Building IS capability in organisations

Construction Innovation

ISSN: 1471-4175

Article publication date: 11 July 2008

Citation

Peppard, J. (2008), "Building IS capability in organisations", Construction Innovation, Vol. 8 No. 3. https://doi.org/10.1108/ci.2008.33308caa.001

Publisher

:

Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited


Building IS capability in organisations

Article Type: Editorial From: Construction Innovation, Volume 8, Issue 3

Recently, most executive teams recognise that information is a key corporate resource and must be managed effectively and in a proactive manner. Indeed, it has long been acknowledged that, as a resource, IT has the potential to enable the achievement of competitive advantage. This requires planning, and to this end, many companies develop information systems strategies. Yet, generating value through IT requires more than the articulation of a strategy for information systems and technology. The required changes enable and shaped by technology – resulting from the execution of the strategy – must be managed effectively and only executives and users outside of the IT function can accomplish this (Peppard and Ward, 2005; Peppard et al., 2007). Employees must additionally have the ability not only to use the resultant systems and technical functionality, but also to work with new data and information (Maklan et al., 2008).

This articulation of the terrain to be navigated strongly suggests that an organisation-wide response is required if value is to be ultimately generated through investments made in IT. This goes beyond the mere management of the technical artefacts (hardware, software, networks, routers, cables, data centres, etc). This latter objective is a throwback to the early days of computing when the task of the chief information officer (CIO)[1] and the IT function was essentially to keep the computers running. At that time, IT had a peripheral role to play in business success. The IT function was essentially a separate unit in the organisation, where the Head of IT prioritised IT spend, decided what computing resources were needed, determined what the business could and could not have and put together the annual IT spending plan. This role even prioritised processing jobs. This early era represented the “priesthood” of IT based on technology worship. Recently, the role that IT plays in the operations and strategy of most companies has fundamentally changed. What organisation could survive for very long without their IT systems? Generating value demands much more than merely “keeping the light on”; if it did not, outsourcing would not pose much of a problem and would be an obvious choice.

Yet, even “managing IT” has never really been about technology per se. It has always been a knowledge-based undertaking. Keeping complex computer systems running required lots of specialised knowledge, most of it of a technical nature. And, when this was all that was needed, this knowledge was best housed within a separate organisational unit. Importantly, it was all under the control of the CIO who could direct its application.

Delivering value to the business through IT similarly requires knowledge. However, the necessary knowledge is dispersed right across the organisation. For example, developing an IT strategy often requires knowledge from other areas of the business; similarly for prioritising spend, for building business cases, for designing the enterprise architecture, for planning change programmes and for executing on IT projects. The challenge therefore becomes one of harnessing this distributed knowledge. This quest points to the conundrum that most CIOs face: while charged with generating value through IT, they do not have access to or authority over all the knowledge that is required to achieve this (Peppard, 2007).

How, therefore, can all the required knowledge to deliver business value through IT be harnessed? And how can this knowledge be integrated and coordinated? My research has identified six competencies that all organisations must exhibit if they are to have any chance of their IT investments delivering value (Peppard et al., 2000; Peppard and Ward, 2005). These competencies resonate around a model that describes a comprehensive map of what the organisation must possess for this purpose. Shown in Figure 1, the model provides a framework to structure the knowledge required to deliver value through IT, and is a comprehensive itinerary of innate organisational abilities.

Figure 1 The new map of IT management: a blueprint for competencies to generate value through IT

What my research highlights, and this is the crucial point, is that the resource elements, i.e. the knowledge and skills, underpinning each of these competencies are not located solely in contemporary IT functions. Consequently, these six competencies do not reside in any one functional area. Furthermore, the wider the span of knowledge being integrated, the more complex is the challenge of exhibiting competence.

What is critical to recognise is that, the knowledge underpinning each of these competencies, defined in Table I, will be a combination of business-based and technically-focused knowledge. It is through the coordination and integration of this diverse knowledge base that each of these competencies is revealed in an organisation. For some competencies, more business knowledge will be required. For others, technical knowledge will dominate.

