. and Rich, J., “The Rise of the Chief Digital Officer,” Russell Reynolds Associates,
Harvard Business School Publishing, 2016.
8 Other researchers have recently identified additional CDO types, including entrepreneur, digital
evangelist and coordinator (see Singh, A., and Hess, T., op. cit., March 2017).The digital accelerator
encompasses the entrepreneurial spirit; the digital marketer has some characteristics of the digital
evangelist but focuses primarily on developing digital marketing activities; the digital harmonizer
to some extent is equivalent to the coordinator role but with a strong goal to streamline internal
processes for achieving customer engagement
9 Agarwal, R. and Sambamurthy, V. “Principles and Models for Organizing the IT Function,” MIS Quar-
terly Executive (1:1), March 2002, pp. 158–162.
10 Guillemette, M. and Pare, G. “Toward a New Theory of the Contribution of the IT Function in
Organizations,” MIS Quarterly (36:2), 2012, pp. 529–551.
11 Henderson, J. C. and Venkatraman, H. “Strategic Alignment: Leveraging Information Technology for
Transforming Organizations,” IBM Systems Journal (32:1), 1993, pp. 472–484.
12 “Surfing a digital wave, or drowning?” The Economist, December 13, 2013, available at http://www.
economist.com/news/business/21591201-information-technology-everywhere-companies-it-
departments-mixed.
13 Nylen, D., Holmstrom, J. and Lyytinen, K. “Oscillating Between Four Orders of Design: The Case
of Digital Magazines,” Design Issues (30:3), Summer 2014.
14 Deans, C. P. “The Impact of Social Media on C-level Roles,” MIS Quarterly Executive (10:4), December
2011, pp. 187–200.
15 Purvis, J. “Human Resources Marketing and Recruiting: Essentials of Digital Recruiting,” Handbook
of Human Resources Management, August 31, 2015, pp. 53–71.
16 Hess, T., Matt, C., Benlian, A. and Wiesböck, F. “Options for Formulating a Digital Transformation
Strategy,” MIS Quarterly Executive (15:2), June 2016, pp. 123–139.
17 Gregory, R. W., Keil, M., Muntermann, J. and Mahring, M. “Paradoxes and the Nature of Ambidex-
terity in IT Transformation Programs,” Information Systems Research (26:1), 2015, pp. 57–80.
18 vom Brocke, J. “Interview with Martin Petry on ‘Digital Innovation for the Networked Society,’”
Business & Information Systems Engineering (58:3), 2016, pp. 239–241.
308 s a n j a t um b a s e t a l .

19 Weill, P. and Woerner, L. S., op. cit., 2016.

20 Peppard, J., Edwards, C. and Lambert, R., op. cit., June 2011.
21 Bird, J. “Fierce competition for chief digital officers,” Financial Times, September 29, 2015.
22 Singh, A. and Hess, T., op. cit., March 2017.

Questions for Discussion

1 Are CDO roles only relevant for companies with large R&D budgets?
2 How is the role of CDOs different from IT executives?
3 How can CDOs achieve a balance between experimentation and alignment with exist-
ing IT initiatives?
4 Should traditional marketing roles report to the CDO, or should it be the other way
around? Is it better to have the CDO as a standalone unit?
5 Why is it important for organizations to consider having a CDO?
6 Is interviewing CDOs the best way to find if the role is needed in an organization?
7 What academic qualification, and/or professional experience do you think is required
to acquire the CDO role?

Further Reading
Singh, A., Hess, T. (2017). How Chief Digital Officers Promote the Digital Transformation of their
Companies. MIS Quarterly Executive, 16(1), 1–17.
Sebastian, I., Ross, J., Beath, C., Mocker, M., Moloney, K., Fonstad, N. (2017). How big old companies
navigate digital transformation. MIS Quarterly Executive, 13(3), 197–212.
Chapter 15

Joe Peppard

RETHINKING THE CONCEPT OF THE

IS ORGANIZATION

O ver th e l a s t 50 years, scholars have used the information systems (IS) organi-
zation both as a dependent and as an independent variable in their research. Yet,
do conceptualizations of the IS organization reflect findings from research studying require-
ments for successfully harnessing information, systems and technology to achieve operational
and strategic objectives? Whilst this questions is of particular concern of this article, it also
raise the wider issue as to the exact role, function and design of an IS unit in contemporary
organizations and, indeed, whether the concept has outlived its usefulness. In particular,
what actually is an IS organization in today’s highly connected, ‘always on’, digital world.
Typically, researchers conceptualize abstract concepts in order to express them in ways
that are accessible to direct study or to isolate them from the main phenomena of interest. In
so doing, they create or fashion a mental structure of what can be an intangible notion. But
any conceptualization must mirror reality if it is to be a legitimate representation. In the IS
research literature, concepts such as technology acceptance (Davis, 1989; Venkatesh et al.,
2003), IS service quality (Jiang et al., 2002; Pitt et al., 1995), end-user computer satisfaction
(Doll & Torkzadeh, 1991), systems usage (Burton-Jones & Straub, 2006), information sys-
tems success (DeLone & McLean, 1992) and user involvement (Barki & Hartwick, 1989) are
just some that have been conceptualized in studies. However, if a conceptualization does not
accurately reflect the phenomena it purports to characterize, then any findings or conclusions
will at best be compromised or at worse dangerous.
In this article, the notion of the IS organization, as defined and conceptualized in the
research literature, is analyzed and assessed. In particular, the appropriateness of a­ ssumptions
that lie behind these conceptualizations are surfaced and the implications of portrayals for
theory development and practice are considered. As part of the analysis, findings from these
studies are considered to determine whether they are actually contributing to the ­problems
that many organizations are experiencing with their information technology (IT) invest-
ments, and their inability to achieve investment objectives (c.f. National Audit Office, 2006;
Nelson, 2005; Shpilberg et al., 2007; The Royal Academy of Engineering, 2004).
310 j o e p e p pa r d

This article first reviews the evolution of the concept of an IS organization, surfacing the
different labels that have been attached to it over the years. It then moves on to develop a
sensitizing lens to provide an overarching framework for the research. Having outlined the
research method, we then present portrayals of the IS organization in research studies pub-
lished in leading academic and practitioner journals. With the aid of the sensitizing lens, these
are then critiqued and analyzed. The article concludes with the implications of this analysis
for research, teaching and practice.

A Short History of the Evolution of the Information Systems

Organization

What is today generally referred to as the IS organization in research studies represents a

concept that has evolved over the last 60 years, not just in name, but in role, function and
position in an organization. Words such as ‘information’, ‘systems’, ‘services’, ‘process-
ing’, ‘management’, ‘data’, ‘technology’ and ‘computer’ have been combined in many
permutations to refer to this organizational unit. Labels such as Computer Department,
Electronic Data Processing (eDP) Department, Data Processing Department, IT Function,
Management Information Systems (MIS) Department, Computer Services, Information
Technology Department, Information Systems Department, IS Group, Information Systems
and Technology Department, Information Services, Information Management Department,
Digital Business Department and Business Technology are just some that have appeared
over the decades and that can be found referred to in studies (e.g. Ahituv & Hadass, 1978;
Jiang et al., 2003; Nelson & Cooprider, 1996; Olson & Chervany, 1980; Ranganathan &
Kannabiran, 2004; Wang & Barron, 1995).
Moreover, these labels have also tended to change over time, with any modification
in name usually reflecting a new role and focus for information, systems and technol-
ogy. Early eDP Departments, for example, concentrated on just that, the processing of
corporate data. The key role of such departments was essentially to keep the organiza-
tion’s computer system up and running. Data, in the form of punched cards, were brought
to the computer room or bureau to be processed, usually in batch mode. At that time,
­technology investments were primarily made to automate clerical tasks, where cost reduc-
tion and improvements in efficiency were the key investment objectives. The subsequent
focus on the provision of information for management decision-making saw many organi-
zations rename this unit the MIS or Information Services Department. More recently, in
some organizations, Digital Business Departments and Business Technology have appeared,
replacing what may once have been called Data Processing Departments, reflecting the
emergence of the internet, e-commerce, mobile, cloud computing and the increasing prev-
alence of IT in the conduct of business. One study has even introduced the label of the ‘e-IT
Department’ (Earl & Khan, 2001).
Examining advances in technology and the corresponding shifts in the operational and
strategic role reveal an evolution in how information, systems and technology is managed
in an organization. Moreover, drawing on prescriptive and descriptive research studies (e.g.
Agarwal & Beath, 2007; Broadbent & Kitzis, 2005; Chun & Mooney, 2009; Feeny & Ross,
2000; Li et al., 2006; Mack & Monnoyer, 2004; Peppard, 2010; Karahanna & Preston, 2013;
Smaltz et al., 2006), we can also map the changing role of the most senior manager of the IS
organization over time, which can be seen as a surrogate for the evolving requirements for
the management of IS/IT, reflecting the shifting focus and emphasis of IT investments. In a
similar fashion, labels attached to this leadership role have also evolved. Early incumbents
were eDP managers evolving to IT managers/directors, chief information officer (CIO) and,
 t h e i s o r g a n i z at i o n 311

more latterly, Chief Digital Officers (CDOs). What is without doubt, the management chal-
lenge is getting more complex as technology becomes more ubiquitous, applications become
more sophisticated, IT deployment more pervasive, connectivity much easier and the role of
IT becomes ever more strategic.

Sensitizing Lens

To establish a sensitizing lens through which to explore how the IS organization is concep-
tualized in studies, three related streams of research are examined and synthesized. The first
is research that addresses the pertinent question of responsibility for IS and where it resides.
The historical dominance of functional structures sees most organizations establish separate
units based on roles, such as accounting, marketing, research and development, logistics
and IS with clearly defined boundaries. These units are staffed by people with specialized
knowledge, providing efficiency and productivity benefits to an organization as well as career
paths and clarity of responsibilities (i.e. sales department for sales and manufacturing for pro-
duction). Whilst this logic might work for some functions, all the evidence indicates that it
proves problematic in the context of IS. A key reason for this relates to the ontological basis
of IS – essentially what is being managed – the second theme that is explored. Building on
the foundation established by these two research streams, the final stream is concerned with
research that explores the challenge of coordinating and integrating knowledge, dispersed
across multiple organizational units, to achieve IS value expectations.

Locus of Responsibility for Managing Information Systems

Over two decades ago, Boynton et al. (1992) posed the question ‘whose responsibility is
IT management?’ advocating that line managers had a key role to play, a position that had
been advocated by Rockart (1988) some years earlier where ‘the line’ was urged to take a
strong leadership role in the management of IT.1 Some years later, Rockart et al. (1996)
noted that

[u]nless IT is included in line managers’ strategy and tactics, and unless line man-
agers can effectively understand and implement a process view of the world, the
best IT organizations are almost powerless. For the last decade, we and others
have pointed out that line leadership is an absolute necessity.
(p. 53)

In addition to line management, the crucial responsibilities of other non-IT employees in

the success of IT projects (and consequently associated IT investments) is widely established
(Kohli & Devaraj, 2003; Maklan et al., 2011; Peppard, 2007; Taylor-Cummings, 1998;
Sauer & Cuthbertson, 2003) as is the call for strong partnerships between IS and non-IT staff
(Peppard & Ward, 1999; Ross et al., 1996). This latter point acknowledging the disconnect
that can exist between these two camps. Research exploring alignment between business and
IS/IT strategies has identified the absence of a close relationship between ‘the business’ and
IS organization – note reference to an explicit separation – and lack of support for IT from
non-IT executives as key inhibitors (Fonstad & Subramani, 2009; Luftman & Brier, 1999).
Studies have reported that addressing the social dimension is critical in achieving alignment
between IS and business strategies (Schlosser et al., 2015), and that alignment is greatly
facilitated when business and IS executives have shared domain knowledge as well as regular
communication (Reich & Benbasat, 2000; Tan & Gallupe, 2006). The key role played by the
312 j o e p e p pa r d

chief executive officer in IT assimilation has also been highlighted in studies (Armstrong &
Sambamurthy, 1999; Peppard, 2010).
The role of human agency, particularly ‘users’, is also widely acknowledged (Markus &
Robey, 1988; Orlikowski & Baroudi, 1990; Orlikowski & Gash, 1994). Consequently, suc-
cess with IS projects is less about technology deployment than it is about managing the organ-
izational change that accompanies its deployment (Markus, 2004; Orlikowski & Hofman,
1997; Peppard & Ward, 2005; Peppard, 2007) with the payback from IT investments real-
ized through the development and orchestrated interplay of complementary IT and business
capabilities (Barua & Mukhopadhyay, 2000; Davenport et al., 2001; Hughes & Scott Morton,
2006; Peppard, 2007; Thorp, 1999). For analytical tools and other technology investments
for tackling so called ‘big data,’ if employees cannot ‘work with information’ and give mean-
ing to it, then it is unlikely that any insight will emerge no matter how successful the technol-
ogy deployment is (Davenport, 1994; Davenport & Prusak, 1997; Kohli & Devaraj, 2003;
Marchand & Peppard, 2013; Marchand et al., 2000).
Moreover, there is also growing consensus that authority and decision-making
­responsibility for the management of IS is no longer the monopoly of an IT management
elite (Huang et al., 2010; Lohmeyer et al., 2002; Ross & Weill, 2002; Weill & Ross, 2004).
Decisions, traditionally made within an IS organization (a legacy of an earlier era when
the role of IT was less important in shaping performance), are being devolved into the
remit of senior business executives, business line management and end users (Ross & Weill,
2002). The research work in IT governance, calling for the establishment of structures and
instruments to frame behaviors regarding decision-making rights, attests to this (Agarwal &
Sambamurthy, 2002; Weill & Ross, 2004). Governance mechanisms, such as steering com-
mittees and other cross unit forums, charge back and co-location focus on encouraging intra-
organizational involvement and allocating responsibilities in considering IS issues and for IS
decision-making. Crucially, and what is usually not made explicit, is that these mechanisms
facilitate the bringing together of people with relevant knowledge to achieve particular out-
comes. For example, charge back has been shown to foster communications between an IS
function and business units with these conversations generating a shared understanding for
both parties of the cost and benefits of alternative IS investments and service offerings (Ross
& Feeny, 1999).

Ontological Assumptions of Information Systems Management

The prescriptions emanating from the previous discourse are premised on the assumption
that they will improve how IS are managed in organizations. The phrases ‘manage IS’ and ‘IS
management’ tend to be widely used, not only in the context of the IS organization, but also
in the wider discourse within both the IS discipline and general management. But what does
‘IS management’ mean and, crucially, what is actually being managed? Is it concerned with
the management of the IS organization? Or, is it about directly managing IS? These questions
raise a more fundamental one, can IS really be managed?
Of course, any discourse around this latter question raises the wider issue as to what
IS (both singular and plural) actually is/are (Alter, 2008; Beynon-Davis, 2010; Bryant,
2008; Lee et al., 2015; Paul, 2010a, b), its relationship to technology (Orlikowski, 2010;
Orlikowski & Iacono, 2001; Orlikowski & Scott, 2008; Scott & Orlikowski, 2013) and,
indeed, what constitutes the IS discipline (Banville & Landry, 1989; Benbasat & Zmud,
2003; March & Niederman, 2012; Somers, 2010). Moreover, addressing the question as to
whether IS can be managed possibly gets to the nub of the issue of generating value from IS,
and two contrasting perspectives can be gleaned from the discourse in the literature. The first
is that IS can be managed; the second, that it can’t.
 t h e i s o r g a n i z at i o n 313

In much of the IS literature, the dominant practice is to objectify IS (in fact, ‘IS’ and ‘IT’
are generally used interchangeably), portraying it as data, information (sometimes knowl-
edge), systems, hardware, software (including licenses), contracts, staff and associated costs
(e.g. development and maintenance). As such, it is depicted as something – essentially an
artefact – that can be directly manipulated. Even with outsourcing, the decision is typically
framed as deciding what should be resourced externally, and consequently, the outcome of
any decision to outsource is considered as managing contracts, supply of services (e.g. service
level agreements, service catalogues and change requests) and relationships. It may be this
logic that sees organizations maintain an IS unit as a separate organizational construct, the
assumption being that IS, as an objective construction, is manageable from within this struc-
ture. Importantly, what it suggests is that what is to be managed can be ring-fenced and con-
tained within clear organizational boundaries, assigned a head (i.e. the CIO), given resources
and a mandate that is often framed as optimizing or maximizing a return from any spend,
all within an acceptable level risk. Indeed, it is in this context that different ‘IT management
profiles’ frame Guillemette & Pare’s (2012) typology of IS organizations.
As previously noted, the concept of ‘IT management’ dates back to an era when com-
puters were large, complex and expensive, requiring specialist facilities and knowledge,
where the key managerial challenge was to keep the computer functioning. The practice of
IT ­management thus became associated with the management activities to keep the machine
working, with requirements evolving over time to encompass the design and implementa-
tion of systems and the provision and presentation of information. And whilst the concept of
information systems (as opposed to IT) management is now in common use, the tasks ascribed
to IS management have expanded to include IS strategy formulation and execution, innova-
tion, IT service management, IT implementation, project management, managing software
development projects, protecting information assets, technology and service procurement,
vendor management and, in many cases, the delivery of benefits from IT investments.
In fact, the notion of IS management is tautological, equating to the management of IS.
It conjures up the notion that ontologically, IS the artefacts are something that can actually
be managed. The focus of attention is thus on these artefacts and their management. Perhaps
this is why management teams, who are disappointed with the perceived return from their
IT investments, instigate programs to improve the performance of their IS organization; the
assumption being that this is where the genesis of this problem lies. Indeed, studies report-
ing on such initiatives typically begin with this proposition (c.f. Cross et al., 1997; Vaast &
Levina, 2006). For example Cross et al.’s (1997) presentation of the transformation of the
IT function at British petroleum noted that ‘[i]n 1989, the IT function of the exploration and
production division of British Petroleum Company set out to transform itself in response to
a severe economic environment and poor internal perceptions of IT performance’ (emphasis
added).
If we take a contrasting perspective, where the focus is not to manage IT (or IS) perse, but
to generate business value from IS note that we are not specifying what this value is other
than have a positive impact on performance then a somewhat different agenda emerges. This
viewpoint acknowledges IS in organizations as a situated and socially constructed phenom-
enon, enabling us to question the very nature of what is sought to be managed. Specifically,
it proposes that IS is not a ‘thing’ or set of ‘things’ that can be managed or manipulated
directly, but that generating value from IS is a multifaceted and complex challenge; it is
clearly not about ‘technical wizardry’ (Dvorak et al., 1997). It necessitates understanding
how IT impacts industry and competitive dynamics, identifying new strategic opportunities,
assessing and assimilating technological innovations, deriving new technology-enabled busi-
ness models and organizational blueprints, prioritizing investment opportunities, managing
IT-enabled change, deploying appropriate technology, steering IT projects, managing risk,
314 j o e p e p pa r d

selecting and managing vendors, exploiting investments in technology, ensuring appropri-

ate usage of information systems, creating the environment for staff to embrace the right
behaviors and values to work with information and ensuring that the value delivered from
any application of IT is captured by the organization. All related activities, practices and
processes cannot happen within the confines of a separate organizational unit, labeled the IS
organization, but are pervasive, organizational-wide concerns and endeavors.
Moreover, activities and practices are underpinned by the application of knowledge:
knowledge that is distributed across the organization. For example, developing an IS strategy
is a knowledge-based task, as is coding systems. Using information effectively is critically
dependent on the application of knowledge to make sense of data and ascribe meaning to it.
In fact, technical infrastructure is the embodiment of knowledge: knowledge that has been
deployed by systems architects, developers, communications experts, etc. in its design and
construction. Outsourcing arrangements can be similarly viewed as having a basis in knowl-
edge; indeed, many organizations argue that they have outsourced their IT to an external
service provider or vendor, as it will provide them with access to knowledge that they do not
currently possess. The challenge in generating value from IS can therefore be framed as one
concerned with coordinating and integrating this knowledge.

Generating Value from Information Systems: A Quest to Coordinate and

Integrate Knowledge
What is being claimed in the previous discourse is that, the necessary responsibilities and
knowledge to generate business value from IS are distributed throughout the organization,
across departmental, functional, divisional and geographical boundaries; sometimes even
organizational boundaries. Crucially, it is not located solely in an IS unit and under the
­jurisdiction of the CIO (Peppard et al., 2000; Sambamurthy & Zmud, 1997). For example,
prescriptions around the IS strategy process demand the involvement of executive manage-
ment if it is to be effective (Earl, 1989, 1993). This is because there is incomplete knowledge
in a (separate) IS unit to successfully develop this strategy.2 Similarly, IT project teams cre-
ated to implement new information systems are typically composed of both IS specialists
and managers and users from ‘the business.’ The reason is that the knowledge and skills to
successfully implement a new IT system are not resident solely in the IT function. Studies
have noted that ‘[a] project team, set up to design and implement a large-scope IT system, is
essentially tasked with integrating distributed knowledge’ (Newell et al., 2004) and that this
integrative capability has important implications for its success (Mitchell, 2006; Orlikowski
& Robey, 2004). Outsourcing research similarly highlights the challenge of knowledge
coordination and integration in meeting expected outcomes (Espinosa et al., 2007; Faraj &
Sproull, 2000; Gopal & Gosain, 2010; Mehta & Bharadwaj, 2015; Sabherwal, 2003).
In fact, much of the knowledge required to generate value for IS investments is under
the control of other C-level executives and not the CIO (Peppard, 2007). This is why it has
been stressed as being of crucial importance for the CIO to build relationships with these
­executives (Gerth & Peppard, 2014). Whilst not expressed in such terms, the rationale for
this is, in effect, to ease access to knowledge resources under their influence. If not, gain-
ing access to this knowledge will be difficult, if not impossible, to achieve. Through their IT
governance initiatives organizations do seek to bring together those employees with relevant
knowledge to make decisions concerning IS. Cross functional, departmental and divisional
forums, such as steering committees, are established in recognition of the limitations of for-
mal functional and hierarchical structures when diverse and dispersed knowledge is required.
Even with access, however, the organization must have a capability to integrate this
knowledge (Grant, 1996; Kogut & Zander, 1996; Spender, 1996). Generating value from
 t h e i s o r g a n i z at i o n 315

IS thus becomes a task of coordinating and integrating relevant knowledge that is distributed
organization-wide. This raises a conundrum for many CIOs: that they are held accountable
for delivering value from IS investments without having access and authority over necessary
knowledge resources (Peppard, 2007).
How distributed knowledge is coordinated and integrated is less developed in the lit-
erature. One perspective advocates the importance of networks of strong, personal rela-
tionships, developed over time, across groups, departments, functions and divisions that
provide the basis for trust, cooperation and collection action (Adler & Kwon, 2002; Lin,
2001; Nahapiet & Ghoshal, 1998). Whilst this viewpoint suggests that this coordination and
integration of knowledge is an attribute of relationships between people, not of the indi-
viduals themselves (Adler & Kwon, 2002), the cognitive challenge cannot be ignored as any
integration will occur in the minds of managers.
Access to knowledge is thus dependent on an individual’s network of ties as well as the
nature and content of the relationship between parties (Adler & Kwon, 2002). With their
IT governance mechanisms, such as cross department forums, organizations do attempt
to facilitate the creation of these contacts and ties. However, to be effective they must be
accompanied by recognition of the value of collaboration and shared knowledge that is based
on a shared language and cognition to aid mutual understanding (Tsai & Ghoshal, 1998).
The motivation to share and combine knowledge and collaborate is underpinned by trust as
well as obligations that can be defined by the role and position that individuals have in the
organization.

Summary of Sensitizing Lens

Table 15.1 summarizes the previous discussion, presenting a sensitizing lens with three
contrasting perspectives (labeled Perspective P1, P2 and P3). These are distinguished by
‘focus,’ ‘fundamental premise,’ ‘responsibility,’ ‘challenge’ and ‘assumptions.’ P1 is essen-
tially concerned with managing technology and built on the premise that its management can
be contained within an organizational sub-unit. In contrast, P2 is premised on the shift to
the broader IS construct but with responsibility for ‘success’ still residing within an IS unit.
Whilst P2 and P3 acknowledge that necessary knowledge is distributed across the organiza-
tion, they differ in how they address the challenge of harnessing it. P2 sees it as a relational
challenge, gaining access to people and, implicitly, their knowledge; P3 frames it as a cogni-
tive challenge to create shared understanding.
The not unreasonable assumption behind P3 is that organizations invest in IS to generate
value, both operational and strategic. The argumentation developed in this section proposes
that the achievement of this should therefore become the central focus rather than to merely
‘manage IS’. The position drawn from the previous discourse proposes that this quest is an
organizational-wide endeavor. Moreover, it has its roots in harnessing knowledge. A corner-
stone of this perspective is that all this required knowledge is not located in one organiza-
tional unit labeled the IS organization. By viewing an organization as a distributed knowledge
system, the coordination, integration, creation and application of knowledge becomes the
key challenge.

Research Method and Data Analysis

To explore how the IS organization is portrayed in the literature, studies published in lead-
ing journals that report IS research were examined through the sensitizing lens developed
previously. These journals, listed in Box 15.1, are those that typically appear in surveys as
316 j o e p e p pa r d

Table 15.1 Sensitizing lens: contrasting perspectives from the literature

Perspective 1 (P1) Perspective 2 (P2) Perspective 3 (P3)

Focus Manage technology Manage IS Realization of value from IS
Fundamental Necessary knowledge Necessary knowledge Necessary knowledge
premise can be contained within distributed across the distributed across the
an organizational unit organization organization
with defined boundary
Responsibility IS unit IS unit with input from Shared across the
for ‘success’ Intellectual: outside the unit organization
Challenge determining Social: getting access to Cognitive: integrating
information people knowledge
requirements
Assumption •• IT can be managed •• IS can be managed •• IS cannot be managed
directly
•• Information •• Bringing relevant •• Representing the
needs can be people together knowledge of others
translated into IT achieves knowledge will achieve shared
requirements integration understanding

f­oremost outlets for publishing scholarly research. It might be argued that other journals
should be included, but the key objective was to ensure a spread of research outlets, review-
ing processes and editorial policies in selecting articles for the research data base. To incorpo-
rate a practitioner perspective, we also added a number of journals with this bent.
To be included in the study, articles had to report research where the IS organization
was either the dependent or dependent variable or being studied directly. We also sought
to include articles studying activities that were positioned in the reported research as taking
place within an IS organizations (e.g. relationship managers or competencies of IT profes-
sionals) as these would possibly provide a picture of what the researchers understood by the
IS organization. Research conducted under the umbrella of IT governance was also included
if the IS organization was a concept in the reported research (e.g. Schlosser et al., 2015) and
a description or definition could be gleaned from the text.
In order to ensure completeness, we also identified published work frequently cited by
a number of these articles but not published in the target journal list. These included some
working papers (e.g. Feeny et al., 1987; Earl & Khan, 2001) and book chapters reporting

Box 15.1 List of journals included in study

Harvard Business Review Journal of Strategic Information Systems
MIT Sloan Management Review European Journal of Information Systems
MIS Quarterly Executive International Journal of Information Management
Information Systems Management Information & Management
MIS Quarterly Information Technology & People
Information Systems Research Journal of Information Technology
Communications of the ACM Information and Organization
Journal of Management Organization Science
Information Systems
 t h e i s o r g a n i z at i o n 317

How is the IS What is the research

Is the IS
What is the Organization focus for the IS What
organization Yes nature of Characterized? (see Organization? (see Patterns can
considered in the
reported Table 2 for Table 2 for categories be
reported
research? Categories that that emerged from discerned?
research?
Emerged from data) data)
No

Exclude

Figure 15.1 Summary of process to identify and analyze candidate articles.

research (e.g. Earl et al., 1996; Hodgkinson, 1996). Books were excluded from the study as
they typically are not refereed.
Potential articles for inclusion in the study were identified first by keyword search in the
target journals followed by a careful reading of their abstracts to narrow down the potential
pool of articles to be reviewed (Figure 15.1). These candidate articles were read in detail
and a final assessment made as to the appropriateness of each for inclusion in the study. From
those finally selected, we determined whether the IS organization was the dependent or inde-
pendent variable in the study or a descriptive account of an IS organization. Studies investigat-
ing the IS unit of a particular organization, if not made explicit in the article, were assumed
to have the objective of improving either operational or strategic performance; they were
therefore considered as an independent variable. Articles were also classified as to whether
they were empirically based or conceptual treaties. To be considered as empirically based,
information about data collection and analysis methods together with actual data, had to be
presented in the article. An assessment was then made as to what the research understood
by the concept of an IS organization, essentially how it was defined and conceptualized in the
paper and used in the study. As shall be demonstrated in later discussions, this proved dif-
ficult as it was usually not made explicit in the majority of papers. Consequently, an assump-
tion as to the nature of the IS organization was therefore gleaned from reading the text of the
article and assessing how it is described and portrayed. The articles were also scrutinized to
discern any patterns emerging over time with regard to changing conceptualizations of the IS
organization; this included the role of its most senior executive. These patterns were coded
and mapped against a chronological timeline.

The Information Systems Organization in Research Studies

Box 15.2 lists the 64 articles, dating back to 1978, included in the final analysis. Examining
first the themes running through these studies over time, we can see that an early stream
of research examined the location and position of the IS organization in the wider enter-
prise (e.g. Ein-Dor & Segev, 1980; Kroeber & Watson, 1979). A closely related research
theme, and one that has persisted over time, is the design, configuration and optimal struc-
ture for the IS organization (e.g. Agarwal & Sambamurthy, 2002; Blanton et al., 1992; Boar,
1998; Earl et al., 1996; Gordon & Gordon, 2000; Ranganathan & Kannabiran, 2004; Vaast
& Levina, 2006; Venkatraman & Loh, 1994; Zmud, 1984) where the debate has swung
between centralization and decentralization (e.g. La Belle & Noyce, 1987; Zmud et al.,
1986) with the middle-ground of a federal structure being proposed as a viable alternative
(Hodgkinson, 1996; Rockart et al., 1996). The early centralization-decentralization debate
related to the potential impact of IT on organizational structures, i.e. whether computeriza-
tion would result in increased centralization or increased decentralization of decision-making
authority (Burlingame, 1961; George & King, 1991; Leavitt & Whisler, 1958). Buchanan
and Linowes (1980) consider the debate as concerned with the distribution of computing,
318 j o e p e p pa r d

Box 15.2 Articles included in the final analysis

Reynolds & Yetton, 2015; Schlosser et al., 2015; Williams & Karahanna, 2013;
Choudhary & Vithayathil, 2013; Guillemette & Pare, 2012; Sia et al., 2010; Huang et al.,
2010; McDonald, 2007; Vaast & Levina, 2006; Porra et al., 2005; Bassellier & Benbasat,
2004; Ranganathan & Kannabiran, 2004; Weill, 2004; Jiang et al., 2003; Schwarz &
Hirschheim, 2003; Brown & Ross, 2003; Ross & Weill, 2002; Chan, 2002; Agarwal &
Sambamurthy, 2002; Gordon & Gordon, 2002; Benmati & Lederer, 2001; Earl & Khan,
2001; Sambamurthy & Zmud, 2000; Gordon & Gordon, 2000; Willcocks & Sykes, 2000;
Purvis & McCray, 1999; Peppard & Ward, 1999; Brown, 1999; Mathiassen et al., 1999;
El Sawy et al., 1999; Brown & Magill, 1998; Earl & Sampler, 1998; Fowler & Wilkinson,
1998; Feeny & Willcocks, 1998a (also 1998b); Boar, 1998; Clark et al., 1997; Agarwal
et al., 1997; Cross et al., 1997; Brown, 1997; Prager, 1996; Earl et al., 1996; Nelson
& Cooprider, 1996; Rockart et al., 1996; Hodgkinson, 1996; Moreton, 1995; Wang &
Barron, 1995; Brown & Magill, 1994; Venkatraman & Loh, 1994; Blanton et al., 1992;
Von Simson, 1990; Tavakolian, 1989; Swanson & Beath, 1989; Dearden, 1987; La Belle
& Noyce, 1987; Zmud et al., 1986; Saunders & Scamell, 1986; Lucas, 1984; Zmud,
1984; Shore, 1983; Ein-Dor & Segev, 1980, 1982; Olson & Chervany, 1980; Kroeber &
Watson, 1979; Ahituv & Hadass, 1978

particularly the question ‘how can managers plan for the acquisition and use of minicomput-
ers in their companies?’ (p. 144). This discussion has been rekindled by Evaristo et al. (2005)
who assess whether IT hardware architecture should be centralized or decentralized (see also
Ahituv et al., 1989; Bacon, 1990).
There has also been a steady stream of research that has examined the relationship between
organizational characteristics and the IS function (e.g. Olson & Chervany, 1980) with studies
seeking to predict the design of the IS organization based on ‘antecedent conditions’ (Brown
& Magill, 1994; Ein-Dor & Segev, 1980), a firm’s competitive strategy (Tavakolian, 1989) or
more recently cloud computing (Choudhary & Vithayathil, 2013). The role of the corporate
IS function in the federal IS organization has also been studied (Hodgkinson, 1996) as well
as perceptions of the power of the IS organization (Lucas, 1984; Saunders & Scamell, 1986).
More recent research has focused on exploring IT governance structures (Brown, 1997,
1999; Sambamurthy & Zmud, 1999; Weill, 2004; Weill & Woodham, 2002).
Other research themes spotlight the IS organization itself and include the following: deal-
ing with forces that maximize career path opportunities (Shore, 1983), identifying com-
petencies for the IS function (Feeny & Willcocks, 1998a, 1998b), designing processes for
the IS function (Brown & Ross, 2003), integrating ‘core IT processes’ (Purvis & McCray,
1999), management practices in the IS organization (Ranganathan & Kannabiran, 2004;
Venkatraman & Loh, 1994), building change readiness capabilities in the IS organization
(Clark et al., 1997), redesign (Vaast & Levina, 2006) and transforming the IS organization
(Cross et al., 1997), infusing learning capabilities into the IS organization (Agarwal et al.,
1997), management development initiatives in the IS organization (Mathiassen et al., 1999),
how IS organizations deal with rapid change (Benmati & Lederer, 2001), power and the IS
organization (Lucas, 1984) and options for resolving the tension between an IS organization
and business units (Gordon & Gordon, 2002). This latter theme has also been explored in
research that has studied the ‘IT-business’ relationship (Bassellier & Benbasat, 2004; Ward
 t h e i s o r g a n i z at i o n 319

& Peppard, 1996), ‘the contribution of shared knowledge to IS group performance’ (Nelson
& Cooprider, 1996), and in studies that have explicitly sought to bridge the gap between the
IS organization and other organizational sub-units (Peppard, 2001; Peppard & Ward, 1999;
Taylor-Cummings, 1998). The role of the IS organization in organizational initiatives has
also been researched, for example, in ERP implementations (Willcocks & Sykes, 2000), re-
engineering projects (Moreton, 1995) and the formation and implementation of IS strategy
(Fowler & Wilkinson, 1998).
Very few articles explicitly define what researchers understand by the IS organization
in the study being reported. Whether as a dependent variable, or an independent variable,
fewer even describe what an IS organization actually is. Indeed, in many articles, it is often
designated as merely ‘IS’ or ‘IT’; for example, ‘[s]hared roles and responsibility require
trust and mutual respect between IT and clients’ (Ross et al., 1996, p. 34); ‘IT is a partner
in the innovation process’ (Agarwal & Sambamurthy, 2002); and ‘[o]ver the years, informa-
tion technology (IT) has struggled with how to create an effective structure and processes’
(Schwarz & Hirschheim, 2003, p. 129). Precisely what it does or its role is not explicitly
stated, with descriptions couched in language projecting some vague notion that it is some-
how involved with IT and sometimes information systems. Such descriptions lead only to
the conclusion that it is a separate sub-unit in the organization led by, for example, the
Vice President for IT, IT Director or CIO. This position is reinforced by research that has
examined the ‘location’ of the IS organization in the enterprise – as if it can somehow be
moved around like a piece on a chess board – and those studies that focus on its design and
configuration.
A number of papers infer a distinction between the IS organization and ‘the business’ or
other organizational units; the implication being that it is a separate part of the enterprise
(c.f. Bassellier & Benbasat, 2004; Gordon & Gordon, 2002; Pawlowski & Robey, 2004; Ross
et al., 1996; Schlosser et al., 2015; Ward & Peppard, 1996). What ‘the business’ represents
is usually not defined, but the underlying discourse suggesting that it is essentially everything
that exists outside the ‘IS unit,’ itself often not defined.
One striking finding from the articles analyzed is the lack of clarity in the writing and the
inconsistency in usage of terminology in relation to both the description and conceptualiza-
tion of the IS organization. We have already demonstrated that many articles present a vague
notion of what the IS organization is, despite its central role in the reported inquiry. The use
of language also hinders assessing what the reported research understands by the concept,
causing confusion in making any assessment of the data, the analysis and the reported find-
ings. In particular, usage of the word ‘function’ as in ‘IS function’ and in its plural form ‘IS
functions’ can be subtle. The former typically refers to a sub-unit in an organization, whilst
the latter seems to refer to a set of activities and tasks, but this is not always the case. For
example, Grover et al. (1998) consider outsourcing as concerned with ‘outsourcing IS func-
tions to external service providers’ (p. 80). They go on to define these functions as providing
services such as application development and maintenance, systems operation, networks/
telecommunications management and end-user computing support. La Belle and Noyce
(1987) note ‘[f]our factors tend to drive the degree of centralization or decentralization of IT
functions within an organization’ (p. 78). Brown (1997) similarly uses the notion of IS func-
tions in her study, writing that these functions include system development and maintenance,
end-user computing support and applications planning. This is in contrast to portrayals of the
IS function as an organizational entity, like marketing, finance or manufacturing functions,
which dominate conceptualizations and contributes to the view of the IS organization as a
separate sub-unit.
An analysis of the language used in describing the IS organization reveals that it is opaque,
with little consistency in usage across studies. For example, is the concern of reported
320 j o e p e p pa r d

research with activities, as in Sambamurthy & Zmud’s (2000) question ‘[h]ow should firms
organize their IT activities?’ (p. 106), also posed in Zmud’s (1984) work 16 years earlier,
or Brown’s (1999) quest to ‘increase our cumulative knowledge about what top-down
mechanisms are being used to promote the coordination of IS activities across corporate/
division boundaries’ (p. 421)? Blanton et al. (1992) seek to provide a ‘better understanding
of information technology organization’ and set out the purpose of their study as ‘to contrib-
ute towards a contingency theory of organizing IT activities into responsible IT groups (IT
organization)’ (p. 531).
Alternatively, is the focus on resources and the management of these resources, such as in
Venkatraman (1997), Venkatraman and Loh (1994) and Sia et al. (2012). The debates around
the merits and demerits of both centralization and decentralization have generally focused on
where the control of these IT resources should reside, i.e. in a central IS organization or with
local IS units. Gordon and Gordon (2002), for example, assert that ‘most companies in order
to grow will need to evolve, giving their business units more control over IT resources and
functions’ (p. 300). However, little indication is provided as to what these IT resources actu-
ally are, but inferences from the articles examined indicate that they primarily are people,
technology, relationships and culture.
Moreover, is the concern of research with IT assets (assuming, of course, that these are dif-
ferent from resources)? IT assets have been defined as a highly competent IT human resource,
a reusable technology base and a strong partnering relationship between IT and business man-
agement (Ross et al., 1996) somewhat analogous to the notion of resources referred to previ-
ously. Or is the issue being addressed the sourcing and provision of IT services to the business?
This is typically where the debate around outsourcing often resides. More recent studies have
focused on the locus and distribution of decision-making rights regarding IT (Sambamurthy &
Zmud, 1999; Weill, 2004).
Notwithstanding the previous comments on the sometimes vague and imprecise language
used in the analyzed articles, patterns that emerge suggest that reported studies fall into one
of five clusters. These are illustrated in Table 15.2. In the table, we also show the three per-
spectives that make up the sensitizing lens and indicate the number of studies from each of
the five clusters that subscribe to each perspective.
The first cluster is where the IS organization is the dependent variable in the study
being reported (e.g. impact of organizational characteristics on the structure of the IS
organization). In all papers in this cluster, it is conceptualized as a separate organizational
sub-unit. A similar situation exists where the IS organization is the independent variable
(e.g. its role in the success of ERP implementations) – the second cluster. Studies in both
these clusters treat the IS organization as a ‘black box’, and none has attempted to describe
or define it.
In contrast, the third cluster contains articles that focus directly on the IS organization,
i.e. look within the ‘black box’. Included articles study how it is designed, configured, struc-
tured or managed. Also included in this cluster is research examining specific aspects of an IS
organization, such as the identification of competencies, building change readiness or infusing
learning capabilities or studies exploring particular activities found in an IS organizations such
as liaison roles, business competencies of IS professionals and how an IS organization can deal
with rapid change. Most articles in this cluster contain empirical data, typically based on a
case study methodology, with a small minority being conceptual treaties. Whilst often not
identifying the scope of the IS organization, the inference from the research design and meth-
odology underpinning these studies is that the IS organization is a separate sub-unit, with its
own boundary that can be precisely defined. Indeed Chan (2002), in her study of alignment,
notes an assumption in the design of the reported research that ‘the boundaries of the IS func-
tion can be identified’ (p. 97).
 t h e i s o r g a n i z at i o n 321

Table 15.2 Summary clustering of the 64 articles analyzed

Research focus for IS Characterization of Empirical Conceptual Total no. Lens perspective
organization IS organization articles articles of articles
P1 P2 P3
Dependent Separate sub-unit 3 2 5 5
variable
Independent Separate sub-unit 8 1 9 9
variable
Direct study of Separate sub-unit 29 2 31 31
structures, Central/local IT 2 2 2
processes and units or ‘Federated
practices or IS structure’
studies of specic Distributed 3 1 4 4
organization
activities or
aspects of an IS
organization(s)
The IS Separate sub-unit 5 5 5
organization
required to Acknowledgment 1 1 1
accommodate that different
future demands arrangements for
IS (organization)
will be required
in future with
(some) activities
and decisions
occurring outside
traditional
functional
boundaries
While a concept Separate sub-unit 2 2 2
in the reported Acknowledges the 5 5 3 2
research, no distributed nature
specic focus on of decision-making
IS organization about IS and the
but analysis of need to promote
decision-making responsibilities and
about IS in accountabilities.
organization(s)
Total 45 17 2
IS, information systems; IT, information technology; P, perspective.

Whilst not directly studying an IS organization, articles grouped in the fourth cluster are
conceptual and report what an IS organization of the future will possibly look like. Most
articles here integrate literature at the time of publication with research findings from other
organizational and management disciplines, particularly the organization sciences, proposing
models, blueprints and frameworks and recommend best contemporary practice (e.g. Boar,
1998). Whilst using the concept of the IS organization to position the research, how it is por-
trayed is often not as an organizational sub-unit with defined boundaries, but as a distributed
322 j o e p e p pa r d

organization with interdependencies. However, the language used in these articles is opaque
and conveys the impression that an explicit IS organization will still exist.
The final cluster contains studies that report on the distribution of decision-making
authority and responsibility for IS in an organization. These papers typically address issues
of (IT) governance and are of more recent interest to scholars. Often, they don’t refer to
the IS organization directly, but, in discussing the allocation of decision-making rights, most
make a distinction between those that fall within the remit of an IS unit (i.e. CIO and IT man-
agement) and those that are best made by non-IT executives, usually referred to as ‘in the
business’ or simply ‘the business.’ Studies explore mechanisms and processes to encourage
consistency and coherence in decision-making behavior in respect of IS. These mechanisms
tend to be for the purpose of allocating accountabilities and responsibilities and forums to
being relevant people together, perhaps some form of IT steering committee for example.
Only two of these articles, Reynolds and Yetton (2015) and Huang et al. (2010), would seem
to adopt a P3 perspective.
We then analyzed the surveyed articles to determine if any patterns could be observed in
the reported research that would enable us to discern different types of organizing modes. Our
analysis enabled us to construct a typology distinguishing between three distinct types based on
an underpinning dominant organizing logic. These three types are summarized in Figure 15.2.
A perspective on the most senior person in the IS organization (which we refer to as the chief
information officer, although the job title of the most senior responsible person has varied over
the years) is also presented; however, this was not always discernable in all articles.
Type 1 represents the most widely subscribed view in the studies analyzed, driven by the
logic of function and hierarchy. With this type, the IS organization itself is a component of the
overall functional structure based on the organization of work by specialization. All necessary
knowledge to achieve its functional objectives of keeping the IT systems working is contained

Functional Partnership Pervasive

• Objective to keep computer • Objective is understanding • Objective to optimize value

systems functioning of business requirements from IT
All required knowledge and issues • Integration of knowledge
located in IS unit • Establishing liaison roles distributed across the
Managing within the unit • Managing around the organization
Clear delineation of boundary of IS organisation • Knowledge representation
responsibilities • Building relationships for a shared understanding
Clear what Head of IT across the IS organizational • Governance of IS
responsible for boundary to facilitate activities/decisions across
• CIO as functional manager Knowledge access multiple boundaries
• Developing the “business” • Intra- and inter-
knowledge of IS staff organizational networks
• CIO as boundary spanner • CIO as orchestrator

Hierarchy Dominant Organizing Mode Network

Figure 15.2 Three organizing modes for generating value through IT.
 t h e i s o r g a n i z at i o n 323

within this unit. With this type, the CIO is a functional manager. Type 2 is still ground in the
IS organization being a separate unit, but it also seeks to manage around its boundary through
the establishment of liaison roles to manage relationships with other areas of the organiza-
tion. The focus of these relationships is to provide access to knowledge; in most cases, the
reason for this is to determine requirements. With is type, the CIO performs the role of a
boundary spanner. In contrast, Type 3 takes a more pervasive perspective of an IS organiza-
tion portraying it, not as an organizational unit per se, but concerned with the creation of
intra-organizational and inter-organizational networks of connections for access to dispersed
knowledge. The implicit assumption is that, this will lead to cognitive alignment. With an
objective to optimize value generated from IT, it mirrors the contention of Sambamurthy
and Zmud (2000) that any necessary competencies ‘will be assembled, delivered, and then
disassembled through a variety of intra and inter-organizational networks rather than through
the IT function acting quasi-independently in a command and control manner’ (pp. 112–113,
emphasis added). In this type, the CIO plays an orchestrating role. We label these three types
the functional, the partnership and the pervasive models, respectively.

Discussion

Our findings reveal that there is no clear and unambiguous definition or description as to
what an IS organization actually is. This is remarkable, as it is not only a central concept in
the IS discipline, but also the core focus of the majority of the articles analyzed; this is akin
to studying ‘technology acceptance’ or ‘IS service quality’ without precisely defining what is
understood by these concepts in reporting the research. Moreover, the assumption behind
the overwhelming majority of studies, whether implicit or explicit, is that the IS organization
is a separate and distinct sub-unit in the organization, and that it can be studied directly or iso-
lated from the main phenomena of interest. Accordingly, the fundamental message that must
be gleaned from this practice is that the ‘management of IT’ (which, apart from one study
(Guillemette & Pare, 2012) is never defined in the included articles) can be contained within
a separate organizational unit, with defined and identified boundaries (c.f. Chan, 2002).
What this unit encompasses or its role and function is never revealed. Even Guillemette and
Pare (2012) equate the management of IT, what they characterize by five different ‘IT man-
agement models’, as defining their proposed typology of IS organizations.
The implicit implication of this dominant portrayal of the IS organization is that the ina-
bility of an organization to manage IT (or IS), and we are assuming by implication to optimize
value from IS/IT, originates from within this unit. This perspective has consequently shaped
research that focuses on addressing this failure with prescriptions from such studies recom-
mending the tackling of the perceived inadequacies of this unit. These recommendations
include calls for developing the ‘hybrid manager’ (Skyrme, 1992), ‘reskilling the IS pro-
fessionals’ (Cross et al., 1997), introducing ‘change agentry’ as a skill for IS professionals
(Markus & Benjamin, 1996), improving business competence of IT professionals (Bassellier
& Benbasat, 2004), developing the credibility of IT specialists (Bashein & Markus, 1997)
and building change readiness capabilities into the IT unit (Clark et al., 1997). Reports of
such initiatives to improve ‘the performance’ of the IS organization, and again, we assume
the contribution of IT are detailed in Cross et al. (1997); Vaast and Levina (2006) and
Peppard (2001). These typically entail replacing the incumbent CIO, re-structuring the
unit, sometimes even repositioning the unit in the organizational structure, re-engineering
processes, reskilling IS unit staff, improving the quality of IT services and establishing rela-
tionships with appropriate stakeholders. Indeed, outsourcing might also be considered as a
viable option.
324 j o e p e p pa r d

However, if we, as suggested by Perspective 3 in our sensitizing lens, portray the genera-
tion of value from IS as requiring the coordination and integration of relevant knowledge,
knowledge that is located organizational-wide, then conceptualizing the IS organization as
a separate organization sub-unit is problematic. The challenge, therefore, is not to design
an effective ‘IS organization’, but to somehow create the context to coordinate and inte-
grate enterprise-wide knowledge. This is perhaps why strong relationships have long been
­recognized as essential in ensuring success with IT investments as these facilitate access to
knowledge. However, access to knowledge is a necessary but not sufficient condition; the
integration of this knowledge will invariably be required and this is a cognitive challenge.
Moreover, this coordination and integration of knowledge needs to occur at all levels and not
just at the most senior echelons of an organization. Knowledge, such as that required to work
with and make sense of information (e.g. using analytical tools to support the generation of
insight), is likely to be resident outside the traditional IS organization.
Consider that if all the knowledge required to manage IS can be contained within a s­ eparate
organizational unit, then outsourcing would be the strategy of choice. Yet, the results of out-
sourcing have, by-and-large, been disappointing (Lacity et al., 2009, 2010). Even bounded
tasks like outsourced software development demand the coordination and integration of
knowledge if they are to achieve expected outcomes (Espinosa et al., 2003, 2007; Gopal &
Gosain, 2010; Mehta & Bharadwaj, 2015).
Thus, the social context becomes a key aspect of generating value from IS. Whilst Chan
(2002) highlighted the role of the ‘informal organization’ in achieving business/IT align-
ment, a plausible interpretation is that this is likely to be due to the inadequacies of formal
organizational structures in supporting this coordination and integration of knowledge. Such
integration requires the active participation of all key stakeholders as well as a shared under-
standing (Preston & Karahanna, 2009; Reich & Benbasat, 2000; Tan & Gallupe, 2006). If, for
example, senior business management believe that IT is a cost to be minimized, this is going
to greatly influence how they engage with IS issues and, in particular, their willingness to be
involved in IS decision-making processes and assume responsibility for what they consider
as falling within the remit of an IS organization. Similarly, if business managers are of the
view that IT does not fall within their realm of responsibilities, and that it is the role of the IS
organization – as a separate organizational sub-unit – to develop the IS strategy, prioritize IT
spend, manage IT projects and deliver the expected business benefits from IT investments,
and then, this is how they will behave towards IS issues and dictates their level of engagement
and involvement. Research already reveals that the CIO role is an ambiguous role (Peppard
et al., 2011) with senior business executives unsure as to what to expect of their most senior
IS executive.
Therefore, the ‘gap’ between what is often referred to as ‘the business’ and ‘IT’ is perhaps
more appropriately seen as a knowledge gap but one that manifests itself in relational issues.
For example, the so called ‘non-IT people’ not appreciating their role in delivering expected
benefits from IT investments and are then disappointed with project outcome. It may be a
case that many business executives ‘don’t know what they don’t know,’ consequently do not
give ‘IT attention’ (Huff et al., 2006) and therefore manage IS in a way that they believe will
lead to success. If the managerial mind-set is shaped by an organizing logic that sees the IS
organization as a separate unit this influences their behaviors, practices and response to any
perceived problems with IT
To return to the research question as to whether conceptualizations of the IS organization
reflect findings from research studying requirements for successfully harnessing informa-
tion, systems and technology to achieve operational and strategic objectives, the evidence
indicates that most don’t. The majority conceptualize the IS organization as a separate unit,
and whilst often not explicit, give the impression any perceived problems with IT can be
 t h e i s o r g a n i z at i o n 325

addressed by either improved management, organization, skills or competencies within the

boundaries of this unit (functional logic) or by better managing the interface with other parts
of the organization (partnership logic). It is only a small number of studies that acknowledge
the distributed nature of the so called IS organization in terms of responsibility and decision-
making (pervasive logic). This can be seen with the more recent interest in IT governance.
However, the assumption is that by implementing instruments of governance, shared under-
stand will be achieved.
Treating the IS organization as a sub-unit capable of being separately managed may have
been appropriate when computers (or machines, as they were often referred to) were first
deployed, but this practice has become eroded with the passage of time, particularly as IS
has assumed strategic importance. If, as strongly suggested by research, ‘non-IT staff’ (i.e.
those employees who do not work directly in the IS organizational sub-unit or are not seen as
having a formal IS role or designated as IS specialists), play such a crucial part in the genera-
tion of value from IT, do they not become part of the ‘IS organization’? Perhaps this is what
is being alluded to when it is said that IT is becoming embedded in the business. In a similar
vein, Peppard and Ward (2004) noted that an organization’s IS capability, what they defined
as an ability to continuously deliver business value from IS, is rooted in ‘the very fabric of the
organization’. Where, then, are the boundaries of the IS organization? It becomes a pervasive
structure akin to the pervasive organizing logic introduced in Figure 15.2, where activities,
decisions and other resources are not located in a specific sub-unit.
However, in creating or describing a future state, we are often anchored and constrained
in our thinking about the future by the past, and this can restrict and anchor our thinking and
limit the sphere of possibility.3 Thus, whilst a separate IS unit to maintain the running of the
computer was appropriate when the operational and strategic role of IS was different than
that of today, the evolution of future organizing models assume that there will be an IS unit
in the organization. This may not be the case. For example, the emergence of end-user com-
puting saw users undertake tasks that were previously performed by IT professionals which
would have been unthinkable when ‘computers’ were first deployed. Today’s practice of
Bring Your Own Device would never have been entertained 50 years ago. Yet, it seems that
many scholars continue to seek to build a better ‘mouse trap.’

