CONCEPTUAL FRAMEWORKS FOR FIRM STRATEGY: An … · 2017-09-29 · Año 8, n.º 14, junio de 2003 19...

Año 8, n.º 14, junio de 2003

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CONCEPTUAL FRAMEWORKS FOR FIRM STRATEGY:An Information Systems Perspective

Rafael Andreu I CivitPROFESOR ORDINARIO DE

SISTEMAS DE INFORMACIÓN Y DIRECCIÓN GENERAL, IESE

Kety JáureguiDIRECTORA ASOCIADA DEL PROGRAMA DOCTORAL ESADE-ESAN

Introduction

Nowadays, firms are facing ever-increas-ing risks and opportunities created by aset of distinct but interrelated factors: achanging environment, fierce competi-tion, industry liberalization and the emer-gence of a global economy. In order tosurvive and compete effectively, firmsmust develop a flexible outlook; in otherwords, they must formulate and/or re-for-mulate their strategies, design and deploy

ResumenEl concepto de estrategia y formación de estrategia puede ser analizado desde diferentesperspectivas. Mintzberg (1990) ha identificado diez escuelas básicas de pensamientocon relación a este tema. La estrategia es concebida como un proceso de visión, diseño,planeamiento o posicionamiento; como un proceso de conocimiento o aprendizaje, sujetoa influencias políticas, culturales o ambientales, o más propiamente como un procesocentrado en la transformación. A través de los años, los sistemas de información hanvenido a jugar un papel crecientemente estratégico en los negocios, capaz de apoyar laformulación e implementación de estrategias y, particularmente, la reformulación deestrategias. Este trabajo ofrece una revisión de la literatura sobre el tema y relaciona lossistemas de información con las diez escuelas de estrategia mencionadas, permitiendo ladiscusión de la utilidad de los diferentes tipos de sistemas de información.

appropriate organisational structures, andbe prepared to operate in an evolutionarymode.

The strategy concept and the strategyformation process can be approached fromdifferent perspectives, covering all of thefirm’s activities. Authors in the generalmanagement field have given differentdefinitions of strategy, emphasising,among others, the following aspects: strat-egy as a means to attain competitive ad-


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vantage; strategy as a means to achievethe organisation’s vision, mission or ob-jectives as defined by the firm’s leaders,etc. Mintzberg (1990) has suggested thatthese approaches can be grouped in tenschools of thought. These schools various-ly conceive of strategy as a process of vi-sion, design, planning, positioning; or asa process of cognition or learning, sub-ject to political, cultural, or environmen-tal influences; or more particularly as aprocess centred on transformation. Someof these schools propose descriptive con-ceptual frameworks, while others are pre-scriptive.

Over the years, Information Systems(IS) has evolved in its organisational role.Currently, IS has a strategic role, with thepotential to affect business operations andindustry reconfigurations, and so influ-ence competition. For example, IS canhave a great impact on cost or differenti-ation when used in value chain activities(Porter, 1980). From another perspective,IS can be seen as a unique and valuable«resource» that adds value to the firm’sactivities (an illustrative and classic ex-ample is that of SABRE – American Air-lines Reservation System).

IS researchers have proposed severalconceptual frameworks to support the for-mulation, re-formulation and implemen-tation of a firm’s strategy. For example,the evolution of IS in organisations, andconceptual frameworks that help firms toidentify their critical IS. In general, thequestion of how IS can be integrated withstrategy has been studied from two pointsof view: (1) IS as a set of data and infor-mation flows that are necessary for thefirm’s information functions and process-es in accordance with its strategy (in oth-er words, as a set of applications that give

support to the firm’s information needs);and (2) IS with an emphasis on techno-logical considerations, especially on newtechnologies that may impact the busi-ness’s development.

As strategy is approached from differ-ent standpoints, its link with IS is not triv-ial. It is rather a complex issue becauseof the diverse interrelations that exist andthat can be exploited. Research on thistopic began at the end of the ’70s and un-derwent a boom at the beginning of the’90s. This paper gives an overview of theliterature on IS strategy and how IS re-lates to the different schools of thoughtin strategy research, with the aim of pro-posing ways of integrating IS in eachstrategy school. The paper is organisedaround the ten strategy schools proposedby Mintzberg (1990), as follows: first, foreach school, the most relevant ideas aboutstrategy are described; then, ideas for in-tegrating IS and strategy are reviewed anddiscussed.