Table I Definitions of the six IS competencie

Figure 2 shows an indicative view of the distribution of knowledge across the organisation that is required for each of the six competence domains. What it highlights is that, the balance of business and IT knowledge required for each of the competencies is likely to vary. For example, for the “Delivering IT supply” competence, most of the knowledge is likely to be technically grounded. This is why most IT functions are good for building systems and deploying technology. At the other extreme, for the “Exploiting information” competence, the knowledge and skills are primarily located in “the business” although some IT knowledge is required for this competence to be effective.

Figure 2 Distribution of knowledge for competencies: business bias or technology bias

Regarding the harnessing of knowledge, recent work exploring social capital in organisations provides a glimpse as to the terrain that must be addressed (Nahapiet and Ghoshal, 1998; Tsai, 2002). Social capital can be seen as networks of strong, personal relationships developed over time that provide the basis for trust, cooperation, and collective action. How we structure organisations can impede the development of this social capital; it may encourage fragmentation rather than integration. For example, IT specialists tend to have their own language and codes of practice. Often, little trust exists between IT specialists and employees from within the business. Indeed, it has been suggested that there can be a cultural difference between employees from the IT function and those from the rest of the business (Ward and Peppard, 1996).

Many CIOs recognise that to deliver value from their organisation’s IT investment they need more engagement from executives right across the organisation. The reason for this, which is not often explicitly stated, is to have access to both their and the knowledge of their reports. CIOs do attempt to facilitate this harnessing of knowledge, although they may not always recognise this as an objective of the initiatives they promote. For example, many have appointed relationship managers as a link between the IT function and business staffs. Educational programmes are also established to improve IT staffs’ knowledge of the business. This overcomes the fact that it can be difficult to get business engagement, i.e. access to their knowledge, so the CIO attempts to build this knowledge inside the IT function. However, this does not overcome the requirement for business and IT people to work together, i.e. integrate and coordinate their knowledge, if competencies are to be developed. To this end, education programmes for non-IT staff are also instigated to create awareness of IT issues and highlight their role in delivery of the expected benefits of IT investments. Even charge-back initiatives, where users are “charged” based on the IT resources and services they consume, can foster dialogue, generating a rich shared understanding of the costs and benefits of alternative IT investment and service offerings.

These six competencies together represent what I refer to as an organisation’s IS capability. This capability is the capacity of an organisation to continuously generate value though IT. All organisations require an IS capability, even if IT is not providing a source of competitive advantage: they still require an IT strategy; they run IT projects; employees need information in the performance of their job. Unless organisations actively develop their IS capability they will persist in struggling to generate value through IT.

In fact, what we now refer to today as the CIO (or IT Director) is the result of an evolution of the role of the head of the IT function. Early labels included Computer Manager, EDP Manager and DP Manager.

Joe Peppard

 

References

Maklan, S., Knox, S. and Peppard, J. (2008), “The missing link of CRM profitability: building marketing capabilities”, California Management Review (forthcoming)

Nahapiet, J. and Ghoshal, S. (1998), “Social capital, intellectual capital, and the organizational advantage”, Academy of Management Review, Vol. 23 No. 2, pp. 242–66

Peppard, J. (2007), “The conundrum of IT management”, European Journal of Information Systems, Vol. 16, pp. 336–45

Peppard, J. and Ward, J. (2005), “Unlocking sustained business value from IT investments”, California Management Review, Vol. 48 No. 1, pp. 52–70

Peppard, J., Lambert, R. and Edwards, C. (2000), “Whose job is it anyway? Organizational information competencies for value creation”, Information Systems Journal, Vol. 10 No. 4, pp. 291–323

Peppard, J., Ward, J. and Daniels, E. (2007), “Managing for the realization of business benefits from IT investments”, MIS Quarterly Executive, Vol. 6 No. 1, pp. 1–11

Tsai, W. (2002), “Social structure of ‘cooperation’ within a multiunit organization: coordination, competition, and intraorganizational knowledge sharing”, Organization Science, Vol. 13, pp. 179–90

Ward, J. and Peppard, J. (1996), “Reconciling the IT/business relationship: a troubled marriage in need of guidance”, The Journal of Strategic Information Systems, Vol. 5 No. 1, pp. 37–65

Further Reading

Ward, J. and Peppard, J. (2002), Strategic Planning for Information Systems, Wiley, Chichester