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ReframingtheDominantQuestsofInformationSystemsStrategyForComplexAdaptiveBusinessSystems.pdf

Information Systems ResearchVol. 21, No. 4, December 2010, pp. 822–834issn 1047-7047 �eissn 1526-5536 �10 �2104 �0822

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Research Commentary

Reframing the Dominant Quests of InformationSystems Strategy Research for Complex Adaptive

Business SystemsHüseyin Tanriverdi

Department of Information, Risk, and Operations Management, Red McCombs School of Business,The University of Texas at Austin, Austin, Texas 78712, huseyin.tanriverdi@mccombs.utexas.edu

Arun RaiCenter for Process Innovation and Department of Computer Information Systems, Robinson College of Business,

Georgia State University, Atlanta, Georgia 30303, arunrai@gsu.edu

N. VenkatramanSchool of Management, Boston University, Boston, Massachusetts 02215, venkat@bu.edu

We review and reframe three main quests of research on information systems (IS) strategy: (1) the strate-gic alignment quest, (2) the integration quest, and (3) the sustained competitive advantage quest. The

assumptions and logic of these quests have become less relevant in increasingly complex adaptive businesssystems (CABS), where the competitive performance landscapes of products and services are highly dynamicand co-evolve. We revise the strategic alignment quest to propose a co-evolution quest that addresses not onlycompetitive strategy questions of a firm but also corporate strategy questions. The co-evolution quest seeks toincrease a firm’s agility and dynamism in repositioning itself, identifying profitable product-market positionsas the evolving competitive landscape erodes the profitability of the firm’s existing positions. To support theco-evolution quest, we revise the integration quest and propose a reconfiguration quest that encompasses notonly business processes but also products and services, as well as the contracts, resources, and transactionsassociated with them. As the firm makes repositioning moves to co-evolve with the competitive landscape,the reconfiguration quest seeks to increase the firm’s agility in disintegrating its existing nexus of contracts,resources, and transactions that support the old positions and in reconfiguring new ones that support the newpositions. Finally, we revise the sustained competitive advantage quest to propose a renewal quest that recog-nizes the temporary nature of competitive advantage in CABS. The renewal quest seeks to destabilize the firm’sold sources of competitive advantage when competitive dynamics erode their utility, rapidly create new sourcesof competitive advantage, and concatenate a series of temporary advantages over time. The three reframedquests provide the foundation for a research agenda on IS strategy in CABS.

Key words : information systems strategy; complex adaptive business systems; emergence; strategic alignment;integration; sustained advantage; temporary advantage; co-evolution; reconfiguration; renewal

History : Vallabh Sambamurthy, Senior Editor. This paper was received on June 28, 2010, and was with theauthors 2 12 months for 1 revision. Published online in Articles in Advance November 18, 2010.

IntroductionIn the past 20 years, since the inception of Informa-tion System Research, we have witnessed the emergenceof complex adaptive business systems (CABS). InCABS, strategic problems faced by firms have becomenot only more complicated but also more complex(Camillus 2008). A complicated problem has manydiverse parts and stakeholders, which increase the

combinatorial space of possible solutions. Althoughdifficult, it is feasible to find an optimal solution to acomplicated problem because the parts do not dynam-ically adapt and mutually interact. In contrast, a com-plex problem has many diverse parts that adapt andmorph into new forms with every attempt to solvethe problem. Finding an optimal solution to a com-plex problem is not feasible; the parts of the problem

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interact with each other in nonlinear ways, self-organize, and produce emergent macrolevel behaviorsthat differ in scale and kind from the microlevelbehaviors of the parts. Researchers also describe com-plex problems as “wicked” problems (Camillus 2008).Information technology (IT) has contributed to theemergence of CABS and wicked problems by fusinginto the fabric of products, services, and business pro-cesses and by increasing the diversity, adaptiveness,interconnectedness, and interdependency of firms.A case in point is the IT-induced complexity of

automobiles and the wickedness of recent safety recallproblems in the automotive industry. More than 80%of innovations in automobiles now come from com-puter systems and software. The goals to improvetechnical performance, safety, and convenience ofautomobiles and to achieve energy savings and emis-sion reductions accelerate the fusion of IT innovationsin automobiles. A premium class car contains about100 million lines of software code that executes on70–100 microprocessor-based electronic control unitsnetworked in the car. The cost of the computing hard-ware and software embedded in the car climbed fromaround 5% of the total cost of a car in the late 1970sto about 15% by 2005. In hybrid cars, the cost ofcomputing hardware and software is about 45% ofthe total costs because engine control in these carsrequires much more sophisticated software. As the carhas become a platform for IT innovations that inter-connect car components and increase their mutualdependencies, the resulting complexity has also ledto the emergence of unintended, unpredictable safetyand reliability problems. In 2005, Toyota voluntar-ily recalled some Prius hybrids because of softwareproblems that caused the car to suddenly stall orshut down. Since then, the problem has defied manysolution attempts, surfaced in other brands, morphedinto new forms, triggered regulatory investigationsand lawsuits, and proved to be a wicked problemthat has damaged Toyota’s corporate reputation andcompetitive advantages. Other carmakers have alsohad to recall some of their brands because of soft-ware problems; IBM estimates that approximately50% of all car warranty costs today are related tocomputing systems and software embedded in the car(Charette 2009).IT-induced complexity is evident not just in prod-

ucts but also in entire business systems. Firms rely

heavily on IT in assembling global supply chain,production, and delivery networks, as well as in coor-dinating large numbers of suppliers, business part-ners, and customers. IT-enabled interconnections andinterdependencies increase the complexity of the busi-ness systems and the wickedness of strategic prob-lems across a wide range of industries. Anomalousstock trading patterns arise from unpredictable inter-actions among automated trading software of rivalfinancial firms in a globally interconnected financialsystem; supply disruptions arise from the amplifica-tion of seemingly minor problems through nonlineardependency relationships of globally integrated sup-ply chains; and widespread power outages are trig-gered by software glitches that propagate throughouta highly connected and interdependent energy distri-bution and management system.The wickedness of strategic problems in CABS re-

