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Copenhagen Business School

The Information Value Chain


Strategic Information Management for Competitive Advantage

by

Sebastian Schwolow & Mikkel Jungfalk

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Abstract
With the objective of developing a framework for strategic information management this
paper discusses the question: How can organisations create a competitive advantage by taking
a strategic approach to leveraging the value of their information? The question is examined
through the looking glass of the four academic domains of business strategy, organisational
strategy, information systems strategy, information management strategy. Based on the
discussion this paper proposes the information value chain model as an analytical tool for
managers to assess the state of strategic information management in their organisation. It is
meant to provide them with a way of decomposing a complex problem into manageable bits,
as well as measuring the efficiency of information-related processes and evaluating the
impact of actions towards their optimisation.

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Table of contents

1. Introduction .......................................................................................... 6

2. Methodology.......................................................................................... 8

2.1 Strategic Information Management............................................ 8

2.2 Organisations as informational ecosystems ............................... 9

2.3 Information ................................................................................... 9

2.4 The value of information............................................................ 12

3. Frameworks ........................................................................................ 14

3.1 The Information Systems Strategy Triangle............................ 14

3.2 Business Strategy .......................................................................... 0

3.3 Organisational Strategy ............................................................. 17

3.4 Information Management Strategy .......................................... 18

3.5 Information Technology/Systems Strategy .............................. 18

3.6 Conceptual Map.......................................................................... 19

4. Information Management Strategy .................................................. 20

4.1 Choo's Process Model of Information Management ............... 20

4.2 Information needs analysis and adaptive behaviour............... 21

4.2.1 Information Requirements ............................................... 21

4.2.2 Information Needs ............................................................. 21

4.2.3 Information Ecology/Culture ........................................... 23

4.3 Information Acquistion.............................................................. 23

4.3.1 External environmental scanning .................................... 24

4.3.2 Internal environmental scanning ..................................... 24

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4.3.3 Information Acquisition Costs and remedies.................. 25

4.3.4 Information Processing ..................................................... 25

4.4 Information Organisation and Storage .................................... 25

4.5 Information Products and Services........................................... 26

4.6 Information Distribution ........................................................... 27

4.7 Information Use .......................................................................... 27

4.8 Implications for information management strategy................ 28

5. Information Systems strategy............................................................ 28

5.1 Marchand's IT Practices Capability Framework.................... 28

5.1.1 IT Operational Support .................................................... 29

5.1.2 IT Business Process Support ............................................ 30

5.1.3 IT Innovation Support ...................................................... 30

5.1.4 IT Management Support .................................................. 31

5.2 Implications for information systems strategy ........................ 31

6. Organisational Strategy ..................................................................... 31

6.1 Senge's five disciplines and stakeholders ................................. 31

6.1.1 Systems Thinking............................................................... 32

6.1.2 Personal Mastery, Mental Model, Team Learning,

Shared Vision .............................................................................. 33

6.1.3 Stakeholders ....................................................................... 34

6.1.4 Implications for organisational strategy.......................... 35

7. Business Strategy ................................................................................ 35

7.1 Michael Porter's value chain ..................................................... 35

7.1.1 Primary and support activites .......................................... 36

7.1.2 Linkages and value systems .............................................. 37

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7.1.3 Configuration and Coordination...................................... 38

8. Discussion ............................................................................................ 39

8.1 A Framework for Strategic Information Management .......... 39

8.1.1 Primary Activities.............................................................. 40

8.1.1.1 Information Acquisition........................................... 40

8.1.1.2 Information Processing ............................................ 40

8.1.1.3 Information Distribution ......................................... 41

8.1.2 Support Activities .............................................................. 41

8.1.2.1 IT Infrastructure ...................................................... 41

8.1.2.2 Human Resources ..................................................... 41

8.1.2.3 Information Governance.......................................... 42

8.1.2.4 Knowledge Management.......................................... 42

8.1.3 Information Requirements ............................................... 42

8.2 Application and Perspectives..................................................... 43

9. Conclusion ........................................................................................... 44

Works Cited ............................................................................................ 45

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1. Introduction

We set out to write this paper because we think that information is a strategic asset that needs
proper managing. While information management as a academic domain is relatively well-
established and has been practiced (whether consciously or not) for decades, its strategic
significance seems only to have been recognised in recent years. Throughout the course of
our studies, we learned that companies are struggling with information-related challenges
such as information overload, findability, information quality, information architectures, etc.
At the same time, they realise that information, eg, about customer preference and needs,
brand image and employee satisfaction has become mission-critical to running and sustaining
their business (12th Annual Global CEO Survey, 2009:27).

Figure 1 - Information gap about the critical drivers of business (12th Annual Global CEO Survey, 2009:27)

The 12th Annual Global CEO Survey 2009 conducted by Price Waterhouse Coopers revealed
an information gap in a number of areas that are vital for strategic decision-making (see
figure 1).
Figure 1 displays the discrepancy between the information needed for strategic decision-
making ("critical/important") and the information available ("comprehensive").
The survey showed, for example, that 94% of CEOs asked considered information about
their customers' and clients' preferences and needs as "important or critical to long-term

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decision-making" (2009:26). In contrast, only 21% of the respondents felt that they received
comprehensive information of this kind. Similarly, while 93% regarded as important
information about the risks to which their businesses are exposed, only 22% of the CEOs
asked perceived the available information as adequate (2009:27).
In our view, this illustrates how valuable an asset information is in long-term strategic
direction and decision-making. We think the information gaps revealed in the study could
have several sources. The information might be unavailable. It might be available but
inaccessible. It might be accessible but in the wrong format. Or it exists in the right format,
but is outdated, inaccurate or incomplete. In any case - for us, the study highlighted the need
for a coherent and practicable approach to managing information as a strategic resource for
long-term decision-making.

Pervading today's organisations, information increasingly incurs costs, too. Failure to


document and disseminate vital information can cost organisations huge fines (Orna,
2005:111). Moreover, information can lead to huge amounts of hidden costs: according to
Feldman (2005) the time workers spend answering emails, creating documents, analysing
information, as well as searching for and reformatting it accounts for millions of dollars in
organisations' annual costs based on average salaries and bonuses. In a contrasting example,
an Australian insurance company achieved substantial savings of A$551,000 (53,000 person
hours) by reducing the 100% error rate in its policy proposal forms by 97%.
In our view, this illustrates the potential for information-related savings as a way of
liberating extra financial resources for organisations.

Operating at a relatively lower cost and making superior decisions are two ways of creating
competitive advantage (Porter, 1986; Barney, 1991; Marchand, 2002). Our examples above
pointed to the strategic value of information in this process. On the other hand, they also
revealed how organisations are struggling to manage their information resources effectively.

We want to address this problem in this paper by answering the question:


How can organisations create a competitive advantage by taking a strategic approach to
leveraging the value of their information?

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2. Methodology

We will use the methodology to clarify the research question and elaborate on how we intend
to answer it.

Research question: How can organisations create a competitive advantage by taking a


strategic approach to leveraging the value of their information?
The overall objective of this paper is the development of a framework for strategic
information management.
To our knowledge, no scientifically founded model of this kind exists mainly owing to
the fact that the field of strategic information management is relatively new. The Oxford
English Dictionary (2009) defines a model as "a simplified or idealized description or
conception of a particular system, situation, or process (...), that is put forward as a basis for
theoretical or empirical understanding, or for calculations, predictions, etc." Based on this
understanding of what constitutes a model, we seek to propose a framework that has practical
applications and value for managers and researchers working with strategic information
management. Furthermore, we wish to initiate a debate about the value of information in the
creation of competitive advantages for organisations by presenting this conceptual discussion
as a first step towards a coherent approach to strategic information management.

