Aligning business and IT strategy

Now that we have definitions of web 2.0 and social media and the importance of them for organizations we continue the research on how organizations can approach these and align them with their organization strategy.

Organizations can adopt an internal or external focus, for their business strategy as well as their IT strategy. This chapter will present evidence that IT, electronic and social media strategies should also be formulated in internal and external dimensions and how these strategies should be governed by organizations.

The strategic alignment model

Strategic alignment model, Oxford University Press US (1992)

IT strategy should be articulated in terms of an external domain and an internal domain. Where the external domain focuses on the position of the firm in the IT marketplace and the internal domain focuses on how the internal Information Systems should be managed. To acquire an adequate fit that delivers benefits to IT investments a strategic fit between internal and external domains is needed. Benefits can be realized by finding a fit between internal and external IT applications and platforms.

Between IT strategy and business strategy there is also a need for functional integration that takes note of the impacts each has on another (Henderson et al. 1993). This way, more value can be realized from investments in IT as they take note of the business strategy and goals the organization has. IT effects on business performance varies across organizations, because of the ability to achieve a link between business and IT strategy (Rai et al. 1997).

The need for strategic alignment of IT

IT has evolved from an administrative role towards a strategic role that can support and shape business strategies. Yet sometimes there seems to be an inability to realize value form IT investments. Henderson et al.(1993) argue that this is due a lack of alignment between business and IT strategies in organizations.

Trying to achieve strategic fit between the dynamic internal support structure and the external product-market is a continuous process of adoption and change. Exploiting IT functionality on a continuous basis can deliver sustained competitive advantage. Organizations try leveraging their IT capabilities to differentiate operations from their competitors and use these capabilities to shape and support their business strategies. This underlines the importance and value of aligning both strategies in organizations.

Technology Investment and Business Performance

Rai et al. (1997) argue that when calculating the return on corporate IT investments focus must lie on the links between IT, business strategy and competitive context.

While IT likely improves organizational efficiency the effect on business performance varies across organizations, because of the firm’s management processes links with IT strategy. This emphasizes the need for linkage between IT and business strategy.

IT investments are often not well measurable with ROA or ROE. This paper suggest to break down IT investments, not treating as a whole entity and following an justification process that considers specific objectives of the proposed investments. For example investments aimed at reducing labor costs can be justified on the basis of cost savings

Corporate governance of IT

Raghupathi (2007) recognizes the value of internal and external strategic fit (Henderson et al.1993) and argues that modern IT governance should formulate strategies according to this model.

IT Governance can be defined as: “The organizational capacity to control the formation and implementation of IT strategy and provide direction to achieve competitive advantages for the corporation”. IT is critical for supporting and enabling enterprise goals. Effective ITG can generate real business benefits like reputation, trust, product leadership, time-to-market and reduced costs. These benefits all increase stakeholder value.

This emphasized the alignment of IT objective with business strategy. IT governance cannot be an isolated activity and must be part of top management. IT Governance is changing: ”Boards of directors are beginning to look beyond the accounting roots of IT governance toward the risk of legal liability and harm to product brand and corporate reputation.”

Conclusion

Inability to realize value from IT investments is due to lack of alignment between business and IT strategies in organizations (Henderson et al.1993).

There is a need for strategic fit between internal and external domain of IT and a functional integration between business and IT strategy (Henderson et al.1993). To achieve this alignment IT governance cannot be an isolated activity and must be part of top management (Raghupathi, 2007). Modern IT governance should formulate strategies according to this model that recognized the value of internal and external strategic fit (Raghupathi, 2007).

I argue that social media strategy should be aligned with the business strategy of organization to achieve successful investments. With the growth of social media importance in organizations it should become part of IT governance. Where the ”Boards of directors are beginning to look beyond the accounting roots of IT governance toward the risk of legal liability and harm to product brand and corporate reputation (Raghupathi, 2007).”

