Balanced Scorecard

Article taken from Balancedscorecard.com

Balanced Scorecard Basics

The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

(Adapted from The Balanced Scorecard by Kaplan & Norton)

Perspectives

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

The Learning & Growth Perspective

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

The Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

Strategy Mapping

Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows).

Balanced Scorecard Software

The balanced scorecard is not a piece of software. Unfortunately, many people believe that implementing software amounts to implementing a balanced scorecard. Once a scorecard has been developed and implemented, however, performance management software can be used to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the Balanced Scorecard system, helps transform disparate corporate data into information and knowledge, and helps communicate performance information.

Benefits of Implementing Balanced Scorecard

Increase focus on strategy and results
Improve organizational performance by measuring what matters
Align organization strategy with the work people do on a day-to-day basis
Focus on the drivers of future performance
Improve communication of the organization’s Vision and Strategy
Prioritize Projects / Initiatives

Return on investment is an important consideration before investing a significant amount of money to build and implement a new strategic management system.

What are the Primary Implementation Success Factors?

Obtaining executive sponsorship and commitment
Involving a broad base of leaders, managers and employees in scorecard development
Agreeing on terminology
Choosing the right BSC Program Champion
Beginning interactive (two-way) communication first
Working through mission, vision, strategic results, and strategy mapping first to avoid rushing to judgement on measures or software
Viewing the scorecard as a long-term journey rather than a short-term project
Planning for and managing change
Applying a disciplined implementation framework
Getting outside help if needed

Definitions of Balanced Scorecard Strategic Planning & Management Terms

Customer Value Proposition

The Customer Value Proposition is the unique added value an organization offers customers through its operations; the logical link between action and payoff that the organization must create to be effective. Three aspects of the proposition include Product/Service Attributes (Performance/ Functionality considerations such as quality, timeliness or price), Image and Relationship.

Mission

A mission statement defines why an organization exists; the organization's purpose

Performance Measures

Performance Measures are metrics used to provide an analytical basis for decision making and to focus attention on what matters most. Performance Measures answer the question, 'How is the organization doing at the job of meeting its Strategic Objectives?'

Lagging indicators are those that show how successful the organization was in achieving desired outcomes in the past. Leading indicators are those that are a precursor of future success; performance drivers.

Perspectives

A Perspective is a view of an organization from a specific vantage point. Four basic perspectives are traditionally used to encompass an organization's activities. The organization's business model, which encompasses mission, vision, and strategy, determine the appropriate perspectives.

Strategic Initiatives

Strategic Initiatives are programs or projects that turn strategy into operational terms and actionable items, provide an analytical underpinning for decisions, and provide a structured way to prioritize projects according to strategic impact.

Strategic Initiatives answer the question, ‘What strategic projects must the organization implement to meet its Strategic Objectives?’

Strategic Objectives

Objectives are strategy components; continuous improvement activities that must be done to be successful. Objectives are the building blocks of strategy and define the organization's strategic intent. Good objectives are action-oriented statements, are easy to understand, represent continuous improvement potential and are usually not 'on-off' projects or activities.

Strategic Result

Strategic results are the desired outcome for the main focus areas of the business. Each Strategic Theme has a corresponding Strategic Result.

Strategic Theme

Strategic Themes are key areas in which an organization must excel in order to achieve its mission and vision, and deliver value to customers. Strategic Themes are the organization's "Pillars of Excellence."

Strategy Map

A Strategy Map displays the cause-effect relationships among the objectives that make up a strategy. A good Strategy Map tells a story of how value is created for the business.

Strategy

How an organization intends to accomplish its vision; an approach, or “game plan”.

Targets

Desired levels of performance for performance measures

Vision

A vision statement is an organization's picture of future success; where it wants to be in the future

Last minute tip for exam questions

Question 1 : Business Intelligence

by definition : BI refers to any activities or skills or compiling, processing, storing or providing access to data to bring out a timely and precise information that make impact to overall business performance.

factors :
1. Alignment of the system to the business objectives
2. Type of system being used - suitability to organizational needs
3. Knowledge in handling the system
4. Accesibility and availability of data/information

Question 2 : Hardware and Software

by definition : Hardware are components of the system that perform the processing, storing, input and output to and from the system. Software are programs or applications that runs on the hardware.

Selection should be based on :
1. Organizational needs - too less = can't function, too much = waste of effort
2. System's capability and limitation - what it can do and what it can't.
3. Software compatibility to the hardware. e.g if you only can afford RAM 256MB then you should not go for Vista.
4. Organization readiness to the system - if user too slow, should look into a simpler solution.
5. System suitability for future upgrade

Question 3 : Data Communication Evolution

Data communication evolved. Take an example, some few years ago, purchaser had to send the PO through despatch or courier service. Take time to arrive to supplier. Evolve to fax system when can immediately arrive supplier. Some organization uses computerized PO which linke them with the supplier.
Reverse that to the supplier perspective. Last time, when you search for something, have to ask the supplier to come and bring the catalogue. Current system by database sharing through internet permits fast and accurate selection of parts through electronic catalogues.
In daily operation it saves time, cost and also effort.

Question 4 : Integrated Information System

By definition : Integrated Information System is a set of system that interact between each other without human intervention. Output of one system immediately become input to another system.
By example, if we can integrate maintenance reporting system, production report and breakdown record, any stoppages happened in production that reported by maintenance personnel will directly appeared in production report and breakdown record. So total downtime will be tally between this three reports. If output of maintenance report had to be key in manually into production report, then there are possibility of mistake or error to happen so output of production report will be different or not accurate. Action that may triggered from the report may not be accurate.

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Introduction

Introduction

Information system played a rather important role in most organizations ranging from small business up to large multi national companies. Information system as a basic act as a support in documentation and most of administrative works. Information system can be defined as a set of information resources that interconnected and under same management control and also shares common functionality. This system usually consists of hardware, software, data, information (processes data), applications, communication and user1

Somewhere around late 60’s to early 70’s, some type of information system had been identified to have a strategic importance to the organization. Avison, Eardley and Powell (1996) named Kriebel (1968) and Whisler (1970) as the first two researchers that identified and discussed about strategic importance of information system and linkage between information systems to business framework. Based on the discussion, it can be concluded that information system that have this kind of linkage that enable the organization to perform specific business strategy are called Strategic Information System.

Basically, strategic information system can be described as an information system that has intention to enable the organization to achieve and later to sustain its competitive advantages against their competitors under a variety of environmental conditions. Pant and Hsu (1995) concluded that there is a strong realization by organizations that implementation of information system to the organization’s strategic activities had become one of effective way to improve business performance.

In this review, we are going to establish a hypothesis on the function of strategic information system in enhancing the organizational efficiency and effectiveness. By literature, efficiency means the ratio of output over the input and in depth; efficiency can be explained as achieving the intended result without additional effort, time or expenses. Effectiveness is a measurement of a degree where effect can be attained or how much influence to achieve the effect. To make things simple, efficiency means doing the thing right and effectiveness refers to doing the right thing.

It is important to look into the link, between the system and the businesses strategic objectives.

