The implementation of information system strategies in UK companies - aims and barriers to success

T.D. Wilson, Ph.D.

Head of the Department of Information Studies
University of Sheffield, UK.

A survey of the Times 500 companies together with 47 financial services companies was carried out in 1988 to determine the extent to which the idea of 'information system strategies' was recognized in these organizations, how strategies, where they existed, were related to business aims, the elements of which strategies were composed, and the nature of barriers to design and implementation.

Introduction

Building on Porter's (1985) definition of strategy as, ' . . . the route to competitive advantage that will determine . . . performance', we can define an ISS as the analysis of the role that information systems can play in helping business units or companies to define a route to competitive strategy.

The literature on information system strategies is extensive: much of it anecdotal in character, or exhorting managers or chief executives in British industry to make more use of information technology. The claim is made, repeatedly, that unless Britain can keep up with Japan, the USA, and the major European competitors in the rate of application of information technology, economic decline is inevitable. The most persuasive argument of this kind has been spelled out by Mackintosh (1987). Some writers, however, go beyond exhortation to try to identify the ways in which information technology may have long-term strategic value for companies, or to show how information technology can have an impact upon profitability. The key names in this respect are Michael E. Porter, who devotes a significant part of his Competitive advantage: creating and sustaining superior performance (1985) to the ways in which technology in general, and information technology in particular, can have an impact upon competitive advantage; and Paul Strassman ( 1985), who develops the concept of management productivity in his Information pay-off: the transformation of work in the electronics age and who has used the PIMS database of key indicators to advise companies on appropriate investment in IT.

The work reported here resulted from an interest shared by the author and Arthur Andersen & Co.: the overall objective of the study was to discover the extent to which major UK companies had adopted a strategic view of information systems development. In addition to this main objective there were a number of subsidiary aims. For companies that claimed to have a strategy we wished to know:

1. How the link to business strategy was maintained.
2. The organizational level at which strategy was initiated.
3. How the effectiveness of a strategy was monitored.
4. What aspects of information systems development featured in existing strategies, and what were future plans for investment.
5. How successful strategies were deemed to have been, and what barriers to the establishment and implementation of strategy had been experienced.
6. How far the idea of competitive advantage was incorporated in strategy, and what particular competitive ends were pursued.

A number of interviews were first carried out in major companies to explore the objectives in an informal manner. A questionnaire for self-completion was then prepared, with sections devoted to the above issues, and in two parts - Part A for those companies with a strategy, and Part B for those without. To enable companies to determine whether or not they had a strategy, the following definition was provided:

An information systems strategy brings together the business aims of the company, an understanding of the information needed to support those aims, and the implementation of computer systems to provide that information. It is a plan for the development of systems towards some future vision of the role of information systems in the organization.

In this paper only the results relating to companies with a strategy are reported.

Of the questionnaires returned, 75 per cent were from companies which claimed to have an information systems strategy as defined above, suggesting that the idea of an information system strategy has been widely adopted. Some caution is necessary, however: first, there is a difference between companies in the financial sector and those in the Times 500 group - 86 per cent of the former and only 73 per cent of the latter report having a strategy (Table 1). This distribution is statistically significant, i.e., in general, financial services companies are more likely to have adopted information system strategies than are other industrial firms.

Furthermore, 6.4 per cent of strategic companies claim that the ISS is a function of individual departments, which is at odds with the organization-wide focus of the definition given in the questionnaire.

Finally, the ISS was said to be 'formal, documented part of business strategy' by fewer than half (47.5 per cent) of those claiming to have a strategy. Further responses suggesting that ISSs are less well developed than the basic figures suggest are: that 12 per cent say that competitive advantage does not figure in the strategy, and 22.5 per cent derive information for management only as a by-product of transaction processing, rather than as a consequence of more sophisticated analyses of management information needs, suggesting an operational aim rather than a strategic aim for information systems.

In fact, if a very strict definition of a strategy-holder is adopted, the number of companies that can be said to have a strategy drops to only 24! The definition adopted in arriving at this figure is that:

The strategy should be formally documented, should be initiated by the Board, monitored by planned reviews, and should base information provision on key indicators, critical success factors, or on a detailed analysis of management information needs.

