Dynamic Strategy Formulation and Dynamic Strategic Change

Introduction

Dynamic strategy is generally accepted as being the ability of a firm to rapidly switch between strategic configurations, thus dynamically responding to any changes in the environment (Day et al, 2004). Such a strategy formulation is becoming increasingly vital in the contemporary business environment, but also increasingly hard to achieve due to the vast amounts of information available to businesses. As such, this piece will examine the role that information systems, IS, and information technology, IT, can play in supporting dynamic strategy formulation and dynamic strategic change. This will be achieved through two methods. The first will be a review of the literature to understand the theory and existing studies around the role of IS and IT in driving strategic change, and the second will consist of two case studies of organisations that used IS and IT in their strategic processes.

Literature review:

The relationship between IT / IS and dynamic strategy

The relationship between IT and dynamic strategy is rooted in the relationship between the various patterns of information systems development and the organisational configurations that a business can adopt. This relationship is supported by Burn (1993) who demonstrated that different stages of information systems development tended to require companies to take different approaches to their strategy, based on the available organisational configurations. Indeed, this relationship revealed a pattern of strategic alignment in the organisations, based on the relationship between the organisational configuration and the stage of information systems development. This implies that the main role of information technology in supporting dynamic strategy is as an enabler of different strategic approaches, thus a high level of IT development is needed in order to support the use of dynamic strategies (Burn, 1993). Another important factor in the creation and maintenance of a dynamic strategy is the fact that information is increasingly being created “faster than individuals and organizations cart make sense of it” (Lerch and Harter, 2001, p. 63). This not only means that organisations are now able to collect ever more detailed data and information, but also means that understanding and processing this data is more important than ever. The vast amount of available data means that it has become even harder to obtain any degree of situational awareness, with businesses struggling to understand the status and dynamics of an environment that is continually changing in so many ways. In this environment, a dynamic strategy can only be effectively created if the business is able to keep pace with the rapid rate at which information is produced, and can analyse the information rapidly enough to keep pace with the environment. IT and IS play a vital role in achieving this, by enabling managers to better categorise, analyse and act on the data produced (Lerch and Harter, 2001). In addition to the importance of information technology in supporting an overall level of dynamic strategy formulation, specialist information systems also play a vital role in supporting the development of dynamic strategy in specific areas of the business. One particular example of this is in the use of customer relationship management strategies to support higher levels of customer commitment and retention. The main theory around customer retention is that customers can only be retained when their requirements and expectations are satisfied, and also when the customer is able to obtain fair value from their transactions with the business. Whilst satisfaction is relatively easy to obtain, the notion of fair value can change rapidly, most often when rivals launch offerings which are cheaper or subjectively superior (Park and Kim, 2003). As such, in order to effectively pursue a customer relationship management strategy, businesses need to ensure that they are aware of what represents fair value from the point of view of their customers. This can only be achieved if the organisation is able to maintain a high degree of customer awareness, through the effective collection and analysis of customer information. Information technology and IT strategy both play a key role in enabling this for businesses, and helping them better retain their customers (Park and Kim, 2003). In addition to enabling specific aspects of dynamic strategy, high end information technology also plays a vital role in enabling businesses to expand and succeed in areas where the requirement for dynamic strategy is even more pronounced. One example of this comes from the attempt by many businesses to become electronically enabled. In order to achieve this on an effective level, businesses need to employ dynamic capabilities to leverage their expertise in the electronic environment. Whilst the key factor in succeeding in this market is a strong degree of visionary managerial leadership, companies also need to show the ability to develop innovative and dynamic IT capabilities in order to support their business aspirations. As such, a sound IT innovation strategy will prove the key to developing a dynamic electronic business strategy to succeed in the new environment (Hackbarth and Kettinger, 2004). One final example of a dynamic business strategy which can be supported by IS and IT is a mass customization strategy, which focuses on succeeding in diversified markets using the cost benefits of mass production and the marketing appeal of individualisation. In this case, information systems play a much more holistic role: not only do they support the process of strategy formulation, but they also enable the entire value chain, particularly in the management of product and process complexity levels. Indeed, Dietrich et al (2007) argue that a mass customisation strategy, and other advanced production approaches, can only truly be achieved if information systems are integrated into the operations process, and hence the strategy, at a fundamental level.

