Relationship of Information Technology to Organizational Performance

Relationship of Information Technology to Organizational Performance Enterprises have continually invested in information technologies (IT) to gain competitive advantages by improving their business processes, integrating and aggregating diverse databases, and then transforming the data into a competitive advantage. The paradox of how to invest in IT for an optimal return however has been elusive (Brynjolfsson, Hitt, 1998). Traditional measures of Return on investment (ROI), metrics and key performance Indicators (KPIs) have failed to scale from the operational sides of a business to the data- and knowledge-based processes and functions (Ko, Osei-bryson, 2008).

Analysis of information technology investments and their contributions to a firm's financial performance illustrate that the selective use of IT to supplement strategies, not its en masse adoption, is a critical success factor (Osei-Bryson, Ko, 2004). Studies have shown that in a market duopoly characterized by slow to moderate growth, the automating of processes and strategies has the potential to deliver higher ROI compared fragmented industries (Quan, Hu, Hart, 2004). Productivity, business profitability and consumer surplus all have implications on the ROI any enterprise attains from their IT investments (Hitt, Brynjolfsson, 1996).

The healthcare industry is one where all three of these factors combine to create a measurable platform for determining the impact of IT technologies and firm performance (Thouin, Hoffman, Ford, 2008). These three factors of productivity, business profitability and consumer surplus form the foundation for knowledge-based innovations that transform data, customer and financial information into the competitive advantage of the business. In healthcare, this has occurred due to the well-defined and orchestrated processes used for managing the patient lifecycle process (Osei-Bryson, Ko, 2004).

The stability and rigor with which the patient lifecycle process is managed provides these businesses with the necessary foundation to automate processes, increase compliance levels and transform their businesses. The transformation of businesses is not purely being accomplished through manually-based workflow or process management techniques however. The emergence of context and role-based knowledge continues to act as an accelerator to the process and strategy-based efforts of enterprises to become as competitive as possible using IT investment. The transition from measuring production efficiency purely on an output basis vs.

value-add based on insight and intelligence began over a decade ago (Dewan, Min, 1997). Knowledge, not pure efficiency, is the new competitive force and differentiator all enterprises, regardless of industry, seek. Investments in IT had solidified and created strong siloes of information in many companies, which led to internal efficiency yet a lack of agility and flexibility in responding to market conditions and customer needs.

The growth of demand-driven supply networks (DDSN) and the re-orientation to IT systems away from being purely myopic and internally focused has shown potential to also deliver higher levels of ROI as well (Barrett, 2007). Studies indicate that just integrating data into a master system of record is not enough; there needs to be a focused series of business objectives, plans and strategies that serve to unify the data into a relevant knowledgebase (Quan, Hu, Hart, 2004).

This is beyond the role of IT to accomplish, and speaks to the paradox of how critical the unquantifiable aspects of IT performance are relative to the investments in technologies made (Brynjolfsson, Hitt, 1996). Investing in IT to perpetuate only functional levels of efficiency with departments often perpetuates the use of analytics that measure speed yet completely leave out collaboration and the creation of shared knowledge (Ko, Osei-Bryson, 2004).

Instead what is needed is an approach to investing in IT that seeks to unify the entire enterprise across all sources and inputs of data, content and explicit knowledge. When systems are designed and technologies acquired to speed up these aspects of knowledge transfer in an enterprise, higher levels of ROI result (Osei-Bryson, Ko, 2004).

Transforming the many forms of data, content and information into a competitive advantage is attained when cross functional and collaborative metrics are used to evaluate progress rather than just a single silo or functional departments' performance alone (Kudyba, Diwan, 2002). For IT investments to deliver a consistently high ROI the critical success factors of measuring performance cross-functionally and across all departments must be inherent in the strategy. Measuring collaboration is critical for any enterprise to gain the benefits of the technology they invest in (Osei-Bryson, Ko, 2004).

This approach to measuring ROI also forces higher levels of integration at the process and system level across all areas of the enterprise, which is a proven critical success factor in IT investment. The focus on how to use IT as a catalyst for knowledge creation needs to pervade the measuring of value over time. References Barrett, J. (2007, November). Demand-Driven is an Operational Strategy. Industrial Management, 49(6), 14-19,5. Brynjolfsson, Erik, & Hitt, Lorin. (1996). Paradox lost? Firm-level.