2 The Evolving Information
Systems Strategy
Information systems management
and strategy formulation:
applying and extending the
‘stages of growth’ concept
Introduction
For some time, reason has held that the organizational growth with respect to the use of Information Technology (IT) and the approach organizations take to the management and planning of information systems could be conceived of in terms of various, quite clearly defined, stages of maturity. Whilst there has been some criticism of the models that have been postulated, many view the various ‘stages of growth’ models as being useful in designating the maturity (in IT terms) of organizations. Four such ‘stages of growth’ models are described briefly below, i.e. those postulated by: (a) Nolan (1979); (b) Earl (1983; 1986, as amended by Galliers, 1987a, 1989*); (c) Bhabuta (1988), and (d) Hirschheim et al. (1988).
The Nolan model is perhaps the most widely known and utilized of the four – by both practitioner and researcher alike. Despite its critics, by 1984 it had been used as a basis for over 200 consultancy studies within the USA by Nolan, Norton and Company, and had been incorporated into IBM's information systems planning consultancies (Nolan, 1984); Hamilton and Ives (1982) report that the original article describing the model (Gibson and Nolan, 1974) was one of the 15 most cited by information systems researchers.
The Nolan model
Nolan's original four-stage model (Gibson and Nolan, 1974) was later developed into a six-stage model (Nolan, 1979), and it is this latter model which is most commonly applied. Like the models that followed it, it is based on the premise that the organizations pass through a number of identifiable growth phases in utilizing and managing IT. These ‘stages of growth’ are then used to identify the organization's level of maturity in this context, with a view to identifying key issues associated with further IT development.
Nolan posited that the growth phase could be identified primarily by analysing the amount spent on data processing (DP) as a proportion of sales revenue, postulating that DP expenditure would follow an S-curve over time. More importantly, however, it was claimed that this curve appeared to represent the learning path with respect to the general use of IT within the organization. As indicated above, the original four-stage model (Figure 2.1) was expanded into a six-stage model in 1979 with the addition of two new stages between ‘control’ and ‘maturity’, namely ‘integration’ and ‘data administration’.
Figure 2.1 Four stages of DP growth (amended from Gibson and Nolan, 1974; Earl, 1989, p.28)
The six-stage model is illustrated in Figure 2.2. As can be seen, Nolan indicates that, in addition to DP expenditure, there are four major growth processes that can be analysed to identify the organization's stage of maturity with respect to IT use.
1 The scope of the application portfolio throughout the organization (moving from mainly financial and accounting systems to wider-ranging operational systems, to management information systems).
2 The focus of the DP organization (moving from a centralized, ‘closed shop’ in the early stages to data resource management in maturity).
Figure 2.2 Nolan's six-stage growth model (amended from Nolan, 1979)
3 The focus of the DP planning and control activity (moving from a primarily internal focus in the first three stages to an external focus in the latter stages), and
4 The level of user awareness [moving from a primarily reactive stance (reactive, that is, to centralized DP initiatives) in the first two stages, to being a driving force for change in the middle stages, through to a partnership in maturity].
Nolan argues that the information systems management focus is very much concerned with technology per se during the earlier stages of growth, with a transformation point occurring at the completion of stage three, after which the focus is on managing the organization's data resources, utilizing database technology and methods.
As indicated earlier, the model has been criticized because it has not proved possible to substantiate its claims to represent reality, either as a means to describe the phases through which organizations pass when utilizing IT, or as a predictor of change (Benbasat et al., 1984; King and Kraemer, 1984). In addition, its focus on database technology clearly dates the model. Earl (1989), for example, argues that organizations will pass through a number of different learning curves with respect to different ITs, as illustrated in Figure 2.3. In addition, it is now clear that different parts of a single organization may well be at different stages of growth with respect to a particular IT.
Figure 2.3 Multiple learning curves (amended from Earl, 1989, p.31)
The Earl model
Unlike Nolan's model, Earl's concentrates attention on the stages through which organizations pass in planning their information systems. First described in 1983 (Earl, 1983), the model has been revised on a number of occasions (Earl, 1986, 1988, 1989). The version presented here is based on the two earlier versions, as amended by Galliers (1987a, 1989), bearing in mind Earl's own subsequent changes. As can be seen from Table 2.1, Earl illustrates the changing agenda for information systems planning by concentrating attention on what is seen as the primary task of the process: its major objective, the driving forces of the planning process (in terms of those involved), the methodological emphasis, and the context within which the planning takes place. Following research on current information systems planning practice, Galliers adds to this a supplementary early stage of planning (which is essentially ad hoc in nature) and an additional factor, concerning the focus of the planning effort. In the latter context, he argues that the focus has tended to change over the years from a predominantly isolated, Information Systems function orientation, through an organizational focus, to a competitive, environmental focus.
Earl's argument is essentially that organizations begin their planning efforts by the first attempting to assess the current ‘state of play’ with respect to information systems coverage and IT utilization. Increasingly, the focus shifts to management concern for a stronger linkage with business objectives. Finally, the orientation shifts to a strategic focus, with a balance being maintained in relation to the make-up of planning teams (between information systems staff, management and users), environmental and organizational information (with the likelihood of inter-organizational systems being developed, cf. Cash and Konsynski, 1985), and the range of approaches adopted (with multiple methods being accepted).