quires us to assess whether the assumptions and logicof the dominant quests of information systems (IS)strategy research are still relevant and adequate. Wefocus on the three main quests of IS strategy researchin the past 20 years: (a) the strategic alignment quest,(b) the integration quest, and (c) the sustained com-petitive advantage quest. Building on concepts fromcomplexity science, we find that these quests havebecome less relevant in CABS. We reevaluate, revise,and redirect them to increase their relevance to afirm’s strategic challenges in CABS. We also proposeresearch questions that are critical in understandinghow IS strategy can enable a firm to remain fit, sur-vive, and thrive in CABS.

Competitive Landscapes Through theLens of Complexity ScienceThe literature on performance or “fitness” landscapes(Wright 1931) likens a firm’s efforts to remain fit, sur-vive, and achieve superior performance in competi-tion to climbing peaks in a rugged mountain range.Let us illustrate the concept of a performance land-scape with an example in which a firm faces twostrategic choices. Imagine a flat grid where x andy axes represent levels of the two choice variables.A position on the grid (x�y) is a possible strategydefined by the firm’s choice of investment levels intothe choice variables. The third dimension, z, repre-sents with height the payoff or profitability of thestrategy. If we plot heights of all strategic choice

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combinations, we obtain the overall topography ofthe firm’s performance landscape (Beinhocker 1999).Some choice combinations produce high profits, rep-resented by peaks. Some choices produce high losses,represented by valleys. Others produce in-betweenoutcomes, represented by peaks, valleys, and plateausof commensurate shapes and heights.

Simple Competitive LandscapesWhen a firm faces few choices and the choices donot interact with each other, the emerging competitivelandscape is simple, characterized by one global peak,as in the case of Mount Fuji (Porter and Siggelkow2008). Consider the problem of finding the optimalshovel weight for moving the largest amount of coal.Frederick Taylor, who pioneered scientific manage-ment for improving labor productivity, plotted theamount of coal moved per unit of time as a function ofshovel weight to find a Mount Fuji-like performancelandscape in which the highest point was the optimalshovel weight (Page 2009). In such simple competitivelandscapes, competing firms can easily see the globalpeak that is optimally profitable for them.

Rugged Competitive LandscapesWhen the firm faces many choice variables andthe choices interact with each other, the perfor-mance landscape becomes rugged (Beinhocker 1999,Kauffman 1993, Porter and Siggelkow 2008). Multiplepeaks and valleys with varying heights and depthsemerge. The landscape can look like the Rockies, theAlps, or the Himalayas. It becomes more complicatedfor competing firms to distinguish global and localpeaks. For example, car design entails a large numberof choices related to engine size and type, fuel effi-ciency, safety and security, seating type and materials,entertainment and convenience features, and cost thatinteract with each other. Carmakers configure thesechoices differently to differentiate their offerings. Thesales performance of a car brand as a function of thedesign choices is a highly rugged landscape becauseof the interactions among the choices. A carmaker’sattempt to find the choice configuration that producesthe optimal sales performance is complicated.

Dancing Rugged Competitive LandscapesWhen the many choice variables of a firm becomeinterdependent with the choices of other firms, therugged competitive landscape starts “dancing.” The

peaks, valleys, and plateaus start changing dynami-cally in unpredictable ways: peaks that represent prof-itable business opportunities can buckle, collapse, andmorph into valleys that represent losses, and peaksthat represent new opportunities can emerge rapidly.For example, in Toyota’s global sourcing, production,and delivery network, Toyota’s choices pertaining tothe design, production, and delivery of a car are inter-dependent with the choices of thousands of suppli-ers, production partners, and dealers. Because of theinteractions and interdependencies among the per-formance landscapes of individual members of thenetwork, the overall sales performance landscape ofa Toyota car becomes a dancing, rugged landscape.A seemingly minor software glitch introduced by onemember of the network on one component of thecar could lead to an unintended safety problem andcause bucking and heaving in the overall sales per-formance landscape of the car. Such interdependentco-evolution of performance landscapes of productsand services of course extends beyond the automo-tive industry, applying in a wide range of industriessuch as aerospace (e.g., Boeing Dreamliner and AirbusA380), consumer electronics (e.g., mobile telephony,television sets, and related products), software, finan-cial services, utilities, and health care.Complexity science informs us that a system be-

comes “complex” and produces a “dancing,” ruggedlandscape when the elements of the system showmoderate rather than extreme degrees of the followingfour properties: (a) diversity, (b) adaptation, (c) con-nectedness, and (d) interdependence (Page 2009).Competitive business systems are complex systemsbecause firms exhibit moderate levels on each of thefour properties. Similarities and differences in IT capa-bilities of firms also help business systems to remainin between the extreme values of the four properties.In terms of diversity, firms are neither too similar

nor too dissimilar. Despite having many similarities,firms seek to differentiate themselves. They developunique resource endowments with historical evolu-tion paths. Making similar levels of investments in ITand acquiring similar IT assets available in the mar-ket contribute to the similarity of firms. However, dif-ferences in business needs, complementary businessresources, and IT implementation effectiveness con-tribute to competitive differences in IT capabilitiesof firms.

