Introduction to information systems strategy

Last updated November 20264 sectionsabout 6 min read

Key takeaways

Strategy is a high-level plan for reaching a long-term goal under uncertainty: it chooses what to do and, just as importantly, what not to do.
Governance sets direction and holds the organisation accountable; management executes within that direction day to day.
A board may delegate the running of information systems, but it stays responsible for supervising how the delegated work is done, as Re Barings plc (No 5) shows.
The IS Manager or CIO translates business needs into an IS strategy, oversees IS operations and projects, manages IS risk and represents the IS function in strategic conversations.
Alignment means every major IS decision, what to build, buy or retire, is made in explicit reference to the business goals it serves.

This paper moves from operating information systems (CISSE's earlier papers) to directing them: setting their strategic direction, governing how they are managed, and holding that management to an ethical standard. This opening chapter fixes the four core concepts, then places them in the hands of management and the IS function specifically.

Core concepts

System

An organised set of interdependent components working together toward a common purpose, an information system among them.

Strategy

A high-level plan for achieving a long-term goal under conditions of uncertainty, choosing what to do, and just as importantly, what not to do.

Governance

The structures, policies and processes by which an organisation is directed and controlled, distinct from day-to-day management (see The role of management, below).

Ethics

The moral principles guiding right conduct, applied here specifically to how information systems are strategised, governed and used.

The role of management

Governance sets direction and holds the organisation accountable; management executes within that direction day to day. Applied to information systems, this means senior management is responsible for setting IS strategy and governance policy (see the chapters on corporate IS strategy and on governance), while IS management is responsible for implementing it, and both bear responsibility for the ethical standard the organisation's IS use is held to (see the chapter on ethics).

Delegation is where the governance and management roles are most often confused. A board may, and must, delegate the running of information systems to management, but delegation does not remove its own responsibility. It must still receive enough information to know whether what it delegated is being done properly, and act when it is not. The collapse of Barings Bank is the classic illustration, and the courts' treatment of its directors states the principle directly.

Re Barings plc (No 5) [2000] 1 BCLC 523 (Court of Appeal, England; persuasive)

Barings Bank collapsed after one trader in its Singapore office ran up enormous hidden losses, helped by the fact that he controlled both the trading and the recording of his own trades. Directors who had not supervised that operation were disqualified. The courts held that directors may delegate particular functions, but they remain responsible for supervising how the delegated functions are carried out, and that a failure of supervision can itself show unfitness. For information systems the lesson is that leaving IT and its controls entirely to the IS department does not relieve senior management of accountability for them.

The role of the IS manager

The IS Manager (or Chief Information Officer, CIO, at senior level) is responsible for translating business needs into a working IS strategy, overseeing IS operations and projects, managing IS risk (see the chapter on risk management), and representing the IS function in the organisation's wider strategic and governance conversations, a role that has shifted from a purely technical, back-office function toward a genuine strategic partner to the business.

Aligning IS and business strategy

An IS strategy that does not serve the organisation's actual business strategy is, at best, wasted investment, and, at worst, actively pulls the organisation in a different direction from where it intends to go. Alignment means every major IS decision, what to build, what to buy, what to retire, is made in explicit reference to the business goals it is meant to serve, the theme the chapter on the Strategy Triangle formalises directly.

Exam tip

The governance-versus-management distinction (direction and accountability, versus execution) recurs through the rest of this paper, keep it precise: a question describing who sets policy is testing governance, a question describing who carries it out is testing management.

Self-check

(a) Define strategy and governance, and distinguish the two. (4 marks)

(b) Explain the role of the IS Manager or CIO in an organisation. (3 marks)

(c) Explain what it means for IS strategy to be aligned with business strategy, and the consequence of a poorly aligned IS investment. (3 marks)

Show worked answer

(a) Strategy is a high-level plan for achieving a long-term goal under conditions of uncertainty, choosing what to do and what not to do. Governance is the structures, policies and processes by which an organisation is directed and controlled. Governance sets direction and holds the organisation accountable; strategy defines the direction itself.

(b) The IS Manager (or CIO) translates business needs into a working IS strategy, oversees IS operations and projects, manages IS risk, and represents the IS function in the organisation's wider strategic and governance conversations.

(c) Alignment means every major IS decision, what to build, buy or retire, is made in explicit reference to the business goals it is meant to serve. A poorly aligned IS investment is, at best, wasted, and at worst pulls the organisation in a different direction from where it intends to go.