Table 2.1 Earl's planning in stages model (amended from Earl, 1986, 1988, 1989) and Galliers (1987a, 1989)
The Bhabuta model
Based on earlier work by Gluck et al. (1980), which proposes a four-stage process of evolution towards strategic planning, and a somewhat similar model of IT assimilation and diffusion postulated by McFarlan et al. (1982, 1983), Bhabuta (1988) developed a model which attempts to map the progress towards formal strategic planning of information systems. This is illustrated in Table 2.2.
Underpinning Bhabuta's argument is the contention that strategies based on productivity improvement (and the information systems needed to support them) ‘will become the dominant paradigm in the turbulent and fiercely competitive markets of the next decade’ (Bhabuta, 1988, p.1.72). His model is more widely focused than either the Nolan or Earl models, in that it attempts to bring together elements of, for example, strategy formulation, information systems, and the mechanisms by which the information systems function is managed. The value systems associated with each phase of the model are also identified (cf. Ackoff, 1981).
In interpreting the Bhabuta model, it should be noted that the categories used are not distinct nor absolute. With the maturing of IT utilization, and managerial sophistication with respect to IT, it can be expected that some of the attributes associated with, for example, Phase 3 and 4 organizations will emerge within Phase 1 and 2 organizations. This point takes account of some of the criticism of the Nolan model (Benbasat et al., 1984), which is itself based on earlier work by Greiner (1972), regarding the discontinuities that organizations experience in growth.
The Hirschheim et al. model
The Hirschheim et al. (1988) model also builds on the earlier work of Nolan (1979) and arises from research, undertaken during the first half of 1986, into the evolution and management of the IT function in a number of British organizations. As a result of this research. Hirschheim and his colleagues contend that in companies where top management had begun to realize that information systems are vital to their business, organizations move through three evolutionary phases in their management of the IS/IT function. The three phases are labelled ‘delivery’, ‘reorientation’ and ‘reorganization’ (see also Earl, 1989, p.197).
Table 2.2 Bhabuta's model linking the evaluation of strategic planning with information systems and the organization of the information systems function (amended from Bhabuta, 1988, p.1.76; Sutherland and Galliers, 1989, p.10)
|
Phase 1 |
Phase 2 |
Phase 3 |
Phase 4 |
Evolutionary phases of strategic planning |
Basic financial planning |
Forecast-based planning |
Externally oriented planning |
Strategic management |
Value System |
Meet the budget |
Predict the future |
Think strategically |
Create the future |
Competitive strategy mechanisms |
Operational level productivity and diffuse innovation |
Focused (niche) innovation and operational/tactical level productivity |
Focused innovation and strategic productivity (quality focus) |
Systemic innovation and productivity |
Led by |
Top management |
Top and senior management |
Entrepreneurial managers (top/senior/middle) |
Corporate-wide employees |
Application of IT/IS |
Resource management Efficient operations Transaction processing Exception monitoring Planning and analysis |
Effectiveness of divisional operations IT infrastructure Support key division makers |
IT-based products and services Communications network Direct competitive tool |
Inter-organizational IS (link buyers, suppliers, manufacturers, consumers). Facilitate organizational learning |
Formalized IS and decision making |
Processing of internal data |
Ad hoc processing of external data |
Systematic external data analysis |
Link tactical/operational activities to external data analysis |
Management of IT, location in hierarchy and scope |
Technology management Individual projects Middle management responsibility |
Formal planning of IS Data sharing and administration Focus on IT infusion Senior management responsibility |
Couple IT and business planning IT planning at SBU/corporate level Senior/Top management responsibility |
Systemic support of organizational processes IT planning at SBU/portfolio level Top management responsibility |
The ‘delivery’ phase is characterized by top management concern about the ability of the IS/IT function to ‘deliver the goods’. Senior executives have begun to take the subject very seriously, but there is often dissatisfaction with the quality of the available information systems and the efficiency of the IS/IT function, together with mounting concern regarding IT expenditure and the consistency of hardware and infrastructure policies. It would appear that often this phase is initiated by replacing the DP manager with an external recruit with a good track record and substantial computing experience.
The emphasis in this phase is on the ‘delivery’ of information systems and, accordingly, the newly appointed IS executive spends most of the time on matters internal to the IS department. The primary role is to restore credibility to the function and/or to create confidence in user/top management that the function really is supporting current needs and is run efficiently. During this phase, IS education is sparse, but where it is provided, it is targeted on DP personnel with a view to improving skills, techniques and project management.
In the ‘reorientation’ phase, top management (or the Director ultimately responsible for IS) changes the focus of attention from the delivery of basic IS services to the exploitation of IT for competitive advantage. An attempt is made to align IS/IT investment with business strategy. In short, it is in this ‘reorientation’ phase that ‘the business is put into computing’. With this change of direction/emphasis, it is common to appoint an IS executive over the DP Manager. The new post is filled, typically, by an insider: a senior executive who has run a business unit or been active in a corporate role, such as marketing or strategy formulation. They are likely to have only limited experience of DP, but are respected by top management for an ability to bring about change. The focus during this second phase is on the marketplace; on the external environment of the enterprise; on using IT for competitive advantage, and in extending the value chain through inter-organizational systems (cf. Cash and Konsynski, 1985).
In the ‘reorganization’ phase, the senior IS executive (by now the IT Director) is concerned with managing the interfaces or relationships between the IS function and the rest of the organization. Some areas will be strategically dependent on IS, others will be looking to IS more in a support role. Some will have significant IT capability, particularly with the advance of end-user computing, and some business executives will be driving IT and IS development. Increasingly IS will be managed along ‘federal’ lines (Edwards et al., 1989) with IS capability in the centre and in business units/functions. These changed and changing relationships require careful management and often ‘reorganization’, and once again attention is focused on internal (organizational), as opposed to external (marketplace), concerns.