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In terms of adaptation, firms learn to adapt to theirevolving environments. They use IT to observe custo-mers, scan the behavior of rivals, and assess their ownactions to learn from past behaviors and outcomes.They also use IT to manage existing knowledge, dis-cover new knowledge, interact with other firms andcustomers, accelerate innovations, and develop intel-ligent responses to competitive moves of rivals andenvironmental changes. However, even with superiorIT capabilities, firms are not smart enough to adaptperfectly to their evolving environments.In terms of connectedness, firms are connected to

each other through people, processes, and technol-ogy. IT increases the connectedness of firms by link-ing business processes, products, services, people, andcustomers. However, even with those IT-enabled con-nections, firms are not fully connected.In terms of interdependence, firms develop var-

ious types of dependency relationships with eachother (e.g., manufacturing, supply, distribution, mar-keting agreements, joint ventures, etc.). IT-enabledconnections increase interdependencies among col-laborating and competing firms, and these interde-pendencies are often asymmetric. For example, asupplier’s (e.g., Bosch) dependence on a carmaker’s(e.g., Toyota) IT systems might be greater than thecarmaker’s dependence on the supplier’s IT sys-tems, and different carmakers (e.g., GM and Toyota)might have different levels of dependence with thesame supplier (e.g., Bosch). Asymmetric dependen-cies produce nonlinear cause-and-effect relationshipsin CABS. Two firms selecting the same strategicchoice combination on the grid can obtain two dra-matically different performance outcomes because ofthe differences in their respective dependencies withsupply, production, and delivery partners. Nonlinear-ity of interactions often makes it impossible to predictemergent behaviors in CABS. In summary, businesssystems maintaining moderate levels of diversity,adaptation, connectedness, and interdependency sat-isfy the four criteria and qualify as CABS.

The Three Quests of InformationSystems StrategyThe Strategic Alignment QuestA central quest of IS strategy research has beento align business and IS strategies of firms to

achieve superior firm performance (Henderson andVenkatraman 1993).A firm’s strategy has two components: (a) cor-

porate strategy and (b) competitive strategy. Thecorporate strategy determines the choice of prod-uct markets in which the firm positions itself andcompetes (Campbell et al. 1995). The competitivestrategy determines how the firm gains an advantageover its rivals within the product-market positionsit has chosen (Porter 1996). The strategic alignmentquest has focused primarily on competitive strategy. Ithas paid less attention to enabling the firm to identifyand reposition itself to emerging profitable product-market positions in a dancing, rugged competitivelandscape.The strategic alignment quest was advanced in

an era when firms faced a number of strategicchoices and numerous interdependencies that madetheir competitive landscape “rugged” (Porter andSiggelkow 2008). However, the landscape was rel-atively stable because both the interconnectednessand the interdependence among firms were relativelylow. The peaks, valleys, and plateaus did not changeunless there were shocks to the landscape—the busi-ness equivalent of major earthquakes (e.g., disruptiveinnovations or regulatory changes). Even when theseshocks caused tectonic shifts, the topography of thelandscape settled soon and remained relatively sta-ble until the next big shock. Thus, the question ofcorporate strategy (i.e., identifying profitable product-market positions in the landscape and repositioningthe firm to those product markets) was not a majorchallenge. Business managers could use Porter’s fiveforces framework to analyze the landscape and iden-tify the profitable product-market positions. Becausethe positions in a rugged landscape are relatively sta-ble, IS managers could focus on aligning IS strategyand competitive strategy within each of the posi-tions identified by business managers. In an era whenmany firms managed their business and IS functionsseparately, the alignment of competitive strategy andIS strategy within each product-market position couldgive the firm advantages over rivals.In the past 20 years, IT has evolved from a tool

in individuals’ work to a tool connecting businessactivities and interorganizational relationships to atool being fused into products and services to becomean essential fabric of business (El Sawy 2003). This

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evolution in the role of IT has accelerated the asym-metry of relationships among firms and their productsand services. For example, dominant platforms enablefirms to develop asymmetric relationships with firmsthat provide complementary products and services totheir platforms. Thus, Microsoft’s desktop operatingsystem, Google’s search and advertising platform,Apple’s iPod, iPhone, and iPad platforms, andIntel’s microprocessor platform enable these platformleaders to create and benefit from asymmetric rela-tionships with complementors. Reflecting complexityscience, increasing connectedness, asymmetricrelationships, and nonlinear dependencies causethe rugged competitive landscape to dance. Thepeaks, valleys, and plateaus of the competitivelandscape start moving up and down and morph-ing into different shapes. Static maps depicting afixed rugged landscape could be very misleadingfor firms seeking to identify and climb profitablepeaks. Industry and product-market boundarieshave blurred. Profitability levels of positions inthe landscape have started changing dynami-cally. Porter’s five forces analysis has becomeinadequate in identifying profitable peaks. In a danc-ing, rugged landscape, the question of corporatestrategy (i.e., which product-market positions areprofitable) has become difficult to answer. From analignment perspective, IS strategy no longer canassume that the firm is positioned in profitable prod-uct markets to start with. Rather, it must recognize thedynamic shifts in the profitability levels of productmarkets and enable the firm to identify emergingprofitable product markets. Aligning IS strategy withcompetitive strategy alone might offer limited andinconsequential results. The alignment quest needsto tackle how the IS strategy co-evolves with bothcorporate strategy and competitive strategy together.

