Strategic Planning from Resource-Based View

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Introduction

As we enter the fourth era of information technology, several proposals have been outlined in relation to using information as agent of integration as well as a tool to support key competencies and distinctive capabilities of a firm or organization. In the past, the main focus has been on how to find strategic information system that enables a firm to gain competitive advantage (Conner, 2001). However, the recent development has seen more focus directed towards integrating information system and technology within a set of organizational concept of core competencies and information system capabilities (Conner, 2001).

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The conceptual approach to resource-based view is in line with recently developed theory of firm’s resource-based competency or capability of the system in line with strategic planning and management (Earl, 1990). This concept gained popularity in the 1990s and has continued to be applied to date. The resource based approach to finding a firm’s key competencies is linked to the developed belief that internal resources can do more to a firm than the external resources. The concept contends that internal resources of a firm can be grouped into three main areas; physical resource, human resources, and organizational resources (Battaglia, 1997). Physical resource is comprised of plant and its equipments, its location, technology, raw materials, machines, etc; Human resources on the other hand is composed of employees, training, knowledge, skills, intelligence, abilities and many more; and the organizational resource entails structure of the firm, process of planning, information systems, trademarks, and many more (Battaglia, 1997).

Although a resource-based approach to planning of information system is viewed as strategic approach to strategic management of information system planning, its introduction to the firm may lead to complex challenges to the firm thus the need to find a solution on how to mitigate these complexities. In fact many industry researches have revealed that the strategic planning of information systems and technology implementation is the most serious challenge that faces information system managers today (Mata, Fuerst, & Barney, 1995; Thong, Yap & Ramen, 1996; Ledrer & Mendelow, 1997). This paper discusses the relevance of a resource based approach to the strategic planning of information systems and technology, in relation to the improvement of a firm’s key competencies and distinctive capabilities. The complexity that an organization may face when it introduces such concepts, and how they can be overcome is also discussed.

Evolution of Information-Business Interlink

In the 1890s, it was reported that United States business fraternity invested a whooping $1 trillion in adoption and upgrading of their information technology units. The sad scenario was that this huge investment was not reflected on the resultant output. The United States’ national productivity increased by a mere 1% annual average, far much below the Japan’s 5% (McFarlan, 1994). It was realized that technology application for a mere automation of routine tasks with no alteration of the process of business operations was the major cause of this huge technology investment flop (Martin, 1992). The situation in Japan was different as technology was used to initiate breakthrough ideas in the process of business management, particularly in support of the direct involvement into value addition activities rather than ordinary saving of costs.

A study revealed that productivity of the United States’ climbed to 3%, together with the rise in corporate profits (Ledrer & Sethi, 1991). This improvement was attributed to “the return in investment in information technology systems”, which was averaged at 55% and 69% for manufacturing and all other businesses respectively (Barlow, 1999, p.6). In this case, the firms had to reorganize and reengineer their production and manufacturing process through strategic application of technology.

Through application of information technology in a strategic manner to boost business productivity, it is critical to observe that it can simultaneously improve the entire business process without necessarily changing the organization. According to Porter & Millar, 1995), any organization not planning to directly involve in the planning for strategic information system is not likely to notice the competitors’ technology application until it become too late for any serious positive reaction. In such a scenario when the possibly applicable technology is seen to “change the basic components of competition in an industry, a half of the companies in that industry disappears within 10 years” (Thong, Yap & Ramen, 1996, p.248).

The Principles of Resource Based Theory

The development of resource based theory is was intended to make organizational managements understand the how their respective organizations reach sustainable competency. This subsequently led to more understanding of its competitive advantages. This theory is based on the idea that it’s normally more costly just to copy what its competitors are doing. Instead, the firm should be focusing in its internal capabilities as a means of achieving superior performance as well as gain competitive advantage (Pettigrew, Whipp & Rosenfeld, 1999). In this aspect, a firm can be defined in terms of the resources it possesses in relation to human capability resources, physical capital resources, and the organizational resources (Mcgolpin & Ward, 1997). It must be noted that resources that are not easy to purchase, particularly those requiring extended processes of learning procedures or those related to the organizational culture can never be imitated so easily, hence offers the possessor a competitive advantage.

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It has been argued that having the difference in performance between competing firms relies on the ability of one firm to possess and nurture specific unique inputs as well as unmatched capabilities (Mcgolpin & Ward, 1997). This theory therefore intimate that competitive advantage can take place only there are heterogeneous as well as immobile resources. According to Mcgolpin & Ward (1997, p. 289), a firm can only provide a competitive advantage when the resources it uses meet some specific criteria such as:

  • The resource must be valuable, i.e. possess a strategic value to the organization such as by its ability to exploit opportunities or ability to neutralize threats;
  • The resource must be rare and unique that its availability is limited that it becomes difficult for the potential competitors to acquire or adopt;
  • The resource must not be easily imitable or copy it as it is. That is, the resource cannot be easily acquired because it of the incapability of other competitors, or there is ambiguity in the means with which the pioneer firm acquired it or simply because its complex in social terms;
  • The resource can not get a perfect substitute that may be acquired by another competitor who may end up achieving same results or even superior.