2.1 Strategic Information Management

Academic discussion of strategic information management is still in its infancy and little
consensus exists as to what it encompasses. We have selected an existing attempt at defining
the objectives of the field. According to Myburgh (2002), strategic information management
"focuses on corporate strategy and direction. It emphasizes the quality of decision making
and information use needed to improve overall business performance."
We will take a closer look at the relationship between information management and
strategy to gain more detailed insight into what strategic information management actually
involves.
Like Marchand (2001:75), we understand information management as a set of activities
that moves through a logical succession of interdependent phases. According to Choo
(2002:24) these activities are designed to harness "information resources and information
capabilities so that the organisation learns and adapts to its changing environment".
Information management focuses on effectively managing "the use of information in support
of coordination and control, tactical problem solving and strategic decision making"

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(Marchand, 2001:74). We find that the combination of these definitions provides a solid
conceptualisation of information management.
When referring to strategy, we mean "the direction and scope of an organisation over the
long-term: which achieves advantage for the organisation through its configuration of
resources within a challenging environment, to meet the needs of markets and to fulfil
stakeholder expectations" (Johnson and Scoles, 2006).
Based on these definitions, we regard strategic information management as an important
activity in supporting and enhancing managerial decision-making for competitive advantage
through a holistic approach to managing the information resources of organisations.

2.2 Organisations as informational ecosystems

In this paper, we will discuss strategic information management as the "strategic approach"
referred to in our research question - How can organisations create a competitive advantage
by taking a strategic approach to leveraging the value of their information? In order to discuss
the question adequately, we also think it necessary to elaborate on our view of
"organisations", "information value", and "competitive advantage".
In this paper, we define organisations as "the principal means by which [people] co-
ordinate for collective action" (Douma and Schreuder, 2008:46) towards a common goal.
This common goal, for the purpose of the following discussion, will be economic in nature.
Economic, here, refers to the aims of making a profit or cutting costs. Examples of
organisations with this specific set-up are business companies, governmental institutions and
even non-profit organisations that merely focus on reducing the cost of their operations.
More specifically, with regard to our overall topic of strategic information management,
we understand organisations as informational ecosystems (Davenport, 1997:4). This view
encompasses the organisation's information culture (value and beliefs about information),
stakeholders (politics), information use (behaviour and work processes), and information
systems (technology).
Davenport's definition of organsations as information ecosystems put information at the
centre of organisational activity. Also, the importance of understanding information to the
discussion of strategic information management in this paper is self-evident. We will
therefore elaborate on our understanding of the concept.

2.3 Information

Definitions of information vary greatly across scholarly domains and often people's choice
of a definition will be politically inspired and depend on how it supports their purposes

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(Braman, 1989:233). Rather than looking for a final definition, we will therefore discuss
information as a concept and explain how it will be used within the framework of this paper.
Braman's paper Defining information (1989) looks at information from several different
angles:

• information as a resource,
• information as a commodity,
• information as pattern perception, and
• information as a constitutive force.

As a resource, information is viewed as a discrete and isolated entity that is created,


processed and used by organisational members (Kirk, 2005:5). This definition specifically
describes information as existing in an organisational context that encompasses
organisational members - ie, people - who are in daily contact with it. As such, information
also exists in a social context. If information is defined as a resource, the implications in this
social context are simple: there are two classes - those who have information and those who
don't (Braman, 1989:236).
While the resource view of information does not attribute any "power to information in and
of itself" (Braman, 1989:236), the point that it is possible to lack information that others have
suggests that the possession of information can create a difference - whatever that difference
is.
The idea of information as a strategic resource (Choo, 2002:xiii) builds on this difference
and introduces the notion of information-based advantages for those who possess information
over those who lack it. This view of information resources shows similarities to ideas from
the field of business economics. Barney (1991:101) identifies information as one of the
resources "controlled by a firm that enable the firm to conceive of and implement strategies
that improve its efficiency and effectivness."
A major approach to information management that emerged during the twentieth century
(Davenport, 1997:16-23) concerns the information that resides as knowledge in the heads of
organisational members. It exists in the form of knowledge or "information-as-knowledge"
(Kirk, 2005:9). Before information-as-knowledge can be communicated, it has to be
transferred from its intangible state into a tangible one by expressing or representing it
physically (Kirk, 2005:9). In other words, "Information-as-knowledge" has to be extracted
and transformation into "information-as-thing" - ie, any "expression, description or
representation" of information-as-knowledge (Buckland, 1991:351). Orna (2006:108) refers
to "information-as-thing" as information products which are defined as "products, print on
paper or electronic, through which information is represented for use". According to Orna
(2006:108) information products are the result of the transformation of knowledge into

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information. In our opinion, information-as-knowledge belongs to an organisation's
information resources. Our discussion has shown that for it to be manageable information-as-
knowledge must first be transferred into information-as-thing or information products. We
regard this as an important prerequisite for effective knowledge management. Knowledge
management is the "management of those work practices that aim at improving the
generation of new and the sharing of existing knowledge" (Schloegl, 2005).

The commodity view of information explicitly introduces the notion of value. Information
commodities are tradable and imply buyers, sellers and a market (Kirk, 2005:5). The value of
information commodities is essentially economic and represented through a certain price.
Examples information commodities include software packages, information services, etc.
From a business economics perspective, price is only a sufficient statistic where qualitative
dimensions are largely irrelevant. With the enormous amount of information readily available
through the internet and other sources, however, information quality (ie, accuracy, validity,
timeliness (Kirk, 2005:13)) is more important today than ever before.
The commodity definition of information thus only highlights one aspect of the value
information might have - namely its economic, trade value.

The definition of information as pattern perception broadens the scope by placing


information in an environmental, causal and temporal context (Kirk, 2005:5). Braman
(1989:238) emphasises that information as pattern perception has the capacity of reducing
uncertainty and can thereby lower "the cost of search and increase the 'productivity' of
decision making". It can help identify inefficiencies in specific stages of the "information
production chain" (Braman, 1989:242) and provide insight into the effects of the creation,
processing and use of information in an organisation. The pattern perception view defines
information as a potent change agent (Braman, 1989:238).

All three definitions - information as a resource, commodity or pattern perception - describe


information as a constitutive force.
As such, it is not just affected by context, but has itself an active role in shaping it
(Braman, 1989:239). As a resource, the possession of information is at the core of possible
advantages of those who have information over those who do not. As a commodity,
information has a specific price and, again, differences in the value of information
commodities can create economic advantages for those who manage to acquire information
commodities at the lowest cost. Finally, information as pattern perception creates advantages
as it reduces uncertainty, making it easier to navigate through a complex world and make
informed decisions.

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This shows that regardless of its definition, information has a effect on the environment in
which it exists.
In this paper, we understand these definitions not as mutually exclusive descriptions, but
rather dimensions of the concept of information. We see information primarily as a resource
that exists throughout the organisation in the form of information products, or "information-
as-knowledge" which can be transferred into information products. The value of information
lies first and foremost in the potential to effect change. Whether the economic value of
information or its role in reducing uncertainty is more prominent, depends on how it is used
and by whom.

2.4 The value of information

Our discussion of the definitions of information showed that the concept of value and how it
pertains to information is a central element in the attempt to define information. It also
illustrated how the value of information is contingent on context.
Although we have examined the general aspects of information value, its specifics are
elusive. It is our view that this is a problem in the world of business where, in the final
analysis, it is bottom-line results that count. Since our focus is on organisations with
economic goals, the question how information is valuable to such organisations is central and
merits closer examination.
Marchand (2001:164) identifies three types of problems in defining the value of
information resources for businesses: first, information value is poorly defined and several
distinct views exist across academic domains; second, the value of information depends on
the business context in which it is employed; and third, how valuable information is for a
business depends greatly on managerial perceptions, as well as success criteria and measures.
This shows that the resource "information" is poorly understood. In fact, through
interviews with leading business information managers, a survey from 2007 found that there
was no "pressure from [...] senior management to establish metrics of value and performance"
for monitoring how information is used in their organisations (Foster, 2007:27). In our view,
this is one more implication that organisations need a strategic approach to information
management and to define clearly how information is valuable to them.
In this paper, we will adhere to the two value dimensions identified in our discussion of the
definition of information - namely, its economic value and its role in uncertainty reduction.
With regards to economic value, what interests us mainly is not the actual money made in
selling information, but the costs incurred in producing it. In fact, much of the research into
the field of information business value focuses on the costs of information-related
inefficiencies (Feldman, 2004; Orna, 2006; Foster, 2007). While we agree with Shapiro and

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Varian's (1999:3) view that the economic value of information must not be based on its
production costs but must reflect the value it creates for the consumer, we believe that it is in
any organisation's economic interest to reduce production costs as much as reasonably
possible.
Pierce (2006:1) describes quality information as "a powerful tool for making rapid and
informed strategic decisions". We agree with this view and see improved decision-making as
the main value of information resources that reduce uncertainty. Based on Pierce's view that
wrong, outdated or incomplete information can result in "unnecessary consumption of
resources, additional costs, lower worker productivity" (2006:3) and duplicated work, we
conclude that, in a business setting, improved decision making based on quality information
and conditions of reduced uncertainty translates directly into economic value.

