The Strategic Management of Information Systems Building a Digital Strategy

• A comprehensively updated revision of a book regarded by many as one the leading and authoritative titles for practitioners, academics and students in the domain of information systems and technology (IS/IT) strategy.
   
• Presents a structured framework with tools, techniques and ways of thinking which provide a practical approach to building a digital strategy, expressed primarily in the language of business and management.
  
  
• Brings together the implications of the significant advances in IT and the most useful current thinking, research, and experiences concerning the business impact and strategic opportunities created by IS/IT.
  
  
• Peppard and Ward discuss the key questions that managers have to grapple with of where, when and how to invest in IS/IT, which is why a IS/IT (or digital) strategy is required.

Joe Peppard and John Ward present a structured framework with tools, techniques and ways of thinking which provide a practical approach to building a digital strategy, expressed primarily in the language of business and management. This approach can be used by executives, managers and IS/IT professionals, working together, to combine their experience and skills to identify what can and needs to be done and how best to do it, so that IS/IT is managed strategically.

Preface to the Fourth Edition ix

About the Authors xvii

1 The Evolving Role of Information Systems and Technology in Organizations: A Strategic Perspective 1

Information Systems (IS), Information Technology (IT) and ‘Digital’ 2

‘Digital Disruption’: The Impact of IS/IT 7

A Three‐era Model of Evolving IT Application in Organizations 15

A Classification of the Strategic Uses of IS/IT 17

Success Factors in Strategic Information Systems 25

A Portfolio Management Perspective on IS/IT Investments 27

What Is an IS/IT or Digital Strategy? 29

From Strategic Alignment to Strategy Co‐evolution 35

Digital Strategies for the 21st Century: Building a Dynamic Capability to Leverage IS/IT 39

Summary 43

Endnotes 44

2 An Overview of Strategic Management and the IS/IT Strategy Implications 49

The Evolving Nature of Strategic Management in Organizations 50

Scope of Strategy Development 54

A Framework for Strategy Formulation 55

Where to Compete 57

How to Gain an Advantage 60

What Assets do We Have? What Assets are Required? 77

How to Change – the Need for Dynamic Capabilities 81

Strategy Implementation 82

Summary 83

Endnotes 84

3 Establishing an Effective Process for Developing Information Systems and Technology (or Digital) Strategies 87

Some Definitional Clarity 88

The Evolution of the IS/IT Strategy Process: From Technology Deployment to Strategic Focus 89

The Business Context for Developing and Managing the Strategy 94

Establishing an Effective Process: Continuous and Flexible 97

Setting the Scope for the Strategy 104

A Framework for IS/IT Strategy Formulation 108

Other Deliverables from the IS/IT Strategy Process 119

Summary 122

Endnotes 123

4 IS/IT Strategic Analysis: Achieving Alignment with Business Operations and Strategy 125

Understanding the Current Situation 126

The Business Operating Model: Processes, Activities and Key Entities 130

Organizational Environment 136

Examining the Existing IS/IT Environment 139

Information and Systems to Meet Current Business Objectives: the Use of Balanced Scorecards and Critical Success Factors 146

Process Analysis 153

Redesigning Processes 158

Evaluating the Gap between Existing and Required IS/IT Environments 161

Summary 162

Endnotes 163

5 Innovating with Technology, Systems and Information 165

Understanding What It Means to Innovate with IT 166

The Process of Digital Business Innovation 168

The ‘push’ and ‘pull’ of Innovating with IS/IT 173

Getting Management Attention for Ideas and Innovations 177

Joining the Dots: the Search for Ideas 180

Innovating by Leveraging Information: Exploration and Exploitation 184

The Big Data Challenge 188

Discovering Strategic IS/IT Opportunities from Information 191

Building an Analytic Capability 198

Summary 201

Endnotes 202

6 Exploiting Information Systems for Strategic Advantage 207

Achieving and Sustaining Advantages across the Value Disciplines 208

Exploring New Value Propositions: Informating Products and Services 210

Analysis of Competitive Forces to Identify IS/IT Opportunities and Threats 216

Value Chain Analysis 220

Customer Life‐cycle Management and the Value Chain 228

From Value Chain to Value Network 235

The Internal Value Chain 239

The Uses of Value Chain Analysis 244

Summary 247

Endnotes 248

7 Determining the Business Information Systems Strategy 251

Business Strategy and IS/IT 252

Tools for IS/IT Strategy Formulation and Their Relationships 256

A Framework for Using the Tools and Techniques Effectively 258

Identifying how IS/IT Could Impact the Business Strategy 260

Establishing the Relative Priorities for IS/IT Investments 265

Large Organizations, Multiple SBUs and Strategy Consolidation 270

Summary 272

Endnote 272

8 Managing the Portfolio of Business Applications 273

Conclusions from Various Portfolio Models 275

Classifying the Applications in the Portfolio 277

Reconciling Demand and Supply Issues in the Portfolio 280

Generic Application Management Strategies 282

Portfolio Management Principles Applied to the Application Portfolio 291

Aligning Development Approaches to the Portfolio Segments 298

The ‘Special Case’ of Enterprise Systems 304

Managing Application Portfolios in Multi‐unit Organizations 306

Summary 309

Endnotes 309

9 Justifying and Managing Information Systems and Technology Investments 311

Investment and Priority Setting Policies 313

Justifying and Evaluating IS/IT Investments 314

Justifying Business Applications 322

Justifying Infrastructure Investments 326

Assessing and Managing Investment Risks 332

Managing the Portfolio of Investments 336

Setting Priorities amongst IS/IT Investments 338

Organizational IS/IT Portfolio and Investment Management Maturities 344

Summary 349

Endnotes 350

10 An Organizing Framework for the Strategic Management of IS/IT 353

The Strategic Management Requirement 354

Positioning and Managing IS/IT in an Organization 356

From a Functional View of IS/IT to an Organization‐wide Perspective – Capability and Competences 359

IS/IT Governance and Why It is Important 366

What Decisions Need to be Governed? 371

Creating the Organizing Framework for IS/IT Decision Making 374

Instruments of Governance 375

Summary 391

Endnotes 392

11 Strategic Management of IS/IT Services and IT Infrastructure 395

Creating and Sustaining Business Change: Projects and Services 396

The Need for the Strategic Management of IS/IT Services and IT Infrastructure 397

IS/IT Service Categories 400

Managing Operational and Value‐enabling Services 410

Strategies for Managing IT Infrastructure and Infrastructure Services 414

Understanding and Managing IT Risks 420

Sourcing of IS/IT Resources and Services 423

Business Process Outsourcing 434

Innovation and Outsourcing 436

Back‐sourcing and Switching Suppliers 438

Summary 440

Endnotes 441

12 The Strategic Management of Information Systems: Quo Vadis? 445

The Evolution of IS/IT Strategy in Theory and Practice 447

A Brief Résumé of some Core Ideas 452

Building an IS/IT or Digital Capability 455

From Creating IS/IT Assets to Improving Organizational Performance: Joining the Means to the Ends 458

Achieving Alignment: a Multi‐themed Perspective 459

The Co‐evolution of Business and Digital Strategies 463

The Opportunity for CIOs to Have a Key Strategic Role 466

Conclusion 468

Endnotes 469

Index 475