Can Information Technology Contribute To An Organization’s Strategy Formulation?
Development of management or business strategies is crucial for an organization because these strategies allow an organization to have a perspective of its business, and achieve its objectives and ultimate goal (Mitchell). There are many stories that show information technology positively affects different aspects of life, such as education, commerce, social networking, etc. in many ways, and the contribution of information technology on an organization’s strategy formulation is one of them.
Information collection is a procedure of diagnosis, which is one of three stages of strategic management process (Mitchell), and information technology can facilitate the collection for helping an organization to better understand their customers, rivals, industry, and policy. In Mitchell’s paper, he classified a strategic management process into three stages: diagnosis, formulation, and implementation (Mitchell). Each of three phases is linked to one another, and the previous stage is the base of the following one; consequently, the result of diagnosis directly affects an organization’s strategy formulation. Thus, because information technology impacts on the diagnosis phase of strategic management process, and sequentially affects formulation and implementation phase, we can conclude that information technology can contribute to organization formulation.
Moreover, there are three tasks included in the diagnosis phase, which are internal environment analysis, external environment analysis, and major critical issues identification (Mitchell). Similarly, Bakos and Treacy (1986) indicated three levels of corporate strategy: the internal, competitive, and business portfolio level (p. 3). We can see the corresponding relationship between three tasks in the diagnosis phase and three levels of corporate strategy, for instance, internal environment analysis corresponds with internal level. According to the correlation between these two theories, the impact of information technology on diagnosis phase can prove that information technology affects all three levels of corporate strategy; therefore, information technology contributes to the entire process of an organization’s management strategy development, including formulation phase.
One way that information technology influences an organization’s strategy formulation is to facilitate its internal environment analysis, such as analysis of personnel, organization structure, and management process; hundreds of studies illustrate how information technology can be utilized to help with management process (Bakos & Treacy, 1986, p. 4). On the other hand, information technology’s contribution on external environment analysis is more obvious and easier to understand. Customers’ data collection and analysis is a significant instance. Companies who want to provide their customers highly customized merchandise and services have to change their strategy’s formulation for effectively and efficiently gathering massive granular customers’ data, which includes customers’ demographics and psychographics, videos or webpages they have clicked, and commodities they have been browsing, etc. (Davenport , Mule , & Lucker , 2011, p. 2). For example, Amazon.com tracks each of its customers’ browsing and shopping records, understanding the customer’s shopping interests by analyzing these data, and advertises those merchandises that fit his/her interests or needs. Besides, because those changes that impact organizations can be mediated by information technology (Morton , 1986, p. 4), managers of an organization can moderate the weight of consideration of risk control when generating or revising the business strategy.
In addition, information technology can contribute to an organization’s strategy because both IT learning strategy and IT training strategy are parts of an Organization’s strategies (Olfman , Bostrom , & Sein , 2003, p. 75). Olfman et al. (2003) used a figure, A Layered View of Training and Learning Strategy, in their research paper to illustrate the symbiotic relationship of IT training strategies, IT learning strategy, and Organization’s strategies (Figure 1), and they proposed a model that contains four dimensions to help organizations better implement a learning strategy (Olfman , Bostrom , & Sein , 2003). Currently, IT skills are required for many tasks in job positions; therefore, information technology training becomes a vital component for an organization in its overall strategy in order for the organization to remain competitive or even survive in the market.
One thing to remember: although information technology heavily contributes to an organization’s strategy formulation, its implementation has to align with the organization’s business focus (Olfman , Bostrom , & Sein , 2003, p. 78).
Reference:
Bakos, J. Y., & Treacy, M. E. (1986). Information Technology and Corporat Stategy: A Research Perspective. Massachusette Institute of Technology, Center for Information System Research, Sloan School of Management, Massachusette.
Davenport , T. H., Mule , L. D., & Lucker , J. (2011). Know What Your Customers Want Before They Do. Havard Business Review.
Mitchell , R. C. Strategy Formulation.
Morton , M. S. (1986). Strategy Formulation Methodologies. Massachusetts Institute of Technology , Center for Information Systems Research Sloan School of Management .
Olfman , L., Bostrom , R. P., & Sein , M. K. (2003). A Best-Practice Based Model for Information Technology Learning Strategy Formulation. SIGMIS Conference . Philadelphia.