Organization strategy formulated in value disciplines

Treacy and Wiersema(1993) presented the value disciplines model that describes three value disciplines that can help define the main focus of an organization’s business strategy, helping the organization to make strategic decisions. Choosing one will shape strategy and operational decisions in a company. These value disciplines are guidelines for organization strategy and in order to be competitive organizations need to maintain an acceptable level on all three disciplines while excelling in one. The three value disciplines are:

Operational excellence:  Aims at offering the best total cost. Optimizing internal and external processes to minimize costs. The focus in the organization is on standardization and streamlining of operations, efficiency and low total cost. Most large international corporations like McDonald’s, Wal-Mart and Dell focus on this discipline. (Marc Eichen, 2006)

Product leadership:  Aims at offering the best product or solution. The focus in the organization is on R&D, design and innovation. Organization structure and culture need to be flexible to stay ahead of competition and offer cutting-edge solutions to customers.

Customer intimacy: Aims at offering the best solution and focus on customers to maintain long-term relations and growth. Continuously tailoring and shaping products and services to fit customer needs. Organization structure needs to be flexible, close to the customer and solving the customer’s problem has to be put above all.

Marc Eichen (2006) argues in his article “Value disciplines: a lens for successful decision making in IT” that the value disciplines are a good method for IT strategy decisions to be aligned with the institutional goals of organizations.

Conclusion: Value disciplines: a lens for successful decision making in IT

Formulating organization strategy in terms of choosing one value disciplines gives and clear view on the business strategy of an organization. Having this clear definition helps communicating the strategy to the rest of the organization.

Operational excellence, product leadership and Customer intimacy can all be used to formulate the goals of IT strategy and shape strategic decisions. I argue they should be used by organizations as a starting point from which to formulate their social media strategy. This way the social media strategy will have a basis that is aligned with the business strategy of the organization.

Internal enterprise use of social media.

The social aspects of social media that allow the collecting and sharing of collective intelligence among the social media platforms users can be used by organizations to internally collect, retain and share information. The web 2.0 structure and technologies can also be used for easier communication and collaboration in organizations.

Brzozowski et al. (2009) write about the internal use of social media at Hewlett-Packard (HP). Social media provides a free broadcast platform that allows authors to circumvent traditional organizational hierarchies and reach organizationally distant readers. Unlike email that is targeted to specific recipients.

HP offers all employees a variety of social media services used for internal collaboration and communication. Internal blogs for example can facilitate internal collaboration and knowledge sharing and aim at the benefits of lightweight informal collaboration among employees.

To reap the benefits of internal social media usage managers should be stimulated to ‘leed by example’. For venues that imply discussion (e.g. blogs, comments, forums) external validation from managers is more important to the users than in venues of archives (e.g. links, wikis). Culture and organization structure also influence the internal support to use social media.

Analyzing the building blocks of web 2.0 and social media

Organization theory also indicates the importance of technologies and their consequences on organizations. Dhar & Sundararajan (2007) argue that the past forty years certain principles in IT can be recognized that remain constant. These invariants can be used to interpret the past and make predictions about information technologies in the future. They present a model where in the influence of these technological invariants and the consequences on IT in Business are explained. These invariants will be used to analyze web 2.0. The consequences on IT that are found seem to be in line with the technological trends we see in web 2.0.

Technological invariants

The first technological invariant is digital representation, the visualization of things as information and in particular digitally represented information. Examples are: a bank balance, music, our voice or video can all represented as digital information. This digitalization allows for new possibilities in the use and transport of information.

The second invariant is computing power. This is: “the long-term exponential growth of hardware power, broadband, storage and the miniaturization of IT devices”. Moore’s law, which states that the processing power doubles each six months, can explain this growth in computing power and has proven to be accurate. Computing power has grown, become cheaper and software has made it more reliable.

