Information technology and data analysis in organizational strategy formulation

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Information networks as "enterprise glue": information mobilization

To what degree should organizations depend on the analysis of large data and other IT resources to formulate basic strategy?

The business agents of the modern day society are faced with countless challenges from both within and outside their environments. For instance, competition intensifies, the customers become more demanding, the stakeholders pose more pressures and the employees play an increasingly important role. In such a setting, firms across the globe strive to develop and implement novel strategies that help them create competitive advantages.

A powerful example in this sense is represented by the integration of technology within the business decision making process. Companies as such purchase and utilize technologic applications at a wide array of company levels, such as staffing, employee compensation, inventory management or customer relationship management. This massive utilization of data is possible due to the commoditization of large data storage devices, and the trend appears to be maintained in the future.

Given this setting, a question is being posed relative to the means in which the economic agents should employ large data analysis and other IT tools in their decision making process and their search for competitive strategies. This project assesses that the degree of IT utilization should be increased, but it also presents some counter arguments in this direction.

2. In favor of large data and IT utilization

The utilization of large data analysis and other tools of Information Technology is gradually becoming critical in the dynamic and competitive sectors of today. Firms which do not integrate technologic innovations in their strategic decision making processes would not be able to respond to the challenges of the continually changing society.

The support for the integration of IT and specifically large data analysis in the internal business processes is supported by various authors, both academic researchers, as well as practitioners. For instance, Carmen Nobel (2010) argues that the integration of IT solutions within business contexts shapes the overall decision making process at various levels, such as the ones listed below:

The integration of decision making as a wider business activity; for instance, Nobel argues that information bases systems push decisions to be made at a lower organizational level, whereas communication systems push decisions to be made at the top level

The usage of technologies "facilitates the dissemination of information throughout a large company, enabling detailed coordination among various operating units" (Nobel, 2010)

The usage of large data analysis solutions increases the company wide access to information and subsequently leads to the decentralization of the decision making process.

In the specific case of large data analysis utilization within the firms, a solid point-of-view is presented by Steve LaValle, Eric Lesser, Rebecca Shockley, Michael S. Hopkins and Nina Kruschwitz (2010). These researchers have participated in an extensive study of almost 3,000 managers, executives and analysts, across 30 industries in 100 countries. Their findings, which come in support of large data analysis, are as such highly substantiated, especially when the study was conducted in a partnership between the MIT Sloan Management Review and the IBM Institute for Business.

The study divided the participating companies into top performances and lower performers. The top performers were understood as companies which performed well within their industry and which outpaced and outperformed their competitors. The lower performance companies were institutions that performed less well than their competitors. The study found that the top performers were characterized by high levels of IT integration, with increased emphasis on large data analysis.

"Top performers approach business operations differently than their peers do. Specifically, they put analytics to use in the widest possible range of decisions, large and small. They were twice as likely to use analytics to guide future strategies, and twice as likely to use insights to guide day-to-day operations. (See "The Analytics Habits of Top Performers.") They make decisions based on rigorous analysis at more than double the rate of lower performers" (LaValle, Lesser, Shockley, Hopkins and Kruschwitz, 2010).

Overall, the top performing companies had relied on IT support at all levels of business decision making and strategic development and they were able to capitalize on this utilization in terms of competitive advantage creation, growth, efficiency and differentiation (LaValle, Lesser, Shockley, Hopkins and Kruschwitz, 2010).

4. Conclusions

At the level of the shortages pegged to the integration and utilization of large data analysis and other tools of Information Technology, the main focus falls on the fact that these mechanisms are not self standing, and that their overall success depends on the organizational ability to combine them with other organizational elements, such as an adequate corporate culture or a rigorous planning function. Additionally, it is argued that the community is not yet prepared to fully embrace big data.

Still, these shortages are not sustainable within the real life context, which is already developing at a rapid pace. The organizational settings and culture already develop and the forces in the macro environment also evolve. Big data and other IT tools will only make the economic agents better prepared to face the emergent challenges and to better support the attainment of their strategic objectives. In such a setting, it is, without doubt, concluded that companies should, to a high degree, use big data analytics and other IT tools in the creation of their strategic directions.

References:

Dumbill, E., 2012, What is big data? Strata O'Reilly, http://strata.oreilly.com/2012/01/what-is-big-data.html last accessed on September 12, 2012

Hayles, R.A., 2007, Planning and executing IT strategy, IT Professional, Vol. 9, No. 5

LaValle, S., Lesser, E., Shockley, R., Hopkins, M.S., Kruschwitz, N., 2010, Big data, analytics and the path from insights to value, MIT Sloan Management Review, http://sloanreview.mit.edu/the-magazine/2011-winter/52205/big-data-analytics-and-the-path-from-insights-to-value / last accessed on September 12, 2012

Manyika, J., Chui, M., Brown, B., Burghin, J., Dobbs, R., Roxburgh, C., Byers, A.H., 2011, Big bata: the next frontier for innovation, competition and productivity, The McKinsey Global Institute, http://www.mckinsey.com/insights/mgi/research/technology_and_innovation/big_data_the_next_frontier_for_innovation last accessed on September 12, 2012

Nobel, C., 2010, How IT shapes top-down and bottom-up decision making, Harvard Business School, http://hbswk.hbs.edu/item/6504.html?wknews=110110 last accessed on September 12, 2012