Table 2.3 The Hirschheim et al. model of changing considerations towards information systems management (amended from Hirschheim et al., 1988, p.4.33; Sutherland and Galliers, 1989, p.11)
Phase/factor |
Delivery |
Reorientation |
Reorganization |
IS executive |
External IS recruit |
Inside business |
Same person |
Leadership |
The board |
The function |
Coalition |
The concerns and considerations associated with each of the phases of the Hirschheim et al. model are summarized in Table 2.3.
Towards a revised ‘stages of growth’ model
The major inadequacies of the early Nolan models relate to their lack of organizational and management focus, and the overly simplistic and subjective assumptions on which they were based. More importantly, they provided little help for the beleaguered DP manager attempting to create a successful IS function within the organization. This, as has been demonstrated, has been remedied in part by the subsequent work of Earl, Bhabuta and Hirschheim et al. In all but the latter case, however, the models described how an organization could place itself within a particular stage of IT planning maturity, rather than describing what is needed to be done in order to progress through to the more mature stages of growth.
The models that have been discussed thus far describe elements (technical, managerial and organizational) in the growth of ‘computing’ within an organization. Were these to be arranged and combined with a structure describing the important elements of an organization generally, then a model depicting the kinds of activities and organizational structures needed for an enterprise to move through IT growth stages (a more comprehensive and useful model) would result.
Such a model, dealing as it would with the growing maturity in the management and use of IT in an organization, would indicate how an organization might develop its use of the technology and its organization of the IS function. However, a means has to be found of bringing together a range of key elements associated with the operation and management of an organization generally in order that the revised model could be developed.
Table 2.4 The Seven ‘S's (Pascale and Athos, 1981, p.81)
Strategy |
Plan or course of action leading to the allocation of a firm's scarce resources, over time, to reach identified goals |
Structure |
Characterization of the organization chart (i.e. functional, decentralized, etc.) |
Systems |
Procedural reports and routine processes such as meeting formats |
Staff |
‘Demographic’ description of important personnel categories within the firm (i.e. engineers, entrepreneurs, MBAs, etc.). ‘Staff’ is not meant in line-staff terms |
Style |
Characterization of how key managers behave in achieving the organization's goals; also the cultural style of the organization |
Skills |
Distinctive capabilities of key personnel or the firm as a whole |
Superordinate goals |
The significant meanings or guiding concepts that an organization imbues in its members. |
After some considerable literature searching, the so-called Seven ‘S's used by McKinsey & Company in their management consultancy (Pascale and Athos, 1981) were used to assist in the development of the model. The Seven ‘S's used in analysis of organizational processes and management are summarized in Table 2.4.
Research method
As a first step, the elements of each of the Seven ‘Ss’ were considered in the context of each stage in the growth of IT utilization and management, according to the models described. In other words, a description of each of the ‘S’ elements was attempted in terms of the IT function and the provision of IT services generally, rather than the organization overall. Following a description of each of the ‘S’ elements in each stage of the model, an indication of what might be done to move into the next stage of the model can be provided. These indicators are based on what constitutes the Seven ‘S's in the next stage.
Having produced a tentative model, it was then applied to four Perth-based organizations, and amendments made. The approach was to interview four or five senior executives from different areas in each of the organizations studied. These executives were, typically:
(a) the Chief Executive Officer, or the Deputy
(b) the Head of a Strategic Business Unit (SBU)
(c) the IT Director, or Head of the IS function
(d) the Head of Corporate Planning, or equivalent.
In some instances, for example, where the particular circumstances warranted broader coverage, more than one SBU head was interviewed. The interviews focused on the experiences of each organization in planning, managing and utilizing IT, and on their preparedness to utilize IT strategically. As a result of these interviews, the tentative model was continually refined and each organization eventually assessed in the context of the revised model. As a result of this assessment, conclusions were drawn as to what steps each organization might take (in relation to each of the Seven ‘S's) in order to move on to later growth stages.
Since then, the model has been ‘tested’ by numerous participants at conferences and short courses, and by clients both in the UK and Australia. As a result it has been further refined.
Revised stages of growth model
The growth in IT maturity in an organization can be represented as six stages, each with its particular set of conditions associated with the Seven ‘S's. These stages are described in Table 2.5.
Table 2.5 Stages of IT growth in organizations (Sutherland and Galliers, 1989, p.14)
Stage |
Description |
One |
‘Ad Hocracy’ |
Two |
Starting the foundations |
Three |
Centralized dictatorship |
Four |
Democratic dialectic and cooperation |
Five |
Entrepreneurial opportunity |
Six |
Integrated harmonious relationships |
The following sections describe each of the stages in the model in detail, using each of the Seven ‘S's as a basis for the description. Each of the elements constitute an important aspect of how the IT function within the organization might operate at different stages of growth. The stages described are not intended to include any overt (nor covert) negative overtones associated with the early stages of the model. Some of the descriptions may appear to paint an uninviting and somewhat derogatory picture of IT utilization and management within organizations during earlier stages, especially in relation to the DP personnel involved. This is primarily due to the fact that the earlier stages tend to represent a historical perspective of how organizations first began to ‘come to grips’ with IT. Conversely, the latter stages are essentially a distillation of what are currently considered to be the best features of IS management as organizations begin to utilize IT more strategically.