The last invariant is modularity, this is the sustained increase in programmability of IT systems in a modular way. This allows aggregated complexity to be easier integrated into existing standardized software platforms. This allows existing IT systems to add new functionality and usability with just modular additions to the software. This way Modularity fundamentally provides power to the first two invariants by making these possible and easier to achieve.

Digital representation is the technological invariant that has enabled many of the web 2.0 services to exist and grow with further digital representation of information. Blogs and wikis contain text, pictures, sounds and videos and increasingly more data and information that is made possible by digital representation of this information (Dhar & Sundararajan, 2007).

Computing power has increased and become cheaper (Dhar & Sundararajan, 2007) making internet publishing on blogs, wikis and other services fast, reliable and cheap. Barriers that might have existed in broadband for the streaming of video for example have been overcome by this continuously increase in computing power over the past 40 years.

Modularity drives the flexibility of web 2.0 allowing new functionalities and usability to be added to existing systems. Existing technologies on web 2.0 platforms are often updated enabling new functionalities. Gmail labs from Google and new functionalities in video’s on Youtube are examples of this. Widgets on blog services and widgets/apps on mobile phones also enable publishers to aggregate complexity trough modularity and offer users new functionality and usability trough updates and releases of widgets.

These three invariants are clearly identifiable in web 2.0 and contribute to the three consequences in the model.

Consequences in business

These three technological invariants form the building blocks to recognize the consequences of IT developments in business. Dhar & Sundararajan (2007) recognize three business consequences of these invariants. Digital representation together with the growth of computing power and communication power facilitate the separation of information from a growing number of artifacts. An example is the music CD, where the digital distribution of mp3′s only became feasible once there were internet connections fast enough to transfer the data.

This separation of information from its artifacts can alter the fundamental economics of an industry, making their products become information goods. The economics and production of information goods differ from tangible goods and will have many consequences for the way business operates once this separation starts to plays a role in the company’s sector. The music industry is one of the greatest examples of this and had to change traditional business models to still make profit in the digital music age.

The second consequence is the growth in computing hardware power and the ability of software to be layered in a modular way. This allows for IT infrastructures to become larger, more powerful and more accessible. Supply chain management software platforms and on-demand search platforms like Google are an example of this. Modularity results in functionality adopted by early innovators to be incrementally integrated into these powerful and shared infrastructure platforms.

The third consequence is a growth in society of the importance and variety of  IT mediated spaces of interaction. The difference between Technology-mediated spaces and spaces in the physical world is that technology mediated spaces are shaped continuously by the participants, where as real-life spaces are developed and launched in less continuous form. Digital representation is key in facilitating exchanges of information in these spaces. Computing power supports this by allowing the built of complex Technology-mediated interfaces and Software modularity enables the evolvement of spaces and build of new ones with little effort.

The first consequence ‘information separates form its artifacts’ in some industries has led to products to become information goods. In combination with electronic networks this has enabled and hasten the transformation of physical products to service products (Rust & Kannan, 2003), fundamentally changing economics and production of businesses in industries that are affected. In the music industry this has had great consequences. On the internet we see iTunes and Hulu as a response from the music and film industry to adapt to these changes and create new business models.

The second consequence, shared IT platforms of growing functionality, where IT infrastructures become larger, more powerful and more accessible. An on-demand search platform like Google is an example of this. These large accessible IT platforms can create opportunities and threats for companies which need to be addressed in corporate strategy.

The third consequence, the growth in importance of technology-mediated spaces and interfaces. Digital representation enables exchanges of information in these spaces and is what happens on blogs, wiki’s and other web 2.0 services. These exchanges are mediated in services and spaces that are found on IT and web 2.0 platforms. This is resembles what we see in social media spaces where: “collective goods are produced through computer-mediated collective action”(Smith et al. 2008). And these exchanges arise on web 2.0 services and platforms.

I argue that the third consequence is largely connected to the second consequence on the web. The technology-mediated spaces can be found in the social media part of web 2.0 that operates on large shared IT platforms.