The Integration QuestThe second quest of IS strategy research has been toachieve IT and business process integration withinand across firm boundaries (Barki and Pinsonneault2005). Initially, the scope of the integration quest wasconfined to the firm’s value chain. By achieving ITand business process integration across the firm’sfunctional and geographic business units, as well asnewly acquired businesses, it sought to exploit syn-ergies in IT and business resources to gain advan-tages over its rivals (Tanriverdi 2005, Tanriverdi and

Uysal 2010). The scope of the integration quest hasbeen expanded to cover the firm’s extended value net-work (Rai et al. 2008) and its relationships with sup-pliers, customers, and intermediaries (Bensaou andVenkatraman 1995, Rai et al. 2006).While the integration quest has focused primar-

ily on the integration of business processes, it haspaid relatively less attention to the integration ofproducts or services (El Sawy 2003). Increasingly,products, gadgets, and “things” of many sorts (e.g.,machines, automobiles, appliances, televisions, enter-tainment devices, music players, smart phones, toys,etc.) are being embedded with more computing tech-nology (Reiner and Schaper 2010), and customersare demanding interoperability from the suppliers ofthese various artifacts. In addition, firms have beenunbundling their previously integrated value chains,modularizing service components, and sourcing ser-vices from lower cost, higher quality vendors andservice providers that are increasingly dispersedaround the globe (Tanriverdi et al. 2007). Thus, firmsare challenged to integrate service modules sourcedfrom geographically dispersed business partners with-out loss of functionality and to deliver the unified ser-vice transparently to customers. These forces of supplyand demand are resulting in an emergent, digitallyconnected network of products, gadgets, and servicemodules that requires the traditional integration questto be revised to cover product and service integrationas well.The integration quest has generally assumed elec-

tronic integration to be beneficial. Achieving quasi orfull electronic integration within and across bound-aries of the firm has been viewed as a source of com-petitive advantage (Christiaanse and Venkatraman2002, Rai et al. 2006, Zaheer and Venkatraman 1994).This assumption was plausible in rugged compet-itive landscapes because the topography did notchange much over time. In their quest to conquerthe peaks and protect their positions, firms soughtto achieve higher integration among the participantsin their network (e.g., suppliers, business partners,and customers) to gain advantages over their rivals’networks. However, as the rugged landscape startsdancing, the assumptions of the integration quest arechallenged, as illustrated by the need for the dynamicreconfiguration of global supply chains in apparel,electronics, airlines, and insurance. To thrive in adancing, rugged landscape, the firm not only has to

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adapt quickly to the competitive actions of rivals inthe current positions but also has to co-evolve withthe changing topography of the competitive land-scape. It might have to exit positions whose profitsare sinking (e.g., previous peaks that are turning intovalleys) and enter into new ones whose profits arerising (e.g., new peaks that are emerging).In such a competitive context, high integration

within the firm and with the firm’s suppliers, busi-ness partners, and customers might, in fact, take ona life of its own, create inertia, and inhibit the firm’sefforts to co-evolve with the competitive landscape.High integration can block the firm from quicklyreconfiguring its network as it seeks to jump offthe sinking peaks and climb and conquer the risingpeaks in the morphing landscape. The firm needs tohave the capabilities to dis-integrate existing prod-ucts, services, and partners rapidly, and to integratenew products, services, and partners quickly. Thus,the integration quest needs to address the reconfigu-ration needs as well.

The Sustained Competitive Advantage QuestThe third quest of IS strategy has been to sustaina firm’s competitive advantages. Consistent with thetheories of competitive strategy (Barney 1991, Porter1996), the goal of IS strategy has been to create com-petitive advantages and sustain them over long peri-ods of time. However, with the emergence of CABSand dancing, rugged competitive landscapes, sustain-ing competitive advantages has become increasinglydifficult. A systematic study across 40 U.S. indus-tries finds that sustained superior performance is veryrare; the few firms that are able to sustain superiorprofitability positions do so for only five to sevenyears, depending on the industry, and the durationof these windows of profitability has been shrinkingover the years (Wiggins and Ruefli 2005).The sustained competitive advantage quest as-

sumed that uncertainties in the firm’s internal oper-ations and its external environment are major threatsto sustaining its competitive advantages (Bensaouand Venkatraman 1995). Internally, in the processof achieving its current advantages, the firm hasaccumulated knowledge that it seeks to reuse andexploit across tasks, processes, products, businessunits, suppliers, and other business partners to sta-bilize, grow, and defend its advantages. Deviationsfrom the proven body of knowledge could be a threat

to the sustainability of the advantages. Thus, thefirm develops IS applications to manage its knowl-edge and to monitor and control deviations from theexpected quality levels in tasks, processes, productquality, worker productivity levels, and performancelevels of business units, suppliers, and business part-ners. Externally, developments in customer prefer-ences, innovations introduced by rivals, and changesin regulations could create uncertainties and threatenthe persistence of the firm’s current advantages. Thesustained competitive advantage quest assumes thatthe firm can address the external threats and avoidbeing overtaken by rivals by reducing the environ-mental uncertainty and engaging in continuous inno-vation. Collecting and processing data on customerpreferences and emerging technological innovationsis assumed to reduce the environmental uncertainty,increase the quality of managerial decisions, enablecontinuous innovation, and hence sustain the firm’scompetitive advantages.In a dancing, rugged competitive landscape, how-

ever, a different source of uncertainty emerges. Com-plexity science informs us that the behaviors in CABSare fundamentally unpredictable. The macrolevelbehaviors of the system differ from the microlevelbehaviors of individual firms in scale and kind andlead to bottom up emergence, where the system con-tinuously self-organizes and produces novelty andsurprise (McDaniel et al. 2003). The fundamentaluncertainty inherent in CABS does not lend itselfto reduction through the collection and processingof information. This type of uncertainty is a muchmore critical and much less understood threat tothe sustainability of the firm’s competitive advan-tages. It challenges the very notion of sustainedcompetitive advantage and suggests that competitiveadvantages are temporary in CABS. For example, aninnovative firm that continues to introduce innova-tive products within its own product-market positioncould lose its competitive advantage if innovationsin other product-markets (e.g., introductions of supe-rior substitutes) change the topography of the com-petitive landscape and erode the relative profitabilityof the firm’s product-market position. Thus, IS appli-cations aiming to stabilize, grow, and defend thecurrent advantages of a product-market position areimportant for a transient period. However, when theemergence in CABS renders the current advantagesobsolete, the firm also needs IS applications that can

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destabilize its current state and enable it to replaceexisting routines, knowledge, and behaviors with newones, so that the firm is able to co-evolve with CABS(Hedberg and Jonsson 1982). The fundamental uncer-tainty in CABS requires us to simultaneously rethinkthe alignment, integration, and sustained advantagequests of IS strategy.