In this paper, we seek to answer the question how organisations can leverage the value of
their information to create competitive advantages. Having discussed organisations and
information value, the last concept in need of clarification is competitive advantage.
Both dimensions of information value - economic value and uncertainty reduction - are
important also at a strategic level for the creation of competitive advantages.
In business economics, organisations with a competitive advantage implement a "value
creating strategy not simultaneously being implemented by any current or potential
competitor" (Barney, 1991:102). This means that organisations can gain a competitive
advantage if they find better ways of increasing the economic value of their information and/
or using it to make decisions that put them ahead of their competitors. "A firm possesses two
types of competitive advantage: low relative cost or differentiation - its ability to perform the
activities in its value chain either at a lower cost or in a unique way relative to its
competitors" (Porter, 1986:13).
Differentiation from competitors is made possible because of information asymmetries.
These exist "whenever a company leverages information about customers, competitors, and
operations that is unusable or unavailable to its competitors" (Marchand, 2001:214).
In connection with the four definitions of information discussed earlier, Kirk (2005:5)
commented that "if information is to provide competitive advantage, then its full potential
needs to be considered". Since our view of information understands all four definitions as
dimensions of information, and since our rationale for information value and its connection to
competitive advantage is based on this multidimensional view, we regard this condition as
fulfilled.

The discussion so far has drawn on a number of academic disciplines ranging from
information science to business economics. We believe that such an interdisciplinary and
holistic approach to examining the management of information in organisations is necessary

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in order to capture accurately the complexity of the topic.The main disciplines we will draw
upon in this paper are related to the main aspects of strategic information management that
we will discuss.
Our definition of information management describes information as a resource that exists
in an organisation along with technology and organisational members. Strategic information
management introduces a link between these factors, and business objectives and
performance.
Discussing the relationship between the four elements of information, technology, people
and business value, we will largely draw upon the fields of information management and
technology, as well as organisation theory, business economics and strategic management.

3. Frameworks

In this part, we will briefly introduce and summarise the models we chose to investigate the
research question, as well as our reasons for choosing them.
We will take our point of departure in an adjusted version of Pearlson and Saunders'
Information Systems Strategy Triangle. Based on our interpretation of this model, we will
introduce four different domains that, for us, constitute strategic information management:
business strategy, organisational strategy, information technology and systems, and
information management.

3.1 The Information Systems Strategy Triangle

In their book Managing and Using Information Systems (2005), Pearlson and Saunders
propose the Information Systems Strategy Triangle as a model to support decision-making
about information systems.
The model comprises three components: business strategy, organisational strategy and
information strategy (2005:2).

• business strategy: is defined as a "well-articulated vision of where a business seeks to


go and how it expects to get there".
• organisational strategy: is "the organisation's design as well as the choices it makes
to define, set up, co-ordinate and control its work processes". Finally,
• information systems strategy: is "the plan an organisation uses in providing
information systems and services" (2005:15).

Pearlson and Saunders point out that it is crucially important that more attention be paid at
the corporate level to decisions about information systems. This is because they realise that

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information systems for all the improvements they can affect, may "actually inhibit and
confuse" (2005:1) information flows within an organisation if not aligned and balanced with
organisational dynamics and strategic business goals (2005:2). Therefore, they argue, that a
thorough understanding of the relationship between the three components of the triangle, and
deliberate action towards their integration are key to any organisation's success (2005:2).

Figure 2: The Information Systems Triangle (adapted from Pearlson and Saunders, 2005:2)

We have chosen this model as our point of departure because it complements our view of
interdisciplinarity and its importance in the discussion of strategic information management.
However, within the framework of this paper, we should like to extend their model for our
purposes.
Pearlson and Saunders discuss a tool for strategic decisions regarding information systems.
And while the graphical illustration of their model (see figure 2) refers to "information
strategy", their actual discussion focuses on "information systems strategy" (2005:12). This is
appropriate for their particular unit of analysis, but we find it too narrow to fit our view of
strategic information management.
Based on our definitions of strategic information management and information
management in particular, we think that information systems will indeed inhibit and confuse
information flows in organisations if the information resource managed is not properly
understood. Even though Pearlson and Saunders mention "data" as a part of information
systems strategy (2005:13), they barely touch upon the subject. For the purpose of this paper,
we will therefore modify the model slightly and add a fourth dimension to the triangle:
information management strategy.

The resulting diamond of strategic information management (see figure 3) thus consists of the
following components:

• business strategy

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• organisational strategy
• information systems strategy
• information management strategy

Figure 3 - A Strategic Information Management "Diamond"

This view of strategic information management prescribes four research domains worth
exploring in answering our research question.

3.2 Business Strategy

In this paper, it is our objective to develop a tool that has a practical application for managers
involved in strategic information management. That is why, from the field of business
strategy, we have chosen a tool that is widely recognised and well established both
academically and in business practice.
Since its publication in 1986, Michael Porter's value chain model (see figure 4) has become
the de facto strategic framework for creating competitive advantages. Therefore, we have
chosen this model to provide the mould for our own strategic framework.
We see the greatest advantages of Porter's value chain model in its distinction of different
building blocks of which business operations are made up. True to the old principle "divide
and conquer", as well as modern problem solving approaches, this set-up enables managers to
split up a complex problem into discrete manageable parts without losing sight of the whole.
For our own framework, we will therefore adopt this componentised structure.

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Porter's model describes the value chain as it exists for the production of goods and therefore
most of the activities in the model will not be applicable to strategic information
management. However, based on Picot's view of information as the prime production factor
(1989:238) we think that the framework at large can be useful in describing how value is
added at each stage in the "production" of information.

Figure 4 - The Michael Porter Value Chain (adapted from www.12manage.com)

3.3 Organisational Strategy

Kirk (2005:3) points out that "the counterpoint between the organisation and its individual
members has particular relevance to IM [information management]" because while
information management is a concept at the organisational level, it is individuals who use and
process information and are thus especially important to the success of information
management. Kirk goes on to say that "we need to consider both the organisation and its
members in information terms as a starting point for developing strategies for effective
information management" (2005:3). The role of human capital in the health of the
organisation and the success of its information management strategy is therefore a central
topic.
An important aspect in the relationship between the organisation and its individual
members is learning. As Peter Senge, author of The Fifth Discipline - Strategies and Tools
for Building a Learning Organisation, puts it: "without learning about the business as well as
their own tasks, employees cannot make the contributions that they are capable of" (1994:11).

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He also advocates the view that no organisation can sustain its competitive advantage in the
long run, unless it is able to learn faster than its competition (1994:11).
We have chosen Senge's theory because it highlights the relationship between the
organisation and its members as described by Kirk (2005). In terms of information
management, Senge's theory has two implications for this relationship: the selection of the
right people for creating a culture of learning for sustainable competitive advantage; and the
importance of managing information-as-knowledge.

3.4 Information Management Strategy

In section 1.5, we defined information management as a "set of activities that moves through
a logical succession of interdependent phases". This set of activities is often referred to as the
information life cycle (Marchand, 2001:75). The original information life cycle concept
consists of five elements: sensing, collecting, organising, processing and maintaining
information (2001:75). In this paper, however, we will use a model proposed by C. W. Choo
in his 2002 book Information Management for the Intelligent Organisation: the process model
of information management.
This model is essentially a derivative of the life cycle, but placed in an organisational
setting. We therefore think it fit for the purpose of our discussion.
However, one of the major points of criticism of the life cycle model is the question "where
does the information life cycle really begin?" (Marchand, 2001:78). Or differently, where
does it end? This is important when it comes to measuring the value of information. When
and where to begin; when and where to end - these are crucial limitations that must be set for
a measurement to be at all possible. Therefore, in this paper, we distance ourselves from the
life cycle model and, instead, embrace the linear value chain construct where information is
analysed under the assumption that in the accumulation of value for a particular purpose it
has a birth, life and death.
We will use the model to examine how information gains value as it moves along the
information value chain.

