Introduction

Business Value Creation with IT (BVC)

Andy Weeger

Neu-Ulm University of Applied Sciences

March 4, 2024

Introduction

Necessity of definitions

Figure 1: He should have defined what “fastest growing” (not) means …

To gain mutual understanding, core terms need to be defined. For this lecture, we need to—at least—figure out what IT and business value means.

Definition

Let’s define some core terms.

IT and digital

IT x

The information systems (IS) literature categorizes IT resources into

• IT assets, such as hardware, IT infrastructure, or software applications (Melville, Kraemer, and Gurbaxani 2004)
• IT capabilities, such as IT skills or IT management abilities (Wade and Hulland 2004)
• IT-enabled resources are systems that are formed through relationships between IT assets (e.g., CRM-systems) and organizational resources (e.g., CRM processes) (Wade and Hulland 2004)

To create IT-enabled resources organizations need to integrate IT assets, IT capabilities and organizational resources in a way that they create synergies.

Discussion

Now what’s the difference between IT asset and a digital asset?

From IT to digital resources

IT resources, IT-enabled resources, and digital resources (Piccoli, Rodriguez, and Grover 2022, 2296)

 

 

Digital resources are a specific class of digital objects that (1) are modular; (2) encapsulate objects of value, assets, and/or capabilities; (3) and are accessible by way of a programmatic interface (Piccoli, Rodriguez, and Grover 2022).

• Digital resources are digital objects designed to work as units in larger systems (i.e., modularity)
• A digital resource has no intrinsic value separate from the demand for the asset or capability it encapsulates (i.e., encapsulate objects of value)
• Digital resources are accessed via a programmatic interface rather than a manual or physical interface. Access is fully managed by a software boundary that exposes the encapsulated asset or capability via a set of prespecified data elements and request-response actions.

Figure 2: IT resources, IT-enabled resources, and digital resources (Piccoli, Rodriguez, and Grover 2022, 2296)

Dynamic capabilities

The resource-based view supports that firms may achieve a competitive advantage based on their bundles of resources and capabilities (Peteraf, Di Stefano, and Verona 2013; Wade and Hulland 2004).

The dynamic capabilities (DC) view argues that firms have to evolve their resource and capability base in order to ensure a sustained competitive advantage (Peteraf, Di Stefano, and Verona 2013) — two types of resources:

• ordinary or operational capabilities, which allow firms to survive in the present by supporting existing operations
• dynamic capabilities, which are directed towards strategic change of ordinary capabilities and resources

DCs govern the change of other organizational capabilities (Teece 2014).

IS and dynamic capabilities

Nomological net of DC in IS research based on Steininger et al. (2022, 454)

 

 

 

 

Figure 3: Nomological net of DC in IS research based on Steininger et al. (2022, 454)

Value

Dicussion

How can value created with IT (including AI) be defined?

IS business value

Value created by IT is—in a business context—usually referred to as IT/IS business value.

IS business value is the impact of investments in particular IS assets on the multidimensional performance and capabilities of economic entities at various levels, complemented by the ultimate meaning of performance in the economic environment. Schryen (2013, 141)

The ultimate meaning of performance refers to what is subsequently derived if the outcome is exploited, e.g.

• impact on performance of a workflow management system: faster business processes
• the ultimate meaning: is dependent on the use of gained time and the extent to which competitors have speeded up their processes

Taxonomy of IS business value

Taxonomy of IS business value types and examples according to Schryen (2013)

 

 

 

Figure 4: Taxonomy of IS business value types and examples according to Schryen (2013)

Usage as the missing link

The process model of IS value creation (Soh and Markus 1995, 37)

 

 

 

Figure 5: The process model of IS value creation (Soh and Markus 1995, 37)

IT assets need to be used in order to create any impact that, eventually, creates value.

Adoption and use

Figure 6: Unified Theory of Acceptance and Use of Technology (UTAUT) (Venkatesh et al. 2003)

The Unified Theory of Acceptance and Use of Technology (UTAUT) suggests that the actual use of technology is determined by behavioural intention. The perceived likelihood of adopting the technology is dependent on the direct effect of four key constructs, namely performance expectancy, effort expectancy, social influence, and facilitating conditions. The effect of predictors is moderated by age, gender, experience and voluntariness of use

Efective use

Figure 7: A model for effective use and its effect on performance according to Burton-Jones and Grange (2013)

Key for Figure 7: Solid arrows reflect primary paths; dashed arrows reflect secondary paths; boxed arrows reflect necessary causality (i.e., x enables but does not determine y ). Bolding on “user,” “system” and “task” reflect the relative emphasis on each element of use (bold reflects more emphasis).

The Theory of Effective Use defines effective use as “using a system in a way that helps attain the goals of using the system” (Burton-Jones and Grange 2013, 636) and conceptualizes it to consist of three dimensions: transparent interaction, representational fidelity, and informed action.

Transparent interaction is the extent to which a user is accessing the system’s representations unimpeded by its surface and physical structures.

Representational fidelity is the extent to which a user is obtaining representations from the system that faithfully reflect the domain being represented.

Informed action is the extent to which a user acts upon the faithful representations he or she obtains from the system to improve his or her state.

Q&A

Literature

Burton-Jones, Andrew, and Camille Grange. 2013. “From Use to Effective Use: A Representation Theory Perspective.” Information Systems Research 24 (3): 632–58.

Melville, Nigel, Kenneth Kraemer, and Vijay Gurbaxani. 2004. “Information Technology and Organizational Performance: An Integrative Model of IT Business Value.” MIS Quarterly, 283–322.

Peteraf, Margaret, Giada Di Stefano, and Gianmario Verona. 2013. “The Elephant in the Room of Dynamic Capabilities: Bringing Two Diverging Conversations Together.” Strategic Management Journal 34 (12): 1389–1410.

Piccoli, Gabriele, Joaquin Rodriguez, and Varun Grover. 2022. “Digital Strategic Initiatives and Digital Resources: Construct Definition and Future Research Directions.” Management Information Systems Quarterly 46 (4): 2289–2316.

Schryen, Guido. 2013. “Revisiting IS Business Value Research: What We Already Know, What We Still Need to Know, and How We Can Get There.” European Journal of Information Systems 22 (2): 139–69.

Soh, Christina, and M Lynne Markus. 1995. “How IT Creates Business Value: A Process Theory Synthesis.” ICIS 1995 Proceedings, 4.

Steininger, Dennis M, Patrick Mikalef, Adamantia Pateli, and Ana Ortiz-de-Guinea. 2022. “Dynamic Capabilities in Information Systems Research: A Critical Review, Synthesis of Current Knowledge, and Recommendations for Future Research.” Journal of the Association for Information Systems 23 (2): 447–90.

Teece, David J. 2014. “A Dynamic Capabilities-Based Entrepreneurial Theory of the Multinational Enterprise.” Journal of International Business Studies 45 (1): 8–37.

Venkatesh, Viswanath, Michael G Morris, Gordon B Davis, and Fred D Davis. 2003. “User Acceptance of Information Technology: Toward a Unified View.” MIS Quarterly, 425–78.

Wade, Michael, and John Hulland. 2004. “The Resource-Based View and Information Systems Research: Review, Extension, and Suggestions for Future Research.” MIS Quarterly, 107–42.