1. The Design School: Strategyformation as a process of conception

This school was the first to consider strat-egy in a competitive context. It proposesa model and guidelines (or prescriptions)for formulating a strategy. The modelcomprises two interdependent activities:strategy formulation and strategy imple-mentation.

Strategy formulation is broken downinto three steps: environmental analysis,internal analysis, and target and objectivesetting based on the firm’s capabilities. Inthe environmental analysis step, opportu-nities and threats (or risks) are identified.In internal analysis, the firm’s strengths


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and weaknesses are assessed. The aim isto match opportunities with the firm’s ca-pabilities, particularly its distinctive capa-bilities (i.e., those in which it performswell and that are difficult for others toimitate), so as to minimise the impact ofits weaknesses and maximise the contri-bution of its strengths. This is what is re-ferred to as SWOT (strengths, weakness-es, opportunities and threats) analysis.

Strategy implementation involves de-signing the organisational structures, in-centive and control systems and othermanagement systems (often implicitly in-cluding IS), and their interrelationships,in such a way as to make the strategywork. In this process, IS is normally in-cluded in the form of the informationflows that are needed for the organisation-al structures and systems to work effec-tively. Information flows through all or-ganisational levels are vital to ensure thatthe organisation’s members are informedabout goals and actual accomplishments(the control issue), and also to coordinatetheir tasks.

Strategy and Information Systems

IS can be integrated with business strate-gy if IS/IT issues are taken into accountduring both the strategy formulation andthe strategy implementation steps. IS/ITcan help to identify areas in which sus-tainable competitive advantages could beachieved (Parsons, 1983; McFarlan, 1984;Benjamin, R.I, Rockart, J.F, Scott Morton,& Wyman, J, 1984). IS are seen as pro-viding the elements (data, processes, in-formation) with which the organisationalstructure operates. Also, IS are seen as thebasis on which control can be exercisedin the organisation.

Normally, in this school, as mentionedabove, IS are considered at strategy im-plementation time. In the early ’70s, ISwere used to support administrative andcontrol tasks, especially tedious and rou-tine tasks such as accounting, payroll andinventory control. IT was understood onlyin terms of machines with great data-pro-cessing speed. In this context, researchfocused on studying and explaining theuse and performance of IS in organisa-tions, as well as how to effectively man-age the IS department, conceived mainlyas a technical department. Also, the Man-agement Information Systems (MIS) andManagement Decision Systems (MDS)concepts were developed, and their designand construction issues were considered.Gorry & Scott Morton (1971) focus on thedevelopment of IS from the perspectiveof the organisation’s decision levels.Hence, IS will support (structured or non-structured) decision-making in the organ-isation and will provide the means bywhich the organisational structure oper-ates. Consequently, IS improve organisa-tional effectiveness and efficiency andenhance the productivity of knowledgework.

2. The Planning School: Strategyformation as a formal process

This school considers strategy formulationas a formal planning process which ishighly systematised and rational and hasa long-term outlook. Planning consists ofidentifying a desirable future and decid-ing how to achieve it. The planning pro-cess comprises plan formulation, imple-mentation, review and evaluation. Theformulation stage is divided into strategicplans, medium-term programmes, andshort-term detailed plans and budgets

Conceptual Frameworks for Firm Strategy



(Steiner, 1979). Implementation consistsof the deployment of short-term plans andincludes the organisational structure andcontrol systems.

In this school, IS are considered a nec-essary tool to obtain the information thatis needed for formal planning. Informa-tion about the firm’s past performance(sales, earnings, return on investment,market share, etc.) is essential for forecast-ing, identifying alternative courses of ac-tion and evaluating them.


In this school, the integration of IS withbusiness strategy can be approached fromtwo different perspectives: 1) IS/IT to sup-port plan development and implementa-tion; 2) strategic planning of the IS func-tional area.

The first includes IS/IT-based tools tohelp top management in business plan-ning, such as modules to support internaland external analysis, simulations, etc.

In contrast, IS strategic planning at thefunctional level is aimed at helping toimprove the effectiveness of IS in the firm.For example, Nolan (1979) and Rockart(1979) have published studies on some ISplanning topics; IBM approached the de-sign of IS after the business strategy plan-ning; and Andreu, Ricart & Valor (1992)have proposed a global focus on IS planning,in parallel with the business strategy.