In the past, few in the DP/IT profession paid much attention to the subtle organizational and psychological aspects of implementing and managing IT within organizations. The same could be said of management. Computing was seen as essentially a technical, support function for the most part. The situation is not quite so parlous at the present time, but some DP professionals still exhibit this type of behaviour, despite the increasing concern for IS professionals to exhibit ‘hybrid’ (i.e. a combination of managerial, organizational and business skills in addition to technical expertise) qualities (BCS, 1990).
Even with very aware DP staff, organizations will still display symptoms of the early stages. Indeed many aspects of the early stages, if implemented correctly, are actually quite important foundations. Correct implementation of IT during the early stages of development may well mean the difference between success or failure during the later stages of an organization's IT development. Indeed, organizations that attempt to move to later stages of the model too soon, without laying the appropriate groundwork of the earlier stages, are more likely to be doomed to IT failure.
Stage 1 ‘Ad hocracy’
Stage 1 of the model describes the uncontrolled, ad hoc approach to the use of IT usually exhibited by organizations initially. All organizations begin in Stage 1. This is not to say that all organizations remain in Stage 1 for any length of time. Some move very quickly to later stages. This may occur through pressure being exerted by a computer vendor, for example, actively attempting to push the client organization into a later stage of maturity.
Strategy
The major (only) strategy in this stage is to acquire hardware and software. Acquisition of IT staff and development of IT skills throughout the organization are for the most part disregarded by management in this initial start-up phase. There is a desire for simple applications to be installed, typically those relating to controlling financial aspects of the business (i.e. accounting systems). The ‘strategy’ normally employed at this stage is concerned with the acquisition of standard packages and, in many instances, external suppliers may be contracted to develop specific applications, rather than in-house applications being attempted (which would have been the norm prior to the 1980s).
Structure
There is no real organizational structure associated with IT in this stage. IT is simply purchased and installed wherever someone (usually with sufficient purchasing power) requires it to be used. As expenditure on IT represents a relatively large capital outlay for the typically small organizations currently at this stage of development, the CEO/owner is usually actively involved in purchasing. Little thought is given to the organizational impact of the IT, nor to the infrastructure necessary to manage its acquisition and use.
Systems
Any systems development that takes place during this stage tends to be ad hoc. Systems are most often unconnected (i.e. developed and operated in isolation). Development and operation of systems is uncoordinated, whether this is across the organization as a whole or within the area requiring the application. Systems tend to be operational in nature, concentrating on the financial aspects of the organization, rather than its core business. The ad hoc approach to development and use of information systems results in many being located within, and supporting, just one functional business area. Most of these systems will overlap and are inconsistent in operation and output. Manual systems are typically retained to ‘backup’ the computerized systems. Systems tend to cover only a limited aspect of the range of work required of the individuals within the area concerned.
Staff
IT staff typically consist of a small number of programmers. A number of programming staff may be employed, but often external contractors are used. Purchase of packaged software means that very few internal IT staff are deemed to be required.
Style
The predominant style associated with the utilization of IT in this stage is that of being unaware and, more significantly, unconcerned with being unaware. IT operates in a virtual vacuum, with almost total disregard as to how it will affect the organization, its processes and human resources. From the IT personnel perspective, the only issues that appear to be of any relevance are technical ones: nothing else is of significance so far as they are concerned. Much of this style can be attributed to the use of external contractors as IT staff. These external contractors will typically show little interest in the organization they are contracted to (they will not be there that long, and their future advancement does not depend on the organization or its management).
Skills
The skills associated with IT use tend to be of a technical nature and rather low level at that. The accent is well and truly on technology, as opposed to organizational, business or informational issues. Skills are individually based: while certain staff have or develop particular skills, these are jealously guarded from others. The only IT skills gained by user personnel relate very specifically to particular applications, whether this is a package or a bespoke development. Computers and computer applications tend to be so arcane that non-IT personnel find it extremely difficult to gain the requisite skills to be able to use the few systems that do exist. IT training provided by organizations in Stage 1 is virtually non-existent.
Superordinate goals
Given that very few people working in Stage 1 organizations have a clear conception of what is happening in the IT area (including the IT people themselves), it is difficult to ascribe a set of superordinate goals to this stage of the model. At best, one might describe these as being concerned with obfuscation. IT personnel typically keep whatever they may know and do hidden from those they are supposed to serve, either by design or through ignorance or misguided elitism (mostly the latter). A more unkind evaluation (although possibly a more accurate one!) would suggest that the practitioners in this stage are not capable of formulating well-constructed superordinate goals.
Stage 2 Starting the foundations
Stage 2 of the model marks the beginning of the ascendancy of an IT ‘priesthood’ in the organization.
Strategy
In this stage, the IT staff (for there is now a permanent cadre of such staff) attempt to find out about user needs and then meet them. This is the era of the IT Audit (cf. Earl, 1989), i.e. simply checking what has and is done, with the future seen simply as being a linear extension of the past. As indicated above, some systems have been installed in Stage 1 (typically packages), and these relate mostly to basic financial processes. Organizations in Stage 2 now concentrate on developing applications associated with other areas of the business. Although the emphasis is still on financial systems, they are now not so narrowly constrained. They are, however, still very much operational systems. No effective planning is performed, even though the IT staff may claim that they do at least plan their own work. What planning is undertaken is usually part of an annual budgetary process. The ‘bottom-up’ nature of ascertaining computing needs and the lack of adequate planning lead to the perception of a large backlog of systems still to be built, and demands for major increases in DP spending.