Basically, review will cover on linkage part which among all will discuss about the alignment of information system to the business strategy, selection of information system to be implemented, knowledge in implementing and handling the information system and also on the factor that either to enable and ease up the implementation or, in the other hand, created hurdles along the path of implementation.

1 http://www.bricker.com/legalservices/practice/hcare/hipaa/164.304.asp

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Alignment of System

Alignment of Strategic Information System to Business Strategy

The alignment of Strategic Information System and Business Strategy has been a consistent topic in the academic and business literature for decades. It is a challenge to link business strategy in this dynamic business world with the fast pace of evolving technologies in information system. Hence, it has to be a continuous process because of continual changes is internal environment that affect the information requirement and the external environment that influences the technological, competitive and manpower availability parameter. This requires a full commitment from top management as it required continual investment to keep abreast with the evolving technology.

It is critical to choose the right technology because it will involve investment and the different between the right and wrong decision can be a pivoting point for the survival of the organization in long run.

The alignment of information technology (IT) and the business goals (hereafter referred to as alignment) is crucial to the success of organizations. Recent studies, however, show that organizations are struggling in addressing alignment challenges (Levy et al., 2003). According to a METAGroup survey of CIOs globally, alignment and value management were ranked as the top issues of concern to CIOs in 2005 (CRM Today, 2005). The Standish Chaos report of 2003 indicates that 71 per cent of all projects were challenged or delivered late and that US IT projects had a waste of $140 billion. Stanleigh (2005) also cites a report by Pricewaterhouse Coopers (2004), which indicated that only 2.5 per cent of global businesses achieve 100 per cent project success. The major reason for these failures has been attributed to poor alignment of projects with core strategies of the organizations (Stanleigh, 2005).

Understanding Strategic Information System.

Strategic information system is a strategy where information systems is used to assists in making timely business decisions and formulating feasible strategic plans. In other words, the synergies of the information systems to business strategy, so that the later will be further enhance with the application of correct information systems.

In 80’s and 90’s there has been a surge in the realization of strategic importance of information systems to an organization.

Strategic Information System comprises a number of modules including strategic prerequisites, competitive priorities, strategic directions, strategic decision areas, strategy choices, strategic options and business transformation, all of which are integrated together seamlessly to form a unified system (Henry C.W.L. et al., 2000). To facilitate the efficient function of the whole system, a free information flow among various modules of the system needs to be achieved.
According to Business Week article, ‘The Technology Payoff’ (Business Week, June 14, 1993), throughout the 1980s US businesses invested a staggering $1 trillion in the information technology. This huge investment did not result in a commensurate productivity gain - overall national productivity rose at a 1% annual rate compared with nearly 5% in Japan. Using the information technology merely to automate routine tasks without altering the business processes is identified as the cause of the above productivity paradox. As IT is used to support breakthrough ideas in business processes, essentially supporting direct value adding activities instead of merely cost saving, it has resulted in major productivity gains.

Strategic Information System Planning

A Strategic Information Systems Planning (SISP) is the blueprint that forms the basis for the initiation and development of information systems in any organization. Without a clearly defined SISP, computers would merely become an expense which does nothing to add value to an organization.

Strategic Information Systems Planning is the analysis of a corporation’s information and processes using business information models together with the evaluation of risk, current needs and requirements. The result is an action plan showing the desired course of events necessary to align information use and needs with the strategic direction of the company (Battaglia, 1991).
SISP thus is used to identify the best targets for purchasing and installing new management Information systems and help an organization maximize the return on its information technology investment. A portfolio of computer-based applications is identified that will assist an organization in executing its business plans and realize its business goals. There is a growing realization that the application of information technology (IT) to a firm’s strategic activities has been one of the most common and effective ways to improve business performance.

Information system has been evolved since the inaugural part of its implementation. It started as a basic data processing system and after time, several stages of realization of system’s utilization which lead to more specific and more business-focus nature of the system. According to the three-era model of John Ward, et al.(1990), there are three distinct, albeit overlapping, eras of information systems, dating back to the 60’s. The relationship over time of the three eras of information systems is shown below :

60’s - Data Processing (DP)
Standalone computers, remote from users, cost reduction function.
70’s & 80’s Management Information System (MIS)
Distributed process, interconnected, regulated by management service, supporting the business, user driven.
80’s & 90’s - Strategic Information System (SIS)
Networked, integrated systems, available and supportive to users, relate to business strategy, enable the business - business driven.


A portfolio model derived from McFarlan (1984) considers that the contribution of IS/IT to the business now and in the future are based on its impact to the industry it belong or in a simple word, to a certain extent, reflects by nature of the business it being involved. Based on this model applications are divided into four categories, as shown here:

Strategic - Applications which are critical for future success. Examples: computer-integrated manufacturing, links to suppliers, etc.
Turnaround - Applications which may be of future strategic importance. Examples: electronic
data interchange with wholesalers, electronic mail, etc.
Factory - Applications which are critical to sustaining existing business. Examples: employee database, maintenance scheduling, etc.
Support - Applications which improve management
and performance but are not critical to the business. Examples: time recording, payroll, etc.

Some characteristics of strategic IS planning are:

• Main task: strategic/competitive advantage, linkage to business strategy.
• Key objective: pursuing opportunities, integrating IS and business strategies
• Direction from: executives/senior management and users, coalition of users/management and information systems.
• Main approach: entrepreneurial (user innovation), multiple (bottom-up development, top down analysis, etc.) at the same time.
Method of Strategic Information Planning.
A number of strategic issues need to be addressed to build an SIS model that will support the realization of business goals.

Michael J.E et. al., (1993) recommends that SISP should target the following area:

Aligning investment in IS with business goal
Exploiting IT for competitive advantage
Directing effective and efficient management of IS resources
Developing technology policies and architecture.

One of the major obstacles to achieving strategy alignment is that many organizations do a poor job of communicating their strategy. When people who are key to executing strategy don’t know what the strategy is or understand how their day-to-day activities contribute to strategy execution, it’s highly likely overall enterprise performance is going to suffer. Strategy maps are one way to shore up communication about strategy with a visual representation.

Strategy maps are:
· Derived from the Balanced Scorecard. Strategy maps emerged as part of Robert Kaplan’s and David Norton’s seminal work with the Balanced Scorecard.1 At their simplest, strategy maps describe how the organization creates value — the missing link between strategy formulation and strategy execution. Using the four balanced scorecard perspectives as a starting point, the strategy map shows the cause and effect linkages between the four perspectives:
Financial — to succeed financially how should we appear to our shareholders?
Customer — to achieve our vision, how should we appear to our customers?
Learning and growth — to achieve our vision, how will we sustain our ability to change and improve?
Internal business process — to satisfy our shareholders and customers, at what business process must we excel?

A strategy map is a generic architecture for describing strategy that helps organizations develop a holistic, integrated, and systematic way of viewing their strategy. The strategy map forces an organization to think about its strategy from the four perspectives, to develop the outcomes and drivers of the strategy, and to draw the linkages between them.

