The Process-Value Model: A Systems View of the IST Value Chain

Transcription

1 Aociation for Information Sytem AIS Electronic Library (AISeL) SAIS 2007 Proceeding Southern (SAIS) The Proce-Value Model: A Sytem View of the IST Value Chain William L. Lomeron lomeronw@nula.edu Bin Mai Follow thi and additional work at: Recommended Citation Lomeron, William L. and Mai, Bin, "The Proce-Value Model: A Sytem View of the IST Value Chain " (2007). SAIS 2007 Proceeding Thi material i brought to you by the Southern (SAIS) at AIS Electronic Library (AISeL). It ha been accepted for incluion in SAIS 2007 Proceeding by an authorized adminitrator of AIS Electronic Library (AISeL). For more information, pleae contact elibrary@ainet.org.

2 THE PROCESS-VALUE MODEL: A SYSTEMS VIEW OF THE IST VALUE CHAIN Abtract William L. Lomeron Northwetern State Univerity lomeronw@nula.edu Bin Mai Northwetern State Univerity maib@nula.edu The productivity paradox, which i conidered a central iue to IST reearch, remain largely unreolved. The proce by which IST contribute to the organization value generation remain unclear. In thi paper, we propoe a new framework, the IST Proce-Value Model (P-VM), baed on General Sytem Theory to decribe the IST value chain and thereby directly relating the IST proce to the production of meaurable buine value. The P-VM reolve many of the limitation of exiting theoretic model and can erve a a platform for further reearch into the mechanim by which IST contribute to enhancing buine performance. Keyword: IST, productivity paradox, General Sytem Theory, value chain, buine value Introduction More than 15 year have paed ince the productivity paradox wa raied a an iue of central concern to the IST reearch community and it till remain largely unreolved. Information Sytem and Technology (IST) reearcher have propoed a variety of methodologie adopted from the finance, accounting and management dicipline (DeLone and McLean 1992, 2003; Peppard and Ward, 2004) in attempt to evaluate the contribution of IST to organizational performance but mot effort have been electively limited and/or lack a bai for effective generalization. However, the proce by which IST contribute to the organization effort to generate value for the end conumer remain a hot debate among both indutry practitioner and academic reearcher alike. The author ugget that the eential problem lie in the lack of an effective core framework for identifying the underlying IST ytem and it relationhip to the buine organization performance objective. The author propoe a new framework, the IST Proce-Value Model (P-VM), to decribe the IST value chain and thereby directly relating the IST proce to the production of meaurable buine value. General Sytem Theory i ued to provide the baic framework and decription of interacting ytem to develop and analyze the IST value chain and the P-VM in organization. The model view the IST ytem a one of many ubytem that comprie the ytem known a the buine organization. The propoed P-VM illutrate how the IST ytem interact with other buine ubytem to contribute to the overall proce of generating buine value. The P-VM reolve many of the limitation of exiting theoretic model and can erve a a platform for further reearch into the mechanim by which IST contribute to enhancing buine performance. The ret of the paper flow a follow. In Section 2, the author decribe ome exiting model addreing the IST evaluation and dicu their limitation. Section 3 contain a ummary of General Sytem Theory (GST), which provide the foundation ued to derive the P-VM. The P-VM i illutrated and decribed in Section 4. The author dicu the importance of the model in Section 5. Section 6 contain the ummarized contribution of the current paper and dicuion of poible future reearch. Proceeding of the 2007 Southern Aociation for Information Sytem Conference 93

