Information superiority : how the perception and use of information changed and manifests in our contemporary era

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Information Superiority

“How the perception and use of information changed

and manifests in our contemporary era”

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Title page

General information

Student name: D.J.M. (David Johannes Maria) van der Hoeven Student number: 10475427

Date of submission: January the 31st 2015 Version: Final version (v1.0)

Qualification: Executive Program in Business Administration – Strategy Track Institution: Amsterdam Business School, University of Amsterdam

Supervisors: Prof. Dr. J. Strikwerda and Dr. ir J. Kraaijenbrink

Statement of Originality

This document is written by Student David Johannes Maria van der Hoeven who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Preface

Geldrop – the Netherlands, 31st of January 2015 Dear reader,

It is my pleasure to present you my thesis around the concept of ‘information superiority’. In our contemporary world information is gathered, disseminated to other agents and utilized everywhere. Whether it is by mobile phone, a simple chitchat or an e-book. Information is in my view one of the basic elements supporting interaction in all forms. Some entities are able to utilize this information better than other entities. This is analogous to how organizations utilize capital in different degrees of effectivity.

The utilization of information, as I will further explain in the thesis, is still one of the main shortcomings in how computer science supports business administration. It is one of the reasons that I decided to pursue the journey by explaining why some organizations are capable or are not capable of using information optimally in the best interest of the organization.

Yours sincerely,

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Acknowledgements

I would like to express my thanks to the following people that (in)directly contributed in any form to the result. First of all my thanks goes to the Amsterdam Business School of the University of Amsterdam for all the courses provided during my master, providing me with a theoretical foundation in the field of business administration and giving me the ability to investigate this subject. Secondly my thesis supervisor Dr. J. Strikwerda for his broad knowledge in different areas around the subject and the given feedback during the thesis process. The second supervisor Dr. ir J. Kraaijenbrink for critically assessing the end result. My friends from the university for their critical opinions and the great teamwork during the master, but also for the relaxing drinks after the classes at Friday afternoon. My colleagues for reviewing my thesis. Finally my mother for her love and mental support during my career at the university.

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Abstract

This study focuses on the concept ‘information superiority’. In the current era information is an important element in conducting business. It appears that there is an increasing tendency of differences between the American and the European economies, of which the information aspect has been given little attention.

This research will focus on answering the two following research questions: (i) “what are typical differences between concepts on the basis of which US managers invest in information technology and the concepts used by European / Dutch managers? How do these differences relate to differences in economic performance?” and (ii) “What explains the divergence in concepts with respect to information(Technology) between the US management practice and the European / Dutch practice”. This is done by a multiple case study.

Results show that support has been found for the fact that investments in IT are defined by the role of information in the theory [of the firm] as in-use by the management. Apart from that there are other important factors that influence the management of information and ICT. The combination of these factors can lead to positive or negative financial performance.

Managers can incorporate these results in their daily business when dealing with how information should be perceived within the organization. Researchers should consider taking the importance of information into the education of business administration and furthermore research which of the influencing factors have a bigger impact on each other.

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Introduction

As humanity continue to progress in the current information era, the ability to process ‘the correct’ information in order to be able to propose a competitive and profitable customer value proposition has become a key aspect in economic and organizational survival. Different organizations, for example: Google, Facebook & Amazon have become more superior on the bases of that ability. The OECD report and presentation of 2013 (OECD, 2013; Reimsbach-Kounatze, 2013) shows that there seems to be an increasing tendency in economic differences between the American and the European economies. This is of course due to many reasons. One of those reasons, which has received little attention, is the ability to process information and to be superior based on information. A few sources wonder and discuss why there aren’t any Google's/Yahoo's or Amazons in Europe (Darrow, 2012; Shuele, 2013; Zange, 2011). So why is it that with an increasing importance of information that there are such differences between these economies. Why can’t Europe keep up and adopt such capabilities?

When looking upon the current research conducted in the field of information superiority it is clear that the definition comes from military warfare strategy (Alberts, 2008). However no research has been conducted on the history of this concept in respect to how this impacted the current differences between economies. There are some articles, for example Porter & Wayland (1992) addressing these issues, but there is a lack of extensive research.

Why is it that in the US information is considered as part of the capital base of the firm (Arrow, 1996; Brynjolffson, 2010), whereas in Europe Managers manage IT on basis of total costs of ownership? Why isn’t the concept being discussed in strategy text books, apart from some elements in Shapiro & Varian’s “Information Rules” (1999).

The central questions of this research are: (i) “what are typical differences between concepts on the basis of which US managers invest in information technology and the concepts used by European / Dutch managers? How do these differences relate to differences in economic performance?” and

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(ii) “What explains the divergence in concepts with respect to information(Technology) between the US management practice and the European / Dutch practice”.

This study will grasp the past and combine it with our current knowledge and understanding on the concept of information superiority and related domains to create a theoretical framework explaining the factors influencing different streams in the current era. This study will not encompass a complete understanding of all factors involved, but will try to set a basis which others can use to further develop the understanding of the domain.

Having this knowledge could help different knowledge domains, for example computer, economic, information and strategy sciences in their understanding of why information is a key asset and which factors influence the (organizational) behavior towards information. Practitioners can use it to assess whether their organization should or could be information superior and what kind of stream they belong to.

This research will start of by reviewing the history of information superiority and try to create an understanding of how information transformed from ‘just an addition’ towards a ‘key asset’ (Kundnani, 1999), followed by a description of how this thesis will be formed, on the basis of the research design and why there has been chosen for an institutional research on the basis of a multiple case study, followed by the results. These results, the managerial and scientific implications as well as advice for further research will be discussed in the discussion section. Finally the research will be wrapped up in the conclusion.

“The worst thing a CEO can do is to hire a Chief Information Officer (CIO) with the intention of delegation responsibility for information management to an expert. This is abdication of essential powers, because information management is inseparable from the essence of every managerial act. …. The accountability for information management should never be passed on to anyone who is not also responsible for [e.g.] customer care and for financial performance”*

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Theory and framework

This section will first discuss the concept surrounding information superiority and continues with a rough chronology of events to ultimately propose a framework on which this research will be conducted.