· Developed within a top-down process. Strategy map development is a top-down process beginning with the financial (value) perspective and ending with the learning and growth (future orientation) perspective. Developing a strategy map is a forcing function that drives an organization to first reach a consensus on its strategy and related objectives, and then to develop expected outcomes and their dependent drivers. Financial and customer perspectives represent the expected outcomes of strategy (i.e., make money and have happy customers), while the internal process and learning and growth perspectives represent the drivers of those outcomes.
· A growth strategy drives revenue. Companies in new or emerging markets will be likely to pursue growth strategies. Developing new sources of revenue through new markets, new products, and/or new customers as well as increasing the “wallet share” of existing customers (i.e., expand the relationship through cross-selling, upselling, etc.) are central to a growth strategy. By growing top-line revenue faster than expenses, organizations can expand margins and improve their profitability — typically leading to stock appreciation.
· A productivity strategy focuses on cost and efficiency. Favored by companies in mature industries, productivity strategies work on the expense side to lower the costs of products and services and improve the utilization rate of assets. This too can also lead to improved margins and profits.

Environment for the Success of Strategic Information System Planning.

Rich communications in organizations reflect the intangible cultural traits and tangible strategic practices (Canessa and Riolo, 2003; Carmeli and Tishler, 2004). Effective information flows require high level of congruence between organizational culture and strategic practices (Leisen et al., 2002; Gallivan and Srite, 2005). Outstanding organizations integrate their organizational value architecture and strategic information system (Wagner, 2004; Avison et al., 2004). identifying styles of strategic information system as caretakers, defenders, analyzers and prospectors. This classification is adapted from the works of Miles and Snow (1978) and Apigian et al. (2006).

This integrative framework of organizational culture and Information System is further extended to identifying styles of strategic information system as caretakers, defenders, analyzers and prospectors which are briefly explained.
Caretakers have a consistent and stable internal focus that processes organizational routines with great efficiency.
Defenders try to protect their particular strategic resources and markets.
Analyzers are highly organized according to their goal-driven results.
Prospectors continue to seek and locate new market opportunities while sustain their current markets with resilience. The strategic information system has a profile in the context of integrative framework of Information System and organizational culture.

Information Management Environment IME refers to the organizational environment for IT/IS management. As observed by many, IT application in organizations generally goes through various stages, from inception to maturity. Nolan’s information systems development stage theory provides the theoretical foundation for evaluation of information management environment maturity (Nolan 1973, 1979). Some scholars further proposed the measurement techniques and parameters based on Nolan’s model. For example, Benbasat (1984) summarized and proposed 19 criteria for measuring maturity. They include such criteria as the degree and the scope of IS application in business, level of senior management knowledge and involvement in IS.

In a rapidly changing business environment, although the formation of networks is important, the cultural patterns are less clear and more undistinguishable. Firms may not easily grasp the complexity that exists between organizational culture and Information System. However, a successful formulation and implementation of Information System may need to consider deeply-held cultural traits and intangible behavioral response patterns of supply chain participants. In this sense, this paper clarifies how a particular type of organizational culture may fit better to a particular Information System and furthermore suggests an appropriate style of strategic information system.

However, the consistent challenge for researchers is how to connect organizational culture in the implementation level of business goals and practices (Denison and Mishra, 1995; Flamholtz, 2001). Here lies the need for rigorous examination of organization culture in the context of ever expanding strategic business reality. In particular, as firms interact and align with the diverse network of suppliers and customers as their supply chain partners, rich dynamics of organizational culture become more illusive and less understandable. In this sense, organizational culture in the context of Strategic Information Systems deserves a careful research

Critical Success Factor

Due to the importance of aligning IS plans with business plans, it is useful to examine the critical success factors (CSFs) for such alignment. Briefly, CSFs are those factors that management need to pay special attention to (Rockart, 1975) in order to enhance the chances of successful IS planning alignment. Past research has investigated CSFs in manufacturing resource planning (MRP) implementation (Ang et al., 1995; Burns et al., 1991), quality management (Black & Porter, 1996; Saraph et al., 1989), strategic alliances (Rai et al., 1996), data management (Guynes & Vancecek, 1996) and strategic IS planning (Ang & Teo, 1997). However, none of the existing research has examined CSFs in IS planning alignment and this paper is an initial attempt to do so. The results should prove useful in enhancing our existing knowledge on how to better align IS plans with business plans, thereby facilitating successful IS planning efforts.
A survey done by Thompson S.H.T et. al., (1998) conclude the rank of critical success factors below. It is a result of response from senior IS executives from 169 firms. It rates the degree of importance of each item on a five-point Likert scale ranging from 1 (not important) to 5 (very important). The results are shown below:

CSF#1: Top management is committed to the strategic use of IT (mean"4.34)
The importance of top management commitment to IT is emphasized by an IT director who commented that it is difficult to use IT strategically because top management do not view IT as a strategic tool for competitive advantage. Consequently, alignment between business and IT is weak.
CSF#2: Information Systems (IS) management is knowledgeable about business (mean"4.26)
Note that IS management knowledge about business is even more important than top management knowledge about IT (which is ranked CSF#10). CIOs with high strategic IT and business-related knowledge were found to enjoy significantly greater participation in top management teams. Furthermore, such knowledge also significantly influenced the extent of IT deployment in business strategies and value chain activities. Note that business knowledge encompasses business strategies, organizational work processes, products and services, industry’s recipes for success, and competitors’ strengths, weaknesses and potential actions.
CSF#3: Top management has confidence in the IS department (mean"4.20).
This item is related to CSFd1 above since top management needs to have confidence in the IS department in order to be committed to the strategic use of IT. Without such confidence, it will be very difficult for top management to allocate appropriate resources (in terms of funds, personnel, etc.) for the planning and development of strategic IT applications.
CSF#4: The IS department provides efficient and reliable services to user departments
(mean"4.12)
CSF#5: There is frequent communication between user and IS departments (mean"4.07)
CSF#6: The IS staffs are able to keep up with advances in I¹ (mean"4.10)
CSF#7: Business and IS management work together in partnership in prioritizing applications development (mean"4.06)
CSF#8: Business goals and objectives are made known to IS management (mean"4.06)
CSF#9: The IS department is responsive to user needs (mean"4.03)
CSF#10: Top management is knowledgeable about IT (mean"4.00)

The list of CSFs enables practitioners to concentrate on a set of factors that will enhance the alignment of IS plans with business plans. By evaluating each CSF in the context of its organization, practitioners will be better able to design appropriate strategies for better IS planning alignment.

Researchers can investigate the reasons why there appears to be an emphasis on content linkage rather than personnel or timing linkages. Practitioners should realize that by placing less emphasis on timing and personnel linkages compared to content linkages, they could be missing out on other important or potentially effective mechanisms for aligning IS plans with business plans. This is especially relevant in cases where there is an absence of business plans, or lack of comprehensiveness of business plans, for such content alignment to take place. In such situations, both timing and (especially) personnel linkages may often serve as useful surrogates for content linkage.

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Selection of System

Selection of Information System to Business Strategic.


One of the most critical factors causing failure in implementation of management information system (MIS) is poor selection of information system to the business strategic. There are many type of MIS with various type of functions, when an organization wants to select a suitable MIS for their organization, they need to study and understand the ability and capability of the MIS system to fulfill their organizational need.

Type of Information System Available in Market.