The growth stages model proposed byNolan (1979) and its later refinements areconceptual frameworks of the processwhereby IS evolve in the organisation.These frameworks are useful for design-ing the functional strategy of IS, as a di-

agnostic tool, because they help to judgethe organisation’s position with regard tothe introduction and assimilation of newinformation technology, and therefore,direct its growth.

The CSFs proposed by Rockart (1979)are defined as the few key areas in whichthings must go right for the organisationto prosper. These areas are usually few andany executive must identify, measure andcontrol (monitor and improve) them withconstant attention. CSF analysis is usedmainly to help executives determine theirinformation needs for control purposes.Consequently, it helps companies identifythe information systems they need to de-velop. It can also be used to identify exec-utive information systems opportunities.

The Business Systems Planning (BSP)methodology, developed by IBM, is de-signed to determine IS/IT needs based onbusiness processes. In general, planningconsists of: (1) defining the company’sbusiness processes; (2) defining a portfo-lio of future IS applications, i.e. the firm’sinformation needs and priorities; and (3)defining the technology and constructingthe infrastructure to implement IS devel-opment. IS/IT applications that satisfy thefirm’s information needs are obtained byfollowing these steps.

The methodology presented by An-dreu, Ricart & Valor (1992) consists ofpresenting a set of generic strategic actions(ITSGA). These are information technol-ogy applications with general potential toimprove business strategy, in such a waythat the strategy contains IS/IT compo-nents that can contribute to the attainmentof sustainable competitive advantages. Forinstance, some of the product-relatedITSGAs focus on increasing the products’


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information content, personalising theproduct or creating new products.

3. The Positioning School: Strategyformation as an analytical process

This school, like the design and planningschool, is prescriptive. It regards compet-itive strategy as the search for a favour-able competitive position in an industry.

The conceptual framework focuses onan analysis of the firm’s market environ-ment, with an emphasis on industry struc-ture and competition, in order to select astrategy that will lead to competitive ad-vantage (Porter, 1980). The analysis ofindustry structure consists of studying thestructural factors in detail (intensity ofrivalry among competitors, threat of newentrants, threat of substitutes, buyers’ andsuppliers’ bargaining power), so as toidentify the critical drivers of long-termprofitability and the industry’s attractive-ness (Porter, 1980). Other important con-cepts in this model are those of the valuechain and generic strategies. The valuechain is a framework that helps conductthe firm’s internal analysis, studying allof the firm’s activities in a global way, soas to determine the types of activities andprocesses that create value for the custom-er. Generic strategies represent alternativeways of competing (cost leadership, fo-cus, and differentiation or high segmen-tation).

Another important point examined bythis school of thought is technology as asource of competitive advantage. Technol-ogy (which includes information systemsand everything to do with technologicalchange) can be an important driver in anindustry’s general structure if it is used

intensively in value chain activities (Por-ter, 1985).


In this school, IS have been consideredmainly insofar as they directly affect thefirm’s competitive position. For instance,IS can help to establish entry barriers and/or develop substitute products or servic-es. For example, automatic tellers havelimited the establishment of new «bankbranches» in the bank industry, and elec-tronic mail has become a substitute forregular mail (Parsons, 1983).

IS can help firms beat their competi-tors in different ways. It may help themto develop new products or markets atlower cost than competitors, or establishagreements with suppliers and customersthat will tie customers to the firm’s prod-ucts and suppliers to a strict delivery time-table. Consequently, IS and technologicaltrends should be considered important el-ements of industry analysis (e.g., Internetuse, e-commerce, etc.) because they canbe a source of competitive advantage forthe firm.

Within the firm’s value chain, IS isconsidered a support activity, part of theinfrastructure (Porter, 1980; Porter &Millar, 1985). All primary and supportactivities in the value chain require IS-based support because all of them requireand generate information.

In this context, the integration of ISand strategy can be viewed from eitherperspective: external analysis (industrystructure) or internal analysis (valuechain). The aim is to identify opportuni-ties for IS-based competitive advantage.The most important models developed by




IS researchers who use some of thisschool’s ideas include: McFarlan, McKenney & Pyburn’s (1983) strategic grid;McFarlan’s (1984) five questions; Wise-man’s (1988) strategic option generator;and Rayport & Sviokla’s (1995) virtualvalue chain.

The strategic grid is a very useful di-agnostic tool for positioning (in the so-called «support», «turnaround», «factory»or «strategic» cells) a firm or a businessunit according to the strategic impact thatIS has on it. IS/IT can play very differentroles in different firms. For some, it per-forms essentially operational functions,while for others it may cover an area ofstrategic importance.