Conclusion

The technological invariants and consequences of IT in business can be used to analyze the building blocks of web 2.0 technologies and the consequences of web 2.0 on IT in organizations. Web 2.0 is greatly driven by modularity and result in the creation of large IT platforms and computer-mediated spaces. Analyzing these IT developments in business has show that web 2.0 technologies are important for organizations.

Here is the first part of a serie of blogposts where I present the the research and findings of my Social Media & Business thesis. I hope you’ll comment and share your views on the material. In the end I will make a pdf available and we might even have updated sections based on comments/discussions!

Introduction

We are at the point of new developments in IT and business in the form of social software and social media applications. Many organizations and researchers have begun experimenting with the internal use of social software in the workplace (Brzozowski et al. 2009). The use of these technologies is quickly maturing and moving to enterprise-level projects and platforms and the social software marketplace is now starting to attract large vendors such as Google, IBM and Microsoft (Gartner research, 2008).

The goal of this research is to develop a model that allows web 2.0 and social media to be aligned with organization strategy. Reason for this is that aligning the business and IT strategies in organizations helps realizing more effective investments (Henderson et al.1993). These theories are analyzed in this paper and come together in the model that will be presented at the end.

Problem statement

Corporations trying to adopt and use web 2.0 and social media applications in their business, raises the question of how organizations can use these in extend to their strategies.

• How should web 2.0 and social media be approached and how can organizations align these web 2.0 and social media developments with their organization strategy?

To answer this question the following sub questions need to be answered:

• What is web 2.0 and social media and what are good definitions?
• How can social media be approached and used by organizations?
• How can social media be aligned with the business strategy of organizations?

Web 2.0 and social media theory

To get a clear definition of what web 2.0 and social media is and how organizations can use these, first web 2.0 will be researched. At the end of this chapter a clear definition of web 2.0 and social media is given and how they are connected.

Historical perspective of web 2.0, the dot-com bubble

After the burst of the dot-com bubble in 2001, it became clear that organizations that survived the crash had certain web business characteristics in common that were later identified as web2.0. (O’Reilly, 2007)

O’Reilly’s definition of web2.0 in 2006 is the following: “The business revolution in the computer industry caused by the move to the internet as a platform and an attempt to understand the rules for success on that new platform” (Valacich & Schneider, 2009). This indicates a shift in thinking about internet as a new platform. Web 2.0 is not only a collection of technologies but also a way of approaching these new technology applications to create successful business model.

The following list was created by O’Reilly when analyzing which applications are thought of as web2.0.

From an internet business perspective key to web 2.0 is: “The embracing of harnessing collective intelligence”. The new technologies and use of the web to allow a collective intelligence to be formed and created online. Businesses who succeed in embracing this can use it to their advantage.

According to O’Reilly (2007) internet businesses need to embrace this as a core competence and understand that: “Network effects from user contributions are the key to market dominance in the web 2.0 era”. This stresses even more the need for companies -especially internet business related- to understand this shift towards web 2.0 and the changes that it has brought.

Definition of web 2.0

While O’Reilly’s paper mainly focuses on the changes after the dot-com bubble for internet businesses it helped identify the general business aspect of web 2.0 as the ‘harnessing of collective intelligence’. It is hard to have a clear definition of a concept like web 2.0, because it doesn’t have clear boundaries (O’Reilly, 2007) and web 2.0 cannot be reduced to one principle (Hoegg et al. 2006).

Web 2.0 technologies can be used to develop different web 2.0 services and platforms. These web 2.0 services include: Blogs, Wikis, Podcasts, Social Networks and Social Bookmarking. Technologies like AJAX, API’s and RSS have made these new web 2.0 services possible and feasible ( Hoegg et al. 2006) .

Anderson(2007) presents a list of principles that he sees as key ideas that help define web 2.0. These key principles are in line with O’Reilly’s ‘collective intelligence’ definition and add to the definition of web 2.0 not only being a collection of technologies.