Information superiority

Sun Tzu already argued thousands of years ago in his famous 'the art of war' that having the correct information and to be able to utilize it to conquer the enemy, started to address importance of information in strategy (Griffith, 1963). Porter (1979) and Barney (1986), the founders of different streams of organizational strategy, recognized that information is an important aspect to be able to utilize strategy at all. The concept of 'information superiority' has thus so far never been mentioned. In some management books information is considered as a cost, even by Peter F. Drucker (1973). The concept was introduced by a corporal, in the United Stated Army. He discusses that America has so much information at its disposal that it is of the essence that the right information is brought to the right people downstream, but also back upstream and for those reasons the military can be seen as information superior. Alberts et al., (2000) and Alberts, (2008) describe information superiority as the ability of an entity to be superior over other entities on the bases of: (i) the differences in the amount of information, (ii) its ability to process this information and (iii) its ability to canalize the information to the right subjects involved, in order to engage into combat, to ultimately reach its objectives and, if necessary, to neutralize other entities. This study will use this definition as a standard to further develop a model.

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The focus of organizations

The start of information use in businesses dates back to the ancient civilization of Mesopotamia, around 7000 BC (Gleeson-White, 2012). It was purely used to record transactions. Through time, especially in the northern part of Italy around the Renaissance, it evolved to a standard principle in accounting (Gleeson-White, 2012). It is called double-entry bookkeeping (Gleeson-White, 2012). This system is still being used today. But just a few centuries ago firms started to increase efficiency (Smith, 1776). Smith (1776) discusses that the division of labor increases productivity and therefore the wealth of a nation. In his example of the pin factory employees gain dexterity in a given task by specialization, and machines would be invented or created to assist these or specific tasks. Around the 1930's Coase (1937) explained that firms exists to increase efficiency by the amount of contracts a firm has for transactions versus the market. The firm would be able to realize transactions at a lower cost, if the contracts have a lower cost than the market (Coase, 1937). Machines, for example the assembly line, facilitated the ability to efficiently built mechanical goods (Becker et al., 2006). The information gained from the machines was used to improve its processes (Becker et al., 2006). Computers already existed at that time, but was mainly used for communication, military and research purposes.

Mechanization of processes

In 1951 the first business computer emerged, named Lyons Electronic Office I, also known as "L.E.O." (Caminer et al., 1997). It was a business computer in its basic form, compared to current standards, but was able to take over processes from individuals. It can be seen as the predecessor of IBM's mainframe (Caminer et al., 1997). IBM was the first to develop a machine in 1954 using floating points arithmetic hardware, called the IBM 704 (IBM, 1954). It was a successor of the mainly scientifically purposed IBM 701. These machines, like L.E.O., were capable of taking over processes from human hands, and therefore (even more) reducing the costs and increasing the efficiency. As can be observed from Mahajan and Mullers study (1996) the total systems of IBM in use gained a considerable increase with its first and second system iterations, especially with the introduction of

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the IBM 360 in 1965 (Mahajan et al., 1996). The IBM 360 was capable of providing multiple solutions, for both small and huge enterprises, capable of taking over processes done by humans. It can be stated as the start of the mechanization of information processes, which were carried out manually on paper so far. The tendency of ICT product improvement for speeding up mechanized processes is a statement that the emphasis was still on improving efficiency. Initially computers were used for operations research type calculations and for mechanizing accounting processes in e.g. banks and large firms taking the existing processes as given.

Nolan & Croson (1995, p. 6) describe: “During what has been termed the data processing (DP) era (1960- 1980) the focus was on automating manual transaction processing systems”. The data in this context was solely in terms of accounting data, apart from the applications on the basis of operations research (e.g. MRP/ERP). In that context information & IT was considered as a cost.

From the field of operations research it is attempted to create mathematical models of organizations, including their ability to learn. In the 80’s however this attempt was ceased, because it appeared to be impossible to create such models (Prakken, 1997)

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The start of IT and the use of information

The expression information technology was coined in 1958 by Leavitt & Whisler: “We shall call it information technology. It is composed of several related parts. One includes techniques for processing large amounts of information rapidly, and it is epitomized by the high-speed computer. A second part centers around the application of statistical and mathematical methods to decision making problems; it is represented by techniques like mathematical programming, and by methodologies like operations research. A third part is in the offing, though its applications have not yet emerged very clearly; it consists of the simulation of higher-order thinking through computer programs,” (Leavitt & Whisler, 1958).

In 1965 Moore (Moore, 1965) predicted that the amount of transistors per IC would double every year. This notion was changed in 1970, to double every two year. Around that time a new era launched; computers indeed gained improvements every year. The success of the Intel corporation intensified the success of the computer during the 70's. However during the 70's it is noticeable that the increasing computing capacity also led to unifications in information, for example the adaptation of the Uniform Product Code (Cummingsdesign, 2014), also known as the bar code, for products in retail stores. The adaptation of universal standards in treating information set the start for higher information system standards.

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The rise of Enterprise Resource Planning

In 1980's a change occurred, computers were becoming better and capable of integrating more processes altogether. The wish of organizations to be able to fully integrate all ICT processes into one system, became slowly more of a standard (Gargeya et al., 2005). This capability was named 'material requirements planning' (MRP). MRP originally comes from the domain of operations research. This advanced planning concept quickly resulted in the need for very fast computers. This later on adopted the name of 'Enterprise Resource Planning' (ERP). Later on this changed to include financial administration. SAP is an example of this kind of software..

Nolan & Croson (1995) describe that: “during the microcomputer era (1980- 1995) the focus was on leveraging professional workers by employing computers to access, analyze, and present data (other than accounting)”. This might be because that the role of information from that era started to change due to acknowledgement of the importance of knowledge(management) in the economic model of the organization.

In order to process data with computers, processes needed to be specified in a unique way. In applying computers, firms were forced to specify their processes. Because programming techniques like COBOL were initially inflexible, a tendency was to adapt the processes in the firm to available software, creating conflicts between de facto but often implicit business models and business models hidden in the software. This was in a way corrected by the Business-IT alignment paradigm published by Venkamatran, but this paradigm overlooks the transformational nature of IT (Applegate, 2000; Applegate, Austin & McFarlan, 2006; Brynjolfsson, 2010).