Implications for Research

The analysis presented in this article suggests that conceptualizing the IS organization as a
precisely defined component of an organization, with its own boundary, processes, prac-
tices and management structures may represent research convenience rather than reflect the
realities of generating business value from IS (as captured in Perspective 3 of the sensitizing
lens). We have demonstrated that, whether as the dependent variable or independent vari-
able in research or as a focus of study itself, it is predominantly portrayed as an organizational
sub-unit, with its own boundary corralling all necessary knowledge to effectively manage
IS. In contrast, research focused on understanding success with IS (in terms of generating
business value) proposes that required knowledge is distributed across an organization. This
suggests that there may be little utility in separating out a distinct IS organization with its
own boundaries. If IS is indeed embedded ‘in the business’, what then is the IS organization
in contemporary organizations?
A challenge for scholars therefore is to clearly define the IS organization – assuming, of
course, that this is indeed possible or warranted. Perhaps, as we have suggested, the concept
of an IS organization is a relic from the past. Do we now need a new ‘scaffold’ or concept to
accommodate this conclusion? Is language, such as the universally accepted distinction between
‘IT’ and ‘the business’ a constraint? This raises the question as to what should and should not
326 j o e p e p pa r d

be included in any definition. In attempting to address this query, we encounter imprecision

from the research literature. For example, are we considering decisions, resources, assets,
activities, practices or all of these? What are the boundaries of the IS organization? If it has
no boundaries, but the boundaries of the organization itself, then is it not impossible to treat
it as a dependent or independent variable in studies? How then do you research a pervasive
organization, where boundaries are at best blurred or, worse, unclear? To return to a ques-
tion posed at the outset of this paper: how do you conceptualize such a construct?
One avenue of potential concern is whether the dominant conceptualization of the IS
organization is leading to the development of theories and practices that are inappropriate
to the realities of how value is generate by organizations from information technology? By
treating the IS organization as a separate unit with defined boundaries might result in findings
and recommendations that have the opposite intention. For example, the implication that
an organization experiencing problems in generating business value from IS can address (i.e.
solve) this problem by focusing attention on its IS organization.
Furthermore, with the exception of Guillemette and Pare (2012) there is surprisingly lit-
tle theorizing around the concept of an IS organization in the literature. Moreover, despite
being a central concept in the narrative within the academic writings, clear definitions are
absent. At a fundamental level, the function and role of an IS organization in contemporary
organizations is not evident from the research literature. Or more precisely, what is an IS
organization? What does, or should, an IS organization do? Indeed, is the concept of an IS
organization even relevant or useful today?

Implications for Practice

This analysis has some implications for practice. The fact is, most organizations today do have
an IS organization: just look at any organization chart. We have already argued that treating
the IS organization as a sub-unit capable of being separately managed is no longer appropri-
ate today. Yet, most of the articles analyzed provide a perspective that equates improving
the performance of the IS unit with positively impacting the value derived from IS invest-
ments. For example, many are implementing service improvement initiatives within their IS
organizations in order to improve the quality of services delivered ‘to the business’. Those
attempting to increase service levels, decrease costs and improve security often look to the
ITIL framework for guidance. ITIL is widely accepted as the world’s leading compilation of
IT best practice for IT Service Management. Establishing service level agreements (SLAs) is
another popular strategy; in essence, SLAs define the penalty if service levels are not met.
However, achieving specified service levels does not guarantee that that business value will
be created. They may be a necessary, but are not a sufficient condition. Further, institut-
ing SLAs also makes a fundamental distinction between ‘provider’ and ‘customer’ and does
not recognize that value may in fact be co-created. There is a subtle but crucial distinction
between improving the performance of the IS organization and improving the performance of IS in
the organization.
The previous analysis questions the usefulness of prescriptions recommending treating the
IS organization as a profit center or running IT as a business (c.f.. Kress, 2011; Lientz & Larssen,
2004; Lutchen, 2003). Many executive teams have gone down this route when seeking to
push their IS organization to ‘prove’ that it is adding value to the business. It is consequently
seen as a separate entity. Moreover, getting buy-in, involvement and the level of engagement
from non-IT staff and other stakeholders, which research indicates is crucial for the genera-
tion of value from IS investments, may prove difficult with the establishment of the IT unit
as a profit center. Psychologically, with a profit-orientation, it can be seen to be in conflict
with the shared responsibility required, if value objectives are to be achieved. Consequently,
 t h e i s o r g a n i z at i o n 327

the coordination and, particularly, the integration, of the knowledge to generate this value
may be difficult to achieve.
The latter’s cognitive challenge also plays a significant role in implementing IT govern-
ance structures. It cannot be assumed that the ability to represent each other’s knowledge
and a shared understanding will be automatically achieved by putting in place various instru-
ments of governance.
The analysis presented in this paper also has implications for teaching. Popular text books
addressing the management of IS and IT provide a contemporary view of the IS organization,
what it is and its role in the organization. Yet, they too are opaque and vague. These text
books are being used to educate future managers and thus play a key role in shaping their
thinking. By portraying the IS organization as a separate unit in the organization, with its
own leadership, administrative and management structures, processes and practices, they
propagate a particular view which, as this paper has argued, contributes to the inability of
organizations to deliver business value through IT. Students reading these studies are likely
to be left with the impression of an IS organization that is removed from what is actually
required to deliver business value.

Conclusion

At the beginning of the millennium, Sambamurthy and Zmud (2000) suggested that there
were increasing signs that the accumulated wisdom regarding effective IS organizational
architectures might be inadequate in shaping appropriate insights for contemporary practice.
The research reported in this paper supports this position. We have examined studies where
the IS organization is either the dependent or independent variable, studied directly or impli-
cated by IT governance decisions. A key finding from the analysis is that the IS organization
is generally not precisely defined, despite its pivotal role in the research being reported. In
scrutinizing how the IS organization is portrayed, we found that the implicit assumption from
the vast majority of studies is that it is a separate sub-unit in the organization. However, the
evidence from studies that have examined how business value from IS is generated, presented
in the sensitizing lens Perspective 3, paints a picture that is at odds with this dominant ortho-
doxy. Similarly, the socio-technical nature of IS also casts a shadow over this assumption.
The perspective of the IS organization as a separate sub-unit may actually be contributing
to problems that organizations have with their IT investments, particularly the inability to
deliver business value.
If the value of technology is in its possession, then having a separate sub-unit in the organi-
zation responsible for its accumulation would be sufficient. With the IS organization con-
cerned only with specifying, building, maintaining and running IT systems, delivering busi-
ness value would only require making the right purchasing decisions, and the problems that
many organizations face as a result of IT outsourcing would not exist. But this is not the case.
If the ability to continuously generate value through IT is to be found in the very fabric of the
organization, then isolating IT and designating it to be managed by an organizational sub-unit
is likely to be a flawed practice.
In this article we have explored conceptualizations of the IS organization. Its objective has
been to reflect on research practices and question the appropriateness of how we character-
ize the IS organization in our research. We hope that this article provokes a debate and that
researchers will seek out new approaches that more accurately capture the realities of what
is required to generate business value through IS.
In his poem Among School Children, Nobel prize-winner for literature, W.B. Yeats
(1865–1939) wrote the line ‘How do we know the dancer from the dance?’, a line with
328 j o e p e p pa r d

strong resonance with the arguments presented in this paper. The dancer–dance also provides
a metaphor to better understand the dichotomy that is alluded to in much of the research
examined. Yeats was postulating that a dance is nothing without a dancer, and similarly, a
dancer is insignificant without a dance to dance. How can we assess a dancer without see-
ing him/her a­ ctually dance? Similarly, how can we judge a dance without actually seeing it
being performed? More profoundly, how do we then draw a distinction between the one
who dances and what he/she is dancing? One cannot exist without the other. Between an
organization and its IT systems, a similar interdependency is present. In today’s information
and technology-driven environment, an organization is unlikely to exist without IS; IS them-
selves cannot exist outside of their organizational context. In improving the contribution of
IT to competitiveness, IS cannot be managed in isolation from the rest of the organization. It
clearly cannot be managed solely from within a box on the organization chart.

Notes
1 The literature tends not to be precise in usage of the labels ‘IT’ and ‘IS,’ using them interchangeably.
This goes to the heart of the second theme to be discussed in developing the sensitizing lens.
2 We can also argue that any involvement also gets stakeholder ‘buy in’ for any proposal and its suc-
cessful implementation.
3 In a 1992 Editorial in MIS Quarterly, Blake Ives noted the limitations of drawing on the past for
­guidance about the future. He wrote: ‘Industry understands that they must now re-engineer rather
than just automate outdated methods. But within the information systems research community we
continue to value an extensive trail of references that often reflect outdated assumptions and yes-
terday’s economics. We are not necessarily paving the cow path, but rather extending it. It is a rare
article that explores the implications of changing economics on the central research question or
that challenges the dated assumptions upon which past works might have been based. If we are to
re-engineer information systems research we must spend less time pouring over the archives and
more time soaking in innovative organizations. It is there, rather than in the rear view mirror, that
the realities of the transformation of information management will become apparent.’

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 t h e i s o r g a n i z at i o n 335

Questions for Discussion

1 Why is it important to analyze and assess the conceptualization of a phenomenon?

2 What is meant by the sensitizing lens, and how was it used in for the study?
3 Discuss how ‘human agency’ is important in the management of information systems.
4 Discuss whether IS can be managed or not.
5 Why is knowledge important to generate value from information systems?
6 Is building networks the only way to coordinate and integrate knowledge for value
generation from information systems?
7 Which among the three types of organizing logics is the most salient for generating
value from information systems?
8 Why is the conceptualization and assessment of information systems important for
practitioners?

Further Reading
Reynolds, P., Yetton, P. (2015). Aligning business and IT strategies in multi-business organizations.
Journal of Information Technology, 30, 101–118.
Peppard, J. W., Edwards, C., Lambert, R. (2011). Clarifying the ambiguous role of the chief information
officer. MIS Quarterly Executive, 10, 197–201.
PART IV

Some Current and Emerging

Challenges

T hus far, we have discussed aspects of strategic information management by

focusing, in Part I, on the process of information systems, planning, strategy and align-
ment; In Part II on digital transformation, key components of digital strategy, digital leader-
ship, and power dynamics in organization, IS and strategy, and in Part III, on key principles
for organizing the IT function, the role of CIO and CDO leadership, as well as reflecting on
the very nature of the IS organizations. In Part IV, we present and discuss the current and
emerging challenges that organizations face in the Digital Economy and the increasing use
of digital technologies from which organizations attempt to gain benefit through their digital
transformation. Such challenges include the use and management of social media, datification,
algorithmic decision-making and the associated issues of “big data”. The topics in Part IV are
listed in the top layer of Figure P4.1.
Chapters 16 and 17 focus on the use of social media for strategizing (Chapter 16) and
socialization (Chapter 17). The research on social media in the last decade has seen consider-
able increase in the areas of: knowledge sharing (Leonardi, 2014); strategy (Haefliger et al.,
2011; Von Krogh, 2012); communication (Huang et al., 2013; Leonardi et al., 2013), enter-
prise social media and networks (Kane, 2015; Kane et al., 2014; Koch et al., 2013; Kuegler
et al., 2015).
Chapters 18–20 consider another relevant, current issue in the Digital Economy that is
linked to datification and the use of “big data”. Issues associated with big data have recently
been the focus of debate (e.g., Chen et al., 2012; Günther et al., 2017).
In Chapter 16, John Baptista, Alex Wilson, Bob Galliers and Steve Bynghall demonstrate
how social media has the capability for open strategy through transparency, inclusiveness and
the emergence of reflexivity. The chapter outlines different social media features and their
effects on strategic activities given the shift from what can be seen as an analogue strategy
process to that of a digital strategy process. Through seven case studies, the chapter outlines
338 i n t r o d u c t i o n t o pa r t i v

Part Four: Some current and emerging challenges

Ch.16: Opening strategy through social media
Ch.17: Organizational socialization and social media
Ch.18: Decision support systems failures
Ch.19: The opportunities and challenges of datification
Ch.20: Ethical issues

Part Three: Organizing and governing the IS funcon

Ch 11: Principles and models
Ch.12: Managing in economic decline
Ch.13: CIO profiles
Ch.14: Alternative roles for chief digital officers
Ch.15: The IS Organization

Part Two: Digital strategy and organizaonal transformaon

Ch.6: Navigating digital transformation
Ch.7: Formulating a digital strategy
Ch.8: Building digital capabilities
Ch.9: Chief digital officers
Ch.10: Organizational power dynamics

Part One: Foundaons to IS strategy and strategizing

Ch.1: Historical approaches
Ch.2: Further reflec ons
Ch.3: A cri que
Ch.4: Conceptual developments
Ch.5: Aligning prac ces

Figure P4.1 The focus of Part IV: Some Current and Emerging Challenges

four tensions in using social media in achieving transparent and inclusive strategic practices
within organizations. To resolve these tensions the authors outline the need for organizations
to develop a reflexive capability which enables them to integrate the feedback from social
media and open strategy initiatives. The chapter describes three stages of gradual development
of reflexiveness as an organizational capability arising from a dynamic process.
In Chapter 17, Dorothy Leidner, Ester Gonzalez and Hope Koch examine the introduction
of enterprise social media (ESM) as a socialization tool for new IT hires within organizations.
The chapter outlines the affordances of ESM, which are grouped around the areas of network-
ing; organizational visibility; information gathering/sharing; and innovation. Through a quali-
tative case study, the interacting effects of these affordances are examined to demonstrate
different levels of affordances. The chapter shows that different levels of affordances lead to
different outcomes via five generative mechanisms: bureaucracy circumvention; the executive
perspective; personal development; name recognition; and as a morale booster. The affor-
dances of the ESM socialization program are actualized through the five generative mecha-
nisms and result in eight outcomes. These are: productivity enhancement; additional work;
 some current and emerging challenges 339

attractive job assignments; stress; social struggle a sense of social support; comfort around
superiors; and cultural understanding.
In Chapter 18, Paolo Aversa, Laure Cabantous and Stefan Haefliger provide an exam-
ple of a sophisticated decision support tool using big data to design and implement strategic
decisions. The study demonstrates that overreliance on such systems could lead to strategic
failure, as illustrated in the Formula 1 2010 championship. The case shows that, despite the
significant investment in real-time decision support systems (DSS) with big data, the use of the
strategic outputs led to Ferrari losing the Abu Dhabi race, and ultimately, the championship.
The authors outline three interrelated sources of strategic failure with DSS and big data for
strategic decision-making: (i) the situated nature and affordances of decision-making with big
data; (ii) the distributed nature of cognition in decision-making; and (iii) the performativity of
the DSS. They conclude that social and material practices need to be considered in strategic
decision-making with DSS and big data, in order to account for the diversity of uses of these
technologies, their affordance and interpretive flexibility, along with intangible aspects such
as organizational culture.
In Chapter 19, Sue Newell and Marco Marabelli, discuss the strategic opportunities and
challenges of algorithmic decision-making. Big data, which is captured through digitized ser-
vices, is used and processed by algorithms to predict behaviors. The chapter outlines a number
of discriminations which are associated with big data algorithmic decision-making either in
products and services provided to groups (“big” data) or individuals (“little” data). The paper
demonstrates how the use of big and little data in algorithmic decision-making can lead to dis-
criminations and societal concerns. Thus, the chapter outlines tradeoffs and issues associated
with the use of these data. These tradeoffs include: privacy versus security; freedom versus
informed control; freedom versus uninformed control, and independence versus dependence.
These tradeoffs are the basis for opportunistic strategic decision-making which can well lead
to societal challenges. The authors conclude by arguing the increased responsibility and reflec-
tion in the use of big data and algorithms for decision-making. The chapter provides a useful
segue to Chapter 20.
Thus, Chapter 20 by Kirsten Martin analyzes the ethical issues associated with big data
as an industry. The author explains the beneficial uses of big data while also outlining some of
the questionable uses of big data. The chapter outlines these ethical issues in four quadrants:
issues with sources; issues with customers and use, and issues within a single supply chain,
and within a system. The chapter concludes by developing guidelines for a sustainable big data
industry, outlining the issues; the causes of current problems and potential solutions, and the
roles of CIOs and CDOs in enacting these solutions. The chapter outlines additional questions
and responsibilities regarding digital transformation, strategy and big data, and the roles of
CIOs and CDOs in these contexts. Thus, the chapter brings the book to an appropriate conclu-
sion given the emergent challenges they categorize.

References
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340 i n t r o d u c t i o n t o pa r t i v

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Koch, H., Leidner, D.E., Gonzalez, E.S. (2013). Digitally enabling social networks: Resolving
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Leonardi, P.M. (2014). Social media, knowledge sharing, and innovation: Toward a theory of
communication visibility. Information Systems Research, 25 (4), 796–816.
Leonardi, P.M., Huysman, M., Steinfield, C. (2013). Enterprise social media: Definition,
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Chapter 16

João Baptista, Alexander D. Wilson,

Robert D. Galliers and Steve
Bynghall

SOCIAL MEDIA AND THE EMERGENCE

OF REFLEXIVENESS AS A NEW
CAPABILITY FOR OPEN STRATEGY

S trategy i s b ot h a statement of intent and a process by which that intent

is formed and performed by members of organizations. The ownership of these two
aspects of strategy has traditionally been with elite groups within organizations (Hambrick,
2007; Pettigrew, 1992). However, the rise of social media as a platform for open communi-
cation and wider engagement in organizational discourse has shifted attention to more collec-
tive views of strategy (Seidl and Whittington, 2014; Whittington, 2006).
Formalized strategy may still be managed from the top in many organizations but social
media is adding pressure to make this process more porous and open to informal activity at
the grassroots level and throughout (and even beyond) individual organizations. This is par-
ticularly relevant as the younger generation of “digital natives” (Helsper and Eynon, 2009)
become more dominant given their aptitude to use social media to engage and interact with
others (Tams et al., 2014; Vodanovich et al., 2010) and share knowledge (Morton et al.,
2015).
The participative nature of social media changes the distribution of rhetorical resources
and reshapes patterns of communication from univocal into multivocal organizational envi-
ronments (Huang et al., 2015). Social media is intrinsic to knowledge management (Von
Krogh, 2012), knowledge reuse (Majchrzak et al., 2013), distributed leadership (Sutanto
et al., 2011), and in facilitating interaction and internal collaboration (Razmerita et al.,
2014). However, it is the increased visibility of what others know through social media that
creates conditions to leverage knowledge in new ways and promotes learning as a process
that operates vicariously rather than through interpersonal experience (Leonardi, 2014).
This is significant to strategy because of how social media accentuates the role and voice of
every member of the organization by providing a platform for engagement and participation,
as well as a more visible line of sight to strategy (Haefliger et al., 2011). Social media can
342 j o ã o b a p t i s ta e t a l .

have therefore the ability to extend reach and richness in the making and “doing” of strategy.
In particular, social media has the potential to modify “how much” strategy is visible, and
when and how individuals are able to participate in creating and shaping practices and content
of strategic significance. It adds reach and volume of feedback ex-ante, but often also replaces
traditional forms of communication of extant strategy.
It is therefore appropriate to broaden our view of strategy to include a wider set of
activities with strategic impact within organizations, some of which have not been recog-
nized as being sufficiently close to the practice of strategy (Bechky, 2011). This broader
view of strategy reflects the growing number of modern work environments where strat-
egy practice is shifting from being “exclusive and secretive” to becoming more “inclusive
and transparent” (Whittington et al., 2011, p. 538). The issue is then how increasing inclu-
siveness (broader involvement of stakeholders) and transparency (wider access to content
and information) interferes with established conventions around who should be involved in
strategy and how, and the extent of what should be shared. For example, becoming more
inclusive can challenge established hierarchical structures within organizations (Collier
et al., 2004) and break with established conventions on strategy being the domain of a
restricted group of top managers (Hambrick, 2007; Pettigrew, 1992) by opening up the
potential involvement to other echelons in the organization, notably middle managers
(Floyd and Wooldridge, 1994; Wooldridge and Floyd, 1990). Adding transparency can
also be problematic because it creates conditions for equal voice and access to rhetorical
resources by all members of the organization (Huang et al., 2013), challenging for exam-
ple the status of middle management because they no longer moderate and intermediate
knowledge exchanges. This echoes Bruhn and Ahlers (2013), who note the importance of
integrating and embedding new communication channels in existing organizational and
strategizing practices and processes.
This is causing significant changes to strategy as conventionally described; changes that
go deep into the praxis of strategy, its norms and artefacts, as well as who is involved in
formal and informal strategic activity in organizations (Whittington, 2006; Whittington
et al., 2006, 2011). However, this leads to further ramifications to the democratization
of strategy by establishing agile, responsive and capable organizations (Doz and Kosonen,
2008a, 2008b), crowdsourcing strategy dialogues (Stieger et al., 2012) and more democ-
ratized forms of strategy (Dobusch and Mueller-Seitz, 2012; Matzler et al., 2014; Stieger
et al., 2012).
This paper focuses on social media as a platform for participation (Cotton et al., 1988) and
considers its role in shaping and forming strategy within organizations (Mantere and Vaara,
2008). We pose the following guiding research question to deepen our understanding of this
research puzzle: How is the adoption of social media changing the nature of organizational strategizing?
The paper is structured as follows. In this section we motivated the study by highlight-
ing the role of social media in shaping strategic activity in organizations. Next we show how
social media is changing the nature and dynamics of processes of strategizing in organiza-
tions and identify the research gap in our current understanding that we aim to address.
The section that follows outlines our methodological approach to the empirical work by
explaining the two stages undertaken to gather and analyze secondary and primary data. This
two-pronged approach allowed us to intertwine a wide range of data from multiple sources
with the concepts of open participation in organizational strategizing. We then report on our
main findings, providing evidence of tensions and capability development in the organiza-
tions studied. In our analysis section we then review and conceptualize the dynamic nature
of capability development by adding reflexiveness as a third dimension to Whittington et al.’s
(2011) model of open strategy. Drawing on Gorli et al. (2015), we suggest that this capa-
bility embodies the process of integrating open and emergent feedback into the structural
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 343

arrangements of organizations. Our conceptualization of the reflexiveness capability is a key

contribution of our study. Lastly, we reflect on the potential for this capability to shift the
governance of the organization towards stewardship as an overall organizational arrangement
that is consistent with open strategizing practices in organizations.

Social Media Expansion into Processes of Strategizing

We commenced with a systematic and comprehensive review of case material publicly avail-
able such as blog posts, online magazines, news, industry reports, company reports, white
papers, etc. This gave us a broad basis to understand the emerging use of social media in
organizations. More particularly, the aim was to capture salient, current examples of the
expansion of social media into processes of strategizing. This was achieved by analyzing the
social media features used (column 1) and their specific strategic use (column 2) and to cap-
ture the effect on strategic activity (column 3). Table 16.1 shows a selection of representative
examples of our initial analysis:

Table 16.1

Social media features Examples: strategic use Effects on strategic activity

Interaction with management Dow Chemical, Lloyds Bank, Active use of social media
Blogs, commenting, video ING, Nokia, Lloyd’s Bank, Linden to make the vision of senior
casting, discussion forums, Labs, Alcatel-Lucent management more transparent
online communities, real- CEO at Dow Chemical was and gather support and
time online Q&As, social an early adopter of internal feedback from employees.
network updates, internal blog since 2007 called “Access In some cases, this is used to
twitter Andrew”. Received 24,000 define new strategic initiatives
visits per blog post and up to and support decision-making.
50 comments. Employees are It also provides a view on
encouraged to leave comments, employee sentiment for senior
which are moderated but the management.
CEO personally authors the blog
and deals with hot topics himself.
At Deutsche Bank some managers
host “Ask Me Anything” sessions
online where questions on any
topic can be freely asked by any
employee in the company.
Extension of closed Philips, Unilever, PwC, Dollar Strategy meetings which were
management meetings Financial, Grant Thornton previously closed become
Real-time and post Dollar Financial, the UK more open, allowing more
commenting on topics from operations of US-based DFC employees to engage and
management meetings, live Global Corp, a diversified discuss strategic issues.
updates on social networks, financial services company,
event blogs regularly film board meetings and
post the videos on the intranet
for employees to view. At Grant
Thornton there is live blogging of
senior management meetings.
(continued)
344 j o ã o b a p t i s ta e t a l .

Social media features Examples: strategic use Effects on strategic activity

Employee listening program HSBC, Virgin Media HSBC has Employees’ concerns and
Community groups, online a structured Employee Listening issues are listened to and
portal for sharing feedback, program for employees to talk recorded, acting as a data input
custom-built forms for about anything, these sessions are into strategic decision-making.
input of data, voting facilitated by managers. Managers
systems then use a custom portal to record
issues raised which is then analyzed
to capture ideas and suggestions to
improve the business.
Ideation programs, managed Avery Dennison, HCT Specific initiatives which ask
input and consultation on Technologies, IBM, Grant for input into a strategic level
specific initiatives Thornton, Red Hat, Luxottica campaign or objective such
Innovation Jam, ideation Sano3 Aventis, ATOS, BNP as a values program. Gradual
platforms, Wikis, voting Paribas, Virgin Media formation of incentives and
systems, community Within Sano3 Pasteur, Yammer measurement to recognize
groups, discussion forum, was used as a community site for contributions from employee
social network updates, its “Women in Sano3 Pasteur” and management. Structured
microblogging and instant (WiSP) network. The network approaches to facilitate
messaging helps to promote gender balance innovation. Recognition of
in a company where women issue-led communities leading
were originally only 20% of to changes within company.
the workforce. Pressure from
the group helped to change
company policy and also meant
the company won the Apec
(French executive employment
association) Gender Parity prize.
Open HR-related processes HCL Technologies, Xchanging Peer to peer recognition on
including peer recognition At HCL Technologies the employees and managers
Badges and recognition, appraisal system is open so that can identify issues, influence
ratings, peer recognition management appraisal feedback behaviors and also guide
systems, gami3cation is visible to all. Employees strategy as feedback cascades
give feedback on managers. upwards.
This helps to establish an open
culture, which has resulted in
further structured approaches to
crowdsourcing strategy among
employees.
Analysis of employee sentiment HSBC, Nationwide Insurance, Analysis of employee
and social dynamics Philips sentiment and relative
Polls and surveys; Analysis Nationwide Insurance (USA) identification of trends to
of community groups; experimented with an app to inform and feed into strategy
Discussion groups; Social identify employee sentiment
networks on its Yammer social network,
which was then used to help
management make decisions.
At Philips KPIs show strategic
contribution of ESN to interaction
between different groups.
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 345

Our analysis revealed various ways in which particular social media features are being used
in strategizing. It also revealed that social media were used in combination or at times were
replacing traditional approaches to strategy development that had often been based previ-
ously on paper communication and face-to-face meetings. This analysis showed a wide range
of social media features being used within organizations such as blogging platforms, com-
menting, activity streaming, social networking, internal twitter, videocasting, online forums
and chats, wiki editing, voting systems, ideation and collaborative platforms. It showed that
these online services were increasingly used to engage employees in organizational activ-
ity and decision-making (Razmerita et al., 2014). In certain cases, social media were more
deeply embedded, and effectively replaced traditional forms of organizational participation,
and in this way social media became a significant influencing factor over the strategic outlook
of these organizations (Haefliger et al., 2011).
In these organizations, strategic activity was shifting from “analogue” processes based
on traditional tools, such as workshopping, stakeholder meetings, corporate events and
sharing documents (Whittington, 2006; Whittington et al., 2006), towards new “digi-
tal” forms of strategic engagement and participation based on social media (Stieger et al.,
2012). Figure 16.l captures this finding by showing the increasing influence of social media
over traditional approaches to managing strategy (Haefliger et al., 2011; Jarzabkowski and
Kaplan, 2014; Whittington, 2006; Whittington et al., 2011). The concentric circles repre-
sent this gradual integration and often replacing in the use of social media in strategic activity
in organizations. As per the examples shown in Table 16.1, the figure also highlights the way
in which social media shifts attention from an approach to strategizing focused on tools and
outcomes, towards an approach more based on strategy conversations, connectedness and
engagement.
These findings motivated us to analyze the effects of participation through social media on
organizational strategizing. In other words, to explore further this shift towards more partici-
pative forms of engagement and its potential to open up strategy content and modify strategy
practices in organizations. This led us to explore how social media created new dynamics of
interaction and placed pressure on organizations to manage emergent feedback from a much
greater number stakeholders and media (Aral et al., 2013; Hienerth et al., 2011) with regard
to strategic issues. In our study, we found different approaches to managing feedback. The
emergence of new capabilities to manage new forms of participation and openness seemed to
be a dominant theme across the case material.

Wiki
Blogs Acvity streams Documents
Policy meengs
Discussion Forums Innovaon jams
Ideaon Workshopping Town halls
Communies Rangs, Comments Corporate events
Instant messaging F2F consultaon
Online workspaces
Board meengs
Badges and points Vong systems Cascading
Video casts Catch up meengs

Digital strategy processes Influence over Analogue strategy process

Based on social media, founded on ongoing Based on traditional tools and centered on
participation and consultation Replacing outcomes and artifacts

Figure 16.1 Digital and analogue strategy processes: social media expansion into processes of strategizing
346 j o ã o b a p t i s ta e t a l .

Social Media and the Emergence of Reflexiveness

To understand this phenomenon it is essential to define and interpret the inherent character-
istics of social media. Social media is not a singular technology. Rather, it is a broad category
that includes various types of online services that add the ability for interactive and par-
ticipative communication within social settings that form organizations. They are inherently
contextual and become embedded in the practices and norms of these social groups. Social
media are therefore better described as an emergent ensemble of features that forms context
for social interactions (Spagnoletti et al., 2015), the shape of which is the result of the unique
interplay with the context of use of each organization (Baptista, 2009). Other types of ICTs
such as email are inherently more closed, transactional, and centered on individuals, whereas
the essence of social media is based on providing high visibility and open participation. At the
practical level, social media add features that enable for example the seamless sharing, com-
menting, responding, syndicating and interacting with content (text, voice and video) and
connecting with others, and follow and interacting with their activity streams (Kaplan and
Haenlein, 2010; Kietzmann et al., 2011) (see Table 16.1). Social media therefore provide a
malleable platform, which is inherently organic, free-flowing and built to support dynamic
and emergent feedback loops of communication within a social group.
Within organizations social media afford new types and patterns of communication and
interactions, and have the potential to impact on its structure, governance and organizing
principles (Leonardi et al., 2013; Treem and Leonardi, 2012; Vaast and Kaganer, 2013).
The dynamic feedback loops that emerge through wider participation in strategic activity
via social media can initially be in tension with extant formal structures and norms within
organizations. However, organizations learn to manage and harness feedback as a useful
resource. In so doing they become inherently more reflexive and able to move towards an
organizational environment where there is wider participation and engagement in the shape
of and direction of the strategy. Gorli et al. (2015, p. 3) suggest that the environment within
an organization is reflexive when it gives “managers and practitioners occasions to reflect on their
systems of action, so that their imagination, inventiveness and enterprise can take wing.” Social media
stimulates this reflexivity as a new capability in organizations. The embedding of social media
in the functioning of organizations means that feedback and participation is structurally part
of the organization. Denyer et al. (2011, p. 393) reflect on the long term effects of social
media adoption within organizations; they suggest that social media have the potential for
“reconfiguration and redesign of the whole socio-technical and managerial system” with the potential
to contribute for strategy practice to be inherently more reflexive (Wilson and Jarzabkowski,
2004, p. 15).
Reflexiveness—the ability to be reflexive—is a social concept that refers to the ability to
integrate analysis of ourselves in thinking and action. At the individual level it means self-
introspection and self-awareness but, in social settings, it involves interaction with others
in the context of established norms within a social group. Thus, within organizations this
capability requires feedback systems and refers to the ability of employees to apply practical
reflexivity (Cunliffe, 2002) to give them structural conditions to be authors of their own
workplace and play an active role in the daily “production, reproduction and transformation of their
work processes” (Gorli et al., 2015, p. 3). Accordingly, organizations with low reflexivity only
allow for low levels of agency in changing established social structure. In contrast, organiza-
tions with high reflexivity allow for high levels of agency and give individuals better ability to
shape norms and structures of their own environment—which is what Gorli et al. (2015) say
develops the ability for individual and collective authorship or in other words “make sense of,
and shape their organizational practices”. This then gives individuals an opportunity “to perceive
and pursue specific opportunities for influencing organizations and their contexts” which is a shift from
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 347

conventional approaches to strategy and organizing. It is this thread and link between social
media use and the structural conditions for participation in organizational strategizing that is
the focus of this study. We now review the research methods used to support this aim.

Research Approach and Methodology

To find evidence of social media use in organizational activity with strategic reach we started
with a wide review of industry reports by systematically collecting any source of case material
reported in the press as noted above. Our efforts were strengthened by one of the co-authors
who is immersed in the social media field and is well informed of its practices. Our aim
was to gain a rich insight into the possible practices across as many organizations as possible
of social media used in strategic activity. Therefore, to address this recent and emerging
phenomenon, our research adopted an exploratory design (Stebbins, 2001) combining two
research methods to help gain breadth and depth. The study began with an extensive search
and analysis of secondary data to build a broad understanding of how organizations use social
media in open strategy initiatives. The second round of data collection gathered primary data
and used semi-structured interviews. Informants were selected as they were responsible for,
and embedded in, the running of social media driven open initiatives. Informants were drawn
from seven organizations spanning different sectors.
In the first phase, the collection and analysis of secondary data focused on consultancy and
management reports, company press releases, the business press and corporate blogs—all
of which were deemed to be a rich source of data (Easterby-Smith et al., 2012) and give
good coverage of organization’s social media-led initiatives. Our initial search revealed data
on 50 cases of organizations using social media in support of strategic initiatives. Following
initial coding of these data, we identified 35 cases across 29 organizations which met the
twofold criteria of social media use in our context: 1) being in-use (cases were rejected if
they were using “primitive” technologies (Whittington et al., 2011)), and 2) were serving as
the driver for open strategy (i.e. social media were aimed at increasing inclusion and trans-
parency). These 35 cases were coded further to identify the social media tools and features
employed, the intended effect on strategizing, the nature of emergent capabilities and the
tensions encountered. This phase of the study provided the basis for our analysis of features of
social media used to drive open strategy and enabled the synthesis of tensions between estab-
lished ways of working user expectations and the configuration of openness achieved. These
were written-up as vignettes to provide “systematically elaborated descriptions of concrete
situations” (Schoenberg and Ravdal, 2000) which enabled us to collate and contrast different
approaches to open strategy. The aim was to capture existing practices across the industry
from secondary data using short vignettes (Friesl and Silberzahn, 2012) and then use this to
conduct extended interviews with a smaller group of organizations for richer and deeper
understanding of social media use in this context.
The second phase of data collection drew on interviews as a method to access rich, expe-
riential accounts of social media technologies in-use and open strategy initiatives. Our aim
was to gain first-hand, experiential accounts of how social media are deployed in support of
open strategizing. We conducted extended, semi-structured interviews with ten respond-
ents from seven different organizations (around 30 hours of audio recording were transcribed
verbatim). The seven organizations were selected from the pool of cases gathered in the first
phase of the empirical work. The transcripts were analyzed first independently and then
jointly by the authors to capture the themes and experiences shared by our respondents. The
themes were used as first order codes, which were subsequently used to recode interview
data in order to capture quotations and evidence of how social media is being used in open
348 j o ã o b a p t i s ta e t a l .

strategy contexts. Table 16.2 summarizes the seven organizations studied and explains the
selection criteria for each. Some of these organizations are also listed and featured in our pre-
liminary findings in Table 16.1. However, in Table 16.2, we analyze new field work based
on interviews, going beyond the public material covered earlier that led us to consider these
organizations in greater depth.

Table 16.2 Details of semi-structured interviews, firm characteristics, and selection criteria

Organization Characteristics Salient insights of social media Interviewee

influence on strategic activity
Xchanging 9000 employees in Known to have recently Global Head
12 global locations, implemented social media of Internal
Technology services with significant impact on Communications
the practices and culture of
the organization
Virgin Media 14,000 employees, Reported as a case study for Director of
UK-based having an advanced online Technical
Telecommunications community-based customer Services, Head of
service eCustomer Care
HSBC 265,000 employees, Widely reported shift towards Global Head of
Global with UK HQ, giving employees new ways Insight, Culture
Financial services to voice concerns and open and Group CEO
up to senior management communications
Grant Thornton 5000 employees, Known case of a new CEO Senior Manager
UK-based Accountancy. active on social media for National
Partnership moving to internally, with an open Communications
shared ownership style of communication.
Moving from partnership to
shared ownership
IBM Studio Several hubs in large Set up to be the “agile” Team Leader,
cities, operates as arm of larger IBM to allow Consultant, Senior
subsidiary of IBM, employees to execute Manager
Global IT and consulting projects differently
services company
Atos 93,000 employees, Very present in the press Group Chief
Global with headquarters as a case of banning email Change Officer
in France, IT services internally. Very ambitious in
social media
Philips 105,000, Global Known to have advanced Digital
with headquarters in metrics to capture social Communications
Netherlands, Electronics media collaboration and Manager
exchanges globally

The interviews revealed how social media are used, and how gradually they contribute
to substantively opening approaches to strategic activity in each case. The experience of
organizational actors tells us how particular tensions were played-out, what capabilities had
developed, and whether the organization concerned had adapted its governance stance in
response to, or in concert with, open strategy initiatives.
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 349

This dual method approach enabled us to gain insight into the variety of ways social
media are used in open strategy as well as providing a window into the ways such ICT
is shaping and challenging management practices. Our aim was to span meso-level pat-
terns of ICT use in firms (cases drawn from secondary data) as well as granular exam-
ples anchored in strategic praxis (interviews). This approach enabled us to give situated
accounts of organizational practices positioned in a broader context of social media usage.
We investigated multiple cases, using complementary methods of data collection, seek-
ing to identify common features of strategizing and strategic praxis supported by social
media. The approach leads to the identification of common understandings, teleologies
and rules driving the adoption of social media, each of which contributes to constella-
tions of practices and material arrangements of open strategy (Schatzki, 2002; Seidl and
Whittington, 2014).

Findings and Analysis: Becoming Structurally Open

We now present and discuss our findings. We first review key initiatives related to social
media use with impact on strategic practice. We analyze how this stimulated the emergence
of feedback loops, and their gradual embedding in significant aspects of organizations. We
pay particular attention to the emergence of new ways of engaging employees in shaping the
functioning of the environment that they belong to, which leads to tensions between new
forms of participation and established structures and norms in the organization. Our findings
suggest that organizations develop new capabilities in response to these tensions. We concep-
tualize these tensions and related capabilities and reflect on how they ultimately move stra-
tegic processes and thinking to become more distributed: seen as something shared, jointly
achieved and enacted within organizations—a characteristic of organizations that have devel-
oped reflexiveness as a new capability.

Emergent Feedback Loops

The growing adoption of social media within the organizations studied created new and often
unexpected forms of interaction and feedback. These new forms of managed and unmoder-
ated communication underpinned changes across all organizations.
For example, the CEO and CFO or Xchanging held regular online chats with the employ-
ees. The questions posed by employees were unmoderated and responded to “on the spot” by
them. This feedback feature was associated with a new culture of interaction between senior
leaders and employees, and both the content and interaction were gradually more deeply
embedded in the culture and processes of Xchanging as mentioned by the Global Head of
Internal Communications:

We had some live chats which we’d never been able to do before, so it was really interest-
ing. We’d get the CEO and the CFO doing a live chat, so people could literally pile in and
ask them questions. They were very open questions that they were expected to respond to
on the spot, so a completely different culture, and really showing people that the C suite
are accessible.

Feedback was also becoming part of the way of working among employees through the adop-
tion of social networking, instant messaging and activity streaming. For example, the Digital
Communications Manager at Philips highlighted how social media stimulated feedback and
connected employees:
350 j o ã o b a p t i s ta e t a l .

It’s totally synchronized so every follower of me will see my intranet article. All my fol-
lowers will be notified that I’ve been interactive with this article. This is really interesting
because normally I would never go to the IT intranet but now I follow people from IT and
they interact with IT intranet articles and then I go to the IT intranet as well to read those
articles because they are of interest to me.

Social media channels delivered wider and deeper use of feedback within the organizations
studied and were a central theme in our analysis. In some organizations feedback from social
media channels developed more naturally within the culture of the organizations, such as in
the case of Philips where the culture was perceived to be open and relaxed. While in other
organizations we noticed the need to follow a more formal approach to managing new feed-
back from social media. For example, HSBC created a structured program, called Exchange
to stimulate feedback and engagement with employees and more specifically to “put employees
in a position where they have the freedom and the trust to talk about anything they want to talk about.”
Feedback from employees under this program was initially pushed through the formal struc-
tures of the bank to ensure it was listened to by senior managers. However, expectations
about using feedback became quickly accepted, as captured by the Global Head of Insight,
Culture and Group CEO communications at HSBC:

In the early days I had to be really prescriptive and very, very strict actually with lead-
ers. Because I think they had forgotten the art of listening and they’d forgotten the art of
listening with intent.

A more complex form of feedback was anonymous posting. Philips’ social media channel
called “Office World” allowed totally anonymous feedback. This feedback feature comple-
mented other forms of social media feedback, but allowed employees to raise issues they
otherwise would not without the safety of anonymous posting. The Digital Communication
Manager at Philips described the use of this service:

everybody with a Philips email address can sign up for employee feedback anonymously,
where your identity is protected … people share their feedback about certain things …
you’re free to say what you really think.

The above highlights the emergence of new forms of social media feedback and novel forms
of interaction, which were associated with new forms of participation increasingly structur-
ally embedded in formal structures of organizations. Next we explore emergence of inherent
tensions arising along the new emergent feedback loops.

Tensions from Integrating Open Feedback in Extant Structures and Norms

As identified previously, the adoption of social media can bring unprecedented levels of feed-
back and dialogue to organizational life. It also sets new expectations of participation and
engagement in increasingly important and strategic aspects of the organization. Tensions
emerge when the structures of organizations are then in opposition to these expectations of
participation. We conceptualize four types of tensions experienced by organizations as they
become more transparent and inclusive in their approach to strategizing (Whittington et al.,
2011) using social media.
Tension 1 is characterized by frustration when organizations adopt social media but limit
its reach (inclusiveness) and visibility of content (transparency). User frustration ensues when
they start to engage with social media and feedback features but realize that their contribu-
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 351

tions are moderated and/or restricted in terms of visibility. Imbalance and dissatisfaction
emerge with the exclusion of certain groups or where the process and ability for employ-
ees to contribute is too rigidly controlled. This leads to inconsistencies between established
norms and new expectations of open participation, as captured by the Global Head of Internal
Communications at Xchanging:

You know, you can’t give people a voice and then tell them “well, actually, you can have
a voice but only if you say what we want you to say”. If you’re going to give them a voice,
then you have to listen. I think we’ve given them the voice and now we’re learning to
listen, but actively listen, and that’s the difference.

She further reflected on the more structural implications of this tension. Employees were
happy to engage with organizational discourse but expected in return their voice and contribu-
tion to be acknowledged and purposefully considered. This is illustrated in the following quote:

As people get braver and start to ask questions of the senior leaders around their strategy,
and they’re being held accountable to it now, so people are saying, you know, “You said
you’d deliver there. Where are we and what have you delivered and why haven’t we deliv-
ered that?” The questions are really up front.

Typically, organizations react to this by taking strides towards increasing either inclusiveness
and/or transparency. However, although this signifies that the effects of tension 1 are allevi-
ated, it can produce different tensions.
Tension 2 is characterized by greater inclusiveness but still low transparency of strategy
on social media. Typically, this means that greater inclusiveness provides conditions for all
employees to contribute and participate in organizational discourse through social media
tools. However, frustration emerges from this situation when management fails to allow
the expression of conflicting views or are seen to not be engaging with employee views.
Dissatisfaction emerges from limited ability to engage with strategy content and have mean-
ingful conversations despite the wider access. We noticed this tension in Virgin Media for
example with a significant emphasis on building a large and inclusive online community but
where the focus was on specific topics and operational discussions.
Alternatively, organizations may focus on adding transparency via social media tools,
rather than on widening reach. This is characterized as Tension 3 where content and informa-
tion is open and visible but restricted to some closed groups. This inevitably causes division
and instability. For example, knowledge workers may have more access to digital channels
than their colleagues in factory or retail outlets. This type of tension was visible for example
at IBM between the agile subunit based at the IBM Studio and the rest of IBM, the following
quote by a Consultant illustrates how these tensions were felt by the IBM Studio team.

They’re trying to create this fast moving environment … but based still around this
very slow moving, large organization. So there’s this little hub that’s working to produce
quickly, but still … this huge process-orientated, monolithic organization behind it, that
kind of fights with that ideal I think.

Organizations naturally respond to these tensions by rebalancing their internal structures to

accommodate employee feedback. They may then reach a state where they have enabled wide
reach (inclusiveness) and richness of content (transparency) so that all employees can openly
interact with each other and content. However, our analysis suggests that this state is perhaps
352 j o ã o b a p t i s ta e t a l .

the most precarious of all because the expectations of participation are the highest but the
organization has not yet developed appropriate structural conditions to incorporate the feed-
back created and use it meaningfully and strategically. We characterize this stage as tension 4.
Tension 4 therefore is also associated with tensions between the open nature of social
media and established more closed and hierarchical structures. For example, where employ-
ees contribute openly to strategic discourse, but senior executives still retain discretion and
control of what and how employees contribute to discourse around strategy content. Thus,
a disconnect may arise between open feedback and the structures supporting the strategic
development of the organization. Tension 4 is fostered by the existence of open communica-
tion, but without the associated redistribution of power and reward structures. Whittington
et al. (2011, p. 535) allude to this when they say that:

Inclusion and transparency do not extend to the transfer of decision rights with regard to
strategy: openness refers to the sharing of views, information and knowledge, not a democ-
racy of actual decision making.

Tension 4 is a corollary of this when organizations adopt social media to open strategizing but do
not become more participative structurally in their strategy processes. The Director of Technical
Services at Virgin Media reflected on how far they had gone to be both inclusive and transparent
but were still under serious tensions to adjust more structurally to the new environment:

We’re still on that journey, that shift to really truly transform. It’s almost a leap of faith
to really move from [being] reactive, to be proactive … it’s about relationships. It’s quite
a long lead time to get into that truly transformed space.

Figure 16.2 illustrates these tensions using a two dimensional diagram where each axis repre-
sents expansion of either inclusiveness or transparency. The four resulting quadrants capture
the types of tensions described above.

Inclusiveness
Everyone connected but Everyone can participate and
More network
capabilities, easy to feedback is moderated contributions are unmoderated
connect with others,
search and TENSION 2 TENSION 4
findability, activity Features allow feedback and
stream and
connecng but everything is Feedback is fully available but
conversations lack of internal structures to
moderated and controlled
internalize and use it strategically

Limited ability to connect Limited access to feedback

and feedback is moderated features but comments
unmoderated
TENSION 1 TENSION 3

Users start to engage but Users keen to share and

wary of moderaon and comment but feedback features
limited deployment only available in pockets

Unmoderated, anyone can comment,

easy to feedback on posts, ratings, Transparency
more genuine content available

Figure 16.2 Tensions arising from increasing inclusiveness and transparency through social media
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 353

The effect of these tensions in the long-run was that organizations adjusted their internal
structures to accommodate the new forms of interaction and feedback. Various adjustments
were visible at various levels in the organizations studied but they had in common increased
appreciation of the participative nature of social media. We now conceptualize these adjust-
ments as the development of a new capability of reflexiveness.

Reflexiveness as a New Organizational Capability

Reflexiveness emerged as a new capability for managing the tensions described above. We
suggest that the development of reflexiveness enabled organizations to successfully integrate
emergent feedback from social media and harness advantages arising from engagement in
open strategy initiatives. We characterize three stages in the progression towards gaining this
new capability: 1) feedback accepted as valuable resource; 2) developing formalized struc-
tures to sustain open behaviors; and 3) strategic integration.
The first stage arises from structural adjustments in response to tension 1, specifically
to the initial emergence of feedback features in organizations that social media provide. The
main characteristic of this stage is the internal recognition that feedback from social media as
a new resource that has value, needs attention and requires management. This recognition of
feedback as useful for organizations was seen to develop gradually, for example the Global
Head of Internal Communications at Xchanging said that they:

had the platform for probably a year and a half, and I think we’ve grown more confident
and trusting in the platform.