Structure
This is the first stage when a separate IT section within the organization is recognized. This section is given various names, but it is typically located under the Finance or Accounting function, as it reflects the main emphasis of IT applications within the organization. The IT section is still quite small, and provides limited services to the broad range of functions in the organization. The growth of internal IT staff usually heralds an era of reducing reliance on outside assistance. The internal IT staff now attempt to gain control of IT matters within the organization and do not usually welcome ‘outside’ interference.
Systems
Many more applications are developed (or purchased) and installed in the organization during this stage. Whereas Stage 1 may usually be quite short lived, Stage 2 may continue for quite some time. Early on, managers and staff in the organization begin to see computerized applications being installed after what may have been quite a lengthy period of waiting. This early delivery of applications provides an initial boost to the credibility of the IT function, thus lulling them and the rest of the organization into a false sense of security. The self-image of an important and powerful ‘priesthood’ is reinforced. Even though applications are being installed at a greater rate than previously, there are still substantial gaps in computerization in Stage 2 organizations. At the same time, many of the applications tend to overlap in purpose, function and data storage. Development and operation of applications is invariably centralized, spawning the development of the ‘computer centre’, and its attendants. Applications remain operational in nature, once again with the concentration being in the financial area, but with some other core business-orientated applications being attempted (although rarely completely implemented to the satisfaction of the end-user). The ad hoc and unprepared nature of going about building the first systems (in Stage 1 and early in Stage 2) also leads to a large maintenance load being placed on the IT section. This large maintenance load invariably leads to a growth in the number of IT staff. Usually this occurs in an uncontrolled manner, and leads, as this stage progresses, to a slowing of the pace in which new systems are developed.
Staff
This stage heralds the appearance of a DP Manager, who usually reports to the Financial Controller or equivalent. Apart from the programmers inherited from Stage 1, the DP Manager will be joined by Systems Analysts and Designers: people charged with the responsibility of ensuring that they have adequately understood the requirements of the ‘user’ and of designing appropriate systems.
Style
The predominant style of the IT staff in this stage is one of ‘don't bother me (I'm too busy getting this system up and running at the moment)’. The pressure really is on these staff, and they show it. Their orientation is still technical. They assume that whatever they are doing is what they should be doing to assist the organization. Their job is to go about building the system as quickly as possible, and as technically competently as possible. Involvement with other staff in the organization, especially when these others attempt to be involved in building systems, is not welcomed, since users ‘keep changing their minds about what they want’. In other words, the IT staff do not appreciate the changing nature of information needs at this stage (cf. Land, 1982; Oliver and Langford, 1984; Galliers, 1987b).
Skills
Rather than purely technical skills associated with the programming and installation of computing equipment, the IT staff now concentrate on skills associated with building and installing complete systems for the organization. Thus, expertise in systems development methodologies, structured techniques and the like become important at this stage.
Superordinate goals
There is now a cohesive set of superordinate goals shared within the IT function, concerned with the primacy and (in their terms) the inherent appropriateness of technological developments. The predominant situation elsewhere in the organization would be one of confusion, however. Many people are doing many things, but nobody quite knows exactly what is going on, and the whole picture of IT use in the organization is only dimly perceived.
Stage 3 Centralized dictatorship
Strategy
Stage 3 attempts to right the imbalances caused by the ad hoc nature of developments in Stage 1 and the ‘blind’ rush into systems of Stage 2. The need for comprehensive planning is recognized and embraced wholeheartedly by some (usually powerful) members of the management team (including some IT staff). IT is under central control up to this stage, but it is actually out of the control of those who are supposedly ‘controlling’ it. The answer is perceived to be in planning, and typically top-down planning. There is an awareness that many of the systems developed thus far do not actually meet real business needs. There is general recognition that IT should support the organization (rather than the converse) and as such, all IT development must be somehow linked to the corporate/business plans in a fundamentally linear manner. Thus, the overriding strategy is to ensure that a top-down, well-documented IT plan is put into place, from which future IT developments will emanate, and against which further development initiatives will be gauged.
Structure
A comprehensive DP department is incorporated into the organization at this stage. It is centralized, with all ‘official’ IT power invested in the department and its head (still the DP Manager). The latter may still report to the Financial Controller (Vice President Finance), but their standing in the management team will have grown slightly, although they are still treated as a technical person, and are not usually asked to participate in making ‘business’ decisions. Senior management have tended to renege on their responsibility to manage and control IT. This may be due to a number of factors, not the least being their almost total lack of understanding of IT, and in many instances, their unwillingness to begin to attempt to understand it. This attitude has then excluded DP staff from the organization's ‘business’ decision-making process, even though they may have wanted to participate, or may have been capable of making a positive contribution. The attitudes of Stage 2 are further developed in Stage 3, leaving a legacy which causes the DP Manager some discomfort. ‘End users’ have had some experience with IT for some time now and feel restless under the autocratic centralist regimes of the DP department. Typically, the DP Manager (and others in the department) will tend to ignore ‘end users’: in some instances letting them run free to do whatever they think fit (cf. Stage 1), but more likely attempting to exercise light control over any end-user developed system, with consequent ill feeling. The DP Manager and the DP department become out of touch with the ‘ordinary’ user in the organization, and problems in implementation and acceptance of systems developed centrally continue to manifest themselves.