3 Other Exiting Model The invetigation into the value of IST to a buine organization ha been a topic of interet almot ince the inception of Information Sytem a an academic field (DeLone and McLean, 1992). People are intrigue by the idea of determining IST contribution to the value creation procee of buine organization, or, alternatively, how to define and meaure information ytem ucce in term of creating buine value. Along the way, reearcher have propoed variou approache and methodologie for addreing thi important iue. In thi ection, the author give an overall introduction to the exiting model of IST evaluation and dicu the neceity of a paradigm hift for continuing reearch on thi topic. The ubiquitou preent of IST and it ever-evolving underlying technology have long demanded that buine organization have a clear viion how IST contribute to the value creation proce of the organization. However, contradicting empirical evidence ha been preented regarding the contribution of IST to the creation of organizational value (Brynjolfon and Hitt 1996, Brynjolfon 1993, Drucker 1991, Panko 1991). There i no conenu on whether or not an organization productivity i increaed with the deployment of IST. However, it eem unlikely in today buine world that a buine organization could urvive a ingle day without an effective and efficient Information Sytem and Technology function. Thi i the productivity paradox that ha long puzzled both reearcher and practitioner. One of the firt attempt at formally modeling the contribution of IST i Delone and Mclean (1992) Information Sytem Succe model, which wa updated by them in In their model, Delone and McLean introduced a comprehenive taxonomy of IS ucce that include ix major dimenion (in their 2003 update, an additional dimenion i added). Their model wa adopted by everal reearcher for application (Delone and McLean 2004; Molla and Licker 2001) or empirical (Rai et al. 2002) validation. While thi model i ucceful in diecting the concept of IS ucce, it doe not treat IST a an integral element of the buine organization value creation proce, and thu doe not ufficiently addre the iue how to relate the ucce of IS to the buine outcome of the organization, which eventually produce buine value. Several reearcher have identified variou iue that complicate the iue of information ytem evaluation. Irani et al. (2001) noticed that a trategic competitive advantage will not be achieved through embraced technology alone but, in the way companie approach the evaluation, management and exploitation of their human, organizational and technology baed aet and infratructure. In puruing thi reearch path, Soh and Marku (1995) adopted Proce Theory to yntheize the model of IT invetment evaluation, and ignified the importance of IT ue and know how a intermediate outcome. Melville et al. (2004) developed a model of IT buine value baed on the reourcebaed view of the firm, and highlighted their principle reult that IT value are dependent upon internal and external factor, including [among other factor] complementary organizational reource of the firm While thee reearch effort have provided valuable inight to the value of IST, their main focu i primarily on IST function and procee themelve; not on how they are integrated with the buine organization value creating procee. Other reearcher have tarted integrating the value of IST into the proce of the buine organization creating buine value. Lomeron and Hard (1994) introduced the term productivene to complement the evaluation of IT performance in term of productivity, effectivene, and efficiency. Baed on that reult, Byu and Lomeron (2004) propoed a framework for performance evaluation baed on the conumer originated value. In their valuebaed framework, performance meaure are determined from the conumer value the buine organization provide from the outcome it produce. Baed on thi framework, Lomeron and Tuten (2005) alo propoed a model that illutrate how IST contribute to organizational value. Thi effort etablihed a general link of the ISTbaed activitie to the organizational value creation effort, a well a providing a preliminary decription of thi IST value chain. In thi paper, we extend the work on the tream of reearch that tudie IST contribution within the context of value-generating procee of organization. We ue General Sytem Theory (GST) a the bai for developing a decriptive model of the IST ytem within the buine organization. The reulting IST Proce-Value Model (P- VM) depict how the IST ytem and IST procee, together with other buine procee, create buine outcome, which in turn generate conumer value. Proceeding of the 2007 Southern Aociation for Information Sytem Conference 94

