The Information Value Chain Revisited – A Critical

Review and Elaboration

May 21st, 2010

1. The Information Value Chain – a

Design School model
1.1 The Information Value Chain model
Schwolow & Jungfalk (2009: 2) describe their model as “an analytical tool for managers
to assess the state of strategic information management in their organisation. It is meant
to provide them with a way of decomposing a complex problem into manageable bits, as
well as measuring the efficiency of information-related processes and evaluating the
impact of actions towards their optimisation”. They argue that information plays a critical
role in defining and refining an organisation’s competitive position. Information is an
asset that has to be managed properly because of its direct and indirect impact on an
organisation’s financial results (2009: 6).

Schwolow & Jungfalk (2009: 12ff) describe information as an organisational resource

whose inherent constitutive force, which they define as the potential to bring about
organisational change, is shaped by the way the organisation derives value from it. They
argue that information resources vary with regard to their constitutive force depending on
whether an organisation finds them more valuable as a commodity (ie, a tradable good
with economic value) or as means of pattern perception (ie, uncertainty reduction through
insight). At the end of their discussion, Schwolow & Jungfalk (2009) conclude that
properly managed information resources have the potential to create two kinds of
competitive advantage – one based on lower information-related costs (cost leadership),
and another one based on uncertainty reduction and the creation of information
asymmetries (differentiation).
Figure 1 – The Information Value Chain (Schwolow & Jungfalk, 2009)

As shown in Figure 1, the Information Value Chain comprises eight discrete activities.

1.1.1 Information Requirements

“Information requirements set the scene for successful information management

(Schwolow & Jungfalk, 2009: 21).
The first activity of the Information Value Chain is the information requirements
analysis. The activity includes a detailed outline of the organisation’s information needs
which “arise from the problems, uncertainties, and ambiguities encountered in specific
organisational situations and experiences” (Choo, 2002: 26). Based on the identified
information needs, an organisation should then define specific information requirements
– ie, determine the information resources required to cover information needs. Schwolow
& Jungfalk (2009: 21) argue that an organisation should define what constitutes its
information resources and determine precisely how they are valuable for the organisation.
Finally, the information requirements analysis comprises a gap analysis that highlights
the state as-is versus the desired state (Schwolow & Jungfalk, 2009: 22). In their paper,
the authors loosely describe what others have investigated in much greater detail under
the headline of “information audit” (Buchanan, 1989; Orna, 2004, 2005).

1.1.2 Primary Activities

Like its underlying model, the Porter value chain (1985), the Information Value Chain is
divided into primary and secondary activities.
Its primary activities denote “the direct handling of information resources in ways that
increase their value” (Schwolow & Jungfalk, 2009: 40).
Information Acquisition includes all processes of environmental scanning (both internal
and external) regardless of their purpose. Information resources acquired during
environmental scanning are then further refined during Information Processing: “all
observable processes involving the modification or synthesis of information resources”.
Finally, more value is added to information resources through Information Distribution,
ie the dissemination and sharing of information resources (2009: 41).

1.1.3 Secondary Activities

Primary activities are supported by secondary activities (2009: 40). The latter ensure the
continuous and efficient execution of the former.
IT Infrastructure includes the totality of an organisation’s back-end and front-end
information systems (2009: 41). The Human Resources support activity adds value “by
selecting and recruiting organisational members that understand the importance of
information and fit into the learning culture of the organisation” (2009: 41). It
furthermore addresses such issues as training and development, compensation and career
management. Information Governance provides the policies and internal guidelines for
handling information resources (2009: 42) and Knowledge Management revolves
around the exploitation of information resources that exist in the form of “information-as-
knowledge”. It comprises “processes with the objective of identifying, externalising,
representing and distributing” (2009: 42) such resources.

1.1.4 Linkages between activities

As in the Porter value chain, all the activities of the Information Value Chain influence
one another through linkages. The entire value chain itself exists within a value system, ie
various other value chains that tie into it and each other in different ways (2009: 37).

1.2 The premises underlying the Design School.

The following section examines the assumptions, to the extent they can be discerned,
which underpin the Information Value Chain model. The examination utilises
Mintzberg’s premises of Design School models as outlined in his 1990 paper “The
Design School: Reconsidering the basic premises of strategic management”.