Systems
Most systems are centrally developed, installed, operated and controlled by the DP department. By this stage, DP staff have implemented systems to cover most major operational activities in some form or another (they may not meet all the needs of the users, but they none the less operate in major business areas). At the same time, there are a number of systems which have been put together by end users in an uncontrolled, uncoordinated manner. These systems exhibit all the problems associated with Stage 1 developments, with the further difficulty that they have not been developed using technical expertise, and do not include all the elements that ensure a well-maintained ongoing success for the system in the future. For example, system security is a major problem here. When these systems fail (which they do regularly), the end users typically lay the blame at the feet of the DP Department and demand that they (the DP Department) fix and maintain the system.
Staff
Not only does the DP Department retain (and increase) the previous complement of staff (programmers, analysts, designers), but it grows further, with the addition of Information System Planners, and Database and Data Administration staff. Towards the end of this stage, the DP Manager may have a change in title to that of Information Systems/Technology Manager or the like. Similarly, the DP Department may be renamed the Information Systems (or Technology) Department.
Style
The predominant style at this stage is one of abrogation (or at least, delegation) of responsibility, from the DP department to other people in the organization, usually the end user. The view taken is that the latter can do whatever they like as regards IT acquisition and IS development – so long as they pay for it. The DP personnel see it as the users’ problem if one of their systems malfunctions or fails. Similarly, the DP Manager will look to senior management for direction, requiring management commitment and guidance for new developments. Also, senior management of the organization have abrogated their ultimate responsibility for IT within the organization to the DP manager and personnel, despite the fact that they are becoming concerned about control and performance problems with IT.
Skills
Apart from the skills gained through the previous two stages, the major skill demonstrated in Stage 3 is that of project management. Those projects that are centrally instigated are normally well controlled, following strict project management guidelines. The major emphasis is to ensure that the systems that are to be built are built on time and within budget.
Superordinate goals
At this stage, the principal overriding values are those of senior management concern with the IT function. Senior management have seen substantial money invested in IT over the period of the first two stages and are now justifiably concerned about whether they will see an adequate return on its investment. As a result, they begin to attempt to ensure that this is achieved. The DP Department becomes defensive about adverse comments regarding how well it is performing, and often expresses how difficult it is to perform well, given the complexities and competing demands.
Stage 4 Democratic dialectic and cooperation
Strategy
The conflicting forces concerned with gaining centralized control and with the move towards end-user computing of the previous stage, has left IT in a state of disarray, with little coordination between the DP department and those using the technology. Thus, the emphasis of Stage 4 is towards integration and coordination. DP thus moves out of its defensive ‘ivory tower’ posture, into the real world turmoil of the business organization.
Structure
The emphasis in Stage 4 moves towards bringing all users back into the fold. In practice this means that the previously centralized DP department becomes a little more decentralized, with the addition of Information Centres, integration of Records Management, Office Automation (Word Processing) and Library Services to a group now known as the Information Systems or Information Services Department. The Information Systems (or Services) Manager (previously the DP Manager) often moves up a rung in the organizational structure (at the Vice President level or just below), and this often involves a change in title. The new title may be Information Resources Manager or, more commonly in America, the Chief Information Officer (Sobkowich, 1985). In many instances, a new manager is appointed as Information Systems Manager. The incumbent DP manager is overlooked, and is sometimes replaced (cf. Hirschheim et al., 1988). The new IS Manager typically has more widespread business management experience, and may well not hail from the IT area. This new manager may come from another part of the organization, or may be recruited from external sources.
Systems
The organization now adopts a ‘federal’ approach to information systems management and development (cf. Edwards et al., 1989). Line departments may (and usually do) gain control over the deployment of IT within their department. This results in miniature DP Departments spread throughout the organization. These exhibit characteristics of Stage 2 maturity. In Stage 4, Systems Analysts are now called Business Analysts. They know more about the business of the line department, but they perform much of the same role as the Systems Analyst of old. The Information Services Department now coordinates the use of IT throughout the organization and suggests methods which the separate DP departments should follow. Office Systems are now installed in an integrated and coordinated manner throughout the organization. Previously, they were implemented on a stand-alone basis, with no regard to integration considerations. Some Decision Support Systems (DSS) are attempted, but more often than not in an ad hoc manner. The organization is just coming to grips with working together with IT (rather than disparate groups pulling against each other), but a coordinated approach to DSS development through the organization is not as yet a reality.
Staff
As mentioned above, the traditional DP staff of analysts, designers and programmers are joined by Business Analysts. These staff are actually employed by the line departments they serve, but must closely interact with the rest of the DP department personnel. A higher level manager for the Information Services area is installed in the organization, usually at the Vice President level (or just below), as indicated above.
Style
The mood of the previous stage (defensiveness) has now changed to one of cooperation and collaboration. The Head of IT is deliberately chosen as being a person who can ensure that IT works in conjunction with, and to the benefit of, the rest of the organization. One of the major tasks allocated to this manager is to instil this sense of cooperation throughout the IT organization. This task is characterized by skills associated with a democracy. A dialectic is initiated and established throughout the organization for all IT-related issues. The dialectic ensures that proper understanding and cooperation are developed and maintained between IT staff and the rest of the organization. The dialectic can result in some constructive confrontation. Many IT personnel employed during the previous stages may be ill-equipped to handle this type of situation, and thus may be replaced or retrained.