Reframing the Three Quests ofInformation Systems Strategy for CABSFrom Alignment to Co-EvolutionTo remain fit, survive, and thrive in CABS, a firmmust co-evolve with the dancing, rugged competi-tive landscape. IS researchers have recognized theimportance of turbulent environments and argued forfirms to develop IT-enabled dynamic and improvi-sational capabilities (El Sawy and Pavlou 2008) andIT-enabled agility (Sambamurthy et al. 2003). Theunderlying premise has been to match and adaptIT and business capabilities to a rapidly changingexternal environment. Agility in adaptation to thechanging environment is necessary but not sufficientfor surviving and thriving in CABS. As complex-ity science argues, adaptation is a property of allfirms in CABS. However, because of the connected-ness and interdependence in CABS, each firm’s adap-tation moves interact with the adaptation moves ofother firms to create unpredictable macrolevel behav-iors that change the competitive landscape’s topog-raphy. The firm must also be able to co-evolve withthe changing topography. Adaptation by itself maybe insufficient simply because it is local. For exam-ple, if a rival introduces an innovative product inone product-market, adaptation would suggest thatthe focal firm match it rapidly. However, adaptationdoes not address how the profitability of that product-market is changing relative to the profitability of theother positions in the landscape. If it is declining, thefocal firm might benefit more by repositioning to amore profitable position rather than by developingan adaptive response to the rivals’ actions within thesinking position. The co-evolution quest is concernedwith changes in the topography of the landscape andseeks to continually reposition the firm to emergingprofitable positions in the competitive landscape.Adaptation might prove inadequate even within

profitable positions because it overlooks the counter-adaptive moves of rivals. When a firm makes an

adaptive move (e.g., develops a new IT-enabled capa-bility), it triggers counter-adaptive moves by its rivalsand other key actors (e.g., regulatory agencies andbusiness partners) that could render the firm’s orig-inal move ineffective. For example, the first attemptto digitize a print newspaper and offer it free onthe Internet was an adaptive move toward an emer-gent peak in the landscape; this peak appeared tobe an attractive product-market position because itcould enable the sales of complementary services,such as online advertising. However, the move trig-gered counteradaptive moves by many newspapers,as well as by related firms, such as Yahoo! (news)and Google (news). It also triggered related innova-tions in other news delivery channels, such as smartphones, readers like Amazon’s Kindle, and Web chan-nels like Facebook, Twitter, and blogs. These devel-opments changed the entire competitive landscape ofthe news/newspaper industry. The unfolding devel-opments triggered by the digitization of the newsdelivery channels ultimately could either collapse ortransform the peak that was originally deemed by thefirst mover to be attractive—rather than just block-ing the first mover’s ability to scale it independentand ahead of rivals. Thus, the demands on firms aremany: They need to go beyond local adaptation, rec-ognize dynamic interactions among the many adapt-ing firms in CABS, observe the macrolevel patternscreated by these interactions, sense how the emergingpatterns change the topography of the competitivelandscape, and co-evolve with the changes by repo-sitioning to emerging profitable positions and exit-ing the positions that turn into loss-making valleys(Allen and Varga 2006, Benbya and McKelvey 2006).The dynamic repositioning and co-evolution needsdictate that the alignment quest be revised to a co-evolution quest that assists the firm with corporatestrategy questions.However, answering the corporate strategy ques-

tions simply by forecasting the direction, magni-tude, and frequency of changes in the topographyof the landscape is inadequate; the changes in CABSare emergent, created spontaneously and collectivelyfrom the bottom-up. A multiplicity of diverse, adap-tive, interconnected, and interdependent firms inter-act, self-organize, and produce fundamentally newbehaviors at the macrolevel that are not exhibitedby the individual firms themselves at the microlevel(Anderson 1972). For example, a widespread power

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outage or a stock market crash is an emergentmacrolevel phenomenon that arises from the inter-actions among microlevel behaviors of many firms(Page 2009). With the emergence of macrolevel phe-nomena, peaks, valleys, and plateaus in the topogra-phy of the competitive landscape move, change, andtransform. A firm in CABS must seek to sense emer-gent macrolevel phenomena on the fly, learn fromthem, develop answers to the corporate strategy ques-tions, and co-evolve with the changing topographyof the competitive landscape, and it must do so ear-lier than its rivals to gain advantages. Thus, we pro-pose the following research question for IS strategyin CABS.

Research Question 1. How can IS strategy enable afirm’s corporate strategy to co-evolve dynamically with adancing, rugged competitive landscape? Specifically, howcan it enable a firm to identify and exit positions whoseprofitability is declining, identify and enter positions whoseprofitability is rising, and keep its portfolio of product mar-kets positioned in profitable peaks in a dancing, rugged,competitive landscape?

From Integration to ReconfigurationAfter a firm makes repositioning decisions, it needs toreconfigure many resources and relationships withinand across its boundaries to implement these deci-sions. Service-oriented and modular IT architecturesnow enable the reconfiguration of IT resources (Rosset al. 2006), and such IT capabilities can be lever-aged to reconfigure a firm’s portfolio of interfirmrelationships (Rai and Tang Forthcoming) and itsoperational capabilities (El Sawy and Pavlou 2008).However, the scale, scope, and frequency of the recon-figuration quests of firms have been increasing dra-matically and going beyond the reconfiguration ofIT resources, selected interfirm relationships, and afew business processes; they now also involve moreand newer types of globally dispersed resources, con-tracts, and transactions. Theories of the firm concep-tualize the firm as a nexus of contracts (Eisenhardt1989), or a nexus of resources (Barney 1991), or anexus of transactions (Williamson 1981). We arguethat the firm needs to be reconceptualized as simul-taneous nexus of contracts, resources, and trans-actions that is dynamically reconfigured as thefirm co-evolves with a dancing, rugged, competitivelandscape.