There are various types of MIS with their own special features in the market. Among them are enterprise resource planning (ERP), inter-organizational system (IOS), electronic data interchange (EDI), electronic trading gateway (ETG), Internet e-commerce, Material resource planning (MRP), just in time (JIT), .etc. All these type of MIS are design and developed by some suppliers in order to fulfill their customer expectation. There are some organizations even instead of buying the standard system they employ some Information Technology Engineers to develop their own MIS system as per their needs. Where else some organization even out source, out-side professionals to develop MIS system as per their needs.

Management Information System and Their Ability and Capabilities.

There are many different type of management information system in market. Individually they have their own special features and capability. Below are some commonly used MIS system with their own special features and function:-

Enterprise resource planning known as ERP is one of the most commonly used MIS system. This system is widely used by mostly big companies and some SME’s. The reason is that it is very costly and time consuming to Implementing an ERP system in any organization (Li-Ling.Hsu, 2004). This system is now becoming a crucial indicator for e-business success (Chian-Son.Y, 2005). There are customized and standard ERP systems in market. The standard ERP system in market often consist of many modules that support business functions such as, manufacturing process system, inventory management system, marketing process system, Order processing system, and…. etc. (Li-Ling.Hsu, 2004).

Electronic data interchange system also known as EDI represent a kind of inter-organizational system (IOS) that traverses legal enterprise boundaries by linking two or more organizations (Gurpreet.D, 2000). This system generally uses telecommunication links in a business relationship. This system also being supported by independent applications (Gurpreet.D, 2000). Normally the integrity of the exchanged data is guaranteed by agreements and rules about data coding and data formats (Gurpreet.D, 2000).

Electronic trading gateway is known as ETG and bar-coding (Gurpreet.D, 2000). This is a major e-commerce project, which brought EDI and e-commerce efforts. There are some components still being continued to be developed further (Gurpreet.D, 2000). This system is not in favor to most customers (Gurpreet.D, 2000). They are not willing to take part in this ETG the project is slow down (Gurpreet.D, 2000).

There are many organizations made their correct choice of MIS based on their organizational requirement and special features of MIS to gain very high level of benefits. In contradict to the above statement not all organizations gain benefit by implementing MIS. Some organizations have even lost a lot of money and the other even gone bankrupt.

Factors Influencing Selection of MIS

In order to make the right selection of the MIS there are several factors needed to be consider. Among them are the ability of the MIS to provide correct and sufficient information on time to the management for decision making, the limitation of the MIS features or function in order to fulfill the organization requirement, the ability of the organization to cope up with very fast development currently faced in MIS, the supplier ability on technical knowledge and support, the understanding of the technology by the organization, and, .etc.

The Technical Ability of the MIS to Provide Correct and Sufficient Information on Time to the Management for Decision Making

An efficient and effective organization need to make decision very fast in order for them to be competitive (Pierre.M, 2001). It is vital for an organization to have the necessary and sufficient information and the required management skills to manipulate such information into implementation of action (Pierre.M, 2001). Having that in mind, it is very important to understand what type of data is currently available in the organization and to what extend this data need to be manipulated or converted into useful information and to check if the proposed MIS is capable of delivering the required information on time for decision making. It is obvious that technology have been a significant driver for an organization to speed up appropriate action (Pierre.M, 2001). If the organization failed to study and make decision based on the technical ability of the MIS to fulfill the organization need. Such decision will fail the organization objective to make the right decision fast and precise. Therefore when choose the type of MIS to be used in any organization it is the best practice that, the organization need to study the ability and capability of the MIS to meet the organization need on time and precise.

The Limitation of the MIS Features or Functions in order to fulfill the Organization Requirement.

In order to avoid unwanted surprises or breakdown after installation it is very much important for an organization to be clear with what is needed for their organization. Studies show that in Taiwan they faced a lot of problem during trying to implement an ERP system in that country. In Taiwan one of the organization have choose ERP system as their MIS. During the implementation they discovered that, there are many factors influencing the smooth implementation of the system. Among the factors are language barriers, difference in culture, nation, and politics (Chian-Son.Y, 2005). Such situation have caused the organization to spend more then what they have budget for the implementation as well the delay in the implementation process. Therefore it is important for the organization to really study and analyze the limitation of MIS features before make their choice to choose the system.
Based on the similar study carried at Taiwan, it is also shows that many countries have problem with the business models. This is due to most ERP software packages are developed In European and US, their software were reflecting more European or US industry practices then international practices (Chian-Son.Y, 2005). This means the difference in culture, nation and politics does not fit this software package to fit all countries and organization (Chian-Son.Y, 2005).

The Ability of the Organization to cope up with Very Fast Development Currently Faced in MIS.

It is also very important for the organization to understand, the complexity of the MIS technology (Caroline.C, 2000). Normally different technology has different level of complexity (Caroline.C, 2000). The more complex the system the higher the requirement for structural agreement from computer to computer message mapping (Caroline.C, 2000). In such case the organization may need to learn and adopt the new technology, this means more cost is needed for upgrade to the new technology (Caroline.C, 2000). In such condition it’s become very high cost for the organization. Then the question is, does the organization is able to cope up with the increase in cost? Does this organization require such complex MIS? Is there any other simple MIS in market which can perform to the need of the organization without incurring high cost? Such consideration will help the organization will help to choose the right MIS.

The next issue is the compatibility, this problem arise when the existing hardware and software system could not support or interface with the newly developed MIS in market (Caroline.C, 2000). The compatibility problem can also come from external source, such as suppliers or customers MIS. Such situation will create the need for new interfaces, as well as for translation from internal file formats to international standard documents meant a significant cost to the company, which must be explicitly recognized before involvement in the project (Caroline.C, 2000).

The MIS Supplier Technical Knowledge and Ability to Support.

There are many suppliers in the market who is providing MIS system. Some of them are very establish and experienced companies, some are newly formed and still in their learning stage. The one with the most experience make less mistake where else the one with the less experience normally try to compete with lower pricing.

It is not like just buying MIS software, implement it and start using them. In normal situation after implement MIS software, there will be some minor problem here and there. There will be some need to make alignments and software interface. Before selection it will be more appropriate to have some service contract with the supplier to keep the software up to date. The organization is also need to have a long term relationship with the supplier to overcome unexpected breakdown or modification need to fit the future technological advancement.
During the selection of MIS is also highly important to choose the right supplier with right knowledge and their existence in long run. If such consideration is not being considered, there is a high chance for the implementation project will be failed or escalate. The escalation normally appends when the project manager decides to continues a project after receiving negative information about it (Dmitriy.V.C, 2008). In this case the manager who handle this project will continuing the project even when he knows the suppliers is not reliable, hoping of showing to themselves the rationality of their original decision. This is value-reducing for the firm (Dmitriy.V.C, 2008).

The Organization’s Ability to educate their Organization and adopt the New Technology.


Most organization invested a lot of money to implement sophisticated MIS system without understanding the implication of cost of implementation and time taken. If we take a ERP system for example, this system often consist of many modules that support business functions such as manufacturing process, inventory management system, marketing, order processing system, etc (Li-Ling.H, 2004). For ERP system, knowledge of the system and the process is mandatory. Without the knowledge of the system it seems it is no going to be very helpful. In order for an organization to be able to use such system it is important to know if the end users in the organization able to adopt this system or technology without any problem. It is necessary for organization to choose the type of MIS which can be easily understand by their employees and user friendly.