3.5 Information Technology/Systems Strategy

As pointed out earlier, we understand information technology and information systems as


support functions of information management strategies within business organisations. In this
paper, we will discuss them as facilitators in moving information from one end of the value
chain to the other and their potential advantages in doing so at greater speed and better
quality.
For this purpose, we have chosen the IT Practices Capability framework as discussed by
Marchand (2001:51). According to the author, "most work in services and manufacturing

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companies today is "knowledge-based" at all levels" and it is therefore important to find ways
of using information technology to support all the different types of these knowledge-based
activities that exist within an organisation.

3.6 Conceptual Map

Figure 5 - Conceptual map

Figure 5 illustrates the result of the previous discussion by mapping the different models we
will use in the subsequent analysis to the four elements of the strategic information
management diamond.

This is the methodological foundation based on which we intend to discuss our research
question:

How can organisations create a competitive advantage by taking a strategic approach to


leveraging the value of their information?

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4. Information Management Strategy

In the following paragraphs, we will discuss the strategic aspects of information


management. As indicated above, we have chosen Choo's Process Model of Information
Management (2002) as the basis for our discussion.

4.1 Choo's Process Model of Information Management

In his book Information Management for the Intelligent Organisation (2002), Choo writes
about how information processes are the "intellectual bedrock for building an intelligent,
learning organisation". In his process model of information management (see figure 6), Choo
illustrates the "design and management of these information processes".

The model consists of six related activities:


• indentification of information needs
• information acquisition
• information organisation and storage
• information products and services
• information distribution and
• information use

The result of the interplay of all these activities is "adaptive behaviour".

Figure 6 - The Information Management Cycle (Choo, 2002:24)

We will proceed by discussing each activity with regard to how it adds value and its strategic
implications.

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4.2 Information needs analysis and adaptive behaviour

"An accurate description of information requirements is a prerequisite for effective


information management" (Choo, 2002:28).

4.2.1 Information Requirements

In our opinion, the importance of clarifying an organisations information requirements cannot


be overstated.
Information requirements set the scene for successful information management. They
should precede any information management activities and be continuously reviewed during
execution. A central problem manifest in today's organisations is the absence of a sufficiently
thorough understanding of what constitutes information resources. Despite the growing
quantitative and qualitative demands on information-related services in organisations (Foster,
2008:17), the acknowledgement of information as a mission-critical asset seems to enter
managerial thinking only gradually. We think a reason for this might be the seemingly
overwhelming dimension of the problem. Information resources are evasive, they seem to be
everywhere and nowhere, and the true predicament is summarised in the proverbial inability
to "see the woods for the trees" - focus and managerial influence are lost in the absence of
concrete guidance as to what (and where) information resources are.
In determining its information requirements, an organisation must therefore agree on a
definition of its information resources, what they are and where they are.
Once information resources have been defined, organisations must determine how these
information resources are valuable to them. Is the focus primarily on cost reduction, or
reducing uncertainty and creating information asymmetries? Depending on how information
is valued by the organisation, the strategy for leveraging that value will differ.
Finally, information requirements should be translated into critical success factors and key
performance indicators should be determined so as to be able to operationalise the strategy in
a controlled and sensible manner where progress can be monitored and success - or failure -
is measured.

4.2.2 Information Needs

In order for an organisation to identify its information requirements, it has to analyse its
information needs. "Information needs arise from the problems, uncertainties, and
ambiguities encountered in specific organisational situations and experiences" (Choo,
2002:26).
Choo relies on a number of questions and problem dimensions designed by MacMullin and
Taylor (1984:98 in Choo, 2002:26) for the analysis of an organisation's information needs.

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For the purpose of this discussion, we have chosen a few example questions whose answers
will determine the nature of a specific organisation's information management strategy.

1. initial state understood vs initial state not understood - clarify unclear aspects of initial
state vs soft qualitative data to define initial state

This question may be helpful in identifying if an organisation is ready to devise an


information management strategy or if more input is needed to make an informed decision. In
a way, this problem dimension constitutes the first step towards a structured gap analysis,
where the state as-is is established so as to be compared later with the goals the organisation
has set for itself.

2. specific goals vs amorphous goals - goal operationalisation and measurement vs ways to


reduce problems to simpler tasks

This question may assist in defining the goal part of the gap analysis. Decisions here have a
role in establishing critical success factors and their respective key performance indicators.
By defining specific goals (eg reduce IT costs) and describing the information needed to
verify them (eg cost-savings ratio), organisations could distinguish between core elements of
their information management strategy and less defined, more open-ended elements.

3. magnitude of risk not great vs magnitude of risk great - cost-effective search vs best
available information: accurate, complete

This question fosters decision-making about qualitative aspects of information needs.


Qualitatively better information is typically associated with higher costs. This risk-based
approach to information quality may help to allocate resources more effectively and prioritise
some information-related activities over others.

4. well-structure vs ill-structured - hard quantitative data vs probabilistic data on how to


proceed

This question addresses the types of information needed to achieve a goal. Consequently, the
answer depends on the types of goals an organisation has set for itself and the information
needs associated with them.

5. familiar pattern vs new pattern - procedural and historical information vs substantive and
future-oriented information

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This final question is related to an organisation's goals, its business model and how it values
information resources. These factors greatly impact an organisation's information
management strategy. Organisations that emphasise information management based on
familiar patterns and procedural/historical information are likely to focus on gaining a
competitive advantage by reducing the cost of information and optimising their processes. On
the other hand, organisations concerned mainly with substantive and future-oriented
information are more likely to focus on creating information asymmetries that lead to
competitive advantages.
In reality, organisations will seek to combine these two approaches.

All of these questions will have a substantial impact on an organisation's information


management strategy. However, since information needs are "contingent, dynamic and
multifaceted" (Choo, 2002:26) the answers to these question will depend to a large degree on
the organisations information ecology (Choo, 2002:49).

4.2.3 Information Ecology/Culture

Information needs and, consequently, information requirements are a product of an


organisation's information ecology. A "complex system of parts and relationships" (Choo,
2002:51), information ecology encompasses the informational, organisational and external
environments (Choo, 20002:49).
When devising an information management strategy, organisations must be aware of the
different forces that are at work in these environments. The eco-system metaphor implies the
interrelationship between these different forces and the importance of managing them in
conjunction rather than separately. Essentially, "the supply and distribution of information in
an organisation should be designed to be compatible with its culture and stage of
development" (Choo, 2002:53).
Of particular importance to the question of defining information resources and their value
to the organisation is the question of responsibility. Orna (2005:110) points out that many
critical questions about these matters remain obscure "because it is nobody's responsibility to
know the answers". It is thus important that organisations strive to promote a culture of
awareness regarding information resources and encourage people to take responsibility.

4.3 Information Acquistion

"Only variety can absorb variety." (Choo, 2002:30)

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With today's high degree of environmental variety, organisations are forced to rely on a
variety of informational sources for scanning their environment. There are two generic
strategies for scanning: first, organisations can increase the variety of channels for acquiring
information about the environment (variety amplification); and second, they can focus on
filtering this influx of information and adjust it to individual organisational members' needs
(variety attenuation) (Choo, 2002:30-31).
Thus, information acquisition adds considerable value to information as it can both
decrease existing information asymmetries and create new ones. From a process-efficiency
point of view, the right balance between variety amplification and variety attenuation can
result in cost reductions and better information quality.
When scanning, organisations can probe in two directions: internal environments and
external environments.