The role of IT / IS in promoting dynamic strategic change

As discussed above, the literature strongly supports the argument that the alignment of IT and IS with business strategy plays a vital role in creating dynamic strategies. However, given the importance of change in the dynamic strategy process, it can also be argued that IT and IS need to play a key role in supporting dynamic strategic change in order for businesses to maintain their dynamic strategies. This argument is supported by Sabherwal et al (2001) who claim that dynamic strategic alignment can only be achieved over a long period of time if the company's IS management profile is set up to support evolutionary changes in strategy. This argument is supported by Hsiao and Ormerod (1998) who argue that information technology enabled strategic change is a vital aspect of any dynamic strategy formulation. Indeed, their study implies that strategic change is pursued is a series of unique ways, each of which rely on the effective management of information and information systems in order to achieve. This research also shows that IT plays an equally vital role in both planned and emergent modes of change, regardless of the change elements that drive these modes. One specific example of the role that information technology can play in supporting dynamic strategic change is in the field of dynamic process modelling. Dynamic process modelling is used across the entire set of operating and support functions of a business, including the information systems, and plays a vital role in ensuring the continued alignment of all these aspects during a strategic change process (Giaglis et al, 2005). This is a vital component of a dynamic strategic change, as alignment must be maintained in order to ensure coherence throughout the business. If different aspects of the business fall out of alignment during the strategic change, the delays associated with realigning them can disrupt the dynamic process and prevent the company from maintaining its dynamic capabilities and responsiveness to market changes. Information systems can assist in avoiding this through the creation of dynamic simulation models that demonstrate the effects of a proposed strategic change on existing business processes, helping managers be proactive and addressing any changes before they cause misalignment between organisational functions. Indeed, true continued strategic business alignment can only be maintained throughout a dynamic strategic change process if the information technology and information systems of the company are specifically configured to support the dynamic process. This argument is put forward by Chen et al (2008) who argue that dynamic strategic changes require dynamic capabilities in order to ensure strategic alignment process, and also to overcome any difficulties encountered in both achieving and sustaining alignment. This is particularly important in the IT context, given that the path dependencies created in previous changes can act as barriers to future alignment. As a result, the information systems of the business need to be managed and directed, with a clear business vision, to ensure future strategic alignment, and hence business success.

Case study 1: Hewlett Packard

The first case study in this piece will be an examination of Hewlett Packard, HP, specifically the actions taken by HP when it was engaged to develop a new information system for a large multinational car manufacturer. This new system was a critical aspect in supporting a dynamic strategic change in the organisation, moving it away from a hierarchy and towards a worldwide network of factories and distribution facilities (Feurer et al, 2000).

Analysis for the case study 1

This implementation focused on the creation of a new information system for a new area of the business. As a result, it was not dependent on the company's existing IT and IS. This meant that it provides a good example of how a system can be designed to fulfil a specific role in the creation of a dynamic strategy, with the only constraints being the network of suppliers and customers, and the requirements of the parent company. The implementation thus used a balanced approach between people and technology, helping to support a dynamic strategy that could react more rapidly to market requirements, whilst also incorporating internal goals and constraints. The resulting system supported a high level of strategic alignment, as well as a high degree of dynamic strategic control (Feurer et al, 2000).