Mintzberg’s first premise states that strategy formation should be a controlled, conscious
process of thought (1990: 175). He elaborates on this point by writing that “managers
‘know what they are really doing’ only if they make strategy as ‘deliberate as possible’”
(1990: 176). His point is summed up in the statement that strategy, from a Design School
point of view, is directly associated with intentionality (1990: 176).
In their paper, Schwolow & Jungfalk (2009) adopt a strategy definition from Johnson and
Scoles (2006) stating that strategy is “the direction and scope of an organisation over the
long-term: which achieves advantage for the organisation through its configuration of
resources within a challenging environment, to meet the needs of markets and to fulfil
stakeholder expectations” (Schwolow & Jungfalk, 2009: 9). This basic assumption
clearly implies intentionality. The definition of long-term objectives and the idea of
managing towards them indicates conscious and deliberate effort, as well as the
assumption that it is indeed possible to control an organisation’s future direction.
The next Design School premise is that the responsibility for control and consciousness
must rest with (…) the strategist (1990: 176). “To the Design School, ultimately there is
only one strategist, and that is the manager who sits at the apex of the organisational
hierarchy” (1990: 176). Mintzberg writes that determining and monitoring the adequacy
of strategy, as well as adapting the firm to changes in its environment, and securing and
developing the people needed to carry out the strategy or help with its constructive
revision and revolution are primarily the concerns of the general manager and none other.
The fact that Schwolow & Jungfalk (2009) developed their model “as an analytical tool
for managers (…) working with strategic information management” (2009: 43) points to
an understanding on their part that strategy making should be left to managers. While
perhaps slightly less rigid than Mintzberg’s notion of the strategist, this view can
nonetheless be subjected to one of the major criticisms of the Design School – namely,
that “this premise not only relegates other members of the organisation to subordinate
roles in the strategy formation, but it also precludes external actors from the process
altogether” (Mintzberg, 1990: 176).

Mintzberg’s third premise is that the model of strategy formation must be kept simple and
informal (1990: 177). He claims that “fundamental to the model is the belief that
elaboration and formalisation will sap it of its essence”. Instead, the Design School view
that “one way to ensure that strategy can be controlled in one mind is to keep the process
simple” (1990: 177). Schwolow & Jungfalk (2009: 43) describe their model as “a
simplified or idealised description or conception of a particular system, situation, or
process (…), that is put forward as a basis for theoretical or empirical understanding, or
for calculations, predictions, etc.” Once again, their basic assumption here fits with the
premise outlined by Mintzberg. Furthermore, the fact that Schwolow & Jungfalk refrain
from providing an explicit definition of what, for instance, “information resources” really
are, instead leaving it up to organisations to find a definition could be construed as
leaning towards this third Design School premise.

The core of premise number four is that “the Design School says little about the content
of strategies themselves, but instead concentrates on the process by which they should be
developed” (1990: 178). In other words, Design School models are process models
for devising strategies, not actual strategies. In accordance with this premise, the
Information Value Chain model is not a strategy in itself, but an approach to strategic
information management. Mintzberg also writes that the “process above all should be a
“creative act” to build distinctive competence” (1990: 178). This, too, applies in the case
of the Information Value Chain. Schwolow & Jungfalk’s view of competitive advantage
aligns with that of Barney (1991) where “in business economics, organisations with a
competitive advantage implement a “value creating strategy not simultaneously
implemented by any current or potential competitor” (Schwolow & Jungfalk, 2009: 13).

Another notion taken from Barney (1991) is that information “is a resource that enables
the firm to conceive of and implement strategies” (2009: 10). The clear split of strategy
conception and strategy implementation, as well as the idea that implementation
necessarily follows conception, is evident throughout Schwolow & Jungfalk’s
argumentation. This reflects another premise put forth by Mintzberg: strategies emerge
from the design process fully formulated (1990: 178). He explains that “strategy appears
at a point in time, fully formulated, ready to be implemented” and that “strategy-making
still tends to be equated with (…) the systematic formulation and articulation of
deliberate, premeditated strategies“ (1985: 162). Under the Design School strategies are
“formulated” before they are “implemented” (1985: 160).

Mintzberg’s sixth premise is that strategies should be explicit and if possible, articulated
(1990: 178). In other words, “the underlying assumptions of organisational design have
been that organisations required articulated objectives, sharp divisions of labour, clearly
defined tasks, well-developed hierarchies, and formalised systems of controls” (1985:
160).
In their discussion of information requirements, Schwolow & Jungfalk argue for the
definition and articulation of a specific desired state as part of the gap analysis (2009:
21). They furthermore introduce formalised systems of controls by stating that
“information requirements should be translated into critical requirements and key
performance indicators (…) so as to be able to operationalise the strategy in a controlled
and sensible manner”.