Another tool for analysing the strate-gic impact of a firm’s IS is McFarlan’s(1984) «five questions». Companies canidentify opportunites for IS-based compet-itive advantage by asking questions suchas: Can IS technology build barriers toentry? Can IS technology build in switch-ing costs for customers? Can technologychange the basis for competition? Can ISchange the balance of power in supplierrelationships?

Similarly, the «strategic option gen-erator» (SOG) model is designed to helpidentify IS opportunities that will enablethe firm to achieve competitive advan-tage. It focuses on the way IS is relatedto five strategic thrusts (differentiation,costs, innovation, growth and alliances)and three strategic objectives (supplier,customer and competitor). Thus, SOGidentifies 15 areas of opportunities forgeneric strategies and each area is opento the perspective of the top managers’vision.

Finally, Rayport & Sviokla (1995) ex-pand Porter’s work and classify the valuechain into two types: physical and virtu-al. They consider that any business com-petes in two worlds: a) a physical market(the marketplace); and b) a virtual worldmade up of information (the market spaceor electronic market). In the physical val-ue chain, information is considered as asupport element that adds value to lineactivities. In the virtual value chain, in-formation is the source of value itself.

4. The Entrepreneurial School:Strategy formation as a visionaryprocess

From this section on, all the strategyschools of thought (the entrepreneurialschool, the cognitive school, the learningschool, the power school, the culturalschool, the environmental school and theconfiguration school) are descriptive rath-er than prescriptive. These schools aremore interested in how the strategy is ac-tually formed –how it is developed– atboth the individual and the organisationallevel, and less so in prescribing conceptsand procedures for formulating it.

In the entrepreneurial school, strategyformulation is considered as the result ofthe leader’s vision. In a global sense, thevision is a subjective idea of how the lead-er «sees» his business in the future. Thisvision is based upon knowledge of thebusiness and the leader’s individual capa-bilities (such as intuition, creativity, judge-ment, wisdom, experience).

The firm’s strategy responds to theleader’s initiatives; therefore, a firm’s lea-der is key for organisational success.


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Strategy formation is described as a vi-sionary process rooted in the leader’s ex-perience and intuition. Consequently, theentrepreurial school focuses on personalissues. In this context, integrating IS andstrategy is not easy.

IS can contribute to the subjectivestrategy construction process by deliver-ing internal and external information in anorderly fashion, and by facilitating datapresentation through graphs or other con-venient ways, much in the tradition ofexecutive information systems (EIS).

EIS can also include support systemsfor decision-making (Turban 1988; Wat-son Hugh, Rainer Kelly & Koh Chang,1991). These systems are highly person-alised and present information in the man-ner each individual executive prefers, al-though some standards may be employed.

5. The Cognitive School: Strategyformation as a mental process

This school considers strategy as a con-struct that is created in the mind of thestrategist. It focuses on the mental activi-ties related to the strategy-making process.Mintzberg (1990) states that there are fiverelevant approaches for explaining thephenomena associated with problem-solv-ing and strategic decision-making. Theyare: Cognition as confusion (people havevery limited capacity to receive and pro-cess information); cognition as informa-tion processing (attention, encoding, stor-age/retrieval and retrieval); cognition as

a mental mapping (an organised body ofknowledge that explains how thingswork); cognition as concept acquisition(how the strategy manages to be formed);and cognition as a constructive model(how each strategist constructs his ownunderstanding by taking information fromthe environment and processing it in aunique way, subjectivity being an impor-tant factor).


In the cognitive school, IS/IT cannot inprinciple contribute significantly to any ofthe approaches described by Mintzberg(1990). However, IS/IT can sometimescontribute in surprising ways. For in-stance, in the first and second approach-es, where strategists are assumed to be«information workers», IS/IT can supportthe activities that involve absorbing, pro-cessing and disseminating informationabout issues, opportunities and decision-making in a precise and rapid way. In thetradition of «Decision Support Systems»(DSS) at the individual level and «GroupDecision Support Systems» (GDSS) at thegroup level, it can provide support sys-tems for decision-making.

A DSS is a system that facilitates struc-tured and non-structured problem-solving,as it combines data, analytical models andfriendly software in a single interactive,computer-based system (Sprague, 1980).It should be stressed that a DSS gives thedecision-maker (in this case, the strategist)access to data and models, but it is thedecision-maker who supplies the intelli-gence, intuition and judgement for prob-lem-solving.