Skills
The skills required of IT personnel in moving from Stage 3 to Stage 4 change dramatically. Although technical capabilities are still required, they are de-emphasized in relation to business skills, and to the overriding need for them to fit in with the rest of the organization (Galliers, 1990). Organizational integration is a major theme, with improved understanding between IT and other organization staff being the result. The IT function gradually gains an understanding of how the business works, and users finally gain a proper insight into IT-related issues. The IT function also gains some business-oriented management for its area, as opposed to the technoprofessional (isolated, defensive) attitude taken in the previous stages.
Supordinate goals
Cooperation is the prevailing attitude throughout Stage 4. All areas in the organization now attempt to gain an understanding of other areas and to work together for the common good and towards a common goal or set of related goals. This is possible only because of the intensive top-down planning work performed in Stage 3 (and carried through into Stage 4). Without the extensive and rigorous planning having been performed earlier, the gains made through the initiation of a dialectic could well be ephemeral.
Stage 5 Entrepreneurial opportunity
At last, the IT function is at the stage of coming out from under the burden of simply providing supporting services to other parts of the organization and can begin to provide a strategic benefit in its own right. The major operational systems are now in place, running relatively smoothly, and providing the opportunity to build strategic systems based on the foundations provided by these operational systems.
Strategy
The predominant strategy at this stage is actively to seek opportunities for the strategic use of IT, to provide a competitive advantage for the organization. This strategy involves substantial environmental scanning. The forces driving IT are predominantly outward looking, with internal operations successfully delegated to other managers.
Structure
Rather than comprising a relatively fixed structure, be it centralized or decentralized, coalitions are now formed between IT and business units in the organization. The ‘federal’ organization has come of age. Many coalitions are formed, each of them separate, but fitting within the overall plans of the organization, and driven by strategic, corporate (and subsidiary IT) plans. These strategic coalitions flow relatively freely into and out of existence, allowing the organization to respond to changing environmental pressures more readily. The necessary infrastructure (combining elements of both centralization and decentralization) has been put into place in the previous stages to ensure that these fluid coalitions do in fact operate as required, and produce results, both in the short term and the long term (i.e. from a maintenance and an enhancement point of view).
Systems
Systems are now more market-orientated than before. IT is used in an attempt to add value to organizational products and services. This factor, combined with the coalition aspect of the organizational structure in this phase, means most new systems are basically decentralized but with proper central coordination and control. Systems intended to provide a strategic advantage to the organization or to a business unit are developed in this stage. Most of these systems rely heavily on gathering and processing external data in addition to internal data. But in most instances, there is still a distinct lack of real integration between external and internal data. Decision Support Systems (DSS) for senior staff are developed and implemented at this stage. These DSS are possible only because necessary operational systems are in place and integrated appropriately. Most staff have had enough experience associated with IT to be able to specify effectively and use DSS and other Executive Information Systems (EIS).
Staff
The new role at this stage is that of a combined Business and Information Systems Planner. These people are responsible for recognizing and planning for strategic information systems, for the organization as a whole and for individual business units. They have had some years’ experience, both in the business (or very similar businesses), and in the IT area (cf. the ‘hybrid’ concept). They may have come from either area, but are definitely cross-disciplinary.
Style
The predominant style is that of the Product Champion, the rugged individual who conceives of a good idea and pushes it through the necessary approval procedures in order to get it off the ground and working. In this case the idea is for information systems that will lead to a strategic advantage for the organization. Such systems are typically very hard to justify on a standard cost–benefit analysis basis. They require the whole-hearted support of powerful members of the organization to ensure that they are implemented (and even then, they run the risk of being stalled in mid-development).
Skills
This is the stage where IT moves out of the era of being a second string service and support unit, into being an integral part of the successful operation of the organization. The skills required to manage this transition are those of a senior executive. Entrepreneurial and marketing skills within selected IT personnel are also the basic requirements for ensuring success in this stage. Very knowledgeable IT users become quite commonplace. Successful organizations use these people to their full potential, as there is no longer any defensiveness about users acquiring in-depth knowledge about IT use.
Superordinate goals
Opportunity is pre-eminent during this stage. An entrepreneurial (as well as intrapreneurial) attitude is positively encouraged. Everyone is willing to identify and act on opportunities for strategic advantage.
Stage 6 Integrated harmonious relationships
Stage 6 is now reached, the dawning of a new age of sophistication and use of IT. At this stage, one notices harmonious working relationships between IT personnel and other staff in the organization. IT is deeply embedded throughout every aspect of the organization.
Strategy
During this stage, management is concerned with maintaining the comparative strategic advantage that has been hard won in the previous stage(s). This involves a constant reassessment of all uses of IT, both within the organization and in its marketplace(s). Cooperative strategies (strategic alliances) are also in place. Interactive planning, involving monitoring both likely futures as well as present circumstances (cf. Ackoff, 1981), is the focus of strategy formulation.
Structure
The strategic coalitions between IT and business units were somewhat separate and relatively uncontrolled in the previous stage. In this stage, however, they are now centrally coordinated (although not necessarily ‘controlled’ in any strict sense). An overall corporate view is integrated with the individual business unit views (both the operational and the IT viewpoint).
Systems
Building on the outward-looking strategic systems of the previous stage, IT now embarks on implementing inter-organizational systems (with suppliers, customers, government, etc.). New products and services may now be developed which are IT-based (rather than the technology being first a supporting element).
Staff
During this stage, the IT Head becomes a member of the Board of Directors. This is not a token measure for providing the occasional piece of advice when asked, but rather, as a full member of the Board, the IT Head will play an active part in setting strategic directions. Strategic decisions will then have the required IT element when appropriate from the very beginning, rather than as an afterthought.