Another characteristic of increased reflexiveness is the stronger signals to encourage and

stimulate open and unmoderated feedback from various areas of organizations. This type
of feedback through social media is inherently emergent and unprompted, so it is outside
the control of senior management. This often marks a departure from managed feedback
through employee surveys for example, and so it requires new approaches. At HSBC the
Exchange program was created to signal and create an environment for employees to provide
unrestricted feedback.
As social media provide organizations with greater understanding and new methods for
managing this type of feedback, new formalized structures emerge to monitor, measure and
report feedback to executives, as captured in this quote from HSBC:

“At one stage every business and every function head, including the head of communica-
tions for that area, got a report every quarter, and there was also a global HSBC one and
that is the one that gets presented at the Board. We are reviewing this process to allow
the full richness of the insights to be used rather than filtering all the insights to senior
management through a single report,” as reported by the Global Head of Insight, Culture
and Group CEO communications.

Stage one encompasses the initial phases of the organization becoming aware of the new
resource it has in terms of information and feedback, followed by structural adjustments
where organizational members are made aware of the value of social media and the need to
manage the new levels of feedback it provides.
Stage two in developing reflexiveness is a response to tensions 2 and 3 and is characterized
by the greater level of formality in managing and using feedback internally. Often this was
accompanied by formalized techniques to monitor the use of social media for sharing, collab-
orating and social networking for example. Some organizations then used this information as
354 j o ã o b a p t i s ta e t a l .

part of the reward structures for employees, so that they were directly incentivized to engage
with feedback features with strategic significance in their organizations. One example from
Philips was in identifying influential participants through advanced social network analysis as
described by the Digital Communications Manager who said that they:

Look at the influence, so how many group members and who are really influential, who
have the highest response rate, the most active members. This is a really popular tool for
the group admins.

Other organizations had also developed advanced systems to measure engagement with
­feedback features. At Atos for example the Group Chief Change Office referred to a
new and sophisticated system of stars that helped management to manage content and
contributions.

We have a robust automated tool that captures the number of readers, the number of reac-
tions, the number of posts, the number of people who subscribe and a few other parameters
… this gives you the number of stars. We believe that the value brought by this community
is reflected by these stars.

However, some organizations moved further to establish a link between these metrics and
the internal reward structures for employees. For example, at Philips they issued a regular
report that assessed progress towards volume and quality of employee feedback and interac-
tion, which was associated with internal bonus structures, the following quote.

A lot of those functions have in their objectives to increase adoption of the social platform.
if they meet their objectives they receive a bonus …

These reward structures also worked to reward employee contributions through a system
of badges which were seen as currency for influence. The Digital Communications Manager
described the significance of the badges in profile development at Philips.

Everybody can give it away. For example, if I go to my profile you will see my things. You
see how many I received. I received one brand badge, three eager to win. I also received
fifty-one great contributions and two very meaningful innovations. I have four inspire and
one operational excellence. One I deliver results and twelve take ownership and thirty-one
team up to excel. This says something about my personality of course.

However, there were organizations that demonstrated more advanced characteristics of

reflexiveness where feedback was fully incorporated into the norms and ways of working
in the organization, but also began to shape deeper aspects of the organization such as
trusting attitudes and behavior, leadership styles and culture. These are the character-
istics of stage three in the development of reflexiveness which emerge in response to ten-
sion 4. In these o­ rganizations feedback was not just integral to the normal functioning
but was starting to shape and influence management styles, governance structures and
strategy.
Linking feedback from social media with organizational strategy is a sign of a reflexive
organization where strategy is more than a statement from senior management, to be instead
seen to be a shared effort and co-created. This aspiration for the organization to develop the
ability to use feedback from social media is captured by the following quote by the Global
Head of Internal Communications at Xchanging.
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 355

hopefully slowly, bit by bit, we’ll get to a point where, you know, we’ll get people influenc-
ing the strategy to come. Right now they [employees] are just reacting to what they’re being
told, but as their confidence builds and as their leaders see that actually our employees
aren’t children and they do have some value to add, then it could influence things going
forward … they [leadership team] would say okay, these people [employees] are asking
questions for a good reason, and they have things I need to start thinking about a little bit
more when I’m setting strategies. How I’ll answer those, and if I can’t answer them, then
let’s think about it and consider all the other options and maybe ask people’s opinions.

An integral part of this process towards becoming more reflexive at strategic level is a shift
in leadership style and management approaches. Leaders that operate more consistently with
the participative nature of the environment developed recognition and notoriety and become
more influential, and ultimately rise in the organization. This shift to form management
approaches more consistent with the participative nature of a reflexive organization is cap-
tured by the following quote from HSBC stating how some leaders “got it” while others
struggled with this new approach:

There was another cohort of leaders who just found this effortless. It was almost like a
different breed of leader that had been quiet up until this point. Who would have thought
you are now somebody who has followers rather than workers because you listened to them?

Further, we noted that this shift in leadership was reinforced as part of the Exchange program
discussed previously, and other structural changes at HSBC. The following quote captures
this link between leadership and a wider movement towards a more reflexive environment
in the bank.

Antonio [CEO of HSBC Bank plc] runs a weekly column on a site called Connected. People
have no problem speaking and posting their comments on the site. That’s got nothing to
do with social media though and I think this is where people get things confused. That is
to do with Antonio. The one thing that he’s made crystal clear as part of his leadership is
that no one is ever going to be told to shut up. I think there has been something that has
subliminally happened through Exchange. Like I have heard people say, “I’m part of a
speak up culture, I’m going to voice this, and I’m not going to wait for Exchange”. That’s
exactly what should be happening, people should feel that they can knock on people’s doors
and say things.

Similar evidence of progression was evident at Grant Thornton where the rise of a new CEO,
Sacha Romanovitch, was linked to her growing profile and ability to engage and influence
through social media. The Senior Manager for National Communications at Grant Thornton
characterized her as “the very definition of a social CEO”. It is significant that as CEO she stated
“I don’t want closed leadership conversations happening via email. I want them happening out in the big
wide world”. This was consistent with her view of the management of the organization which
she said would like “the vast majority of the management of the firm to be done in an open forum”. All
this marks a trajectory towards gaining capabilities to appropriate and engage with feedback
at a strategic level.
In some organizations a deeper implication of this was the effect on governance. At Atos
the adoption of social media and feedback was far-reaching and the organization was there-
fore considering strategic implications of this. For them this had deep implications and repre-
sented a transformation as reflected by the Group Chief Change Officer.
356 j o ã o b a p t i s ta e t a l .

We are now at a step where we clearly see what the benefits will be when
we move into a new model of organization. Not new tools, not a new hierar-
chy function supporting this way of work. When we really create a more agile
organization, in which co-exists structurally a social organization and a classical
hierarchical organization, and we make all these flow effortlessly, seamlessly.
And of course now, we are speaking of a transformation, which starts with the
senior managers and into all the organization.

Other organizations, recognizing the complexity of this transformation, took a different

approach in reconciling the distinct nature of the two modes of working and organizing. For
example, IBM created a separate unit called “IBM Studio” to operate according to the more
“agile” and employee centered approach. By separating the Studio from the rest of the organi-
zation IBM expected to create an environment that gives:

individuals more free rein and autonomy on what they choose to work on, and how they’re
going to do it. The way that the team works, the tools that they use to operate on, and
then even things that they do is very much open to them.

The vision was “that the rest of IBM catches up with us and operates in a model closer to the way we’re
working” as stated by the Team Leader of IBM Studio. At the core of this new way of working
was a view of individuals as active participants of the environment where they operate. It is
significant that IBM created this as a separate entity because as stated “If you try to change the
ways of working and the culture to agile but at the same time keep on measuring and rewarding people,
and using exactly the same metrics you have previously, that will fail.”
The cross-organization analysis above highlights how the process of introducing social
tools stimulates employee participation and feedback, but also leads to tensions and capability
development, ultimately shifting deeper structures of organizations towards more participa-
tive environments where in some cases gives employees greater degree of influence over
organizational strategy.

Conceptualizing reflexiveness
Across the cases analyzed we saw that the use of social media created conditions for individu-
als to contribute and engage in meaningful and significant aspects of their organizations’ strat-
egies. Social media provided a platform for appropriating strategic content, but also to shape
that content by commenting and contributing to ongoing discourse in their organization. The
feedback systems embedded in social media created structural conditions for individuals to
become active participants of their own organizational settings. This is consistent with the
view that strategic action involves individuals thinking and acting reflexively and is enabled
by structural conditions in the organizational environment. A reflexive environment creates
equal opportunities to all constituents for participation and engaging in feedback. Our analy-
sis shows that the adoption of social media contributes to the creation of an environment and
contextual conditions for reflexive behavior, which over time evolves to become a property
of the organization as suggested by Gorli et al. (2015, p. 4):

Reflection thus becomes a collective ability to question the assumptions that underpin the
organizing process. Although individual reflection is not eliminated, the attention paid to
the organizational level stresses the impossibility of isolating reflection from the social and
organizational micro-contexts in which courses of action are produced and reproduced.
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 357

Although Gorli et al. (2015, p. 3) do not mention social media they indicate that these
same properties or affordances of becoming more reflexive and open ultimately con-
tribute to “staff in an organization to become authors of their own work settings.” As strategy
practice shifts from the realms of a privileged group to become recognized as a shared
resource, it builds a capability that “consists of a constant process of interrogation whereby
we reconstruct shared meanings with others” (Gorli et al., 2015, p. 5). Reflexiveness gives
agency to employees to become actively included and derive meaning from more transpar-
ent information.
Thus, reflexiveness contributes a third dimension to Whittington et al.’s model of open
strategizing as represented in Figure 16.3, thereby extending the open strategy literature.
This added dimension captures the dynamic nature of the process of opening up strategic
work within organizations.
This third dimension, as represented in Figure 16.3, injects the need for organizational
capabilities to an otherwise static typology. In practical terms it represents the capability
created by organizations to better manage feedback from individuals (as a result of a more
transparent and inclusive environment) and use it positively to collectively shape the strategic
direction of the organization. This is consistent with the view of strategy as a form of reflex-
ive behavior that draws on learned “institutionalised patterns and recipes for action” but “requires
reflexivity in order to select the appropriate move at the appropriate time” (Wilson and Jarzabkowski,
2004, p. 15). This situated and contextual view of strategy suggests that social media and
its feedback features give individuals the ability to “assume responsibility for, and constructively
contribute to the goals of the organizations to which they belong” (Gorli et al., 2015, p. 1), they call
this “practical reflexivity”. As seen in the analysis of the case material the embedding of social
media in the ways of working of the organization created conditions for the emergence of
feedback, and in some cases the active participation in significant aspects of the organizations.
In this respect their use creates the “reflexive” environment that Gorli et al. (2015) refers to
in their study.

Reflexiveness
Reflexiveness as the development of new capabilies for
managing tensions arising from new feedback loops and open
parcipaon
Inclusiveness
More network
Everyone connected but Everyone can participate and
capabilies, easy to
feedback is moderated contributions are unmoderated
connect with others,
search and TENSION 2 TENSION 4
findability, acvity Features allow feedback and Feedback is fully available but lack
stream and connecng but everything is of internal structures to internalize
conversaons moderated and controlled and use it strategically

Limited ability to
o connect and Limited access to feedback features
feedback is moderated but comments unmoderated
TENSION 1 TENSION 3
Users start to engage but Users keen to share and comment
wary of moderaon and but feedback features only
limited deployment available in pockets

Transparency
Unmoderated, anyone can comment, easy to feedback
on posts, rangs, more genuine content available

Figure 16.3 Tensions between open social media participation and extant structures as drivers for
“reflexiveness” capabilities
358 j o ã o b a p t i s ta e t a l .

We find that while social media create inclusiveness (by involving more individuals) and
transparency (wider availability of information) through the embedding of social media fea-
tures in organizations, reflexiveness is the ability to manage and appropriate this feedback
structurally to shape the direction of the organization. We therefore suggest that increasing
inclusiveness and transparency in strategy (Whittington et al., 2011) through social media in
organizations stimulates the corresponding development of reflexiveness. These relationships
are illustrated in Figure 16.3, where open strategy is a progression across the three dimen-
sional axis.
Next, we take a more dynamic view of this process, to conceptualize the progression from
tensions towards the development of new organizational capabilities, ultimately resulting in
new but more consistent structural arrangements in the organizations.

Dynamic View of Tensions and Capabilities Development

We characterized the development of reflexiveness in three stages, as a gradual process of
capability development as organizations adjust structurally to better manage emergent feed-
back from social media platforms. We noted how the normative structures shifted towards
open communication and emergent feedback, gradually also shifting practices and behaviors.
Figure 16.4 captures this process. It provides a dynamic and longitudinal representation of
the process by which social media creates conditions to trigger tensions that encourage the
development of new capabilities to better manage and integrate emergent feedback in the
functioning of organizations. At the core of this process are the tensions characterized earlier
in Figure 16.2. As discussed, these tensions trigger adjustments to the organization, render-
ing it more capable of managing and integrating emergent feedback within its work envi-
ronment. Figure 16.4 shows two juxtaposing layers. The first layer shows the progression
with the tensions identified. The second layer represents the new capabilities developed in
response to the tensions.
This longitudinal conceptualization of the dynamics that push organizations towards more
open practices in strategizing, and ultimately their organizing was for example seen at Atos,
a process that was referred to as a “third revolution”. But there were also instances of these
deeper effects at the IBM Studio which operated under a distinct mandate from the rest of
IBM to create conditions for a more collective and agile governance model. This mandate

Feedback recognized and signaled as Feedback is now managed but Feedback is more integrated in
Reflexiveness useful for organizaon sll in pockets internal structures and norms

Extant Management Processes to manage feedback Structures of the organization too

Lack of processes for managing
are specific for events or services rigid and still adjusting to integrate
Structures & Norms feedback. Existing structures
and not yet fully integrated wider feedback
impose too much moderation.

Inconsistencies TENSION 1 TENSION 2 & 3 TENSION 4

Users start to engage but awry Users keen to participate but Feedback is fully available but lack
of moderation and limited feedback features still in of internal structures to
Tensions internalize and use it strategically
deployment of feedback pockets or moderated at times

Broader access to feedback Feedback features fully available

Commenting and connecting is
Social Media features features and reduced moderation and employees expect to
enabled in pockets but limited
for parcipaon and central control contribute and participate
availability

Stage 1 Stage 2 Stage 3

Reflexiveness as a new • Further expansion of feedback • New policy and formal structures to • Feedback is embedded in employee
capability for managing features and/or reduction in manage feedback emerge activities
moderation of content and posts • Feedback is monitored and used in • Structure of organization start to
tensions arising from new
• Formal and informal signals to key decisions adapt to ongoing feedback
feedback loops and open • Career advancement reflects effective
encourage feedback • Feedback and employee
parcipaon • Managed processes start to emerge use of feedback and participation
participation is formally rewarded

Figure 16.4 Dynamic and multi-level representation of the dynamic effects of tensions from social
media use, and the emergence of reflexiveness as a new organizational capability
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 359

gave employees a higher degree of independence and ownership of their work, which made
it much closer to a “startup than other monolithic and sometime faceless organizations”. This meant
that individuals performed their work with limited supervision but still as part of an organized
structure of ongoing peer evaluation, reinforcing collectively agreed contributions, while at
the same time abandoning what is perceived by the group to be inferior or low priority. Also,
at Grant Thornton deeper changes to reward structures and working arrangements were
noticed, reflecting a move towards a governance model that is more centered on individuals
as owners of their work, and better able to shape the direction of their organizations. Our
study indicates that as organizations gain new capabilities to manage and integrate emergent
feedback in their structures they become more reflexive, and consequently create conditions
for organizational authorship, or in the words of Gorli et al. (2015, p. 5) they:

encourage social actors to see themselves as agents and as authors of the organizations and
institutions in which they live. In other words, practical reflexivity is closely linked to the
pursuit, enhancement and development of organizational authorship.

It is the subtle but gradual shift in agency towards individuals as “stewards” of their own
paths that cumulatively shift the structures of the organization towards what Hernandez
(2012, p. 175) describes as “stewardship”. She argues that individuals can “collectively create
feedback loop processes to systematically shift organizational governance from agency towards steward-
ship” (p. 172).
While Hernandez does not empirically explore these feedback loop processes, our study
offers practical examples of how participative social media may offer such dynamics in the
workplace, ultimately leading to what Hernandez suggests is a culture and normative envi-
ronment where “an affective sense of connection with others prompts individuals to feel compelled to
positively influence the collective” (p. 175). Moving towards a stewardship model reflects this
progression towards giving individuals greater ability to participate in organizational life so
that they increasingly feel owners of “strategy”, as more broadly defined previously. It is this
ability to shape the environment that employees operate in that we refer to as stewardship-
based organizing, as conceptualized by Hernandez (2012).
These deeper changes represent what Hernandez (2012, p. 172) remark as “feedback loop
processes systematically shift organizational governance from agency towards stewardship” and rep-
resents the aggregated effect of new capability development. This reflects the progression
from organizing strategic activity around processes that optimize employee activity around
predetermined goals towards an approach that is more centered on individuals as active par-
ticipants of their own work environments.

Concluding Remarks

This study has examined the role of social media as organizations embrace open strategy. We
contend that social media have the potential to increase inclusiveness and transparency as two
essential properties of open strategizing. However, these can initially create tensions and
inconsistencies and so are not sufficient in themselves for openness. Our study suggests that
organizations (including their leadership) respond to these tensions and learn to manage and
integrate feedback from social media in their internal structures. We characterize this as a
new capability of reflexiveness required for organizations to become more open.
The key engine for the development of reflexiveness arise from the tensions found between
latent ways of undertaking strategy and the new levels of inclusive, transparent and participa-
tive work enabled by social media. We argue that the use of social media within organizations
360 j o ã o b a p t i s ta e t a l .

generates emergent feedback loops that create new and higher expectations and norms of
participation, ultimately moving organizations to become more centered on individuals’ abil-
ities to contribute to organizational life. We suggest that adopting participative practices and
becoming more reflexive create conditions for organizational authorship, and a shift towards
stewardship governance (Hernandez, 2012) where strategy is increasingly jointly owned by
organizational actors who feel responsible for the collective, rather than disengaged employ-
ees operating by following norms and procedures. We suggest that the adoption of social
media and the embedding of participative practices in the structure of organizations create
conditions for strategy to become shared and collectively owned; one which positions many
more organizational actors as strategy practitioners.
The interlinked nature of these areas reemphasizes the importance of forging a joint
Information Systems‒Strategy agenda for research and practice (Whittington, 2014). As
discussed, there is much potential for social media to revolutionize strategizing as an open
activity where stakeholders participate or take ownership of strategy content. Our study,
thus, contributes to the literature on open strategy by advancing our understanding of emer-
gent new arrangements in who is involved in strategy (practitioners) using what tools (arte-
facts) and how it is performed (praxis) ultimately detecting the emergence of new profes-
sional practices in this field (Whittington, 2006; Whittington et al., 2011, 2006). We also
contribute to the Information Systems Strategy literature by reflecting on the role of and
impact of ICTs such as social media in organizational strategizing (e.g., Chen et al., 2010;
Galliers, 2011; Marabelli and Galliers, 2016), and their role in the development of new
organizational capabilities (e.g., Peppard and Ward, 2004) but in particular to the grow-
ing literature that considers social media use in the workplace (e.g., Huang et al., 2013;
Leonardi et al., 2013). We also contend that this study informs practice: the more we know
of the tensions and capabilities arising from social media and participative platforms in the
workplace, the better placed senior management will be in leveraging these new phenomena.
The study raises several important interrelated challenges for future research, including a
reinvigoration of the role played by employees in defining strategy content. Further, and as
we have argued, the features of social media, coupled with reflexive agents and modified gov-
ernance structures, render both the practice and content of strategy contested and negotia-
ble. A further strand of investigation could thus focus on the interrelationship between social
media and governance—an important, yet underexplored, theme within open strategy. It
is clear from our findings that participation played an important role in the emergence of
feedback loops and engaging employees. However, an unresolved feature of our study con-
cerns precisely how employees should participate in strategy using social media; participa-
tion from rendering strategy inclusive and visible may be perfunctory despite organizational
actors appearing to take ownership of decision-making.

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Questions for Discussion

1 How does social media alter the communication and strategizing in organizations?
2 Is the process of strategizing shifting to inclusive and transparent? What is the role
of social media in such a shift? How does such shift affect power redistribution in
organizations?
3 Using the Power Matrix (chapter 10), analyze what is the role of actors (strategists and
social media users) and IS (social media) and how do these affect strategizing?
4 Could resistance be observed in the shift from analogue strategy process to a digital
strategy process? Where and how would such resistance get observed?
 o p e n i n g s t r at e g y t h r o u g h s o c i a l m e d i a 363

5 How would the tensions between feedback from social media and formal structures
and norms within organizations get resolved? How can organizations develop a reflex-
ive organizational capability? Who would manage the development of such capability
and help resolve any emerging tensions?
6 Why the use of social media does not guarantee achieving transparency and inclusivity
in organizations?

Further Reading
Huang, J., Baptista, J., Galliers, R.D. (2013). Reconceptualizing rhetorical practices in organizations:
The impact of social media on internal communications. Information and Management, 50, 112–124.
Tavakoli, A., Schlagwein, D., Schoder, D. (2017). Open strategy: Literature review, re-analysis of cases
and conceptualisation as a practice. The Journal of Strategic Information Systems, 26 (3), 163–184.
Chapter 17

Dorothy E. Leidner, Ester Gonzalez,

and Hope Koch

AN AFFORDANCE PERSPECTIVE OF
ENTERPRISE SOCIAL MEDIA AND
ORGANIZATIONAL SOCIALIZATION

T he ch a l l en g e o f s o c i al iz i n g newcomers has become an ever more

pressing issue for organizations as the nature of work has increasingly shifted from
long-term employment within a single employer marked by slow but steady upward pro-
gression to more short-term positions and lateral movements across a variety of different
organizations (Wright, 2013). With organizational affiliation waning, occupational affilia-
tion has been on the rise. Whereas in the 1970s, workers were more likely to change their
occupation than their employer, by the early 1990s, changing employers had become more
common than changing occupations (Rose, 1995). Information technology (henceforth, IT)
workers are among those who demonstrate greater occupational than organizational loyalty
(O’Mahony and Bechky, 2006). The problem of employee flight is substantial: the cost of
losing an employee is up to three times the employee’s salary (Farren, 2007; Insala, 2010).
According to an IT staffing company, the direct and indirect costs incurred by organizations
in replacing a single employee who makes $60,000 per year reach approximately $150,000
(Del Monte, 2018). The lack of organizational loyalty is important not just in terms of the
costs an organization faces in hiring and training replacements, but also in the productivity
losses incurred when well-trained IT workers leave a project before completion and the team
must either redistribute the work or integrate a new member. So significant is the problem
of IT talent and retention, that the issue has been rated by CIOs as the 2nd or 3rd most
important issue facing IT leaders for five consecutive years in the SIM survey on IT issues and
Trends (Kappelman et al., 2018).
One way that organizations may increase employee loyalty to the organization is through
socialization programs (Reichers, 1987). Facing large numbers of new IT workers enter-
ing the workforce (US Bureau of Statistics, 2015) as well as the challenge of integrating
experienced workers, IT departments are showing increased interest in socialization
­
 organizational socialization and social media 365

p­ rograms designed not just to train new employees in task-related skills, but also to instill a
sense of loyalty to the organization in hopes of increasing the organizational affiliation of its
IT workforce. Given the costs associated with hiring and training new IT employees as well
as the loss in productivity incurred when valuable employees leave, the issue of effectively
socializing new IT employees is of strategic importance to IT departments. Socialization is
the process whereby newly hired employees learn the beliefs, values, orientations, behav-
iors, social knowledge, and work place skills necessary to successfully fulfill their new organi-
zational roles and responsibilities (Fisher, 1986; Louis, 1980; Schein, 1968; Van Maanen and
Schein, 1979). Socialization leads to positive outcomes such as better job performance, less
stress, higher job satisfaction, and reduction in intent to leave (Ashford and Black, 1996;
Fisher, 1985; Kammeyer-Mueller and Wanberg, 2003). While the benefits of socialization
are clear, the means of achieving effective socialization are complex with many tools and
techniques available. Historically, socialization programs have relied upon formal onsite ori-
entation sessions, offsite training sessions, buddy systems, mentoring programs, and business
trips with co-workers (Louis et al., 1983).
Recently, organizations have begun implementing enterprise social media (ESM) as
an informal organizational socialization tool. Social media allows users to create, edit and
exchange web-based content (Kaplan and Haenlein, 2010), thereby enabling organizations
and employees to foster relationships, share knowledge and collaborate (Boyd and Ellison,
2007). ESM have a role to play in organizational innovation, operations, and human rela-
tions (Kane, 2015). Considering the potential role of ESM in an organization’s IS strategy
is important for organizations that wish to realize business value from ESM (Kane, 2015).
Academic and practitioner research has encouraged IS managers to develop a social media
strategy based on the capabilities of social media platforms to manage interpersonal networks
and share content. These capabilities are well-suited for socialization programs (Kane, 2015;
Kane et al., 2014). Organizations have begun using ESM systems to help new employees
learn about their jobs, their colleagues, and the organization (Bennett et al., 2010). ESM
enables fast and extensive knowledge sharing and facilitates open conversations (Thomas and
Silverstone, 2015) both of which can foster new hire socialization. Moreover, ESM provide
various opportunities such as self-marketing and relationship building that extend beyond
the embedded functions and features of the technology and that may hold important rami-
fications for new hire socialization and, in essence, make the socialization process an “open”
one. Much as ESM has been shown to enable open strategizing with a resultant sense of
community and stronger organizational commitment (Hutter et al., 2017), ESM may enable
open socialization wherein active participation may result in a strong sense of community
and commitment.
However, the multivocality enabled through ESM in which more voices are heard and
more messages are generated (Huang et al., 2013, 2015) may shift the control of organi-
zational communication away from central, largely senior, sources to employees who have
access to, and choose to engage with, the ESM. While such participation changes the rhetori-
cal practice of organizations, in a sense democratizing the practice (Huang et al., 2013), it
may also create conflicts and tensions (Huang et al., 2015). For example, in the context of
open strategy, ESM has been shown to create tensions between the participatory practices
of the technology and the existing managerial practices (Baptista et al., 2017). Such ten-
sions might also be created in the application of ESM to organizational socialization practices.
Formal socialization programs have been carefully scripted by senior management to convey
a desired organizational message, culture, and mission. The introduction of ESM as informal
socialization tools has the potential to threaten this careful scripting and disrupt the cultural
norms of the organization. ESM thus have both the potential to foster a greater sense of
366 dorothy e. leidner et al.

community and organizational commitment, but also the potential to create tensions. Given
the strategic importance of socialization in the current organizational context of decreas-
ing organizational commitment marked by frequent job changes, ESM for socialization are
strategically important systems and must be mindfully implemented in order to produce
effective results.
Despite the strategic importance of ESM systems in organizations (Gartner Inc, 2014;
Kane, 2015) and the strategic importance of attracting, training and retaining a skilled
IT workforce (Kappelman et al., 2018), few studies to date have investigated the use of
ESM for employee socialization (VanOsch and Coursaris, 2014). In order to contribute to
our understanding of how ESM affects employee socialization, this paper invokes a case
study of an organization that had recently incorporated ESM into its IT new hire program.
Drawing upon technology affordance theory as our lens, we address the following research
question: how do ESM affordances influence the socialization of IT new hires? This paper
is organized as follows. We first provide the theoretical foundation. We then present the
method, a case description and the analysis followed by the implications, limitations, and
conclusion.

Theoretical Foundation

Our investigation draws from organizational socialization research (Kammeyer-Mueller and

Wanberg, 2003; Van Maanen and Schein, 1979) and from the technology affordance per-
spective of information systems (Majchrzak et al., 2013). The research on organizational
socialization informs our understanding of the socialization process. We then apply the tech-
nology affordance perspective as the theoretical foundation for understanding how and why
ESM may alter socialization processes and outcomes.

Organizational Socialization
Organizational socialization is a learning process wherein newly hired employees acquire the
requisite knowledge, skills, values, and norms to enable them to perform their roles in their
organization (Bauer and Erdogan, 2011; Berger and Luckmann, 1967; Fisher, 1986; Van
Maanen and Schein, 1979). Four elements comprise the socialization process: task mastery
(learning how to perform one’s job), role clarification (gaining an understanding of one’s
job), acculturation (adjusting to the organization’s culture), and social integration (develop-
ing relationships with others in the organization, especially peers and superiors) (Morrison,
1993). Effective socialization practices are those that enable newly hired individuals (hence-
forth, new hires) to achieve proximal outcomes of self-efficacy, role clarity, knowledge of
organizational culture, and a sense of belongingness (Bauer and Erdogan, 2011; Kammeyer-
Mueller and Wanberg, 2003).
The socialization process can take place formally via institutionalized socialization and
training programs as well as informally through interactions among employees and observa-
tion. Indeed, how one is socialized is as important as the content of socialization (Ashforth
et al., 2007) and the initial socialization experience has implications for perceptions, behav-
iors and attitudes that remain throughout an individual’s employment in the organization
(Fisher, 1986; Wesson and Gogus, 2005). As the importance of informal socialization prac-
tices became recognized and as the organizations into which individuals were being social-
ized became increasingly characterized by distributed teams and virtual communities, the
potential importance of information technology in socialization processes began to receive
research attention.
 organizational socialization and social media 367

IT has been shown to play an important role in not only the initial socialization into
a group, but also in the ongoing socialization that is particularly important in distributed
and/or virtual settings (Oshri et al., 2007). According to Oshri et al. (2007), difficul-
ties in sharing norms, attitudes, and behaviors can be alleviated by the use of electronic
communication and collaboration tools before, during and after face-to-face meetings. For
example, video-conferences can be used to introduce new team members to each other,
which may serve as an important socialization tool prior to a face-to-face meeting of the
team whereas email may be used to clarify key points both before and after face-to-face
encounters. Some research indicates that the formation of virtual communities can assist in
the socialization of employees. In this case, the role of IT is to enable communication and
knowledge sharing which facilitate learning, identity formation, and relationship develop-
ment (Allee, 2000; Brown and Duguid, 2000; Chang et al., 2009; Wasko and Faraj, 2005;
Wenger et al., 2002), all of which are considered essential components of socialization. To
date, the research on IT in socialization has largely focused on traditional communication
and collaboration tools (e.g., email, video conferencing, intranets, online chats) (Oshri
et al., 2007) and on knowledge sharing platforms (Brown and Duguid, 2000; Chang et al.,
2009). IT use in these studies has focused on individuals’ behaviors (e.g., information seek-
ing vs. contribution) and the content of information exchange (such as questions, inter-
nal documents, and clarifications). To further advance our understanding of the role of IT
in socialization, we investigate a new technology being used for socialization (ESM). Our
research seeks to uncover the mechanisms through which ESM influences the socialization
processes and socialization outcomes of organizational new hires. In order to delve deeply
into the question of how ESM influences organizational socialization, we draw from the
theory of technology affordance.

Technology Affordances Perspective

In the IS literature (e.g., Kane et al., 2011; Leonardi, 2011; Markus and Silver, 2008),
affordances refer to possibilities for action offered to an individual by an object (Volkoff and
Strong, 2013). An affordance is a property of the relationship between an actor and an object
(Volkoff and Strong, 2013) and thus, represents an opportunity for action (Hutchby, 2001;
Stoffregen, 2003). One affordance arising from the relation between a user and a technol-
ogy can provide multiple affordances and produce multiple outcomes (Treem and Leonardi,
2012; Volkoff and Strong, 2013). In the same manner, the interaction between the user and
the technology can afford actions that create hindrances.
In spite of its growing prevalence in IS studies, IS researchers have yet to agree on how
to distinguish technology affordance from technology use. The term affordances has been
described in manifold ways such as: “what is offered, provided, or furnished to someone or
something by an object,” “a property of the relationship between an object and an actor which
is defined as an opportunity for action,” “the potential for behaviors associated with achieving
an immediate concrete outcome,” (all the above from Volkoff and Strong, 2013, pp. 822–
823), “the action potential that can be taken given a technology” (Majchrzak, et al. 2013,
p. 39), “a relational construct linking the capabilities afforded by technology artifacts to the
actors’ purposes” (Faraj and Azad, 2012, p. 26), “the possibilities of using select features or
combinations of features in a way meaningful to the user’s goals, abilities, and line of action”
(Faraj and Azad, 2012, p. 26), and as something “constituted in relationships between people
and the materiality of the things with which they come in contact” (Treem and Leonardi,
2012, p. 146). These views of affordance emphasize that affordance is an action (or potential
for action until it has been actualized) and that it is a fundamentally different perspective than
merely looking at technology use or technology feature use.
368 dorothy e. leidner et al.

However, in spite of this conceptual separation of use and affordances in word, in prac-
tice, much of the IS affordance research does not sufficiently distinguish between features,
use, and action. Treem and Leonardi (2012), for example, describe four affordances of social
media: persistence, visibility, editability, and association. However, these are not actions.
Rather, these are attributes of the technology. Other affordances research mingles the con-
cepts of feature use and affordance. For example, Majchrzak and Markus (2013) assign the
affordance label “metavoicing” to the action of “reacting online to others’ presence, profiles,
content and activities.” Yet reacting online via voting or commenting or other social media
features is a direct use of the features of social media. Similarly, when describing electronic
health record (EHR) affordances, Strong et al. (2014) label as an affordance the “capturing
and archiving digital data about patients”, yet capturing and archiving data are using EHR fea-
tures to capture and record data. Likewise, they label “accessing and using patient informa-
tion anytime from anywhere” as an affordance whereas these are again direct uses of system
features, as is “monitoring organizational operations.” Moreover, the literature on affordance
has been inconsistent in carefully distinguishing the outcome of affordance actualization from
the affordance itself. For example, Strong et al. (2014) identify “capturing and archiving digi-
tal data” and “standardizing data, processes, and roles” as EHR affordances. They then iden-
tify as outcomes the fact that “digital data about patients are captured and archived” and that
“data, processes, or roles are standardized.” The outcomes are the same as the affordances.
Because of the failure to meticulously distinguish use from affordances and affordances from
outcomes, the result is that the distinction between use, affordances, and outcomes becomes
muddled.
To clarify our position on these conceptual distinctions, we provide an example of com-
muting to work. One might choose to ride a train to commute to work. Riding the train
is the equivalent of using the technology. In this case, the technology in question (e.g., the
train) is an object that moves. By definition, to “ride” is to be carried by an object that moves.
As one uses the technology (e.g., rides the train), one might engage in various affordances,
such as working, sleeping, meditating, or conversing with another passenger. These affor-
dances are possible by virtue of the fact that the individual chose to ride the train (e.g., use
the technology). One could achieve these same affordances via other means, such as if one
took a bus or a taxi to work and one could also achieve these affordances without going to
work at all. However, if the goal is to get to work and one takes advantage of a moving object
to get to work (e.g., one rides the moving train), then as one uses the object to achieve a par-
ticular goal (getting to work), one may benefit from other affordances along the way. Riding
the train is the direct use of the object whereas working, sleeping, meditating, or conversing
are not uses of the train itself, but affordances made possible by the train ride. One might
be tempted to say that the outcome is that the individual arrives at work, but this is the out-
come of riding the train, not the outcome of the affordances produced by riding the train. An
outcome of affording the ride on the train to work, for example, may be that the individual
completes more work in a given day than he would if he drove to work. Or perhaps the out-
come of the individual who afforded the ride to meditate is that this individual arrives at work
in a relaxed state of mind. The affordance lens is a powerful tool for helping IS researchers
understand the choices made regarding a technology and the consequences of these choices.
We suggest that to move forward in affordance research, it is important to carefully and
intentionally separate technology use from technology affordance, and technology affordance
from outcomes of the affordance, in order to understand how the use of technology features
provide affordances to individuals and how these affordances produce outcomes. The affor-
dance perspective has both theoretical and methodological implications. Theoretically, it
helps provide an explanation of how and why technology produces affordances and outcomes.
Methodologically, it requires researchers to carefully distinguish between use, affordance,
 organizational socialization and social media 369

and outcomes in their analysis. Applying this to our context of ESM and new hire socializa-
tion, an affordance perspective will allow us to investigate the interactions between new
hires and the ESM in ways that go beyond the use of the ESM’s features in order to explain
how the affordances actualized by new hires affects their socialization into the organization.

Method

Because studies of ESM within organizational socialization programs are scarce, we chose to
study one case in depth. In Dube and Pare’s (2003) study of IS positivist case research, 60%
of all studies they found were of a single case with 40% being multi-case studies. Since Dube
and Pare’s analysis, single case studies continue to be well represented in top IS journals (e.g.,
Bygstad et al., 2016; Chua et al., 2012; Gregory et al., 2013, 2015; Sarker et al., 2012; Seidel
et al., 2013 to name but a few) because of their potential to discover new insights through
unique, extreme, or revelatory cases. According to Yin (1989), a single case study is appro-
priate in three situations when the case: (1) represents the critical situation in testing a well-­
formulated theory, (2) represents an extreme or unique instance, or (3) is a revelatory inquiry.
In this latter case, a researcher has an opportunity to observe and analyze a phenomenon previ-
ously inaccessible to scientific investigation. Our case fits the second and third situations. At
the time we began collecting data, the case was very unique. Organizations were just begin-
ning to adopt ESM and IT departments were not widely using ESM and certainly not as part
of a new hire program. Moreover, it was not previously possible to study how social media
influences the socialization of new hires, because as a phenomenon, it had only begun to exist.

Data Collection
We refer to our case organization as Financial Services Plus (FSP), a pseudonym. Our data
collection spanned the course of eight years. Our continuous involvement over a long period
of time allowed us to acquire a deep contextual understanding of the IT department and its
new hire program and rich insights into the interactions of new hires with the ESM.
Data collection consisted of face-to-face interviews with new hires, middle managers and
executives. We collected additional data by attending events, meeting with employees dur-
ing off-time (i.e., dinner and or breaks), observations, and reading weekly journals main-
tained by new hire interns. Since 2007, we have conducted over 100 interviews and 8 focus
groups with 50 of FSP’s professional IT and human resource employees.
Table 17.1 lists the demographics of the employees who participated in our interviews.
Table 17.6 in the Appendix details the focus groups conducted. During the focus groups, we
had round-table discussions with multiple participants. These discussions were very impor-
tant to our understanding of the ESM and the organizational context. We recognize the
possibility that focus group settings might constrain a participant’s answers. We therefore
rely on the focus group observations as helpful in understanding the context surrounding the
introduction and use of the ESM, but base our detailed analysis on the interview data.
Culturally, our new hire interviewees were similar. Most participants were United States
citizens who had recently graduated from a four-year degree program in management infor-
mation systems or computer science. Employees in a variety of roles (i.e., new hires, manag-
ers, and human resource professionals) took part in our interviews and focus groups.
The interviews were semi-structured. Questions centered around what the ESM
allowed the new hires to do, what ESM activities they participated in, what happened once
they started using the ESM system, and challenges the system created. The interviews
lasted between 30 and 60 minutes. Most interviews were recorded and transcribed. In
370 dorothy e. leidner et al.

Table 17.1 Interviewee demographics.

Role No. No. of Gender Experience at Level of seniority

interviewed Interviews FSP
IT Interns 6 8 4 males/2 females < 3months Low
IT New Hires 25 40 22 males/3 females < 3years Low
IT Managers 11 33 6 males/5 females 15–20 years Medium/high
IT Professionals 1 2 1 male 5 years Medium
HR Professional 2 9 1 male/1 female > 5years Medium
IT Executives 5 13 3 males/2 females 2–25 years Medium/high
Totals 50 105

cases where it was not possible to record (for example, a few interviews with managers
took place over lunch and background noise interfered with recording), detailed notes
were taken.

Data Analysis
Because our aim was to understand how the affordances actualized from the ESM created
outcomes for new hires, we adopted a critical realist data analysis approach focused on
uncovering the generative mechanisms that explain empirical outcomes. As explained by
Volkoff and Strong (2013), the identification of affordances helps researchers specify mecha-
nisms that explain the outcomes of the introduction of new technology in organizations.
Generative mechanisms are the causal structures that explain empirical outcomes (Bygstad
et al., 2016). Here, we do not expound on the principles of critical realism because these
are well addressed in the IS literature (see, for example, Mingers et al., 2013; Williams
and Karahanna, 2013; Wynn and Williams, 2012). Less well explained are the specific data
analysis procedures one should follow in seeking to identify generative mechanisms. Authors
describe various procedures. Williams and Karahanna (2013) describe four steps: identifying
the critical events; explicating the structure and context from the event analysis; identifying
generative mechanisms through retroduction; and confirming the generative mechanisms
through empirical corroboration. Henfridsson and Bygstad (2013) describe a four step pro-
cess of using open coding to identify key events: identifying the objects of the case, identify-
ing key mechanisms through retroduction, and analyzing contextual conditions and outcomes
of the mechanisms. Mingers et al. (2013) also describe four steps in the DREI methodology:
describe the events, retroduce explanatory mechanisms, eliminate false hypotheses, and
identify correct mechanism. Bygstad et al. (2016) provide a six step framework: descrip-
tion of events and issues; identification of key entities; theoretical re-description; retroduc-
tion (identification of immediate concrete outcomes, analysis of the interplay of human and
technical entities, identification of candidate affordances, and identification of stimulating
and releasing conditions); analysis of the set of affordances and associated mechanisms; and
assessment of explanatory power.
Taking inspiration from these various suggestions on how to analyze data from a critical
realist perspective, we undertook a five step process. The first step was an open coding of
the transcripts and notes with a view towards identifying key events in the new hire program
leading to and following the introduction of the ESM and identifying the features and func-
tionalities of the ESM. The second step involved an analysis of the perceived outcomes of
 organizational socialization and social media 371

the ESM. This step entailed another round of data coding wherein we looked specifically for
references to the impact of the ESM on the new hires. This process was iterative in that we
began with a long list of stated outcomes, but then developed general categories within which
to group similar outcomes. The third step entailed coding for affordances. This step involved
carefully reading the interview transcripts and field notes to look for statements about how
the ESM was used. It was critical in this stage to separate direct use of system features from
the affordances such use provided. For example, creating user profiles is a use whereas build-
ing relationships with peers is an affordance. This step was very iterative with the three
researchers working independently to identify candidate affordances, discuss them, refine
them, and return to the data to corroborate them with examples. As previously mentioned,
prior research discussing social media affordances has tended to confound use of features
with affordances. We therefore began our analysis of affordances with a clean slate, allowing
the affordances to emerge from the data. The fourth step was our retroduction in which we
linked affordances into strands of affordances and associated these affordance strands with
particular outcomes. Through this process of linking affordances into strands (or patterns of
actualized affordances) and affordance strands to outcomes, we were able to abstract the gen-
erative mechanisms. Our final step was to establish the context of the affordances, outcomes,
and mechanisms. In this step, we looked for insights into why some new hires experienced
socialization and others did not. This analysis revealed three types of users who actualized
different affordance strands and experienced different socialization outcomes.

The FSP Case Description

FSP is one of the largest providers of financial planning, investments, insurance, and bank-
ing in the United States. FSP’s IT department houses 2500 employees among which roughly
10% are new hires. FSP’s IT department has historically suffered from a 60–70% new hire
turnover rate, reflecting the IT department’s struggle to acclimate and socialize new hires
into its IT workforce.
To improve the organizational socialization of new hires, FSP charged an IT director with
revamping FSP’s new hire program. The IT director leveraged social media technologies and
implemented an ESM tool, called OnBoard, a pseudonym. OnBoard is a Web 2.0 technol-
ogy that consists of features inclusive of, but not restricted to, social networks, discussion
forums, micro blogs, and profile pages. OnBoard consists of a technical and social system.
The social system consists of face-to-face events and meetings. The technical system con-
sists of the social media platform. OnBoard complemented the standard 6-week orientation
period by providing a platform for new hires to get to know one another and stay in touch
during their three-year new hire program.
Leadership of the ESM comes from a core team of six IT new hires responsible for creating
and maintaining the OnBoard technical and social system. The IT new hire program direc-
tor chooses these leaders from a pool of new hires who have been identified by existing core
team members and who have expressed interest in leading OnBoard. Core team members
can serve a maximum of two years, but most serve one year.
Within the second year of OnBoard’s implementation, the human resources (HR) direc-
tor recognized IT new hires’ involvement with OnBoard’s socializing activities and officially
integrated OnBoard as part of the HR’s organizational recruiting and onboarding efforts.
HR gives new hires access to OnBoard as soon as they accept a position so that they can start
connecting with other new hires. Then, after going through FSP’s new employee training
program, new hires use OnBoard to continue their socialization into the organization.
To date, executives credit OnBoard with reducing turnover, increasing employee
­engagement, and improving morale. Middle managers who had previously been involved
372 dorothy e. leidner et al.

in mentoring new hires report spending less time as a mentor, something they viewed as a
personal benefit of OnBoard. In addition, executives began using OnBoard to solicit input
from new hires on new products and services FSP was considering.
Whereas the organizational perspective of OnBoard’s outcome was overwhelmingly posi-
tive, the new hires’ perspectives of OnBoard were more nuanced. New hires reported a
wide range of outcomes from OnBoard, including such positive outcomes as productivity
enhancement, attractive job assignments, comfort around superiors, and a sense of support
as well as negative outcomes such as additional work, stress, and social struggle. Table 17.7
in the Appendix lists the outcomes with supporting quotes and examples.

Case Analysis

We begin our analysis by describing the three types of users that emerged from our analysis
(Table 17.2). We label the three types as go-getters, work-players, and just-doers (Table
17.2). The go-getters were the most active OnBoard users. They used many features on a
daily basis and viewed their engagement with OnBoard as an opportunity to grow profes-
sionally. The work-players were active OnBoard users and engaged in both social and work-
related uses of OnBoard, but tended to not take leadership roles that demanded time and
energy. The just-doers were the least active users of OnBoard, consuming, but not contrib-
uting, information and avoiding activities that were not directly work-related. Of the 31 new
hires and interns interviewed, 12 were go-getters, 11 were work-players, and eight were
just-doers. Following Table 17.2, we will highlight the differences across these three groups
as we describe the affordances, generative mechanisms and outcomes.

Table 17.2 The three emergent user groups.

Type of user Frequency of use Description Type of usage:

The go-getters High Go-getters use many of the Activities include:
features of the system on a Create, manage, and read
daily basis and integrate it into content
their work day activities. They Develop features of the
view their involvement with system
the system as a way to grow Spearhead, organize,
professionally, build their social promote, find volunteers
network, and demonstrate and acquire executive
leadership. Most go-getters sponsorship for events
are members of the core team Share ideas, insights about
responsible for the OnBoard topics, and information
social and technical system
The Low-medium The work-players view Activities include:
work-players the system as fun and find Participate in social events
enjoyment in helping others. both during and after
They have less home and family work
responsibility than the just- Initiate meet-up events
doers. Specifically, the work- Chat online with
players enjoy the social aspects co-workers
of the system while getting their Provide others with
work done and participate in information or guidance as
such activities without regard to needed
time or location
 organizational socialization and social media 373

Type of user Frequency of use Description Type of usage:

The just-doers None to low The just-doers prioritize their Activities include:
other responsibilities such Ask for help on solving
as work, family and outside an issue
interests above investing in Search for information
the OnBoard community. on a specific work topic
Therefore, they avoid using the (e.g., “how to do”)
system and play a limited role
in creating and contributing to
OnBoard. They view the system
as a poor use of time

Table 17.3 shows the system features, use of the features, and the associated affordances.
As noted, we carefully distinguish between use of the features and the affordances provided
by such use. Because we are using affordances to identify the generative mechanisms connect-
ing the OnBoard system to outcomes, we will only briefly describe the affordances.

Affordances
Networking Affordances
OnBoard affords users the ability to build relationships, interact with peers, socialize both
during and after working hours and take a break during the workday. New hires’ first
OnBoard exposure precedes their first workday, when they use OnBoard to connect with
FSP new hires that graduated from their university (Affordance 1, Table 17.3). A new hire
described his pre-first day experience using OnBoard as “the best type of networking you can
do because it allows you to have a connection with someone prior to your first day at work.”
During orientation, OnBoard provides a way for new hires to get to know one another by
facilitating open communication (Affordance 2, Table 17.3). When formal orientation con-
cludes and new hires enter their various work groups, OnBoard allows them to maintain
connections from their hiring class.
By promoting interactions, informal online communication, and socializing, OnBoard
helps new hires become friends with co-workers. New hires can plan informal meet-up
events that occur outside of work hours (Affordance 3, Table 17.3). Meet-up events may
include playing sports, picnicking or other forms of entertainment. OnBoard’s search feature
enables new hires to find others with similar interests. Then new hires reach out to those
with similar interests to chat online and take a break (Affordance 4, Table 17.3).Asa result of
regular interactions, new hires meet after working hours to socialize and decompress from
the rigor of the workday. It is through this type of interaction that new hires establish rela-
tionships that reach beyond their departmental boundaries.
Although go-getters, just-doers, and work-players all actualize the affordance of establish-
ing relationships and interacting with peers to some extent, the just-doers did not actualize
the affordances of socializing or taking a break. Their tendency is to only actualize affordances
that directly apply to their work responsibility. Consequently, just-doers develop a smaller
and work-focused network in comparison to the go-getters and work-players.

Organizational Visibility Affordances

OnBoard affords organizational visibility to IT new hires by providing opportunities for
them to participate in OnBoard sponsored events, build peer relationships, develop and
Table 17.3 FSP’s OnBoard Features, Uses and Affordances.

OnBoard features OnBoard uses Affordances Go-getters Work-players Just-doers

Networking
User profile, • Create personal profiles 1. Building Relationships with Peers ✓ ✓ ✓
sports page, • Connect to others 2. Interacting with Peers ✓ ✓ ✓
entertainment • List friends 3. Socializing ✓ ✓
• Market skills and abilities 4. Taking a Break ✓ ✓
• Post status updates
• Social searching: Read about others, look up people from
their university and hometown
• Set up meet-ups for sport matches
• Track sport match winners
• Highlight hotspots in the area
• Set up socializing outings for after work
Organizational visibility
Event planning • Use crowd-sourcing features (e.g., commenting and 5. Participating in OnBoard Events ✓ ✓
voting) to determine what type of event to plan, to choose 6. Building Relationships with Peers ✓ ✓
event leaders and volunteers, and to gauge input on event 7. Demonstrating Leadership ✓ ✓
planning such as time, location and food 8. Interacting with Superiors ✓
• Use posting feature to market events and rsvp for events
• Use sharing feature to post comments and pictures from the
event
OnBoard features OnBoard uses Affordances Go-getters Work-players Just-doers
Information gathering/sharing
Pulse, discussion • Make brief comments about what’s going on at work—e.g., 9. Finding resources ✓ ✓ ✓
boards, the pulse of the place 10. Helping peers ✓ ✓
relocation page, • Discuss and arrange opportunities for training, education,
maps certification and study group sessions
• Lists and search for housing, roommates, carpools, and ride
sharing arrangements
• List local area places that provide employee discounts and
where employees frequent
Innovation
Discussion • Search departments where IT employees can work 11. Broadening perspective ✓ ✓ ✓
boards and house • Arrange to work in a new area for a day 12. Acquiring new technology skills ✓ ✓ ✓
calls 13. Acquiring insight on new *a
processes, products and services for
management
a
The “acquiring insight on new products and services” was an affordance actualized by senior management.
376 dorothy e. leidner et al.

d­ emonstrate leadership skills, and interact with superiors. All new hires who attend an
OnBoard event have the possibility to interact with executives. Events have included execu-
tive luncheons, casino nights, coding competitions, and cross-fit workouts. All events must
have an executive who has agreed to sponsor and attend the event. This rule serves as an
important enabler of the visibility affordances. However, those new hires who lead events,
(e.g., the go-getters) work much more closely with executives than do the work-players
and just-doers who, at most, attend the event and briefly meet the executives. A go-getter
comments: “OnBoard has helped me develop some leadership at an early stage in my career;
it made me aware of how to get things done.” Another go-getter discussed how OnBoard
allowed leaders to “promote the event, seek volunteers, connect with the next lead, and give
event updates.” This type of exposure gives new hires a chance to make a name for them-
selves in front of management and peers. In the words of one go-getter, “I know so many
more executives outside of my department than most of my teammates do. There’s no telling
ten years down the road what promotional opportunities I’ll have and what these connections
will do for me.”
As the go-getters actualize the affordance of demonstrating leadership skills (Affordance 7,
Table 17.3), they create an affordance of interacting with superiors (Affordance 8, Table 17.3)
for the just-doers and the work-players. While the work-players will take advantage of such
of an opportunity, the just-doers are less likely to participate in such events and pass on this
affordance. By participating in OnBoard events (Affordance 5, Table 17.3), the work-players
informally meet senior management and executives. Informal interaction with executives
through participation in OnBoard events (e.g., Wounded Warrior, paintball, American Idol,
and others) made new hires feel comfortable around superiors. Benefits of this include help-
ing new hires approach superiors with less hesitation, relieving pressure in formal meetings,
making new hires feel that management is interested in their well-being, and that they matter.