All these key principles offer new possibilities for communication, collaboration and business. The key idea of openness refers to the social philosophy of web 2.0 and data on an epic scale refers to the amounts of data we produce electronically. Some argue that maximizing the collective intelligence of the participants is fundamental to web 2.0 (Hoegg et al.2006). Web 2.0 isn’t just only about technological aspects, but also about social aspects like collective intelligence, communication and collaboration.

Definition of social media

From a sociological perspective, social media can be described as “collective goods produced through computer-mediated collective action”. An example is Wikipedia, where the collective goods are articles, and the collective action is the co-editing process of article writing (Smith et al. 2008). These goods are produced and shared on web 2.0 computer-mediated platforms.

Social media platforms offer valuable high quality content that is embedded in socially constructed repositories and the structure of these content collections is different from the web 1.0 structure (Smith et al. 2008). Social media uses the possibilities of the web 2.0 structure to enable the social aspect of collaboration, communication, media sharing and more.

Conclusion: Technology, services and platform aspects of web 2.0

Web 2.0 is not just a collection of technologies, but is a broader concept where technologies, services and platforms come together (Hoegg et al. 2006). To get a clear view of what web 2.0 and social media is and how these affect organizations a distinction is made between the different aspects of web 2.0.

Web 2.0 is a combination of technologies, services and platforms. For organizations to better understand web 2.0 and social media we make a distinction between three aspects of web 2.0. First we have web 2.0 technologies like AJAX, API’s and RSS. These enable web 2.0 services like Blogs, Wikis and Podcasts. These services come together on web 2.0 platforms like Facebook (social networks), Google, Blogger and Twitter. These platforms also allow new applications to be created on top of them like crowd sourcing, viral marketing campaigns and real-time information. On this platform aspect of web 2.0 is where social networks are found and where Social Media operates.

I argue that Social media can be identified in web 2.0 services and platforms and thus overlaps with the application aspect of web 2.0. Defining social media as: collective goods produced through computer-mediated action on web 2.0 services and platforms, gives a better indication on which level of web 2.0 social media operates. This has led to the following distinction between web 2.0 aspects and gives a clear overview of both web 2.0 and social media definitions, that can help identify where the business use of both can be found.

I argue that the business use of web 2.0 can be found in social media. Social media is where the application and platforms that are interesting for the business use of web 2.0 come together and where strategic decisions are made. These platforms offer opportunities for organizations like crowd sourcing, collecting data, marketing and many more. Making use of the collective intelligence aspect of web 2.0 and using social media platforms to collect and share this collective intelligence among the users. In this paper social media is identified as the services and platforms that are interesting for business use and where we the focus will lay on in this paper.

Part 2 follows soon!

Interested in Business Intelligence, Decision Support Systems, Expert Systems, Data Warehousing and Data Mining? Here follows an overview of all the academic papers on Business Intelligence that we had to read for our exam:

• A framework for the development of Decision Support Systems, R.H. Sprague, MIS Quarterly, Volume 4, Issue 4 (Dec. 1980).
• The science, not art, of business intelligence, M.C. O’Guin, et al.,  CompetitiveIntelligence Review vol 12(4) 15-24 (2001).
• Towards real-time business intelligence, D. Azvine, Z Cui, D.D. Nauck, BT Technology Journal, Vol 23 No 3, July 2005.
• Intelligence generation and superior customer value, S.F. Slater, J.C. Narver, Journal of the Academy of Marketing Science, Vol 28 No. 1 120-127.
• Specifying an expanded framework for classifying and describing decision support systems, Daniel J. Power, Communications of the Association for information Systems, Vol. 13, 158-166 (2004)
• Competing on Analytics, Thomas H. Davenport, Harvard Business Review, January 2006.