These 24 companies would constitute only 13 per cent of those replying to the survey, and only 17 per cent of those claiming to have a strategy. Six of the 24 are financial services companies (22 per cent of that group of respondents; and a further seven are found in the top 100 companies.

The formality of the strategic process

Relationship to the business strategy

The first question is Section A was: How is the information systems strategy related to the company's overall business strategy?, with the five alternatives shown in Table 2.

Clearly, the formality with which the strategy is related to business aims is variable and throws some doubt on the extent to which, in many cases, the approach can be regarded as a 'strategy'. In particular, the fact that over 6 per cent regard strategy-setting as a departmental function, suggests that, in those companies, information system strategies are still not seen as central to corporate effectiveness.

The main reason for selecting 'Other' was the federal nature of many of the companies, that is, the firms were either subsidiary companies within a group of companies, or part of a holding company, or the headquarters of one or other of these two categories. In these circumstances information systems strategies tended to be a function of the individual business units rather than of the group or holding company.

The following comment was typical:

Group policy is that responsibility for IT is delegated to each operating subsidiary . . . [which] is required to prepare an ISS as part of their business strategy on a three-year cycle...

However, some groups had recognized the need for an overall corporate strategy, as the following response indicates:

As a large diverse corporation, IS strategy has tended to be dealt with at major grouping levels . . . Acquisitions have . . . carried on, or developed, independent strategies. A major review is currently in progress to determine the degree to which a corporate strategy is required.

Table 3 shows the distribution of results over the four industry groups. There are too many small value cells for significance tests to be used, but it is noticeable that firms in the financial group are more likely to have a formally-documented strategy than in the other groups.

IT management and the Board

If an ISS is to be properly related to the business strategy, it is important that the Board should be closely involved. In 22 per cent of cases the person responsible for IT in the company was a Board member and, of the remaining cases, a further 87 per cent reported to a Board member.

The relationship between Board membership and possession of a strategy is not statistically significant, as in 7 out of 42 (17 per cent) 'no strategy' companies the person responsible for IT was on the Board. Further evidence of Board involvement comes from the question on the level of the organization at which a strategy had been initiated, which gave the result shown in Table 4.

The involvement of the Board in the inception of information system strategies is to be expected, given that company business strategy is associated with information systems. However, previous surveys have suggested that acceptance of the idea is rather less widespread than revealed by these results.

In 65 per cent of cases the strategy is monitored through planned, periodic performance reviews and in 23 per cent by ad hoc reports to the Board. The remainder reported a combination of planned and ad hoc reviews, or control by various kinds of committees, or subsidiary, or plant-based review.

One seemingly heartfelt response pointed to difficulties experienced in monitoring IS strategies:

With very great difficulty, especially in the area of systems that are designed to improve service and provide competitive edge...

Key features of strategy or IT implementation

The literature on ISSs identifies a number of elements which may be treated in strategies, and this study sought to discover the importance attached to a variety of these elements. Companies were asked to identify the importance of each element in their strategies on a scale 0 to 10, where 10 identified a major element in strategy. When the responses were ranked (Kendall's W), the order of importance shown in Table 5 resulted.

In the ranking, in relationship to item 3, some companies were at pains to point out that, for them, this meant the continued development of systems, rather than their introduction, and it seems likely that this was true for most.

Further information on the elements of strategy was revealed in the interviews. For example, one systems manager of an insurance company described the main elements of the company's strategy in the following way:

The central plank is the continuing evolution of a master set of operational systems for the office. It was the original development of [these] in the late seventies that first established IT as a strategic weapon for the office. And it is still seen by the management that those operational systems are the cornerstone of our IT strategy. Our primary additional objective this time round has been to replace our existing systems in an evolutionary fashion with systems which will cope with a much higher volume of business in an equally efficient manner and yet will allow rapid product introduction, evolution of product, evolution of organizational structure.

