Information Technology Reference
In-Depth Information
Chapter 2
Deriving Business Value from IT
Applications in Product Development:
A Complementarities-Based Model
Robert G. Fichman and Satish Nambisan
Abstract
Many companies that have made considerable investments in IT appli-
cations to support their product development activities have realized limited value
from such efforts. In this chapter, we argue that a deep understanding of the com-
plementarities that exist in the product development context is critical to ensure
that business value is derived from the IT applications. We propose a multi-level
complementarities-based model of IT innovation and business value to explain the
factors that shape the success of IT-enabled product development. Our model posits
that firms will obtain more value from innovative IT investment initiatives when
the resulting IT applications are fitted into a system of
initiative or product develop-
ment context-specific
complementary organizational elements (strategies, structures,
processes, etc.). Further, firms will get more value from IT initiatives when invest-
ment is combined with certain firm-level elements such as a business strategy
that is especially amenable to IT support, strong IT capabilities, and a modern
organizational architecture that incorporates a cluster of practices associated with
“digital” organizations. The model can guide researchers and managers in identi-
fying the firm-level pre-conditions for realizing value from investments in IT to
support product development and specifying necessary complementary investments
in organizational change associated with product development.
2.1 Introduction
In recent years, IT applications that support product life cycle management (PLM)
have assumed critical importance as companies focus on enhancing the efficiency
and effectiveness of their innovation processes across the enterprise. PLM appli-
cations provide a common information backbone for all of the company's product
development initiatives and also offer connectivity with other business operations
through seamless integration with enterprise IT applications such as enterprise
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