• Integrated decision support systems: A data warehousing perspective, Salvatore T.
  March, Alan R. Hevner, Decision Support Systems, Vol. 43 (2007)
• The benefits of data warehousing: Why some organizations realize exceptional payoffs, H.J.Watson, et al., Information & Management 39 (2002) 491-502.
• Data Warehousing Supports Corporate Strategy At First American Corportation, Brian L. Cooper et al., MIS Quarterly Vol. 24 No. 4, pp. 547-567/December 2000
• An overview of data warehousing and OLAP technology, S. Chauduri & U. Dayal.
  Paragraph 6 is not mandatory, reading this paragraph will be sufficient.
• Building the data warehouse, Stephen R. Gardner, Communications of the ACM, 41(9) (1998).

• Determining Information Requirements for an EIS, Hugh J. Watson, Mark N. Frolick, MIS Quarterly, Volume 17, Issue 3 (Spe. 1993), 255-269.
• Critical Success factors revisited: success and failure cases of information systems for senior executives, Decision Support Systems 30 (2001) 393-418.
• What does it take for successful executive information systems?, Decision Support Systems 14 (1995) 147-156.

• The evolution of expert systems., Ovidiu S. Noran,
• An introduction to Expert Systems, Michael Will, Picodoc Corporation, 2001.
• Knowledge management and data mining for marketing, M.J. Shaw, et al., Decision Support Systems 31 (2001) 127 – 137.
• From Data Mining to Knowledge Discovery in Databases; Usama Fayyad, et al., American Association for Artificial Intelligence, Fall 1996, p. 37-54.
• Assessing Loan Risks: A Data Mining Case Study, Rob Gerritsen, IT Pro, November/December 1999.

• Data to knowledge to results: Building an analytic capability, Thomas H. Davenport, et al., California Management Review Vol 43, No.2, Winter 2001.
• Evolving from Information to Insight, G. Ferguson et al., MIT Sloan Management Review, Winter 2005, vol. 46, no.2.
• Data quality in context, D.M. Strong, et al., Communications of the ACM, May 1997/Vol. 40.No.5.
• The impact of Data Integration on the Costs and Benefits of Information Systems, MIS Quarterly, September 1992, p 293-311.
• A business case framework for group support technology, Post, Brad Quinn, Journal of Management Information Systems, Winter 1992-1993, Vol. 9, iss. 3

• Management issues in data warehousing: insights from the Housing and Development Board, J. Ang & T.S.H. Teo, Decsion Support Systems 29 (2000) 11-20.
• An empirical investigation of the factors affecting data warehousing success, B.H. Wixom, H.J. Watson, MIS Quarterly, Vol. 25 no. 1, march 2001.
• An empirical investigation of the key determinants of data warehouse adoption, Ramamurthy, Sen & Sinha, Decision Suppport Systems, vol. 44 (2008) p 817-841.
• Strategic actions in information technology investment based on real option theory, Yong Jin Kim, G. Lawrence Sanders, Decision Support Systems 33 (2002) 1-11.
• The measurement of business intelligence, Lönnqvist & Pirttimäki, Information Systems Management, Vol. 23 (2006).
• Price and Value of Decision Support Systems, Dan R. Pieptea, Evan Anderson, MIS Quarterly December 1987, p515-528
• Past, present and future of decision support technology; J.P. Shim et al., Decision Support Systems 33 (2002) 111-126.
• Progress in Web-based decision support technologies, Hermant K. Bhargava, Daniel J. Power, Daewon Sun, Decision Support Systems 43 (2007) 1083-1095.

I’ve highlighted some of my favorite papers and the most important ones, enojoy!

Transformation of physical products to service products

The transformation of physical products to service products is enabled and hasten by electronic networks. For firms to garner long-term customer relationships they must take full advantage of the e-service opportunities that these electronic networks can offer. They predict that product-centered orientated firms that resists the call of the customers for control are not likely to survive in this electronic environment and give the example of record labels.

The e-commerce vs e-service path to increased profits

The traditional path is focused on automation and efficiency to reduce costs. While the e-service path is focused on enhancing service and building profitable customer relationships to increase revenues.