4.3.1 External environmental scanning

Different organisations that operate in different environments will have different ways of
scanning these. In any case, however, "selection of sources to monitor the external
environment must be sufficiently numerous and varied as to reflect the span and sweep of the
external phenomena" (Choo, 2002:30).
Studies have shown that business intelligence can be a decisive determinant of success
(Choo, 2001:3) as more advanced systems for environmental scanning lead to higher growth
and profitability (Choo, 2001:4).
External environmental scanning will be important for the usual analyses associated with
the environment (market dynamics, market trends, industry analysis, competitor analysis,
etc). We argue that these are search modes that support forward-looking strategies aimed at
reducing uncertainty and creating competitive information asymmetries. In this way, they
correspond to variety amplification focused on finding new patterns rather than familiar ones.

4.3.2 Internal environmental scanning

Familiar patterns, on the other hand, are analysed during the process of internal
environmental scanning. Here, the main mode of operation will be to monitor internal
operations and processes, with the aim of eliminating inefficiencies and process-loops
thereby reducing costs.
Two foci can be identified: first, organisations can gather information about internal
operations and optimise them; and second, they can focus on information acquisition
activities and optimise them. From an information management strategy perspective, the
second is the more interesting one.

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4.3.3 Information Acquisition Costs and remedies

Information acquisition entails costs and risks. Costs are mainly concentrated in hours spent
looking for, collecting, and selecting information through various channels. Risks are
manifested in inaccurate, incomplete, and outdated information that can lead to poor
decisions. Other risks include security hazards and information overload. Choo (2002:29)
points out that to avoid these risks, "information variety must be managed".
Focusing on information acquisition activities, organisations should strive for efficiency
and qualitative excellence by monitoring, evaluating and optimising them. Furthermore, a
governance system is needed which is grounded on accepted rules, organisational policies,
conventions and stipulated requirements for information acquisition (Choo, 2002:29).

4.3.4 Information Processing

Though not explicitly mentioned by Choo (2002), we think that information processing is
very much related to information acquisition. Information processing adds value through the
synthesis or modification of information resources acquired during environmental scanning to
satisfy specific information needs.
Choo (2002:32) emphasises the importance of human agents in information processing:
"While information technology can and should be used to extend the reach of information
foraging, human processing through sampling, filtering, noise reduction, and other value-
adding services remains an indispensable link in the information chain".

4.4 Information Organisation and Storage

"Information that is acquired or created has to be organised and stored systematically in


order to facilitate information sharing and retrieval" (Choo, 2002:33).

This information management cycle activity emphasises the importance of information


technology in processing information resources. Information technology adds value as it
enables the organisation to process huge amounts of information in an automated fashion
(Choo, 2002:33) thereby reducing processing time. It facilitates the communication of
information resources, their distribution and sharing, access to them and their transformation.
It is therefore important for an organisation to have an IT infrastructure that supports its
information management strategy.
Regarding IT infrastructure, organisations should strive for systems and procedural
efficiency (Choo, 2002:33). System efficiency revolves around making optimal use of the IT
infrastructure to yield faster response times. Procedural efficiency addresses the quality

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aspect of information - its accuracy, timeliness and completeness - to reduce errors and undue
delay.
Like information acquisition, information organisation and storage should also be subject
to organisational policies and information governance (Choo, 2002:34).

4.5 Information Products and Services

"Information products and services, and indeed information systems in general, should be
developed as sets of activities that add value to the information being processed in order to
assist users to make better decisions and better sense of situations, and ultimately to take
more effective action". (Taylor, 1986)

In his discussion of information products (not to be confused with Orna's information


products as defined in the methodology) and services, Choo (2002) focuses on a selection of
value-added activities (see figure 7) identified by Taylor in 1986. Value-added activities are
"those that signal, enhance, or otherwise strengthen the potential usefulness of system
messages" (Choo, 2002:39). Thus, while information organisation and storage was concerned
with the technological "back-end" (hardware and administrative software), information
products and services constitute the front-end software at the interface with humans.

Figure 7 - Value added in Information Products and Services (Choo, 2002:40)

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Choo (2002) argues that information products and services can add value in processing
information resources if they are easy to use, facilitate filtering ("noise reduction" and
"quality") and are adaptable to different needs (Choo, 2002:40). Furthermore, they must
affect savings in time and costs.
For our purposes here, these last two elements are the most important. We think that
improvements in ease of use, noise reduction, quality and adaptability will lead to time and
cost savings. In devising an information management strategy, organisations might thus focus
on these value-added activities when seeking to improve the front-end IT infrastructure.

4.6 Information Distribution

"Information is expensive to produce, but cheap to reproduce" (Varian and Shapiro, 1999:3).

As illustrated by the quote above, information distribution has a major part in increasing the
value of information resources. Varian and Shapiro (1999:8) use the analogy of a single copy
of a film that "would be of little value without a distribution technology".
This, again, points to the importance of IT infrastructure in support of information
management strategy. Distribution - ie the "dissemination or routing of (...) the right
information to the right person in the right time, place, and format" (Choo, 2002:42) - creates
value in two ways.
As people share information, learning is fostered and deeper insight is generated (Choo,
2002:44). This is crucial for organisational innovation to take place in a more speedy and
organisation-wide fashion, and clearly highlights the importance of knowledge management
in exploiting the value of information resources. From a cost perspective, distribution results
is scale economies. Here, the cost of a piece of information is disproportionally related to the
number of people who share that information.
Efficient distribution should thus be part of any information management strategy.

4.7 Information Use

In this final part of the information management cycle, Choo (2002) addresses two ways in
which information resources can be valuable.
He argues that organisational members use information resources to make better sense of
their environment and subsequently engage in purposive action towards it through decision-
making. Choo addresses an important point here. Information resources for decision-making,
essentially, are only as valuable as the action the trigger. That is why information
management strategy should include explicit measures for operationalisation.

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4.8 Implications for information management strategy

Essentially, there are three major activities where value is added to information resources:
Information acquisition, Information Processing and Information Distribution. These
processes furthermore rely on an IT infrastructure, human resources, information governance
and knowledge management for integration and coordination. Ultimately, if all of these
elements function optimally both individually and collectively they will positively affect
information use.
At the beginning of every information management strategy stands the information
requirements assessment which includes an analysis of the gap between the current state and
the desired state of organisational information management. For this purpose, organisations
should identify their information resources, determine the types of information they need as
well as qualitative specification, assign responsibility and set up critical success factors and
key performance indicators in order to measure progress.
In conclusion, based on their information requirements assessment, organisations should
focus on implementing an IT infrastructure with efficient back-end and front-end systems to
affect time and cost savings; enforcing information governance and enabling knowledge
management; supporting the distribution and sharing of information; as well as information
acquisition and, finally, information use and strategy implementation.

5. Information Systems strategy

In the conclusion of the previous part, we stated that "based on their information
requirements assessment, organisations should focus on implementing an IT infrastructure
with efficient back-end and front-end systems to affect time and cost savings".
In this part, we move on to the next corner of the strategic information management
diamond (cf. figure 3) and discuss how information systems strategy is essential to designing
a solid IT infrastructure that optimally supports the information management strategy. We
will examine the subject based on Marchand's IT Practices Capanbility Framework
(2001:51).

5.1 Marchand's IT Practices Capability Framework

The IT Practices Capability Framework represents a pyramid with four layers: IT managerial
support at the top, followed by IT innovation support and IT business process support.
Finally, IT operational support constitutes the layer at the bottom of the pyramid (cf. figure
8).

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Figure 8 -The IT Practices Capability Framework (Marchand, 2001:51)

IT managerial support combines two top-level decision-making activities: strategic


planning and management support (Marchand, 2001:50). At the top of the pyramid, these
activities represent few but important decisions. In contrast, IT operational support at the
bottom stands for many "decisional transactions" of less importance (Marchand, 2001:51).
The model is based on two underlying assumptions: today, the lion part of work processes
in services and manufacturing is "knowledge-based at all levels" (Marchand, 2001:51); and,
knowledge work is organised around different levels and types of decisions within companies
(2001:52).

This goes back to our argument that IT has to be in alignment with an organisation's
information requirements. The different "types and levels of decisions" mentioned by
Marchand determine what kind of knowledge work the organisation relies upon and how this
work should be supported by an information systems strategy.

