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DEVELOPING GLOBAL IT CAPABILITIES

William R. King

O GLOBAL AND MULTINA- tional companies that espouse a global strategic vision for themselves actually enact that

vision? Further, do those that do im- plement their global strategic vision develop global IT capabilities to sup- port the vision? If they do, what are the most important mechanisms through which global IT capabilities are developed?

These were the three questions that Dr. Paulo Flor of Deloitte & Tou- che and I asked in a research study we conducted among 130 U.S.-based mul- tinationals. Answers to the three ques- tions are key to understanding how companies are evolving toward glo- balization and what role IT plays in their evolution.

THE RESEARCH MODEL The research model shown in Figure 1 is a global IT capabilities development model, not a business process model. (In a business process version of this model, some arrows might go in the other direction.) It relates the firm’s global strategic vision to the enacted global business strategy, which, in turn, drives the development of global

IT capabilities. In the study, we set out to determine if this model is actually valid.

The data were gathered using a questionnaire survey of two persons in each firm — a senior executive who could provide information con- cerning the strategic vision and enact- ed strategy and a senior IT executive who could provide information con- cerning IT capabilities. The data were analyzed using a sophisticated statisti- cal technique called structural equa- tion modeling (SEM). The results were quite interesting.

DO COMPANIES ENACT THEIR GLOBAL VISIONS? We concluded that, in the main, the answer to the first question is “yes.” Companies that talk about their global strategic vision actually do many things to enact that vision. This means that they operate in a globally interde- pendent manner in terms of four types of resources: physical, informa- tion, human, and financial. In other words, companies that are enacting a global strategic vision exchange these resources among national entities on a regular, as well as an “as needed,” ba- sis. Companies that haven’t enacted their global vision exchange these re- sources less regularly and frequently or, in the case of information, only in a limited fashion. The only resource category that global enactors fall short on is physical resources, which means that information, human, and financial

exchanges are much more common than are exchanges of products, raw materials, machinery, etc.

This result cannot be said to be un- expected, but it is clear that for many years, not all companies that spoke about globalization enacted that strat- egy. Now, it seems that they do.

DO THESE COMPANIES DEVELOP GLOBAL IT CAPABILITIES? The answer to the second question is also positive. Companies that have a global vision and enact that vision tend to develop more, and more so- phisticated, IT capabilities. IT capabil- ities were measured in terms of the extent and importance of IT planning, the range and reach of their communi- cations networks, and the level of IT support services they provide.

This conclusion is not at all unex- pected because IT is necessary if a complex organization is going to con- duct and coordinate the extensive re- source exchanges that characterize truly global enterprises.

WHAT ARE THE MAIN DRIVERS OF GLOBAL IT CAPABILITIES? In terms of global IT capabilities, we found that companies that meet the first two criteria (e.g., have a global vi- sion and enact it through resource ex- changes) indicate that human resource and information exchanges are the main drivers of global IT capabilities, assessed in terms of IT planning and

WILLIAM R. KING holds the title university professor in the Katz Graduate School of Business at the University of Pittsburgh. He has served as president of TIMS (now INFORMS), founding president of the Association for Information Systems (AIS), and editor-in-chief of MIS Quarterly.

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IT STRATEGY AND INNOVATION

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IT STRATEGY AND INNOVATION

the range, reach, and level of support services they provide. Other types of resource interdependence do not af- fect the development of IT capabili- ties nearly so much.

This result suggests that the in- creased flow of people across the mul- tinational company has prompted firms to develop a set of shared IT ca- pabilities to support their information needs. Managers traveling across bor- ders must be provided with a set of shared IT capabilities that allow them to perform their tasks efficiently and effectively. For example, data must be standardized across units for easier understanding and interpretation by the people transferring to, or visiting, these units. Similarly, network con- nectivity must be made available for easier and faster communication of managers in the various national units

of the multinational company. In this sense, the needs and requirements of people moving across the boundaries of the national units has been a prima- ry motivator for the development of a global IT infrastructure. However, the need to share information, indepen- dent of the demands created by the flows of people, is also a great motiva- tor of global IT capabilities.

SUMMARY This study’s results suggest that glo- balization is real in every sense. Com- panies that state that their objective is globalization proceed to enact that strategy. In doing so, they develop glo- bal IT capabilities to support the ex- tensive resource exchanges that are required by globalization.

Because the primary drivers for developing these IT capabilities are

the exchanges of human resources and information that are required in a globalized company, this suggests a strategy for firms that wish to global- ize or to speed up the globalization process:

❚❚ Transfer people between national units in substantial quantity and often

❚❚ Develop standardized information that must be exchanged among units or between units and head- quarters

Because people who are trans- ferred undoubtedly drive information exchange and standardization, inde- pendent of the requirements placed on units by upper management, it seems that people exchange is the real key to globalization.

FIGURE 1 Global IT Capabilities Development Model

Global Strategic Vision

Enacted Global Business Strategy

Global IT Capabilities