How Organization can Overcome Poor Selection of MIS.

There are several ways an organization can overcome poor selection of MIS. One of them is prior to the selection; the organization should study the ability of the end user to adopt this system without any problem. If the end user have problem to understand the MIS system, a detail training will help the user get clear idea on how the system linked and works. The other method is to get Information technology consultant or to employ one with such knowledge to monitor closely and support the organization when ever there is a problem or breakdown in the system. The best way of all is study and analyses then make the selection.

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Knowledge Factors

Knowledge in IT and its Relation to Implementation of Strategic Information System

Knowledge related to the business strategy is one of the most important intervening factors for an organization to continue to operate in an increasing competitive marketplace locally or globally. Workers in all business area must be well prepared, equipped with proper knowledge and skill. Significant contribution require from them to ensure the organization remain efficient and effective to face today high tech and modern word. Poor knowledge in information system will affected the interrelation among workers, customers, suppliers, and other key business parameters.

Successfully Story of Information System (IS)

Developing a Computerized Model with Proper Knowledge.

High competition in the building design require for new methods and facilities to help the firm scheduling, estimating and drafting the propose design and achieve the basic project objectives of economy, timeliness and quality. Knowledge needed to have excess to computerized tool but due to poor or lack of knowledge some gaps was found regarding the integration of these tools into a unified system. Obtaining, handling and distributing information among entrepreneurs, designers, consultant’s contractors and vendors in the business today become more complicated and difficult with the complexity of the business and project.

This article was showing us the advantages of having the computer-based information system. We need to agreed that the existing method such as job design, work flow, reporting system, accounting procedures and control mechanism soon will be replace with the new method called ASAP ( automation system for architectural practices ) that was newly develops to improve traditional method, with the IT implementation it was enhancing technical and managerial decisions. ASAP provides new data base utilities and managerial tools:

- A flexible cost estimation function
- An effective planning and control function
- Comprehensive databases for standards, specifications, codes and regulations.
- Additional databases for library, communication, archive services and project approval process, legal and technical documentations.

All the above advantages require some period of implementation stage and developing the workers skill where with the new facilities it will enhancing organization efficiency and effectiveness.

An Example of the Successful IS and Communication Technologies.

Information and communication technology plays a vital role for the success story of the mobile city Bremen in Germany. This is clear example of the efficient and effective organization where dealing with modern technologies make this state recognize as a high tech region. Being a high tech location means that they need to:

- professionalize research and understand science also as a service,
- organize efficient transfer of innovations from academia to industry.
- provide scientific excellence to attract companies for long term partnership.
- synchronize research strategies with the overall development strategy of the state and vice versa.

Center of computing technologies and Mobile Research Center, Bremen providing unique range of services for interdisciplinary scientific research, developing modern infrastructure, marketing, computing, communication technologies, and high frequency technologies and developing innovative mobile solutions. The living Lab Mobile City dealing with scientific quality and innovations and at the same time the mobile Research Centre provides powerful research network, perform development for new products and collaborates with business partners to commercialize such product.

The mobile city of Bremen set an example of the successfully Information System and communication technologies when put in practice. Failure to maintain and keeping all this advantages will discontinue the excellent track record.

The World is Going Fast in Online Learning.

Higher education received major benefit and becoming a big business when the IT providing efficient facilities, with the new facilities a lot of opens universities that provides courses on line through Internet. Data mining can be viewed as a result of the natural evolution of the information technology and its application is a major component of the whole content management system. Data mining enables difference managerial levels to understand, tracking and managing the wealth of the information stored in multiple data sources.

Data mining tool perform data analysis and may uncover important data patterns, contributing greatly to business strategies, knowledge bases, scientific and medical research.


IT in South Korea - The World’s Most Technologically and Digitally Connected Country

South Korea, ranking third in the IT industry and ninth in network readiness also recognized among the world’s most technologically and digitally connected countries. This study is to identify South Korea’s successful IT start-ups HRD practice. Four factors from four fast growing IT start up in South Korea to show the importance of organization culture for IT start ups’ continued grows

The founder effect- A successful IT start-up begins with convincing the leaders. Attracting employees through their personal characteristic, leadership style, technical expertise and compelling vision.
Workforce development- High- tech companies are depending on the ability of knowledge workers, how good knowledge can be transferred and practice by the employee.
Organization culture - The rapid grow of the company was achieved through their technological breakthroughs and profitable business model. The company was introducing “management by culture” where employer allowed employees to create voluntary on-line communications in order to discuss its culture openly. The fast growing IT companies need to establish the right organization culture for success. Innovation takes place only in organizations where organization culture empowers individuals and accepts taking risk.
Challenges – Difference Company facing difference challenges in IT start-up, they need to rectify their unique problem and came out with the proper action

Identifying Risk during Information System Development.

Improving and developing the information and communication technologies has given the opportunity to derive direct business benefits to the customers and suppliers. A critical time for the relationship within organization and costumer which is using the information and communication technology is when the provider of the services decides to up grade their information system. The change over to the new information system may create:

- Risks associated with new technology.
- Risks associated with project size.
- Risk of failure, ie; the damage that can be done.
Through the case study in this article, it was proposed to develop a risk analysis methodology consisting two major tasks to be carried out.
- The elements of risk which are specific to the area under study have to be identified.
- Those elements of risk have to be measured and given value all the potential risk need to carefully analyzed and managed.

Failure to put extra responsibility on IT developers, make it more visible and smooth transition from old to the new system may result subsequent lost of business. Migrating from traditional method to the information technologies and communication technologies may lead to the same risk and failure. Insufficient knowledge should be review.

Planning and Managing the IS with Proper Knowledge.

IS normally developed as part the strategic plan in the efficient and effective organization, when developing an IS that there are fundamental contexts in which our analysis must be placed prior to the development.

- The culture of the organization.
- The business life cycle.
- Levels of information decision making strategic, tactical, and operational.

IS are costly and slow to develop. Learning and developing fundamental knowledge’s become a basic requirement before investing time and money to select the most suitable and effective system. Such a system should integrate a number of interrelated functions and activities to ensure efficient reporting and analysis of business and environmental transactions.
Network Information Resources Management System based on Knowledge Mining.
The rapid development of information network, computer technology and globalization help managers to obtaining information through network such as Network Information Resources Management System (NIRMS). NIRMS is a cooperative and interactive man machine process where the role of human intelligence in the information flow was combined with information resources. NIRSM as a knowledge mining tool will offer users survey via the network, users message board, BBS, network call an online discussion area.

A Knowledge-based System as Design Aid for Quality Assurance Information Systems

In the process of protecting company profit and interest, customer satisfaction and need must be fulfilled and one of the methods is through an effective quality assurance system. New technologies or new customer expectation/satisfaction level and demands require the quality assurance to work hard and improve their knowledge. The quality assurance system as a sub-system of the manufacturing system can be facilitated with appropriate computer base decision support system (DSS).