Dynamically reconfiguring the nexus of global con-tracts, resources, and transactions requires that thefirm have the ability to assemble new contracts,resources, and transactions while disassembling someexisting ones. This ability depends on IS strategy inthat business and IT are being fused and IT infras-tructure and capabilities are being interwoven intothe business fabric of the firm (El Sawy 2003). It alsodepends on IS strategy because it enables or inhibitsthe firm’s ability to detach from, or integrate with,large numbers of innovators, customers, and businesspartners around the globe in sourcing and deliveringproducts and services (Tanriverdi et al. 2007).To exit some of its current product-market positions,

the firm has to dis-integrate some of the previouslyintegrated nexus of business processes, products, ser-vices, suppliers, business partners, and customers.But the integration quest of the past 20 years, whichhas achieved significant success in horizontal integra-tion across units of the firm, and vertical and quasi-integration across firms, has made the disintegrationand reconfiguration of IT-enabled connections anddependencies very challenging (Markus 2001). Tightlyintegrated IT systems and applications create barri-ers to the divestiture of business units (i.e., changesin corporate strategy) and the reconfiguration of busi-ness relationships created and nurtured over time. Forexample, in corporate divestitures, dis-integrating ITsystems and business processes of the divested unitfrom the parent firm disrupts automated internal con-trols of the parent firm, creates material weaknessesin the parent’s financial statements and problems inregulatory compliance, and increases the costs of com-pliance (Tanriverdi and Du 2009). Thus, we have thefollowing research question.

Research Question 2. How can IS strategy enable afirm to reconfigure its nexus of global contracts, resources,and transactions to support the firm’s dynamic co-evolution with a dancing, rugged, competitive landscape?

From Sustained Competitive Advantage to RenewalThe objective of the prevailing theories of competitivestrategy is to create and sustain competitive advan-tages over a long period of time (Barney 1991, Porter1985). Accordingly, IS strategy research, building onthe resource-based view of the firm and the dynamiccapabilities view, promotes sustained competitiveadvantages as the primary objective of IS strategy

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(Nevo and Wade 2010, Pavlou and El Sawy 2006).However, as noted, in the dancing, rugged, compet-itive landscape of CABS, there is continual emer-gence, novelty, and surprise. Macrolevel behaviorsare fundamentally unknowable and unpredictable.For example, in the software industry, an innovationintroduced by one firm within one product-market(e.g., Google’s introduction of online advertising tothe online search platform or Apple’s introductionof mobile music to the iPod, iPhone, and iPad plat-forms) can significantly disrupt the incumbent firms’competitive advantages, change the performance rankorderings of firms not only in the market of origin butalso in the complementary software product-markets,trigger a series of competitive reactions, and increasehypercompetition in the industry (Lee et al. 2010).Under these circumstances, the pursuit of competi-tive advantages that can be sustained for long periodscould be a strategic mistake and a distraction for firms(D’Aveni and Gunther 1994). It might be more realisticfor firms to pursue temporary advantages for shorterperiods of time (Wiggins and Ruefli 2002). As CABStransform and the existing advantages erode, a firmcan pursue new temporary advantages and strive forconcatenating a series of temporary advantages overtime, although consistently achieving new temporaryadvantages will be highly challenging.After a firm decides to reposition to new product

markets in CABS, it has a temporary period of timeto execute its decision and create and exploit advan-tages. After this period, the adaptive moves of rivalstrigger bottom-up emergence that causes the compet-itive landscape to dance and requires new reposition-ing and co-evolution moves from the firm. Duringthe temporary period of stability, the firm needs IScapabilities to assemble, orchestrate, and stabilize anexus of globally distributed resources, contracts, andtransactions to create and exploit advantages overrivals. However, by the time the adaptive moves offirms trigger topographical changes in the competi-tive landscape, the firm must have learned how otherfirms and the overall business system responded to itsprevious repositioning moves, learned about reposi-tioning opportunities in the emergent landscape, andprepared to dis-integrate some existing resources andrelationships and assemble new ones to implementthe new repositioning moves. Overlooking the effectsof emergence on CABS and trying to defend the cur-

rent advantages could inhibit the firm’s co-evolutionwith CABS. Thus, we propose the following question.

Research Question 3. How can IS strategy enable afirm to concatenate a series of temporary advantages in thedancing, rugged, competitive landscape of CABS? That is,how can IS stabilize and exploit competitive advantages ofthe firm for a temporary period; destabilize and unlearn thesources of previous advantages when the competitive land-scape dances; learn about, create, and stabilize new sourcesof advantages; and continually repeat this pattern?

In summary, the co-evolution quest supports adynamic and agile corporate strategy that continu-ously identifies emerging profitable positions in adancing, rugged, competitive landscape. The recon-figuration quest supports the implementation of thedynamic corporate strategy by enabling the agile dis-assembly of the firm’s old nexus of resources, con-tracts, and transactions and the reassembly of newones to reposition the firm to the new positions identi-fied by the corporate strategy. The renewal quest sup-ports dynamic and agile changes in the competitivestrategy of the firm to gain advantages over rivals ineach of the new positions. The co-evolution, reconfig-uration, and renewal quests complement each other.They dynamically align a firm’s corporate strategy,competitive strategy, and IS strategy to enable thefirm to concatenate a series of temporary competitiveadvantages in the dancing, rugged, competitive land-scape of CABS. Table 1 summarizes the differencesbetween the underlying assumptions and logic of theexisting and proposed quests of IS strategy in terms ofthe firm, competition, corporate strategy, competitivestrategy, integration, and information system. It alsosummarizes the questions that these differences raisefor IS strategy in CABS.