Information gathering/sharing Affordances

OnBoard affords new hires the ability to find resources and help peers as they settle into their
new community. OnBoard provides various web pages (e.g., apartment lists, roommate
lists, carpools, and recommended restaurants) with information to aid the new hires in their
search for housing, transportation and shopping. All new hires who use OnBoard have the
possibility to actualize the affordance that helps them gain or share information. A go-getter
who is “not from this area” discussed how OnBoard made her aware of local businesses that
give discounts to FSP employees and helped her find housing and a roommate. The informa-
tion gathering affordance was especially helpful early on when new hires were embarrassed
to admit what they did not know. As explained by a work-player:

So you come to work your first day and you’ve just got hundreds of questions.
You can bug your point of contact to death with all of those questions, but you
don’t really want to. So that’s another thing that OnBoard kind of helps with.

This information gathering/sharing affordance was particularly helpful when new hires were
struggling with assignments in that it linked them to information that they needed to com-
plete their tasks more efficiently. For example, a work-player talked about how OnBoard
introduced him to a tool that would automatically tell him everything about the databases his
programming affected, including the owners. This tool automated the slow, time consuming
process he was following.
All three groups of users actualized the finding resources affordance. By contrast, the
helping peers affordance was only actualized by the work-players and go-getters. The
 organizational socialization and social media 377

i­ nformation gathering/sharing affordance in OnBoard requires action from new hires to con-
tribute the resources that helps others. In one example, a go-getter created a “Navigating
FSP: The Series” where he wrote a weekly report addressing the things he wished he would
have known when he started. This included all the acronyms employees use and how to find
one’s car in the parking lot. OnBoard users who provide such information are actualizing the
affordance of helping peers (Affordance 10, Table 17.3) that allows other new hires to actual-
ize the finding resources affordance (Affordance 9, Table 17.3). Work-players and go-getters
derived satisfaction from helping peers. In the words of a work-player, “OnBoard allows me
to mentor other new hires because I can relate to the kind of things they are going through;
helping makes me feel good.”

Innovation Affordances
Innovation affordances include two affordances for new hires broadening perspective and
acquiring new technology skills and one for senior management acquiring insight on new
products and services. The latter was not an originally envisioned function of OnBoard, but
as executives began to see the variety of ways in which new hires used OnBoard, they real-
ized OnBoard’s potential for igniting organizational innovation. The new hire affordance of
acquiring new technology skills (Affordance 12, Table 17.3) first emerged after a technology
vice president expressed displeasure about OnBoard’s social events during the workday. A
concerned go-getter took this to heart and decided to organize an event with work, rather
than social, purposes in mind. The go-getter initiated a coding competition. The competi-
tion challenged new hires to develop an application of their choice on a mobile platform
with which FSP was experimenting. All participants, go-getters, work-players and just-doers
expanded their technical skills by working nights and weekends to learn the mobile develop-
ment language and build the application. In this way, the go-getters affording OnBoard to
create a work-related outcome of benefit to FSP resulted in work-players as well as just-
doers acquiring new technical skills. In another example, a go-getter discussed how OnBoard
facilitates what were referred to as house calls. Through house calls, new hires can visit other
work areas that interest them. This allows the new hires who wish to transition to another
area to learn about the work area (Affordance 11, Table 17.3) before formally committing.
A go-getter described this broadening perspective affordance as one that helps him with his
career development. “I never feel trapped, because I know I can always transfer to a new
area.” He further explained that visiting areas lets him know how his work impacts other
areas and vice versa.
Thus far, our analysis has focused on the primary users the new hires for whom FSP
developed the OnBoard system. However, senior executives, who were not engaged with
OnBoard outside of sponsoring and attending events organized by the go-getters, soon recog-
nized that the platform itself could be of value to them as well and began to request feedback
from new hires on new product offerings and software development (Affordance 13, Table
17.3). An executive stated:

OnBoard is a good sounding board for us as management to bounce ideas off of

the young people. Let’s face it, they are highly educated and tech savvy. If we
want to know something, we can start a discussion on OnBoard and see what
they say.

Executives began tasking go-getters with identifying groups of new hires with 0–5 years
of work experience to provide feedback and future perspective on various tools. One such
effort resulted in the creation of an app that allowed “customers who are being deployed to
378 dorothy e. leidner et al.

hit a button on their mobile phone and initiate a flow of events they want to happen.” As
further explained by the executive:

Lots of times people only have 24 h notice before being deployed and they need
to make some financial changes as part of the deployment‒like increase life
insurance and reduce car insurance since they are storing the car. This way they
can spend time with their family and not spend their last hours working with
their financial institution.

So pleased were executives with the newfound innovation potential of OnBoard that they
further extended OnBoard to reach other users. One such extension of OnBoard is iInno-
vate, a SharePoint site that serves as an innovation lab where anyone with an idea to improve
organizational processes, products or services can submit their suggestion. Another exten-
sion of OnBoard is Dev.Ask, an internal website that allows developers to post questions
for the entire development community about coding or processes. In this way, the initial
affordances of OnBoard that were actualized by the new hires, namely the networking and
visibility affordances, triggered an interest in senior executives to enable other affordances
through OnBoard that led to outcomes that were far removed from the initial desire to
socialize new hires with OnBoard.

The Interacting Effects of Affordances

Identifying the single affordances of OnBoard serves as the first step in understanding how
the actualization of affordances in OnBoard affects new hires’ socialization into the organiza-
tion. Considering that multiple affordances are present at the same time, it is important to
understand the nature of their relationships (Strong et al., 2014). Consistent with Strong
et al. (2014), certain affordances, later termed “higher-level” by Bygstad et al. (2016), can
only be actualized after basic affordances. We refer to these as first-order and second-order
affordances to highlight that the second-order affordances cannot be actualized until the first-
order affordances have been actualized and to avoid implying that “basic” affordances are
somehow easier or simpler to actualize than “higher-order” ones because in our case, this is
not found to be true. The first-order affordances were no easier or simpler to activate than
the second-order nor did the second-order affordances demand any higher level of thinking
or perception to activate. In our case, the interacting with peers, demonstrating leadership,
and participating in OnBoard events acted as first-order affordances. The actualization of
these first-order affordances then allowed new hires to actualize second-order affordances,
which collectively resulted in outcomes. As described in Table 17.4 (and Table 17.7 in the
Appendix) and explained in the following section, strands of first and second-order affor-
dances abstract into generative mechanisms that explain how the affordances lead to the
outcomes (see Table 17.5 for a summary of the outcomes).
We next explain these strands of interacting affordances and the generative mechanisms
they form as well as the outcomes that the generative mechanisms explain.

Generative Mechanisms
Bureaucracy Circumvention
Interacting with peers is a first-order affordance that makes several other affordances pos-
sible, including building relationships, finding resources, and helping peers. Together,
these affordances explain the outcome of productivity enhancement through the genera-
tive mechanism we refer to as “bureaucracy circumvention” (see Table 17.4). Many large
Table 17.4 Generative Mechanisms, Affordances, and Outcomes.

Generative mechanisms First-order affordances Second-order affordances Outcomes User type

Bureaucracy Circumvention * Interacting with Peers * Building Relationships with Peers • Productivity Enhancement All 3
* Finding Resources
* Helping Peers
Executive Perspective * Interacting with Peers * Building Relationships with Peers • Cultural Understanding GGs and WPs
* Participating in OnBoard Events * Building Relationships with
Superiors
* Helping Peers
Personal Development * Demonstrating Leadership * Building Relationships with Peers • Productivity Enhancement All 3
* Participating in OnBoard Events * Building Relationships with • Attractive Job Assignments GGs, WPs
Superiors
* Finding Resources • Comfort around Superiors GGs, WPs
* Helping Peers
* Acquiring Insights on New
Products/Services
Name Recognition * Demonstrating Leadership * Building Relationships with Peers • Comfort around Superiors GGs, WPs
* Participating in OnBoard Events * Building Relationships with • Additional Work GGs
Superiors
* Socializing • Stress GGs
* Helping Peers • Social Struggle GGs, JDs
* Acquiring New Job Skills
Morale Booster * Demonstrating Leadership * Building Relationships with Peers • Cultural Understanding GGs, WPs
* Interacting with Peers * Building Relationships with • Sense of Social Support All 3
Superiors
* Participating in OnBoard Events * Finding Resources
* Helping Peers
* Socializing
* Taking a Social Break
Key: GG: Go-Getters WP: Work-Players JD: Just-Doers.
Table 17.5 Outcomes.

Outcome Quote/example User type

1. Productivity A work-player working on a recruitment video could not All 3
enhancement use video or camera equipment in the building without
permission, which “often took weeks because security is
thorough.” The new hire was able to reach out to a peer he
met through OnBoard and within days his video request was
approved.
2. Additional work A go-getter had to work on all of the images on the GGs
OnBoard site. This led to the creation of a Geocaching site,
where she spent time creating rollover graphics. She stated:
“this is all done outside of my regular working hours.”
3. Attractive job A go-getter described his experience of meeting an executive GGs, WPs
assignments at an OnBoard event, who then asked him to run the United
Way campaign because of his experience with OnBoard.
A work-player got transferred to the coveted mobile
development group after winning an OnBoard coding
competition.
4. Stress A go-getter discussed his stress of balancing OnBoard with GGs
work:
our managers support OnBoard, but we understand
that our job is #1 and OnBoard is #2; OnBoard is
volunteer work so OnBoard can get a little stressful
for us because it takes a lot of time when an event
comes up.
A go-getter discussed his supervisor finding out he was
doing extra graphics work for a senior executive he met
through OnBoard. His boss explained, “I didn’t know you
were doing that.”
5. Social struggle A go-getter described his frustration by stating: “it is hard GGs, JDs
to satisfy everyone; they [new hire peers] complain about
events or voice how we could have done something better.
I am like if you want to complain put on an event yourself.”
6. Sense of social A go-getter relied on OnBoard people to support her and All 3
support listen to what she is going through and commented:
I was stressed about when a server was going to be
ready for my job. We were working long hours to
complete the project. Rather than going through the
whole internal process, I was able to instant message my
contact. He put me at ease and then I stopped stressing.
7. Comfort around A work-player stated: “I get to know executives on a GGs, WPs
superiors personal level that makes it easier to present in front
of them during formal meetings; I learn how to better
communicate with them.”
8. Cultural A work-player described that his experience volunteering GGs, WPs
understanding side by side with executives at Wounded Warriors helped
him understand OnBoard’s mission and its customers.
He stated, “now more than ever I understand why I need
to build the video system that will allow our customers
to interact with loan officers from conveniently located
branches.”
 organizational socialization and social media 381

c­ ompanies face a similar bureaucratic structure with rigid policies, procedures and hierar-
chies to follow. The bureaucracy circumvention mechanism is not about violating policies,
but rather accelerating the response time by knowing who in the company is able to help.
In the examples below, we explain how the four affordances comprising this strand of
affordances leads to the outcome of productivity enhancement via the bureaucracy circum-
vention mechanism.
New hires gave several examples of productivity enhancement made possible through
their affordance of OnBoard. On one occasion, a go-getter who was trying to meet a
deadline for a database modification (e.g., table structure, permissions, and other) cir-
cumvented the standard process by reaching out to someone he knew personally through
OnBoard This simplified the process because “they are more likely to take you seriously
when they know who you are instead of just some random person coming with a problem.”
This then enabled him to check the status of his needed database change. This information,
from his fellow new hire, assured him that the database group was working on the needed
modification and that he’d be able to deliver the project on time. The new hire was able
to get the necessary information because he had a close relationship with someone in the
database group that he had formed through his affording of OnBoard to establish relation-
ships with peers. In another example, management charged a work-player new hire with
producing a recruitment video. Said the new hire, FSP is “bureaucratic with a strong chain
of command and complex processes and procedures.” To accomplish their work, new hires
were frequently left waiting on access, permission or someone to do something. This new
hire in charge of the recruitment video was met head on with FSP’s bureaucracy. He could
not use video or camera equipment in the building without permission from security,
which “often took weeks because security is thorough.” By contacting a peer whom the
new hire had met through OnBoard and who had connections to the security group, the
new hire was able to bypass the waiting process and accelerate the approval of his video
request. The peer knew exactly with whom he needed to speak and within days his video
request was approved.
In general, new hires report that the relationships they form through OnBoard and their
ability to find resources through the peers they meet enable them to get things done more
efficiently, as summarized by one new hire:

The more people I know during a project, the better I can get things done that
I need done. When I meet somebody in a network or at any social activity that
OnBoard sponsors, later on in a project when I need help on a certain thing like
testing, I can be like, oh I know this person. I can ask him to see if I can get a
resource.

An executive described the complexity of FSP as one that makes it difficult to

learn who to go to with different issues and the OnBoard alumni group does
worlds of good in shortcutting some of that and helping these kids (i.e., IT new
hires inclusive of go-getters, work-players, and just-doers) get up to speed in
learning who, what, when, where, why, and how.

The new hires who had developed the most extensive networks and had the strongest
ties with their superiors the go-getters were not surprisingly the ones able to achieve this
outcome.
382 dorothy e. leidner et al.

The bureaucracy circumvention mechanism involves not just the actors themselves
availing themselves of an affordance, but other actors (e.g. peers) must also actualize
the affordance of helping peers. An important goal of socialization programs is to equip
new hires with a level of confidence in the skills they need to do their jobs and fulfill
their responsibilities. This is referred to as “self-efficacy” (Bauer and Erdogan, 2011).
Experiencing productivity and being able to circumvent bureaucracy in order to get a job
done arguably facilitates new hires’ confidence in their ability to perform their job tasks
(e.g. self-efficacy).

Executive Perspective
Interacting with peers and participating in OnBoard events are first-order affordances
that make possible the affordances of building relationships with peers and superiors and
­helping peers. Jointly, these affordances explain the outcome of organizational culture
understanding via the generative mechanism that we label “executive perspective” (see
Table 17.4) by which we mean the new hires’ ability to see things through the perspective
of executives.
Learning about organizational culture and learning how to fit into the organizational cul-
ture is an important part of socialization (Bauer and Erdogan, 2011). New hires provided
various examples of how their assimilation into the culture of FSP was an outcome of their
OnBoard involvement. As explained by a just-doer:

What helped about OnBoard is that I was thrown into FSP. I didn’t know any-
thing about FSP. All I know is that this building is a mile long and people lose
their cars on the first day. I have no idea how to get anywhere, but with this
OnBoard they have helped me understand the company culture, help me under-
stand what I need to do to be successful, and even give me opportunities to talk
to the people I need to further my career and things that matter most to me.

New hires claimed to be “learning about FSP through superiors’ eyes.” In another exam-
ple, a work-player explained how volunteering side by side with executives at events like
Wounded Warriors helped him understand FSP’s mission and its customers. Reflecting
on his Wounded Warrior volunteer experience, a work-player said, “now more than
ever I understand why I need to build the video system that will allow our customers to
interact with loan officers from conveniently located branches.” Though invisible and
intangible, the executives’ perspective is much different than “what you get down in the
weeds.” This executive perspective mechanism of executive perspective explains how the
affordance strand of interacting with peers, participating with OnBoard events, building
relationships with peers and superiors, and helping peers lead to the outcome of cultural
understanding. Gaining knowledge about the organizational culture allows new hires to
develop a sense of belonging, which makes them feel accepted by their peers and superiors
and helps new hires understand how to complete their work tasks within the organization
standards. This is referred to as social acceptance and role clarity respectively (Bauer and
Erdogan, 2011).

Personal Development
Demonstrating leadership is a unique first-order affordance because the outcomes of this
affordance also depend on other actors being willing to participate in the events that were
developed by the actor taking a leadership role. Therefore, the first-order affordance of par-
ticipating in OnBoard events becomes available for other new hires. These two first-order
 organizational socialization and social media 383

affordances are actualized by different groups of actors and make several other affordances
possible, including building relationships with peers and superiors, finding resources, helping
peers, and acquiring insights on new products/services. These first-order and second-order
affordances explain the outcomes of productivity enhancement, attractive job assignments,
and comfort around superiors via the generative mechanism we label as “personal develop-
ment” (see Table 17.4). The personal development mechanism is about new hires experienc-
ing professional growth.
While go-getters organize most events, and in so doing demonstrate leadership, work-
players and just-doers attend these events. As a go-getter comments: “OnBoard has helped
me develop some leadership at an early stage in my career; it made me aware of how to han-
dle myself more professionally.” One just-doer described his participation in OnBoard plan-
ning meetings. As an example of how OnBoard helped him achieve productivity enhance-
ment, the just-doer stated:

I was in one of the OnBoard meetings and at this meeting I met one guy who
was more on the financial side and he knew a lot about the financial system I was
working on. I was able to ask him a bunch of questions to help me understand
the system and what I was supposed to be doing.

In another example, the following quote from a work-player illustrates how OnBoard helped
him enhance his productivity:

OnBoard serves as a way to get to know other parts of the business. I work
as a business analyst that develops software that logs all incidents (e.g., prob-
lems) for management. OnBoard has served me as a resource. There have
been cases where I met this one guy then I needed his help a couple of days
later. In the long-term, I have an advantage over others because I have got-
ten to know a lot more people throughout the business than those that I met
during my new employee orientation, who I have never seen at an OnBoard
event; so I’ll have more resources as far as contacts than new hires that do
not participate.

An important outcome of this strand of affordances was attractive job assignments. For
example, the winners of the coding competition described earlier received new job assign-
ments in FSP’s prestigious mobile development division.
Establishing relationships with superiors facilitated a sense of new hire comfort around
superiors. The following quote illustrates how a go-getter was able to interact with the Chief
Information Officer (CIO) in an informal setting: “I met the CIO at a casino night event
organized by OnBoard and I was able to chat with the CIO and get to know him on a personal
basis.” Another go-getter described OnBoard usage as one that has helped him “make con-
nections with executives” and mentioned that “executives came out to our paint ball event,
which shows that they are part of the team and our interactions at such events gives a new
meaning into the open door policy” at FSP. In addition, work-players became comfortable
sharing opportunities, problems and insights with management. In another example, a work-
player talked to an executive about a defect he had found in FSP’s infrastructure. A manager
explains:

So we have a person who has been here less than a year. He showed a defect to
a full vice president, who immediately realized that the young individual was
384 dorothy e. leidner et al.

c­ orrect. The vice president went into an immediate, rapid response to fix it. And
it wasn’t that the guy [new hire] is so much smarter than everyone else … it was
just that a fresh set of eyes saw something, raised a question, and he was right.

While all three types of users benefited from some level of personal development, the go-
getters and the work-players were the ones to achieve the most benefit because of their
involvement in planning and organizing OnBoard events and higher participation in attending
such events.

Name Recognition
Demonstrating leadership and participating in OnBoard events are two first-order affor-
dances that make possible the affordances of building relationships with peers and superiors,
socializing, helping peers, and acquiring new job skills. Collectively, these affordances lead
to a beneficial outcome of the new hires feeling comfortable around superiors (as opposed
to intimidated or nervous), but also to several negative outcomes, including additional
work, stress, and social struggle. The mechanism that links the affordances of demonstrating
leadership, participating in OnBoard events, building relationships with peers and superi-
ors, ­socializing, helping peers, and acquiring new job skills to the outcomes of productivity
enhancement, comfort around superiors, additional work, stress, and social struggle is what
we refer to as “name recognition” (see Table 17.4). The name recognition mechanism is
about establishing a reputation within the organization.
Many large organizations tend to have hierarchal structures that make it difficult to meet
executives. Yet, OnBoard affords new hires the opportunities to establish relationships
with peers and superiors while socializing. For example, when participating in the execu-
tive luncheons, new hires experience an intimate setting that allows them to build trust and
personal relationships with executives. A go-getter stated: “having lunch with executives has
helped us with our career growth because we get to know them personally.” And as stated by
a work-player: “I get to know executives on a personal level that makes it easier to present
in front of them during formal meetings; I learn how to better communicate with them.”
The following quote from an executive reinforces the sentiment: “the COO of FSP knows
12 members of OnBoard because he works with OnBoard on a regular basis; he is on a first
name basis with them.”
Since go-getters lead events and manage the OnBoard ESM system, go-getters tap into
the affordance that helps them expand their skills beyond their current job assignment. The
skills include leadership, communication, marketing, salesmanship, project management,
budget management, creativity, and SharePoint administration. These new skills often led to
additional work. On one occasion, a go-getter with experience in website development was
assigned the task of working on all the images displayed in OnBoard. This led to the creation
of a Geocaching site, where she spent time creating rollover graphics. She stated: “this is all
done outside of my regular working hours.” A top manager stated that he “has now given
OnBoard members (e.g., go-getters) new tasks, which includes creating videos that help the
new hires know things they need to do at the organization as part of an employee development
plan.” In another example, a go-getter described his experience of meeting an executive at an
OnBoard event as one that not only provided him with “getting to know the executive on a
personal level,” but one that led to the executive asking him to run the United Way campaign.
These additional opportunities were extra tasks that superiors asked the recognized new hires
to execute in addition to their assigned job responsibilities. A go-getter comments about how
assuming additional responsibilities created additional stress and led him to transition away
from OnBoard:
 organizational socialization and social media 385

I was so ready to relieve the stress from that part of my life. Possibly because
of being on the core team, my job responsibilities started picking up more and
more. So, after a year of being on the core team, I had so much work going on
that I just didn’t have any time for that anymore.

Even though the go-getters followed management’s mandate, superiors viewed OnBoard par-
ticipation as discretionary and time for which they could not charge FSP. Superiors recognized
OnBoard’s benefits, even asking OnBoard go-getters to promote OnBoard to college recruitees,
and yet new hires still had to confine their OnBoard use to non-working hours such as breaks,
lunches, and evenings. This created a sense of inequity among new hires and made it difficult at
times for OnBoard’s leaders to recruit their replacements. For example, the less active new hires
experienced some resentment and alienation, as the quote from a just-doer below illustrates:

I am married; I can’t play intramurals from 6 to 9. There are some definite dis-
advantages to not participating completely. Around here, just because it is such a
big company, it is who you know. A lot of the times job postings are filled before
they are even posted internally. If you play on a sports team with someone, they
are more likely to say, “hey we have this position opening,” before the job is
even posted internally.

Given the link between networking and promotion, new hires that did not participate in
OnBoard events resented the opportunities afforded to those who did (i.e., go-getters and
work-players). Yet, just-doers prioritized family, work tasks, and off-time over commit-
ting to OnBoard events or increasing their involvement. They viewed OnBoard as simply
“more work to be done” or “a waste of time” and limited their level of usage. This perception
blinded just-doers to the value in OnBoard’s outcomes. A work-player who later agreed to
lead OnBoard explains how OnBoard’s core team initially alienated the new hire community:

People [fellow new hires] didn’t really appreciate that they were the core team.
They had their own shirts. They distinguished themselves on the website.
OnBoard is supposed to make everyone equal. It is a community.

The quote alludes to the social struggle that some new hires perceived as a result of the go-
getters’ relationships with superiors. Recognizing that superiors provided OnBoard’s leaders
additional opportunities and at times favorable work assignments, some work-players, just-
doers, and even middle management experienced jealousy. The new hires resented that they
were seemingly penalized for not fully participating in something that was outside their job
scope and that superiors wanted them to relegate to after hours. In addition, middle manag-
ers resented that they didn’t get the same opportunity to build their name by participating in
social events that exposed them to top management. One middle manager comments:

I started in 1991. Back then there was a training program and they put you to
work. It was up to you to stay up with the people you went through the training
program with. Now new hires have OnBoard that makes it easier for them to
stay connected with others and meet new people. I never got to meet the CEO
like the new hires do. The only opportunity I had for promotion was if someone
passed away or retired. Now promotion is more merit based and new hires can
push themselves up through the five levels at FSP. And with new hires interacting
with executives and promotion by committee, they have a definite advantage.
386 dorothy e. leidner et al.

Since go-getters knew that their reputation depended on OnBoard’s success, they had a personal
stake in making OnBoard prosper. Go-getters depended on their fellow new hires to participate
in OnBoard, attend events, add content, and volunteer, but they had no control over the level
of participation of their peers. Rather, go-getters involved in this process felt pressured to cajole
their peers into participation in order for OnBoard events to succeed. A go-getter comments:

The most stressful thing is that you’re organizing events where you’re the one
whose neck is on the line, but you are almost never the one actually doing the
work. You are heavily dependent on people in the community to help you out.

As the quote above illustrates, go-getters recognized that a bad event reflects negatively on
their leadership and may create a negative reputation with peers and management. The fol-
lowing quote eludes to a go-getter’s frustration: “it is hard to satisfy everyone; they complain
about events or voice how we could have done something better.” Therefore, go-getters
experienced a social struggle in that their reputation depended on the participation of work-
players and just-doers both of which felt that the go-getters benefited more from their par-
ticipation than they did.

Morale Booster
Interacting with peers, demonstrating leadership, and participating in OnBoard events are
first-order affordances that makes possible the affordances of building relationships with
peers and superiors, finding resources, helping peers, socializing, and taking a social break.
Together, these affordances explain the outcomes of cultural understanding and sense of
social support via the generative mechanism we label “morale booster” (see Table 17.4). As
the examples below illustrate, the morale booster mechanism raises the spirits of the new
hires and provides them positive energy.
New hires provided several examples of the outcomes of cultural understanding and sense
of social support. The following quote from a go-getter illustrates how OnBoard helps new
hires learn about the organizational culture:

OnBoard puts on events just for interns right when they get here, then puts
together the end of the year OnBoard trip, which was a scavenger hunt at
Schlitterbahn. Many of these interns when hired seem generally excited when
they come on board. It seems to help them not to be shy or feel lost because they
are not really sure of what their place is, so I think that OnBoard events make
people feel a lot more comfortable when they start by having a role in OnBoard
right away and feel important, which helps them learn about the organization as
they are establishing their work role.

In another example, a just-doer explains:

OnBoard has a welcoming party just for new hires, so right off the bat we had a
get together of all the brand new hires explaining to us what OnBoard was, why
it was important to you to know the culture here and what it could help us with.

He continued to describe this experience as one where he felt that OnBoard provided him
a “support system that would help guide him and help him instead of just being thrown into
the workplace.” The following quote from a just-doer illustrates how OnBoard provides a
sense of social support:
 organizational socialization and social media 387

I knew I would have a support system here to kind of guide me and help me
instead of just being thrown into the workplace. OnBoard helps in having those
friendships and those bonds with people outside of your area and I think for me
knowing what other people are doing, what is acceptable, and asking them ques-
tions that you are afraid to ask your manager makes it easier.

Most new hires want to feel welcomed and important when entering an organization. When
new hires are treated special and given opportunities to get to know others, socialize, and
take breaks from their work tasks to build and reinforce relationships, they experience a
boost in their emotion and confidence. At times, the peer and superior relationships and
interactions turned into mentoring. As the quote below shows, go-getters experience a sense
of satisfaction from helping their peers:

Mike (a just-doer) is going through all the same stuff I went through‒being over-
whelmed in the Java training, feeling you’re not worth your paycheck. It’s a nice
feeling to help him through this stuff because it’s kind of overwhelming at first.

Thus, mentoring peers and being the go-to-person for other new hires gives go-getters a
certain feeling of satisfaction in providing social support to others. Both the morale of those
helping and the morale of those receiving help is boosted and through this boosting, impor-
tant outcomes from the OnBoard affordances result.

Summary
Our findings illustrate how OnBoard’s affordances led to various outcomes for different
actor groups via the five generative mechanisms of bureaucracy circumvention, executive
perspective, personal development, name recognition, and morale booster. The outcomes
experienced were both positive and negative, consistent with the power of social media to
unleash forces for both (Huang et al., 2015). We next discuss the important theoretical and
managerial implications.

Implications

To date, ESM research has examined such issues as managing employee relations, balancing
social and work life, managing knowledge, changing organizational culture and promoting
innovation (Bradley and McDonald, 2011; Koch et al., 2013; Louis et al., 1983; Mullaney,
2012). Our research extends the work on ESM to the important domain of organizational
socialization. The objective of this study was to understand how ESM influences the organi-
zational socialization of new hires. Our study has implications for research in the areas of
organizational socialization and technology affordances.

Socialization Research
Our research offers three implications for socialization research. First, given that social
media is an important tool in the development of social capital (Kane et al., 2014) and that
social capital can be helpful as well as burdensome (Oldroyd and Morris, 2012), one might
expect both positive and negative socialization consequences for employees that use the ESM.
Our research helps shed light on these consequences of ESM use. Individuals who are more
inclined to participate in a social media system, or who have more time to do so, reap higher
388 dorothy e. leidner et al.

rewards. Yet they are not being rewarded for job performance so much as for system partici-
pation. This raises two issues. First, their use might very well distract them from their work,
or, as experienced by several of our informants, lead to additional work outside of their pri-
mary responsibility. This can lead to role confusion and lower productivity. Second, because
the system use is divorced from the actual work tasks facing the new hires, it is not yet known
whether the new hires who are gaining visibility and reaping the visibility benefits that pro-
vide them with more attractive job assignments are actually the new hires with the greatest
aptitude for the work tasks and roles. Instead, it is possible that those who have the highest
ESM performance (e.g., organize the most and best events and provide the most informa-
tion) are not actually those who have the highest job acumen. Research into top performers
in organizations has found that top performers are many times more valuable in generating
business value than lower performing peers (Ernst et al., 2000; Narin and Breitzman, 1995).
Star employees those who demonstrate superior performance and who are highly visible in
the labor market (Groysberg et al., 2008) experience a “cumulative advantage” whereby
their productive resources increase at a considerably greater rate than their less visible and
valuable peers (Oldroyd and Morris, 2012) . Because of their importance, star employees are
well rewarded and highly influential. For new hires, the relevant labor market is the internal
one wherein they vie for attractive job assignments after they have become fully entrenched
in the organization. The go-getter users of the ESM at FSP display the characteristics of “stars”
they demonstrate superior performance in the ESM and they become highly visible in the
internal labor market of their organization. Yet because ESM performance is not necessarily
predictive of work task performance, the organization runs the risk that the use of ESM as
a socialization mechanism inadvertently creates stars who will not be able to shine outside
of the ESM. Future research is needed to understand the ways in which ESM performance
is, and is not, tied to actual work performance so that organizations can design incentive
mechanisms to encourage those uses that improve work performance and discourage those
uses that do not.
A second important implication of our study for organizational socialization research is
that even as social bonding may emerge through ESM use for socialization, so too do social
struggles. Management may intend for social media to serve as an inclusive mechanism
whereby all new hires may establish relationships, but because relationships help develop
social capital (Coleman, 1988; Nahapiet and Ghoshal, 1998) and social capital results in
social power (Bourdieu, 1986; Burt, 1995), the implications extend well beyond a new hire
socialization program. Recent research emphasizes that the socialization process of “becom-
ing” includes “becoming unequal” meaning that occupational socialization creates inequality
(Anteby et al., 2016). Although the work emphasizes segregation across occupations within
an industry (for example, women tend to be more represented as nurses and men, as doc-
tors), our research suggests that this process of becoming unequal through socialization may
also occur within an occupational group (in this case, a group of IT new hires). In our case,
the go-getters accrued greater connections to people and resources than the work-players
and just-doers and, consequently, greater power. In such a situation, power struggles will
ensue; in this case, social power struggles and inequalities form. This then results in divisive-
ness from a very system intended to promote inclusiveness. A stream of research is develop-
ing in the area of individual and group marginality and how marginality is tied to innovative
behavior and performance. Marginality is a condition of disadvantage facing individuals or
groups resulting from vulnerabilities that arise from unfavorable environmental, cultural,
social, political and economic factors (Billson, 1996). Some of the negative consequences
of marginality include limited career choices, poor performance, isolation, and exclusion
(McLaughlin, 2000). Through socialization, segregation of members in an occupational
group becomes naturalized. Given the potential of ESM to both promote belongingness and
 organizational socialization and social media 389

yet create marginality, future research should probe more deeply into how to avoid margin-
alization as a side effect of ESM use.
Our study offers a third important implication for organizational socialization research,
shedding light on how changes to the organization itself occur via the socialization process.
Socialization research focuses on how new employees can learn about the organization and
how to do their jobs (Jones, 1986; Saks and Ashforth, 1997). It largely assumes a static,
and single, organizational culture into which successive groups of new hires are social-
ized and views new hires as the target of socialization programs (Ashforth and Saks, 1996;
Taormina, 1994). Our findings challenge these assumptions. First, our study suggests that
even as new hires were learning the norms and culture of FSP, they were simultaneously
altering the culture and norms through their engagement with the OnBoard system. What
was before an 8–5 highly hierarchical environment where work-private boundaries were
strong is becoming a much more organic, less hierarchical environment where boundaries
between work and private life are more porous. Consequently, future new hires will learn
norms that are quite different from the norms that the previous new hires were learning. By
virtue of the previous new hires using the system to learn FSP’s norms, they were actually
simultaneously changing the norms. Hence, introducing a change to the socialization prac-
tices resulted in a change to the organization’s culture into which socialization takes place.
This resulted in a dual culture facing the new hires. Some new hires embraced an emerging
flexible culture built around OnBoard and based on the reputation economy with blurred
work-life boundaries whereas others new hires maintained the traditional bureaucratic cul-
ture allowing for work-life separation and valuing hourly productivity. It may be that, in
the future, an important work skill will be the ability to cope with seemingly inconsistent
cultural norms embedded in various technology-based work practices. Second, our study
suggests that the new hires shifted from a state of being socialized into the organization
into a state of socializing each other into the organization. The very role of the new hire
socialization process changed as the HR department began to observe the direct benefits
of the ESM on new hire socialization. As HR began to incorporate the system into its own
human resources’ processes, new hires experienced a shift in perspective from being the
target of socialization efforts to being the means of socialization efforts. Future research is
needed to investigate how role flipping making new hires both the leaders of and recipients
of socialization initiatives facilitates or impedes assimilation into the organization as well as
group and organizational cohesiveness and identity.

Technology Affordance Research

In terms of technology affordance, our study also offers important implications. The affor-
dance lens compels scholars to contemplate the relationship between the potential action
to be taken and technology capabilities (Faraj and Azad, 2012; Lee, 2010; Majchrzak et al.,
2007) as well as the relationship between affordances and outcomes (Faraj and Azad, 2012;
Volkoff and Strong, 2013) . Volkoff and Strong (2013) suggest that it is important to study
the affordances themselves in order to gain a deeper understanding of how change occurs
following the introduction of a new IT. The technology affordance research suggests that
affordances when actualized by different actors even for similar objectives have differing out-
comes for themselves and for others (Bygstad et al., 2016). Our findings extend this research
by demonstrating (1) how affordances of different groups of actors intertwine to produce
outcomes not just for the actors themselves but also for non-actors and (2) how outcomes for
one group of actors produces affordances for another group of actors.
Concerning the first, our findings provide insights into a phenomenon that we will refer
to as the second-hand effects of technology. With their use of the OnBoard system, the new
390 dorothy e. leidner et al.

hires impacted middle managers, non-users of the OnBoard system. In the case of middle
managers, the second-hand effects were the reduced time they had to invest in mentor-
ing new hires, a positive effect, but also the feeling of resentment at new hires getting to
meet senior managers that they had not even met. This feeling of resentment underscored
a deeper concern that they might be disadvantaged by the visibility accruing to some of the
new hires. IS research has long focused on use and users as important components in an
information system. Our findings suggest that non-users are also affected by an IS in impor-
tant ways. Future research should delve more deeply into this issue of the second-hand
effects of technology.
In terms of the second, our research shows that outcomes do not just reinforce the actual-
ization of affordances, as prior research has demonstrated (Volkoff and Strong, 2013), but that
outcomes create new affordances for different sets of actors. In our case, new hires meeting
senior managers as a result of their participation in OnBoard events not only made the new
hires more comfortable around their superiors, but also led to new affordances for senior
managers, who recognized the potential insights new hires could provide into new product
and service ideas and who therefore began soliciting feedback from new hires. This eventually
led to entirely new outcomes the Dev.Ask and iInnovate solutions. Thus, affordances, actors,
and outcomes intertwine with each other and create new affordances and outcomes for new
sets of actors. Moreover, our findings suggest that outcomes stemming from the actualization
of an affordance depend not only on how one user group uses the affordance, but are also
contingent on how another group does, or does not, make use of the same or new affordance.
In our case, this is vividly illustrated by the go-getters receiving benefits that were contingent
upon how the other two groups actualized affordances. Without the work-players and just-
doers actualizing the affordances of participating in OnBoard, the go-getters group would not
have obtained the advantageous socialization benefits like superior recognition and positioning
themselves for promotion. Future research can pay closer attention to the co-dependency of
non-actualization of affordances by one group of actors with the actualization of affordances by
another group of actors.

Limitations and Conclusions

This study’s implications need to be considered in light of the limitations. First, the results
relied on data collection from a single organization. Given that organizations use various
socialization programs, our study raises questions of generalizability. It is possible that new
hires may experience different outcomes in other organizations. While our study does achieve
within-case generalizability (Lee, 1989; Pan and Tan, 2011), our insights may be seen as
untested hypotheses (Lee and Baskerville, 2003). Future research might empirically test the
relationship between the various mechanisms and outcomes. For example, researchers could
compare the relative effectiveness of productivity enhancements to new hires via the two
mechanisms of bureaucracy circumvention and personal development or researchers could
examine other technology that create affordances that enable these same mechanisms. In
like fashion, researchers could examine the relationship of the executive perspective mecha-
nism and cultural understanding, comparing the effectiveness of this mechanism toward the
achievement of shared cultural understanding to other mechanisms used to engender cul-
tural understanding, such as company policy manuals and online courses. One might go even
 organizational socialization and social media 391

further to consider how these mechanisms might be useful in other contexts, such as how
the executive perspective mechanism might be useful in achieving social alignment. Second,
we rely on the new hires’ perception of ESM use, not a quantitative measure of use time or
frequency. New hires might have over or under-estimated their interaction with the system.
Nevertheless, this does not undermine the importance of the relationships uncovered. The
new hires perceived the affordances we uncovered and based upon their self-reported level
of engagement with the system, three distinct categories of users were identifiable. Future
research might extend this by examining how users manage their usage level, increasing or
decreasing their usage to fit what they feel is the “right” or “ideal” usage level. Furthermore,
future research might examine whether users, once they have positioned their usage level
relative to others, feel capable of becoming more engaged or feel trapped in a certain pattern
of usage.
In spite of the above limitations, our study offers an important extension to ESM research.
Previous research on social media in organizations has focused on such important issues as
how organizations can use social media to manage public perception (Benthaus et al., 2016),
how organizations must learn communicational ambidexterity to fully manage social media
as a strategic capability (Huang et al., 2015), how internal social media systems form a
symbolic capital that employees seek to govern (Karoui et al., 2015), and how ESM influ-
ences employee performance (Kuegler et al., 2015). Our research examines a previously
unaddressed phenomenon of how ESM influences the socialization of new hires. Given the
importance of new hire socialization in ensuring a productive and committed workforce,
the incorporation of ESM into the organizational socialization process is of strategic impor-
tance to organizations and the IS organization responsible for designing such systems. Our
study uncovers five important mechanisms through which ESM influences organizational
socialization: bureaucracy circumvention, executive perspective, personal development,
name recognition, and morale booster. That ESM are capable of producing such impor-
tant mechanisms is noteworthy in itself. That these mechanisms enable IT new hires to be
more productive and more comfortable in their new organization is of keen importance to
organizations challenged with recruiting, training, and maintaining a skilled IT workforce.
While our study indicates that ESM usage facilitates the acclimation of new hires into a large
organization and facilitates their productivity, it also shows that ESM can create social strug-
gle, isolation, and resentment among new hires. For this reason, managers should think
carefully about their ESM strategy and consider how to encourage uses that create positive
socialization benefits as well as positive productivity benefits without inadvertently fostering
social divisiveness.

Acknowledgment

A previous version of this paper appeared in the proceedings of HICSS 2015 as Gonzalez, E.,
D. Leidner, and H. Koch, “The Influence of Social Media on Organizational Socialization,”
Proceedings of the 48th Annual Hawaii International Conference on System Sciences, 2015.
Publication was made possible, in part, by support from the Open Access Fund sponsored by
the Baylor University Libraries.
392 dorothy e. leidner et al.

Appendix A

(See Tables 17.6 and 17.7).

Table 17.6 Focus group conducted.

Focus group and focus Date/length Focus group attributes

Core Team, Generation 2 6/27/ 6 IT new college hires (5 males/1 female)
Learn about OnBoard 2009, 1 h Each had < 3 years tenure at FSP
Members of the core team
FSP employees from a local 6/27/09, 10 new college hires and interns, 2 IT
university. Participated in 1h manager, lead University
an OnBoard lunch aimed at recruiter, executive sponsor
helping new hires connect 13 male/1 female
with people who graduated
from their University.
Learn how they use OnBoard and 4/22/10, 7 college recruits; Human Resources
their acclimation to FSP 2.5h Advisor, College Recruiting; Talent
College recruits and FSP’s Supply and Programs, Staffing Advisor;
recruiting staff. Learn Program Manager, College Relations
about FSP’s culture, new Supply and Programs; 3 human resource
hire program and OnBoard managers; 1 human resource recruiter,
initiative 1 IT middle manager, 1 executive, eight
males, 7 females
Employees involved with OnBoard 7/14/10, 3 IT new hires, 1 IT new hire core team
Discuss OnBoard and FSP’s 1h members, 2 managers that oversee the
new hire program IT new hire program, 3 executives, 7
males/2 females
Core Team, Generation 3 7/14/10, 5 new hire core team members
Discuss OnBoard’s evolution 1h 3 males/2 females
FSP’s managers 9/29/11, 4 FSP managers, 2 new hires
Learn about FSP’s college new 3h 4 male/2 female
hire program
FSP managers and new hires 11/12/14, 2 IT managers, 3 IT new hires
Learn what FSP’s new hires are 4h 4 male/2 female
doing and necessary skills Tour
FSP’s new corporate office in
Plano, TX. Meet with FSP’s
lead recruiter and recent MIS
graduates to learn what they
are doing at FSP and how to
improve the MIS curriculum
Discuss IT new hire and intern 9/28/ 2 IT managers, 2 new hires
program and job roles 2016, 1 h 2 female/2 male
Table 17.7 Generative Mechanisms, Affordances, Outcomes, and Examples.

Generative First-order affordances Second-order Outcomes Example

mechanisms affordances
Bureaucracy • Interacting with • Building Productivity Go-Getter: In an effort to meet a deadline used OnBoard to circumvent FSP’s
circumvention Peers Relationships enhancement standard processes and check the status of his needed database change. This
with Peers information, from his fellow new hire, assured him that the database group was
• Finding working on the needed modification and that he’d be able to deliver the project
Resources on time. Compared to his peers, this new hire was able to get the necessary
• Helping Peers information because he had a close relationship with someone in the database
group that he had formed by affording OnBoards to establish peer relationships.
He states: FSP is “bureaucratic with a strong chain of command and complex
processes and procedures.”
All New Hires: To accomplish their work, new hires were frequently left
waiting on access, permission or someone to do something. As an example,
when FSP’s new hire director charged a new hire with making a recruitment
video, the new hire was met head on with FSP’s bureaucracy: he could not use
video or camera equipment in the building without permission from security,
which “often took weeks because security is thorough.” The new hire was able
to reach out to a peer he met through OnBoard. The peer knew exactly with
whom he needed to speak and within days his video request was approved. The
quote below further illustrates OnBoard’s self-efficacy benefits. “The more
people I know during a project, the better I can get things done that I need done.
When I meet somebody in a network or at any social activity that OnBoard
sponsors, later on in a project when I need help on a certain thing like testing,
I can be like, oh I know this person. I can ask him to see if I can get a resource.
An executive describes how FSP’s complexity makes it difficult to learn who to
go to with different issues and the OnBoard alumni group does worlds of good
in shortcutting some of that and helping these kids (IT new hires inclusive of
go-getters, work-players, and just-doers) get up to speed in learning who, what,
when, where, why, and how; knowing how to be comfortable in saying that they
don’t know anything about this and who to go to.”

(continued)
Generative First-order affordances Second-order Outcomes Example
mechanisms affordances
Executive • Interacting with • Building • Cultural Go-Getter: Explains OnBoard’s role communicating with new hires. Many
perspective Peers Relationships understanding of these communications invite new hires to social events like Air Force
• Participating in with Peers graduation. The new hires that attend build relationships with peers and
OnBoard Events • Building superiors and help their peers—especially since most events require that
Relationships the new hires put on the event. Through the process of peers and superiors
with Superiors reviewing the communication, everyone develops a better idea of FSP’s culture.
• Helping Peers ‘I am one of the Communications people. I write the emails, we do a lot of the
meeting invites. We also have a little newsletter, so we keep that on OnBoard
and we also email it out, so that’s a big part of Communications. It’s important
because we’re kind of the face of OnBoard as far as communication out to the
members of the social networking system. When I first started, it was kind of
scary to click send on the email because it was going to like 300 people and
copied to some executives and so forth and I’d think, “I hope this looks good
…”. We have everyone review everything and have it run by other members of
the Core Team, so it’s kind of scary.’
Work-Player: New hires get to “learn about FSP through their superiors’
eyes.” The executives’ perspective is so much different than “what you get down
in the weeds.” Volunteering side by side with executives at events like Wounded
Warriors helped him understand FSP’s mission and its customers. Reflecting
on his Wounded Warrior volunteer experience, he comments: “now more
than ever I understand why I need to build the video system that will allow our
customers to interact with loan officers from conveniently located branches.”
Generative First-order affordances Second-order Outcomes Example
mechanisms affordances
Personal • Demonstrating • Building • Productivity Work-Player: explains how OnBoard helped him enhance his productivity.
development Leadership Relationships Enhancement “OnBoard serves as a way to get to know other parts of the business. I work as
• Participating in with Peers • Attractive Job a business analyst that develops software that logs all incidents (e.g., problems)
OnBoard Events • Building Assignments for management. OnBoard has served me as a resource. There have been cases
Relationships • Comfort where I met this one guy then I needed his help a couple of days later. In the
with Superiors around long-term, I think I am at an advantage from others because I have gotten to
• Finding Superiors know a lot more people throughout the business than those that I met during my
Resources new employee orientation, who I have never seen at an OnBoard event; so, I’ll
• Helping Peers have more resources as far as contacts than new hires that do not participate.”
• Acquiring Just-Doer: mentions that he did not participate much in OnBoard social events;
Insights on however, he did participate in OnBoard planning meetings. The just-doer states:
New Products/
Services I was in one of the OnBoard meetings. One guy was more on the financial
side and he knew a log about the financial system I was working on. I was
able to ask him a bunch of questions to help me understand the system
and what I was supposed to be doing.
Go-Getters: Recounted a technology vice president chastising them about
too many OnBoard social events during the workday and sharing with them
management’s vision for OnBoard. This resulted in a coding competition that
the go-getters orchestrated with FSP’s technology fellows. The competition
challenged new hires to develop an application of their choice on a mobile
platform with which FSP was experimenting. All participants (e.g., go-getters
and work-players) expanded their technical skills. The winners received new job
assignments in FSP’s mobile development division and their application launched
FSP’s development for the Android.
Go-Getter: describes his personal relationship with a superior: “I met the CIO
at a casino night event organized by OnBoard.” This experience allowed the
new hire to chat with the CIO in an informal setting that made it easy for him to
present in front of superiors in formal meetings.
(continued)
Generative First-order affordances Second-order Outcomes Example
mechanisms affordances
Work-Player: Talked to an executive about a defect he’d found in FSP’s
infrastructure. A manager explains:
So we have a person who has been here less than a year. He showed a
defect to a full vice president, who immediately realized that the young
individual was correct. The vice president went into an immediate,
rapid response to fix it. And it wasn’t that the guy [new hire] is so much
smarter than everyone else … it was just that fresh set of eyes saw
something, raised a question, and he was right.
Name • Demonstrating • Building • Comfort Go-Getter: states: “I get to know executives on a personal level that makes
recognition Leadership Relationships around it easier to present in front of them during formal meetings; I learn how to
• Participating in with Peers Superiors better communicate with them.” “The COO of FSP knows twelve members of
OnBoard Events • Building • Additional OnBoard because he works with the on OnBoard on a regular basis; he is on a
Relationships Work Stress first name basis with them.”
with Superiors • Social Struggle Go-Getters: “I had to work on all of the images on the OnBoard site. This led to
• Socializing the creation of a Geocaching site, where I spent time creating rollover graphics.
• Helping Peers This is all done outside of my regular working hours.” A go-getter described his
• Acquiring New experience of meeting an executive at an OnBoard event, who then asked him
Job Skills to run the United Way campaign because of his experience with OnBoard. A
top manager stated that “he has now given OnBoard members (e.g., go-getters)
new tasks, which includes creating videos that help the new hires know things
they need to do at the organization as part of an employee development plan.”
Go-Getter: comments about how the additional responsibilities in his team led
him to additional stress and to transition away from OnBoard.
I was so ready to relieve the stress from that part of my life. Possibly
because of being on the core team, my job responsibilities started picking
up more and more. So, after a year of being on the core team, I had so
much work going on that I just didn’t have any time for that anymore.
Generative First-order affordances Second-order Outcomes Example
mechanisms affordances
Go-Getter: describes his frustration: “it is hard to satisfy everyone; they [other
new hires and superiors] complain about events or voice how we could have
done something better.” Complaints included OnBoard initiatives that didn’t
go well, ideas for other events or how the go-getters could do better. As a
go-getter user put it: “The frustrating thing about being a leader is people saying
how come you guys aren’t doing this or I want this, and I was looking at them,
saying like if you want it, you do it. And it was really funny that we got tons of
complaints saying you guys aren’t doing enough of this and enough of that.”
Work-Players and Just-Doers: For example, participating less frequently
created some negative social struggles including resentment and alienation.
Work-Player: who later agreed to lead OnBoard and thus transitioned to a
Go-Getter explains how OnBoard’s core team initially alienated the new hire
community, “People [fellow new hires] didn’t really appreciate that they were
the core team. They had their own shirts. They distinguished themselves on
the website. OnBoard is supposed to make everyone equal. It is a community.”
Just-Doer: states, “I am married; I can’t play intramurals from 6 to 9. There
are some definite disadvantages to not participating completely. Around here,
just because it is such a big company, it is who you know. A lot of the times
job postings are filled before they are even posted internally. If you play on a
sports team with someone they are more likely to say, “hey we have this position
opening,” before the job is even posted internally.”
(continued)
Generative First-order affordances Second-order Outcomes Example
mechanisms affordances
Morale booster • Demonstrating • Building • Cultural Go-Getter referring to all users: explains how OnBoard helps new hires
Leadership Relationships Understanding learn about the organizational culture and feel supported,
• Interacting with with Peers • Sense of Social OnBoard puts on events just for interns right when they get here. It then
Peers• • Building Support puts together the end of the year OnBoard trip, which was a scavenger
Participating in Relationships hunt at Schlitterbahn. Many of these interns when hired seem genuinely
OnBoard Events with Superiors excited when they come on board. It seems to help them not to be shy or
• Finding feel lost because they are not really sure of what their place is, so I think
Resources that OnBoard events make people feel a lot more comfortable when they
• Helping Peers start by having a role in OnBoard right away and feel important, which
• Socializing helps them learn about the organization as they are establishing their
• Taking a Break work role.
Go-Getter: relied on OnBoard people to support her and listen to what she
was going through, “I was stressed about when a server was going to be ready
for my job. Rather than going through the whole internal process, I was able to
IM my contact. He put me at ease and then I stopped stressing.”
Just-Doer: explains how OnBoard provides a sense of social support,
I knew I would have a support system here to kind of guide me and help
me instead of just being thrown into the workplace. OnBoard helps in
having those friendships and those bonds with people outside of your
area and I think for me knowing what other people are doing, what is
acceptable, and asking them questions that you are afraid to ask your
manager makes it easier.
 organizational socialization and social media 399

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Questions for Discussion

1 How can organizations achieve affiliation and commitment of the workforce? How can
workforce get retained? What is the role of socialization programs? How can these get
achieved through using enterprise social media?
2 How can ESM be used to convey the organizational culture and mission? Discuss the
interlinkage between organizational culture and new hires. How are these affected
through the use of ESM?
3 What power dynamics and redistribution are observed when using ESM?
4 Why the same affordances have different effects on various users and non-users? Could
these effects get achieved using different affordances and mechanisms?
5 Would such socialization programs have different effects in different organizations?
What are the contingent conditions for their success? How should such programs get
implemented and managed?
6 What should the management involvement in these programs entail to ensure these are
successful and sustainable?