Knowledge based decision system (KBS), as a problem processing system, are to retrieve information from a knowledge system and to use this information to generate useful results. The application of the expert system and widespread of PC usage provide an ideal network for disseminating knowledge through the organization.

Use of an expert system in the design of quality insurance information system will allow

- Experts and managers to concentrate on more complex problem and issues
- Helping non-technical specialist to reach and make correct decisions in an effective and efficient manner.

Knowledge Management and Organizational Competitiveness: a Framework for Human Capital Analysis.

In the new economy, the achievement or sustained competitive advantage depends on firm’s capacity to develop and deploy its knowledge based resources. This is particularly true in industries based on knowledge, such as information and software services. Competitive advantage depends more and more on people embodied know how. This article puts forwards and integrative framework that joint current research and theory about

- The knowledge management,
- Strategic human resources management for the analysis of human capital
- Intellectual capital – difference forms of human capital are existed.

Planning a Revenue Stream System in an E-Business Environment.

Global competition requires much organization to adopting an integrated approach to implement and managing the e- business. Integrated revenue systems should be integrated in single, non redundant data repository. One of the major benefits an integrated system is single up-dating and storing at one place and provide single source of reports. The ability to leverage knowledge about customer such as deep understanding on customer satisfaction will generate sustainable and profitable relationship.

Implementing an integrated revenue system are risky and costly but can create value for organization by building and maintaining customer loyalty especially in the business to customer sector.

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Moderating and Internevning Factors

Moderating Factors in Implementing Strategic Information System

In functioning on its role for enhancement of organizational efficiency and effectiveness, there are few factors which either directly related or in such cases indirectly related, helps to ease the difficulties.

Part of the moderating factors are from the government of certain countries and another part is on the system itself whether is related to system composition or services. The rest of the factors are on the availability of information and connectivity and also internal factors within the organizations.

Government Contribution towards Enhancing the Usage of Information System

In this era, most on government would like to promote the usage of information system. For an example, in Malaysia, government really encourages the usage of information system by implementing policies and also development of basic infrastructures. In strive to become a developed nation by 2020, Malaysia look into information system as one of key primary factors that can contribute to rapid growth of the country. Government starts researches institutes such as Standard and Industrial Research Institute (SIRIM) and Malaysian Industrial and Microelectronics Systems (MIMOS) somewhere in 1985. To further enhance the development, the government launched the Multimedia Super Corridor another ten years later. The implementation of these research institutes and ICT encouragement bodies not only give benefit in term of facilities and instrumentation only but able to be advanced to another policies which involves benefits from another related factors such as tax exemptions, research grants and others1.

Building information system infrastructure had been acknowledged as one of top priorities for today’s government. It can’t be denied that most government believes that ICT will help to enable a country to move from a level to a certain acceptable level. To be in top list of countries with highest Technology Achievement Index (TAI)2 became a target for developed and developing countries. TAI defines the countries ability to utilize technology and information and communication technology as a tool for development. TAI, among all, includes measurement of technology creation, innovation information, diffusion of previous innovation and also skills and knowledge. A sample of TAI list as per below figure


TAI Rank TAI value
1. Finland 0.744
2. United States 0.733
3. Sweden 0.703
4. Japan 0.698
5. Republic of Korea 0.666
6. Netherlands 0.630
7. United Kingdom 0.606
8. Canada 0.589
9. Australia 0.587
10. Singapore 0.585
11. Germany 0.583
12. Norway 0.579
13. Ireland 0.566
14. Belgium 0.553
15. New Zealand 0.548
16. Austria 0.544
17. France 0.535
18. Israel 0.514


Apart from developing infrastructure, government also plays an important role by setting up policies and requirements which include usage of information and communication technology and information system as a part of an organizational strive to achieve certain policies and recommendations. As in China, government implements a policy where every pharmaceutical manufacturing must achieve a GMP certification. Manufacturing organization who fails to achieve the certification may face the possibility of closing the business. Many of them believe that usage of information system can facilitate and also accelerate the effort towards GMP implementation and also to attain certification (Zhou, Chuah, Chen 2002). These types of certification and policies, indirectly promotes the implementation and utilization of information system in manufacturing organizations. Soft encouragements by government also contribute to wider utilization of information technology. The government of China had put a lot of effort in encouraging the organizations to adapt the learning concept and also improve enterprise knowledge (Zhou, Chuah & Chen 2002) by promoting the “informationalization” to support it’s industrialization.

Jimba and Atinmo (2000) also agreed that since information society basically operates from global perspective, there should be a certain basic infrastructural requirements in order for a nation to participate. Among all, it includes sufficient computing power, internet access, adequate teledensity and basic economic that able to support connection.
It can be agreed also that certain countries government’s vision also influence the factors of implementation of information system and information technology in that country, such as cases in Malaysia with Vision 2020, the e-Japan vision in Japan, Botswana’s “prosperity for all” Vision 2016 and also Canada’s vision to be the most connected nation in the world.3

System’s Contribution towards Enhancement of Information System Utilization

Looking onto system’s perception, the evolution of system itself enables more organization to have benefit from the system. As networking and information mailing system growing rapidly, organization may take advantage of new opportunities (Smith 1999). Composition of information system should not be prescribed as only for basic accounting and record keeping (Porter and Miller, 1985) but it should be a strategic tool to gain competitive advantage, improve productivity and performance, finding better way in managing the organization and also developing new opportunities (Gregus and Benova, 2006).

Evolution in information system, from the Material Resources Planning (MRP) which only supports single function towards the Enterprise Resources Planning (ERP) which integrate entire organization, make it simpler to the organization (Soon-Yu, 2005). Md. Hafiz, Mohd Adam and Husnayati (2006) extract the three era model of evolution by John Ward,et al. (1996) which defines the evolution from the era of Data Processing in the 60’s which includes remote hardware and user, mainly for cost reduction purposes, towards Management Information System’s era in 70’s and 80’s that is interconnected, user driven and functions to support the business and much later to the Strategic Information System’s era in 80’s and 90’s with networked and integrated system, closely related to business strategy and more business driven.

Son-Yu (2005) also conclude that since there are requirement of integration between ERP, Supply Chain Management and Business to Business (B2B), there will be a strong force to providers as SAP, JD Edward, Baan, Oracle and PeopleSoft to introduce newer version with more added values which in the other hand will make it more handy for organization to use it.
Supports from system providers also are fatal to organization. Supports are in two categories that are customization of information system to the organizational needs and also support in performance of the system either in maintaining the system, problem solving and also improvement of the system.

As an example, SAP provides after sale services such as end-to-end solutions operation, SAP Enterprise support, SAP Safeguarding and few other options4. Oracle also has their worldwide support for their users covering PeopleSoft and also JD Edwards.

Availability of Information and Accessibility Functions in Enhancing the Usage of Information System

Jimba and Atinmo (2000) compiled some finding about availability and accessibility as moderating factors in utilizing information system. It refers to Bonzi (1992), Hesse, et al. (1993) and Karminer and Braunstein (1998) who agree that accessibility and availability of information supports the enhancement of productivity of research and studies. As such, smooth access to database will enable organizations to get benefit from the information system.