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However organizations started to gain issues because of an increase in the complexity of processes managed with ICT components. This complexity sometimes hampered the flexibility of the business (Zachman, 1987). Organizations became so depended on these systems and changing processes was not always as easy as expected. ICT experts also had different views on how ICT should be run the business, which often conflicted with the interest of the business (Zachman, 1987). Zachman (1987) argues that organizations should compare ICT architecture with the architecture of a house. The architecture of a house has certain rules and limitations and must be carefully aligned with the expectations of others. The information household was at that moment in time open for discussion, due to the inability to utilize the correct information (systems) and canalize it into proper value for the organization.

With an increasing attention on ERP (Gargeya et al., 2005) in the 80's and 90's business and IT alignment became a very popular issue, due to the nature of the complexity of the ICT systems conflicting the interest of the business (Gargeya et al., 2005). However the organization will have to burden the costs of the implementation of such complex software, until an x amount of benefits have been delivered (Gargeya et al., 2005). Organizations often take these costs for granted, foreseeing the seemingly outweighing benefits. However they do try to monitor the costs of the high investments and try to reduce wherever possible (Ellram, 1971). The widely used concept total cost of ownership (TCO) often gets adopted to monitor such complex endeavors. Since Gartner popularized this methodology in 1987 (Mieritz et al., 2005), it was utilized not only for ERP, but for all ICT investments. Gartner Corporation argue that: “Given tighter financial controls and increasingly expanding IT influence, TCO analysis is more critical than ever”, (Mieritz et al., 2005, p. 1), they continue with: “Thus, it's important to distill TCO into its elemental parts and define it at its fundamental level", (Mieritz et al., 2005, p.1). They address that costs is the most important aspect on how ICT should be managed, with financial controls. However Ellram (1971) addresses that the nature of this methodology origins from gaining efficiency, with a close relation to transactions costs theory.

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Information goods

Later on different organizations have risen that were capable of utilizing ICT components and information to create specific value for the customer. Information was not solely anymore a supporting asset in order to gain efficiency in the production of mechanical goods, but also became a good on their own (Bakos and Brynjolfsson, 1999; Kundnani, 1999).

The globalization, due to the assistance of ICT components helped in opening new business endeavors using information capital to pursue competitive advantage (Kundnani, 1999). Arrow (1996) and Stigler (1961) already stated that information is capital of the firm, which can be utilized as a good. Amazon and Google uses a strategy to trade in information goods, rather than physical goods.

The adoptability of such building blocks could be related to that information capital are in fact resources (Kundnani, 1999). The given of information goods implies that apart from information as capital, information is also a resource to produce products (Shapiro & Varion, 1999; Varian, Farrell & Shapiro, 2004). This can then be related back to Barney's perspective on how resources can give advantages (Barney, 1991). In that context information & IT was considered as a capital.

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In-use theory defines investments in IT

Proposition I: Investments in IT are defined by the role of information in the theory [of the firm] as

in-use by management.

Schön (Schön, 1991) makes a distinction between the espoused theory and the theory in-use by managers. The espoused theory is what managers will answer when asked why they make specific decisions or choices. Managers will tend to provide an answer, which make them look good and accepted in the group from which they want support or acknowledgment. The theory-in-use is the script in the thinking of managers, which often is unconscious, which really drives their choices and decisions. This unconscious theory-in-use usually is the result of education, socialization, success, conformity, the development of a dominant logic etc. This difference between the espoused theory and the theory-in-use makes it difficult to investigate the concepts, motives, etc. on basis of which managers make decisions.

Decisions by managers need rhetoric to make that decision acceptable in their peer group, be they investors, co-workers, whatsoever. So back in the 50’s visionary managers might have a vision on the role and potential of applying computers in business, but their vision and decisions needed to be explained in then existing business language. At that time information hardly was seen as a resource or capital good, information was defined as in management accounting, accounting data on transactions, stocks of goods, prices, etc. and a more abstract theory implying information was decision theory. Although advertising existed, this was less perceived as information. Subsequently two main streams of managerial concepts existed to define the role of information: management accounting, resulting in automated management accounting systems, general ledger, invoice processing etc. and decision theory, more specific in operations research. For instance the 1983 book on Principles of Information Systems for Management, Ahituv and Neumann pay in chapter 3 attention to Simon’s model of decision making and the value of information is based on quantitative decision theory, that is information has value when it reduces uncertainty or when it improves performance (Ahituv & Neumann, 1983, pp.51-56)

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The theory of the firm in neoclassical economy basically is an input-output model, in which the working of the firm itself is a black-box. The theory of the firm concentrates on issues as the boundaries of the firm, that its inner working, coordination of activities needs to be more efficient as is the efficiency of markets (the existence of firms). Knowledge is part of the technical factor in the relation between inputs and output, implicitly so is information. Drucker in his 1973 book ‘Managemen’ writes that information is not a product, but a cost (Drucker, 1973) Penrose in 1959 developed Coase’s theory of the firm into the resource based view of the firm, as collection of productive resources for the purpose of producing and selling goods and services (Penrose, 2009). But information was in her view not one of those resources, knowledge was however.

Although the academic theory of the firm only slow and quite lately develops (Fandel, 2010) entrepreneurs envisioned before that the wider implications and options created by the application of information technology, including changes in industries, in distribution, in competition, in operations etc. (Forester, 1985). Based on such visions, the theory-in-use to decide investments in IT was adapted and moved away from decision theory and management accounting only.

Another issue is what objectives or strategies managers pursue. In the 50’s the emphasis was on growth and on efficiency. Especially the banking and insurance industry realized that computers, through the mechanization of clerical routines in processing transactions, promised to be a worthwhile investment to achieve cost effective growth. A case is the Dutch Post- Check- en Girodienst (PCGD), on basis of which IBM entered the Dutch market in 1957.

Efficiency in the 50’s mainly was achieved through learning curves in production, especially for standard mass production, in which computers played a minor role through operations research applications.