6. The Learning School: Strategyformation as an emergent process

The learning school was initiated as a re-action to (and a questioning of) the plan-ning school. The approach it adopts is fair-ly rational (attainment of pre-determinedand precisely defined objectives, and ahighly formalised organisational struc-ture). The fact that the strategy can origi-nate within the organisation without anylogical or sequential planning is ignored.

Strategy is understood as a pattern inan action flow (Mintzberg & Waters,1985). This pattern is said to arise fromthe firm’s historical decisions, but bear-ing the future in mind. It emerges in smallsteps and is based on continuity as the or-ganisation adapts over time. Learning oc-curs by doing» and requires both time andresources. Observation of past behaviouris the basis for strategy development,without taking into account whether suchbehaviour was intentional (planned) ornot. Consequently, strategy can only bemade explicit ex-post.

In addition, the adherents of thisschool point out that in a complex anddynamic world, the strategy that is actu-ally carried out (the realised strategy) con-tains a large element of emergent strate-gy. This is so because it has to be open,sensitive and flexible (willing to learn) inorder to respond to changing events.

Recent additions to this school includeinterpretations of strategy formation froma capability standpoint and from a knowl-edge development perspective. Capabili-ties and knowledge are considered as themain results of the learning process, bothin the individual and in the organisation.Strategy formation is represented as a col-

lective learning process (organisationallearning).

From a capability perspective, strate-gy consists of developing difficult-to-im-itate organisational routines, whose pur-pose is to coordinate the firm’s resourcesso as to render their use as productive aspossible, thus constituting a source of dis-tinctive competencies. Capabilities arealso considered the result of the organisa-tion’s practice (using its organisationalstructure and management systems).


IS can support organisational learning tothe extent that it reflects a way of doingthings that is specific to the organisation.IS may include organisational routines (in-formation flows, calculations, ways of in-teracting, cooperating and making deci-sions, as long as the corresponding pro-cesses are well structured) generatedthrough interaction between IS users (whoin the process make their knowledge andexperience explicit) and the IS staff. AsIS are constantly evolving (new functionsbeing added to them over time in an in-cremental way), they can foster the devel-opment of the organisation’s capabilities.

According to this school, no matterhow innovative IT may be, it will not, byitself, create any competitive advantage–rather, advantage will be achieved byputting organisational knowledge, expe-rience and capabilities, enabled by IS/IT,to work (Andreu & Ciborra, 1996). In oth-er words, IT/IS can add value to a firmonly as a tool and infrastructure that en-ables the efficient and effective pursuit ofthe learning organisation concept (King,1996). For instance, Groupware technol-ogies can support communication activi-


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ties and collaborative work as an infra-structure, creating shared spaces whereworkers can coordinate their activities ef-ficiently and, up to a point, independent-ly of time and space constraints.

7. The Power School: Strategyformation as a process of negotiation

The power school’s assumption is thatwhen there is disagreement over goals orover the preferred means for pursuinggoals, strategic decision-making will beaffected by power and politics. The dis-agreements and conflicting interests thatare built into any organisation representan opportunity for negotiation and re-ne-gotiation. In this context, strategy forma-tion is conceived as a negotiation processthat can take place at the individual, de-partmental or divisional level (that is tosay, within the organisation) and at theorganisational level (the organisation’sbehaviour in response to its environment).

The strategy that results from situa-tions within the organisation can be con-sidered an emergent process (Mintzberg,1990). Strategy is seen as a political gamein which it is very important to determinethe context in which the game takes placeand identify the players. Pfeffer (1992)stresses that it is essential to know thesources of power and to be able to coun-terbalance the power of other participantsin the game, including potential allies andpossible opponents.


IS can help to rationalise work, supportdecision-making and communication, andimprove internal and external coordina-tion. It can also support the distribution

of power. In this sense, IS can be seen asa means of bringing about a change in thebalance of power within the organisation.

Similarly, an organization’s IS definea pre-determined information distributionpattern, as they are part of the organisa-tion’s formal structure. This results insome people or groups having more ac-cess to information than others, thus help-ing to define power arrangements.

Moreover, IS can help members of dif-ferent groups within the organisation en-hance their control or reduce their depen-dency. For instance, people who dependon other individuals can become less de-pendent if they have IS that support themin problem-solving or critical contingen-cies; as a result, they gain power. It isstressed that the ability to create depen-dency is one of the most important deter-minants of power.