Further Reading
Du, W. D., Pan, S. L., Leidner, D. E., Ying, W. (2019). Affordances, experimentation and actualiza-
tion of FinTech: A blockchain implementation study. The Journal of Strategic Information Systems,
28 (1), 50–65.
Karahanna, E., Xu, S. X., Xu, Y., Zhang, N. A. (2018). The affordances–features perspective for the use
of social media. Management Review, 42, 1–24.
Chapter 18

Paolo Aversa, Laure Cabantous and

Stefan Haefliger

WHEN DECISION SUPPORT SYSTEMS

FAIL: INSIGHTS FOR STRATEGIC
INFORMATION SYSTEMS FROM
FORMULA 1

D e c i s i o n s u p p o rt s ys t e m s (DSS), which often process big data using

models and output results through multiple interfaces, increasingly pervade knowl-
edge-intensive professions from traffic control, health, to security, and finance (George
et al., 2014, Constantiou and Kallinikos, 2015, Galliers et al., 2017). Data support
­strategic decision-making in various ways by feeding models and technologies of visuali-
zation and control (Brynjolfsson and McAfee, 2012, McAfee et al., 2012, Baesens et al.,
2014, Loebbecke and Picot, 2015). Recently, scholars and practitioners have agreed on the
bourgeoning importance of DSS and big data for strategic decisions, which—if properly
leveraged—can p­ ositively contribute to firm performance, profit, growth, and competi-
tive a­ dvantage (Davenport and Harris, 2007, LaValle et al., 2011, McAfee et al., 2012).
Information System (hereafter IS) research on big data and decision support systems has
primarily focused on the technological aspects and design challenges of big data (Chen et al.,
2012, 2014) and only recently started considering the organizational dimensions of strate-
gic decision-making with big data (Constantiou and Kallinikos, 2015, Poleto et al., 2015,
Gunther et al., 2017). We argue that the design and use of tools in context deserve more
attention given the well-known challenges of modern DSS, particularly when big data fur-
ther complicate their functioning. This organizational dimension of decision-making builds
on the managerial definition of big data and associated challenges (McAfee et al., 2012): (1)
Sources of data become increasingly diverse, multiple, and dynamic; (2) More stakeholders
in decision-making generate and analyze data using more and more devices; (3) Feedback
speed and volume of data favors the non-human actors (e.g., Artificial Intelligence and
similar solutions).
404 pa o l o a v e r s a e t a l .

In this paper, our aim is to contribute to strategic IS research on DSS by showing the
value for top management of considering the organizational dimension of decision-making
with big data, in situations that are strategic to a firm’s competitive advantage. To do so, we
analyze in detail an extreme case of decision-making with DSS with big data leading to failure
of strategic dimensions in Formula 1 (F1): the 2010 Abu Dhabi grand prix where the Ferrari
team lost the F1 world championship due to what was considered by many a judgment error
in retrospect (Allen, 2010, Collantine, 2010). We choose this event for three main rea-
sons. First, given the clear relation between DSS and performance in F1 and the fact that, in
this field, performance and competitive advantage are unmistakably measurable (Gino and
Pisano, 2011, Marino et al., 2015, Aversa and Berinato, 2017), F1 has been mentioned as an
ideal setting for studying the use of big data (George et al., 2014: 321), and it is particularly
suitable to observe DSS-aided decision-making under pressure. Second, this decision failure
case epitomizes business situations where time is critical and information systems cannot be
separated from their context of use, neither in space nor in time. It is therefore an ideal case
to shed light on the strategic implications of the design and use of DSS for organizations—
which ultimately determine organizations’ success or failure. Third, and importantly, this
case exemplifies the three challenges of big data and creates inroads into a research agenda
in strategic IS with the development of decision-making tools in mind. The development of
tools and information technology artifacts is the domain of design science (March and Smith,
1995, Hevner et al., 2004) that includes the organizational domain by taking into account the
user (Markus and Silver, 2008) as well as the openness of a system that remains incomplete
(Garud et al., 2008, von Krogh and Haefliger, 2010).
In order to analyze this iconic case of DSS with big data under time pressure, we adopt
a practice-based perspective (Nicolini, 2011, Gherardi, 2012). This perspective has gained
increasing interest both in the IS (Arnott and Pervan, 2014, Peppard et al., 2014, Cecez-
Kecmanovic et al., 2014a, 2014b) and strategic management (Wagner et al., 2010, Cabantous
and Gond, 2011, Vaara and Whittington, 2012, George et al., 2014, Whittington, 2014,
Jarzabkowski and Kaplan, 2015) communities over the recent years. As applied to strategic
decision-making with DSS, a practice-based approach invites IS scholars to consider not just
the individuals who make the decisions (together with their cognition) but instead to study the
“practice of deciding.” In other words, this perspective suggests approaching d­ ecision-making
as a situated, social and material practice involving the decision makers, the technologies, and
the specificities of the decision contingencies, in order to study how the relations between
all these elements constitute decisions and ultimately to evaluate their outcomes (Cabantous
et al., 2010, Cabantous and Gond, 2011).
Our practice-based interpretation of the case leads us to question the public interpreta-
tions of the “heroic” individual user of a DSS who succeeds or fails and we reveal three groups
of insights: the first is about the closely connected sets of biases at the intersection of the
human and the machine. IT and DSS with big data are not simply at the service of a boundedly
rational human decision maker, even if that is the sole public interpretation of the events.
A more nuanced analysis of this strategic decision failure reveals the importance of consider-
ing decision-making with big data as a socially situated practice, and hence to consider the
affordances of IT artifacts and the organizational context. It also shows that strategic decision-
making with big data must be understood within a distributed cognition approach; and finally
shows the importance of considering the performative power of the models that aggregate
and structure the data entering the DSS. Ultimately, our analysis shows the importance of
considering decision-making with DSS and big data as a social and material practice given the
diversity of uses of decision-making technologies and artifacts in time and space, while paying
careful attention to their interpretive flexibility or affordance (Zigurs et al., 1988, DeSanctis
and Poole, 1994, Markus and Silver, 2008, Junglas et al., 2013, Bernhard et al., 2014) as
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 405

well as other intangible aspects such as organizational culture (Schein, 1985, Barney, 1986,
McDermott and O’Dell, 2001, Suppiah and Singh Sandhu, 2011).
Overall, our analysis leads to more questions than answers because it invites a reading of
the failure case that goes beyond what the press and observers took as a first conclusion in
order to stimulate research in strategic IS and systems design. Our analysis also enables us to
develop a compelling research agenda for strategic IS scholars, which, in line with recent key
contributions (Arnott and Pervan, 2014, Peppard et al., 2014), pays particular attention to
the role of recent DSS for strategic purposes, including the interactions between the techni-
cal and organizational dimensions of decision-making as a response to the challenges laid out
by authors who recently addressed the business promise of big data (Davenport and Harris,
2007, Jacobs, 2009, Baesens et al., 2014, Lazer et al., 2014, Loebbecke and Picot, 2015,
Poleto et al., 2015). We conclude our paper by discussing implications for design science and
the management of strategic information systems.

Theoretical Background

The strategic use of IS in practice can lead to individual and organizational failure, and it
is one of the foremost challenges of scholarship to help decision makers and support their
potential to make successful decisions (McAfee et al., 2012, Gunther et al., 2017). Several
key strategic domains in organizations e.g., those related to business models, innovation,
and operations are strongly influenced by decisions taken with the help of DSS and big data.
Advances in technology as well as in the theoretical understanding of the role that material
artifacts such as IS play in collaboration and decision-making (Orlikowski, 2000, Leonardi,
2011, Nicolini et al., 2012) have led strategy and IS scholars to increasingly study practice as a
sight of research (Mazmanian et al., 2014, Jarzabkowski and Kaplan, 2015, Scarbrough et al.,
2015). Fundamentally, this is because the strategic outcome of decisions partly depends on
the actual use, in situ, of the tools available to the decision makers. The input and models that
constitute a DSS are as important as the decision makers who employ them towards a desired
outcome, which is why “decision-making ‘disasters’ may stem from the oversimplification or
misrepresentation encoded in tools” (Jarzabkowski and Kaplan, 2015: 538, March, 2006).
The affordances of the tools (e.g., DSS, models, screens with visual representations etc.)
represent our first point of departure when studying a case of strategic decision failure.
DSS have a long history of taking into account groups of decision makers and the types
of tasks they face (DeSanctis and Gallupe, 1987) as well as the processes and approaches
of implementing systems in practice (Earl, 1993). Only more recently have scholars called
for closer attention to the doing and thinking of individuals and their artifacts (Cecez-
Kecmanovic et al., 2014b). In this view on strategic IS, the missing elements include a holis-
tic, integrated perspective rather than different approaches (Earl, 1993): a practice-based
approach “prefers concrete micro actions rather than abstract macro analysis” (Peppard et al.,
2014: 1). Such a practice approach to decision-making may bring to the fore how and why
different uses of tools such as DSS lead to various outcomes and help IS scholars relax some
of the prevalent dualities between human and computer, or between thought and action
(Feldman and Orlikowski, 2011). Yet, this approach is still not fully developed in strategic
IS. This brings us to our second starting point, which considers that cognition is not simply
located in the (head of the) decision maker but is distributed across a variety of entities
(Boland et al., 1994). We shift the locus of decision-making for strategic purposes from
the mind of the individual(s) making the decisions, to the network of artifacts and human
beings involved in the practice of deciding. Approaching cognition and decision-making as
a distributed ­phenomenon (Hutchins, 1995a, 1995b) can help strategic IS scholars to better
406 pa o l o a v e r s a e t a l .

understand how the s­ pecificities of the decision situations, as well as the relations and entan-
glements between human (e.g., decision makers) and non-human (e.g., models, screens,
software, remote partners) entities shape decisions with DSS and big data. It also brings into
the picture the importance of organizational culture as background contingency affecting
ex-ante the decision process design, and ex-post the interpretation of the outcome (Schein,
1985, Barney, 1986).
A third point of departure is equally rooted in long-standing thinking about strategic IS,
namely the status of belief in policy and the role of “semi-confusing information” (Hedberg
and Jonsson, 1978). According to Hedberg and Jonsson (1978), the embedded rules and
models within an IS can stabilize or destabilize organizational action and, therefore, its out-
comes, and competitive advantage. The appropriate triggers for change can be located in the
use of semi-confusing information feeding into the models that organizational actors trust or
follow. Thus, in response to the increasingly prominent role played by models and artificial
intelligence today, a practice approach is well suited to reveal the performative dimension
of strategic IS. Performativity studies focus on the transformative power of models, seen as
intermediary devices between theory and reality (or myth and environment, in Hedberg and
Jonsson, 1978), in shaping practice, and document the feedback loops between reality and
the models embedded in these tools (Callon, 1986, MacKenzie and Millo, 2003). Models—
like those embedded in DSS—are (imperfect) “representations” of the real world, and actors
use them to model and change the reality (Morgan, 2012), so that their nature and enact-
ment shape reality itself in a recursive way. Approaching decision-making from a practice
perspective could help IS scholar better understand how advanced DSS, which are “models”
that integrate both expert knowledge of IS engineers and the knowledge of the users, are
used and manipulated and, ultimately, how the models embedded in the tools play an active
role in decision-making.
In summary, we approach strategic decision-making supported by IS from a practice per-
spective that borrows from pivotal work combining strategy-as-practice with IS research
(Arnott and Pervan, 2014, Peppard et al., 2014, Whittington, 2014). Specifically, we probe
a critical case of strategy failure because, theoretically, such a case may reveal the c­ hallenges
for the design of IS in high resolution due to the collapse of a routine event: multiple actors
interpret, ex-post, what went wrong and reflect intensely upon the sources of failure, not least
because of the dramatic costs for the organization (in our case, Ferrari’s underperformance).
Given the proposed focus on the use of tools in context (Jarzabkowski and Kaplan, 2015)
and on episodes of strategizing (Whittington, 2014), we analyze the causes of failure in detail
starting from three salient issues that appear in traditional research on DSS and ­dominate
a practice perspective today: affordances, distributed cognition, and performativity. Our
effort aims to synergistically continue the route clearly identified by recent contributions
(Arnott and Pervan, 2014, Peppard et al., 2014) towards an integrated perspective that
foster an holistic view of the critical use of DSS, particularly when the combined effect of big
data and pressuring conditions favor erroneous use and highlight systematic pitfalls related to
strategy design and implementation.

Method

Empirical Setting
Our contribution is grounded in events happening in a competitive setting that is ideal to
observe causes and effects of decision-making with big data: the last race of 2010 Formula
1 World Championship, taking place in the UEA, Abu Dhabi Grand Prix (Yas Marina
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 407

r­ acetrack). Former works have already leveraged the Formula 1 setting to advance strategy-
related contributions (e.g., Castellucci and Ertug, 2010, Jenkins, 2010, Aversa et al., 2015,
Piezunka et al., 2018). In this occasion Ferrari’s driver Fernando Alonso unexpectedly lost
the F1 Driver World Championship due to what media and field experts unanimously have
defined as its team’s mistaken “race strategy.” Such strategy was driven by a modern DSS
system that heavily relied on big data (Collantine, 2010).
A F1 team’s most evident strategic objective is winning car races of the F1 World
Championship, thus obtaining the best performance within the season and maximizing the
income derived from superior race performance (mostly through monetary prizes, increas-
ing sponsorship, and enhanced global visibility). Every year, the Federation Internationale de
l’Automobile (i.e., FIA), which is the governing body that rules the sport and the industry, allo-
cates the revenues with the F1 teams on a proportion of their race results. Accordingly, most
of the teams’ efforts and investments are aimed at improving the technological ­performance
of their cars on the racetrack, and thus their sport achievements—which are fundamentally
correlated (Sylt and Reid, 2010, Aversa et al., 2015).
F1 cars are incredibly complex vehicles whose architecture reaches its performance peak
only when the combination of its parts is perfectly balanced (Marino et al., 2015). During the
race, this architectural balance is obtained through an ad-hoc set-up conducted by the engi-
neers in the pits before the race and by the drivers based on the instruments available in the
car cockpit during the race. Each driver can adjust several parameters such as movable wings,
suspensions, engine mapping, weight ballast, and breaking distribution to optimize the func-
tioning of their car. All F1 cars use special high-performing tire sets that are available in differ-
ent compounds and designed to better perform under different weather conditions (e.g., dry,
semi-wet, wet race etc.). As tire sets deteriorate rapidly through the race, F1 teams can call
their cars to the pit-lane in order to change the worn tire set with a set of fresh ones. Today, a
tire change called in technical jargon “pit-stop” (Leslie, 2015), involves 20 people performing
34 actions in around 2.3 s, but overall each car spends between 20 and 30 s in driving through
the pit-lane, changing tires, and getting back into the action of the racetrack (i.e., in technical
jargon this is referred as “pitting” the car). Teams can perform several pit-stops per race (usu-
ally between one and four depending on the specific race and tire characteristics).
Defining the number and timing of pit-stops are two of the most critical decisions for a
team during a F1 race. Teams’ decisions vary massively on both aspects and they determine
success and failure in races. To monitor, analyze, and deploy the best strategy during a race
(vis-a-vis current conditions and competitors’ strategy), each F1 vehicle combines advanced
telemetry systems with a complex modeling simulation (Bi, 2014). Telemetry in F1 is the
transmitting of streams of live data sourced by racing car sensors—there are between 160
and 300 on each car—generating between 1 and 20 gigabyte of data in each race. The output
is sent (often through a proprietary wireless protocol based on around 800 channels) to each
team’s data elaboration center in the racetrack pits and simultaneously rebounded to the
“remote garage” back in the company headquarters in Europe. There, a team made of up to
30 engineers and IT specialists runs simulations that forecast the possible race outcome given
the current car’s data (i.e., race performance, activity of the subparts, and drivers’ biophysi-
cal data etc.), the relative position of the other cars on the track and their most likely race
strategy as well as a variety of other factors. The models that are used to run these simulations
are based on assumptions that derive from the team strategists’ experience, as well as histori-
cal data from previous races—about 60% of the data generated by the car is used in that race,
while the remaining 40% is stored for later applications. The outcome of this modeling is
a selected portfolio of strategic options that is sent back to the “race pitwall” (i.e., the data
analysis center at the racetrack), where the chief race strategist has only a few minutes to
cross check the selected strategic options with the data in his control displays, consult with
408 pa o l o a v e r s a e t a l .

1. Raw data from the car sensors

2. Combined data (real-time + historical;
+ assumptions/predictions)

3. Data elaboration;
Modelling Identification of few
strategic options

Figure 18.1 DSS with real-time big data in Formula 1 racing.

the race engineer in charge of the team’s cars, and make a decision—such as “to pit” the car,
wait until a later lap, or not pitting at all (see Figure 18.1).
The complexity of this process and the incredible (time) pressure during the racing com-
petition push most of the companies to hire entire teams of IT specialists for data telemetry
and data analysis and to spend around 5% of their yearly budget—which is between $150
and $500 million per year—in developing a high-performing and reliable real-time DSS with
big data. F1 championships are won or lost partly because of this process and the events and
practices in racing represent a promising arena for research in strategic IS both due to the
fast-paced decision practices and due to the ongoing development of tools that support stra-
tegic decisions under high pressure.

Data Collection
The secrecy of the F1 world, the risk of retrospective call biases, and the limited number
of acknowledgeable informants to report on such iconic events represent a major challenge
for information collection in this setting. Despite this challenge, we nonetheless managed to
conduct a series of exclusive semi-structured interviews with some of the (very few) peo-
ple directly involved with this strategic decision, namely F1 executives Chris Dyer (Chief
Race Strategist at Ferrari—in charge of calling the final pit-stop strategy), Piergiorgio Grossi
(Chief Information Officer at Ferrari—who supervised the design and implementation of
the DSS), and Otello Valenti (Head of HR at Ferrari—in charge on inquiring on the team’s
responsibilities after the race). These interviews aimed at gaining details and granularity of
the decision-making context, including information on the sequence of events, the nature
of the DSS, the support technologies, and the types of data used, as well as the interaction
between human and technological agents. We also inquired about Ferrari’s organizational
and decision-making culture. In order to complement out “off-the-record” account of the
race, we also interviewed three F1 journalists who oversaw the race from the media box
above the pit-lane. In our interviews with journalists, we covered similar topics as with
the executives, but we also inquired about the rumors, “paddock talks” and the actions not
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 409

reported by the media. All in all, the interaction with our six expert informants accounted
for an average of 2.5 h each, for total of 18 h of engagement. The interviews were recorded,
transcribed, and analyzed in conjunction with the archival sources. As we were concerned
for the small number of informants, we asked F1 professionals whether other people should
have been considered as acknowledgeable informants, but were told that the few people we
had met were those who had made the decision, and no-one could have provided a more fine-
grained report of what exactly happened.
We complemented this unique set of interviews with publicly available real-time infor-
mation about the race. As per usual F1 rules, all communication during the race happens
via radio and the communication with the driver are recorded and available for research
purposes, while the communications between the team members is owned by Ferrari, and
are not accessible. We therefore collected the official Ferrari driver Fernando Alonso com-
munication with the Chief Race Strategist at the pitwall (Chris Dyer).
Finally, in order to have the most comprehensive interpretation of the sequence of
events and attribution of responsibilities for the (failing) decision at Ferrari, we searched
the media database Factiva for all sources (e.g., newspapers, blogs, etc.) in English language
published about the focal event (Siggelkow, 2007) two weeks before and up to one year
later. Keywords like “Abu Dhabi,” “UAE,” “Grand Prix,” “Yas Marina,” “F1,” “Formula 1,”
“Ferrari,” “Alonso,” where combined in multiple forms to retrieve the documents. We ulti-
mately retained 52 documents (around 120 pages) out of the 356 documents that the search
returned.1 These documents include interviews taken close before, during, or right after the
event—which partially reduces concerns for retrospective call biases, and contain detailed
opinions and interpretations from key stakeholders such as Ferrari’s President, Ferrari F1
team CEO, Ferrari’s Technical Director, FIA’s president, other drivers, engineers, mechan-
ics, technicians, Formula 1 journalists, and fans.

Data Analysis
Our analysis was aimed to identify the factors that played a significant role in determining
Ferrari’s race strategy and its unsuccessful turnout. Following standard practices in grounded
theory (Strauss and Corbin, 1990), two scholars intimately familiar with F1 (both from an
industry as well as academic perspective) discussed the materials and reconstructed the
sequence of events and decisions using tables and schemes. We leveraged a set of the most
significant quotes from the event protagonists to enhance our descriptive narrative of the
events. Then, we adopted a systematic approach to concept development and grounded the-
ory articulation, by focusing on aggregating the available evidence to identify a set of explana-
tory constructs (Gioia et al., 2012a). Moving from first-order concepts (i.e., evidence from
the field such as individual “Overconfidence biases”, “Attention bases issues”) we identified
second-order themes at a higher level of abstraction (e.g., “Cognitive biases”; “Factors enhancing
cognitive biases”) and ultimately aggregate dimensions that point to specific theoretical per-
spectives (e.g., “Individual bounded cognition”). In this process, a third scholar (less familiar
with the setting) acted as devil’s advocate (Gioia et al., 2012b: 19, Van Maanen, 1979) and
challenged the interpretation and aggregation results. Questionable interpretations were dis-
carded. Finally, following commons visualization practice (Corley and Gioia, 2004), we built
a table reporting the data structure (see Table 18.2). As we analyzed the data, we carefully
searched for explanations and justification of the decision, and tried to disentangle the chain
of causes that determined the final outcome, particularly when this was grounded in the
contingencies that affected the decision. We also aimed at separating the opinions from the
media and the public, while comparing them to the evidence we collected from the field and
from the interviews with the protagonists.
410 pa o l o a v e r s a e t a l .

Decision Support System Failure: Observations from Formula 1

Chronicle of the Race: F1 Abu Dhabi Grand Prix 2010

On Sunday November 14th 2010, the German driver Sebastian Vettel crossed the finish line
of the Grand Prix of Abu Dhabi as first, and gained the Formula 1 World Championship on a
Red Bull Racing car. This moment became a memorable event in the history of F1 as it repre-
sented an unprecedented case on many aspects. It was the first time Red Bull Racing won the
F1 World Constructor’s Championship; the first time Sebastian Vettel won the F1 Driver’s
Championship; and the first time that Formula 1 raced in Abu Dhabi, UAE. In addition, the
results of the race came rather unexpected: Before the Abu Dhabi’s showdown the Driver’s
Championship ranking had been dominated by Fernando Alonso of the Ferrari team (246
points) followed by Mark Webber of Red Bull Racing team (238 points), while Sebastian
Vettel followed in third position (232 points). Vettel had performed very well throughout
the weekend, obtaining the best lap during Saturday’s qualifying session, and thus the pole
position in the starting grid for the Sunday’s race.
However, the media and the public opinion unanimously agreed that him winning the
world championship would have not been possible without a key strategic mistake made
by the Ferrari team, which unequivocally compromised not only Alonso’s race but also his
possibility to win the F1 Driver’s World Championship title (see among others interpreta-
tions by Allen, 2010, Collantine, 2010). Even in the case of Vettel’s victory of the Abu
Dhabi grand prix, Alonso would have been able to maintain the top spot of the championship
tally—and thus graduating F1 world champion—by finishing in 4th place; and yet the team’s
decision in an early pit-stop timing “contrived to lose him positions so he ended up seventh”
(Allen, 2010). Table 18.1 shows the participants and the final ranking at the end of the 2010
Abu Dhabi race.
At the 2010 Abu Dhabi race, Ferrari’s strategy was in the experienced hands of the
Australian Chief Race Strategist, Chris Dyer. Despite being the first time ever that a F1 grand
prix was taking place at Yas Marina Circuit in Abu Dhabi (UEA), Chris Dyer could count
on his long experience in F1 that started in 1997 with Arrows and continued since 2001 at
Ferrari where he had significantly contributed to winning five World Championships with
Michael Schumacher (one of the most successful drivers in F1 history) and one champion-
ship with the Finnish driver Kimi Raikkonen. The DSS used by the Ferrari team at the 2010
Abu Dhabi race was one of the finest and most advanced in the entire F1 circus: a Monte
Carlo simulation model with deterministic parameters designed by the Ferrari IT department
under the coordination and supervision of Piergiorgio Grossi, at the time Ferrari’s Chief
Information Officer.
At the very first lap the driver Michael Schumacher (Mercedes team) had an accident that
stopped his car and forced him to retire. As often in these cases, to help officers safely clear
the tarmac from the broken car and its debris, the “safety car” was called out to the track
and all F1 cars slowly proceeded in line behind it until works were completed and the track
was restored. During this time, some mid-field cars pitted. Alonso had started the race in
third position and was quickly overtaken by McLaren’s driver Jenson Button in the first lap,
while Mark Webber (2nd in the championship) maintained his 5th position from qualifying.
With Sebastian Vettel leading, it was imperative for Alonso to keep his 4th position, or the
difference in points gained would make Vettel win the championship. In this context, it was
Mark Webber (5th position) who represented the biggest threat for Alonso. Ferrari head
strategist, Chris Dyer, thus mainly based Alonso’s strategy on Webber’s moves. Relatively
early in the race, at lap 11 of 55, Webber’s car experienced rapid tire degradation and was
called to the pits to substitute his worn tire set with a fresh one. In order to maintain the gap
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 411

Table 18.1 2010 Abu Dhabi grand prix statistics.

Rank Driver Constructor Laps Time/retired Start grid Pts Pit-stop at

lap
1 Sebastian Vettel Red Bull-Renault 55 39:36.8 1 25 24
2 Lewis Hamilton McLaren- 55 10.162 2 18 23
Mercedes
3 Jenson Button McLaren- 55 11.047 4 15 39
Mercedes
4 Nico Rosberg Mercedes 55 30.747 9 12 1
5 Robert Kubica Renault 55 39.026 11 10 46
6 Vitaly Petrov Renault 55 43.52 10 8 1
7 Fernando Ferrari 55 43.797 3 6 15
Alonso
8 Mark Webber Red Bull-Renault 55 44.243 5 4 11
9 Jaime Toro 55 50.201 17 2 1
Alguersuari Rosso-Ferrari
10 Felipe Massa Ferrari 55 50.868 6 1 13
11 Nick Heidfeld BMW 55 51.551 14 15
Sauber-Ferrari
12 Rubens Williams- 55 57.686 7 18
Barrichello Cosworth
13 Adrian Sutil Force 55 58.325 13 47
India-Mercedes
14 Kamui BMW 55 59.558 12 33
Kobayashi Sauber-Ferrari
15 Sebastien Toro 55 + 1:03.178 18 37
Buemi Rosso-Ferrari
16 Nico Williams- 55 + 1:04.763 15 46
Hulkenberg Cosworth
17 Heikki Lotus-Cosworth 54 + 1 Lap 20 41
Kovalainen
18 Lucas di Grassi Virgin-Cosworth 53 + 2 Laps 22 1
19 Bruno Senna HRT-Cosworth 53 + 2 Laps 23 1
20 Christian Klien HRT-Cosworth 53 + 2 Laps 24 1
21 Jarno Trulli Lotus-Cosworth 51 Rear wing 19 28
Retired Timo Glock Virgin-Cosworth 43 Gearbox 21 40
Retired Michael Mercedes 0 Collision 8 –
Schumacher
Retired Vitantonio Force 0 Collision 16 –
Liuzzi India-Mercedes

with Webber, Ferrari Chief Strategist “pitted” Alonso soon after Webber (lap 15 or 55). The
outcome of this pit-stop decision was aimed to make Alonso come out of the pit-lane in front
of Webber, but in 12th position, behind drivers who had not pitted yet.
To make Alonso end up in the desired 4th position, Ferrari’s team was assuming Alonso
to be able to overtake the cars racing in front of him. Alonso had in fact a competitive driving
style, with particular skill in overtaking, and his Ferrari had a much quicker pace than the
cars ahead. However, the Abu Dhabi racetrack characteristics were making overtaking very
difficult for all cars, and indeed very few overtakes had happened until that moment. Alonso
surprisingly got stuck behind other less performing cars such as the Renault driven by Vitaly
412 pa o l o a v e r s a e t a l .

Petrov. To win the championship, Alonso could afford to leave only Vettel and other three
competitors in front of him but his early pit had laid another four cars ahead of him—two of
which (Vitaly Petrov’s Renault and Nico Rosberg’s Mercedes) had already pitted opting for
a single pit strategy, and thus would not be stopping again; while others more ahead were
able to pit and still rejoin the race in front of Alonso. As a result, Alonso finished his race in
7th position, thus concluding the F1 Driver’s World Championship in 2nd place with only
1-point difference from Sebastian Vettel.
Post-race analysis highlighted how this outcome could have been reverted, had Chris
Dyer decided not to pit Alonso right after Webber. All other things equal, had Ferrari
left Alonso out and called him to pit around 20 laps later than when he pitted, the situa-
tion would have allowed Alonso to rejoin the race in 4th position and win the world title
(Allen, 2010).

Media and Public Interpretation

All the secondary sources and expert opinions we retrieved converged in attributing to the
individual bounded cognition of the decision maker (Ferrari’s Chief Strategist Chris Dyer) the
main responsibility for the negative result (see the 1st aggregate dimension in Table 18.2).
Heads at Ferrari identified the decision to pit Alonso at lap 15 as the critical error, and
­ultimately blamed Chris Dyer who made that strategic call.

“We made a wrong decision in terms of strategy … we were unduly concerned about the
wear rate of the soft tires and we did not take into consideration the difficulty of getting
past other cars on the track.” Stefano Domenicali, Ferrari F1 Team Principal

External experts also agreed in identifying this a key strategic mistake by Chris Dyer:

“Ferrari snatched defeat from the jaws of victory in Abu Dhabi. Fernando Alonso’s race
hinged on a critical strategic decision to pit early, which left him stuck behind Vitaly
Petrov.” Keith Collantine, Editor at F1Fanatic.com
(Allen, 2010)

Media mentioned, directly or indirectly, several cognitive biases, including Chris Dyer’s
switch of attention from achieving the actual goal (ending the race in 4th position) to out-
racing the closest competitor (Mark Webber, which in the end represented a minor threat
compared to Sebastian Vettel). For example, an expert informer wrote:

“The reason they made the mistake was because they were too concerned with what Mark
Webber was doing and failed to see the bigger picture.” James Allen, F1 Editor at Financial
Times
(Allen, 2010)

Media also blamed Dyer’s overconfidence, and his overly optimistic belief that his driver
(Alonso) could successfully overtake the cars in front. This is probably motivated by the fact
that Fernando Alonso was one of the best drivers in overtaking, held the highest number of
points at the beginning of the race, and was racing with a very quick car. Also, Ferrari was
aware of its proficiency in DSS with big data development, compared to the other com-
petitors in F1. Other key factors were pointed out as to enhancing the negative effects of
such cognitive biases: For example, time pressure during the decision—there were only few
Table 18.2 Data source and data structure.

Data source First-order concepts Second-order themes Aggregate dimensions

Media and external Switch of attention from achieving the actual goal (ending the race in 4th Cognitive biases 0 – Individual bounded
informants position) to out-racing the closest competitor (Mark Webber, which in the end cognition
represented a minor threat compared to Sebastian Vettel). Fernando Alonso
was one of the best drivers in overtaking, held the highest number of points at
the beginning of the race, and was racing with a very quick car (Ferrari)
Time pressure during the decision (there are only few minutes and laps to
ultimately decide whether to pit or not)
Task overload (many different technical tasks must be performed during the Factors enhancing cognitive
racing weekend) Novelty of the situation (first race ever in Abu Dhabi) biases
Direct observation, Possible causes of distractions in the decision place (e.g., cars passing next to 1 – Situated nature of
primary evidence and the pitwall) the decision-making
interviews with the main Visual separation/distance between the decision makers and the actual race process/Affordance
actors
Unique responsibility of the Chief strategist in the decision Ergonomics of the
Organizational culture favoring blaming and “scapegoats.” decision-making situation
Organizational culture
Hierarchical structure (chain of command in decision-making)
Under-specialization of the professional role
Impossibility to“ignore/disregard” the output of the DSS
(continued)
Data source First-order concepts Second-order themes Aggregate dimensions
Direct observation, Several people involved in the analysis of the data (but a single decision maker) Social distribution of the 2 – Distributed cognition
primary evidence and Reliance on DSS to compute the best strategy cognitive task (DM) Material
interviews with the main distribution of the cognitive
actors Radio-mediated communication (possible noise, no visual contact) task (DM)
Impossibility to modify or adapt the DSS during the decision process Temporal distribution of the
The parameters for the underlying assumptions in the model are set before the cognitive task (DM)
race
Assumptions based on complex algorithms, and the DSS which provide inputs Technical specificities of DSS 3 – Performativity
in the decision-making process. and assumptions embedded
No possibility to include intuitive judgment in the decision process or the DSS. in DSS
The model does not provide probability estimates on the different options
(e.g., the decision makers is only informed about which are the best options,
but there is no indication on their probability of leading to a positive outcome,
nor what is the probability difference between these options and the other
alternatives)
The model does not have a learning function (it cannot include some changing
conditions emerged during the race such as the general difficulty to overtake)
Firm-based DSS system (i.e., the instruments tend to focus on data of the Information, data
team’s car, while developing limited insights on competitors)
No historical data on relevant parameters (i.e., likelihood of overtaking in this
specific circuit)
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 415

­ inutes and laps to ultimately decide whether to pit or not—and task overload, as there
m
were many different technical tasks that Dyer had to perform during the racing weekend and
his Chief Strategist role was not seen as a “full-time” activity. Experts claim that Dyer made
a decision

“[that] was wrong not because of a bug (in the DSS), but because of the settings and the
probabilities and so on. What I think is that with a different pressure, with more people
looking at it, or focused mindset, probably it was not so difficult to understand that the
software was wrong and there was something else to do. I am sure that Chris at home, with-
out any data would have not called the driver in. He was kind of distracted.” Piergiorgio
Grossi, Head of IT at Ferrari.
interview, 2015

Finally, field evidence suggested that the novelty of the race (it was the first F1 race ever in
Abu Dhabi), and Dyer’s limited personal experience in that specific track might have biased
his decision and underemphasized the challenges in adopting a race strategy mostly based on
overtaking.
After debriefing on the race result, Ferrari executives decided to fire Chris Dyer, which
terminated his involvement in F1 for 6 years (as in 2016 he came back to F1 with team
Renault).

The Australian Chris Dyer—that everyone pointed as the main cause of the decision in
Abu Dhabi that costed Fernando Alonso the world title—had been late to come back …
Last December, he was fired from his role as head strategist because of his decision on
November 14, for that mistake, for that moment when Alonso entered the box too early, at
lap 16, to copy Webber, and lost any opportunity to win the world title …
(Sanz, 2011)

Today, after more than 7 years from that historical moment, and despite the many techno-
logical and organizational upgrades undergone to prevent such mistakes and improve several
aspects of its their DSS, Ferrari has still not won the F1 Driver’s World Championship.

Towards a More Holistic Interpretation of the Case

While media and expert explain decision-making solely through an individual bounded cogni-
tion lens, our analysis of the case sheds light on three additional challenges beyond individual
cognitive biases. The data we collected about the case, together with the practice perspec-
tive that guided our analysis of this data, first suggest that the material and social context of
the decision-making situation needs to be included in the analysis in order to derive useful
lessons from this failure (see aggregate dimension 1 in Table 18.2). We found for instance
that the ergonomics of the situation played a role: the pitwall location as a decision place can
create possible causes of distractions (e.g., loud cars passing by the pit-lane and thus next to
the pitwall; television broadcasting and photographers shooting the decision-making process;
weather conditions such as hot temperature). Also, despite being placed right next to the
starting grid, the pitwall crew is facing a wall of flat screens that create a visual separation/
distance between the decision makers and the actual race. In addition, our case suggests that
the broader organizational context in which the decision is made is of crucial importance to
understand decision failures. Ferrari’s strong chain of command and hierarchical structure—
with little possibility of bottom up interventions and unilateral responsibility ­attribution
416 pa o l o a v e r s a e t a l .

to the Chief Strategist—as well as a specific organizational culture that favors blaming and
“scapegoats”—and which in recent years brought the team to substitute three acclaimed
senior technical executives (Chris Dyer, Aldo Costa, and James Allison) and two sporting
directors (Stefano Domenicali, and Marco Mattiacci) as a response to disappointing racing
results—impacted on the decision maker. Other elements can help understand the decision
failure, including the under-specialization of the professional role of the Chief Strategist at
Ferrari that at the time was a part-time task for engineering directors; and a clear rule that
prevented from disregarding the output of the DSS. This latter element seems crucial in our
case, as reported by our interviewees. Yet, the DSS was programmed to feedback only two
options and Dyer, who was required by team procedures to pick the best option out of those
offered by the DSS, correctly picked the best of the two. Unfortunately, this was not good
enough to keep the 4th position and win the championship:

“We were deciding between A and B, and we chose A. What we miss in the end was option
C, which at that time still looked a much better option. Option C was quite different from
A and B. A and B were stop-now or stop in 5 laps time, option C was stopping in 15 laps
time or something … Option B was kind of local maximum, it was better than one lap
before, better than one lap after B, better the two laps after B, but it actually it was not
better than 10 laps after B. So, fundamentally, we missed option C. The option C would
have put us in the position to finish fifth or perhaps fourth at the end of the race” Chris
Dyer, Head of Strategy at Ferrari.
interview, 2015

This “third option” (that had reasonably higher chances of winning) was not included
among the DSS options, and following it would have meant for Dyer disregarding the
team rule. This would have not been a problem, in case this option brought Ferrari and
Alonso to winning the championship; but as F1 is a turbulent environment where anything
can happen and results can be reverted by random happenings like a tire puncture, in case
of failure (with a unique decision maker, and a blame culture) this decision would have put
Chris Dyer in hard-to-justify position with his superiors. This point shows the importance
of deeply understanding the organizational culture where the decision takes place, since
this culture shapes decision makers’ perception of what the DSS affords them to do, and
their final actions.
A second important insight that emerges from our analysis as key to understand the sev-
eral causes of the decision failure is distributed cognition (see aggregate dimension 2 in Table
18.2). This notion refers to the sharing the cognitive tasks between people, and with artifacts
across time. In our case, the interplay of Ferrari team members in charge of the race strat-
egy, such as Chris Dyer (Head of Race Strategy), Andrea Stella (Fernando Alonso’s Race
Engineer), and Robert Smedley (Felipe Massa’s Race Engineer), their mutual communica-
tion practices and their interaction with the DSS to define the pit-stop strategy also partly
explains the decision that was taken. For example, it is reasonable to suggest that the location
of the remote garage of analysts in Ferrari’s headquarters (Maranello, Italy) far away from the
race track, influenced the decision-making process. Importantly, recognizing the distributed
nature of cognition leads to a closer analysis of the interactions between the human agents
involved in the decision-making practice and the technology. In fact, the material aspect of
distributed cognition reveals as the decision maker relied on an advanced DSS under the
assumption this would compute the best possible strategy. The decision was communicated
via radio to the other team members—which could reveal challenges due to noise and/or
lack of visual contact; and ultimately the DSS suffered from a temporal distortion because its
basic assumptions and underlying parameters could not be significantly updated during the
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 417

race (for example there was no way to input a lower likelihood of successful overtaking, as
it emerged during the race).
Third and finally, our case suggests that greater attention should be paid to the performa-
tive aspects of the DSS (see aggregate dimension 3 in Table 18.2). Evidence from the field
revealed that complex algorithms in the simulation system and the DSS provided hard-to-
manage inputs in the decision-making process. There was however hardly any possibility
to integrate the emerging decision maker’s intuition in the decision process or in the DSS.
Further, the model did not provide probability estimates on the different options (e.g., there
was no indication on their probability of leading to a positive outcome, nor what was the
probability difference between these options and the other alternatives) nor it included a
learning function that could have refined its outcome based on the difficult overtaking that
every driver was experiencing during the race. In simple words, the system could not update
some key changing conditions that emerged during the race such as the general difficulty
to overtake. Information and data held a performative function as well. In general, DSS
appeared to be relatively “firm-based”—that means that the instruments tended to focus on
data of the team’s car (e.g., focus on Ferrari), while developing more limited insights on
competitors. Further, there were no historical data on relevant parameters of the Yas Marina
circuit (i.e., likelihood of overtaking in this specific circuit) as this was the first time F1 was
racing in UEA.
In summary, Chris Dyer himself publicly acknowledged his mistake but nonetheless
emphasized how this was the best possible solution (and the only allowed) given the two
options that the DSS had suggested and given the overall constraints. A perspective mainly
focused on individual cognitive bias fails to provide a more comprehensive understanding of
the broader challenges in the decision. Simply put, Chris Dyer’s mistake was influenced by a
complex and intricate combination of factors that included not only his personal judgment,
but also a miscalculation of the DSS that was embedded in a system of practices that did not
allow the decision maker to disregard it and a set of contextual features that exacerbated the
situation: such as time and psychological pressure; the impossibility of directly observing
the race; and mediated communication with other key agents (among others). Evidence we
collected from the field by adopting an integrated practice-based perspective suggests that
to reach a deeper and more systemic understanding the interpretation of the facts includes,
in addition to Individual bounded cognition, three other key aspects (1) Situated nature of the
decision-making process/Affordance; (2) Distributed cognition; and (3) Performativity.
The fact that even iconic and visible events involving performance and technology-
driven companies such as Ferrari receive a narrow and individualistic interpretation of
failure and success drives home a sound and compelling case for a more holistic approach
in future research on decision-making. The case from Formula 1 should support such an
agenda as it represents a world that has traditionally pioneered the most advanced deci-
sion support systems (including big data) and is famous for meticulously analyzing every
decision in order to optimize any outcome down to a fraction of a second—as this could
separate the winners from the losers. Every detail counts. Thus, in the following section,
we leverage reflections from this case to discuss implications for strategic IS and suggest a
practice-based agenda.

Discussion: Towards a Research Agenda

As a direct consequence from our insights into the case, we discuss and derive an agenda for
research for IS scholars around three lines of inquiry: (1) The material and social features of
the decision situation, including the specificities of the organizational culture that impact on
418 pa o l o a v e r s a e t a l .

decision-making (e.g., blame culture) and the interpretive flexibility (or affordances) of DSS;
(2) The distributed nature of cognition along three dimensions, namely temporal (i.e. cogni-
tion is distributed across time), social (i.e. the division of cognitive labor between individu-
als), and material (i.e., human beings interact with non-human entities in decision-making
with big data); and; (3) The performative dimension of the models incorporated in big data
decision tools. Along these lines, we generalize to the field of strategic IS and advance a set
of theoretical reflections that deserve attention before including the specific view of design
science and tools that follows from these reflections. The agenda stems from the perspectives
outlined in Table 18.3.

Table 18.3 The three facets of the phenomenon and research questions.

Facets of the Research questions

phenomenon
Situated nature of Features of decision-making What are the characteristics of
decision-making situation, including the elements the decision situation in which
with big data of the organizational culture that actors use the DSS features and
play an important role in the way how these characteristics shape
organizational actors make sense of actors’ perception of the DSS
the decision situation (e.g., blame affordances?
vs. just culture, accountability),
the ergonomics of the decision
situation (e.g., visual and audio
environment). These characteristics
of the decision situation shape how
actors interpret what the DSS allows
them to do
Distributed Fine-grained account of the collectives How does the socio technical
cognition of human entities, and non-human “agencement” of the human
in bigdata entities (e.g., technologies, algorithms) and non-human actors lead to
decision-making making the decision decisions?
Description of the cognitive division of
labor between team members (social
distribution), and of the ways in which
the cognitive decision task is distributed
across time (pre-computation), and
with the artifacts (e.g. DSS) used by
actors to make the decision (material
distribution)
Performative Assumptions embedded in the Ferrari How do the theories and
dimension of DSS have been enacted through the assumptions encapsulated into
decision-making decision-making process. How were DSS actively participate in
tools unexpected events modeled (e.g., decision-making?
safety car, competitor’s change of
strategy; possible accidents) and how
does the responsibility of the decision
maker vary? What is (not) included in
the model?
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 419

The Situated Nature of Decision-Making

Decision-making with DSS and big data is a situated activity, that is an activity that takes
place in a social, physical, and technical environment. Recognizing the situated nature of
decision-making with DSS and big data allows conceiving it as social practice, and thus directs
our attention to the features of the decision-making situation that might influence decision
makers’ perceptions of what the technologies they use afford them to do (Gibson, 1979).
This line of inquiry thus suggests studying how some elements of the organizational culture
influence the way organizational actors make sense of the decision situation (e.g., blame vs.
just culture, accountability) as well as the ergonomics of the decision situation such as the
visual and audio environment (e.g., Schein, 1985, Weick, 1987, Suppiah and Singh Sandhu,
2011). Ultimately, it directs our attention to decision makers’ perception of the interpretive
and material affordance for action provided by DSS with big data decision-making technolo-
gies. Table 18.4 lists some of the research questions associated to a situated approach to DSS
with big data decision-making practice.
First, a practice-based approach to decision-making with DSS and big data shows the
importance of considering seriously the social and material context of deciding with such
technologies, and the features of the situation within which decisions are made. It could
lead strategic IS scholars to explore the practices of decision-making with big data (e.g.,
how do organizational actors use big data DSS?) and to identify the features of the decision
situation (e.g., spatial layout of the work environment) as well as the organization’s deci-
sion culture that impact on decision makers’ perceptions of the affordances of DSS. The
notion of “affordance” (Gibson, 1979, Hutchby, 2001) refers to the idea that the objects and
artifacts that actors use are subject to “numerous interpretation and uses and [do] not allow,
or ‘afford’, any interpretation or use: [their] constituent properties have specific effects
on actions” (Giraudeau, 2008: 294). The literature on affordances in management (e.g.,
Giraudeau, 2008, Orlikowski and Scott, 2008, Jarzabkowski and Kaplan, 2015) shows that
the intentions of the tool’s designers and the material properties of the tools are not the sole
determinants of the ways management tools or technologies are used. These two elements
matter, but the context of use also matters since it influences how users interpret what the

Table 18.4 Studying the situated nature of decision-making with big data.

Research questions Research designs for Strategic IS

1. How do the systems interact with the Study the social decision context of DSS by
use and design of the spatial layout of exploring the micro-practices of decision-making
the work environment when decision- with big data taking into account the perceptions
making is based on big data? of affordances of DSS
2. What are the cultures of uses of big data Compare social decision contexts of DSS,
DSS, and how do they best enhance decision-making cultures with DSS (including
decision quality and performance? affordances) across organizations
3. How do the uses of big data DSS change Compare practices and systems use over time
an organization’s decision-making and across space and the use of similar DSS across
culture (e.g., effects on organizational organizations in comparable contexts
reconfiguration; governance) Given complex causal effects, explore cases
where management designs strategy processes
and governance in coordination with strategic
information systems and big data use
420 pa o l o a v e r s a e t a l .

tools allow them to do, and therefore how they use it—that means their affordances. It is
important to note that, while this approach considers that “the materiality of an object favors,
shapes or invites” a set of specific uses, it also recognizes that the materiality of an object
“at the same time, constrains, a set of specific uses” (Zammuto et al., 2007: 752). In-depth
qualitative studies focusing on the affordances of DSS with big data could help address these
questions and reveal the usage flexibility of such tools.
Second, strategic IS researchers could study the effectiveness of distinct cultures of DSS
use in order understand if some cultures of use of DSS with big data lead to greater decision
quality than others. Strategy researchers have long studied the relationship between decision
quality and decision processes (Fredrickson, 1984, Dean and Sharfman, 1996, Elbanna and
Child, 2007). Yet, this research has yielded mixed results (see Forbes, 2007 for an over-
view) and it is not clear whether such decision processes always pay in terms of decision
quality. Strategic IS scholars could contribute to this debate by bringing in the notion of
affordances. It would be important to consider how analytical decision tools (such as big
data decision s­ ystems) are used in practice, and how different cultures of use of these tools
are related to decision quality. Having decision tools that enable extensive data collection
and ­comprehensive data analysis is important, but might not be enough to improve decision
quality. Ultimately, what matters is the way these tools are used. In-depth qualitative stud-
ies recognizing the flexibility of use of DSS with big data could help better understand how
decision systems improve decision quality: How are big data decision tools used in practice
to make decisions? What organizational capabilities are needed to use big data effectively?
And what cultures of uses of big data DSS best enhance decision quality and performance?
Third, strategic IS scholars could also study how the introduction of big data DSS change an
organization’s decision-making culture. The causal links between the cultures of DSS use and
the organization design and routines are likely to be complex. Cases are needed to ­establish
the effects of the use of DSS with big data on how members of the organization make deci-
sions, collaborate, communicate, and jointly make use of the systems in place. Conversely,
the IS assumes a strategic role and their design is likely to affect the way decision-making
integrates into management functions and controls. Further, the microstructures of a DSS
and the access it provides to data, scenarios, levers for action and so forth, may impact on the
way decisions are taken and the ultimate performance of the decision-making process. Ditto,
the role of the pitwall in F1 represents a stark example for the critical role of a DSS layout in
physical space and its use in time.