5.1.1 IT Operational Support

At the operational level, information systems can affect economies of scale. For instance,
account opening is one of the most important processes in banking since their business model
relies on this source of revenue. If the decision-making process about creating a customer
account were still manual, the costs would be enormous, errors numerous and waiting times
disastrous. Through investments in the automisation (IT) of the decision-making process, the
cost per account opening can be significantly reduced and scale economies be realised.
Differently put, IT facilitates the reduction of transaction costs.
According to Cordella (2001), however, IT can also lead to an increase in costs. While
transaction costs savings are mainly attributed to the capacity of processing more quickly

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larger amounts of information, this very fact might also lead to information overload. Again,
this points to the importance of having an information management strategy based on clear
information requirements that explicate how information resources are valuable to the
organisation.
Finally, IT makes it possible to monitor an organisation's processes and performance,
analyse the collected information and use it as the basis for process enhancements that result
in cost advantages.

5.1.2 IT Business Process Support

IT can support standard business processes (eg account opening) by streamlining inputs,
processing and decision-making. Marchand (2001) mentions enterprise resource planning
systems as an effective IT platform for automating supply chains within and across functions
to "improve coordination, control costs, and increase efficiency" (Marchand, 2001:57).
Cross-functional sharing of information resources capitalises on economies of scope and
saves costs by reducing instances of duplication and redundancy.
A second approach discussed by Marchand (2001) is business process re-engineering
(BPR). Defined as "the fundamental re-thinking and radical redesign of business processes to
achieve dramatic improvements in performance such as cost, service and quality" (Marchand,
2001:56), BPR can benefit from IT based on the monitoring, collection and evaluation of
operational information which then flows into the "fundamental rethinking".

According to Marchand (2001), "both IT for operational support and IT for business process
support focus on institutionalising and formalising "yesterday's strategic decisions". In terms
of information management strategy, this means that these two aspects of information system
strategy are related to information requirements of "familiar pattern - procedural and
historical information ". Backwards-looking as they are, they rely on standardisation, eg
through information governance, and goal operationalisation.

5.1.3 IT Innovation Support

While IT for operational support and business process support strives to reduce information
asymmetries, IT for innovation support and managerial support helps create information
asymmetries and advantages over others by emphasising new patterns and substantive and
future-oriented information.
As a result of better screening and information acquisition supported by IT, organisations
may be able to detect opportunities in their environment by analysing trends and customer
information. Also, the ability to share, develop and update information resources plays an

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important role in business process re-engineering and process innovation, as well as product
development and the exploitation of opportunities (Marchand, 2001:60).

5.1.4 IT Management Support

At the top of the pyramid, IT contributes to more informed strategic decision-making about
risks, future investments and competitive moves. As such, IT supports information
acquisition and environmental scanning which provides managers with information resources
for anticipating market trends, address rapidly changing competitive conditions and respond
effectively to competitive opportunities and threats (Marchand, 2001:63).
Furthermore, environmental scanning activities - ie the collection of internal and external
information resources - can contribute inputs for information needs and requirements
analyses.

5.2 Implications for information systems strategy

Information systems strategy addresses the use of IT at different levels of the organisation
and towards different ends. It should be treated as a support function of information
management strategy - specifically, information acquisition, distribution and processing.
Therefore, information systems strategy must be aligned with information management
strategy and the underlying information requirements. Effective information systems
strategies can lead to time and cost savings through greater speed, accuracy and processing
power. Value is added through the exploitation of economies of scale and scope, lower
transaction costs, as well as decision and innovation support.

6. Organisational Strategy

In this part, we will take a closer look at how organisational strategy can support information
management strategy to make the most of information resources. We will examine this
relationship by looking at Peter Senge's five disciplines of the learning organisation. To put
this into perspective, we will include a brief discussion of stakeholders.

6.1 Senge's five disciplines and stakeholders

In his 1994 bestseller "The Fifth Discipline", Peter Senge proposed a number of strategies
and tools for building the learning organisation. His idea was that the learning organisation is
contingent upon the interplay of five different disciplines: personal mastery, mental models,
team learning, a shared vision and systems thinking (see figure 9). With these five
disciplines, Senge analyses the relationship between individual learning and organisational

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learning, which we think
is a fundamental aspect of knowledge management.

Figure 9 - The Five Disciplines of the Learning Organisation (www.12manage.com]

Moreover, even though earlier we described human resources as a managerial support


activity of the information life cycle, we think that individual organisational members are
really at the heart of the discussion of information value. This is because value is essentially a
human ascription - information per se does not have any value at all unless it is considered
valuable by someone. As soon as more than one person ascribe value to a piece of
information the potential for conflict arises. Therefore, we think it necessary to put our
discussion of Senge into perspective by including a stakeholder view.

6.1.1 Systems Thinking

Systems thinking "encompasses a large and fairly amorphous body of methods, tolls, and
principles all oriented to looking at the interrelatedness of forces and seeing them as part of a
common process" (Senge et al, 1994:89). The point is that individual organisational member
must be able to recognise cause and effect relationships between their actions and the
consequences for their organisation and fellow organisational members. The notion of
systems thinking stipulates that the ramifications of anything organisational members observe
and any actions or decision they take, must be considered as part of a system. This means that
consequences of actions do not have a linear effect, but a systemic one.
Systems thinking can significantly increase the value derived from information and its
potential in uncertainty reduction or the creation of information asymmetries. We talked
earlier about analysing information based on familiar patterns or new patters so as to gain
insights into operational, as well as innovative and decision-making processes. All these

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analyses, however, are in vain if organisational members cannot recognise the implications of
certain information for the organisation and act upon them. Systems thinking enables
individual organisational members to do this and create information-based value for the entire
organisation.

Systems thinking is the outcome of a combination of the remaining four disciplines.

6.1.2 Personal Mastery, Mental Model, Team Learning, Shared Vision

"People with a high level of personal mastery live in a continual learning mode. They never
arrive." (Senge, 1990:142). Personal Mastery is an ongoing process and while it includes the
accomplishment of a certain skill or competence, it goes far beyond that. Senge speaks of
mastery in the sense of curiosity, openness, the will to learn and, ultimately, a level of
accomplishment that allows for aspiration and the development of vision (Leonardi, 2007).
Apart from the implications for hiring people, this kind of mindset is important for systems
thinking, and thus for increasing the value derived from information. Of course, organisations
should hire the best people for whatever tasks they need done. On top of that, though, they
will also want people who can recognise opportunities when they see them, use information
to innovate and enhance or take the right decisions.
Mental models are ‘deeply ingrained assumptions, generalizations, or even pictures and
images that influence how we understand the world and how we take action’. Senge argues
that rigidity with respect to mental models hampers learning. Organisations must embrace
and foster openness and overcome political and organisational barriers to learning. Since
mental models determine how information and strategic information management are
understood by organisational members, it is important to nurture a culture that acknowledges
the value of information for the organisation and has a clear focus on managing information
resources on an equal level as any other organisational asset.
Within this kind of organisational culture, information distribution in the form of
knowledge sharing and management will be facilitated and team learning - Senge's fourth
discipline - can thrive. It is also important for information needs analyses in the sense that
organisational members should be encouraged to voice their opinions and concerns in this
respect. Flexibility with regard to mental models may also have a positive impact on the pace
at which new strategic information management approaches are adopted and implemented.
Finally, building a shared vision is about creating a vision that is genuinely embraced by
everyone in the organisation. Senge puts this in contrast to visions that are devised by a single
person (eg the CEO).
This is important to align organisational members' understanding of organisational
objectives. Obviously, information can only be valuable to an organisation if it is used in a
way that drives the accomplishment of organisational goals.

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These are the ideal conditions that organisational strategy should strive to achieve. In reality,
however, organisations comprise multiple stakeholders who have different interests and will
thus value information differently. Therefore, when it comes to determining information
value and implementing a strategic information management approach, it is important to view
it in light of individual stakeholders and their interests.