Style
The style is now one of interdependence, with IT being but one part of the business team, working together towards making and keeping the organization successful.
Skills
All the skills required of a member of a Board, together with being a senior manager who understands IT and its potentialities, as well as the business, are necessary at this stage. And in keeping with the team approach, IT personnel are very much in tune with the needs and aspirations of the strategic business units with which they work.
Superordinate goals
Interactive planning, harmonious relationships and interdependent team work are the predominant values associated with this stage. The internal focus is on collaborative IT initiatives between groups, brought together to develop strategic information systems products. The external focus is on strategic alliances utilizing shared information systems, and the value chain is extended to include suppliers and customers.
This revised ‘stages of growth’ model is summarized in Table 2.6.
Application of the revised model
Application of the revised model in the context of the four Perth-based organizations is described in more detail elsewhere (Galliers and Sutherland, 1991). In this context, however, and in subsequent applications, the model has proved useful not only in clarifying the location of each organization in IT maturity terms, but also in providing insights into aspects of IS management and planning which appear to require particular attention. Specific insights into the model's application include the following:
1 Any organization is likely to display characteristics associated with a number of stages for each of the Seven ‘S’ elements. It is unlikely that any particular organization will find itself entirely within one stage. In addition, it is most likely that different parts of a single organization will be at different stages of growth at any one time. Use of the model in this context provides management with insights into areas/elements requiring particular attention.
2 Elements in early stages of the model must be adequately addressed before related elements in later stages are likely to be successfully undertaken. For instance, Decision Support Systems (DSS) or Executive Information Systems (EIS) are extremely unlikely to be effective without the right kind of basic operational systems/databases in place. Furthermore, an organization simply trying to overcome the large backlog and heavy maintenance load of systems (associated with Stage 2) is unlikely to be able to develop substantial strategic information systems, without further development in, for example, skill levels and planning approaches.
3 Organizations do not need to work slavishly through all the elements of each stage, making the same mistakes as many organizations have done in the past. For example, ‘young’ organizations can make effective use of top-down information systems planning to circumvent some of the pitfalls associated with this aspect of the first two stages. Typically, however ‘skipping’ portions of the model can only be successfully accomplished when the senior management of the organization has already experienced the conditions that affect performance in the earlier stages, and thus understand the benefit/advantages of following ‘correct’ procedures.
Table 2.6 A revised ‘stages of growth’ model (Sutherland and Galliers, 1989, p.23, reproduced in Galliers, 1991, pp. 61–62)
4 The positive aspects of earlier stages of the model are not discarded when moving through to the later stages. More ‘mature’ organizations will incorporate those elements from all proceeding stages to the degree that they are consistent with the later stages. Thus, organization at Stage 5 will still perform Information Systems Planning, they will still have a DP function (of sorts) and will be likely to require Information Centres. The more mature organization will be flexible enough to determine the most appropriate nature of IT use and organization, rather than blindly following the structures and procedures adopted by other organizations.
5 To be effective, organizations should consolidate in most elements up to a particular stage, and then select certain key elements (in accordance with their own planning critiera/priorities), which they should then address in moving to the next stage. Indeed, all elements should be addressed in order to pass more smoothly on to the following stage.
6 It is not necessarily the case that organizations will develop automatically towards the more mature stages. Indeed, it has been found that organizations move ‘backwards’ at times, as a result of a change in personnel or managerial attitudes, see Galliers (1991) for example. Furthermore, it has proved useful at times to chart the development of the organization over a period of time by identifying when (i.e. in what year) each particular stage was reached.
The model has been found to be particularly useful in that it takes a holistic view of information systems management issues, dealing as it does with the development of information systems applications and information systems planning/strategy formulation, the changing nature of required skills, management style/involvement, and organizational structures. While the model cannot pretend to give all the answers, it does provide a framework which enables appropriate questions to be raised when setting out an appropriate strategy for information systems, giving pointers as to what is feasible as well as desirable in this regard.
Further testing and refinement of the model is taking place, but after two years of application, the authors are confident that the model is sufficiently refined to provide both IT and general management with a usable and useful framework to assist in the task of marshalling their IT resources in line with business imperatives.
While one might argue with the precise detail of the contents of each element at each stage of the model, this does appear not to affect the utility. Its key contribution is in focusing management attention onto a broad range of issues associated with the planning and management of information systems, in surfacing assumptions and attitudes held by key executives about the role IT does and might play in achieving/supporting business objectives and thereby enabling a shared understanding/vision to be achieved, and (most importantly) providing an easily understood means of putting IS/IT management on the senior and middle management agenda.
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Questions for discussion
1 The authors, in describing the Nolan model, state that ‘different parts of a single organization may well be at different stages of growth with respect to a single IT’. What implications does this have for the management of IT and for IT strategy?
2 The authors describe several prior models to IT evolution in organizations. What are the relative strengths of the models in (a) their applicability to describe actual situations, and (b) in their usefulness for managers of IT?
3 Do you agree with the underlying assumption that moving through the stages represents a desired advancement in the use of IT in an organization?
4 Can you think of some contextual factors that might predict in which phase an organization would be placed regarding their management of IT and whether they move slowly or quickly through the phases?
5 What implications does the increasing pace of technology advances and the increasingly networked world have for the revised stages of growth model?
* Galliers, R. D. (1989) The developing information systems organization: an evaluation of the ‘stages of growth’ hypothesis, paper presented at the London Business School, January 1989.