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Functional fields define ICT investments

Proposition II: Due to the pedagogical model of the MBA education in which managers are trained in

separate functional fields, managers define ICT investments according to the information needs defined by those functional fields, for example, management accounting, operations management, operations research, marketing and sales. Managers define the functionality of ICT-systems according to these functional fields and dependent on whether such functions are defined as cost centers or investment centers, expenditures on ICT will be defined as costs or as capital investments and therefore the potential of ICT as a generic capital good are undervalued or not achieved.

The conventional concepts and methods for management and organization are based on the RBV of the firm. Although many manager state (espoused theory) that knowledge, human capital is becoming more important, few take the consequences in terms of new methods for management and organizations. Also claimed methods for knowledge management, based on IT, fail because such methods and tools tend to steal tacit knowledge from workers, not acknowledging the ownership issue (Leonard-Barton, 1995). Memory Transaction system are facilitators for teamwork by knowledge workers, but not widely applied. So there is theory on the Knowledge Based View of the firm (Foss, 2005; Foss & Mahnke, 2003; Foss & Michailova, 2009), but only a few firms are demonstrating it.

The pedagogical model of the MBA is described and criticized in (Moldoveanu & Martin, 2008). Especially Martin pleads for holistic thinking by CEO, based on his study of a number of successful CEOs.

The information linkages between the functional fields first were seen and applied in Enterprise Resource Planning Software (ERP), as described earlier on in this thesis. The ERP-systems after an initial success (e.g. the Baan software for Boeing) faltered at the end of the nineties, due to the diversification of business models, and processes becoming part of the competitive position of firms

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(Davenport, 1998, 2000). The initial ERP systems degenerated into accounting information systems, based often on an obsolete accounting model.

Another factor in management decisions was the role of standard software as offered by vendors like SAP. Such vendors knew very well that the customer needed to specify its processes and information needs, but in many cases customers failed to do so, taking a short cut by accepting standard software and opting for adapting their processes to the software, because it run successful elsewhere. Around 1990 this could be successful in a number of cases due to lack of differentiation between business models, but less so around 2000. And a number of cases are documented in which the implementation of ERP systems caused the downfall of companies or created serious financial distress.

The response to this in the form of the business-IT alignment model (Henderson & Venkatraman, 1993) turned out to be wrong.

Figure 1. (Applegate et al., 2006, p. 39) Positioning Boundary Risk Projects Priorities Context Opportu-nities Positioning Boundary Risk Projects Priorities Context Opportu-nities People Partners Processes Organization Culture Infrastructure Leadership Governance People Partners Processes Organization Culture Infrastructure Leadership Governance Value

Business Information Technology

S tr a te g y C a p ab ili ti e s

Alignment of business and IT domains Alignment of strategy and capabilities

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Given the transformational nature of ICT and digital technologies on market, customer preferences, distribution, on industries, this paradigm is considered obsolete and misleading (Shpilberg, Berez, Puryear, & Shah, 2007).

Another issue is that may CIO’s and IT-professionals make investment decisions in IT based on the concept of Total Costs of Ownership (TCO), assuming that information is a cost, whereas economists acknowledge that information is part of the capital based of the firm (Arrow, 1996), and is as well an input in the production function as a basis of information goods (Shapiro & Varian, 1999; Varian, Farrell, & Shapiro, 2004).

Hence that a typology of information capital or IT-investments is being used:

Figure 2. Kaplan & Norton (2004). Strategy Maps p. 251, based on Applegate.

Information Capital Category Description

Transformational Applications Systems and networks that change the prevailing business model of the enterprise

Analytic Applications Systems and networks that promote analysis, interpretation, and sharing of information knowledge

Transaction Processing

Applications Systems that automate the basic repetitive transactions of the enterprise Technology Infrastructure The shared technology and managerial expertise required to enable effective delivery and use of Informational Capital

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The paradigm

Based on the earlier described theory and the history till today it is observable that a paradigm has risen on the surface. When looking back at theory of information superiority, as given by (Alberts et al., 2000; Alberts, 2008) and the theory how information and ICT evolved it roughly translates to the figure and timeline from Nolan and Croson (1995):

Figure 3. Edited figure of (Nolan & Croson, 1995, p. 7).

1960 1975 1980 1995 2010 DP E ra Micr o (IT) Era Netw ork E ra O rg an iz at io n a l L ea rn in g

Industrial Economy Transitional Economy Information Economy Period of Traditional Principles Period of Creative Destruction Period of Transformed Enterprise Integrated Enterprise / open (e-) business models MDO 1990

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On the basis of the history it is observable that there are two streams pursuing certain superiority over another, but on the bases of other principles. This is where a paradigm rises between the nature of what information superiority means and how organizations incorporate (and perceive) the usability of information and ICT goods. It is on the basis of efficiency or the basis of information capital. The history and therefore the rise of information superiority with an unique paradigm incorporated can then roughly be translated towards the following framework.

Figure 4. The simple paradigm

But what explains that, whereas initially the US and Europe both followed the same concept as basis for investments in IT, since about 1990 a bifurcation occurred. The US dominantly shifts towards a knowledge based view of the firm as basis of investments in IT, whereas Europe sticks to an tangible assets based view, sticking to TCO as basis for investments in IT as observed in figure 4. This framework only describes of the different streams of theory.

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This framework does not take into account the discrepancies that have occurred between Europe and America as stated in the introduction, therefore more investigation is required to complete the framework that currently surrounds the concept of information superiority.

The lack of a coherent theory on information

Proposition III: In addition to the restrictions implied by the propositions I and II, an additional factor

responsible for ambiguity in IT investments and subsequent implementation of ICT-projects is the lack of an overall coherent theory on information and the uses or roles of information in business.

According to Strikwerda (2011) multiple types of information exist, as shown in figure 5.