The second major plank ... is concentrating on the competitive edge, strategic advantage - what we call delivery systems. Much improved ways of delivering our product, our service, to the point of sale - beyond our own branch network, into the brokers office, into the building society office...

In another area, retail distribution, another interviewee identified the main planks as:

...We wanted to reduce the paperwork, we wanted to improve the communications... to produce online communications, to give people the timeliness of data... Another plank of the strategy, which had associations on the technical side, was that we agreed that our systems should be loosely coupled...: to split the operation across as many computers as we chose to do. But it would still appear transparent to the Company... And so even if one [of the machines] goes down we can still run all the others...

Barriers to strategy

Mintzberg (1987) suggests that strategy formation is a craft, rather than a science, and the process of crafting a strategy will involve negotiating various barriers. The barriers suggested in the literature include a number that affect any innovation, such as the hostile attitudes of management levels in a company, and the problem of recruiting appropriate staff. Some, such as the difficulty of measuring benefits, are more specific to IT implementation.

Companies with a strategy were asked to identify the barriers either to setting up or implementing a strategy and to state whether the barrier had been major or minor. The results are shown in condensed form in Table 6. In Table 6, the ranking is based on the proportion of companies citing a barrier as a major impediment. It is interesting, however, to look at the ranking that emerges when the change in proportions citing a barrier as a problem at set-up and implementation is used. This can be seen in Table 6, but is also set out in Table 7 for ease of reference.

Some of the changes shown in the table might be called logical shifts: for example, one might expect greater difficulty in recruitment when an organization actually needs to recruit, at the implementation stage; one might expect the lack of resources for user education to become more apparent when user education for the new systems needs to take place; and it is not surprising that technology lag makes itself felt after the initial optimism of the planning stage.

Logical explanations for some of the changes are more difficult to find, however: the nature of the business (degree of diversification, rapidity of growth, etc.) is perceived as a major barrier initially and by an even greater proportion during implementation - what is the explanation for this? Perhaps it is that anticipated problems in this area actually materialize. Also, the attitudes of middle management assume a greater significance at implementation - this may be related to the lack of resources for user education and to the perception that technology lags behind needs, i.e., is failing to deliver anticipated benefits. Perhaps the smaller increase for senior management attitudes is related to the marked decline in the significance of political conflicts. The downward shift in political conflict may also be associated with the decline in doubts about benefits, although the difficulty of measuring benefits remains a problem.

When we examine the extent to which these factors are perceived to be either major or minor barriers, the picture shown in Table 8 emerges.

From these various rankings, the difficulties in recruiting appropriate staff, the lack of resources to engage in user education, the nature of the business, and the difficulties of measuring benefits, emerge as the key features of IT strategies that are likely to cause problems for companies.

Further details of barriers and problems surfaced in the interviews. Even companies with a strong commitment were not immune to blind spots. For example, one interviewee said that:

...while there is this very strong belief in information technology, the top management have not believed in end-user computing... The main drive... is coming from DP because we see opportunities for managers, professionals, to help themselves. But it is not something for which there is a strong demand, and it is something which top management has treated as, you know, 'Why do you want to play with that, why don't you get on with your real job?'

The same person highlighted another inhibiting factor:

...another aspect of corporate style - the attitude to cost. The organization will quite happily invest millions almost at the drop of a hat in large-scale technology for big operational systems. I can get authority to spend a million or two on new hardware to improve the system in a ten-minute meeting with the managing director. And yet the same man will say, 'I might find a PC on the desk quite useful, but how much does it cost? [and then] 'It's not worth spending £2500 for a piece of junk on my desk.'

An interesting aspect of the recruitment problem was revealed in a financial services company which had a tradition of project teams directed by a senior manager from the user group and staffed mainly by users:

When we started all this there was quite a large army of part-qualified, or recently qualified, very bright, young actuaries, accountants, and so on, that we could pull on. An unfortunate effect of the systems we developed was that we reduced the need for the office to have a lot of those people - you didn't need lots of actuarial trainees with calculators doing these things any more. What we didn't see at the time was that we were cutting our own throats.
Now, over the last three or four years, that's been recognized in the office. Not just for computing reasons, but for all sorts of other reasons, it's starting to build up its professional input, its graduate trainees, again.

