Following the Decision Trail of is Portfolios
[Sponsored article] Large firms often grapple with hundreds of simultaneous decisions relating to investments in information systems (IS). But the question of why some decisions are approved and others rejected, and how that relates to the firm’s IS strategy, has not been properly studied. A new study addresses that gap by developing a model and applying it to actual decision-making within a Fortune 50 multi-business operation.
[Sponsored article] Large firms often grapple with hundreds of simultaneous decisions relating to investments in information systems (IS). But the question of why some decisions are approved and others rejected, and how that relates to the firm’s IS strategy, has not been properly studied. A new study addresses that gap by developing a model and applying it to actual decision-making within a Fortune 50 multi-business operation.
At the heart of that work is the desire to determine the decision rationale (DR) for IS portfolio prioritisation and whether it accords with IS strategy.
“Incongruence between DR and a firm’s IS strategy is not only likely to be associated with allocation of investment in unsuitable IS initiatives, but also associated with firms missing out on key IS-enabled strategic business opportunities,” report the authors Prasanna Karhade, Michael J Shaw and Ramanath Subramanyam.
They therefore develop a profile of DR and analyse how this is applied under two types of strategies: a conservative IS strategy that is ultimately focused on the assessment and mitigation of risks, and an innovative IS strategy focused on exploring new opportunities.
They zoom in on three key features of DR: communicability, consistency and its risk appropriateness.
“A simple, communicable DR uses scarce resources – senior management’s time and attention – judiciously. The frequency with which decision rules are applied, in particular the number of decisions made using the same rule, represents consistency. And risk appropriateness relates to the right kinds of questions being raised and/or answered, based on the chosen IS strategy, before decisions are made,” they said.
Each strategy has different external and internal factors that will affect its DR. A conservative IS strategy is associated with a relatively stable external environment, a formal decision-making structure, and a risk-averse tendency in the quest for efficiency improvements. “These qualities are likely to result in an easily communicable, highly-consistent DR and focus on risk assessment and mitigation,” they said.