The Distributed Nature of Cognition in Decision-Making

Decision-making with big data involves the use of DSS if only to make the volume and speed
of available information manageable for the decision makers. While one set of research ques-
tions relates to the system itself and its use in a specific cultural and organizational context,
there is a second set of questions that points to how cognition—understood as a tempo-
rally, socially and materially distributed phenomenon—operates when deciding with big
data DSS. We need more understanding of the cognitive roles played by big data DSS and
how such ­systems interact with the information processing activities of their users (Norman,
1991). In his seminal work, Hutchins refers to cognitive systems that function inside indi-
viduals, between individuals and their use of tools, in a group of individuals in interaction, or
between a group and their use of tools (Hutchins, 1995a: 373) and points to the possibility
that ­cognition is distributed across time, with the notion of pre-computation. Recognizing
that cognition is diffused beyond the mind of a single individual has important consequences
for an analysis of decision-making with big data DSS, because the decision makers rely on
support systems as well as on each other as a group.
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 421

As the F1 case shows, despite recent technological advances, the DSS are still far from
being fail-safe, and their limitations are exacerbated under pressure and time constraints. In
retrospect, decision makers tend to blame each other rather than understanding the implica-
tions of the distributed agents involved in the decision: for developers of strategic IS a more
precise understanding of decision-making role distributions among human and non-human
agents is fundamental to attribute improvements and innovate.
In Table 18.5, we identify three illustrative research questions to help understand the
distributed nature of cognition when strategic IS plays a key role. First, recognizing the dis-
tributed nature of decision-making with big data DSS directs our attention towards the inter-
actions between human (e.g., the decision makers) and non-human (e.g., big data decision
tools) actors involved in the decision-making situation. This calls for fine-grained studies of
the interactions between decision makers and DSS during the decision-making process. For
example, during a F1 race: Which systems and individuals are involved in which part of the
analysis that leads to a decision to stop the car? Who is reflecting on the impending decision
with which analysis and data?
A second set of questions that IS scholars could investigate relates to the distribution of
decision-making tasks across team members and through time. They could, for instance,
test the interactions between the multiple decision makers and the DSS and ultimately study
the implications of pre-computation on the way decision makers perceive what the tools’
affordances are. In doing so, they could also explore regularities for consistency with inter-
pretations and organizational routines. Third and finally, in-depth investigations of the dis-
tributed nature of decision-making with big data DSS can help understand the ways in which
such tools extend human cognitive capabilities, by limiting some well-known decision biases.
Recent studies in the field of cognitive psychology show that decision biases (Kahneman and
Tversky, 1982; Manktelow, 2012) can be limited by an effective use of material artifacts
(e.g., Villejoubert and Vallee-Tourangeau, 2011, Vallee-Tourangeau et al., 2015). We still

Table 18.5 Studying how cognition is distributed in decision-making with big data.

Research questions Research designs for strategic IS

1. What cognitive roles do strategic Trace the interactions between decision makers and
information systems and decision DSS systems during the decision-making process,
tools play in decision-making? for example during a F1 race. Which systems and
individuals are involved in which part of the analysis
that leads to a decision? Who is reflecting a decision
with what?
2. How is the cognitive task Test the interactions between the multiple decision
distributed across team members makers and the DSS
and through time? Study the implications of pre-computation on the
affordances
Explore regularities for consistency with
interpretations and organizational routines
3. How do big data decision tools Explore the extent to which big data decision tools
extend human cognition and/or improve human cognitive abilities and/or generate
generate new decision biases? (new) biases in decision processes. Study how these
decision tools reconfigure the decision task performed
by human beings and if they change the balance
between intuition and analysis
422 pa o l o a v e r s a e t a l .

do not know, however, the extent to which the use of artifacts, such as big data DSS, limit
some of these biases (and if so, which ones?) and therefore play the role of cognitive artifacts
extending human cognitive capabilities; or, if decision-making practices associated with the
use of big data DSS lead to new types of decision biases. Strategic IS scholars could address
these questions by using a distributed cognitive perspective that study the effects of material
artifacts on decision-making.

Decision-Making in Practice: The Performativity of Models

The concept of performativity, as developed in economic sociology (Callon, 1998, MacKenzie
et al., 2007), directs our attention to the role of expert bodies of knowledge (e.g., theories,
formulae, models) in the functioning of the economy and organizational life. An expert body
of knowledge such as economics does not simply describe an existing external economy
but actively participates in the economy and can even “perform” (or bring into being) that
economy that it is meant to describe (Callon, 2007). Building on this concept, and strategy-
as-practice research, Cabantous and Gond (2011) have argued that rational decision-making
is something that organizational actors make possible by mobilizing, in their daily practice,
decision-making tools rooted in rational choice theory. In using these tools, they bring into
being a specific theory of choice, namely rational choice theory (Cabantous et al., 2010,
Cabantous and Gond, 2011).
Generally, approaching decision-making as a performative practice recognizes the social
activities that produce decisions, and, importantly, directs our attention to the theories (and
assumptions) embedded in the tools used to support the decision-making. This notion helps
capture the ways in which a model (or a “representation of reality”) interplays with the world
it describes, and reveals how the models and the contexts of application wherein they func-
tion are mutually generative and selective. As applied to decision-making with big data DSS,
such an approach questions the relationship between big data DSS and the “reality” they are
supposed to describe by revealing the co-creation and the potential feedback loops between
the properties of the models and the effects of action based on the models. For instance,
MacKenzie and Millo (2003) show how the Black-Scholes-Merton formula for option pricing
progressively acquired a performative power. A central element in their story is the incorpo-
ration of the formula into portable programmable calculators used by traders at the Chicago
Board Exchange. The more traders used these devices to calculate the price of options, the
more the formula became predictive of option prices. In other words, the formula, which
initially did not well represent the reality of option pricing, eventually provided an accurate
description of reality as traders relied on devices that incorporated the formula.
Cabantous and Gond’s idea that rational decision-making, in practice, is performative can
serve as a foil to a deeper exploration of the kind of performative processes and outcomes
associated to the practice of deciding with big data. Table 18.6 summarizes the three sets of
research questions associated to our enquiry into the performative nature of the practice of
deciding with big data.
A focus on the performativity of decision practices first foregrounds the analysis of the
models (e.g., optimization models, multicriteria decision models) that are encapsulated into
decision tools. Such an approach to decision-making seems especially promising in the case
of big data DSS, since these systems include complex “models,” materialized into software
and hardware. These systems are, like any models, intermediary devices between theory and
data; they embody a simplified way of representing reality (Morgan, 2012). As a result, when
decision makers use big data DSS, they rely on these “models” to act, and hence enable the
model to impact on social reality. In this perspective, the relationship between users and sys-
tem forms agencies of assessment capable of enacting different realities (Cecez-Kecmanovic
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 423

Table 18.6 Studying the performativity of big data decision support systems.

Research questions Research designs for strategic IS

1. What is the source and nature of the Establish a base-line for rational decision-making
assumptions and information that enter in terms of time, space, communication, power
big data DSS? relations, cultural contexts etc.
2. What type of performativity can Compare devices and models with practice
emerge from the use of big data DSS? and outcome in terms of effectiveness and
3. What are the implications of using convergence or divergence
big data DSS given their potential Investigate the learning effects and mimetic
performativity? behavior among competitors’ use of big data DSS

et al., 2014b). In other words, models inside DSS are not only representations of reality but
also actors (generators of actions) that impact the reality that the model is supposed to rep-
resent. Yet, we are only at the beginning of research about the models (as representations of
reality and as actors themselves) encapsulated in and enacted in the use of DSS. The specific
inclusions and exclusions of data create relations between the DSS and their users that per-
form reality and can be considered acting in multiple rounds: design, use, reuse, and so forth.
Approaching decision-making with big data DSS as performative practice also raises
a question as to the type of performativity that can emerge from such tools. MacKenzie
(2008) distinguished between three types of performativity. “Barnesian” performativity
happens when the use of a model or formula alters decision-making processes and makes
them more similar to their depiction by the decision model (as in the case of the Black-
Scholes-Merton formula). This type of performativity is rare. Two other more common
types of performativity are “generic” performativity—i.e., when actors use decision model
in their practice —and “effective” performativity—i.e., when the use of a decision model
has an impact on decision-making processes. With which type of performativity—generic,
effective, or Barnesian—are big data DSS models associated?
Third, our case showed that in some contexts, DSS using big data play a key role in
strategy and that some ways of using DSS can have devastating effects. Understanding their
performative potential becomes particularly critical in cases when decision makers need to
act under time pressure and limited information. If big data DSS allow actors to be poten-
tially more performant by making better decisions—partly thanks to the performativity of
the system—then research is compelled to investigate the feedback loops associated with the
use of big data DSS (e.g., their learning effects). How do observers and market participants
understand the performativity of the DSS they use? What are the elements that drive perfor-
mance and how is the impact attributed to the systems in use, the availability and analysis of
big data, and the practice of systems use?
It is here that the three elements of our research agenda converge because decision makers
act with and through DSS. For example, race engineers closely observe competitors’ behaviors
and make decisions based on how they believe others strategize including the recursive loops
implied. This affects the practice of decision-making with the DSS, the distributed cognition
of the decision makers and their organizational environment, and the performativity of the
support systems. Big data, as well as increasing pressure and turbulence in the environment
exacerbate the underlying effects. Only a comprehensive, integrated agenda can link these
seemingly separate questions. Appropriate research designs include the information technol-
ogy explicitly in the analysis (Orlikowski and Iacono, 2001) and theorize within a complex
web of practices, events, and results. We turn to more specific issues for strategic IS next.
424 pa o l o a v e r s a e t a l .

Conclusion

Starting with a closer look at the Abu Dhabi F1 race in 2010 we ground our observations of
strategic decision-making with big data DSS in an empirical analysis of the case and identify
three understudied areas of research for IS scholars interested in improving decision-making
practice and understand such phenomena from a systemic perspective. To have a comprehen-
sive understanding, all three domains need to be carefully considered through an integrated
perspective. First, the affordances of the DSS require attention: organizations specify systems
according to their needs and build special and temporal structures that influence the decision-
making practice, and ultimately contribute to the firm’s strategy. Research could benefit
from attending to a number of questions pertinent when taking a practice-based view on stra-
tegic decision-making. Further, decision-making is a collective task and thinking in organiza-
tions occurs collectively. A practice-based approach to decision-making with big data DSS
invites IS scholars to fully recognize the distributed nature of cognition, not least because
deciding with big data DSS enhances the volume and speed of information and requires
interpretation via multiple decision makers. Lastly, we have argued that a practice-based
approach to decision-making with big data DSS points to the overlooked ­performativity of
DSS and invites strategic IS scholars to build on insights from recent research on model use
and performativity. DSS make extensive use of models with their necessary simplifications
and assumptions. Understanding the working of the assumptions in practice, the feedback
loops, and the performative effects is important in identifying biases and potential failures
ahead of time.
Finally, because our findings challenge the design of the tools themselves, we derive two
implications of our research for research designs in strategic IS. The development of artifacts
in information technology is the domain of design science (March and Smith, 1995, Hevner
et al., 2004, Gregor and Hevner, 2013). As data stems from multiple sources within and
beyond the organization, a first implication of our research is that the development of any
DSS system needs to take into account the dynamic technical environment of a context that
is being developed by multiple stakeholders. This could result in the need to design for
incompleteness (Garud et al., 2008) and close consideration of the relationship between the
technological artifacts and the users (DeSanctis and Poole, 1994, Markus and Silver, 2008).
In particular, affordance and the potential openness of the design to other o­ rganizations
and individuals in the environment (von Krogh and Haefliger, 2010) point to implications
for design science. In a competitive arena such as F1, where rules and standards dictate a
framework for innovation of the automotive and support technologies (Aversa et al., 2015),
the focal organization is not alone and the decision maker does not act in isolation. Taking
the team-level knowledge, dynamics and the competitive dynamics into account creates
­additional complexity for the design of the system (Erden et al., 2008).
Second, the design of IS follows feedback cycles in as far as the competent building of
artifacts draws on knowledge in rigorous implementation and on problems in relevant
implementation (Hevner, 2007). In this respect, design science influences and is influenced
by the practice of use (DeSanctis and Poole, 1994, Markus and Silver, 2008, von Krogh
and Haefliger, 2010) and new research designs should focus on how the perception, treat-
ment, and interpretation of data systematically influence decision-making, if they do. This
is part of the DSS yet more subtle than the programming itself. Following the example
of F1, the s­ensory data from the car on the racetrack may receive a certain weight in the
decision-­making process relative to the communication data. This relative weight of data
sources, the time delays, and other factors are programmed and modeled into the DSS and
may favor ­specific outcomes. Such outcomes, if systematic, may in turn reinforce require-
 d e c i s i o n s u p p o r t s y s t e m fa i l ur e s 425

ments to be programmed into the system and support the models chosen, hence an effective
­performativity of the DSS. A hypothesis at this point, we suggest research design in strategic
IS to carefully appreciate the potential performativity in the design through the models used
and the assumptions made.
Scholars have highlighted how understanding the implications of DSS and big data is (and
will increasingly be) at the core of firms’ performance and competitive advantage. Such
technologies underpin the creation, development and performance of strategic decisions
related to business models, work-practices, stakeholder interests, organizational models
(Gunther et al., 2017). Failing to appreciate the nuanced implications of such contemporary
­phenomena can lead to severe costs and organizational failure. Hence, we posit that fully
understanding (in an integrated fashion) the effects of decision-making with DSS in practice,
represents a paramount aspect that deserves scholarly and professional investigation.
The race to lead the “big data revolution” (Mayer-Schonberger and Cukier, 2013)
keeps going within and beyond the racetrack but challenges remain compelling. Formula
1, again, exemplifies this situation. Particularly after Ferrari’s fiasco in 2010, teams have
significantly increased their investments in trying to optimize these critical decision-­
making ­processes. Yet, the challenge is far from being fully resolved. For example at the
2015 Monte Carlo Grand Prix Mercedes failed to transform the information of its DSS
and, by making a wrong pit-stop call, jeopardized their driver’s, Lewis Hamilton’s, vic-
tory (Johnson, 2015). The software as well as inter-team communication were blamed for
the mistake, which is p­ articularly noteworthy given the fact that Mercedes was recently
awarded for developing the best DSS visualization tool in F1 (Caskill, 2015). All in all, this
confirms that even in fields that pioneer the most advanced DSS with big data, unveiling
the perils and pitfalls of technology-based decision-making still represents a timely and
compelling task with major strategic ­implications. We hope that our agenda will stimulate
scholars and executives’ inquiring and ultimately contribute valuable insights for theory
and practice.

Note
1 All materials are available upon request, including videos of the race and audio commentaries.

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Questions for Discussion

1 What do you think the role of AI will entail in the future? Would AI and big data be
useful in high pressure, uncertainty and turbulent environment/conditions?
2 How are knowledge-intensive professions changing because of increased digitalization,
use of decision support systems and big data?
3 Utilize the Power Matrix (chapter 10) to evaluate the role of the Chief Strategist and
the Decision Support System in strategic decision-making. How is power redistrib-
uted?
4 What is the role of organizational culture, distributed cognition, social material
­practice, affordances, technology and judgement in strategic decision-making? How
does organizational culture affect knowledge sharing and strategic decision-making?
5 How should decision-makers use algorithms and big data to inform decisions?
6 How could technology and big data be used to avoid errors and for prospective
­decision-making, rather than retrospective as outlined in the chapter?

Further Reading
Dremel, C., Wulf, J., Herterich, M. M., Waizmann, J. C., Brenner, W. (2017). How AUDI AG
Established Big Data Analytics in Its Digital Transformation. MIS Quarterly Executive, 16(2).
Ebrahimi, S., Hassanein, K. (2018). Data analytics competency for improving firm decision making per-
formance. The Journal of Strategic Information Systems, 27(1), 101–113.
Chapter 19

Sue Newell and Marco Marabelli

STRATEGIC OPPORTUNITIES
(AND CHALLENGES) OF
ALGORITHMIC DECISION-MAKING:
A CALL FOR ACTION ON THE
LONG-TERM SOCIETAL EFFECTS
OF ‘DATIFICATION’

T h e l a s t d e c a d e has witnessed the widespread diffusion of digitized

devices that have the ability to monitor the minutiae of our everyday lives (Hedman
et al., 2013). Nolan (2012, p. 91) argues that ‘Global IT has enabled information on
most everything to flow most everywhere at stealth speed’. The data trail we leave is
increasingly used by companies to manage employees and target and personalize products
and services for clients and customers, based on developing algorithms that can make
predictions about individuals by recognizing complex patterns in huge data sets compiled
from multiple sources. In this article we consider some of the observed and potential
consequences of this new type of data-driven, algorithmic decision-making, illustrating
that while it can offer strategic opportunities for business and sometimes benefits for
individuals, there are also costs, hence raising societal issues: as Galliers et al. (2012)
indicate, there can be a difference between how business is benefiting and how society is
benefiting – or otherwise.
The IS literature has already raised social and ethical concerns associated with IT (Smith,
2002; Smith and Hasnas, 1999), and in particular those concerns are often associated with pri-
vacy issues (e.g., see Belanger and Crossler, 2011; Chan et al., 2005; Coll, 2014; Greenaway
and Chan, 2005). However, few IS studies have linked these concerns with the digitization of
our everyday life (exceptions include Abbas et al., 2014; Boyd and Crawford, 2014; Lyon,
2014; Slade and Prinsloo, 2013), and fewer still have discussed this phenomenon in relation
 d at i f i c at i o n : o p p o r t un i t i e s a n d c h a l l e n g e s 431

to algorithmic decision-making (one exception being Schroeder and Cowls, 2014). Here,
we focus on the consequences of ‘algorithmic decision-making’, which occurs when data are
collected through digitized devices carried by individuals such as smartphones and technolo-
gies with in-built sensors – and subsequently processed by algorithms, which are then used
to make (data-driven) decisions. That is, decisions are based on relationships identified in the
data, and the decision maker often ignores why such relationships may be present (Mayer-
Schonberger and Cukier, 2013). While these data-driven decisions made by businesses lead
to personalized offerings to individuals, they also result in the narrowing of their choices
(Newell and Marabelli, 2014).
Given the above, we argue that algorithmic decision-making has societal consequences
that may not always be positive and, in this Viewpoint article, we aim to articulate such
concerns. In so doing, we bring to the fore the issues related to algorithmic decision-mak-
ing and highlight the interdisciplinary nature of this topic (Chen et al., 2012; Smith et al.,
2011). As we have indicated, some work has been done to shed light on the social implica-
tions of the widespread diffusion of digital devices in the IS community, but also in other
disciplines such as sociology – as in the work of Lyon (2001, 2003, 2014), Doyle et al.
(2013), and Ball (2002, 2005) on impacts of monitoring and surveillance on society, and
of Castells et al. (2009) and Campbell and Park (2008) on societal changes determined by
the diffusion of digital devices. Here, we call for IS research that examines (and challenges)
corporations (and governments) in terms of the strategic decisions that are being made
based on data that we are now constantly providing them (see also MacCrory et al., 2014),
whether we realize it or not. Next, we define some key concepts and set the boundaries of
our analysis.

Big Data, Little Data, and Algorithmic Decision-making

Data-driven or ‘algorithmic’ decision-making is based on collecting and analyzing large ­quantities

of data that are then used to make strategic decisions. Algorithmic decision-making incorporates
two main characteristics: firstly, decision-makers rely on information provided by algorithms
that process huge amounts of data (often big data, as we will explain next); secondly, the reasons
behind the ‘suggestions’ made by the algorithms are often ignored by decision-makers (Mayer-
Schonberger and Cukier, 2013). We expand on both characteristics below.

Digitized Technologies and Data Analytics

Data that originate from digitized devices are increasingly permeating our everyday lives.
These digitized devices have the ability to keep track of and record what we do. As a result,
somebody else may eventually be able to use the data thus produced – often with purposes
different from those originally intended. Thus, we focus on ‘digital traces’ – all data pro-
vided by individuals (1) during ‘IT-related’ activities, captured from social networks, online
shopping, blogs, but also ATM withdrawals, and other activities that will leave a ‘trace’
(Hedman et al., 2013; Wu and Brynjolfsson, 2009) and (2) that are captured through tech-
nologies that we use that have in-built sensors. These technologies include LBS (Location-
Based Technologies) that are IT artifacts equipped with GPS systems and so have the ability
to collect a user’s location such as a smartphone with GPS – see Abbas et al. (2014) and
Michael and Michael (2011) for social implications – and other surveillance and monitoring
devices – see the previously cited work of Lyon (2001, 2003, 2014) for privacy implications.
It is clear that the huge amount of digital trace data that are collected through the many dig-
itized devices that we now use to support our daily activities fall into the ‘big data’ umbrella.
432 sue newell and marco marabelli

The big data (analytics) concept is very similar to the more familiar (and less sexy) business
intelligence that has been studied for the past decade or so (e.g., Negash, 2004; Power, 2002;
Rouibah and Ould-ali, 2002; Thomsen, 2003). McAfee and Brynjolfsson (2012). Following
Gartner (2001) definition, it is the three Vs of big data1 on which we focus: Volume (the
amount of data determines value); Variety (data arise from different sources/databases and
are cross-matched to find relationships), and Velocity (data are generated quickly). Big data
encompasses much more than this individually generated data trail (see Chen et al., 2012 for
a broad discussion of big data analytics) but here we focus just on this everyday digital trail
that we each leave. That is, we focus on those big data that are generated by individuals dur-
ing their everyday lives (and are captured as digital traces). In other words, we focus on data
that arise as a consequence of each of us now being a ‘walking data generator’ (McAfee and
Brynjolfsson, 2012, p. 5). This attention to the digitization of our everyday life allows us to
narrow the focus of our inquiry and to expand on concerns regarding the use (and abuse) of
one aspect of big data analytics that concerns algorithm-driven decision-making and associ-
ated personalization – to which we now turn.

Algorithmic Decision-making
(Big) data captured through digitized devices are processed by algorithms aimed at predicting
what a person will do, think and like on the basis of their current (or past) behaviors. These
algorithms can predict particular outcomes, as with the numbers of ‘friends’ on Facebook
being used to predict a person’s credit risk (www.google.com/patents/US8560436) or an
individual’s Facebook ‘likes’ on a college Facebook page, used to predict her/his willingness
to become a donator (www.nytimes.com/2015/01/25/technology/your-college-may-be-
banking-on-your-facebook-likes.html7_r=0). Interestingly, these predictions often repre-
sent a black-box: while humans must decide what to measure and produce the algorithms
to analyze the data being collected, these decisions do not necessarily involve understanding
the causes and consequences of particular patterns of behavior that are identified (Mayer-
Schonberger and Cukier, 2013). Rather, it is deemed sufficient that connections are discov-
ered. Traditionally, making decisions has been a human-centered, knowledge-based activity
with humans discriminating on the basis of an understanding of theory or context (Tsoukas
and Vladimirou, 2001). By contrast, algorithmic decision-making means that discriminations
are increasingly being made by an algorithm, with few individuals actually understanding
what is included in the algorithm or even why. In other words, it is seen as being sufficient
that an algorithm is successfully predictive, never mind if the reasons for the associations
found in the data from different sources are unknown. We argue that this is likely to create
problems when no one in a corporation really understands why some decisions are made.
For example, one could argue that the last financial crisis was at least partially a product of
this problem, with the algorithms that predicted the pricing for mortgage-backed securities
clearly not taking into account all the risks while at the same time not being subject to ques-
tion because the basis of the algorithm was neither clear nor easily accessible, either to the
senior managers in the financial institutions where the algorithms were being used or to the
credit rating agencies who were evaluating these products (Clark and Newell, 2013).
In sum, here we focus on data collected through digitized devices that we increasingly
use to support our everyday activities. This is ‘big data’, because the three (or more) Vs of
Gartner’s (2001, 2012) definition apply. In fact, data coming from digitized technologies
are high in volume because of the widespread diffusion of digital devices that allow access
to social networks at any time, as well as all other types of technologies that record what
we do even if we do not ‘own’ them (e.g., surveillance cameras, or an ATM card machine,
where the usage information goes into our bank’s database). Thus, data come from ­different
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sources (variety). For instance, data used for making ‘algorithmic decisions’ may come
from a combination of contributions on social networks and LBS systems (e.g., a ‘check
in’), or spending capacity of consumers associated with personal facts of individuals (e.g.,
the partner’s birthday). Data velocity is clearly another characteristic of the digitization of
our everyday life, because we are ‘walking data generators’ 24/7 and ‘More data cross the
Internet every second than were stored in the entire Internet just 20 years ago’ (McAfee and
Brynjolfsson, 2012, p. 4). On this point, it is worth noting that most of the digitized devices
that collect such individual level activity data fall under the Internet of Things (IoT) umbrella
(Miorandi et al., 2012; Xi et al., 2012). However, we do not restrict our analysis to those
digitized devices that are connected to the Internet because some devices remain (for now)
independent of the Internet (e.g., some OBD devices). One such example is provided by
Progressive Insurance in the USA (www.progressive.com), which provides a memory stick
that is plugged into a car’s onboard computer and the data must be uploaded to the insurance
company rather than automatically sent via the Internet.

Potential discriminations associated with the (ab)use of algorithmic

decision-making: big and little data
The use of algorithmic decision-making associated with data coming from the digitization of
our everyday lives improves the capacity of a business to make discriminations. Thus, busi-
nesses have always discriminated in terms of to whom they offer products and services, because
products and services are targeted to different audiences (we cannot, unfortunately all afford
to buy a Bentley car). With algorithmic decision-making they are simply taking this a step
further. For example, they can now much more precisely target and personalize offerings to
customers and potential customers – those predicted to buy particular products or services.
As a more specific example, a car’s computer that monitors speed, usage of brakes, horn,
lights, etc. (such as Progressive Insurance’s OnStar OBD technologies mentioned above) has
the ability capture all these details that are then sent to data centers. Computers then ana-
lyze the (big) data and insurance companies are able to use the results to discriminate (e.g.,
by charging young men higher premiums because the data indicate that they – ­generally –
drive less safely than other categories of drivers). Such data-driven decision-making has been
questioned because it can go against the ethical principle of equal or fair treatment. This is
exemplified in the recent case in the EU, where insurers are required to no longer use statis-
tical evidence about gender differences to set premiums. Thus, despite the fact that gender
differences are clear from the data (e.g., young male drivers are ten times more likely to be
killed or injured than those – of both sexes – over the age of 35; women live, on average,
longer than men), it is considered to be discriminatory (following an EU ruling that came
into effect in December 2012) to use this trend evidence to differentiate between premiums
(e.g., car insurance or actuarial rates) for men and women. The point about this change in
the law is that it was considered to be discriminatory because, for example, while young men
in general may drive more recklessly and so be more prone to accidents, an individual young
man may not and would therefore be discriminated against when insurers set premiums
based on group trends observable in collective data.
While using big data and algorithmic decision-making to observe trends and so discrimi-
nate between groups of individuals can have social consequences that are potentially unfair,
this targeting can now be taken further when data are used not to predict group trends but
to predict the behavior of a specific individual. This is sometimes described as ‘little’ data –
although it should be noted that little data are actually based on big data but are simply used in
a more targeted way. Thus, little data focuses on the everyday minutiae of specific individu-
als, using computing capacity to collect extremely granular data (Munford, 2014). Drawing
434 sue newell and marco marabelli

on the previous example of a car’s OBD, little data can now allow us to concentrate on a
specific driver, and we can decide whether an individual is a good or bad driver based on the
sensor data from his/her car. Sensors have the ability to capture individual’s behaviors and
are widespread. As an illustration, consider that approximately 85% of handsets now have
a GPS system chipset installed (Abbas et al., 2014). By using sensor data, the insurer would
not be setting premiums based on the general trends in accident rates between groups, but
instead would base their calculations on the actual driving habits of an individual. However,
if little data are more ‘objective’ in terms of discriminations made by corporations, it prob-
ably poses more issues for societies given the observed or potential social consequences; for
instance, in terms of an individual’s privacy (Lyon, 2014) or in terms of the exploitation of
the vulnerable – an issue that IS scholars seem not to have fully addressed as yet.
It is then clear that algorithmic decision-making poses two main concerns in terms of big
and little data: first, (in terms of big data) this data trail provides the opportunity for organ-
izations to move to algorithmic decision-making, which McAfee and Brynjolfsson (2012)
argue, is superior to traditional ‘HiPPO’ (highest-paid person’s opinion) decision-making.
Algorithmic decision-making is, they argue, superior to human judgment-based decisions
because of all the inherent biases in human judgment (Hodgkinson et al., 2002). However,
we question this assumption because making decisions on the basis of big data (and algorithms)
might create unfair discriminations. Second, we argue that monitoring an individual’s behav-
ior poses societal concerns since ‘the digital artifacts will be able to remember where they
[individuals] were, who used them, the outcomes of interactions, etc.’ (Yoo, 2010, p. 226)
and this often happens without individuals even being aware that they are being monitored.
Thus, we posit that undertaking research to assess these societal harms, so that corporations
can be held responsible and citizens become more aware, can potentially be very useful.
Below we identify three tradeoffs that involve issues associated with the use by corpora-
tions (and governments) of data from digitized devices that support our daily activities, and
in particular with the strategy of using data analytics. The first of these considers the privacy
of individuals versus security for society – an issue that is preeminent in people’s minds fol-
lowing the recent terrorist attacks, particularly in Paris, in January 2015.

Tradeoffs and Societal Issues Associated with Big (and Little) Data

Privacy versus Security

Digitized devices can improve security, and examples include the security-tracking systems
adopted for prison populations, when prisoners are released but are required to wear a track-
ing ankle-bracelet. These systems are aimed at improving the overall security of our society,
with the sensor acting as a deterrent for prisoners to escape or commit a crime when they
are on parole. Other instances where security is enhanced by everyday digitized devices is
in the capacity of sensors to trace a stolen device, or a kidnapped child, as in the case that
occurred in September 2013 in Texas, where the Houston police were able to trace the
whereabouts of a kidnapper by tracing the iPad that he had with him in his car (http://abc13.
com/archive/9242256/). A similar example relates to police authorities being able to detect
a crime because it is all ‘caught on tape’, for example with sensor-activated security cameras
and, potentially, Google Glass or other camera-based devices that are now routinely carried
by many.
All these examples of companies, government agencies and private individuals using digi-
tized technologies to increase security come at some costs in terms of individuals’ privacy.
In terms of locating a lost smartphone, it has to be the user who, deliberately, accepts giving
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up her/his (right of) privacy by activating the ‘find my phone’ option (https://itunes.apple.
com/us/app/find-my-iphone/id376101648?mt=8). The example of Google Glass or digital
cameras worn, for example, by cyclists or skiers to record their journey, is more complex
since the privacy that a user gives up affects others’ privacy, thus representing a shift from
the individual to the societal level. In some circumstances one’s use of social software appli-
cations affects others’ privacy, as for example, for people who are tagged in somebody’s
Facebook profile without them knowing. Perhaps not surprisingly, privacy advocates have
argued that in these types of exchanges consumers are justified in expecting that the data they
collect and share should remain private among those to whom it was originally disclosed –
dependent on users’ risk perceptions, as noted by Gerlach et al. (2015) – rather than being
shared with third parties who may subsequently behave opportunistically (Beldad et al.,
2011; Petronio, 2002).
Thus, it is clear that improving security across society, based on digital devices, can impact
on individual’s privacy. Some companies are doing something about this. For instance,
Facebook no longer allows a user’s ‘wild tagging’ and, instead, an automatic email is sent to
a user who is tagged, for approval (or at least this is a configurable option under privacy set-
tings). Yet, the exponential diffusion of tracking software embedded in social networks such
as Facebook and the sensors and cameras in many other digital devices lead us to think that it
will be hard for organizations (or governments) to regulate how individuals use responsibly
technologies that enable tracking (i.e., in a way that balances security and privacy). The soci-
etal issue is raised because the move towards using devices and applications to gain increased
security comes at the expense of reduced privacy. This points to a question about whether
users (and more broadly society) want to give up some security potential to ensure more pri-
vacy (Culnan and Williams, 2009; Velasquez, 2006). This is a decision that citizens need to
debate with their politicians (Dinev et al., 2008) and that governments in turn need to debate
with businesses, since it is businesses that collect and analyze digital traces. This is exempli-
fied by the Lee Rigby case (the British soldier killed on a street in London), where Facebook
was accused of not helping to protect security because it did not use its analytical capability
to detect and report the fact that the killer was posting that he was intending to commit just
such a murder (www.theguardian.com/uk-news/live/2014/nov/25/lee-rigby-woolwich-
inquiry-report-published-live-coverage).
Other privacy/security tensions are reflected in the current debate on whether US police
officers should wear cameras following recent cases involving police officers’ improper
use of force (see for instance the developments over the Michael Brown case www.cnn.
com/2014/12/04/us/eric-garner-ferguson-body-cameras-debate/). Here, a sensor tech-
nology would be employed but would not actually generate data that will be processed by
algorithms, since the camera records would be reviewed only in particular circumstances.
However, this and other types of sensor are pervasive (Lyytinen and Yoo, 2002) (and inva-
sive), and the data (e.g., the camera records) would be stored. In such circumstances, we do
not know whether in the future somebody will develop an algorithmic-based decision system
to analyze the data (e.g., to assess the performance of police officers). It is thus clear that the
widespread diffusion of digitized technologies can be harmful to individuals’ privacy while
justified by corporations and governments in the name of public security – a tradeoff widely
discussed by Lyon (2003, p. 79) in terms of ID cards that are supposed to improve national
security in that he raises the issue of whether as citizens we are willing to ‘pay the price in
liberty for security’. This tradeoff, then, raises complex social issues because of the ready
availability of these data and because of the capacity of algorithms to discriminate almost in
real time – for instance, to determine that particular categories of people (based on race,
income, job, etc.) are more likely to commit a crime, and could, therefore, be subjected to
higher levels of policing and potentially also face discrimination in other areas (Lyon, ibid).
436 sue newell and marco marabelli

This, therefore, pits an individual’s privacy against the security of society, but also suggests
broader social issues in terms of freedom versus control, as we articulate next.

Freedom versus Control

The ‘datification’ of everything means that we can use devices to constantly track every deci-
sion made and place that a person visits (be they an employee, a citizen, or our child), and
use these data to monitor and control (some now prefer to use the term ‘nudge’) behavior
(Whitman, 2011). This second tradeoff between freedom and control is more complex than
the previous one because, here, individuals can be aware that they are being controlled. This
is informed control (e.g., because they are required to carry RFID badges at the work place or
maybe even have chips implanted under their skin, another example of invasive technology –
www.bbc.co.uk/news/technology-31042477 – or because they decide to use an ­electronic
collection system in their car to drive through tolled roads and bridges). However, they can
also be controlled without knowing that they are being monitored. This is uninformed con-
trol. Uninformed control happens, for instance, when tracking cookies monitor someone’s
online activity, or, more generally, when ‘second hand’ use of data originating from digitized
technologies are used.

Freedom versus Informed Control

Surveillance based on parents tracking their children’s every move (e.g., using an applica-
tion on the child’s smartphone) is clearly informed control and would allow parents to feel
that they are in control of their children’s movements. However, the loss of freedom (and
privacy, as we have already pointed out) of those subjected to this surveillance might have
far-reaching effects, for instance in terms of children’s feelings of personal responsibility.
After all, we know that punishment is not always an effective deterrent because, once the
punishment is removed, the individual often resorts to the prior (undesirable) behavior; so,
if individuals conform only because they know they are being monitored, will their behavior
change once the monitoring ceases? With constant surveillance, like punishment, while we
may change behavior, the beliefs about what is appropriate or inappropriate may remain
(Podsakoff et al., 1982; Staples, 2013). This tension, then, is between improved control (by
business but also government or private citizens) at the expense of individuals feeling that
they have some freedom and autonomy – a feeling that we know has a significant influence
on motivation in the long-term (Hasan and Subhani, 2011). One such example is Hitachi’s
new digital identification badge that collects data on individual employees’ exact location
within an office, records who the person has spoken to, for how long and how energetically
(www.cnn.com/2014/02/02/opinion/greene-corporate-surveillance). Adopting this kind
of technology as a strategy for constant monitoring may, however, affect employees’ motiva-
tion and perhaps also their capacity to produce disruptive innovation. Indeed, productivity
might benefit (at least in the short term) from such an aggressive approach to control in the
workplace. However, the longer-term consequences of such constant surveillance may be
more problematic. For instance, Lyon (2003, p. 20) points out that a ‘surveillance system
obtains personal and group data in order to classify people and populations according to
varying criteria, to determine who should be targeted for special treatment, suspicion, eligi-
bility, inclusion, access, and so on’, arguing that such ‘social sorting’ leads to long-term dis-
criminations. He states that ‘data about transactions is used both to target persons for further
advertising and to dismiss consumers who are of little value to companies’ (ibid,; 1), leading
to long-term social differences. Moreover, breakthrough innovation, which is more risky
and leads to more frequent ‘failures’ (O’Reilly and Tushman, 2004), might be jeopardized
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because individuals who are constantly monitored are less likely to expose themselves to fail-
ure in front of their peers and superiors. This suggests that those making strategic decisions
about how to use this new tracking technology (whether business, government or private
individual) might want to think about reducing the amount of surveillance on employees,
customers, family members or citizens since this would be the price they might want to pay
for allowing people to feel in control of the decisions they make – in other words, being
informated and not automated to use the language of Zuboff (1984). This supports our argu-
ment that a tradeoff emerges between control and freedom in the context of the digitization
of our everyday lives.

Freedom versus Uninformed Control

The feeling of being controlled, as we have discussed, might lead to some unwanted con-
sequences (e.g., loss of a sense of responsibility or lower productivity in the work place).
However, probably a more relevant societal issue emerges when control (over an individu-
al’s freedom) is made without the individual even knowing that she/he is being controlled
(when this is not made explicit or is not requested). To this end, here we provide an example
involving individuals’ online activities, where the ‘free’ access to information is increasingly
controlled as Internet companies (social networks, news, etc.) now determine (based on
algorithms) what we see. For instance, we may see many posts about the newest iPhone (6,
at the time of our writing) and assume that many of our Facebook friends are posting articles
about this new technology. However, the frequency with which we see these posts may be
partially due to us having clicked on an advertisement related to the iPhone 6: Facebook’s
algorithm decides that we are interested in such products and then shows us others’ posts
that are related to the iPhone 6. A consequence of such use of algorithms by corporations to
decide – for the consumer – the posts, news or advertising that they are exposed to, is that
it may lead to a slow and often subtle manipulation of consumers’ worldviews as well as to
new forms of discrimination. Simply put, what is presented to the reader is decided by an
algorithm – tapping into prior searches – and is not based on an explicit personal choice. An
example of uninformed control by a corporation that produces worrisome societal issues is
found in the account presented by Eli Pariser, who showed that ‘Facebook was looking at
which links I clicked on, and it was noticing that I was clicking more on my liberal friends’
links than on my conservative friends’ links. And without consulting me about it, it had
edited them out. They disappeared’ (Pariser, 2011). In the longer term, this manipulation by
corporations of what the consuming public is exposed to – exposing us only to things that we
like (or the things that an algorithm assumes we like) – may produce societal changes. For
instance, our exposure to online diversity will be reduced, as in the example of Eli Pariser.
More recently, Greg Marra, a Facebook engineer argued that, ‘We think that of all the stuff
you’ve connected yourself to, this is the stuff you’d be most interested in reading’, explain-
ing further that an algorithm monitors ‘thousands and thousands’ of metrics to decide what
we should see on our Facebook page. These metrics include what device we use, how many
comments or ‘Likes’ a story has received and how long readers spend on each article/post.
The assumed goal, as a New York Times article suggests, is that companies are using algorith-
mic decision-making ‘to identify what users most enjoy’ (www.nytimes.com/2014/10/27/
business/media/how-facebook-is-changing-the-way-its-users-consume-journalism.html?_
r=0). However, this also indicates that this practice of showing us only things that ‘fit’ with
our (little) data profile, limits our possibility to choose, and might inhibit our capacity to
make informed decisions (on what we buy and even what we think).
These strategies, then, that are adopted by organizations to allow them to tailor results and
personalize offerings to individual consumers are leading to citizens (i.e., all us of who ‘surf
438 sue newell and marco marabelli

the web’) being exposed to less and less diversity online. A potential consequence is that we
may become less tolerant to diversity, meaning that we may as a result become less able to lis-
ten to someone who thinks differently (e.g., a Republican, in Pariser’s example). Moreover,
there may be other, more worrying consequences in the long-term that are associated with
race-diversity intolerance and the increased exploitation of the vulnerable. For example, in
relation to the latter issue, if algorithms work out who is less capable of ­making good financial
decisions, personalized advertisements can then be sent persuading these ­people to take out
risky loans, or high-rate instant credit options, thereby exploiting their vulnerability. The
strategic use of our own data by corporations to personalize our Internet, in other words,
is just another and potentially more pernicious way of allowing discrimination; pernicious
because the only person who has access to the outcomes of the discrimination is the individual
being discriminated against (who is often not aware of the fact that they are exposed to dis-
criminatory information – uninformed control), making it easy for unscrupulous businesses
to use personalization in a way that harms the vulnerable.
Another way to illustrate how societal concerns emerge as a consequence of businesses
(and governments) using data from the digitization of our everyday life is by articulating the
tradeoff between independence and dependence, to which we now turn.

Independence versus Dependence

Citizens in many countries increasingly depend on digital devices for many activities.
However, here, a tradeoff originates from the tension between the willingness to depend
on IT devices and being able to live without them (i.e., to be independent), should the need
arise. Think of our decreasing sense of direction due to our dependency on GPS systems or,
were we to consider safety issues, think of those sensor-based systems that are able to park
our car – or even drive it! These driving systems use onboard cameras and laser rangefind-
ers to identify obstacles (or hazards, if the onboard computer controls the car while it is ‘in
motion’); then an algorithm is able to scan the surrounding environment and to identify
safe zones, avoiding for example other cars (see for instance a 2012 MIT study on these
algorithms – http://newsoffice.mit.edu/2012/mechanical-engineers-develop-intelligent-
car-co-pilot-0713). In the case of car autopilots, algorithmic decision-making has a twofold
role: first, data on ‘real drivers’ are collected and analyzed so that the algorithm can make the
appropriate decisions (e.g., reacting as a driver would, but with the difference that the algo-
rithm is never tired or inattentive, thus carrying a safety advantage with respect to humans).
Second, sensors embedded in cars (laser rangefinders, in this example) collect environmental
data that are analyzed in real time, so the algorithm has the ability to either assist the driver by
supporting his/her decisions (with warnings to the driver) or to make decision on its own –
when the car is in full autopilot mode. Drivers, thus, are somewhat ‘tempted’ to benefit from
the comforts companies now design into their products using digital technology, but this
necessarily takes place at the expense of our future independence. In fact, if our car computer
emits a warning signal while we drive on a highway, suggesting that we should slow down,
we might argue that it is because the GPS embedded in the car computer has just received a
‘traffic warning’ or, because the weather channel is broadcasting heavy rain in minutes, or
because we are about to drive through a road work area, but we do not really know the actual
reason of the warning, yet we slow down – this (again) illustrating that algorithmic decision-
making incorporates advantages (in this context, for users) but at the same time precludes
a full understanding of why some decisions are being made. This limits learning through
practice (Brown and Duguid, 1991) that in the long term might modify an individual’s ability
to learn new tasks and, more generally, adapt to the workplace or to society more generally
(Dall’Alba and Sandberg, 2010; Nicolini et al., 2003).
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While it is certain that there are good reasons for companies designing and for users
adopting these automated systems, as we saw, this might also lead to a change in our ability
to undertake particular activities without sensors, and learn. In the example of the autopilot,
once our car parks itself, will we forget how to park on our own? IT-assisted systems have
been around for a while in commercial planes, but pilots are constantly trained on how to
pilot a plane in case the autopilot stops working. However, would individuals be trained on
how to drive a car once such ‘autopilot’ systems become common in private motor vehi-
cles? This example brings to the fore the point that digital technologies and devices (and the
associated algorithmic decision-making) are increasingly influencing and even managing our
lives, leaving unanswered the question on whether these algorithms are just supporting our
activities, or whether they are actually in charge (e.g., controlling what we do) – and if they
are taking over, does this excess of control occur at the expense of our ability to improvise
and respond to emergencies? Thus, in the car example, it is clear that issues associated with
safety emerge. In fact, as car drivers who now rely on sensors, we do not have the luxury
that airline pilots have, of simulators to ensure that we maintain our skills so that we are pre-
pared for an emergency. Nevertheless, even pilots (who, unlike private citizens, are trained
on how to operate aircrafts) are not free of the consequences from technology that ‘takes
over’, as the US NTSB (National Transportation Safety Board) reports in relation to some
major plane accidents (see for instance the case of Air France Flight 447 in 2009, http://
spectrum.ieee.org/riskfactor/aerospace/aviation/air-france-flight-447-crash-caused-by-a-
combination-of-factors).
The negative consequences of an excess of IT dependence are associated with the risks
we are exposed to when we forget how to do certain things. Progress necessarily involves
automation (and the loss of certain manual capacities), and many innovations developed by
­corporations positively contribute to our quality of life (and to our safety). However, it is dig-
ital devices and the associated algorithmic decision-making that pose issues, especially when
supervising or undertaking human activities that might involve life-threatening outcomes
were the technology to stop working. Moreover, because of the connectivity between sensor
devices, there is also the potential of chaos occurring if everything stops working for everyone
simultaneously. In particular, we argue, it is the diffusion of such IT automations among com-
mon citizens that creates threats were we to become fully dependent on the technology and
unable to operate without it. However, the adoption of some of these automations is (or will
become) virtually mandatory for many – creating discriminations against those who do not
conform. One simple example relates to US residents who, if desiring to use cars equipped
with a standard stick shift (instead of an automatic), will have to pay more, just because
‘standard’ is not a standard in the US. On the other hand, those who can only drive automatic
cars will have to pay more if they want to rent a car when they travel overseas, because most
cars will have a standard shift and there will be a premium for an automatic car. This point
raises the issue of the role of business in promoting such (automated) digitized technolo-
gies: does business have a responsibility for thinking about such consequences and building in
opportunities for learning to reduce our overdependence?
In sum, we argue that this tradeoff is affected by the willingness of users to give up some
of the comforts that come from dependence on IT, in the interests of preserving their abil-
ity to cope when the IT does not work as expected. Yet, digital technologies are extremely
tempting, and now widely adopted. For instance past research on mobile technologies has
already shed light on users’ needs to be ‘always on’, with the consequence that a feeling of
‘dependency’ arises (Jarvenpaa and Lang, 2005). However, here we go beyond the psycho-
logical feeling of dependency and point to the users’ need to be somewhat assisted (if not
led or managed) by digital technology (that involves algorithmic decision-making) – with
discrimination being the consequence of not conforming to this dependence. Companies
440 sue newell and marco marabelli

too need to include sensor-based technologies in their products and services to remain com-
petitive. For example, a logistics company that does not use GPS-equipment to determine
best routing opportunities would experience difficulties in finding partners to develop a
supply chain being thus discriminated against (again, for not conforming). However, we
suggest that companies might also usefully start to think about how they can and should, in
some circumstances at least, support the development of the ability to cope with situations
of technology failure, with the consequence that algorithms assist decision-makers but do
not entirely take over from human judgment. In our view, a balance must be struck, which
to date seems to favor increasing dependence on IT over being able to cope in the face of
IT failure.
We have thus far identified three key tradeoffs: between privacy and security, control and
freedom, and dependence and independence, which are obviously inter-related. We do not
claim that these are the only tensions that are relevant; however, they do allow us to provide
concrete examples of strategic opportunities for businesses as well as societal issues emerging
from corporations’ (and governments’) exploitation of data coming from the widespread use
of digital technologies that support – and impact – our everyday lives. In the next section we
discuss the more general social issues arising from these tensions.