In the dimension of information technology, resource based view must rely on the in-house team who must learn that past experience, culture of the organization and competencies are the key to successful adoption of a technological overhaul (Ward & Griffiths, 2000, p. 502). Mata et al. (1995) did a conceptual study and outlined five factors that define a good information technology adoption. They are: “Customer switching costs, access to capital, proprietary technology, technical IT skills and managerial IT skills” Mata et al. (1995, p.499).

The Perspective of Strategic Planning of IS/IT

In order to effectively analyze the perspective of strategic information systems and technology, it would be critical to highlight the information system three-era evolution model advanced by Ward & Griffiths (2000). The model distinctively identifies three overlapping information system eras. The first era is that of 1960s which was characterized by standalone computers, which were remotely separated from their users and were mainly focused on cost reductions strategy. The second was the management information system era that came between 1970s and 1980s. This era specifically focused on helping firms in the process of distribution, interconnection, management service regulations, business support, and user driven initiatives. The third and the last is the strategic information systems (SIS) era which came in the 1980s and became more advanced in the 1990s and 2000s. SIS era helped network and integrate systems, increased availability and support to users, directly related to the business strategies, and boosted business-to-business collaborations (Ward & Griffiths, 2000).

To effectively apply the overall data processing, management information systems, and strategic information systems to suit a specific firm’s needs, there should be plans and management initiatives that go together with the present and future contributions they present to the business (Martin, 1999). The problem is normally based on the fact that many of the traditional models focuses on how these systems relate to one another in terms of tasks being carried out rather than how it relates to business success. However, the contribution of IS/IT through resource-based perspective in the present and future business is viewed in the dimension of strategy, turnaround, factory, and support (Markus, 1993; Martin, 1999). The strategy is based on the future focus, i.e. application that is critically strategic for the future progress such as computer-integrated manufacturing, linking producers and suppliers; Turnaround applications that is likely to be targeted for future strategic value such as e-mail, e-data sharing and many more; and the factory applications necessary in the sustenance of the present business such as employee database and schedule for carrying out maintenance (Caldeira, 1998; Martin, 1999).

Characteristics of Strategic Planning Of Information Systems and Technology

Strategic IS planning have some distinct characteristics that define its main tasks, objectives, directing the focus, and defining the main approach (Barney, 2001). Basically, the main features that define IS/IT are:

  1. the principle task of defining the firms key competencies and provide the needed link to business strategy;
  2. guiding the key objective for pursuance of the available opportunities and the integration of business information system and strategies;
  3. acquisition of direction from the senior managers and executives, group of users or management and information systems;
  4. Support of the principle approach of encouraging user innovation, and multiple standards of progress such as through advancing ‘bottom-up development’ and top-down analysis simultaneously (Barney, 2001, p.118).

Strategic Planning Of IS/IT Components

Although strategic planning of IS/IT has been hailed as one of the best approaches to the development of modern business strategies, the task involved is normally difficult and in many occasions organizations fail to grasp how it’s done in line with the laid down organizational goals and objectives (Campbell & Luchs, 1997). Notably, strategic planning of information systems is based on major organizational changes, which range from demands of the users to the business strategy. Additionally, strategic planning of information system does change the characteristics of plans in a critical way (Ives, Olson & Baroudi, 1993; Campbell & Luchs, 1997). For instance, the time span for the changes from one year to three or more years, while plans of developments are spearheaded according to the present and future demands of the business rather than increased needs of the user (Campbell & Luchs, 1997, p.276). The time horizon increase means that the top management of the organization has failed to respond positively to the strategic planning of information system process since it becomes difficult to make them committed to such a long and rigorous process (Thong, Yap & Ramen, 1996; Feeny & Willcocks, 1998). According to Feeny & Willcocks (1998, p.248), the other important questions that should be critically looked at when strategically planning the information systems are linked to “the scope of the planning study, the focus of planning exercise- corporate organization vs. strategic business unit, number of studies and their sequence, choosing a strategic information systems planning methodology or developing one, and targets of planning process and deliverables” (Feeny & Willcocks, 1998, p.256). Mcgolpin & Ward (1997) observes that because the strategic planning of information system is a complex process, coupled with the fact that each organization is unique on its own, there no one specific way that can be considered best in tackling it.

