IT Value and Interpretation Bias

IT executives create value for their organizations in various ways. Two widely adopted paradigms for doing so are applying IT to increase process efficiencies, and informating the organization by using IT’s knowledge management (KM) capabilities. Research has demonstrated that there is value to be achieved through both these strategies: Practitioners have been advised to implement KM projects in order to be able to respond flexibly to environmental turbulence. Yet recently the value of IT for reaping process efficiencies has resurfaced as an important investment avenue. Practitioners are not entirely clear which of these paradigms to follow as they allocate IT resources, and this study addresses this need. We investigate IT value creation by IT managers in the field, using the theoretical perspective of sensemaking to describe a system of biases held by some senior IT managers regarding IT value creation. We empirically assess this theoretical model using a two-phase research approach, in which qualitative interviews were followed by a cross-sectional survey of 116 IT executives. Results broadly support the model-driven hypotheses—those IT leaders that value IT primarily for its efficiency-based effects are prone to the system of interrelated interpretation biases described by our model. Interestingly, managers who emphasize the value of KM are less likely to have such biases and tend to be more realistic about their IT performance. By understanding where interpretation biases are most likely to appear, IT managers can be mindful about avoiding them and ensure that they IT resources are allocated wisely and effectively.