Success of strategies

Companies were asked to indicate how successful their strategies were, and why. The proportions selecting the different categories are shown in Table 9.

Table 10 shows the distribution of responses by rank position in the Times 500 group: interestingly (although the numbers are small) companies in the lower half of the rankings appear to be more satisfied with their strategies than those in the upper half.

Some of the companies (46 per cent) did not state why they had chosen a particular category; however, the comments that were made are very interesting. Curiously, the least interesting are those made by companies who claimed to have 'Highly successful' strategies. The comments amount to saying that the company had achieved what was set out to be achieved, for example: "We have successfully achieved all objectives during the first year of our 3-5 year plan."

Occasionally, reference was made to the achievement of cost-effective benefits: "To date they have met the objectives set at the outset - normally within budget."

One response was rather more informative:

Rapid development of systems using 4GLs has meant systems can be delivered within acceptable time scales and before business needs change. Sophisticated software has meant high level of acceptability of systems by users.

Difficulty in gaining full approval for strategy. This makes long-term, integrated systems development difficult.

Pressure on building short-term applications to cope with immediate business requirements inhibits progression towards long-term goals...

While the existence of a separate computer services company within the Group has given a professional focus to 'data processing' services, the remoteness from end users has led to a shortfall in identifying their 'informational' needs, which lead managers to a poor opinion of computing generally.

Problems with staff recruitment with appropriate expertise coupled with the requirement to develop most applications 'in-house' due to major investment in minority supplier restricting application package choice.

The most interesting comments were associated with the 'Reasonably successful' response. They divided into three groups: 'positive' comments advancing reasons for having accomplished as much as had been achieved; 'negative' comments explaining why more had not been accomplished; and 'neutral' comments.

The dominant kind of positive comment related to senior management and Board support for strategies, a factor which has been frequently mentioned in the literature. Typical statements included:

Enthusiastic backing from, and the direct involvement of the Chief Executive. The Company's senior managers have a natural inclination towards using IT and [the company] is moving towards central business planning which is fully compatible with the thinking behind an ISS.

Major involvement on a regular basis from senior executives down through other levels of management.

Successful implementation of systems (included in one of the quotes above) is also separately put forward as a reason for being 'Reasonably successful':

Able to produce required information significantly faster and more efficiently than two years ago, with beneficial effects for management and staff actually doing the work.

Future investment in IT

Future investment in IT was probed through two questions: the first sought information on plans over the next three years; the second, information on plans beyond that time. Table 11 shows the percentage of companies identifying areas of major investment (i.e., a score of 4 or 5) over the next three years, with the items ranked.

Interestingly, of the top six investment intentions, only one, the introduction of Multi-function Workstations, could be said to be an advanced application; the other five are all quite familiar areas of system development.

Comments by an interviewee, in the financial services sector, emphasize the industry-specific character of some of these developments, however:

We think there is a role for fairly simple expert systems technology, on two grounds: firstly, it enables us to easily prepare systems for the agents to use that will lead them through procedures and ensure their compliance with the Financial Services Act; and secondly, it will provide sales tools, from simple product systems through to quite complex financial analysis, needs analysis, so that we can disperse relatively complex technical knowledge out to those points-of-sale and improve the sales performance of all those tied outlets.

A system of this kind was actually under development:

...we currently have a working prototype of the high-level . part of that system which collects... the 'know your customer' data for compliance, which is, incidentally, the data you need to later feed the advisory legs.

In an interview with a managing director in the construction industry the question was put: 'Do you see a role for terminals in site offices?':

Yes, I certainly do, but I've seen it for the last 15 years... I'm still convinced when the day comes that there are terminals, whatever type of terminal that may be, on site, then we've really got somewhere. And we will never get a complete system until we do get it on site... The day's got to come when you can have something small on site. where you can key... the hours for the payroll, or where a clocking-in system puts it there, where you go round to do a valuation and you key it in... then you're really getting somewhere... the materials, the lot.