Critical reflection on the case study 1

The main success factor underlying this case study was the use of the information system to support the deployment of flexible resources as late as possible in the production process. This not only saved costs, but also helped support a mass customisation process, as described by Dietrich et al (2007). The use of the information system to provide this degree of flexibility also helped the company use a series of innovative processes to drive production in the network of factories, which encouraged further dynamic strategic development. This use was supported by a breakthrough in the technology enablers, which were driven by the cross functional teams working across HP and the car manufacturer. These breakthroughs made it possible for the system to be used to identify the critical processes which tend to have the strongest impact on the ability of a company to achieve its strategic objective (Besanko et al, 2007). The systems were then able to analyse these key processes and translate them into high level models of how the new organisational structure would interact with its environment, in terms of the core, support and innovative processes and how these could be proactively adapted to the environment to maximise overall performance. This is a critical aspect of any strategic planning involving information systems (Ward and Peppard, 2002), and played a further key role in the success of the overall implementation, and the relevance of this case study to the development of best practice in the information systems field (Eisenhardt, 1989).

Case study 2: Queensland Heath

The second case study in this piece is a study of Queensland Health, QH, which is one of the largest Australian government agencies. This agency implemented a centralised IT service management model as part of a dynamic strategic change away from a function based strategic focus, and towards a service based focus (Tan et al, 2010).

Analysis for the case study 2

The implementation of the system was widely seen as a success, with the system experiencing a large number of breakthroughs, both organisational and technological. The main organisational factor that supported the success of the case study was that the commitment of senior management was obtained, hence directing all the organisation's resources towards the successful implementation of the system, and the resulting organisational change. This was supported by the high level of commitment and skill shown by the project champion, who recognised the need to integrate a change management strategy into the information system implementation, to ensure that the systems implementation acted to support an aligned dynamic change, rather than hinder it. In the technological area of the study, the organisation made sure to maintain close relationships with the vendors that installed the system, in order to facilitate a high level of technology transfer to the in house staff, as well as using a benefits realisation plan to track the project benefits and ensure they were realised (Tan et al, 2010).

Critical reflection on the case study 2

The main learning point from this study is the importance of integrating any information systems implementation with a valid and rigorous change management strategy in order to drive successful change. This is in line with the arguments of Keen (1981) who notes that information systems will only act to support an organisational change, and maintain strategic alignment in that change, if the information systems themselves are implemented using organisational change principles. This success factor was also supported and underlined by the role played by the change champion in achieving organisational support for the change, as well as the process of obtaining commitment from senior management. This combination of factors implies that the most important factor in ensuring that IT and IS support dynamic strategic change efforts is the need to use effective change management methodologies to drive the entire process. In addition to this, the results and learning from the technological aspects of the case study indicates that the organisation needs to ensure that it has the required level of technical and technological expertise in order to run and maintain the system and ensure it is achieving its goals. The main factor in ensuring that this is achieved is the need to ensure a high level of involvement in the implementation process and, if external vendors are used, to ensure a high level of knowledge and technology transfer from said vendors. The use of a benefits realisation plan, or other method of tracking and driving project benefits, is also important in ensuring that IS and IT implementations are successful in achieving their goals.

Conclusion

In the modern business environment, organisations can only create and maintain relevant and successful strategic direction if they follow a process of dynamic strategic formulation. Failure to follow this process will leave the company unable to keep up with market and environmental trends, and hence will be surpassed by superior competitors. Information systems and information technology can support the process of dynamic strategy formulation by making information more available to businesses, and supporting the efforts of said businesses to analyse and formulate their strategy by providing tools to support their strategy formulation efforts. This is supported by the literature, which demonstrates how information systems can support both the development of dynamic strategies and dynamic strategic change at both the general and specific level. The importance of information systems to the process of strategy formulation and strategic change is also supported by the case studies. As the HP case study shows, information systems can play a critical role in developing a strategy and deploying it, by supporting the process of strategic discovery and relating the processes of the organisation to the strategic environment. Similarly, the case study of QH demonstrates the importance of using rigorous methods when driving strategic change. Not only must these methods be used to support the change itself, but also in the deployment of the information systems, to ensure that said systems will support the overall and not act to hinder it in any way. An understanding of the importance of information systems in providing the information needed for strategy formulation was vital in the success of both of the cases examined in this piece.

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