Dynamic Synchronization of Strategy and Information Technology

This is an MIT Sloan Management Review article. In an often overemphasized focus on efficiency, many companies turn to packaged information technology systems to manage business processes. University of Michigan Business School professors C.K. Prahalad and M.S. Krisnhan suggest they should be more concerned with strategy--and getting line managers and IT managers to use information systems in ways that facilitate strategic change. A new applications-portfolio scorecard helps managers assess information infrastructure before making investments. Six key considerations are: each IT application's role in strategy, whether the knowledge embodied in the application (say, salaries in a payroll application) is stable or evolving, how much change will be needed, where the application will be sourced, whether the data are proprietary or public, and the application's freedom from conformance defects. Those parameters differ for different functions. Only those companies that deeply analyze what they need from each IT application will acquire the right portfolio. The authors' work with 500 executives reveals that few managers believe their information infrastructure can handle the pressures from deregulation, globalization, ubiquitous connectivity, and the convergence of industries and technologies. Though fully aware their organizations lack rapid-response capability or flexibility, the managers rarely knew how to fix the disconnection between the quality of IT infrastructures and the need for strategic change. Considering that information-infrastructure expenditures are generally 2% to 8% of companies' revenues, new measures to address the disconnection are essential. A corresponding change in the mind-sets and skill sets of smart line managers and IT managers also helps improve overall competitiveness.

• Information systems
• Strategy execution
• Change management
• IT management