6.1.3 Stakeholders

According to Bourne and Walker (2005:653-654) information-based power is rooted in the


"possession of or access to information perceived as valuable". In an organisation where
many people come together, they will naturally influence each other and compete for power.
In some way or other, they all become stakeholders in the organisation. A stakeholder is a
"person, group, or organization that has direct or indirect stake in an organization because it
can affect or be affected by the organization's actions, objectives, and policies"
(businessdictionary.com).
This reality represents an obstacle to the implementation of Senge's disciplines, knowledge
management approaches or, indeed, strategic information management.
With regard to Senge, political tensions among stakeholders can undermine the concepts of
a shared vision and team learning, as well as the whole idea behind effective systems
thinking. As such internal power play can pose a threat to successful organisational learning.
Knowledge management is hampered as information distribution and knowledge sharing
fail because of pragmatic boundaries - obstacles to knowledge communication associated
with "differences in political interests between those involved" (Swan et al, 2007:1825).
Knowledge communication plays an important role in the externalisation of information-as-
knowledge. Representing information-as-knowledge turns it into a manageable information
resource. However, knowledge workers who feel that they disclose at a disadvantage their
information-as-knowledge, naturally will refrain from doing so. Therefore, pragmatic
boundaries to knowledge communication constitute a threat to effective knowledge
management.
Finally, strategic information management may fail altogether, because the people in charge
or with the decisive authority do not understand the concept or realise the value information
has for them and the organisation they manage.

As we have seen, stakeholders play an important role not only with respect to the learning
organisation, but also regarding strategic information management as a whole. They must be
carefully considered, mapped and managed in order to avoid the problems discussed above.

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6.1.4 Implications for organisational strategy

Externalised information-as-knowledge increases an organisation's information resource


base.
This is achieved through effective knowledge management, a large part of which happens at
the interface between individual and organisational learning. The above discussion, however,
has shown that a fundamental paradox seems to exists between the ideal of the learning
organisation and the reality of conflicting stakeholder interests undermining effective
learning.
Organisational strategy should therefore focus on developing effective hiring procedures
for selecting people who truly "master" their job, as well as compensation schemes that
reward this behaviour sufficiently to attract and retain such human capital.
Organisational culture should embrace openness, flexible mental models and be guided by
a genuinely shared vision. In order for organisations to implement these measures, they must
be aware of the different stakeholders involved, their position and interests relative to each
other, as well as their influence.
In this manner, organisational strategy can contribute to leveraging the value of
information by promoting an environment where information is truly recognised and treated
as a resource; information resources are utilised in an intelligent way and towards the same
ultimate objective of competitive advantage.

7. Business Strategy

In this last part, we will examine how business strategy can contribute to the exploitation of
information resources. We will discuss this relationship by means of Michael Porter's
ubiquitous value chain model.

7.1 Michael Porter's value chain

In his seminal book "Changing Patterns of International Competition", Porter describes the
firm as "a collection of discrete activities performed to do business that occur within the
scope of the firm" (Porter, 1986: 13).

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Figure 10 - The Michael Porter Value Chain (adapted from www.12manage.com)

With information being the prime production factor (Picot, 1989:238), it seems logical that
it should be considered as part of what is necessary to do business within the scope of almost
any firm today. While Porter's value chain focuses on production processes, we think that
identifying the information value chain can greatly benefit organisations in practising
strategic information management for competitive advantage.
Porter argues that competitive advantage can only really be understood based on the
specific setup of discrete activities in the value chain (Porter, 1986:13). Thus, it is not the
organisation as a whole which constitutes the core of competitive advantage, but the superior
relative performance of particular value chain activities. Based on this argument, the
identification of the information value chain must begin with the definition of discrete value
chain activities.

7.1.1 Primary and support activites

Porter's value chain consists of primary activities and support (or secondary) activities (see
figure 10).

Primary activities are the ones directly related to "the physical creation of the product or
service, its delivery and marketing to the buyer, and its support after sale" (Porter, 1986:14).
They include inbound logistics, operations, outbound logistics, marketing and sales, and
service.

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Support activities "provide inputs or infrastructure that allow the primary activities to take
place on an ongoing basis" (Porter, 1986:14). Porter lists four support activities: firm
infrastructure, human resource management, technology development and procurement.

Discussing information management strategy implications in section 4.8, we argued that there
are "three major activities where value is added to information resources". These activities
were information acquisition, information processing and information distribution. They
constitute the primary activities in the information value chain.
As discussed earlier, information acquisition comprises the discrete activities of internal
and external environmental scanning as well as variety amplification and attenuation to
satisfy the organisation's information requirements optimally. Information processing is the
modification and synthesis of information resources thus acquired and comprises such
processes as filtering, sampling, noise reduction, etc. Finally, information distribution
includes sharing and dissemination activities.
In section 4.8, we identified knowledge management, information governance, human
resources and IT infrastructure as the secondary activities supporting information acquisition,
distribution and use.

Regarding information use, we consider it the ultimate objective of strategic information


management. The correct interpretation of information resources and their use in sense-
making must precede any decisions that increase information-based value for the
organisation, ie the destruction or creation of information asymmetries, or cost reduction.
Projected onto Porter's model (see figure 10), information use therefore constitutes the
"margin", while information acquisition, processing and distribution make up the primary
activities of the information value chain.

7.1.2 Linkages and value systems

Individual value chain activities do not exist in isolation, but depend upon and impact other
elements of the value chain. These relationships are called linkages - "the way one activity is
performed frequently affects the cost or effectiveness of other activities" (Porter, 1986:15).
Despite Porter's argument that competitive advantage springs from individual activities, it
is important to be aware of the way in which value chain activities influence each other. This
awareness can prevent decisions which lead to improvements in one area while affecting
others negatively. Also, it opens up the possibility of managing particular activities both
directly and indirectly (through related activities).
Linkages among value chain activities are not the only important value chain relationship.
In fact, an organisation's value chain is itself part of what Porter calls a "value system" - a

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larger stream of activities in which the organisation's value chain is embedded (Porter,
1986:15).
For the information value chain, this means that it must be seen as part of a system of value
chains. This is again an argument for strategic alignment - obviously, the better the
information value chain is integrated with other value chains in the system, the smaller the
risk of friction and inefficiencies.

7.1.3 Configuration and Coordination

Organisations can create competitive advantages by designing their value chains in unique
ways. Through the two dimensions of configuration and coordination, they can realise the
advantages that put them in front of their competitors.
Configuration describes "where (...) each activity in the value chain is performed" (Porter
1986:17) and there are essentially two options: concentration and dispersion. An organisation
with a value chain based on concentration will typically perform every activity in one
separate location, whereas an organisation applying dispersion will perform every activity in
every location.

Factors favouring concentration are:


• economies of scale
• learning
• comparative advantages
• coordination advantages

Factors favouring dispersion are:


• different local needs
• transport, communication and storage cost advantages
• favourable political environments

For the information value chain, the same applies. We discussed earlier the implications of
economies of scale, learning and coordination (transaction) costs (for example, see 5.2).
Organisations exploiting comparative advantages look for the cheapest location to perform an
information value chain activity. Regarding dispersion, organisations might be forced to
respond to local information requirements. Transport, communication and storage cost
advantages, as well as the political environment are factors that can be highly relevant to the
creation of information value.
For example, an organisation might choose to disperse one of its information acquisition
activities (for example, domestic market intelligence) based on local information
requirements. At the same time, it might try to the reduce costs of information processing by

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concentrating this value chain activity in a location with comparative cost advantages (for
example, by moving back-office information processing to India where skilled labour is
available at a relatively lower cost).
Finally, it is important to remember that "the balance between the advantages of
concentrating and dispersing an activity normally differ for each activity" (Porter, 1986:21).

8. Discussion

The underlying research question of this paper is: How can organisations create a competitive
advantage by taking a strategic approach to leveraging the value of their information. We
discussed the individual elements of this question - competitive advantage, strategic
approach, information value - through the looking glass of four different strategic domains:
information management strategy, organisational strategy, information systems strategy and
business strategy. In this final part of the paper, we will look at all of them in conjunction and
examine what logical conclusions can be drawn from the previous discussion.