Implications and ConclusionsImplications for Research Design and Methods forIS Strategy Studies in CABSThe properties of CABS and of dancing, rugged,competitive landscapes pose major challenges to ourepistemology: How do we know and how do wemake claims to knowledge about IS strategy inCABS? The epistemology that dominates much of ourresearch today is Popper’s falsification logic (Popper1959). We formulate hypotheses, collect data to testthem, and try to falsify them. If we cannot reject

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Table 1 Assumptions and Logic of Existing and Proposed Quests of IS Strategy: Implications for IS Research

Assumptions and logic of Assumptions and logic of proposed Implications forConcepts existing quests of IS strategy quests of IS strategy IS research

Firm • The firm is either a nexus ofcontracts, or a nexus ofresources, or a nexus oftransactions (different andindependent lenses).

• The firm is a simultaneous nexus ofglobal contracts, resources, andtransactions that shifts dynamically(interdependent and interconnectedlens).

How does IS strategy enable adynamically shifting nexusof global contracts,resources, andtransactions?

Competition • Competition takes place in arugged, competitive,landscape that is relativelystatic and stable.

• Competition takes place in adancing, rugged, competitivelandscape that is dynamic andunstable.

How does IS strategy enable afirm to co-evolve with adancing, rugged,competitive landscape?

Corporate strategy • IS strategy can take thepositioning decisions ofbusiness managers as givenand assume that they arecorrect and fixed. It does notanswer corporate strategyquestions.

• IS strategy needs to help the firmwith its corporate strategyquestions. It cannot assume thatbusiness managers are able toidentify emerging profitablepositions in a dancing, rugged,competitive landscape.

How does IS strategy enable acorporate strategy thatdynamically repositions thefirm’s business portfolio toemerging profitablepositions in a dancing,rugged, competitivelandscape?

Competitive strategy • In a rugged, competitive,landscape, the objective ofIS strategy is to create andsustain competitiveadvantages for a long periodof time.

• In a dancing, rugged, competitivelandscape, the objective of ISstrategy is to renew erodingcompetitive advantages rapidly andto concatenate a series oftemporary competitive advantages.

How does IS strategy enable afirm to concatenate a seriesof temporary competitiveadvantages in a dancing,rugged, competitivelandscape?

Integration • In a rugged competitivelandscape, the integrationquest seeks to integrate ITsystems and businessprocesses within and acrossfirm boundaries.

• In a dancing, rugged, competitivelandscape, the quest is todynamically reconfigure the firm’snexus of global contracts,resources, and transactions.

How can IS strategy enabledynamic reconfiguration ofa nexus of global contracts,resources, and transactionsin a dancing, rugged,competitive landscape?

Information system • In a rugged, competitivelandscape, the lack ofinformation about theinternal operations andexternal environment of thefirm creates uncertainty,which in turn poses a threatto the firm’s competitiveadvantages.

• In a dancing, rugged, competitivelandscape, behaviors of CABS areemergent. They are fundamentallyunpredictable and unknowable. Thistype of uncertainty cannot bereduced with data collection andprocessing. Each snapshot of CABSis unique and presents a sample ofone for learning.

How can IS applications bedesigned to enhancemanagerial capacity forsense-making, learningfrom samples of one, andimprovising in CABS?

• IS applications collect andprocess data and manageknowledge of the firm toreduce the uncertainty.

• The role of IS applications is toenhance managerial capacity forsense-making, learning, andimprovising in CABS.

the null hypotheses, we fail to falsify the hypothe-sized relationships and assume the hypothesized rela-tionships hold until evidence shows otherwise. Wealso often assume that the relationships will endurelong enough for us to claim the findings as new“knowledge.” However, because of the rapidly anddynamically changing relationships in CABS, theseassumptions often are not valid. By the time we cap-ture measures and test hypothesized relationships,CABS will have exhibited emergent behavior and the

rugged landscape will have danced. In the new state,the previously discovered relationships are unlikelyto be valid. Thus, just like the temporal nature of thecompetitive advantages, our claims to knowledge canonly be temporal during a window of stability in thedancing, rugged landscape of CABS.Available methods of study are inadequate for

knowing in CABS. We need new research methods andepistemologies to understand IS strategies in CABSand need to understand what constitutes validity and

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reliability in research designs used to study CABS. Weneed to move away from static research designs andtoward dynamic research designs that recognize com-petitive dynamics, interdependencies in networks offirms, the properties of competitive landscapes, andcontextual interactions that span multiple levels ofanalysis (e.g., networks, firms, products and services,and the IT-enabled business platforms). Research oncompetitive dynamics in networks of firms tends toemphasize structural sources of competitive advan-tage, such as a firm’s position or embeddednessin the network. In a dancing, rugged, competitivelandscape, the positions and embeddedness of firmsdo not remain static, as is clearly seen in the soft-ware industry (Lee et al. 2010). Positions constantlychange as a function of the focal firm’s and otherfirms’ actions and interdependencies, requiring us touse time-varying measures to capture the changesdynamically. Researchers suggest that we should con-textualize research about various organizational phe-nomena because context (i.e., surroundings associatedwith the phenomena under study) affects organiza-tional behavior and relationships among key variables(Johns 2006). Researchers also recognize that the con-textuality of interactions at the levels of value chainactivities and firms has implications for competitiveadvantage (Porter and Siggelkow 2008). Contextual-izing research and studying the contextuality of inter-actions across multiple levels of analyses has beenchallenging; such challenges are likely to escalate inthe study of CABS because both the phenomena andthe context change continuously as a result of emer-gence at multiple levels: the activities within the valuechain of a firm might interact with each other in non-linear ways to produce emergence; firms can interactwith rivals firms in nonlinear ways to produce emer-gence; and networks of firms might interact with net-works of rival firms to produce emergence.Scholars who have started tackling the chal-

lenges of conducting research and making knowledgeclaims in CABS make the following recommendations(McDaniel et al. 2009): (a) use research design as averb rather than a noun; (b) learn from “samples ofone or fewer” (March et al. 1991); (c) prepare for sur-prise; (d) build in tension; (e) capitalize on serendip-ity; and (f) act, then look. Because the phenomenaand the context in CABS change continuously, it isinsufficient to view the original research design asa fixed plan to guide action throughout a study.