Social Consequences of Digital Technology and Algorithmic

Decision-making

While in the past knowledge and learning have been recognized as path-dependent (Cohen
and Levinthal, 1990; Zahra and George, 2002), in this era of widespread diffusion of digital
technologies that capture our everyday activities, our awareness about things appears to be
not so much path-dependent as determined by our past actions and algorithmic rules. For exam-
ple, the algorithm EdgeRank is used by Facebook to weight ‘likes’ and modify an individual’s
Facebook page as a result, therefore manipulating the ‘wisdom of the crowd’ (Kittur et al.,
2007). While this may make sense from a marketing perspective for businesses (e.g., it is
helpful to identify a customer’s interests), it poses concerns for society because of the poten-
tial broader and longer-term social impacts. More specifically, our examples for each tension
suggest that businesses (and at times governments and private individuals) are generally in
favor of a more secure society over an individual’s privacy, of a more controlled population
(employees, customers and citizens) over individual freedom – leaving more and more people
increasingly dependent upon technology, at the expense of personal independence.
To consider these issues, we start from the premise that digital trace data is here to stay;
companies will increasingly include tracking software and sensors in the products and the ser-
vices they offer, and so collect masses of data on our everyday habits with a view to using these
data to develop algorithms that drive decision-making. In fact, whether data are gathered
from social networks, an ATM transaction, or from a sensor-based device, there are many
aspects associated with companies using such data that many users want, hence it is unlikely to
‘go away’. As a result, businesses will keep exploiting big and little data potentials to profile
customers, please social network users, and grant (commercial) opportunities to those who,
at best, accept being controlled, reducing their need to learn while giving up some privacy.
On the one hand, individuals benefit from corporations’ use of big/little data a­nalytics –
one can save some money on an insurance policy, access a free show if willing to watch
commercials, or just be pleased to see that everybody thinks her/his way (see the Facebook
experiment by Pariser, above). On the other hand, businesses are aware that improving their
knowledge about employees and customers will lead to more control of employees and more
(addressed and effective) sales, and therefore more profits. And it is this enticement by the
 d at i f i c at i o n : o p p o r t un i t i e s a n d c h a l l e n g e s 441

business world that leads people to assume that they have to give up some privacy/freedom/
independence, whether this is because it is a way to access a line of credit to buy a house or
because they want to use social networks to fulfill their social needs (Kane, 2014).
As we previously pointed out when we provided our definition of algorithmic decision-
making, this might lead to very superficial understandings of why things happen, and this
will definitely not help managers, as well as ‘end users’ build cumulative knowledge on
phenomena. Since decisions are made following an algorithm, how the algorithm came up
with a particular result is unknown; as a result, there will be very little opportunity to learn
from mistakes. Ironically, therefore, decision-makers might be losing the capacity to make
decisions on their own, thereby making them a good example of (over) dependence on digi-
tal technology and algorithmic decision-making (cf. our third tradeoff). However, perhaps
more important (from a societal perspective) than the lack of lessons learned, is the need
to discuss the creation of new forms of discrimination as a result of algorithmic decision-
making and the associated personalization of information. Think again of when algorithms
determine that particular categories of people (e.g., based on race, income, job) are more
likely to commit a crime and, as a result, those concerned find difficulty in obtaining a loan
or changing job, never mind being subjected to tighter police scrutiny. This clearly violates
basic privacy rights, but is justified based on the idea that it will increase security in society.
Or, think again of the control exercised by algorithms in sensor-equipped cars on teenagers:
these data are used by insurance companies to decide whether a driver is good or bad, again
on the basis of an algorithm (the tradeoff between control and freedom). Similarly, when we
give new technologies the possibility to take over our learning and let our car park and drive
for us (or let our car ‘suggest’ what we should do in order to perform a perfect parallel park),
our decision-making is being driven by algorithms (the tradeoff between independence and
dependence).
These tradeoffs operate together rather than independently. For instance, if we use an
app. that ‘knows’ what music we like so that, when we start driving, we do not need to
search for a particular song, this is because we have enabled functionality on our radio/phone
that is able to ‘see’ our favorite playlists, or that looks into our past purchases. For instance,
iTunes Genius works with a ‘secret algorithm’ created by Apple that compares our library
of tracks to all other Genius users’ libraries and considers complex ‘weight factors’ to then
come up with the appropriate playlist for a specific user (Mims, 2010). Here, we do not aim
to go into technical details on how these algorithms work – as Apple engineer Erik Goldman
said, the algorithm is ‘secret’, jokingly noting that ‘if he told you how Genius works, he’d
have to kill you’ (Mims, ibid.) – to highlight the relevance and commercial value of these
algorithms. However, this example reflects how, in some circumstance we are literally at the
mercy of an algorithm, which makes a decision for us. What if we look for vegetarian food
just because we go out for dinner with friends who happen to be vegetarian? Does this mean
that, due to the connections between databases of large companies (or because of tracking
cookies), we will be denied the opportunity of seeing advertisements for steakhouses on our
Facebook webpage? Or will we be classified as good drivers because a sensor detects that
most of the time we obey speed limits (even if the reason is that we know that where we
drive the speed limits are strictly enforced)? Or will our preferences in terms of the music
that we listen to be so reinforced by the automatic selections based on the algorithm that we
reduce our exposure to alternative genres?
It is clear that the three tradeoffs showcase interests and needs of individuals on the
one hand, and the somewhat opportunistic strategic moves of businesses (and govern-
ments) on the other. Moreover, our discussion illustrates the relevant role of algorithms
in making decisions about an individual’s characteristics/preferences based on trends, and
therefore about what individuals should see and are likely to buy. Eric Schmidt (Google)
442 sue newell and marco marabelli

Digital technology

Digital Traces: all data provided by Sensors: LBS (location Based

individuals during ‘IT-related’ Tehnologies) and other surveillance and
activities, that leave a ‘trace’ monitoring devices

Tradeoffs

Tradeoff: Privacy vs. Tradeoff: Control vs. Tradeoff: Dependence vs.

security freedom independence

Algorithmic decision-making and discriminations (examples)

Violation privacy to increase An algorithm assumes that we Algorithmic decision-making

security might have the result that like some products more than support (or take over on) our
an algorithm determines that others, but the same algorithm lives; however, there are
particular categories of people are hides what we might not like, penalties for those who do
more likely to commit a crime originating discriminations not conform

Main tension

Individuals: willing to give up their privacy, Businesses: keen on exploiting new opportunities
freedom, and independence, to explore new deriving from the digitization of everyday life, but
opportunities of the digitization of everyday life sometimes with costs to some individuals

Figure 19.1 A summary framework of the consequences of an algorithm-based world.

said in 2010 that, ‘It will be very hard for people to watch or consume something that
has not in some sense been tailored for them’. This statement involves privacy issues
(businesses will know almost everything about consumers), control issues (consumers
are literally monitored and then controlled with choices made for them), and depend-
ence issues (loss of independence in making informed decisions, since the information
provided about a specific choice will be driven by online feeds – created by algorithms).
We posit that IS research is needed to examine the social issues that are emerging in
relation to the strategic uses made by corporations of data from the digitization of our
everyday lives. With the intention to provide an overall picture of the ethical issues and
challenges created by this increasing trend, above we present a framework (Figure 19.1)
that illustrates how digital technology (first layer) generates tradeoffs (second layer),
when this technology is combined with algorithmic decision-making (third layer), lead-
ing to tensions (fourth layer). This summary framework has the purpose of showcasing
strategic opportunities as well as societal challenges in an era of widespread diffusion
of digital technology, and of supporting further interdisciplinary research on this topic,
along with our suggested new avenues of research and potential research questions (in
the last section that follows).

Research Agenda and Concluding Remarks

We do not know for sure the extent to which digital technology and the associated big/
little data analytics are going to impact society in the long term. However, we suggest
that individuals seem to be likely to accept the ‘dark side’ of datification through digital
traces (always there), and constant monitoring through sensors because they are persuaded
that the benefits outweigh the costs. Thus, businesses (and governments) try to send to
 d at i f i c at i o n : o p p o r t un i t i e s a n d c h a l l e n g e s 443

citizens the message that security is more important than privacy (to fight terrorism, for
instance). And the same businesses make us believe that if we want to quickly find what
we are looking for (whether it is a movie that we like, through Netflix, or a specific piece
of information, through Google) we need the support of algorithms, that ‘know’ us and
what we want – precluding our exposure to diversity. And finally, businesses develop
digital technologies that ‘help’ us do new things more quickly, but simultaneously make us
more reliant on (and so more vulnerable to) these same technologies as well as reducing
our ability to learn.
Therefore we suggest that research should be carried out that considers broad social
issues associated with businesses’ (and government’s) strategic use of data, especially so
because we currently have very little understanding of what the consequences of corpora-
tions’ non-responsible use of these data will be for society (Tene and Polonetsky, 2013),
albeit we have suggested some negative impacts above. One way of looking at these social
issues may be using an ethical dilemma lens, where we consider individuals’ right to main-
tain their privacy, freedom and independence, against businesses’ right to discriminate to
promote sales – using cutting-edge technology such as big data analytics. We suggest that
such dilemmas can be addressed using the teleological or deontological approaches to eth-
ics (or both). The deontological approach (utilitarianism) is the best-known consequen-
tialist theory (Bentham, 1776; Mill, 1863), and suggests that ethical behavior is one that
maximizes societal welfare while minimizing social harm (Berente et al., 2011; Vallentyne,
1987). According to this approach, insurance companies may be right in being algorithm
driven – thus applying higher premiums to those who, according to the data analytics, are
more at risk of having car accidents. However, the (contrasting) deontological approach
bases ethical decisions on broad, universal ethical principles and moral values such as hon-
esty, promise keeping, fairness, loyalty and rights (e.g. to safety, privacy) so that the pro-
cess or means by which an individual does something, rather than the outcome, is the focus
of decision-making (e.g. lying is dishonest as it is one’s duty to be honest regardless of
whether this might lead to some ultimate good), therefore the end never justifies the means
(Mingers and Walsham, 2010). According to this latter approach, discriminations should
not take place if a minority is adversely and unfairly treated – never mind if following an
algorithm maximizes positive consequences for society. More specifically, here we want to
identify research questions that examine the social issues related to each of our tradeoffs,
as described next.
Firstly, in terms of the tradeoff between privacy and security, one aspect that
deserves attention relates to how far different countries (and regulators) will balance
this tradeoff. From an ethical perspective, for instance, they might choose to privilege
the maximization of societal welfare (so taking a teleological approach) or to pay atten-
tion to ‘minorities’, who are penalized by the discriminations of algorithmic decision-
making (deontological approach). Information privacy laws and regulations – how citi-
zens perceive (the value of) privacy – are country-specific and are related to cultural
and historical issues (Milberg et al., 1995). One example is the recent debate about the
‘right to be forgotten’ (http://ec.europa.eu/justice/data-protection/files/factsheets/
factsheet_data_protection_en.pdf), which forced Google to delete some information
(and to implement processes to do so in the future, should people ask) from the results
of its search engine in Europe, while this issue is not perceived currently as a relevant
one in other countries such as in the US. To this end, it would be interesting to dig
deeper into research questions such as: ‘How far do institutions and governments influ-
ence the balance between privacy and security associated with digital technologies that
collect data on our everyday lives?’ ‘What are the historical, cultural and social reasons
behind the variety of approaches to digital privacy adopted by different countries?’ ‘Do
444 sue newell and marco marabelli

these different approaches reflect differences in citizens’ ethical and moral values?’ ‘Do
(or will) social networks have the ability, in the long term, to modify ethical and moral
values about privacy in different countries?’ ‘Will the diffusion of digital technology (and
the IoT) lead to the standardization of ethical and moral values across countries, in the
long-term?’
In terms of the tradeoff between freedom and control, we know very little about how
far users are aware that they are being controlled by large Internet companies (especially
if we think of ‘second hand’ data), and if they are, it would be interesting to learn about
whether individuals’ needs to enact social networks (Kane, 2014) prevail over the poten-
tially uncomfortable feeling of being profiled (little data). Moreover, we do not have spe-
cific quantitative data that illustrates the effectiveness of algorithmic decision-making in
identifying people’s needs – for instance we know that little data has the ability to ‘know’
(or assume) what people want to purchase on the basis of a number of digital traces, but lit-
tle is know about the actual revenues that derive from this – and whether the costs of imple-
menting ‘smart’ algorithms and maintaining expensive hardware that can process big data is
covered by the increased sales. We should assume that businesses achieve positive bottom
lines from big data, since datification and algorithmic decision-making is widely adopted and
is expensive (www.forbes.com/sites/ciocentral/2012/04/16/the-big-cost-of-big-data/),
but we do not know, in concrete terms, the extent to which this has improved sales, cus-
tomer satisfaction, inventory management or other financial, operational and organizational
parameters. Knowing this would perhaps indicate a price for a loss of individuals’ privacy
and freedom. After all, one of the commonly cited examples of the usefulness of algorith-
mic decision-­making was of Google being able to predict the location of a US flu epidemic,
based on searches for flu remedies, faster than the Center for Disease Control (CDC). Yet,
the story often remains untold, that they have been unable to repeat this success (www.
theguardian.com/technology/2014/mar/27/google-flu-trends-predicting-flu). Thus, it is
important that we conduct research that looks at the benefits for citizens of having a ‘tai-
lored’ Internet, as against the costs of the benefits of living in an ‘Internet bubble’. And
finally there is a question about, ‘what ethical guidelines might businesses usefully adopt to
manage big/little data and produce the algorithms from these data’? For instance, Facebook
has indicated that they have developed ethical policies for those who design algorithms, but
such policies are not disclosed to the public. It is important that we research these issues
so that we understand the ways in which businesses are using algorithms for discriminat-
ing so that we can enter a debate with business about associated ethical concerns (much as,
for example, was the case in relation to the use of child labor in the past). Consider, for
example, a monitoring system that profiles utility customers and sets different prices for gas
and electricity, based on geographical areas and demand (another example of uninformed
control). In this instance, maximizing societal welfare (cheap electricity for the majority) at
the expense of minorities may well be unacceptable from an ethical standpoint (since those
who end up paying more, are likely ironically also to be the very people who may be the
most vulnerable and least able to pay). As a start in this process, we need research that sheds
better light on the overall awareness of individuals in terms of how their data are being
used by businesses and whether people are happy with this, especially as this exploits the
more vulnerable in society. Thus, while big data analytics has the potential to shed light on
important human and societal issues (Markus, 2015), this should not happen at the expense
of the vulnerable.
In terms of the tradeoff between independency and dependency, we think that major
societal issues are associated with the lack of opportunities for individuals to learn –
and this poses issues from a knowledge creation and sharing perspective. As we pointed
 d at i f i c at i o n : o p p o r t un i t i e s a n d c h a l l e n g e s 445

out earlier in this article, knowledge develops cumulatively and, according to the prac-
tice perspective (Feldman and Orlikowski, 2011; Sandberg and Tsoukas, 2011; Schatzki
et al., 2001; Whittington, 2014) knowledge equates with practice. However, in the
­context of this tradeoff, it is the algorithm that gains knowledge about the minutiae of
individuals – for instance, analyzing how humans drive a car, so that it can then operate
as such, while humans may not gain a better understanding from this process. This poses
relevant issues that involve both the private and work life of individuals. For example,
‘will individuals lose their capacity to learn (even from mistakes)?’ ‘Will IT-assisted sys-
tems reach a point that they will impair an individual’s problem solving skills and abili-
ties in her/his everyday life?’ This issue can be taken further if we refer to the potential
decreased ability of managers to make decisions on their own, due to the few opportuni-
ties to ‘practice’ decision-making processes. For instance, ‘Will an individual’s capac-
ity to adapt to a new organization and a new job be compromised by increased control
(made by algorithms, and that leads to living in a “bubble”, see our previous discussion
of Pariser’s “experiment”), which makes people less likely to be flexible and accepting
towards diversity?’ Also, there is the issue of the legitimacy of decisions that are based on
algorithms and whether they will be accepted by those affected by the decision when the
reasons for the decision are not actually known, even by those developing the algorithms.
Thus, ‘will businesses face more claims of unfair discrimination in the future when peo-
ple identify that they have been treated differently to others but when the justification for
this is not understood and cannot be clearly articulated by anyone?’ ‘The computer says
“no”’ (e.g., www.youtube.com/watch?v=AJQ3TM-p2QI), may come to be an unac-
ceptable justification for being discriminated against as we are increasingly confronted
by this ‘rationale’.
The examination of the above social issues demands a multi-disciplinary approach that
considers economic, legal, organizational, ethical, cultural and psychological consequences
of the digitization of our everyday lives for different populations. In examining these issues,
we would do well to remember that the ways new computing technologies (and the associ-
ated data) are used is not neutral in terms of the consequences for the human actors who
leave digital traces that are then collected and analyzed. Corporations (and governments)
have choices about how and what digital traces they collect and measure, and about the
algorithms that they develop to make decisions based on this measurement, even if these
decisions are increasingly distributed throughout a corporation rather than in the hands of
the CIO (Nolan, 2012). These choices raise fundamental social questions as we have seen. As
researchers we have an opportunity – and a responsibility (cf. Desouza et al., 2006, 2007)
– to expose this empirically and theoretically and so promote an agenda of ‘responsible ana-
lytics’ that attempts to reduce the long-term negative social consequences of this new era
concerned with the digitization of society.
In conclusion, this paper is an explicit call for action. We argue that researchers as
well as practitioners should take these issues into serious consideration and articulate an
interdisciplinary debate on how the datification of our everyday lives and the associated
algorithmic decision-making (and the IoT) will affect society. This consequent research
agenda requires a multi-disciplinary perspective. The issues are extremely relevant, stra-
tegic research topics. Whether we are interested in finding ways to increase business
value or we are concerned with broader social issues of equality and democracy, they
require immediate action. Strategic IS scholars are interested in ‘the way IT “delivers
the goods” by providing business AND social benefits’ (Galliers et al., 2012, emphasis
added). We would argue that minimizing social harm, even if to a minority, should be
added to this agenda.
446 sue newell and marco marabelli

Note
1 The definition of big data was updated by Gartner in 2012 as they now describe the concept as ‘high
volume, high velocity, and/or high variety information assets that require new forms of processing
to enable enhanced decision-making, insight discovery and process optimization (Gartner, 2012).
Moreover, others have added ‘new Vs’ – e.g., veracity, variability, visualization, and value, viewing
big data in terms of 5 or even 7 Vs. Here, where we stick with the original definition (Gartner, 2001)
as this reflects the essence of big data for the purposes of this article.

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 d at i f i c at i o n : o p p o r t un i t i e s a n d c h a l l e n g e s 449

Questions for Discussion

1 What are the benefits for individuals, organizations, governments, society of the
increasing use of digital technology and big data?
2 Can algorithms understand and interpret patterns of activities to predict behavior and
preferences?
3 What are the implications of the use of algorithmic decision-making on innovation,
e.g. automated systems?
4 How to tackle increasing dependence on IT devices for products and services?
5 Would algorithms hamper learning. How could organizations support learning and
innovation?
6 What are the economic, legal, organizational, ethical, cultural, and psychological conse-
quences of digitalization? How are these different for different cultures and populations?

Further Reading
https://journals.sagepub.com/toc/jina/30/1
Chapter 20

Kirsten E. Martin

ETHICAL ISSUES IN THE BIG DATA

INDUSTRY

The Big Data Industry

B ig data r e c e i v es a lot of press and attention—and rightly so. Big Data, the
combination of greater size and complexity of data with advanced analytics,1 has been
effective in improving national security, making marketing more effective, reducing credit
risk, improving medical research and facilitating urban planning. In leveraging easily observ-
able characteristics and events, Big Data combines information from diverse sources in new
ways to create knowledge, make better predictions or tailor services. Governments serve
their citizens better, hospitals are safer, firms extend credit to those previously excluded
from the market, law enforcers catch more criminals and nations are safer.
Yet Big Data (also known in academic circles as “data analytics”) has also been criticized
as a breach of privacy, as potentially discriminatory, as distorting the power relationship
and as just “creepy.”2 In generating large, complex data sets and using new predictions and
generalizations, firms making use of Big Data have targeted individuals for products they did
not know they needed, ignored citizens when repairing streets, informed friends and family
that someone is pregnant or engaged, and charged consumers more based on their computer
type. Table 20.1 summarizes examples of the beneficial and questionable uses of Big Data and
illustrates the potential confusion on how Big Data fits in a community—if at all.
Part of the ambiguity in researching Big Data is choosing what to study. Big Data has
been framed as: (1) the ability to process huge “treasure troves” of data and predict future
outcomes, (2) a process that “leverages massive data sets and algorithmic analysis” to extract
new information and meaning, (3) an asset, (4) a moment where the data volume, acquisition
or velocity limits the use of traditional tools and (5) a tactic to operate at a large scale not
possible at a smaller scale.3
Framing Big Data as an asset, ability or technique sterilizes an important ethical discus-
sion. Big Data is mistakenly framed as morally neutral or having benefits that outweigh any
costs. Grand statements such as “Big Data itself, like all technology, is ethically neutral”4 are
 ethical issues 451

Table 20.1 Examples of Beneficial and Questionable Uses of Big Data

Beneficial Uses Questionable Uses

By Technology
License Plate Reading passing cars for tolls on Used by private detectives; placed
Readers highway; police locating stolen car on trucks to gather license plate data
broadly
Facial Recognition Finding potential terrorists at large Used by social networking sites to
sporting events identify members in pictures
GPS Location-based coupons; traffic Location-based stalking; iPhone as a
predictions; directions on map homing beacon
By Context
Healthcare Treatment of cancer; health of Discrimination in healthcare and
pregnancy; Google Flu Trends insurance; app knows how fit you are
Insights into interaction between Development of a health score from
medications from search terms; purchase habits and from search terms
insights into hospital spread of
infections
Identifying veterans’ potential
suicidal thoughts
Education Personalizing student instruction Using data for possible admissions
Accountability for performance discrimination
by school
Identifying students at risk of
dropping out
Electricity Turning on/off home electricity Allowing criminals to know if you are
home; smart homes hacked
LawEnforcement Machine learning to identify Accessing smartphone without a
burglar; accessing phone records warrant; identifying suspects by web
to identify potential suspects in a browsing habits
mugging Individuals under scrutiny for not
New York Fire Department using participating in tracking
data mining to predict problems
Retail Improving layout of store based on Tracking movements/shopping
typical movements of customers habits of spectators at a stadium using
Better coupons, suggested items Verizon’s Precision Marketing Insight
program
WalMart’s use of RetailLink to
integrate suppliers with onsite Price discrimination (e.g., Amazon,
supplier inventory Orbitz)
Target sending notice of pregnancy to
unsuspecting teen’s parents
Urban Planning Traffic management; smart grid Identifying who is listening to which
technology radio station; EZ Pass responder
Use of popular app by competitive tracked everywhere
cyclists and runners for road Possibility of hackers changing traffic
planning lights and creating traffic jams
Identifying areas for road Identifying areas for road
improvement improvement but focusing only on
those with mobile apps
452 kirsten e. martin

implicit in reports that focus on the strategic and operational challenges of Big Data, but
which largely ignore the ethical and social implications.5 The growing field of data analytics
excludes ethical analysis in both practice and academia. Yet creating, aggregating and selling
data can change relationships and business models and requires rethinking information gov-
ernance strategies—including issues concerning ethics and privacy.6
I suggest Big Data should be analyzed as the Big Data Industry (BDI) in order to identify
the systemic risks in current Big Data practices. Such an approach situates Big Data within a
larger system of firms, organizations, processes and norms for analysis. The volume, variety
and velocity7 of the data, plus the novel analytics required to produce actionable information,
renders Big Data a difference in kind rather than degree. To create and use these large data
sets to maximum effect, many firms aggregate data to create a new “whole” and sell access
to this new data set.
The separate and distinct firms in the Big Data Industry work through agreements to
produce a product (Big Data) for customers—similar to any other industry.8 In response,
CIOs and CDOs (Chief Data Officers) are shifting to an outward, strategic focus in lever-
aging Big Data rather than the inward, service focus used for traditional data. At present,
however, there are not yet any industry norms or supply chain best practices that can
guide them.9
This article examines the ethical issues in the nascent Big Data Industry. Industries are
the aggregate of firms involved in the production and distribution of a product—e.g., the
software industry, the ERP industry, the automobile industry, etc. Importantly, if a market
exists for a product, then a corresponding industry exists to meet that demand. And, as
the market for Big Data continues to grow and be measured, the corresponding Big Data
Industry, comprised of those firms involved in the production, analysis and use of Big Data,
begins to coalesce around standard industry practices. (Note that this article focuses on
­privacy issues in the U.S. Big Data Industry; as described in the panel below, the privacy
regulatory environments in the U.S. and Europe differ significantly.)

Privacy: U.S. Versus EU

The use of Big Data in Europe faces a distinct set of regulatory constraints governed by the
EU’s Data Protection Directive (95/46/EC) and, for example, the United Kingdom’s Data
Protection Act 1998. Regulations require those using “personal data” to abide by the direc-
tive’s requirements to being fair, to be clear as to the purpose of gathered information and,
problematic for Big Data, to strive for minimization. See also the Bureau of National Affairs’
World Data protection Report 14(9) as well as the U.K.’s Information Commissioner’s
Office Big Data and Data Protection (2014).
For example, Facebook recently was unable to comply with the stricter EU regulations
because of a lack of adequate consent and control for users: Facebook users have no true opt-
out mechanism, no valid consent for the transfer of data to third parties and a general lack of
control over their data. In other words, Facebook’s “take it or leave it” approach to choice is
not sufficient for European law.10 Generally, privacy is taken more seriously by regulators in
the EU (and by U.S. companies doing business in Europe), with “data subjects” having a right
to be forgotten, authentic user consent and a general leaning toward “opt-in” as the default.11
The article first examines the information supply chain within the Big Data Industry,
including upstream sources of data and downstream uses of data. Next, it examines two
crucial consumer-related ethical issues created by systemic norms and practices of the Big
Data Industry: (1) the negative externality of surveillance and (2) destructive demand.
Remedies for these potential issues are proposed, with the goal of fostering a sustainable
Big Data Industry.
 ethical issues 453

An industry-level analysis extends the examination of Big Data in three ways. First, fram-
ing Big Data as an industry highlights the participants, power relationships and systemic issues
that arise within the production and use of Big Data, insights that are not available when
Big Data is isolated as a technology. Second, an industry-level analysis captures pervasive
industry practices that are missed when considering single uses of Big Data. These systemic
issues can be resolved with the industry-specific measures described in the analysis. Finally,
an industry-level analysis broadens the number of interested parties to all who have a stake in
creating a sustainable Big Data Industry. All companies in controversial industries have their
legitimacy questioned and have a vested interest in creating sustainable industry norms. In
other words, the recognition that bad behavior may delegitimize the entire industry provides
an incentive for industry leaders to curb such practices.12 A brief overview of the leading
firms in the Big Data Industry is given in the left panel on the next page.

The Big Data Industry’s Supply Chain

Within the Big Data Industry, data, such as online consumer data or location data from an
application, is passed from one firm to the next within an information supply chain, com-
parable to supply chains in traditional industries (see text panel on the next page). Within
this supply chain, consumers provide information to firms, which then pass it to tracking
companies, which may also pass it to data aggregators. Data aggregators act as distributors by
holding consolidated information of many users across many contexts.

Supply Chains
In a traditional business model, supply chains comprise a series of firms working together
to deliver value by transforming raw material into a finished product. Trees are harvested
in the forest, traded to the pulp manufacturer and eventually become the paper used to
print an article; tomatoes are picked, packed, shipped and crushed into sauce to be used
on a delivered pizza. The figure below illustrates a generic supply chain: each firm adds
value to the product or service to transform the raw materials in one location and deliver
a finished product to the end customer through value creation and trade.
All supply chains carry ethical issues both downstream and upstream. Software
­companies must ensure that their products are not eventually sold in Syria through a
­distribution center in Dubai; Apple is held accountable for the working conditions of its
upstream suppliers, such as Foxconn. Supply chain researchers examine upstream sourc-
ing issues, looking at how supplier selection takes account of, for example, the way forests
are harvested in the paper industry or how apparel is manufactured overseas, as well as
following products downstream through logistics and eventual sale and use (Figure 20.1).

Raw Shipping/
Suppliers Manufacturing Retail Customer
Materials Distribution

Figure 20.1 Supply chains

454 kirsten e. martin

Data aggregators or data brokers may sell the information to researchers, government
agencies or polling companies, or an ad network may use the information from an aggre-
gator or broker to place an advertisement on a website when a user returns to browse or
shop online. Survey firms, academic research teams, government agencies or private firms
may also contract with a data broker directly to use data to supplement survey research,
make employment decisions and investigate possible criminal activity. An information sup-
ply chain is thus created with multiple firms exchanging information and adding value to
the data.
As with traditional supply chains, the information supply chain can be analyzed both by
the downstream distribution and use of Big Data as well as by the upstream sourcing (see
Figure 20.2).
The issues arising from the downstream use of Big Data and upstream sourcing of infor-
mation are summarized in Figure 20.3 and described in detail below.

Issues with Downstream Customers and Uses of Big Data

As shown in Table 20.1, downstream uses of Big Data can be perceived as producing ben-
eficial and questionable (often unethical and harmful) outcomes. However, the potential
harm that can result from using Big Data should not detract from the benefits—from curing
diseases to identifying fraud. Nonetheless, selling information increases the risk of secondary
misuse of the data, with eventual harmful impacts on users. While the potential harm from
incorrect information or false conclusions merits attention, harm downstream in the supply
chain includes harm from the correct conclusions. For instance, Target famously correctly
identified a pregnant teenager based on her purchase history and sent a congratulatory let-
ter to her house, which was seen by her parents who were unaware that their daughter was
pregnant.13

Figure 20.2 Example of Information Supply Chain Within the Big Data Industry
 ethical issues 455

Figure 20.3 Issues within the BDI Supply Chain

The harmful effects of using Big Data can be extended to include:

•• Value destruction (rather than creation) for stakeholders

•• Diminished rights (rather than realized) for stakeholders
•• Disrespectful to someone involved in the process (rather than supporting them).

Such effects are not possible without information provided upstream, thereby linking all
supply chain members to the eventual uses of information.14
First, data uses can be analyzed based on the consequences to the individual. More obvious
adverse consequences include being denied credit, losing a job, having secrets outed to your
family, paying more for insurance, etc. For example, information may be used downstream
to modify insurance premiums or mortgage rates. However, there can also be positive con-
sequences, as when downstream use identifies trends in demographics such as flu outbreaks,
or prioritizes search results for a travel site.15 Table 20.1 focuses on the consequences (both
good and bad) from the use of Big Data.
A more egregious yet subtle consequence is what law scholar Ryan Calo conceptualizes as
digital market manipulation. When firms know more information about consumers with an
ever better ability to fine-tune the consumer experience, they are able to influence consum-
ers at a personal level and to trigger vulnerability in consumers in their marketing.16 Calo’s
argument suggests that Target, for example, would not only identify a consumer who is
pregnant, but could also engineer food cravings in her through subtle triggers. As summa-
rized by Calo, firms will increasingly be in the position to create “suckers” rather than waiting
for one to be born every minute.
456 kirsten e. martin

The harm resulting from the use of Big Data can also be identified by asking not only how
value is created or destroyed for individuals, but also whether individuals’ rights are being
realized in the process of using the data. Barocos and Selbst nicely illustrate the harm that can
arise not only from the information supply chain, but also from the process followed in using
Big Data. Big Data may develop learned prejudice algorithms based on pre-existing informa-
tion. By basing predictive algorithms on previous data patterns, learned prejudice builds on
previously institutionalized prejudice—for example, in areas such as college admissions or
when a Google search on black-sounding names brings up arrest records. Such algorithms can
produce objectionable outcomes, as with accidental or intentional discrimination.17
Finally, categorizing individuals under certain headings can be disrespectful to them—
for example, the categorization of individuals based on their personal history, such as rape
victim status, becomes an exercise in objectifying individuals as a mere category. Big Data
aggregators have been known to list individuals by classifications such as alcoholics, erectile
dysfunction sufferers and even as “daughter killed in car crash.”18 Even without value being
destroyed, individuals can be disrespected through objectifying them as a mere category—
particularly a category that overwhelms in significance, such as being the victim of a crime,
struggling with an addiction or coping with a death.

Issues with Upstream Sources

In addition to the possible downstream harmful effects of using Big Data, firms in the infor-
mation supply chain must also contend with issues concerned with upstream suppliers of
data, in particular the possibility of partnering with bad suppliers. The ability to develop an
ever-greater volume, velocity and variety of data requires large, complex and distributed
data sets from many sources. Sources of data within the Big Data Industry include consum-
ers, products, location, machines and transactions (and all combinations of these). In fact,
the variety of combined data differentiates Big Data from traditional data analysis: many data
sources combine data types or use data in novel ways. This pooling of diverse, sometimes
innocuous, pieces of data contributes to a greater potential for statistical significance or to
making sense of new knowledge.19
Within the Big Data Industry, upstream sources may be undesirable because of the
quality of information, biases in the data and privacy issues in the collection and sharing of
­information. Data quality may be an issue due to inaccuracies in the data or a lack of cover-
age.20 Inaccuracies may arise from the manner in which the data was collected, the degree of
imputed21 data within the data source or from deliberate obfuscation by users.2224 Assessing
the quality of upstream data is similar to assessing the quality of upstream sources in a manu-
facturing supply chain, where firms are free to specify the quality they desire for their prod-
ucts. However, firms using upstream information further down the information supply chain
will be held accountable for the quality of that information.
Data may also have biases that skew it toward specific types of users, such as a particular
race, ethnicity, gender, socioeconomic status or location. Using upstream data further down
the supply chain requires an understanding of the level of bias in the data—skewed data will
skew the results and limit the generalization of the findings. For example, location tracking
can be beneficial to the community when used for transit scheduling; however, if one group
is systematically ignored in the source data (e.g., groups with less access to mobile devices
used to track location data), that group will not benefit from the improved transit system or
may have traffic flow inaccurately predicted.23
Finally, and importantly for the ethical implications of the Big Data Industry, the firm
supplying data should be assessed on how it respects privacy in the collection of information.
Consumers disclose information within a set of privacy rules, and sharing that information
 ethical issues 457

with other firms in the supply chain may breach their privacy expectations. In other words,
information always has “terms of use” or norms governing when, how, why and where it can
be used.24 For example, information shared with Orbitz, a travel website, has a distinct set of
privacy expectations based on the individual’s relationship with the website and the context
of the interaction. Individuals may expect location information to be used to offer hotel or
restaurant discounts for their destination, but they do not expect that information be passed
to data aggregators and used a year later to make pricing decisions. Users disclose informa-
tion with a purpose in mind and within an implicit confidentiality agreement.
Privacy law scholar Woodrow Hartzog suggests that this confidentiality agreement should
be honored by firms that subsequently receive or gather the information within a concept
of “chain link confidentiality.”25 The expectations present at initial disclosure—who should
receive information, how it can be used, how long it will be stored—should persist through-
out the online information supply chain.

Role of Firms in the Information Supply Chain

In conventional supply chains, upstream suppliers may have quality problems or unethical
business practices that taint the final product. In the 1990s, for example, Wal-Mart and Nike
infamously relied on overseas manufacturers that used child labor and unsafe working condi-
tions. More recently, Apple has grappled with the reputational problems arising from using
Foxconn, a supplier with harsh working conditions. Firms that willingly enter a supply chain
have an obligation to ensure that the practices of other firms in the chain match their own.
Similarly, organizations within the information supply chain are held responsible for the data
stewardship practices of both upstream and downstream partners.
An organization’s responsibility within a supply chain is derived from the benefits it
receives from the practices of the supply chain. In accepting those benefits, the firm implic-
itly signs up to the practices of the supply chain—including potentially questionable practices
of upstream sources. Nike benefits from the practices of its suppliers even though the work-
ing conditions of those suppliers leave a lot to be desired.
Each firm in the Big Data Industry contributes to, and benefits from, an information sup-
ply chain and willingly takes on part of the responsibility for actions and practices within that
chain. For example, when Facebook seeks to use information from upstream data brokers
such as Acxiom, Epsilon, Datalogix and BlueKai,26 it must not only worry about its own
collection methods, but also the upstream sources’ data collection methods. Choosing and
creating supply chains means that firms are responsible for the conduct and treatment of
users throughout the chain. Thus Nike is held responsible for how its products are sourced,
and coffee retailers are held responsible for how their coffee is farmed.

Systemic Issues in the Big Data Industry

As described above, the role of firms within their information supply chain should be ana-
lyzed, but the Big Data Industry includes firms that are developing generalized norms and
practices. In effect, the systemic participation in the Big Data Industry gives rise to “everyone
does it” ethical issues—where norms of practice are beginning to form across many firms
and supply chains, as illustrated in Figure 20.4. Quadrants A and B capture the ethical issues
within a single supply chain, as described above.
This section examines the ethical issues captured by Quadrants C and D, and links them
to parallel, more traditional industries. The first issue is creating negative externalities (or
surveillance as pollution), where surveillance is a byproduct of the systematic collection,
458 kirsten e. martin

Figure 20.4 Current Ethical Issues within the Big Data Industry

aggregation and use of individual data (Quadrant D). The second is the growing problem
of destructive demand within the Big Data Industry (Quadrant C), where the need for con-
sumer data is pressuring consumer-facing firms to collect and sell increasing amounts of
information with lower standards. Both sets of ethical issues stem from the systemic norms and
practices within the industry. In addition, both are more consumer or individual-focused and
may apply to a particular subset of firms within the Big Data Industry.
The ethical issues that have to be faced at both the supply chain level and the industry level
are summarized in Table 20.2 (For comparison, the table provides corresponding examples
from traditional industries; it also describes how CIOs and CDOs will have to deal with the
issues.)

Creating Negative Externalities (Or Surveillance as Pollution)

In all markets, costs regularly accrue to parties not directly involved in an immediate deci-
sion or exchange. For example, a firm making steel can create harm to the community in the
form of the pollution it produces. The steel company may contract with a customer—which
does not feel the effects of pollution—without including the “cost” of pollution. This is an
example of a negative externality, which exists when the harm done to others is not taken into
account in the immediate transaction.27
There are also negative externalities in the Big Data Industry arising from the aggressive
focus on collecting consumer data. The danger is that disclosing personal data can become the
default, and individuals who choose not to disclose can be harmed. For example, individuals
who attempt to opt out of aggressive data collection by using TOR28 or other obfuscation
technologies may be targeted by the National Security Agency as suspicious.29 The harm to
individuals who do not share their data is a result of the decisions of the majority who do
share.
More complicated is when the harmful effect is compounded by many parties in an indus-
try acting in a similar way. For example, a manufacturing firm may not take account of the
harmful effects on the local community of the pollution it produces. However, the aggregated
harm of pollution from manufacturers worldwide becomes a problem for society in general
through global warming. Aggregated negative externalities are a consequence of “everyone
 ethical issues 459

Table 20.2 Ethical Issues in the Big Data Industry

Ethical Issues Big Data Industry Traditional Industry As Faced by CIOs and
Examples Examples CDOs
Supply Chain Level
Unfair or objectionable Harms from Sale of computer How do downstream
harms from using Big downstream use, systems in Iran or users of your data
Data such as using Big Syria; use of product protect the consumer
Data to discriminate in crime data or impact
in consumer credit consumers?
decisions or college
admissions
Gathering of data as an Questionable upstream Apple and Foxconn; What questions do
intrusion or violation sourcing, such as Nike and sweatshops you ask about using
of privacy purchasing location data from unknown
data surreptitiously or questionable
gathered from mobile sources?
applications or using
data from invisible
web beacons unknown
to user
Industry Level
Harm to those not Negative externality Steel industry and How is your company
involved in the of surveillance, such pollution pollution possibly
immediate decision as the hidden and contributing to
or transaction caused systematic aggregation surveillance by
by broad tracking of data about participating in broad
of consumers individuals user tracking—or
and collection of partnering with
information someone who does?
Focus on resale of Destructive demand, Demand for residential How is your company
consumer data; such as creating a mortgages created creating destructive
treating consumers flashlight application by the mortgage- demand by using
simply as a means to just to gather user backed securities data of questionable
supply the secondary contact or location industry; websites quality or that
market of information data and applications used was collected by
traders as bait breaching privacy
expectations?

does it”— the harm results from the fact that the practice is pervasive in an industry. The
harm from aggregated actions across an industry is more than the sum of the harms caused
by individual firms.
Firms within the Big Data Industry create an aggregated negative externality because
they contribute to a larger system of surveillance through the breadth of information gath-
ered and because firms that collect and aggregate data are invisible to users. In general,
surveillance conflicts with the need of individuals to be unobserved as well as their need
for uniqueness and a sense of self. An individual’s personal space permits “unconstrained,
unobserved physical and intellectual movement” to develop as an individual and to cultivate
relationships.30 Surveillance can cause harm by violating the personal space—both physical
and ­metaphorical—that is important to develop as an individual and within relationships.
460 kirsten e. martin

Importantly, the fear of being watched and judged by others causes “spaces exposed by
­surveillance [to] function differently than spaces that are not so exposed” by changing how
individuals behave and think.31
Surveillance works by affecting not only those who are being watched, but also those
who are not actually being watched. In fact, the mere belief that someone is being watched is
enough for individuals to act as though they are under surveillance. Prisons are designed so
that only some of the prisoners are watched, but the prisoners do not know specifically who
is being watched at any one time. Individuals do not need to know they are under ­surveillance
to act as though they are under surveillance. Importantly for the Big Data Industry, the
­negative externality of surveillance means the industry can rely on those individuals not cur-
rently being watched to believe and act as though they are under surveillance.
Surveillance is particularly effective in changing behavior and thoughts when individu-
als (1) cannot avoid the gaze of the watcher and (2) cannot identify the watchers.32 By
aggregating data across disparate contexts online, the Big Data Industry contributes to the
perception that surveillance is impossible to avoid yet also creates a data record that tells a
richer, more personalized story than individual data points.33 Broad data aggregators sum-
marize highly diverse data (the “variety” in Big Data) so they can analyze individualized
behavior. In addition, most data aggregators are invisible to the user and thereby aggravate
the surveillance problem by being not only unknown, but also unreachable. Unknown and
invisible firms that gather and store data contribute to the perception of omnipresent and
omniscient surveillance and exacerbate the power imbalance between the watched and the
watcher.34
Currently, the Big Data Industry does not consider or take account of the negative exter-
nality of surveillance. Firms that capture, aggregate or use Big Data create a cost to the larger
community in the form of surveillance.

Contributing to Destructive Demand

In addition to the aggregate harm of surveillance, the Big Data Industry has the potential to
foster destructive demand for consumer data when firms exert pressure on consumer-facing
organizations to collect more information. As described below, consumers unknowingly can
become suppliers to a secondary Big Data market.
The main source of information for the Big Data Industry is a byproduct of legitimate
transactions with consumer-facing firms. Data is collected from a transaction in the primary
market—e.g., checking the weather, buying groceries, using a phone, paying bills, etc.—
and is then aggregated and merged to create a large robust data set. In effect, that data is seen
as sitting inventory when a firm in the secondary Big Data market—such as a data broker or
tracking company—creates value through the secondary use of the data. The consumer data
from the initial transaction, such as buying books on Amazon or reading news on The New
York Times, can be sold or repurposed in a secondary market without losing value. Examples
of destructive demand created by secondary markets are described in the panel on the fol-
lowing page.
A tipping point exists where the product— whether residential mortgages as described in
the panel or consumer information—is no longer pushed into the secondary market, but rather
the secondary market becomes a pull for the product of the primary, consumer-­targeted mar-
ket. In this situation, the secondary market creates a destructive demand by exerting pres-
sure on suppliers to adopt questionable or unethical practices to meet the demands of the
secondary market. Primary market firms (e.g., residential mortgage originators) then treat
customers as a mere means35 to the secondary market (for mortgage-backed securities). The
demand becomes particularly destructive when the service in the primary market serves as a
 ethical issues 461

lure (or bait) for the supply of the secondary market—as when mortgage originators became
a lure to produce mortgages for the mortgage-backed securities market.
Within the Big Data Industry, websites and applications with trusted relationships with
consumers can become the bait for Big Data, such as when a flashlight application tracks your
location or when a website with numerous tracking beacons36 stores consumer information.
The primary market promises a customer-focused relationship (first-market relationship)
when it is actually attempting to sell customers’ information to a secondary market.
The attributes of the mortgage-backed securities market, and the destructive demand it
created, provide a warning for the secondary market for consumer information in the Big
Data Industry. The demand for the primary market becomes destructive:

1 Where the secondary market becomes as or more lucrative than the primary market. For e­ xample,
the fee charged to consumers for mortgages was dwarfed by the profits from the sale
of mortgages into the secondary market. Mortgage originators could lose money on
a mortgage but still make a profit by selling the mortgage in the secondary market.
Within the Big Data Industry, problems will arise when the sale of consumer informa-
tion is more lucrative or, at minimum, equals the profits from the primary market
activities, such as selling an application or providing a service.
2 When the quality in the secondary market is less than in the primary market—i.e., when the
quality requirements of data brokers or data aggregators do not match the expectations
of consumers who disclose information. For example, the mortgage-backed securi-
ties market was not concerned about the quality of the residential mortgages they
­purchased from originators.

Examples of Destructive Demand from Secondary Markets

Secondary markets can be beneficial. A secondary market for bicycles and cars can increase
the life of the product. In fact, customers may be more willing to invest in a car in the
­primary “new car” market knowing that the robust secondary market for used cars exists to
sell the car when necessary. Other secondary markets create value from items that would
otherwise be thrown away—e.g., the byproduct from cattle ranching (wax) or from steel-
making (scrap metal). The secondary market allows firms to capture value from seemingly
waste products, such as ranchers selling the byproduct of cow fat used for candles.
However, secondary markets can apply perverse pressures to distort the demand, qual-
ity or price in the primary market. An example is the market for carbon credits. Firms who
create HFC-23, a super greenhouse gas, as a byproduct of their manufacturing are paid to
destroy it to prevent the gas causing environmental damage. However, the secondary mar-
ket for HFC23 became too lucrative: some firms had an incentive to create HFC-23 so they
would be paid to destroy it. In fact, the World Bank paid $1 billion to two chemical factories
in China to destroy HFC-23, and later evidence suggested these firms may have deliberately
overproduced the gas so they could be paid to destroy it in the secondary market.
More problematic is when the secondary market begins to systematically distort the pri-
mary market, as in the well-known case of mortgage-backed securities and the residential
mortgage market. The primary market for mortgages is between a lender and home-buyer.
Financial institutions lend money to qualified individuals to buy a home at a rate that takes
into account the potential risk of the individual defaulting on the loan.
A secondary market for residential mortgages uses consumer mortgages as the inven-
tory for a new financial instrument: mortgage-backed securities (MBS). The MBS market
increased dramatically between 2000 and 2008, and the associated demand for consumer
mortgages to feed the MBS market led to lax sourcing in the primary mortgage m ­ arket.
462 kirsten e. martin

Interestingly, the price did not change in the primary market; rates and interest rate
spreads remained steady throughout the growth in the MBS market. However, the quality
standards for consumer mortgages required in the primary market dropped to match the
(lower) requirements in the secondary market. More mortgage originations and fewer
denials led to a greater number of high-risk borrowers through lax sourcing for the MBS
market.
This mismatch between the quality required in the secondary and primary markets
proved particularly hazardous. The interests of firms in the secondary market did not
align with those of consumers, and without a relationship with consumers there were
higher default rates for the mortgages included in their MBS. However, when incentives
of the secondary market were aligned with the primary market of the consumer, as in the
case of affiliated investors, economists found no change in the mortgage default rates.
The increase in private securitization by non-commercial bank financial firms, with lower
requirements for quality, created a destructive demand for lower quality mortgages in the
primary market.
3. When firms in the primary market have limited accountability to consumers for their transactions
in the secondary market. Primary market firms can hide their bad behavior when they sell into
the secondary market because their activity in the secondary market is not visible or incorpo-
rated in the primary market. The term “moral hazard” refers to when individuals or institu-
tions do not bear the full consequences of their actions, as in the case of mortgage originators
selling bad loans into the MBS secondary market. In the Big Data Industry, consumer-facing
organizations are currently not held accountable for selling access to consumer data even
by market forces, and their activities in the secondary market are invisible to the primary
consumer market.

Guidelines for a Sustainable Big Data Industry

The Big Data Industry is currently in a unique, yet vulnerable, position, with identi-
fied ­systemic risks but without clear industry leaders to develop cooperative strategies.
Moreover, the power of Big Data is generated by non-consumer-focused firms that aggre-
gate and distribute the data, and regulating such firms has met with questionable success in
the other industries.37 However, all firms are tainted by the bad behavior and questionable
practices of others in their industry and have a stake in a sustainable resolution. Three types
of firms in the Big Data Industry are of particular importance in creating sustainable industry
practices:

1 Possible leaders in the industry, which could emerge from their unique position as
gatekeepers, such as consumer-facing companies, website operators and application
providers. These companies control how information is initially gathered and how it
is subsequently shared.
2 Organizations with unique influence and knowledge in the area of Big Data analytics,
such as the American Statistical Association and the Census Bureau, as well as HHS
and the National Research Council (which govern academics’ Institutional Review
Boards). These organizations have the stature and deep knowledge of research, data
sets, analytics and confidentiality to begin to set standards of practice.
3 Providers of key products within the Big Data Industry, such as Palantir, Microsoft,
SAP, IBM, etc. These companies have few competitors and unique knowledge of ana-
lytic products and services, and can offer advice to firms at a critical point to analyze
and use Big Data.
 ethical issues 463

As this article has shown, the ethical issues and problems facing the Big Data Industry are
similar to those faced by other industries. Practical solutions to creating mutually beneficial
and sustainable relationships within the industry include visible data stewardship practices,
greater data due process internally and using the services of a data integrity professional.
These solutions, which are summarized in Table 20.3 and Figure 20.5, directly address the
issues identified in this article. (Table 20.3 also describes how CIOs and CDOs can address
the problems.) Despite the potential to create harm, the Big Data Industry has the poten-
tial to be a force for good and the focus therefore should be on implementing the solutions
described below to create value for all stakeholders.38

Table 20.3 Possible Solutions to the Big Data Industry’s Ethical Issues

Type of Issue Cause of Problem Potential Solution As Faced by CIOs and CDOs
Data Stewardship
Supply Chain Firms not Illustrate role of firm Identify and take ownership
Sourcing and accountable in larger supply chain of upstream sources and
Use Issues for conduct of Make machine- downstream customers/uses
upstream sources readable notification of data
and downstream of supply chain Ensure information about
customers information available data stewardship practices
to policy makers, is available to experts and
reports and privacy novices
advocates
Supply chain not Make data stewardshipDo not enter into
visible practices of supply confidentiality agreements
chain visible that preclude explaining your
data partners, either upstream
sources or downstream users
Data Due Process
Surveillance Harm to others not Minimize surveillance Make tracking visible to
as Negative captured by firms consumer
Externality collecting, storing Internalize cost of (Industry) Require additional
or using personally surveillance with data due process for firms
identifiable increased data due acquiring and retaining PII
information(PII) process
Data Integrity
Destructive Secondary market Use a data integrity (Industry) Institute data
Demand for of data trading professional when integrity professional or
Consumer has lower quality handling or selling PII board for projects partnering
Information requirements than with Big Data sources and
primary consumer- customers
focused market
Secondary market Make activity in Account for and communicate
is not visible to secondary market additional risk from
primary market visible to regulators partnering in secondary
(consumers) and consumers market for Big Data through
disclosure
464 kirsten e. martin

Problems Supply Chain Sourcing Surveillance as Destructive Demand for

and Use Issues Negative Externality Consumer Information

General Solutions Make supply chain visible to Decrease surveillance harm Make secondary market
technologists, researchers, and internalize costs when for consumer data visible
consumers and regulators contributing to surveillance
Guidelines for the
Big Data Industry

1. Identify and Make data sources and uses Clearly identify firms
communicate data of information visible and within an information
stewardship practices searchable (see Figure 2) supply chain

2. Differentiate data Internalizesurveillance cost:

due process model additional datadue process
for PII and non-PII* required when retaining PII

3. Quantify activity in Communicate to consumers,

Explain % of data sold and
secondarymarket for regulators and investors the
% of sales from selling
Big Data value created and associated
informationin secondary
risk from activity in secondary
marketfor information
market forinformation

4. Institutedata integrity Ensure adherence to and Internalizesurveillance cost: Make primary data
professional or board compliance withstewardship require dataintegrity collectors responsiblefor
for Big DataAnalytics norms through professional professional orboard when quality of information
data integrity using personal data(PII) gathered

Figure 20.5 Guidelines for a Sustainable Big Data Industry

*The ability to fully differentiate between personally identifiable information (PII) and non-PII is debatable,
as argued by Narayanan, A. and Shmatikov, V. “Myths and Fallacies of Personally Identifiable Information,”
Communications of the ACM (53:6), (2010), pp. 24–26.

Identify and Communicate Data Stewardship Practices

Current information supply chains are not visible, putting consumers at a disadvantage
in choosing preferred supply chains or holding a firm responsible for its decision to join a
particular supply chain. Such information asymmetries could be minimized by clearly illus-
trating the upstream sourcing information and downstream use in order to report the data
­stewardship practices. Data stewardship includes the rules about internal treatment and
external sharing of information for different types of data. Industry groups can develop data
stewardship best practices for firms and, more importantly, coalesce around a format for
communicating data stewardship practices.
Making the supply chain visible will clearly identify a firm’s position in the chain and
enable the firm to take responsibility for the upstream and downstream practices of others.
A firm’s different upstream sources of information, the type of information collected, its
internal uses and storage, and the firm’s possible downstream customers and recipients are
all important for understanding the entirety of the supply chain and the firm’s data steward-
ship practices. An illustrative example is shown in Figure 20.6. The data sources, type of data
and level of identifiability are important for understanding the upstream sourcing practices;
the firm’s primary use, secondary use and storage explains the purpose and vulnerability
of the data; and the types of data, recipients and level of trust in the recipients explains the
downstream uses of the data collected.
While the information supply chain may look complicated, a similar problem has been
resolved in areas such as free-trade coffee, organic food and sustainable fishing: trusted
­supply chains are identified, certified and valued by customers and customer groups. The
information supply chain of a particular firm should be similarly available to industry groups,
customer groups and regulators that have the knowledge necessary to certify a level of
 ethical issues 465

Upstream Informaon Flow Downstream InformaonFlow

Demographic Member of Verified

Generalization Supply Chain

Behavior Firm’s Confirmed Trusted

Generalization Firm’s Internal Recipient
Primary Secondary
Individualized
Information
Use Use and
Storage Unverified Recipient
(Data Stewardship
Identifiable Pracce Unknown)
Information
Arrows designate type of information

Figure 20.6 Example of a Firm’s Information Supply Chain Diagram

data stewardship within the supply chain. Making information supply chains available in a
machine-readable form would support the illustration in Figure 20.6, as has been devel-
oped and effectively called for by Cranor.39 Users would then be able to identify and choose
trusted and certified supply chains.
Providing information about a firm’s larger supply chain and data stewardship practices in
a uniform way is critical not only for helping users directly, but also for allowing researchers,
reporters, technologists and academics to easily diagram and analyze the many different sup-
ply chains and provide an audit trail for the data.