Strategic Planning Of IS/IT Methodologies

Strategic planning of information system and technology has been categorized into: impact and alignment methodologies, where the former is critical in the creation and justification of the new uses of information technology, and the latter helps to align information system objectives with the goals of the organization. Summaries of the methodologies are explained below

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The Impact Methodologies

Value Chain Analysis

To understand the impact methodology, it is important to understand the concept of value chain as advanced by Porter & Miller (1995). Porter believes that “every firm is a collection of activities that are performed to design, produce, market, deliver, and support its products…all these activities can be presented using a value chain” (Porter & Millar, 1995), p.77). He further explains that information technology represents one of the main supporting roles for the value chain, as it is considered pervasive, i.e. every value in the chain produces and uses information. At the same time, office operations are changing hence the ability to perform some the most important part of technologies in question (Porter & Millar, 1995, p.78). In other words if a firm is in a position to discover a more superior technology that enables it to perform specific critical activities more than its competitors is considered to have gained competitive advantage or has gained key competency and distinctive capability.

The charting of value chain then follows and this helps the senior managers and executives to rank the steps in order of importance to establish which departments are critical in the achievements of the strategic goals and objectives of the organization (Porter & Millar, 1995). Similarly, executives are able to establish the “interface between primary functions along the chain of production, and between support activities and all of the primary functions” (Porter & Millar, 1995). This will significantly help in the identification of critical aspects of the interrelationship between departments, thus boots collaboration.

Value chain is important as it enables analysis of to focus more on the value addition rather than cost reduction. However, it has also proved to have specific weaknesses. One of the weaknesses is that it’s only able to provide a firm’s higher levels of information and ignores any aspects of development and implementation of small but important issues (Ives & Olson, 1994). The data generated through chain analysis is concentrated on the internal aspects of the firm’s operations; hence the failure to have a proper data structure that is also broad in nature.

Critical Success Factors Analysis

Critical success factors helps the managers analyze the organizations’ strategic planning information system and technology, which is used to interpret the objectives together with tactics, and operations in a clearer fashion (Hamel & Prahalad, 1996). This helps them acquire information on the current status of the organization as well as reveal the weaknesses of the current system. Earl (1990, p.7) defines critical success factors as those areas that when deemed satisfactory, allows the firm to gain competitive advantage due to the IS/IT as the key competence.

The strength of critical success factors will assist the firm managers get key information that they require, hence they are able to concentrate on resources that will be critical towards achieving the necessary competitive advantage (Earl, 1990, p.9). However, critical success factor is not sufficient to perform comprehensive strategic planning of information systems and technology. This is because it fails to provide definition of data architecture or even provide automated support that is useful for the overall analysis (Earl, 1990, p.11). For a firm that needs to implement this system, critical success factors should be related to the objectives of the firm’s units that are under review, more directly.

Alignment Methodologies

IBM developed a methodology known as business systems planning, which applies together “top down planning and the bottom up implementation” (Delone & Mclean, 2002). Its main focus is in the business processes that subsequently go through analysis to determine the needs for data, as well as data classes were found to be critical (Rouse & Howard, 2003). The data classes are consequently brought together for form database. Finally, the resultant business systems planning plan will offer description on the overall information systems structure and necessary steps that needs to be followed in its application (Rouse & Howard, 2003).

If an organization resorts to use business systems planning, it is likely to benefit more as it combines top down planning and bottom up implementation at the same time, thus the advantage of the integrated approach (Rouse & Howard, 2003). It must be noted that, in the top down planning, the methodology is similar to critical success factor (CSF) method thus helps the managers strike a balance between business plans and the supporting information system. For this method to work efficiently, it needs a close attention of the senior managers together with a lot of direct commitment (Delone & Mclean, 2002; Rouse & Howard, 2003). It also requires high level experienced IT experts in the planning stage with a lot of time needed to configure the process for successful implementation.

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Conclusion

Strategic planning of management system in the modern business presents a very interesting focus on the development of firms’ strong business development focus, especially for the longer term projects and sustainable growth of the organization. On the basis of firms’ key competencies, the conceptual structure of the firm is linked to the needs of firms to develop their belief and trust in the internal resources that are rare, unique and non-transferable, hence putting them at a competitive advantage. Having been grouped into physical, human and organizational resources, it is believed that once a firm adopts either of these resources, the competitors cannot adopt a similar resource. This may be as a result of incapability, unique cultural structure of the resource or limited availability of the said resource.

Strategic planning of information systems and technology is one critical area that is viewed as a resource based approach to the strengthening of a firm’s key areas of competencies and ensuring it realizes long term sustainable development. It is noted that despite being critical to the sustainable competitive advantage of a firm, IS/IT is a realistically complex process due to the need that it should strongly get embedded in the entire business process. However, an effective system must cover all core demands of an organization such as meeting all goals of the business as outline in the strategic plan, making the firm have a competitive edge over other competitors, and satisfying the data processing and management of information systems needs of the firm. In other words, the firm must have a comprehensive plan for information systems, not just as strategic tool to cut cost but as away of value addition.

Reference

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