Relationship between Information Technology and Business Strategy

Several categories of IS and BS relationships exit. Primarily, such relationships indicate the extent of maturity of an organization in the use of IS. An organization that uses IS for bringing in efficiency in its business processes is looking at IS from a different prism than an organization that is looking at IS to provide it with insights on how to be more competitive. The organizations are at different levels of maturity.

Using IS to Reduce Costs

Organizations use IS to bring in greater efficiency in their business processes to reduce cost of operations thereby also reducing the cost of offerings. Such a strategy of using IS with the motive of cost control alone takes a narrow view of the capability of IS in the overall scheme of doing business. In this case, IS follows the business strategy of cost reduction. Indeed IS are used as a weapon to implement the business strategy. IS in such organizations are structured and focused on delivering greater efficiency to the organization by streamlining the processes but is not tailored to provide the management of the organization.

Using IS to Differentiate Products and Services

Organizations at a higher maturity level of information system use it for creating a competitive advantage by helping organizations to take decisions that help in differentiation of products and services from their competitors. Organizations like Capital One, Google and NetFlix use the power of information to the fullest. They derive predictive value which enables them to be always one step ahead of competition as they are able to predict the direction of the market and differentiate their offerings to suit the market needs. They keep their ears close to the market pulse with the help of IS. They regularly check their own transaction data to see the emerging or changing patterns of customers who might help them to offer a new product or service to differentiate their offering. This requires complete top management support and a holistic approach towards IS. When the management is convinced of the benefits of IS and the organization as a whole has reached a degree of maturity in dealing with IS, then these kind of linkage with strategy and IS is possible.

Using IS to Focus on a Particular Market Segment

This is another example of IS being used in isolation. Organizations use IS to keep track of a particular segment of market which interests them. This sometimes requires integration of IS with external data sources.

Using IS to Build Stronger Linkages

IS can be an important tool to maintain linkages with your own network of suppliers and customers as the vendor relationship management systems run on this premise. A strong and reliable IS linking the organization with its business relations, like vendors, customers and regulators leads to better communication and understanding between the different business entities. This is another role in which IS is now being significantly used-the role of networking. In this role, IS is used more as a medium of communication rather than a decision support tools. In this role IS works as a source that determines the information flow among different business entities.

Using IS for Information, Knowledge and Leadership

IS can be used in itself as a strategy to provide the organization with information and knowledge leadership. The speed and insights provided by IS results in faster turnaround times for new products and services. Leadership in IS results in quicker and more incisive insights reaching the market from the organization. As Rand D times reduce, customer preference is easily mapped and organization is lean and always geared to manage change. This gives a strategic advantage to a firm.