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Information Management
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The firm’s strategic resource heterogeneity is a potential source of competitive advantage, the specific contribution of resources of the firms performance must be evaluated within the context of its competitive environment. The firm’s product market strategy defines its competitive environment, which in turn determiners the level of uncertainty and complexity (Galbrarth & Nathanson, Govindarajan, 1988).
Environmental Uncertainty: The dynamic nature of critical factors external to the firm, such that their fluctuations are difficult to predict.
Environmental Complexity: The number of factors and interdependencies that are crucial to the firm’s performance, including societal demands for minimal levels of performance or information services (Garrod, 1999).
Information as a resource can serve to combat environmental uncertainty and complexity in a variety of ways. In such competitive environment, the performance of the firm is related to its knowledge base and information generation and processing capabilities. Knowledge based resources and capabilities are most valuable in the uncertain environments, which is evident from the great emphasis, which is laid on the management of knowledge resources particularly knowledge workers in the new economy firms. While property based resources are most valuable in stable and predictable environments, which is observable in traditional old economy firms. Information can be used to enhance competitive flexibility by creating a wider range of strategic options that the firm can exercise.
The environment dimension of uncertainty and complexity create the information drivers required by the firm, and these consequently determine the strategic value of the firm’s information based resources. However, it is the organizational processes that employ the information resources, which create the strategic advantages. The development of linkages between the organizational processes and the information resources enabled by IT systems are very important. The firm’s information processing abilities determine the extent to which it acquires information from the environment, transfers it throughout the organization, and integrate it within its processes. IT does not serve as a strategic resource merely by ownership alone, its strategic value is revealed when it supports organizational capability. The management of IT ensures the extent to which the firm leverages the availability of information resources into development of organizational capabilities unique to the firm.
Innovation and coordination are the organizational capabilities for which a firm can use IT to meet the demands of its competitive environment. Innovation occurs when a new idea or procedure is adapted by a firm or within an industry. Innovation can take place in the firm’s administrative processes, business processes, or the product and the services produced by the firm (Swanson, 1994). Innovation prolongs the strategic value of the firm’s resources by exploiting them in novel ways creating causal ambiguity of the outcomes of innovative processes and creating additional uncertainty for its rivals. It also creates the flexibility in the firm to respond promptly to the environmental changes thus creating a first mover leader position in the market. If the environment is highly uncertain this capability can be exploited by the firm to track environmental changes and respond before any of the competitors do so. Competitors have difficulty in imitating or duplicating the use of similar resources. Degree of innovation of the firm’s strategy is significantly related to its use of information processing mechanisms. Successful firms in uncertain environment have adopted innovative strategy. When a firm operates in an unpredictable context, it must develop products and processes repeatedly in innovative ways (D’Aveni, 1995). It is important resource for innovation, which can be used to realize product innovation as well as industry transformation.
Coordination refers to the organizations means of controlling complex tasks between interdependent entities and widespread use of coordination methods enhances the information processing capacity of the firm (Ebers, Ganter, Galbrarth, Nathanson, Malone & Rockart). Coordination is driven by the level of complexity confronting the firm, arising out of known factors which impact interdependent processes and which must be controlled in order to conduct the work efficiently. Coordination is an administrative task of management. The coordination ability is revealed through its integrating mechanism and inter-organizational linkages, and it has been shown that information extensive organizations rely extensively on such mechanisms (Bakes, Cash, Kensynski, Harckel, Hagstrom & Hepworth).
IT coordinates tasks by processing large amounts of information rapidly, and when it exploits information through innovations in the firm’s processes, products and services. The strategic value of the IT should not evaluate solely by the level of financial investments, but rather through the level of investment in organizational processes that rely on the technology (Garrod, 1999).
Information processing refers to the firm’s knowledge based capabilities to use information as coordination mechanism between interdependent tasks in the firm’s value chain. It encompasses market coordination, production, processing and distribution functions.
Information exploitation refers to the firm’s capabilities to apply information resources or processing functions in innovative ways. Information is itself a resource and it can be exploited through innovative applications. The innovative activities using IT will be those that use the technology in ways that are new to the firm or to the industry in which it operates and thus have not been institutionalized as societal demands for minimum performance levels or information services. The innovation in the information processing activities may be realized through new transfers of knowledge within the firm or between the firms or it may be realized through new uses of information that is a by product of other processes that may even be routine or ordinary for the firm. In general information exploitation will require some adaptation of organizational processes and technology to create the new processes.
Environmental uncertainty is created when firms have difficulty predicting the dynamic fluctuations of customer demand and competitive forces in its environment that are crucial to its performance, such as varying consumer preferences, industry rivalry, technological developments, regulatory influences or other factors that the firm cannot control. When the firm is faced with interdependent processes and tasks or societal demands for expediency and service. These interdependent tasks create intense information demands for the firm, which in turn necessitate the coordination of the tasks in order to meet the expected level of performance.