In a study conducted by Markus(1983), it was found that when a new IS isimplemented, a process of power dynam-ics is triggered. Certain design features inan IS may imply a division of roles andresponsibilities that alters the status quowithin the organisation. This alteration islikely to generate resistance/support in thesocial context in which the system is im-plemented (where different IS interact).In other words, individuals or groups thatstand to lose power will resist the change,while those who gain power will support it.

8. The Culture School: Strategyformation as a collective process

This school considers that firms have theirown organisational experience, gainedover time, as a result of which managers




have a set of tacitly assumed rules in mindso that they are able to perceive a situa-tion and react to it according to the «or-ganisation’s own» conceptual frameworksand paradigms. In other words, it is basedon the social force of culture as a meansof building the strategy. Therefore, strat-egy formation is seen as a process of col-lective and cooperative vision, based ona pattern of basic assumptions shared bythe organisation’s members.

Putting organisational culture at thebasis of strategy makes sense because val-ues, beliefs, assumptions and symbols thatare shared by an organisation’s membersmeet the conditions for creating competi-tive advantages. A firm’s organizationalculture can be defined as the way in whichit conducts its business (Barney, 1986).Often, a firm’s organisational culture hasthree attributes: it is valuable, rare andimperfectly imitable, which means it canprovide sustainable competitive advantagein a given context (Barney, 1986). A cul-ture tends to be valuable because it fos-ters the organisation’s ability to do thingsand behave in an idiosyncratic way, so asto add financial value (high sales, lowcosts, high margins) to the firm. It is rareto the extent that its attributes and charac-teristics are hard to find in other firms’cultures. And it is imperfectly imitablewhen it is difficult to replicate because itsvalues, symbols and beliefs, its history andheritage cannot be readily described andcategorised. If a firm’s culture is valuableand rare but not impossible to imitate, itwill not be a source of sustainable com-petitive advantage.

In addition, organisational culture pro-vides the organisation with a context inwhich strategy can unfold effectively. Or-ganisational culture is considered to have

a strong tacit knowledge component, as itoriginates in a process of socialisation.


Integrating IS in a firm’s organisationalculture is very difficult. Among other rea-sons, this is so because often managersand the information systems communityhave different and even opposite assump-tions and beliefs.

Schein (1997) presents these two com-munities as sub-cultures in collision. Eachhas a different approach to information,people, organisations and managerialwork. For instance, with respect to infor-mation, the information systems commu-nity may seek to run a paperless office,while managers may prefer to get infor-mation from people rather than from com-puters (Davenport, 1994). With respect topeople, the IS community tends to assumethat IS/IT lead and people follow, whilemanagers tend to think the opposite, thattechnology should adapt to people.

Schein (1997) stresses that to unitethese two sub-cultures they need to carryout joint tasks, so that learning can occurand new assumptions can be created tocombine the best elements of each.

Other authors argue that the use of newinformation technology to support mana-gerial and professional work will affectorganisational culture. In other words, itwill drive cultural, and consequently or-ganisational change: for instance, less useof face-to-face communication for officework, or remote or virtual teamwork fortasks that were impossible to coordinatebefore (because computer messaging isfaster, traceable, and accessible from al-most anywhere).


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9. The Environmental School:Strategy formation as a reactiveprocess

This school’s basic concept is that the en-vironment conditions and influences theorganisation. The environment is seen asbeing made up of different domains –so-cial, cultural, legal, political, economic,technological and physical– which are in-terdependent (Hatch, 1997). While otherschools consider the environment as mere-ly a factor, here it plays a leading role: theorganisation is seen as an open system.

According to this school, strategy for-mation takes place as a passive process inresponse to environmental conditions.There are three lines of thought in thisschool: contingency theory, populationecology, and the institutional approach.

Contingency theory states that themost effective way to organize dependson the environment (its complexity, stabil-ity, market diversity and hostility). Basedon these conditioning aspects, the organi-sation will outline a set of responses.

In the ’70s, a second approach, calledpopulation ecology, emerged. It sees theenvironment as the agent that naturallyselects the organisational forms that arebest adapted to its characteristics. Thus,some survive and others are eliminated.The basic assumption is that organisationscompete within their corresponding eco-logical niches for the resources they needin order to operate. Also, organisationsadopt patterns of interdependence withinthe group (or population) that affect eachmember’s survival and prosperity.