4 Summary of General Sytem Theory GST wa firt propoed by Ludwig von Bertalanffy in 1945 (Bertalanffy, 1968) a an analytical approach for invetigating complex entitie, which he called ytem, that are compried of multiple interdependent and interacting component working to achieve a common purpoe. Thee ytem include phyical, mechanical, biological, economic and ocial entitie. GST provide a framework for clearly identifying the ubject entity, creating a formalized model of the entity and thereby enabling the ability to tudy the entity. More importantly, it allow independent reearcher to identify imilar entitie on which to conduct comparable tudie. While a decriptive model may lack the rigor of a mathematically grounded model, it can provide the bai for future formalization and i better than no model at all (Bertalanffy, 1968, p. 24). An IST ytem i an archetypical example of a ytem that conform to the poit of GST. Several recent IST tudie have ought to bring ome of the principle of GST directly into their reearch. Gregor (2006) draw on many of the tenet of GST to examine the nature of theory in IST. Porra, et. al. (2005) ued GST to provide a framework for undertanding the conitent miallocation of corporate reource to it i IST function by Texaco management with regard to the actual contribution to Texaco operational ucce. Lerrner (2004) ued GST to contruct a mathematically formalized information ytem theory. None of thee tudie, however, have uccefully provided a methodology to identify a bai for uccefully meauring the performance contribution of IST to an organization ucce. The author believe that the lack of an effective decriptive IST model baed upon the premie of GST i a ignificant contributor to thi lack of ucce. To effectively formulate an IST model baed upon GST, it i eential to undertand the fundamental element of GST. Thee can then be ued a the foundation for a comprehenive IST model. The baic poit of GST maintain that every open ytem exit in a continuum of other open ytem. Every ytem i a ub ytem of it parent ytem and i the parent of it own ub ytem. A ytem i defined by it boundarie between and it interaction with it parent ytem. The boundary mut clearly define thoe component that contitute the ytem and eparate them from it environment, which i everything outide the ytem and, in fact, may be another well defined ytem. In particular, the ytem boundarie are defined by the point at which element within the ytem exchange energy, information and/or reource with element outide the ytem. After the boundary ha been defined, appropriate input, output and outcome can be identified. Thee factor enable unit of analyi or meaurement ytem to be defined that form the bai for performance analyi of the ytem. (Sink, 1985, p. 27) Tanreiverdi (2005) ha demontrated in hi empirical reearch project that knowledge management i a critical organizational capability through which IST influence firm performance. In GST term, knowledge manager (IST conumer) repreent the key point of interaction between the IST ytem and it direct environment, the buine organization. Thee IST conumer, upported by the IST interaction, then work with other component of the buine ytem to produce the outcome that repreent buine performance. Thee outcome provide the point of interaction for the buine ytem with it conumer environment. The preceding dicuion and reearch finding provide the foundation for the IST Proce-Value Model decribed in the following paragraph. The Proce-Value Model (P-VM) for IST Value An important conequence of the P-VM i the readily identifiable value chain aociated with IST ytem product and ervice. Uing thi value chain, it i poible to determine the cot-benefit of producing any outcome and the IST ytem contribution to the proce. The overall model i preented in Figure 1 and decribed in the following paragraph. Proceeding of the 2007 Southern Aociation for Information Sytem Conference 95

5 Buine Organization Sytem R ES O UR C ES Material Information Energy INPUT Uer Requirement Expectation Objective Reource Data Meage PROCESSING Uer Knowledge Acquiition Performance Enhancement Service INTERACTION IST Sytem Preparation Interpretation Integration Analyi Aembly Production P-SM Uer OUTPUT Application Satifaction Evaluation Interaction Product Tranaction Meage Document Report Analyi B u i n e O U T C O M E S C on u m er V A L U E FEEDBACK P-PM Information Sytem & Technologie Interaction Evaluation New Sytem New Technologie Operation Support Uer Support Figure 1. The Proce-Value Model for IST A tated previouly, the ultimate goal of a buine organization, and thu of it ubunit and procee, i to create outcome that generate conumer value, the end point of the value chain.. More importantly, however, i the fact that the outcome ought by IST i the ame outcome being ought by the other ubytem within the organization. The demarcation and interaction between the IST ytem and it parent ytem, the buine organization and between the parent ytem and key exchange point, the conumer, are clearly hown in the P-VM. The buine organization ytem boundary i identified by the bold dahed line encompaing variou entitie and procee, among which are the IST ytem and the IST function. We now focu our attention on the component of the P-VM that are part of the buine organization ytem. The Core: IST Proce Model (P-PM and P-SM) At the core of the P-VM are two ub-model for IST procee. The firt i the traditional model of IST, the Proce-Product Model (P-PM, repreented by the horizontal box defined by the dah-dot-dot line in the center of the buine organization ytem) repreenting the input- proce -output function of producing information product, which wa the original function of early IST ytem. Within the context of a buine organization, the proce portion of the P-PM conduct preparation, interpretation, integration analyi, aembly, and production proceing ytem data and meage input. The ytem output aociated with the PPM include variou information product including tranaction, meage, document, report, and analyi. The econd model i the largely unacknowledged Proce-Service Model (P-SM, repreented by the vertical box defined by the dah-dot line, alo, in the center of the buine organization ytem) that illutrate the upporting interaction of the IST ytem with knowledge manager. In thi context, the P-SM hare common input and proceing function with the P-PM. The differentiating function of the model i the interactive upport of knowledge acquiition and performance enhancement by knowledge manager. Thi function ha been acknowledged by ome reearcher a the mot import contribution of the IST ytem to ucceful organizational performance (Leib, 2002; Tanreverdi, 2005). Proceeding of the 2007 Southern Aociation for Information Sytem Conference 96