Research design should be viewed as an imperfectiveverb, an ongoing design activity that co-evolves withthe emergent phenomena and context. The researchstrategy cannot predict what will emerge during theresearch process. However, it can recognize the rangeof possibilities. Researchers should be prepared forsurprise and serendipity and need to be flexible indestabilizing initial research designs and adapting tonew ones that better fit the study of the emergentphenomena and context. Research can be designedin ways to enhance the capacity of researchers torespond to serendipity. Because the dynamics andpaths of CABS are unlikely to repeat, each eventand each snapshot of observations is likely to beunique. This lack of repeatability requires researchersto learn from “samples of one or fewer” by assess-ing and experiencing small histories richly (Marchet al. 1991). History of CABS can be experiencedrichly by using multiple observational strategies with-out privileging any one of them; experiencing moreaspects of CABS and developing multiple interpreta-tions; and recognizing that each observational strat-egy provides a different but valid view of the samequestion (McDaniel et al. 2009). Thus, researchers can“build in tension” and put “planned confusion” intheir research designs by incorporating multiple ideasand perspectives on emergence in CABS that canallow for the “proper destabilization” of the initialhypotheses. Finally, researchers can use an “act-and-look” approach, where they make adjustments to theirresearch design and update beliefs and explanationsas phenomena unfold. An illustration of the applica-tion of these approaches in the CABS of the healthcareindustry can be found in McDaniel et al. (2009).

Implications for Practice of IS Strategy in CABSA major concern of IS strategy has been to convincebusiness executives to commit significant resourcesto a firm’s IT infrastructure, IT-enabled agility(Sambamurthy et al. 2003), IT-enabled dynamic andimprovisational capabilities (El Sawy and Pavlou2008), as well as to deliver business value withthose commitments. However, a key learning fromcomplexity science is that large commitments mightnot generate the desired outcomes in CABS becauseof the fundamental uncertainty, unknowability, andunpredictability inherent in CABS. Instead, complex-ity science suggests making smaller commitments,conducting a variety of low-cost strategic experiments

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to probe into the future, making sense of CABS, andlearning about its behaviors. For example, as impliedby the design science perspective and research on pre-diction markets, a producer—before making a majorcommitment to a multimillion dollar movie develop-ment project—can design a short movie fragment, dis-seminate it on the Web, create a prediction market toprobe into the potential market for the movie, learnfrom the reactions of viewers and rival producers, andco-evolve accordingly.In the process of being fused into the fabric of

business (El Sawy 2003), IT inevitably embeds “deepstructures.” IT capabilities are designed based onassumptions and models about competitive dynam-ics. Given the long lead times and costs entailedin the development and deployment of IT capabili-ties, the core assumptions and models that becomeembedded in the IT capabilities tend to remain rela-tively static over a long period of time and to struc-ture the actions of firms. However, in CABS, theassumptions and models might have to change fre-quently. One snapshot of CABS is not the same as thenext snapshot. Underlying assumptions and modelsof IT capabilities need to co-evolve with emergentphenomena and changing contexts in the dancinglandscape without major redesign. Deeply embed-ded IT-enabled structures that match the environmentwell at one point in time create inertia when therugged competitive landscape dances at a later pointin time and block the firm’s efforts to co-evolve withthe emergent topography of the landscape. However,embedding too little structure into IT is not desirable,either, because the firm then has difficulty coordinat-ing its co-evolutionary efforts. For example, the firmneeds sufficient IT structure to assemble and coordi-nate a new nexus of global resources, contracts, andtransactions. Complexity science suggests embeddingsemistructures, in which some features are prescribedand determined (e.g., priorities, time intervals, andsequencing among different types of IT capabilities)but other aspects are not. Semi-structures are suffi-ciently rigid to provide partial order and enable a firmto co-evolve with the competitive landscape, but theyare not too rigid to block co-evolution. They neithersettle into a stable equilibrium nor fall apart (Brownand Eisenhardt 1997).Structures embedded in IT pose risks for the firm’s

attempts to co-evolve with the dancing, rugged, com-petitive landscape because such structures can lead

to rigid connections between the past, present, andfuture states of the firm. It is important for IS strate-gists to organize semistructures in IT to allow forthe discovery of “emergence events” and the imple-mentation of choreographed, time-paced transitionsamong different types of IT capabilities and to enablesimultaneous attention and linkage among the past,present, and future (Brown and Eisenhardt 1997). Dis-covering the emergence events that indicate whetherCABS are entering a period of stability or instabilityis important for deciding whether a firm’s IS strategyand capabilities ought to emphasize the exploitationand stabilization of current sources of advantage orthe exploration of new ones and the destabilizationof old ones. In periods of destabilization and transi-tory periods between stabilization and destabilization,IT capabilities are needed that increase managerialcapacity for making sense of behaviors of CABS andthe dynamics of dancing, rugged, competitive land-scapes and that enable firms to learn and co-evolvewith CABS and the landscapes.

AcknowledgmentsThe authors thank Reuben R. McDaniel Jr. of the Univer-sity of Texas at Austin for comments and suggestions onan earlier version of this manuscript; his views on com-plexity science influenced and enriched this commentary.The authors also thank V. Sambamurthy, Editor-in-Chief ofInformation Systems Research (ISR), and anonymous editorialboard members and reviewers of ISR for comments andsuggestions on this commentary.

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