Summary and discussion of Richard Nolan and F. Warren McFarlan’s article “Information Technolgy and the Board of Directors” published in 2005 by Harvard Business Review.
Information Technology and the Board of Directors
In this article the authors show how board members can recognize their firms’ position and decide whether they should take a more aggressive stance. They illustrate the conditions under which boards should be less or more involved in IT decisions. Furthermore, they delineate what an IT governance committee should like in terms of charter, membership, duties and overall agenda. They offer recommendations for developing IT governance policies that take into account an organization’s operational and strategic needs, as well as suggest what to do when those needs change. They furthermore, demonstrate how appropriate board governance can go a long way toward helping a company avoid unnecessary risk and improve its competitive position. To define the boards involvement two strategic issues should be considered, the first is how much the company relies on cost-effective, uninterrupted, secure, smoothly operating technology systems. This issues is referred to as the defensive IT. The second one is how much the company relies on IT for its competitive edge through systems that provide new value-added services and products or high responsiveness to customers, the offensive IT. The defensive IT is about operational reliability, whereas the offensive IT tends to be ambitious and risky because they often involve substantial organizational change. Firms can either be defensive or offensive in their strategic approach to IT, hereunder there are four approaches which the authors calls “modes”. The defensive modes are Factory Mode and Support Mode and the offensive modes are Strategic Mode and Turnaround Mode. In addition to these different modes for the use of IT the authors go on to discuss how to build an IT committee, they believe the three key...
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