Figure 5.. Strikwerda 2011, p. 22, based on a.o. Birchler, U. W., & Bütler, M. (2007). Information economics, Routledge advanced texts in

economics and finance (pp. xxiii, 462 p.). London ; New York: Routledge. Lash, S. (2002). Critique of information. London ; Thousand Oaks, Calif.: SAGE

In management theories and in IT usually the mathematical definition of information is being used, because IT basis itself on the data-based definition of information, going back to Shannon & Weaver, but that is merely signal theory, applicable only to closed well-structured systems (Shannon & Weaver, 1949). Through the movie industry, TV and gaming, most economic value is to be found in the lower right quarter: Disinformation (YouTube, social media), images, etc. Software is another economic sector, the upper right quarter.

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Another factor with respect to information is that IT plays many roles with respect to a business:

Figure 7. The multiple roles of IT (Strikwerda, 2008).

In management theories/books and organization books/theories, inadequate attention is being paid to the multiple roles of information. In modern marketing attention is being paid to the impact of digital technologies on consumer behavior, distribution policies etc. But still a comprehensive view is lacking.

The effect of a redefining comprehensive view is that managers, feeling the need to make investments in ICT and digital technology, will take recourse to familiar models, concepts to create themselves a worldview which they feel comfortable with to make decisions (lexicographic decision making, see the psychological theories on decision-making). Those CEO which succeed in creating a worldview based on the information economy and information society, including changed consumer behavior and changed industry rules, therefore most likely will be successful over CEOs who try to adapt their existing worldviews to the impact of ICT, the Internet and digital technologies.

This results in that there is a lack of an adequate theory of information and the issue that in management/organizational theory the different roles of information is absent.

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Research design

Due to the explorative and explanatory nature of this institutional research in combination with the complexity/measurability of all the involved dimensions a quantitative basis would not fit this study. The existing quantitative data regarding this subject is rather limited and would not cover the to be investigated subject, nor would the data allow any generalizability to come to a general framework. That said this research also does not fit a ‘typical’ qualitative study on the basis of interview(s).

The to be explained phenomena cannot be observed by looking at the individual level or extracting the information from multiple individuals; the phenomenon has to be observed from a more corporate and abstract level, due to that it is an organizational manifestation. The ideal situation is to be able to explain theory and observe how it manifests in practice. Yin (2008) describes the latter as an empirical enquiry.

Therefore for this study three (actual) cases have been selected containing the management of the organization and specifically the involvement of information and ICT; a multiple case study (Yin, 2008). These will be the subjects (Thomas, 2011) of this study. By doing so the generalizability of theory and even possible contradictions to the suggested theory might be more obvious.

These cases and its documentation are mostly (semi) publicly available. This will make it easier to recollect the data and the replicate the researcher’s logic.

The cases will be examined in a standardized manner by analyzing the texts and by identifying the different subjects that are being discussed. These subjects are categorized into constructs. The researcher has specifically chosen to not generalize at the start, but take each case as an own example and compare them at the end of the process.

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The cases

The selected cases contain a certain variance. The focus is on exploring the phenomenon in different (extreme) settings. The time constraints are taken into consideration in selecting the amount of cases, since all cases selected need to carefully analyzed within the bound period for conducting the research. In the next sections a description of the data collection will be given, after that the three cases will be described why this particular case has been chosen and in which context the case has been written. It is of importance to understand why a case is written and in which context, because it is could be the context that gives a particular meaning to why a phenomenon occurs.

Data collection

The data collection is done by searching cases that contain a certain degree of information between the borders of the domains of ICT, strategy and information governance. Case 1 is published publicly by the House of Representatives of the Netherlands on their website (Tweede Kamer, 2014). Case 2 and 3 can be obtained by anyone by paying an amount of money. The (semi) public availability of the cases promotes transparency and the possibility to replicate.

Case 1 is a research report, which is based on interviews and documents. Case 2 is a descriptive case on the basis of interviews and documents. Case 3 is a case made for discussion. The reason for choosing secondary data sources is, as described earlier, that it is of importance to identify constructs that explain certain behavior at the organizational level and not at the individual level. The inherited weaknesses for selected secondary resources are acknowledged and accepted, due to the given time constraints to conduct this research. Case 1 and 3 are selected as extreme cases, due to the extreme conditions that occur within the cases. In case 1 almost everything goes wrong. In case 3 there is an European organization with American management leading the important program. Case 2 is considered a typical case, because it can be considered as a ‘typical’ big (in terms of organization size) and successful American organization.

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A summary with information about the three cases can be found in the following table:

Case: Document title: Type: Source: Type: Publicly

available? Sample rational 1: The Dutch governance 33 326 Parlementair onderzoek naar ICT-projecten bij de overheid

Word Secondary data source - Text Explanatory & Exploratory Yes Extreme

2: IBM IBM Benelux as an

example of a product/customer/channel geography orchestrated organization [multidimensional organization] PDF Secondary data source - Text Explanatory & Exploratory Semi, (access required) Typical

3: Nestlé Nestle's Globe Program

(A): The Early Months

PDF Secondary date source - Text Explanatory & Exploratory Semi, (access required) Extreme

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Case 1 – The Dutch Government

On the 15th of October in 2014 a report was made public about the ICT affairs at the Dutch government. Headlines of newspapers (ANP, 2014; Stokmans, 2014) screamed about the 1 to 5 billion Euro of public money that is put to waste on an annual basis. This report was made by a commission led by Ton Elias on behalf of the house of representatives of the Netherlands. Elias argues that the Dutch government has some serious issues around the governance of its ICT (Elias, Ulenbelt, Fokke, Bruins, Slot, van Meenen, 2014, pp. 5, 9-10).

The timing that this report was made public timed perfectly during the search of finding appropriate cases for this research. Many cases are often outdated or do not suit the to be investigated subject, unless the researcher can commit extensive time to make the case itself.

This case is selected as a perfect example of how ICT governance should not be done. The case is very extensive in different areas and comprehensively explains all different areas towards people with less understanding of the domains that are involved.

The case does not only describe the hazards of political influence, but also the problems for a government to govern itself. This will positively contribute to the study, since it will also describe environmental factors and the conditions in which project and operations are done on a strategic, tactical and operational level.