In this case, however, the enthusiasm for the idea was tempered by the realization that current technology and particularly current telecommunications, militated against the implementation of the idea.

Some of these developments, of course, will be industry-specific, e.g., a company without a sales force is unlikely to find a use for sales-force computers. Worth noting, however, are the investment areas where major developments have been forecast (image processing, voice-related systems, and expert systems) which are not yet seen as major investment areas.

Question 10 identified nine areas for potential future strategic development and asked companies to state whether the area was of little interest, some interest, or major interest, or was already part of strategy. Table 12 lists the areas by the mean ranking (using Kendall's W).

Table 13 presents, in abbreviated form, using the ranks assigned in the above table, the proportions of companies identifying the areas as of major interest, or as already part of the 1SS.

Competitive advantage in IT strategies

The idea that IT can contribute to the competitive -advantage of a company in the market place is one that has received widespread publicity over recent years, and a number of case studies have been collected to show the means whereby IT has been used in this way.6 Of the techniques shown, historically, the use of IT to reduce costs has been the most common, and it is interesting to see in these results, that product or service improvement is now seen as the main competitive advantage to be gained from information systems; at least among those companies that have adopted a strategic view.

As one interviewee put it:

...back in 1965, when we were one of the first in the industry... we believed that there were a lot of cost savings to be made... and what we did was partially successful and partly not. But, as it went on, obviously we learnt more about it, and I think we then started making better use of it...

The interviewee went on to talk about other benefits for senior management, for example, having computer-produced appraisal documents for plots of land, or computer-based financial estimates and balances, and was asked: 'Would you define those benefits as something like "management productivity"?':

Yes, I would, definitely... And... it's the kind of thing you can't quantify and say it's saved us people, but I wonder what it benefits you by the fact that you've got it there?

Companies were asked whether CA was a feature of their IT strategies, and 88 per cent claimed that it was. There was little difference over the different segments of Times 500 group, but the more than 90 per cent of the top 100 and more than 96 per cent of the financial group made this claim. The CA strategies used, in rank order of major importance, are shown in Table 14.

Conclusion

Previous studies of the strategic uses of information systems have intimated that few companies have adopted a strategic view. This study suggests the picture may not be as black as others have painted. Certainly, the survey reported here has gained response from more companies than has typically been the case, and a certain degree of confidence can be expressed in the findings. At the very least it can be said that the idea of information systems strategies is recognized by a good proportion of the companies in the Times 500 group, and has really taken hold in the financial services sector.

The interviews, in particular, lead this author to believe that the deliberate process of strategy formulation may be relatively rare, even among those companies which now claim to have a strategy. Mintzberg's words on the matter ought to be taken as offering comfort to those who see strategy as evolving, rather than as being set down as a consequence of deliberate strategy-formation action:

While it is certainly true that many intended strategies are ill conceived, I believe that the problem often lies one step beyond, in the distinction we make between formulation and implementation, the common assumption that thought must be independent of [and precede] action. Sure, people could be smarter - but not only by conceiving more clever strateaies. Sometimes they can be smarter by allowing their strategies to develop gradually, through the organization's actions and experiences. Smart strategists appreciate that they cannot always be smart enough to think through everything in advance.

Acknowledgement

I would like to express my gratitude to Arthur Andersen & Co., Management Consultants, for enabling me to undertake the work upon which this report is based. I would like to thank especially Willie Jamieson, Partner in the firm, for his helpful response to my initial enquiry and for his continued support throughout the project.
I would also like to thank the University of Sheffield for granting me Study Leave to undertake this and other activities during 1988.

References

• MacKintosh, I. (1987). Sunrise Europe. Oxford: Blackwell.
• Mintzberg, H. (1987). Crafting strategy. Harvard Business Review, (July/August), 66-75.
• Porter, M.E. (1985). Competitive advantage: creating and sustaining superior performance. New York, NY: Free Press.
• Strassman, P. (1985). Information payoff: the transformation of work in the electronics age. New York, NY: Free Press.

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