6 The Support Element for the IST Core To enable an IST ytem with it attendant procee, we mut, alo, have the peronnel, technology and oftware to contruct, operate, maintain and upport it. Thee capabilitie are upplied by the IST function, repreented by the ingle box at the bottom of the buine organization ytem. IST activitie and procee include interaction evaluation, new ytem development, new technologie implementation, operation upport and uer upport. In addition to upporting the IST ytem, IST alo upport the phyical technologie and ytem that collect data and upport uer interaction. The uer flow channel repreent the uer activitie within the organization that occur that enable the uer to achieve the outcome expected from them. In advance of engaging the uer interaction proce, the uer develop internal input of requirement, expectation, and objective that guide their interaction with the IST ytem. The reult of the IST interaction produce internal output including application, atifaction, evaluation, and interaction along with producing the outcome expected by the buine organization. The ucceful creation of deired outcome lead to the creation of conumer value. Importance of the P-VM The miing feature in mot IST evaluation reearch ha been the ability to identify an outcome that can effectively be ued to meaure IST performance. The P-VM illutrate a value chain for IST that lead to the ame outcome that have already been etablihed by organizational management a the objective of the organization. Conumer Value ha the unifying ability to provide the ame meaurement criteria to all outcome of the organization whether they are tangible or intangible. However, once the outcome ha been identified, alternate meaurement approache can be ued. A recent article in Information Week (Charbrow, 2006) identified 12 different metric that are currently being ued by IST practitioner to evaluate variou apect of IST performance. None of thee metric were tied directly to organizational performance. Once a deired buine outcome ha been identified, performance enhancement can be both predicted and, ubequently, evaluated. Meauring the outcome before and after the enhancement how the performance improvement achieved by the IST project. The value of the improvement compared to the cot of achieving the improvement provide the bai for performance evaluation. Summary and Implication for Future Reearch The quet for effective performance evaluation of IST ytem ha been and continue to be an important activity for IST reearch. The ability to demontrate concluively and objectively that IST contribute poitively to buine performance ha thu far eluded reearcher. A the apparent importance of IST continue to grow and it pervaivene continue to increae, the importance of thi quet for IST reearcher and profeional remain undiminihed. Variou approache have been propoed, and variou model have been contructed to model the buine value for IST. Unfortunately, thoe different model often yielded vatly different, and in many cae, contradicting reult and implication. Thi reulted in what i called the productivity paradox of IST. New approache to invetigating the value of IST to the buine organization are required and a new paradigm for determining the nature of IST contribution to the buine organization value generating procee i eential. In thi paper, the author propoe a new model of the IST value chain baed on general ytem theory (GST). In the propoed Proce-Value Model (P-VM), the IST ytem within the buine organization and the IST function exit a integral, but eparate, component of the buine organization ytem, whoe purpoe i to generate buine outcome that produce conumer value. The P-VM appear to overcome mot, if not all, of the limitation of other exiting model, and i able to directly link the IST ytem into the other value chain of the buine organization. Thi approach provide ignificant implication with regard to the ability to value the contribution of IST to organizational performance and etablihe a olid foundation for further invetigation to thi critical, yet currently unclear, iue. Our model preent the firt tep toward a new approach to tudy the value of IST to a buine organization. The author are currently working on everal important extenion of the P-VM, with the ultimate goal of a Proceeding of the 2007 Southern Aociation for Information Sytem Conference 97

7 comprehenive and operational model to effectively and accurately determine the contribution of IST to buine performance. (Reference (25) available from the author) Proceeding of the 2007 Southern Aociation for Information Sytem Conference 98