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Case 2 – IBM

IBM is, as mentioned earlier, one of the key founders in the ICT components and services suppliers landscape. The organization already survived the last few decades of technical innovation, economic depresses and other socio/political influences and still is a leading organization in the area of ICT products and services. Survivability for a certain period of time, explains to some extend the organizational learning due to past experiences (Nelson, 1991). Since IBM is one of the key founders of IT systems and there is a case around the management of the organization it would suite as a good example.

Strikwerda (2007, p. 1.) describes IBM in his case as following: “IBM provides consulting services, IT-services and IT-products like servers, software and semiconductors. The service offer includes the development and delivery of solutions. These are solutions for specific industries like e.g. the financial industry, and for specific processes, e.g. HR-transactions. In addition to this IBM operates processes which are outsourced to IBM by companies and non-profit institutions”.

“The case was originally written as part of a study commissioned by the Dutch Foundation for Management Studies in The Heague and is a translation of the case as published in: Strikwerda, J. 2008. Van unitmanagement naar multidimensionale organisaties. (Strikwerda, 2007)”, (Strikwerda, 2007, p.1). “The case is based on interviews with IBM, material provided by IBM and partly on some open sources”, (Strikwerda, 2007, p.1). It is unknown what the goal of the study was, but the transformation process involved information and ICT in order to succeed.

IBM is an American organization and it would be of interest if the theory surrounding information superiority which holds true for the American military also holds true for American organizations. IBM can as earlier described be considered a successful American organization. Due to this this IBM case is selected as ‘typical case’ representing how American management influences ICT governance in conducting business.

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Case 3 – Nestlé

There is a chance that whenever you buy food or beverages that there is a small logo of Nestlé on the package. Nestle was in 2000 the largest company in that domain with an expected revenue of SFr 80 billion (Killing, 2003, p.2). However even though the revenue of the organization and growth was above its competitors one analysis showed: “(…) Nestlé’s margins were lower than those competitors (…)”, (Killing, 2003, p.2). It was shown that the sales- and administrative overhead were the main causes (Killing, 2003, p.2).

Around that time the GLOBE (Global Business Excellence) program was initiated by Mario Corti (Killing, 2003, p.1). An American manager named Chris Johnson, responsible for Nestlé’s business in Taiwan, was assigned to lead the Nestlé GLOBE program (Killing, 2003, p.1). The new title he obtained and becoming the youngest of Nestlé’s management would alert the organization of the importance of this program (Killing, 2003, p.1).

The GLOBE program involved a series of changes for the Nestlé organization revolving the world largest SAP implementation (Killing, 2003, p.3). A SAP implementation has a huge ICT component in itself due to the nature of the application in relation to the processes it tries to support.

The case was prepared by Killing in 2003 as a preparation for class discussion (Killing, 2003, p.1). Therefore the case is not specifically made to address information governance and ICT. However the case does explain factors involved in the transformation of the organization and its relation to information and ICT aspects.

Apart from that Nestlé is in contrast to IBM an Swizz organization. With an American manager in the lead of the program. This specific situation in relation to the complexity of the program would make it more interesting to see how this particular situation influences the conduct of business and the governance of information and ICT at Nestlé. Therefore this case is considered as an extreme case (Yinn, 2008).

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Strengths and limitations

The strengths of this study are that the cases contain relatively detailed descriptions about the situation at hand. This will give a clear overview about the expected phenomena. The validity of the research will be relatively high due to the multiple case dimension, which can give replication logic and rival explanations (Yin, 2008). In order to incorporate replication logic and reliability, the selected cases are (semi) public available. This research will be fully public for those interested.

The limitations are that the cases might hide certain politics or influential factors not being described at all, therefore missing important factors that might give different explanations to the theory. Also the phenomena is explored and explained by a few cases. There are in practice millions of cases/scenario’s. This means that every case itself is a specific situation. Therefore the generalizability might actually not always occur, due to specific scenario variables. That said one case is written in Dutch. This means that the person who is interested in replicating the researcher’s logic, might have trouble when interpreting that specific case. However the researcher will try to explain his views regarding this case in a comprehensive matter.

Careful thought will be given to the fact that not all literature ever written can be covered in the 5-month period. A balance will be found in the major streams currently surrounding different domains, for example computer, information and strategy sciences. This study will be limited by only explaining the phenomenon and trying to cohere it into the earlier stated framework. It might be in the interest of other academia to further specify the framework and test it into practice.

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Results

In this section the three cases will be carefully examined and as comprehensively as possible explained. Each section will end with a summary of all the identified constructs, how these constructs impacted the case, with a specific note why or how the effect occurs as it occurs.

Case 1 – “The Dutch government

As described earlier the Dutch government is full with flaws in its conduct and management of information and ICT. The report of Elias describes different aspects within the scope of ICT and gives examples of how the problems occur as they do and gives recommendations on how this could be improved. For the purpose of this research the recommendations given by the case will not be judged whether they are correct or not. Only the phenomena that occur at the government will be reviewed to identify the constructs that have an impact on the government of information and IT.

“Corporate” detachment

As mentioned before the government is not a corporation, but does have an obligation towards the Dutch population. The government should act in the best interest of society. The research of Elias (2014, pp. 12-15, 45-46, 65-69) describes however that there is a detachment between the head of the government (the house of representatives of the Netherlands) and the management of ICT. This detachment causes a discrepancy between the wishes and demands of the society and the solutions that ICT that offer (Elias et al., 2014, pp. 98-99). The detachment is enhanced by the lack of interest from the head of the government towards the ICT management and the users (Elias et al., 2014, pp. 12-13, 45, 121-123). The metaphor that ICT is a black box, where none interaction is possible and where everything should work as it should work, applies. The governance of ICT is also considered too ambitious and the people in charge are not held responsible or accountable for failures, due for example unclear or roles and responsibilities (Elias et al., 2014, pp. 9, 13, 17, 72-73, 81-82). The other way around (bottom-up) is also hampered by same problems (Elias et al., 2014, pp.72-73). This effect is enhanced by the unavailability of the correct (management) information (Elias et al., 2014, pp. 86-87, 89-94).