Lastly, the institutional approach con-siders the organisation as an organic whole

embedded in social reality. Not only doorganisations require raw materials, capi-tal, labour, knowledge and equipment;they also need the acceptance of the soci-ety in which they operate (Hatch, 1997).In other words, social legitimacy (madeup of the social, cultural, political and le-gal sectors) is seen as a major environ-mental force.


As we have seen, this school’s emphasisis on environmental analysis. The environ-ment interacts with and influences the or-ganisation, creating opportunities and im-posing restrictions for the organization’ssurvival and forcing it to adapt. Firmsmust respond to these changes by design-ing organisations that are appropriate forthe given level of environmental uncer-tainty and complexity. From this perspec-tive, advances in technology, particularlyin IS/IT, can lead to changes in organisa-tions’ environments.

Technology can create or support sub-stitute products or options for alternativeservices. It can also make «today’s» prod-ucts obsolete «in the future».

Technological progress has led to amerging of information technology andtelecommunications that has had a greatimpact on organisations and has restruc-tured entire industries, such as financialservices (automatic cash dispenser ma-chines), manufacturing (CAD/CAM), orretailing (POS) (Bradley Stephen, Haus-man Jerry and Nolan Richard, 1993). TheInternet is stimulating new ways of run-ning businesses electronically, and thusrestructuring businesses again; for exam-ple, in the area of financial services (homebanking).




Technological evolution has been acatalyst of social change. The informa-tion age has witnessed great social, cul-tural, legal, political and economicchanges. The use of credit cards, for in-stance, serves to illustrate many aspectsof contemporary society: most people,including young people, use credit cardsfor their bank transactions and to buy oncredit. This implies a change in people’sideology, habits and norms, which in turnrequires a response from firms in termsof the way they define and implementtheir strategy.

10. The Configuration School:Strategy formation as a process oftransformation

The main message of the configurationschool is that strategy formation is an ep-isode-based process involving two basicprinciples: configuration and transforma-tion. While configuration describes thefirm’s state (the organisation and its con-text), transformation describes the strate-gy formation (creation) process. Transfor-mation occurs when the firm’s configura-tion gets out of synch with its environ-ment, so that it needs to be resynchro-nized. Successive configurations andtransformations define the «life» of a firmover time (for example, the life cycles oforganisations). The key is to maintain sta-bility and acknowledge the need for trans-formation, while adapting to the context(Mintzberg, 1998).

An organisation can be described asa stable configuration –a particular organ-isational design linked to a particular typeof context at a given moment in time–which can be interrupted by strategicchange (transformation).

Transformation consists of a very shortprocess of transition from one configura-tion to another. In other words, transfor-mation may set out to change the organi-zation in accordance with the direction inwhich it is heading and thus put it on astable course (new configuration). Al-though the concept of change is verybroad, this school sees it as the transfor-mation of many elements at the same time(revolutionary change). This type ofchange occurs only rarely during a firm’slife.

Mintzberg (1998) maintains that thetransformation process can be based onany of the other schools of thought (de-sign, cognitive or planning, among oth-ers), but the way it is applied will dependon context and time. For instance, for longperiods and simple, stable environments,the planning school and a bureaucraticorganisation can be used.


Bearing in mind that the configurationschool concentrates on two key elements,namely configuration and transformation,the integration of IS and strategy can beanalysed by relating the contextual dimen-sion to configuration. IS can play a keyrole in organisational forms because it fa-cilitates work coordination and the organ-isation of the firm’s members (Galbraith,J.R.; Lawler III E.E. (1993). As Malone(1987) remarks, the use of IT in the de-sign of organisations can help to reducecoordination costs.

Coordination is an important aspect oforganisational design because in complexand dynamic environments the organisa-tion must be capable of integrating all itsactivities in a coherent whole in order to


31

respond rapidly, with quality and low cost.Moreover, in dynamic environments or-ganisations tend to opt for a greater de-gree of decentralisation, with a flatterstructure, less hierarchy, greater decisionautonomy and hence greater delegation;to make this possible, coordination mech-anisms need to be built into the organisa-tional structure. In this context, IS can fa-cilitate good coordination through betterinformation flows (moving information inmultiple directions) both within firms be-tween firms and their environment.

Henderson & Venkatraman (1994) andEarl (1996) have contributed studies onIS strategy using ideas related to the con-figuration school. They focus on the ISstrategy model from an organisationaltransformation perspective, understandingstrategic alignment as a dynamic process.