The push and pull factor as explained by Nancarrow, Pallister and Brace (2001) talks about the speed, easiness, coat and amount of information available (pull factor) and for research suppliers to be the first with information and innovate to remain competitive (push factor) which will enable organization to source more information via the internet.

Wide access to networking and information permits an organization to attain necessary knowledge crucial to its specific business strategy. Internet growths are rather rapid. Organization could use the internet access in order to reach to information or, in the other hand communicate their information to others. In certain cases as Xerox, as cited by Bhatt (2000), the organization uses the facility to survey their customers and asses their satisfaction through an accessible database. This will enable the organization to interact with their customers, knowing their needs and to know the root cause for customer’s dissatisfaction.

Internal Factors that Enable the Organization to Implement Information System.

Within organization itself, there are also a lot of factors that ease the process of implementing the system. Prasad (2000) listed seven primary factors within the organization that contributes to the information system implementation which discussed as 7T agents that are:

1. Talent – Expertise, experience, knowledge and skills and competencies in handling the job, make decision, resolve conflicts and creating culture in the organization.
2. Task – Complexity of each activity, breakdown of task, structure of work and also probability of successful completion.
3. Teamwork – Group understanding, dynamics, balance of task, co-operation and commitment between members, job delegation and also satisfaction.
4. Techniques – tools being used, understanding about system, systematic approach about knowledge and system.
5. Technology – Affordable system for the organization, availability of system and technology, features and adequacy of system.
6. Time – Schedules, constraint, arrangement of task to meet the specific timeframe planned for an activity.
7. Tool – Communication tool, networking system, availability of required tools.

Involvement of management in setting up and implementation of information system are crucial to accelerate the process. Dhillon and Caldeira (2000) believe that the mindsets of the top management are a key determinant to the successful implementation of the system. Teaming up the strategic objective of an organization and information system requirements are vital to the success of implementation. Muscatello, Small and Chen (2003) concluded that effective executive management commitment plays a rather important role in the implementation process. Study shows that an organization that have focus on significant effort in planning, justification and installation, succeed in adopting the system.

According to Davenport, Harris and Cantrell (2004), there are three factors that drive the values that are:
1. Integrate which means unifying the system, with standardization of data and processes that can lead to faster communication and effective decision making.
2. Optimization the system which refers to shaping the processes to fit the unique of strategic need of the organization.
3. Informate by transforming work with means of information, transforming unprocessed data to become useful information that support the strategic organization needs and decision making.
User participation and involvement also remarked as one of factors that stimulate the success of information system implementation. Participation means the user’s willingness to participate in the development and implementation of information system. Involvement stated the phsycological state of user and attitude towards the implementation of information system and to the information system itself (Kappelman and McLean, 1992) and the relation are as per shown in below figures.

Intervening Factors in Implementation of Strategic Information System.

Today’s operations are much depends on computer based information system. It includes the storage of data and information, processing of data and information, hardware and software, a social system as a result of integration and lastly the documents and procedures as guide to the users. It means that present information system not only technically viewed but it is rather a larger social dimension (Md. Hafiz, Mohd Adam, Husnayati, 2006). But, in implementing the system, there are a lot of obstacles that requires action and decisions. Barriers ranged from deciding on the system until full implementation of the system. It is necessary to look into intervening factor in each and every perspective they appear. Apart from looking into the barriers itself, it is also important to understand the nature of barrier in order to study and counter it through specific actions.

Barriers from the Organization Itself

Top Management’s Perception on Strategic Information System

Relationship between functions of information system and corporate strategy does not get much attention from the top management (Pant and Hsu, 1995). Smith (1999) stressed that even though there are some beliefs in the top management that information system is important to the business, but their belief is not visualized by their performance. Information system always been perceived as different from the organization strategic beliefs and treated as some additional operation to support daily tasks. Involvement of the top management is vital to the success of information system. Management should understand that the objective of information system is to generate information on the business activities that useful to support in making sensible decision regarding its operational and strategic tasks (Smith, 1999).

Furthering this, Smith (1999) also pointed out some factors on how importance for a business starter to have the strategic information system in mind at the early stage of set up. They should know about what type of information system available on the shelf and what type of information system that can strategically help the organization to be start up. Later, it is required to think on how the system can help the organization and how it should be incorporated to the planned business framework. The type of data to be selected, the way it going to be stored, how data can be transformed to become information and how these information can be communicated across the whole organization, including suppliers and customers in order to gain mutual understanding for the benefit of the organization. Zhou, Chuah and Chen (2005) also agreed that implementation process of information system will meet a lot of problem without support and participation from the top management.

Calhoun and Laderer (1990) stressed that failure to understand top management’s objectives are another factor contributing to barriers in implementation. It is either the top management did not really know their objectives or do not want to disclose it to the information system function. Misunderstanding the organizational objective in setting up phase of the information system implementation will lead to a major failure into the implementation itself.

Weak in Management and Organizational Structure

Organizations that have a weak management and organizational structure may face a lot of trouble in implementing the system. As stated by Zhou, Chuah and Chen (2005) that some of the failure in introducing the MRP system to Chinese herbal industries are due to the management and organizational structures are outdated and ineffective. Organization that able to utilize the information technology should find that they are able to gain their competitive advantages against their competitors who don’t (Smith, 1999). Pant and Hsu (1995) stressed on Barlow’s (1990) point that degree of success in integration of technology and business much depends on the organization structure.

Failure to Integrate Business Resources and Information System

Information system resources rarely act alone in creating and sustaining competitive advantages (Rajendran and Vivekanandan, 2008). It usually works in relation to other business resources to provide strategic benefits. Performance of an organization depends on how information system resources being integrated with organizational, technical and other resources (Benjamin and Levinson, 1993). Failure to integrate the information system resources with the other business resources will lead to the organizational failure in achieving their competitive advantages.

Barriers from the User’s Perspective

Lack in Computerization Skill and Knowledge in Information System Users.

In order to gain benefit from the system, it is utmost important for the organization to ensure that the users are well equipped with necessary knowledge and skills that required so that the information system can be implemented smoothly. As stated by Zhou, Chuah and Chen (2005) that one of the cause that make it difficult to introduce the information system in Chinese industries are due to low educational level of the user and the degree of computerization and automation are rather low, causing such an intensive system as MRPII and ERP become unsuitable to those industries.

Apart from inadequate knowledge, failure to adapt to rapid change in information system also becomes a large barrier in implementing the system. Evolution of information system from purely supporting orientation administrative has changed towards more strategic role within an organization. As such, organization must be flexible enough to adapt these changes and gain benefit from it.

Apart from that, continuous training and education of user should be looked into. Implementations are not only about information and technology, but also involving the human resources in the integration. Skill and knowledge have to be improved. Sponsorship for employees to attend external training and competency program could act as an incentive to build strength in users that will benefit the organization.

Failure in having computerization knowledge and skill also lead to failure in User-Information System relationship which supposed to trigger the organization towards achieving its maturity level.

Low Education Level among Information System Users

Level of education also is one of the factors affecting the success of implementation. Low level of education highly related to low computerization skill and knowledge. This again refers to Zhou, Chuan and Chen’s (2005) findings that low level of education contribute to difficulties in implementation of information system. Low education level may become a result of underdevelopment of certain nation. Jimba and Atinmo (2000) quoted Hountondji (1995) that concludes that weak in knowledge and intellectual capability were a result from underdevelopment. Low level of education also closely related to low level of computerization skill and knowledge.