8.1 A Framework for Strategic Information Management

Based on Michael Porter's value chain and our discussion of Choo's process model of
information management, Senge's five disciplines and Marchand's IT practice capability
framework, we suggest the following framework for strategic information management:

Figure 11: The Information Value Chain

Like Porter's value chain, the information value chain consists of primary and support
activities.

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Primary activities involve the direct handling of information resources in ways that
increase their value: information acquisition, information processing and information
distribution.
Support activities ensure that the primary activities can take place continuously and in the
most efficient way possible. The latter is an addition to Porter's definition of support
activities. While the support activities at the bottom of the information value chain illustration
(human resources and IT infrastructure; see figure 11) mainly focus on ensuring continuous
execution, the activities at the top (knowledge management and information governance)
focus on the additional aspect of ensuring execution in the most efficient way.

In the following paragraphs, we will discuss the content and implications of each activity.

8.1.1 Primary Activities

8.1.1.1 Information Acquisition

The first primary activity in the information value chain is conceptually similar to Choo's
view of information acquisition. It includes the totality of all environmental scanning
processes regardless of their purpose.
Information acquisition is especially important for identifying market trends, opportunities,
evironmental risks, internal process inefficiencies, customer preferences, demand patterns
and a host of other information resources that can be leveraged to create competitive
advantages.
Information technology can facilitate information acquisition. While benefits result from
greater speed and fewer errors, as well as huge amounts of processing capacity, information
overload might counteract these positive forces. It is therefore important to balance variety
amplification and attenuation in information acquisition. For this purpose, clear-cut policies
for information governance can prove extremely valuable.

8.1.1.2 Information Processing

Information processing includes all observable processes involving the modification or


synthesis of information resources acquired during environmental scanning. Examples of
such processes are sampling, filtering, noise reduction and formatting.
The value of information processing lies in the editing, preparation and representation of
information resources for specific purposes.
Like information acquisition, information processing is augmented throught the use of IT
and policies governing the ways in which information is processed (eg, formatted,
represented, stored and disposed of).

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8.1.1.3 Information Distribution

Information distribution encompasses all activities aimed at the dissemination and sharing of
information resources. Such activities could, for example, be e-mailing, training and
educational sessions, intra/extra-nets, online collaboration or the publication of content
through a website.
Information Distribution adds value based on the principle "Information is expensive to
produce, but cheap to reproduce". It can be especially useful in knowledge management,
enabling organisational members to share their expertise. Other typical areas of application
are marketing, internal and stakeholder communication.
Information technology in combination with information governance policies can also
facilitate this primary activity. While the technology enables the seamless and speedy
dissemination and sharing of information, policies regarding security, privacy, formatting and
compatibility can greatly improve the quality and integrity of the distributed information
resources.

8.1.2 Support Activities

8.1.2.1 IT Infrastructure

IT infrastructure comprises all back-end and front-end systems an organisations deploys.


These include storage devices, physical networks and computer hardware at the back-end, as
well as word processors, ERP software or customer relationship management systems at the
systems front-end.
An organisations IT infrastructure adds value through business process automation,
speedier information processing at higher quality and greater capacity. It thus reduces the risk
of human errors and the time spent performing these processes manually.
It is important that organisations align investments in IT infrastructure with their
information requirements - there should be a clear business reason for the deployment of a
certain IT.

8.1.2.2 Human Resources

Human resources activities include the likes of recruitment and selection, compensation,
training and development, career management, etc.
Human Resources add value by selecting and recruiting organisational members that
understand the importance of information and fit into the learning culture of the organisation.
The effective administration of compensation and incentives can also increase people's
willingness to share their tacit information resources.

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Generally, Senge's five disciplines provide valuable directions for selecting people who
will contribute to information value exploitation through a responsible attitude towards
information resources. As such, the human resources function also has a part in enacting the
organisation's culture and shaping the organisational information ecology.

8.1.2.3 Information Governance

Information Governance encompasses the policies and internal guidelines for handling
information resources - ie, their acquisition, processing, distribution, storage, security,
maintenance, disposal, etc.
The value of information governance lies in the development of common organisation-
wide standards for treating information resources based on the organisation's information
requirements. Organisations can thus avoid security issues, litigation because of non-
compliance with external regulatory requirements or compatibility issues and inconsistencies.
It is important to note that, as with all bureaucratic instruments, a reasonable balance has to
be struck between regulating information handling and actually obstructing it.

8.1.2.4 Knowledge Management

Knowledge Management as a support activity comprises processes with the objective of


identifying, externalising, representing and distributing information resources that exist in the
form of information-as-knowledge. This could be expertise, information about customers,
processes, competitors, etc.
The value of knowledge management lies in the transformation of tacit information
resources into manageable information products (Orna, 2006) and the resulting extension of
the organisation's information resource base. Furthermore, it facilitates individual and
organisation learning and affects efficiency gains due to the reduction of redundant activities
and duplications.
With respect to knowledge management, it is organisational culture and information
ecology that are important. Successful knowledge management requires above all the
willingness among organisational members to share their expertise and insights. IT can
greatly facilitate the externalisation, dissemination and sharing of information resources.

8.1.3 Information Requirements

As illustrated in figure 11, any analysis of the efficiency of a primary or support activity, or
action towards improving it should be preceded by a thorough information requirements
analysis. This analysis can be based on the five generic questions listed in our discussion on

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information needs and should be extended into a catalogue of questions that better suit the
immediate organsational setup.

8.2 Application and Perspectives

At the outset of this paper, we quoted The Oxford English Dictionary (2009) (OED) to define
a model as "a simplified or idealized description or conception of a particular system,
situation, or process (...), that is put forward as a basis for theoretical or empirical
understanding, or for calculations, predictions, etc."
Now that we have arrived at a model, this definition yields some important implications for
its application. We view the Information Value Chain model as a simplified, idealised
description of how information resources exist in organisations. On the one hand, this means
that in reality organisations may handle information in much more complex ways than the
model suggests. However, we believe that, in principle, the model covers all the information-
related activities that take place in organisations today. In this respect, it is also idealised -
which means that certain processes may also be entirely missing from organisational reality.
In terms of possible applications for the Information Value Chain, we therefore see it as an
analytical tool that allows managers working with strategic information management to
benchmark their organisational reality against the ideal suggested by research from different
domains, and provides them with a way of decomposing a complex problem into manageable
bits. Based on the OED definition we also see the Information Value Chain model as a tool
for measuring the efficiency of information-related processes and predicting up to a certain
degree the impact of actions towards their optimisation.
Perspectives for research are also based on the simplistic and idealised nature of the model.
Its components, the relationship between them and the underlying assumptions of the model
would have to be subjected to empirical testing.

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9. Conclusion

We set out to write this paper based on our view that information is a strategic asset that
needs proper managing. Our overall objective was the development of a framework for
strategic information management by answering the research question: How can
organisations create a competitive advantage by taking a strategic approach to leveraging the
value of their information? We argued that it was necessary to take an interdisciplinary and
holistic approach to managing information in organisations in order to capture accurately the
complexity of the topic. Based on this premise we proposed the diamond of strategic
information management to illustrate our view of what the discpline encompasses. The
diamond consisted of the four academic domains of business strategy, organisational strategy,
information systems strategy, information management strategy.
Based on our discussion of each domain and its relationship to information value, strategy
and competitive advantage, we created the information value chain model. Consisting of
several discrete activities, the information value chain is structured into such processes that
involve the direct handling of information resources in ways that increase their value
(primary activities) and process that ensure that the primary activities can take place
continuously and in the most efficient way possible (support activities). The individual
activities were: Information Acquisition, Information Processing and Information
Distribution (primary), as well as Knowledge Management, Information Governance, Human
Resources and IT Infrastructure (support). The final and most important element in of the
model was Information Requirements. Any analysis of the efficiency of a primary or support
activity, or action towards improving it should be preceded by a thorough information
requirements analysis.
We see the information value chain model as an analytical tool for managers and
researchers working with strategic information management.
Perspectives for future research are based on the simplistic and idealised nature of the
model. Its components, their dependencies and the underlying assumptions of the model
remain to be tested.

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