Henderson & Venkatraman (1994)propose a strategic alignment model forformulating and implementing IS strate-gy. The model is based on two fundamen-tal strategy concepts: (1) the strategic fitbetween the firm’s external and internalcomponents; and (2) functional integra-tion (the relationship between IS/IT andthe business). The authors define the mod-el in four domains: business strategy, ITstrategy, organisational infrastructure andprocesses, and IS infrastructure and pro-cesses. Alignment is seen as a process ofcontinuous adaptation and change; there-fore, there are various alignment perspec-tives. The interrelation of the four domainsproduces four alignment perspectives:strategy execution, technology transfor-mation, competitive potential and servicelevel. The authors state that none of thesefour domains is the best one for carryingout the strategy because it all depends ontime and context. Also, the potential im-

pact of IS/IT on the business is so variedand complex that executives should con-sider these alignment perspectives as con-ceptual frameworks and be ready to con-tinuously adapt them. Furthermore, thepurpose of the model is to provide a setof ideas and tools to leverage the emerg-ing capabilities of IT for transforming or-ganisations and markets (Henderson &Venkatraman, 1994).

Earl’s (1996) IS/IT alignment modelis based on the integration of four do-mains: IS strategy, IT strategy, manage-ment information strategy and the organ-isation’s strategy. The purpose of the mod-el is to integrate information resourceswithin the organisation, and thus providea managerial checklist for the Chief In-formation Officer (CIO). To make thisperspective succeed, it is important toidentify the specific role of the CIO.

Conclusion

As we have seen throughout this paper,integrating IS and business strategy is acomplex process because there are mul-tiple relationships between strategy andIS, and above all because these interrela-tionships are dynamic (they change overtime).

Placing IS in the context of differentstrategy schools of thought has enabled usto order and analyse the different IS mod-els and tools as they relate to strategy.These categories should be used as build-ing blocks for the firm’s information sys-tems strategy. The idea is to integrate ISissues from each school according to eachfirm’s strategic considerations. Usually,when a firm’s strategy and IS strategy areformulated and implemented, elements of




one or more schools of thought (for ex-ample, mental and social aspects, the de-mands of the environment, or organisa-tional learning) will be taken into account.The exact combination of components willdepend on the context the firm finds it-self in at that particular moment. In dy-namic and complex environments, for ex-ample, the firm’s formulation and imple-mentation of its IS and strategy may in-clude aspects of the entrepreneurial, pow-er, positioning and cognitive learningschools; whilst in a stable environment,the planning, design and positioningschools are likely to be more relevant.

This analysis also leads to a better un-derstanding of the strategic importance ofIS in the firm (see Table). For example,in the entrepreneurial and cognitiveschools, IS may be seen as providing aninformation flow that supports the ratio-nalisation of the subjectivity and intuitioninvolved in decision-making. In otherwords, IS helps strategists in non-routinecomplex decisions that are key to formu-lating and re-formulating strategy. In thelearning and power schools, by contrast,IS may be seen as an information flowthat supports the organisation’s own wayof working, that is to say, IS facilitatesrestructuring or strategy implementationtasks. In the design, planning, position-ing, culture and configuration schools, IScan be seen as information flows support-ing all strategic functions and processes.Finally, in the environmental school, IS

is seen with an emphasis on emergenttechnology, which impacts people and or-ganisations.

Nowadays, in an increasingly complexand dynamic competitive environment,strategy implementation is becoming asimportant as strategy formulation. In thiscontext, IS can facilitate organisationalinnovation. IS support the flow of infor-mation in all directions within the organi-sation (both operational and managerial);they thus facilitate organisational learningand more effective communication, coor-dination and control, which can lead tobetter individual and organisational work.Also, currently available IT (client-serv-er systems, open standards, interoperativecommunications, the Internet, etc.) offersa powerful infrastructure for rapid andeffective communication.

On the other hand, when managerschoose a technological platform to sup-port their firm’s strategy, they should con-sider certain very particular features ofinformation technology, such as techno-logical obsolescence and immature tech-nology. In other words, because technol-ogy changes very fast, the solution maybe to adopt an emergent technology. Yetan emergent IT may be immature and in-capable of optimally supporting strategyformulation and implementation. Amongthe technologies that are still immature areworkflow (complexity) and video-confer-encing (bandwidth restrictions).


33



cont… Table IS/IT integration in ten schools


35

cont… Table IS/IT integration in ten schools



cont…Table IS/IT integration in ten schools


37

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