Adaptative development of a model for manging it value with strategic flexibility

Abstract

In recent years, IT has become an important success factor for firms acting in national and international markets. In corporate leadership, the IT function represents a vital element supporting the business organization in achieving its goals. Doing this, IT investments have risen steadily for many years. However, not all business functions share the perception that the IT function is a key player in the firm. As demonstrated within the thesis, the overall confidence in IT and the perception of the IT value proposition is often below expectations. Business requirements seem unfulfilled. Many studies confirm these perceptions. IT functions use diverse evaluation methods to increase and control its value. However, these evaluation methods seem incapable of steering the IT value proposition consistently. Additionally, in light of the ongoing crisis and market dynamics, the question arises of how the IT function must be set up to support firm flexibility. It is indisputable that flexibility is an appropriate instrument for responding rapidly to market changes. Therefore, the IT function must adjust their business-relevant IT capabilities to respond to changing business demands flexibly. Thus, both flexibility measures and adequate evaluation methods must be integrated into a comprehensive operating model that supports the management of the IT value proposition. Such a model enables the IT function to align its IT value proposition with internal and external requirements. Having understood the IT value proposition as a comprehensive set of perspectives and attributes, it is important to determine the capabilities that the IT function must fulfill to be perceived as an added value to business functions. The thesis performed a qualitative content analysis that identified IT function business requirements. These requirements were condensed into nine major capability clusters: people and organization, risk and security, infrastructure and operations, processes, projects, innovations, services, control and finance, and communication. These capability clusters represent the basis of business-required IT capabilities and a comprehensive theory of IT value. Throughout this study, the capability clusters served as essential design elements for the model developed herein. Having identified the necessary IT capabilities, it must be verified which evaluation methods are useful to control these IT capabilities in regard to IT value creation. A catalogue of requirements was developed to identify adequate evaluation methods. An empirical survey was conducted to determine the suitability of the evaluation methods. The results reveal that respondents use accounting-oriented evaluation methods the most. In contrast market-oriented evaluation methods offer the advantage of greater future-orientation and integration of changing environments. The responses regarding multi-dimensional evaluation methods reveal that respondents do not use the full range of evaluation methods presented in the survey. The results regarding process-oriented evaluation methods reveal a wide difference in usage of the two evaluation methods presented: most respondents do not use the hedonic wage model, but the time-salary-time-saving method is more commonly used. A majority of respondents answered that they use surrogate evaluation methods. The results reveal that this category of evaluation methods is easy to handle and can be applied to diverse situations on short notice. Having identified the advantages and disadvantages of evaluation methods, measures were developed that increase IT function flexibility for an agile IT value proposition. Here, redundancy, modularity, reconfiguration capability and organizational learning have been identified as design principles for flexibility. These four design principles were combined with the capability clusters to derive measures that support IT function flexibility and have been evaluated by the help of an empirical survey. In response to this survey, IT managers assessed these flexibility measures and ranked their utility in each capability cluster. Having developed and assessed the evaluation methods and flexibility measures, the study derived a comprehensive model combining evaluation methods for managing IT function capabilities and measures to increase IT function flexibility. This comprehensive model is based on the Aral and Weill model, which represents the meta-construct for the proposed model. Their model was extended by the three components developed in the present study: (1) capability clusters, (2) associated evaluation methods, and (3) ranked flexibility measures. As all firms are structured differently, the configuration of the model must be adaptable to firms¿ standards. To support such individual configuration, the model provides examples of flexibility measure configurations, further improving the model components¿ transparency.