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Finally people with the incorrect knowledge about the domains involved (management, information and ICT) are occupying positions of (staff) advisors without knowing about the impact any decision or advice will have (Elias et al., 2014, pp. 16, 90, 137-143, 147).

What can be observed throughout the whole case is that the clear detachment and mismanagement at the government is to blame to all parties involved. Most importantly those that should be responsible and accountable for their respective domains are not held for it. This can be compared by driving a car with a blindfold, no hands on the steer, without caring about any consequences. This exposes the organization (the government in this case) to extreme risk. The foundation of which the organization should be managed lacks, therefore the whole corporate detachment and mismanagement negatively influences the way information and ICT is managed.

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Knowledge

In many aspects and chapters of the case it seems that the government has no clue what is going on. The whole ICT chain, from supply to demand, from project to operations and the management of information and ICT there is a lack of (integral) knowledge (Elias et al., 2014, pp. 16, 136-143). This fundamental problem, occurs within the whole hierarchy (from top to bottom) (Elias et al., 2014, pp. 136-138). From a basic perspective, it is normal that people don’t know everything, one does not possess all knowledge. Humans, generally speaking, are capable of learning and adapting. The problem in this case is that the knowledge absorbability and the ability to learn around the domains involved (information and ICT) is very low (Elias et al., 2014, pp. 16, 138-139).

A theme discussed around the knowledge absorbability seems to be the fact that internal people are not gaining enough knowledge due to the hiring of external people, because: (i) the knowledge gained during projects is often lost and (ii) there is an unbalance between internal and external people within the organization (Elias et al., 2014, pp. 143-146). One could wonder why this occurs, since this aspect plays an important part in the ability to learn within the organization and could enhance or weaken the problem. The fact that employees don’t take advice from external hired people for granted, even with a lack of knowledge, does not serve the cause either (Elias et al., 2014, p. 162, 164).

Also the possible exposure to the incompetency that exists, which has a relation with job insecurity, causes a certain degree of resistance and unwillingness to change (Elias et al., 2014, pp. 141-142).

From the case it is observable that a certain degree of unwillingness to change and the amount of hired external people directly influences other factors e.g. ability to learn. The combination of having a lack of knowledge and not having the ability (or will) to increase it negatively influences the conduct and management of information and ICT and therefore generates issues like corporate detachment and renders the organization rather inert.

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The focus on costs

It is from the case observable that the government has a high focus on costs. This focus on costs can be observed from the ‘ICT-dashboard’ (Elias et al., 2014, p. 93). But this focus causes other important aspects when managing the organization to be neglected (Elias et al., 2014, pp. 93).

During the tender process the government has a focus on aspects and therefor inherits certain problems due to the absence of knowledge (Elias et al., 2014, pp. 18, 159-160). The government puts a focus on requirements and wishes that are unrealistic or very inefficient that thrives costs, unnecessary, through the roof (Elias et al., 2014, pp. 18, 160, 162). Apart from that the supplier can abuse the system, by having interests that is not for the greater good of the society, due to the absence of knowledge (Elias et al., 2014, pp. 18, 163-164). This makes a lot of sense, since the supplier has their own interests and goals to pursue (Elias et al., 2014, pp. 165-166).

The used rules around the tender process also demand a, relative, strict focus on specific aspects (for example functionality, costs, references etc.), which increases complexity and costs of the process (Elias et al., 2014, pp. 162, 168). If the organization automatically puts a on specific aspects, without reflecting whether it’s necessary, conditions are created where certain suppliers, especially start-ups or small organizations, are automatically neglected (Elias et al., 2014, p. 169). Due to this the essence of the result of the tender process, the best desired solution, does not get served best (Elias et al., 2014, p. 169).

The organization appears to have a big focus on costs, however this aspect appears not to be done correctly either. The tender process is too influenced by the current rules that are being followed. The inherited focus on costs and other specific aspects negatively contributes to the desired end result (the solution). That stated, the absence of knowledge in this case negatively influences the costs and the tender process. Therefore the focus on costs and the absence of knowledge negatively influences the governance of IT and information.

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The absence of information

Throughout the case multiple times the absence of the (correct) management information gets discussed (Elias et al., 2014, pp. 86-87, 89-95, 191-192). One of the few things that are being monitored are costs, but since a clear (overall) picture of what the costs actually are it is then problematic (Elias et al., 2014, pp. 89,93). This problem is of course enhanced when the costs made are not realistic when for example the Tender process is not done correctly or when people can’t make good cost estimates due to a lack of knowledge (Elias et al., 2014, pp. 90, 158-161). The image given would be not represent the complete ‘truth’ at all. Apart from that there seems to be a lack of policy of what should be done with information and how this should be governed at all.

The lack of an information governance policy results in a lack of having a proper foundation to build the information governance on at all. This and other factors results in a lack of correct management information, since the current information does not yield the truth about the whereabouts of the organization. This aspect negatively influences the governance of information and ICT.

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Summary case 1

In the next table all identified constructs will be lined out, followed with the impact the construct has in the case supplemented with a short note about the reasons and results of how and why the construct manifests as it does.

Identified constructs Impact in case Note

Corporate detachment Negative Involved parties are not connected, both

top-down and bottom-up. No clear policy.

Absence of knowledge.

A lack of correct management information. No one held responsible and/or accountable for failure.

Knowledge Negative No knowledge of involved domains results in

issues in the conduct and management of information and ICT and other involved domains.

Ability to learn Negative No willingness or ability to learn negatively

performance.

Increases the problem around having the appropriate knowledge available to put into use.

This is due to the possibility of the

incompetency being exposed, which relates to job insecurity.

Unwillingness to change Negative Negatively enhances any aspect where change

is involved, therefor information and ICT as well.

Focus on costs Negative Negatively influences the governance of

information and ICT during the tunnel vision that occurs during for example the tender process.

The way costs are analyzed are not done properly either, due to a lack of knowledge.

The absence of information Negative Without a proper information management

policy at all the government of information and ICT is by default impossible.