There is a shift form focusing on technology and systems towards focusing on understanding the customer. The electronic environment enables both this inward and outward-looking view of e-commerce. E-service is a customer-centric concept with emphasis on service and relationships to build customer equity instead of an emphasis on products and transactions.

The e-service paradigm takes advantage of the nature the online environment with it’s flows of information to learn about customers and communication to engage in long-term relationships.

Examples of the shift

“Dell Computers is a good example of how a firm selling products in an increasingly commodity market can follow an e-service orientation to build its customer equity” (Rust & Kannan, 2003). Organizations as IBM, HP and Sun are also undergoing this shift and increasingly focusing on their services as prime revenue source.

Source and based on: Roland T. Rust and P.K. Kannan, “E-service: a new paradigm for business in the electronic environment”, Communications of the ACM, June 2003/Vol. 46, No. 6

A technology-Centric view of IT in Business

Dhar & Sundararajan(2007) argue that the past forty years certain principles in IT can be recognized that remain constant. These invariants can be used to interpret the past and make predictions about information technologies in the future. They present a model where in the influence of these technological invariants and the consequences on IT in Business are explained.

Technological invariants

The first technological invariant is digital representation, the visualization of things as information and in particular digitally represented information. Examples are: a bank balance, music, our voice or video can all represented as digital information. This digitalization allows for new possibilities in the use and transport of information.

The second invariant is computing power. “The long-term exponential growth of hardware power, broadband, storage and the miniaturization of IT devices”. Moore’s law states the doubling of processing power each six months and explains this grow in computing power. Computing power has grown, become cheaper and software has made it more reliable.

The last invariant is modularity, this is the sustained increase in programmability of IT systems in a modular way. This allows aggregated complexity to be easier integrated into existing standardized software platforms. This allows existing IT systems to add new functionality and usability with just modular additions to the software. This way Modularity fundamentally provides power to the first two invariants.

Consequences in business

These three technological invariants shape the base to recognize the consequences in business. Dhar et al. recognizes three consequences of this invariants in business. Digital representation together with the growth of computing power and communication power facilitate the separation of information from a growing number of artifacts. The music CD, where the digital distribution of mp3′s only became feasible once there was enough broadband is an example of this.

This separation of information form its artifacts can alter the fundamental economics of an industry, making their products become information goods. The economics and production of information goods differ form tangible goods and will have many consequences for the way business operates once this separation starts to plays a role in the company’s sector.

The growth in computing hardware power and the ability of software to be layered in a modular way allows for IT infrastructures to become larger, more powerful and more accessible. According to Dhar et al. supply chain management software platforms and on-demand search platforms like Google are an example of this. Modularity results in functionality adopted by early innovators to be incrementally integrated into these powerful and shared infrastructure platforms.

As a result these large IT platforms can create opportunities and threats for companies which need to be addressed in corporate strategy.

The third consequence is a growth in society of the importance and variety of IT mediated spaces of interaction. The difference between Technology-mediated spaces and spaces in the physical world is that the latter is shaped continuously by the participants, where the IT ones are developed and launched in less continuous form. Digital representation is key in facilitating exchanges of information in these spaces. Computing power supports this by allowing the built of complex Technology-mediated interfaces and Software modularity enables the evolution of spaces and the build of new ones with little effort.

This results in new way of organizing and manipulating information, giving rise to new social structures and business models. Organizations need to understand that these developments and changes in spaces can disrupt the existing business models.

Conclusion: Why IT is important in business.

We have seen that IT can transform industries and that production, economics, social structures, business models and corporate strategy are all effected by these consequences of IT in business. This underlines the importance of IT in business.  “Executives need to be vigilant about how information technologies might be transforming their industries and must be able to anticipate future transformation before it occurs.” The model they presented can help analyze the building blocks and consequences of web 2.0 and social media for businesses and the transformation that they might bring to industries.