Differentiate Data Due Process Requirements for Personal Data

Two approaches can be used to manage surveillance as a negative externality: (1) individual
firms can reduce their role in contributing to surveillance and (2) the industry can implement
policies to internalize the cost of surveillance for firms. First, surveillance is most effec-
tive (and therefore most harmful) when the watcher is hidden yet omnipresent.40 Firms can
reduce their role in consumer surveillance by becoming more visible to the consumers and by
limiting data collection. The negative externality of surveillance suggests that firms that are
invisible to users, such as data aggregators and data brokers, have a special role in the online
surveillance system. Both data aggregators and data brokers are invisible to users while aggre-
gating data across diverse sources. Making the tracking of individuals obvious at the time of
data collection can diminish the harm of surveillance.
In addition to decreasing the effectiveness and related harm of surveillance, internalizing
the cost of surveillance for firms is an effective tool to diminish this negative externality.
For example, data brokers and aggregators that store and distribute information within the
Big Data Industry could have additional data due process requirements imposed on them for
collecting, retaining and distributing personally identifiable information (PII). While some
have claimed that PII is not clearly distinguishable,41 firms that retain information that can be
linked back to an individual so it can be fused with other information about the same indi-
vidual should have an additional obligation of data due process.
Citron and Pasquale outline three areas of data due process requirements, which are
instructive moving forward: (1) identifying audit trails, (2) offering interactive modeling and
(3) supporting user objections.42 In addition to firms being required to provide an audit trail
for how information is sourced, used and distributed similar to that shown in Figure 20.6,
they could also be required to offer interactive modeling of the use of information and a pro-
cess to enable individuals to examine and object to the information stored. These ­additional
466 kirsten e. martin

requirements would impose a cost on those that opt to retain personally identifiable informa-
tion. The additional obligations would increase the cost of retaining the information, inter-
nalize the previously externalized harm (surveillance) and possibly dissuade some firms from
using and retaining PII.
Requiring better internal oversight of the data stewardship practices and additional data
due process procedures would increase the cost of holding individualized yet comprehensive
data and internalize the cost of contributing to surveillance. Many negative externalities are
beyond the scope of a single firm to rectify; the cost of reigning in surveillance is too much
for one firm to bear and the effect of a single firm changing its data practices would be mini-
mal. For those that wish to use large samples of personally identifiable information, better
data governance together with the services of a data integrity professional—who is certified
and held accountable for the data practices of the firm—would ensure that data stewardship
practices and data due process are followed. Similarly, an internal consumer review board, as
advocated by Calo and cited in the draft White House Consumer Privacy Bill of Rights Act of
2015, would similarly internalize the cost of storing and using personally identifiable data.43

Quantify Activity in the Secondary Market for Big Data

Destructive demand flourishes when the interests of the secondary market for consumer
information are not aligned with the primary market and when the secondary market is not
visible to the primary market. By linking all relevant firms through an information supply
chain, firms in the secondary market have “skin in the game” and thus an incentive to align
interests.44 In other words, by framing themselves as members of a larger supply chain, firms
have a vested interest in ensuring others in the chain uphold data stewardship and data due
process practices. Otherwise, their reputation would be at risk.
In addition, by making the secondary market more visible to the primary market, the
primary market can take into consideration secondary market firms’ actions. Consumers may
be more (or less) willing to divulge information to a firm in the primary market depending
on its type of involvement in the secondary market for selling information. Importantly,
the current approach, where the secondary market for Big Data is invisible to the primary
consumer-facing market, does not allow for such feedback.
Aligning interests not only benefits the primary market; it can also benefit quality and
trusted firms in the secondary market. For example, within the mortgage-backed securi-
ties market, unaffiliated financial companies, which did not have interests aligned with the
­primary market, were not able to sell their securities at the same rate as those companies that
were affiliated. In other words, this secondary market recognized the inherent risk of trad-
ing with companies whose quality criteria did not align with the consumer market. For the
Big Data Industry, history suggests there would be a market for quality data practices in the
secondary market for Big Data.

Institute Data Integrity Professional or Board for Big Data Analytics

The practical implications of these guidelines call for renewed attention to the training and
development of data integrity professionals. The focus of their training should be on incor-
porating an ethical analysis, which is consistent with FTC Commissioner Julie Brill’s focus
on the role of technologists in protecting privacy in the age of Big Data, as well as Mayer and
Narayanan’s call for engineers to develop privacy substitutes within their design.45
First, professional data scientists are needed to implement the solutions outlined above
to curtail surveillance and destructive demand, as well as to ensure data stewardship prac-
tices. Currently, advice for Big Data professionals, including data scientists, data analytics
 ethical issues 467

s­pecialists, and business intelligence and analytics specialists, focuses on the challenges in
using Big Data, such as leadership, talent management, technology, decision making and
company culture. There is little advice on ensuring data integrity.46
Second, consumer review boards, made up partly of professional data scientists, would
oversee and authorize research on human beings within the commercial space. As Calo notes,
academics are required to receive clearance to conduct research from their Institutional
Review Board and undertake associated training, even when the research is for societal ben-
efit. Yet private companies conduct research without oversight, even when at the expense
of the consumer.47 Revelations that OKCupid and Facebook48 had conducted experiments
on users without their knowledge only show how prescient Calo was in the call for con-
sumer review boards; and effective consumer review boards would require data integrity
­professionals.
Finally, academic institutions continue to develop degree courses in business analytics,
business intelligence and data analytics to train Big Data professionals—but they do not
require students to take a course in ethics. A survey of the top 15 such programs shows the
intense focus on technique, with little regard given to privacy, ethics or corporate and pro-
fessional responsibility.49 Accreditation for such programs should require them both to train
data integrity professionals who graduate with a degree in data science, data analytics or busi-
ness intelligence, and to support the solutions proposed in these guidelines.

Concluding Comments

This article has examined Big Data within the context of the Big Data Industry and identified
persistent issues and points of weakness in current market practices. In doing so, it has exam-
ined the industry’s information supply chain of upstream suppliers and downstream uses of
data, the ethical issues arising from the negative externality of surveillance caused by persis-
tent tracking, aggregation and the use of consumer-level data, and the potential destructive
demand driven by the secondary market for consumer information. Importantly, the article
has identified the Big Data Industry as having both economic and ethical issues at the indi-
vidual firm, supply chain and general industry level and has suggested associated solutions to
preserve sustainable industry practices.

Notes
1 Both the size of the data set, due to the volume, variety and velocity of the data, as well as the
advanced analytics, combine to create Big Data. Key to definitions of Big Data are that the amount
of data and the software used to analyze it have changed and combine to support new insights and
new uses. See also Ohm, P. “Fourth Amendment in a World without Privacy,” Mississippi. Law Journal
(81), 2011, pp. 1309–1356; Boyd, D. and Crawford, K. “Critical Questions for Big Data: Provoca-
tions for a Cultural, Technological, and Scholarly Phenomenon,” Information, Communication & Society
(15:5), 2012, pp. 662–679; Rubinstein, I. S. “Big Data: The End of Privacy or a New Beginning?,”
International Data Privacy Law (3:2), 2012, pp. 74–87; and Hartzog, W. and Selinger, E. “Big Data in
Small Hands,” Stanford Law Review Online (66), 2013, pp. 81–87.
2 Ur, B. et al. “Smart, Useful, Scary, Creepy: Perceptions of Online Behavioral Advertising,” presented
at the Symposium On Usable Privacy and Security, July 11–13, 2012, Washington, D.C. See also
Barocas, S. and Selbst, A. D. “Big Data’s Disparate Impact,” 2015, draft available at SSRN 2477899;
and Richards, N. M. and King, J. H. “Three Paradoxes of Big Data,” Stanford Law Review Online (66),
2013, pp. 41–46.
3 In order of reference: Barocas, S. and Selbst, A. D., op. cit., 2014; Hartzog, W. and Selinger, E., op.
cit., 2013; Big Data Management & Analytics, Gartner, 2014, available at http://www.gartner.com/
468 kirsten e. martin

technology/topics/big-data.jsp; Mayer-Schonberger,V. and Cukier, K. Big Data: A Revolution ThatWill

Transform How We Live,Work, and Think, Houghton Mifflin Harcourt, 2013; Richards, N. M. and King,
J. H., op. cit., 2013.
4 Wen, H. “Big ethics for big data,” O’Reilly Radar, June 11, 2012, available at http://radar.oreilly.
com/2012/06/ethics-big-data-business-decisions.html.
5 For example, Gartner notes that there are three strategic and operational challenges: information
strategy, data analytics and enterprise information management, but makes no mention of ethical
challenges. See also Big Data and Privacy: A Technological Perspective, Report to the President, 2014,
available at https://www.whitehouse.gov/sites/default/files/microsites/ostp/PCAST/pcast_big_
data_and_privacy_-_may_2014.pdf; Big Data Platform Bringing Big Data to the Enterprise, IBM; and
Manyika, J. et al. Big Data: The next Frontier for Innovation, Competition, and Productivity, McKinsey &
Company, 2011, available at http://www.mckinsey.com/insights/business_technology/big_data_
the_next_frontier_for_ innovation.
6 The shift to creating value through monetizing data impacts relationships with stakeholders as well as
policies internal to the organization—see Tallon, P. P, Short, J. E and Harkins, M. W. “The Evolution
of Information Governance at Intel,” MIS Quarterly Executive (12:4), 2013, pp. 189–198; Najjar, M. S.
and Kettinger, W. J., “Data Monetization: Lessons from a Retailer’s Journey,” MIS Quarterly Executive
(12:4), 2013, pp. 213–225.
7 The 3Vs of Big Data—volume, variety and velocity—were originally defined in a META/Gartner
report but have subsequently been expanded with veracity, value, validity, variability and even visu-
alization, leading to the term “V confusion”—see Grimes, S. “Big Data: Avoid ‘Wanna V’ Confu-
sion,” InformationWeek, August 7, 2013, available at http://www.informationweek.com/big-data/
big-data-analytics/big-data-avoid-wanna-v-confusion/d/d-id/1111077?.
8 Firms monetizing the value of data require new tactics and strategies as well as, perhaps, accounting
rules to capture the value (and risk) created in new transactions. See Monga, V. “The Big Mystery:
What’s Big Data Really Worth?,” Wall Street Journal, October 13, 2014, available at http://blogs.wsj.
com/cfo/2014/10/13/the-big-mystery-whats-big-data-really-worth/.
9 Lee, Y. et al., “A Cubic Framework for the Chief Data Officer: Succeeding in a World of Big Data,”
MIS Quarterly Executive (13:1), 2014, pp. 1–13.
10 See also Lomas, N. “Facebook’s Data Protection Practices Under Fresh Fire In Europe,” TechCrunch,
available at http://social.techcrunch.com/2015/02/23/facebook-ad-network/.
11 Scott, M. “Where Tech Giants Protect Privacy,” The NewYork Times, December 13, 2014, available at
http://www.nytimes.com/2014/12/14/sunday-review/where-tech-giants-protect-privacy.html.
12 The BDI requires not only information brokers to aggregate data, but also hardware, software and
professional services firms to support the collection, storage and use of the data. Leaders include firms
focused on analytics solutions (e.g., SAS, IBM, SAP) as well as industry specialists (e.g., Amazon Web
Services) and service providers (Accenture). For more information, see Robb, D. “Top 20 Big Data Com-
panies,” Datamation, November 20, 2014, available at http://www.datamation.com/applications/top-
20-big-data-compa-nies-1.html. Importantly, many firms combine products and services that support
the BDI—e.g., IBM (hardware, software and services), HP (cloud and storage), Dell (storage), SAP
(analytics),Teradata and Oracle (hardware, software, services), SAS and Palantir (analytics and software)
and Accenture (software and services). See Leopold, G. “Big Data Rankings: Leaders Generated $6B
in Revenues,” Datanami, December 4, 2014, available at http://www.datanami.com/2014/12/04/
big-data-rankings-leaders-generated-6b-revenues/. While hardware, software, analytics and even tech-
nology consulting firms make most of the industry leader lists, missing are the data brokers and data
aggregators that make up the information supply chain discussed in the next section.
13 Duhigg, C. “How Companies Learn Your Secrets,” The NewYork Times, February 16, 2012, available at
http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html.
14 As stated by Bambauer, “estimating harm is a wearisome task”—see Bambauer, J. “Other People’s
Papers,” draft paper, 2014, p. 15, available at http://masonlec.org/site/rte_uploads/files/Bam-
bauer_Other_Peoples_Papers_GMU.pdf. Bambauer categorizes privacy harms as arising from col-
lection, risk of misuse, aggregation, obstruction and hassle; Richards lists sorting, discrimination,
persuasion and blackmail as potential harms—Richards, N. M. “The Dangers of Surveillance,” Har-
vard Law Review, 2013, available at http://harvardlawreview.org/2013/05/the-dangers-of-surveil-
lance/; Calo focuses more broadly on objective and subjective harms—Calo, M. R. “Boundaries of
Privacy Harm,” Indiana Law Journal (86), 2011, pp. 1131–1162.
15 For example, car insurance companies are moving toward usage-based premiums based on driving
data collected in real time—see Boulton, C. “Auto Insurers Bank on Big Data to Drive New ­Business,”
 ethical issues 469

Wall Street Journal, February 20, 2013, available at http://blogs.wsj.com/cio/2013/02/20/auto-

insurers-bank-on-big-data-to-drive-new-business/. Similarly, health insurance companies can deny
services and increase premiums through accessing data online—see Gittelson, K. “How Big Data
Is Changing Insurance,” BBC News, November 15, 2013, available at http://www.bbc.com/news/
business-24941415.
16 Calo, M. R. “Digital Market Manipulation,” The GeorgeWashington Law Review (82:4), 2013, pp. 995–
1051.
17 For the concept of objectionable classification and biases, see Barocas, S. and Selbst, A. D., op.
cit., 2015; Sweeney, L. “Discrimination in Online Ad Delivery,” acmqueue (11:3), 2013, available at
http://queue.acm.org/detail.cfm?id=2460278; and Cohen, J. E. “What Privacy Is for,” Harvard Law
Review (126), 2013, pp. 1904–1933.
18 For examples of objectionable categorizations, see Hill, K. “Data Broker Was Selling Lists Of Rape
Victims, Alcoholics, and ‘Erectile Dysfunction Sufferers’,” Forbes, September 19, 2013, available at
http://www.forbes.com/sites/kashmirhill/2013/12/19/data-broker-was-selling-lists-of-rape-
alcoholism-and-erectiledysfunction-sufferers/.
19 Groves has previously categorized data sources as organic vs. designed—Groves, R. M. “Three Eras
of Survey Research,” Public Opinion Quarterly (75:5), 2011, pp. 861–871. Sources have also been cate-
gorized as analog vs. digital in Big Data and Privacy: A Technological Perspective, Report to the President,
2014. However, the differences in these categories are not always clear or meaningful in determining
the appropriateness of the supplier.
20 For an analysis of quality and bias issues in Big Data sources, see Boyd, D. and Crawford, K. Criti-
cal Questions for Big Data: Provocations for a Cultural, Technological, and Scholarly Phenomenon, Microsoft
Research, 2012; Lerman, J. “Big Data and Its Exclusions,” Stanford Law Review Online (66), 2013, pp.
5563; and Crawford, K. “The Hidden Biases in Big Data,” Harvard Business Review, April 1, 2013.
21 Imputation is the process of replacing missing data with substituted values.
22 The role of obfuscation in protecting privacy is examined in Brunton, F. and Nissenbaum, H. “Ver-
nacular resistance to data collection and analysis: A political theory of obfuscation,” First Monday
(16:5), 2011.
23 O’Leary, D. E. “Exploiting Big Data from Mobile Device Sensor-Based Apps: Challenges and Ben-
efits,” MIS Quarterly Executive (12:4), 2013, pp. 179–187.
24 Nissenbaum, H. Privacy in Context: Technology, Policy, and the Integrity of Social Life, Stanford Univer-
sity Press, 2009; Martin, K. “Understanding Privacy Online: Development of a Social Contract
Approach to Privacy,” Journal of Business Ethics, 2015, pp. 1–19; and Richards, N. M. and King, J. H.
“Big Data Ethics,” Wake Forest Law Review (23), 2014.
25 Hartzog, W. “Chain-Link Confidentiality,” Georgia Law Review (46), 2011, pp. 657–704.
26 Hill, K. “Facebook Joins Forces With Data Brokers To Gather More Intel About Users For Ads,”
Forbes, February 27, 2013, available at http://www.forbes.com/sites/kashmirhill/2013/02/27/
facebook-joins-forces-with-data-brokers-to-gather-more-intel-aboutusers-for-ads/.
27 Coase illustrated negative externalities with the example of a spark from a train that causes harm to
farmers along the tracks—Coase, R. H. “Problem of Social Cost,” Journal of Law and Economics (3),
1960, pp. 1–44. Importantly for Coase, negative externalities do not necessarily require government
intervention, which carries its own cost, but may be resolved through private ordering between
­parties.
28 TOR—The Onion Router—is a service to make accessing websites anonymous. Users’ requests are
routed among many other TOR users’ requests and are bounced throughout the TOR network of cli-
ent computers to remain hidden to outsiders. For more information, see https://www.torproject.
org.
29 Zetter, K. “The NSA Is Targeting Users of Privacy Services, Leaked Code Shows,” WIRED, July 3,
2014.
30 Fried, F. An Anatomy of Values: Problems of Personal and Social Choice, Harvard University Press, 1970;
and Rachels, J. “Why Privacy Is Important,” Philosophy & Public Affairs, 1975, pp. 323–333.
31 Cohen, J. E. “Privacy, Visibility, Transparency, and Exposure,” The University of Chicago Law Review
(75:1), 2008, pp. 181–201. The inability to escape online surveillance is illustrated in Brunton, F.
and Nissenbaum, H., op. cit., 2011, and Strandburg, K. J. “Home, Home on the Web and Other
Fourth Amendment Implications of Technosocial Change,” Maryland Law Review, (70:3), 2011. In the
words of Cohen, “Pervasive monitoring of every first move or false start will, at the margin, incline
choices toward the bland and mainstream” thereby causing “a blunting and blurring of rough edges
470 kirsten e. martin

and sharp lines.”—Cohen, J. E. “Examined lives: Informational privacy and the subject as object,”
Stanford Law Review, (52), 2000, pp. 1373–1438.
32 Cohen, J. E., op. cit., 2008.
33 The Mosaic Theory of privacy explains why privacy scholars are concerned with all elements of
tracking, including transaction surveillance and purchasing behavior. This theory suggests that the
whole of one’s movements reveal far more than the individual movements—where the aggregation
of small movements across contexts is a difference in kind and not in degree. See Kerr, O.S. “The
Mosaic Theory of the Fourth Amendment,” Michigan Law Review (111:3), 2012; and United States v.
Jones, Supreme Court of United States, January 23, 2012, available at http://www.supremecourt.
gov/opinions/11pdf/10-1259.pdf.
34 Richards, N. M., op. cit., 2013.
35 The Mere Means Principle is an ethical principle that posits that you should never treat people
merely as a means to your own ends.
36 A tracking is an often-transparent graphic image, usually no larger than 1 pixel x 1 pixel, that is
placed on a website that is used to monitor the behavior of the user visiting the site.
37 For a comparison of regulating the credit reporting industry with regulating Big Data, see Hoofna-
gle, C. J. How the Fair Credit Reporting Act Regulates Big Data, paper presented at Future of Privacy
Forum Workshop on Big Data and Privacy: Making Ends Meet, September 10, 2013, available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2432955.
38 For a balanced view on solutions that both optimize the use of technology and respect privacy and
ethics, see Mayer, J. and Narayanan, A. “Privacy Substitutes,” Stanford Law Review Online (66), 2013,
pp. 89–96; and Bambauer, J., op. cit., 2014.
39 Cranor, L. F. “Necessary but Not Sufficient: Standardized Mechanisms for Privacy Notice and
Choice,” Journal on Telecommunications and High Technology Law (10), 2012, pp. 273307. Rather than
focus on the type of information, the firm’s storage, information use or third-party access to data
would be highlighted if such tactics diverge from commonly accepted practices. Research demon-
strates that users care most about the possible secondary use or third-party access to information
both online and with mobile devices, as noted by Martin, K., op. cit., 2015; Shilton, K. and Martin,
K. E. “Mobile Privacy Expectations in Context,” Telecommunications Policy Research Conference (41),
2013; and Martin, K. E. “Privacy Notices as Tabula Rasa: An Empirical Investigation into How Com-
plying with a Privacy Notice Is Related to Meeting Privacy Expectations Online,” Journal of Public
Policy and Marketing, 2015.
40 Cohen, J. E., op. cit., 2008.
41 Ohm, P. “Broken Promises of Privacy: Responding to the Surprising Failure of Anonymization,”
UCLA Law Review (57), 2009, pp. 1701–1777; and Narayanan, A. and Shmatikov, V. “Myths and Falla-
cies of Personally Identifiable Information,” Communications of the ACM (53:6), 2010, pp. 24–26.
42 Citron, D. K. and Pasquale, F. “The Scored Society: Due Process for Automated Predictions,” Wash-
ington Law Review (89), 2014, pp. 1–33; see also Crawford, K. and Schultz, J. “Big Data and Due
Process: Toward a Framework to Redress Predictive Privacy
43 Calo, R. “Consumer Subject Review Boards: A Thought Experiment,” Stanford Law Review Online
(66), 2013, pp. 97–102.
44 For the mortgage-backed securities market, skin in the game— and aligning interests—was effective
to avoid losses—James, C.M. “Mortgage-Backed Securities: How Important Is ‘Skin in the Game’?,”
FRBSFEconomic Letter, December 13, 2010.
45 Brill, J. A Call to Arms: The Role of Technologists in Protecting Privacy in the Age of Big Data, Sloan Cyber
Security Lecture by Commissioner Julie Brill, Polytechnic Institute of NYU, October 23, 2013;
Mayer, J. and Narayanan, A., op. cit., 2013.
46 Chen, H., Chiang, R. H. L. and Storey, V. C. “Business Intelligence and Analytics: From Big Data to
Big Impact,” MIS Quarterly (36:4), 2012, pp. 1165–1188.
47 McAfee, A. and Brynjolfsson, E. “Big Data: The Management Revolution,” Harvard Business Review,
October 2012.
48 Stampler, L. “Facebook Isn’t the Only Website Running Experiments on Human Beings,” Time, July
28, 2014, available at http://time.com/3047603/okcupid-oktrends-experiments/.
49 The survey includes both bachelor’s and master’s programs from across schools/programs such
as business and engineering. See http://www.informationweek.com/big-data/big-data-­analytics/
big-data-analytics-masters-degrees-20-top-programs/d/did/1108042?page_number=3 and http://
analytics.ncsu.edu/?page_id=4184. Programs reviewed include Bentley, Columbia, LSU, NYU,
GWSB, Northwestern, Rutgers, CMU, Harvard, MIT, NCSU, Stanford, UT Austin and UC Berke-
ley. Both InformationWeek’s and NCSU’s lists focus on U.S. universities.
 ethical issues 471

Questions for Discussion

1 What are the benefits and challenges of the use of big data? How can the benefits get
maximized and the challenges reduced?
2 How are the roles of the CIO and CDO changing in the big data industry? How should
the CIO/CDO manage big data?
3 How can industries and governments mitigate the negative effects of big data in the
supply chain?
4 How would the framework presented help organizations and governments mitigate
the issues identified? What policies and standard should get introduced to that effect?
5 What are the differences between the different countries regarding the use of big data
and consequent ethical issues?
6 How can practices improve and the economic and ethical issues reduce?

Further Reading
Bhimani, A., Willcocks, L. (2014). Digitisation,‘Big Data’and the transformation of accounting informa-
tion. Accounting and Business Research, 44(4), 469–490.
Günther, W. A., Mehrizi, M. H. R., Huysman, M., Feldberg, F. (2017). Debating big data: A literature
review on realizing value from big data. The Journal of Strategic Information Systems, 26(3), 191–209.
 Index

Page numbers in bold refer to content in figures; page numbers in italics refer to content
in tables.3M 102

7-S framework 40, 41 automated systems 438–439

administrative approach 14, 17, 18, 18, 20, 21 automotive industry 171
affinity pyramid 180–181, 181 Aversa, Paolo 403–425
affordances, technology see technology Avison, D. 103
­affordances Avnet 244
Agarwal, Ritu 243–258
Ahlers, G.M. 342 Backhouse, J. 224
algorithmic decision-making 430–433; ­freedom balanced scorecards 100
versus control 436–438, 444; future Bank of America 262
research agenda 442–445; independence Baptista, João 341–360
versus dependence 438–440, 444–445; Barocos, S. 456
potential ­discriminations 433–434; privacy Beath, Cynthia 133–150
versus ­security 434–436, 443–444; social Beatty, Robert C. 261–276
­consequences of 440–442, 442; see also Bell Atlantic 244
big data Benlian, Alexander 151–173
alignment 45–46, 57–59, 247, 311; see also Bennis, Warren 175
alignment literature study Berente, Nicholas 292–308
alignment literature study 85–86; aligning best practice 60, 61–62
­activities 90–94, 92–93, 100; aligning as Bezos, Jeff 151
adaptation 94, 94; aligning as experience 94, big data 232, 403–405, 450–452, 451;
97–98; aligning as integration 94, 96–97; ­algorithmic decision-making 431–433;
aligning as translation 94–96, 94; appendices distributed cognition 418, 420–422, 421;
104–120; future research agenda 99–103; ethical issues in supply chains 453–457, 453,
general patterns of research 89–90, 90, 90; 454–455, 458; freedom versus control
limitations 99; literature overview 86–87; 436–438, 444; future research agenda
research method 88–89; summary of findings 442–445; guidelines for an ethical ­industry
98–99 462–467, 463, 464, 465; human role in
Allen, D.K. 223 data analytics 296, 312; independence
Allen, James 412 versus dependence 438–440, 444–445;
Amazon 134, 141 ­performativity 418, 422–423, 423;
ambidexterity 64, 75, 76–77 potential discriminations of algorithms
Among School Children 327–328 433–434; ­privacy versus security 434–436,
Amsinck, Henrik 140, 174–200 443–444, 452, 456–457; situational
Andersen Consulting 100 decision-making 418, 419–420, 419; social
Apple 135, 196, 441, 453, 457 consequences of algorithms 440–442, 442;
Ashkenas, R. 78 systemic ethical issues 457–462, 458, 459;
Atos 354, 355–356, 358 see also Formula 1 (F1) Abu Dhabi Grand Prix
authority 312, 322 2010 study
 index 473

big old companies’ digital transformations LEGO Group 186, 186–187; market research
133–134; customer engagement strategy industry case 205, 208–209, 212, 213;
134–135; digital services platforms 138–142, ­publishing industry case 205, 210–211, 212,
141; digitized solutions strategy 135–136; 213; reasons for establishing CDOs 216–217,
impact on IT units 142–143; operational 216, 292–293, 293; retail industry case
backbones 137–138, 140–142, 141; recom- 205–206, 205, 212, 213; role of 203–204,
mendations for companies 143–144, 143; 204, 211–214, 213; tourism industry case
research methodology for study 145–148, 205, 206–207, 212, 213; types of 297–303;
145–146, 147–148 see also chief information officers (CIOs)
Black-Scholes-Merton formula 422 chief information officers (CIOs): c­ lassifying
Blanton, J.E. 320 leadership profiles 278–279; digital
Blockbuster 151 ­innovation 304–306; digital ­transformation
Boddy, D. 95 202, 203, 204; economic decline
Boland, R.J. 75 ­management 261–275; importance of CIO
Boston Consulting Group 145 leadership 277; as IT advisors 279–280,
Boudreau, M.C. 51 ­279–280, 284–285, 284, 286, 288; as IT
Boynton, A.C. 311 laggards 279–280, 279–280, 285, 285,
Breu, K. 86 ­286–287, 288–289; as IT mechanics
Brill, Julie 466 279–280, 279–280, 282–284, 283, 289;
British Petroleum Company (BP) 313 as IT orchestrators 279–280, 279–280,
Brocke, Jan vom 292–308 ­281–282, 281, 288; key lessons on IT
Brown, C.V. 248, 319, 320 ­leadership 287–289; leadership study
Bruhn, M. 342 ­methodology and findings 279–281, 280;
Brynjolfsson, E. 434 visioning networks 247; see also chief digital
Buchanan, J.R. 317 officers (CDOs)
Burawoy, M. 91 chief strategy officers (CSOs) 204, 204
bureaucracy circumvention mechanism ­ Ciborra, C.U. 36, 45, 59, 60, 63, 64, 73, 76
378–382, 379 circuits of power framework 223–224, 227
business models 191 Citron, D.K. 465
business process redesign or re-engineering Clark, C. 244
(BPR) 32, 34, 36, 45, 46, 57, 60 Clegg, S.R. 223, 224
business strategy 74, 175, 193–196 co-evolution 246–247, 252, 255, 256, 257
business systems planning (BSP) 33, 100 cognition see cognitive bias; distributed cognition
business-led approach 11–12, 17, 18, 18, 20, 21 cognitive bias 412–415, 413
Bygstad, B. 370, 378 community platforms 179–180; see also social media
Bynghall, Steve 341–360 competitive advantage 21, 34–35, 49, 59–61
computer-aided software engineering (CASE)
Cabantous, Laure 403–425 14–15
Calo, Ryan 455, 466, 467 conceptual developments 30–31, 38,
Carr, N.G. 71 56–66; assessing capability 40–43, 40,
Center for Disease Control (CDC) 444 42; ­background history 31–35, 32, 35;
Center for Information Systems Research (MIT ­business scope redefinition 35–37, 36, 37;
CISR) 145 ­distinguishing strategy components 37–39,
centralization 317, 319, 320 37; myths of strategic ICT 44–49, 48;
Chan, Y.E. 96, 99, 320, 324 ­strategic thinking in the 1990s 44; towards an
change management 77–78, 214 inclusive framework 49–51, 50, 63–65, 65,
Checkland, P.B. 62 71–73, 72
Chen, Daniel 277–291 Consumer Privacy Bill of Rights Act (2015) 466
Chen, R.S. 97 corporate IT (CIT) 184–186, 185, 187–188,
Chicago Board Exchange 422 194, 196
chief digital officers (CDOs) 164–167; ­authority Coughlan, H. 96, 97
of 217–218; characteristics of ­successful Coureil, Herve 142
CDOs 294–297; and chief information Cranor, L.F. 465
­officers (CIOs) 202, 203, 218, 304–306; critical success factor (CSF) approach 34
­education industry case 205, 207–208, 212, Cross, J. 313
213; emergence of 196, 202–203, 292; crowdsourcing 179
­financial services industry case 205, 209–210, customer engagement 134–135, 295, 296–297
212, 213; future of 218; key skills and com- customer relationship management (CRM) 137,
petencies 214–215, 216, 218; at 140, 158, 265
474 index

Daniels, Richard 135 old ­companies’ digital transformations; chief

data: aggregators 453–454, 460; analytics 295, ­digital officers (CDOs); digital leadership;
296; due process 465–466; integrity digital strategies
466–467; processing 32–35, 47, 62, 310; see digitalization strategies see digital transformation
also big data; little data strategies
database systems 33, 56–57 digitized solutions strategy 135–136
Davenport, Tom 34 DiRomualdo, A. 248
decentralization 317, 319, 320 discrimination 433–434, 436, 438, 439, 441,
decision support systems (DSS) 403–405; 445, 456
­alignment 97; distributed cognition 418, distributed cognition 414–417, 414, 418,
420–422, 421; human role in data ­analytics 420–422, 421
232; performativity 418, 422–423, 423; Doolin, B. 223
situational decision-making 418, 419–420, Drucker, P.F. 101
419; theoretical background 405–406; see also Dube, L. 369
Formula 1 (F1) Abu Dhabi Grand Prix 2010 Dutta, S. 95, 96, 97
study Dyer, Chris 408, 409, 410–411, 412–415,
decision-making: alignment 98, 101; authority 416, 417
278, 312, 317, 322; see also big data; decision
support systems (DSS) Earl, M.J. 5–27, 37–38, 45, 57–58, 73, 76
Denyer, D. 345 economic decline management 261–262;
deontological ethics 443 ­bulletproof the infrastructure approach
dependence, on IT 438–440, 441, 444–445 263, 265–267, 265, 271, 272; clean house
destructive demand 459, 460–462, 463, 464, 466 approach 263, 267–269, 267, 271, 272;
developments, conceptual see conceptual extend the lifestyle approach 263–264, 263,
­developments 264, 271–272, 271; guidelines for 273–274;
DevOps 141 maintain the legacy approach 263, 269–270,
Dhillon, G.S. 225 270, 271–272, 271; ups and downs of
digital: accelerators 297–299, 298, 303; 272–273, 273
­harmonizers 301–303, 302, 303; innovation Edelman, L.F. 78
295–296, 295; marketers 299–301, 300, EdgeRank 440
303; platforms 138–142, 141, 144, 197–198; Edmondson, A. 62
technology 158–160, 159, 163; trace data El Sawy, Omar A. 174–200, 244
431–432, 440; see also chief digital officers electronic data processing (eDP) 310
(CDOs); digital leadership; digital strategies; electronic data systems (EDS) 262
digital transformation strategies employee loyalty 364–365; see also
digital leadership: business models 191; business socialization
strategy 190, 193–196; corporate IT (CIT) empowerment 224–225
194, 196; defining 174–175; digital plat- engagement platforms 183–184, 184, 197
forms 197–198; digital workforce 198–199; enterprise: platforms 175, 181–188, 183, 184,
enterprise digitalization 193–197; enterprise 192, 197, 243; resource planning (ERP) 45,
platforms 192; LEGO’s journey towards 46–47, 137, 138, 158, 175, 197; systems 60,
188–189, 189; people mindset and skill set 61–62, 76
193; workplaces 195; see also chief digital enterprise social media (ESM) see social media
officers (CDOs) environments, for strategizing 74
digital strategies: customer engagement episodic power 225–226, 227, 228, 231–233,
strategy 134–135; digital services platforms 232
138–142, 141, 144; digitized solutions ethics: ethical approaches 443–445; guidelines
strategy 135–136; operational backbones for the big data industry 462–467, 463, 464,
137–138, 140–142, 141, 144; see also digital 465; and information supply chains 453–457,
leadership; digital transformation strategies 453, 454–455, 458; systemic issues in the
digital transformation strategies 151–153; case big data industry 457–462, 458, 459; see also
studies 153–158; digital ­transformation societal issues
framework (DTF) 152, 157; financial European Union (EU) 433, 452
aspects 168; impact on IT units 142–143; Evaristo, J.R. 318
key d­ ecisions in strategy formulation executive information systems (EIS) 33
168–171, 170; at LEGO Group 178–188; executive perspective mechanism 379, 382
­structural changes 164–168, 165–166; use exploitation 63, 73, 74, 75–76
of ­technologies 158–160, 159; value creation exploration 63, 73, 75, 76–77
changes 160–164, 161–162, 163; see also big Facebook 432, 435, 437, 440, 444, 452, 457, 467
 index 475

Fairclough, N. 223 Hardy, C. 224–225

federal organizational model 243, 244 Hartzog, Woodrow 457
feedback: emergent feedback loops 349–350; Harvard Business Review 36, 48, 60
and reflexiveness 353–356, 357, 357, 359; He, Z.-L. 59
tensions from integrating open feedback Heald, K.A. 89
350–353, 352 Hedberg, B. 406
Feldman, M.S. 76 Hekkala, R. 225
Ferrari see Formula 1 (F1) Abu Dhabi Grand Prix Henderson, J.C. 19, 74
2010 study Henfridsson, O. 370
Ferrovial 140 Hernandez, M. 359
financial resources 168, 169 Hess, Thomas 151–173, 202–220
Finnegan, P. 74 Hilti 305
five forces analysis 48 Hirschheim, R. 86, 96, 98
Fleming, P. 222 Hitachi 436
Fonstad, Nils O. 133–150 HSBC 350, 353, 355
Formula 1 (F1) Abu Dhabi Grand Prix 2010 Huberman, A.M. 91
study 404; chronicle of the race 410–412, Hutchins, E. 420
411; holistic interpretation 415–417;
media and public interpretations 412–415; IBM (International Business Machines
­methodology 406–409, 408, 413–414; see Corporation) 33, 34, 95, 351, 356, 358–359
also decision support systems (DSS) ID cards 435
Foucauldian power perspective 223, 227 inclusiveness 342, 350–352, 352, 357, 357, 358
Foxconn 453, 457 individual bounded cognition 412, 413
freedom 436–438, 444 information: gathering/sharing affordances
Frost, C.E.B. 97, 102 375, 376–377; infrastructure 50, 63, 74–75;
functional organizing mode 322–323, 322 intensity matrix 37, 37; and knowledge dis-
funding models 141–142 tinction 47, 48
information supply chains see supply chains
Galliers, R.D. 30–52, 56–66, 71–78, 85–121, Information Systems Journal 129
221–233, 341–360 informed control 436–437
Gartner Inc. 174, 432 innovation affordances 375, 377–378
GE Digital 133, 135 innovation networks 247–248, 255
Gerlach, J. 435 insurance industry 171
Geus, A.P. de 19 internal environments 73
Gheradi, S. 59 Internet 48–49, 60–61, 160; algorithmic
globalization 181 ­decision-making 433, 437–438, 444
Goldman, Erik 441 Internet of Things (IoT) 137, 140, 433
Gond, J.-P. 422 ITIL framework 144, 326
Gonzalez, Ester 364–398 Ives, B. 74, 95
Goodhue, D.L. 19
Google 435, 443, 444 Jobs, Steve 135
Gordon, J.R. 320 Jonsson, S. 406
Gordon, S.R. 320
Gorli, M. 342, 345, 356–357, 359 Kaarst-Brown, M.L. 278
governance mechanisms 312, 315, 325 Kaiser Permanente 134–135, 136, 138, 139,
GPS systems 438 141–143
Grant, G.G. 102 Karahanna, E. 370
Grant Thornton 355, 359 Karanasios, Stan 221–233
Greiner, L.E. 40 Karpovsky, Anna 85–121
Grossi, Piergiorgio 408, 410, 415 Kearns, G.S. 77, 87
Grover, V. 319 Keen, P.G.W. 56
Guillemette, M.G. 313, 323 knowledge: creating and sharing infrastructure
Gurbaxani, V. 248 74–75; management 46–47, 48, 61–62, 65,
Gwillim, D. 77 76, 314–315, 324; and power 226, 228
Knudstorp, Jørgen Vig 138, 140–141, 176, 177,
Haefliger, Stefan 403–425 178, 193
Hammer, Michael 34, 36 Koch, Hope 364–398
Hansen, M. 59, 62 Kræmmegaard, Pernille 174–200
Hanseth, O. 64 Kristiansen, Ole Kirk 175
476 index

Krogh, G. von 75 Martinez, A.V. 96

Kumar, K. 77 Massachusetts Institute of Technology (MIT)
35–36, 37, 44, 45, 145, 179
La Belle, A. 319 Matt, Christian 151–173
Lacity, M.C. 39, 248 Matta, N. 78
Land, F. 60 Mayer, J. 466
Landsbergen, D. 97 MBA curricula 31
Lawrence, T.B. 222, 225–226 McAfee, A. 434
leadership see digital leadership McFarlan, Warren 32
learning activities 97 McKinsey & Company 40, 41, 174
Leavitt, H.J. 44, 60 McLean, E.R. 57
Lederer, A.L. 76, 87 media industry 217
LEGO Group: background 175–178, 177, Media Lab (MIT) 179
178; business impacts of digitalization 188; Mehta, N. 98
business strategies 193–196; consumer Mentzas, G. 76
­engagement 133, 136, 139; and digital mergers/acquisitions 74
­leadership lessons 189, 193–199; digital method-driven approach 12, 17, 18, 18, 20,
­officers 186, 186–187, 196; enterprise 21
platform ­digitalization 181–188, 183, 184; Miles, M.B. 91
marketing digitalization 180–181, 181; Millo, Y. 422
operational ­backbone 137–138, 140; product Mingers, J. 370
digitalization 179–180; restructuring corpo- Mintzberg, H. 19, 35, 45, 63, 76
rate IT (CIT) 184–186, 185, 196; towards MIS Quarterly Executive 239
digital leadership 188–189, 189; workforce misconceptions see myths, of strategic ICT
and workplace 187–188, 198–199 Mittelbayerische Verlag AG 154, 154, 156–157,
Leiba-O’Sullivan, S. 224–225 163
Leidner, Dorothy, E. 261–276, 277–291, mobility 294
364–398 Mocker, Martin 133–150
Leonardi, P.M. 368 Moloney, Kate G. 133–150
Levi-Strauss, C. 73 morale booster mechanism 379, 386–387
Lindblom, C. 76 mortgage-backed securities (MBS) 461–462
line management 311 Moynihan, T. 19
Linowes, R.G. 317 MTV Networks 203, 217
little data: freedom versus control 436–438, multinational arrangements 74
444; future research agenda 442–445; myths, of strategic ICT 44, 56–57; alignment
independence versus dependence 438–440, 45–46, 57–59; competitive advantage 48–49,
444–445; potential discriminations of 59–61; knowledge management 46–47, 48,
­algorithms 433–434; privacy versus security 61–62
434–436, 443–444; social consequences of
algorithms 440–442, 442 name recognition mechanism 379, 384–386
location-based service (LBS) 431, 433 Narayanan, A. 466
Loh, L. 320 National Security Agency (NSA) 458
Luftman, J. 86 National Transportation Safety Board (NTSB)
Lyon, D. 435, 436 439
negative externalitites 458–460, 459, 463, 464,
Mackay, Jane M. 261–276 465–466
MacKenzie, D. 422, 423 negotiating 97
Majchrzak, A. 368 networking affordances 373, 374
Malaurent, J. 103 New York Times 437
management, assumptions of 312–314 Newell, S. 78, 430–445
Management in the 1990s 36, 36, 44, 44, 45 Nicolini, D. 59
management information systems (MIS) 33 Nike 457
Marabelli, M. 226, 430–445 Nilles, Michael 136, 142
marketing 180–181, 299–301, 300, 303 Nolan, R.L. 40–41
Markus, L. 368 Nolan Norton and Co. 41
Marra, Greg 437 Nonaka, I. 62, 75
Marshall Industries 244 Norris, G. 77
Martin, James 33 NovaRede 95
Martin, Kirsten E. 450–467 Noyce, H.E. 319
 index 477

OKCupid 467 Quinn, J.B. 18, 19

omnichannel marketing 180
open strategy model 342; see also social media Rafaeli, A. 76
operational backbones 137–138, 140–142, Ramanujam, V. 77
141, 144 Ramnath, R. 97
Oracle 95, 188 rational choice theory 422
Orbitz 457 Ravensburger AG 154, 154, 157–158, 163
O’Reilly, C. 59, 61 reconfiguring activities 95–96
organization concepts analysis 309–310; reflexiveness 346–347; conceptualizing
­evolution of IS organizations 310–311; future 356–359, 357, 358; as new organizational
research and practice 325–327; reflection on capability 353–356
study findings 323–325; research methodol- Reich, B. 99
ogy for study 315–317, 317; research study relationship networks 247–248, 248, 252–253,
findings 317–323, 321, 322; sensitizing lens 255, 257
311–315, 316 Republic (Plato) 56
organizational approach 15–16, 17, 18, 19, resource management 320
20–21, 21, 22–23 revenue 163–164, 168
organizational visibility affordances 373–376, 374 revised IS framework development 49–51, 50,
organizing IT function 243–246; partner model 63–65, 65, 71–73, 72, 78
251–253, 252; platform model 251, 254–256, Robey, D. 51
254; principles for 245, 246–251, 248, 249, Rockart, J.F. 247, 311
249–250; scalable model 251, 256–258, 256 Roepke, R. 102
Oshri, I. 367 Romanovitch, Sacha 355
outsourcing 95–96, 313, 314, 319 Rondinelli, D. 86
Ross, J.W. 75, 133–150, 253
Pare, G. 313, 323, 369 Ruhleder, K. 50, 64, 75
Pariser, Eli 437 Ruohonen, M. 97
participation see user participation
partner model 251–253, 252 Sabherwal, R. 46, 86, 96, 98
partnership organizing mode 322, 323 Salmela, H. 97
Pasquale, F. 465 Sambamurthy, V. 243–258, 248, 320, 323, 327
Paton, R. 95 Sauer, C. 95, 96
Peppard, J. 86, 309–328, 325 scalable model 251, 256–258, 256
performativity 406, 414, 417, 418, 422–423, Scarbrough, H. 78
423 Schein, E.H. 247
personal development mechanism 379, 382–384 Schindler Group 135–136
personally identifiable information (PII) 465, 466 Schmidt, Eric 441–442
pervasive organizing mode 322, 323 Schneider Electric 136, 140, 142
Philips 133, 349–350, 354 Sebastian, Ina M. 133–150
Pinsonneault, A. 225 secondary markets 460–462, 466
platform model 251, 254–256, 254 security 434–436, 443–444
platform-as-a-service (PaaS) 139 Seddon, P. 77
Plato 56 Selbst, A.D. 456
Porter, Michael 32, 34, 48–49, 60–61, 72 Senn, J.A. 36, 60
power dynamics 221–222; implications for sensor technology 435, 440
strategic IS 228, 228–231, 231–233, 232; service level agreements (SLAs) 326
perspectives on power 222–226, 227 Sethi, V. 76
power matrix 231–232, 232 Sia, S.K. 320
PowerPoint 100 Sifonis, J.G. 19
Pozzebon, M. 225 signalling 96–97
Preston, David S. 277–291 Sillince, J.A.A. 97, 102
primary markets 460–462, 466 Silva, L. 222, 224
privacy 434–436, 440, 443–444, 452, 456–457 Simeonova, Boyka 221–233
process quality management (PQM) 34 Singh, Anna 202–220
profit-orientation 326 SISP see strategic information systems planning
Progressive Insurance 433 (SISP) study (1988-89)
ProSiebenSat.1 Media SE (P7S1) 153–156, situational decision-making 413, 415–416, 418,
154, 163 419–420, 419
punctuated equilibrium 46 SMACIT technologies 133–134, 135, 143, 198
478 index

social media 341–343; alignment 100; Strong, D.M. 368, 370, 378, 389
­conceptualizing reflexiveness 356–359, 357, stuctural changes 164–168, 165–166
358; emergent feedback loops 349–350; supply chains 453–454, 453, 464–465, 465;
and employee socialization 365–366; downstream data distribution 454–456,
­expansion into srategizing processes 343–345, 454–455; role of firms 457; upstream data
343–344, 345; and reflexiveness 346–347, sources 454–455, 456–457
353–356; research methodology for study surveillance 223, 436, 459–460, 459, 463, 464,
347–349, 348; tensions from integrating open 465–466
­feedback 350–353, 352; see also Facebook; sustainability 60
­socialization/social media study Sutherland, A.R. 41
socialization 364–366; future research ideas Sutten, Mike 139, 142–143
387–389; generative mechanisms 378–387, Swan, J. 78
379–380; organizational 366–367; technol- systemic power 225–226, 227, 228, 228–231,
ogy affordances 367–369, 373–378, 231–233, 232
374–375, 389–390; see also socialization/ systems theory 39
social media study
socialization/social media study: appendices Target 454, 455
392–398; findings and analysis 372–387, technological approach 14–15, 17, 18–19, 18,
372–373, 374–375, 379–380; generative 20, 21
mechanisms 378–387, 379–380; implications technology affordances 367–369, 373–378,
387–390; limitations and conclusions 374–375; bureaucracy circumvention
390–391; methodology 369–372, 370; 378–382, 379; and decision support systems
technology affordances 373–378, 374–375, (DSS) 419–420; executive perspective 379,
389–390; see also socialization 382; future research ideas 389–390; morale
societal issues: freedom versus control 436–438, boosters 379, 386–387; name recognition
444; future algorithms research 442–445; 379, 384–386; personal development 379,
independence versus dependence 438–440, 382–384
444–445; privacy versus security 434–436, technology deployment 312
443–444; social consequences of algorithms technology vendors 197–198
440–442, 442; see also ethics teleological ethics 443
Society for Information Management (SIM) 244, Tenkasi, R. 75
364 terminology usage 319–320
Soden, J.V. 57 Thorogood, A. 95, 98
soft systems methodology 35, 35 Tor 458
software-as-a-service (SaaS) 140, 141, 188, 198 training 96
Sole, D. 62 transparency 342, 350–352, 352, 357,
sourcing networks 248 357, 358
Spicer, A. 222 Treem, J.W. 368
stages of growth model 40–43, 42 Tumbas, Sanja 292–308
Star, S.L. 50, 64, 75 Tushman, M.L. 59, 61, 73, 75
stewardship 359, 463, 464–465, 465
storage resource planning 32 Uber 193
strategic alignment maturity model uninformed control 437–438, 444
(SAMM) 86 Unisys 262
strategic business units (SBUs) 34 United Kingdom (UK) 452
strategic information systems planning (SISP) United Services Automobile Association
study (1988-89) 5–6; appendices 23–27; (USAA) 136
­benefits of SISP 7–8, 8; concerns about Urquhart, C. 225
SISP 8–9, 9, 20; data assessment 19–21; user participation 96, 182, 183
­implications for research and practice 21–23;
interests, methods, and outcomes 7–11; Valenti, Otello 408
methodology 5–6; objectives of SISP 7, 8; value creation 160–164, 161–162, 163; in IT
preliminary evaluations 18; related theories function 248–251, 249, 249–250, 253, 255,
18–19; SISP approaches overview 10–18, 13, 257
17, 18, 20, 21; success factors 9, 10, 11, 18, Vayghan, J. 95
20; unsuccessful features 8, 9 Venkatraman, N. 74, 77, 320
strategizing environment 73–74 Verizon 244
strengthening activities 96 Vinther, Anders L. 174–200
 index 479

Virgin Media 351, 352 Wijnhoven, T. 74

visioning networks 247, 258 Willcocks, L. 39, 95, 96
Volkoff, O. 370, 389 Williams, C. 370
Wilson, Alexander D. 341–360
Wagner, E. 61, 78 Winter, S. 75
Wal-Mart 457 Wong, P.-K. 59
Walsham, G. 77, 223 workforce, digital 198–199
Wang, N. 95, 98 workplaces 175, 187–188, 198
Ward, J. 325
Warner Animation 180 Xchanging 349, 351, 353, 354–355
Washington Post 151
Weick, K.E. 39, 50 Yeats, W.B. 327–328
Weill, P. 75 Yin, R.K. 89, 369
Weiss, J.W. 95, 98
Wenger, E. 62 Zmud, R.W. 320, 323, 327
Whittington, R. 35, 44, 342, 352, 357 Zollo, M. 75
Wiesböck, Florian 151–173 Zuboff, S. 437