On IT Business Value

Today, I was reading an academic article that defined information technology (IT) business value as the organizational performance impacts of information technology at both the intermediate process level and the organization-wide level, and comprising both efficiency impacts and competitive impacts (IT and Organizational Performance, MISQ, 2004, Melville, Kraemer, and Gurbaxani).  This definition did not satisfy me as an adequate representation of this concept.  In this post, I will attempt to think through my definition of IT business value and its relation to Objectivist ethics, so that I might apply it to an article I am writing.  As a thinking post, please consider feedback most welcome.  My ideas are not finalized on this topic.

Organizational performance strikes me as part of a larger concept for business value.  There is also missing a direction of the impact.  Impacts can obviously be good and bad.  Can we legitimately call it a value if the impact is bad?  I don't think we can.

To address organization impact, lets look at a root concept - business.  The purpose of business is to facilitate the creation of value for trading partners by systematically organizing resources for the production of goods and services.  Businesses are not transient one-time events, nor are they disorganized mobs of traders.  Businesses have a definitive boundary within which individuals interact in an organized fashion.  Business value can take on multiple meanings, depending on with whom you refer.  Business value can refer to the value-added process for a product that the business sells.  Business value can refer to shareholder wealth created from the business growth and profits.  Business value can also refer to the overall fitness or long-term sustainability of the business as a whole.  It is to this last notion of business value that I believe is most comprehensive context.  Using value in this way implies a relationship to ethical values.

As Ayn Rand described values:

It is only a living organism that faces a constant alternative: the issue of life or death. Life is a process of self-sustaining and self-generated action. If an organism fails in that action, it dies; its chemical elements remain, but its life goes out of existence. It is only the concept of ‘Life’ that makes the concept of ‘Value’ possible. It is only to a living entity that things can be good or evil.

In business, a similar constant alternative exists, the life or death of the business.  Business processes consists of generated and sustaining actions.  If the business dies, the people and resources remain, but its existence as such is gone.  It is only the concept of business life that makes the concept of business value possible.  Lest we take this analogy too far, businesses are sufficiently different in that they can be created by men, can be willfully destroyed by men, and can be recreated by men if they so desire.  So it is not self-generated action.  It is composed of many individuals acting together in mutually agreed upon ways, trading products and services with each other.

But, when entrepreneurs create a business, they generally do so with the purpose of continuing the business indefinitely.   Ethical values only refers to those values created for the individual, but in the entrepreneur's case, the business becomes an extension of the entrepreneur's value system.  The business value refers directly to value to the entrepreneur.  As the entrepreneur disassociates his personal values from the business values, the business can only continue its existence if its values perpetuate long term sustainability.   For example, a business must maintain a positive cash flow.  A business must organize the operations, logistics, and the supply chain to ensure raw goods arrive, are transformed into finished products, and sold.  A business find customers and demonstrate the value offered by what they're selling.  A business must systematically replace employees or grow into new business areas.  The topic of business strategy attempts to answer this question of business value in terms of long term sustainability.

Is the idea of long term sustainability sufficient for business value?  Is there more or less?  Is it all about profits?  What about the community?  Without going to far down this road, I will say that it is not all about profits, but profits are a healthy indicator that things are going right (just ask the auto companies).  And the community may be considered a healthy base for trading, so helping the community can often help the business.  However, the community does not hold any rights over the business and the business does not owe the community anything other than justice when trading with individuals therein.

So where does IT fit in?  IT business value, in my conception, is information technology that enables long term sustainability by fostering value creation in business processes, resources, and relationships. This value creation can take many forms - increased efficiency, more effective processes, improved flexibility, increased communication, decreased errors, improved relationships with stakeholders, better management of assets, heightened security, etc.  Value creation such as heightened security may increase long term sustainability by preventing competitors from stealing trade secretes, it may not increase organization performance, as the authors I first cited claimed.  In fact, the impact of heightened security might slow innovation and organizational decision making, but be a necessity for competitiveness.

So this is the extent of my thinking on this concept.  I believe the real innovative piece of thinking I'll be adding is the relationship between individual values and business values.  Hopefully, I can get some input from other Objectivists on my ideas in that realm.