Language and Literacy Barriers

Among all, language also became one of the barriers that limited the implementation of information system. To give an example, most of the systems that available are in English. But in certain region, level of English understanding is so poor that user may fail to interpret the need of the system and also the information that resulted from the processes. As in Thailand, English literacy is so poor that less than five percent are able to understand English5. So implementing the system in this area will lead to a lot of hurdles along the way of implementation. To make it worst, there are some other nations that used other character than Romanized characters, such as Former Soviet Union and some Eastern Europe countries that used Cyrillic characters. For them, utilizing the systems which based on Romanized is rather difficult.

Agourram and Ingham (2007) state about Shing-Kao (1997) who stressed that since people see information with their own values, assumptions and expectations, different person may look at the same information differently.

Perception and Expectation

By implementing the information system, management are hoping that it can help to support decision making which will lead to better performance. But on the employee’s view, implementation are negatively perceive as a treat for them. They may feel worry about losing their job to technology. Information system actually helps to improvise the data processing tasks for better decision making. Management has to make the employees understand the aim of implementation.

Another problem is on the expectation. Users are expecting that computers may become a solution for problems in data processing. This over-expecting may sometime results in frustration.

Barriers From the System’s Perspective

Nature of the System that Make it Difficult

There are two major technological issues in implementing the system which are;

- Complexity where each technology have their own complexity. The organization need to learn and adapt to the requirement of the system.
- Compatibility which refers to suitability of computers to suit for one application to another.

The complicated methodologies also being understood as one of factor contributes to the difficulties. Pant and Hsu (1995) suggests that even though planning of strategic information system known to be important but, some organization still find it as difficult. One of the reasons why it happened is because there is no availability of comprehensive, easy-to-use and structured methodologies.

Fear of Wasting Money without Benefit in Return: Looking into failure’s experienced by Others

While information system brings a lot of advantages to the organization, there are some organizations that reluctant to implement it. This came from the experiences from other organizations which results in partial failure, even in certain cases, a total failure. Muscatello, Small and Chen (2003) quoted a research by Trunick (1999) which shows that close to 40 percent of organization that implement information system only be able to enjoy partial implementation, while another 20 percent totally abandon the system. Since the cost of implementation is not small, fearing the failure had become a bad dreams for organizations especially those with small in scale and with low financial resources.

Failure of information system’s implementation in small organizations greatly contributed by lack of resources and formalized systems. They often fail to justify the expenses and time to spend on selection of the system.

1 Richard Labelle – ICT Policy Formulation and E-Strategy Development – UNDP-APDID ICT4D Series 2005 (Page 14)
2 UNDP, Human Development Report 2001 : Making New Technologies Work For Human Development
3 Richard Labelle – ICT Policy Formulation and E-Strategy Development – UNDP-APDID ICT4D Series 2005 (Page 7)
4 SAP Services: Software Maintenance and Support. http://www.sap/com/services/bysubject/support/index/apx
5 Richard Labelle – ICT Policy Formulation and E-Strategy Development – UNDP-APDID ICT4D Series 2005 (Page 71)

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - Findings and Conclusion

Discussion and Findings

Information systems are widely used in business. Information systems become strategic when it has the necessary connection to the business’s strategy. Understanding this link is crucial in order to understand the nature of Strategic Information System. By understanding this, we can study the role of this system towards enhancing the organizational efficiency and effectiveness. But in order to be strategic enough, the system has to impose few factors, among all, the contribution from the system towards achieving and sustaining organizational competitive and comparative advantages.
In order to enable the system to support in achieving and sustaining organizational competitive and comparative advantages, there are few criteria need to be discussed. Those criteria are the alignment of information system to the business strategy, the selection of type of information system to be implement, the knowledge in information technology that enable the utilization of information system and factor influencing the success of implementation from positive and negative’s perspectives.
In the alignment’s scope of contribution, the planning stage of information system is one of the most important factors. How well the system being planned will lead to the nature of result that it will come. Pant & Hsu (1995) discussed about the critical issues in planning of information system. The planning stage starts with identification of need. Information system should be implemented based on need of the organization. Later it should consider the methodologies of implementation which covers around factors such as impact methodologies and critical success factors.
Looking at the process of selecting the information system, both side of implementation should be in the focus. In the system’s side, the type, ability and capability of the system are crucial. Selection of the system also includes availability of systems offered, cost of implementation and also support from the system’s supplier.
On the organization’s side, it is important to measure the readiness of organization to adopt the system. Lack of information technology management is known to be one of critical factors that restraint the evaluation of cost and benefit of implementation (Dhillon & Caldeira, 2000). Another factor is organization’s strategy to cop with rapid development in information system. Mourrier (2001) explained about change in information technology and system that permits speedy decision making. This changes have to be adapted to the organization to keep in pace with the streamline of information system.
To further discuss this, we could not avoid pulling in the knowledge impact towards the implementation. Human, often is known to be the most “difficult to control” factor in an organization (Perez & de Pablos, 2003) and intellectual capital became more important in the organization. Williams (1997) also discussed about key resources that need to be developed, that is knowledge and it should be analyzed prior to determining the information system. Knowledge also related to risk of implementation. By knowing the knowledge level within the organization, we may foresee the risk and implication of the system’s implementation in the organization.
Lastly, there are requirement to study the factors the may enable or disable the smooth implementation of information system. It ranged from the infrastructure and development factors, organizational factors and factor at the system itself. Both side of positive and negative factors need to be understood in order to ensure implementation can be done and may achieve the organizational objectives.
For an example, looking into infrastructural context, it may trigger some understanding about basic need of hardware in implementation which comprises of computing devices, networking peripherals, data transmission and communication system and few other related factors. Zooming into broader view, it can be discussed on how important is the authority involvement in this field by building the required infrastructures, implement certain policies and involvement in promoting the usage of information systems.
Factors that slow down the success of implementation should be look into as an opportunity to learn and improve. Measures to overcome those barriers need to be searched.
Overall, this review briefs something about how a Strategic Information System can influence the organizational result in the end.

Limitation of review

This review only limited to analysis on strategic information system’s role which focused from alignment, selection and factors in implementing the system. Specific research on the direct impact of strategic information system was not done. It is recommended that the linkage of the implementation of information system towards the results of achievement to be studied in later review.

Conclusion

Base on the review done, it can be seen that strategic information systems do play an important role in enhancing the organizational efficiency and effectiveness. But the basic foundation at the implementation stage is vital. User participation at implementation phase will permit them to fully understand the needs and peripherals of the system (Kappelman and McLean, 1992).
Alignment between information system and strategic objective of the organization are utmost important. In order to have good alignment, there are a lot of factor that need to be focused on. The first is on the selection of system to be used. Internal factor of knowledge and adaptation of user to the system also plays a major part in creating an alignment between the information system and organizational objectives.
Result will be seen in the way of realization of cost-quality leadership, product and service development and also on market development.

Strategic Information System and Its Role in Enhancing Organizational Efficiency and Effectiveness - References

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