Strategic Responses to Changes in Information Technology

Abstract

Strategic decisions are long-term choices about the goals, activities, and structure of an organization. An organization's strategy is shaped by its resources, by the technology associated with its activities, and by its economic and political environment. An ideal strategy is responsive to changes in these factors yet stable in the general direction it provides for resource use. Finding an appropriate balance between stability and change is a difficult and important challenge. Rapid change in any of the key determinants of an organization's strategy can disturb the balance between stability and responsiveness. One area of technology that has experienced particularly rapid, sustained change over the past two decades is information technology. Advances in hardware, software, and telecommunications have dramatically reduced the cost of collecting, storing, processing, and transmitting data and information. Computers are now affordable enough to be used extensively in organizations of all sizes. Equally impressive advances in data storage technology, database management software, and telecommunications systems make data collected in organizations more accessible. They have also been the basis for rapid growth in commercial data services (King) and for the establishment of shared information systems such as that based on the Uniform Communications Standard in the food industry (Cotterill). Finally, significant advances also have occurred in software that support managerial and operational activities. Spreadsheet packages and more advanced financial planning software, word processing software, and automated process control software are all having important impacts on the way work is performed. In the decade to come, expert systems and robotics may have still more significant impacts. These changes in information technology can alter the costs and benefits of alternative organizational structures. They can also affect the way organizations compete by lowering the costs of producing and distributing existing products and by making new products and services possible. But these strategic impacts are often poorly understood and difficult to analyze. In a recent survey of corporate MIS directors and general managers, assessing the strategic implications of information technology was identified as a key concern (Brancheau and Wetherbe). While managers are familiar with the ways new product and process technologies affect their organization's activities, they are much less comfortable assessing the largely intangible impacts of changes in information technology. In this paper we use two distinct yet complimentary conceptual frameworks-Galbraith's information processing theory of organizational design and Porter's theory of competitive advantage-to identify potential strategic impacts of changes in information technology in one particular class of agribusiness firms: local farm supply cooperatives in the upper Midwest. These firms are of interest because they face difficult strategic decisions stemming from structural changes in the agricultural sector, because changes in information technology have had a particularly important impact on the range of information system alternatives open to them, and because they often lack the resources and expertise to evaluate effectively new information system alternatives. They are also of interest because so little is known about information technology use and its impact on performance in small firms. In the final section of the paper, we identify key issues that our application of the theories of Galbraith and Porter raise for future research on the impacts of changing information technology in small firms.