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Case 2 – “IBM from product-centric to a multidimensional organization”

IBM is a very known international organization that has undergone big changes due to the way IT products and services evolved in the last decades. IBM changed from a product-centric firm under the command of Akers to a network-centric computing strategy under the command of Gerstner (Strikwerda, 2007, p. 3). Gerstner believed that the organization shouldn’t be autonomous operating companies in different locations and set the first steps towards integration (Strikwerda, 2007, p. 3). Palmisano took this to the next level by adopting this into IBM’s strategy and therefore, actively, transforming the organization towards a Global Integrated Enterprise (Strikwerda, 2007, p. 3). These changes had consequents for the organization as a whole, and thus also ICT.

From localization towards standardization

The case zooms in on how the Finance function transformed from an localized entity towards an integrated entity. According to Strikwerda (2007, p. 4-5): “the service of the function Finance emphasized the information for statutory tasks and the recording of data”.

But before IBM underwent these changes it was observable that IBM Finance had its costs twice of its competitors, due to the local (decentralized) business units. Strikwerda (2007, p. 4) states that: “this implied that the finance function often operated local solutions, local data warehouses and local IT applications”. He continues with: “Definitions of data elements to a large extent were inconsistent between countries, as a result of which consolidation of turnover and other information was tedious”, (Strikwerda, 2007, p. 4).

The service of the finance function was hampered by both the system and the content of the management information, which was solely focused on the local business units (Strikwerda, 2007 p. 4-5). This problem resulted in the fact that the IBM headquarters neither had the IT capacity to consolidate the localized data, but from provided data itself could not always the demanded information be generated (Strikwerda, 2007, p. 5).

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The transformation towards an Global Integrated Enterprise included that the finance function became directed directly from the headquarters and that the three following major changes were implemented: “new processes have been defined, a new data strategy is deployed and a new IT-strategy is executed”, (Strikwerda, 2007 p. 5). These 3 changes included: worldwide common data definitions, standardization of data in a common global general ledger, one global financial information warehouse (often also known as a data warehouse) , a few regional dispersed mega centers and an automated system for consolidation (Strikwerda, 2007, p. 5).

These implemented changes clearly resulted in: (i) a reduction of IBM’s finance function costs and (ii) an improvement of the quality of its services (Strikwerda, 2007, p. 5, taken from Stevenaar, 2005). Whereas it used to be 4% of IBM’s turnover it was only 1,2% in 2007, (Strikwerda, 2007 p. 5, taken from Stevenaar, 2005).

The case does not state if all of these changes indeed had an positive effect to the end result and in what degree they contributed to that. But what can be observed is that the combination of these changes did contribute towards an Global Integrated Enterprise.

The central phenomenon that has led to improvement at IBM and, which can be observed in all the changes, is the standardization and centralization of local (information) processes and systems. Therefore the standardization and centralization of local (information) processes and systems has, in the case of IBM a positive influence on the governance of information and ICT.

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The importance of information

According to Strikwerda (2007, p. 5): “IBM’s philosophy is that IT’s mission is to support and enable the business of IBM and should not define or restrict the business of IBM”. The central data warehouse enabled IBM to create information on multiple dimensions (Strikwerda, 2007, pp. 5-6). Due to the earlier mentioned standardized data definitions the whole organization is managed on the basis of the given dimensions. Not only targets, but also performance is measured from one single source (Strikwerda, 2007, pp. 6-7). However, since there are multiple dimensions involved, a simple hierarchy is stated to state the importance of certain aspects within the organization. In this case the brand/product dimension (Strikwerda, 2007, p. 7). The performance assessment is done on an annual basis (Strikwerda, 2007, p. 7). Managers would therefore have to cooperate in the planning process to achieve the best goals for IBM as a whole by incorporating their domain of dimension(s) into the other dimensions ones (e.g. the primary ones) (Strikwerda, 2007, pp. 6-7).

What can be observed is that management function of the Global Integrated Enterprise functions on the basis of information. Both the planning and assessing of the organization for all dimensions are incorporated in the annual process. Therefore IBM acknowledges the importance of information as a corporate asset and actively invests in this. In this case it has a positive influence on the governance of information and ICT while conducting business.

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Organizational values

The central data warehouse is considered a trusted source for management information and cooperation of business managers (Strikwerda, 2007, p. 6). The values of trust and cooperation in addition to synergy (“The whole is more than the sum of its parts”, Strikwerda (2007, p. 9)) also come back in the competency profile IBM defined for its managers (Strikwerda, 2007, p.9). These values as well as: “Innovation that matters to the company and the world” (Strikwerda, 2007, p. 9), “responsibility in every relationship” (Strikwerda, 2007, p. 9), “Dedication to every client’s success” (Strikwerda, 2007, p. 9) are those that would define the new way of working (Strikwerda, 2007, p. 9). This new way of working was required to be able to function properly: (i) within the new management process (e.g. cooperation within the hierarchy of dimension importance) and (ii) to cope with the foundation on which the management information was realized, the trusted source (data warehouse).

The “new way of thinking” that was required of IBM’s managers and employees to operate in IBM’s Global Integrated Enterprise was a pre in order to have other settings function properly. Trust and cooperation played an important part in governing the management function on the basis of information by the trusted source (central data warehouse). Therefore for IBM organizational values, especially trust and cooperation, are important aspects in the governance of information and ICT while conducting business.

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Knowledge roles and responsibilities

The new system automated all transactions without any human interference (Strikwerda, 2007, p. 6). This caused certain roles within finance to change: “The traditional bookkeeper, focused on recording transactional data needed to be replaced by higher educated controllers, who understand how to interpret data”, (Strikwerda 2007, p. 6). These controllers were responsible for conducting analysis on data, to assist business managers in their decisions by for example: transforming data into information (Strikwerda, 2007, p. 6). Since any manager from any dimensional domain could require assistance with any business decision, the controllers needed to be multidisciplinary within the information domain in order to provide the correct service (Strikwerda, 2007, p. 6).

This change demanded something of the users interacting with(in) the information domain. Both managers as well as those that assist them in conducting business decisions require a certain degree of knowledge in order to interact and provide service. That stated the required knowledge and the ability to use this knowledge influences the way business is conducted at IBM. Therefore, individuals with knowledge about information and the involved business domains positively assisted IBM in conducting business.