Finally, in the Design School structure must follow strategy, ie “corporate strategy must
dominate the design of organisational structure and processes” (1990: 179). The
Information Value Chain as well as the models it is based upon all advocate ways of
structuring organisational reality based on selected, predefined goals and objectives. The
notion underpinning all of them is that once a strategy has been devised, the organisation
must change, adapt to and embrace the new strategy.

From the above discussion, we conclude that the Information Value Chain rests for the
most part on Design School premises and is thus deeply rooted in this paradigm of
strategy formulation.

2. Information Value Chain application in

an Adhocracy
Why is this a problem? Seeing that the Information Value Chain model is meant to be
applied to specific business processes within an organisation, the Design School approach
is not in itself a problem – as long as these business processes can be subjected to a high
level of standardisation. However, as soon as these processes require different approaches
from one case to another, become more project-based and are essentially more “ad hoc”
in nature, the Design School approach becomes problematic.
Mintzberg & McHugh (1985) call organisations in which these types of processes are
prevalent “adhocracies” or project structures, and claim that they are one of the major
contemporary organisational forms (1985: 160). They argue that “no organisation can
function with strategies that are always and purely emergent (…). But none can likewise
function with strategies that are always and purely deliberate. (…) A viable theory of
strategy making must encompass both models.”

Based on the statement above the Information Value Chain model alone represents but
one end of a continuum in the development of a viable theory of strategy making. In an
attempt to improve model, this final section of the paper therefore projects Mintzberg &
McHugh’s generic approach to emergent strategies onto Schwolow & Jungfalk’s
deliberate model for strategic information management.

Section 4.1 discusses the characteristics of an adhocracy and their implications for each
activity of the Information Value Chain. Section 4.2 then continues with a final
discussion of Mintzberg & McHugh’s grass-roots model and its implications for the
application of the Information Value Chain in strategy-making.

2.1 Characteristics of an adhocracy and their implications for individual

Information Value Chain activities

According to Mintzberg & McHugh (1985), adhocracies are organisations that operate in
“an environment that is both dynamic and complex, demanding innovation of a fairly
sophisticated nature” (1985: 160). These organisations produce unique and heterogeneous
outputs which forces them to engage highly trained experts (1985: 161). Direct
supervision and standardisation as mechanisms of control are discouraged along with
their supporting organisational structures, such as hierarchy, performance targets and
rules. Instead, “because of the complex and unpredictable nature of its work, the
organisation relies largely on mutual adjustment for coordination” (1985: 161). As a
result, strategy formation potentially involves many people and power is decentralised
selectively and spread in uneven ways “subject to availability of information and
expertise needed to deal with the issue at hand” (1985: 161). Essentially, adhocracy is
thus about “rapid and continuous responsiveness to the environment, with minimal
organisational momentum” (1985: 191). This means that adhocracies have to embrace
proactively the idea of continuous change in their environment by building structures that
facilitate flexible and speedy adjustment to that change. Finally, it is the role of
management to design structures that leaves their highly trained staff to exercise their
expertise freely and unrestrained by traditional roles (1985: 192).

2.1.1 Implications for Information Value Chain Primary Activities

According to Schwolow & Jungfalk (2009: 13), it is of existential importance for

organisations operating in short-cycled and dynamic environments to keep pace with the
change that surrounds them. Information is therefore primarily an asset if it provides
insight into emerging trends and has predictive capacity. Its value in creating competitive
advantage is based on uncertainty reduction and the creation of information asymmetries.
This “pattern perception” is the basis for what Mintzberg & McHugh (1985: 160) call
“innovation of a fairly sophisticated nature”: an organisation that can, for example,
identify patterns in the way demand for its products shifts over time might find it easier to
respond to, preempt or even initiate such shifts through consistent innovation.

As a result, adhocracies should therefore calibrate their Information Acquisition activities

so as to accommodate a greater emphasis on external environmental scanning activities.
Furthermore, the question of variety amplification and attenuation – ie, determining the
fine line between collecting exhaustive information versus collecting too much
information – has to be viewed in a new light.
With environmental scanning activities less constrained, variety attenuation might thus be
scaled back to allow for what Van Andel (1994: 640-642) calls “patterns of serendipity”
to emerge. Such patterns might be analogies, surprising observations, successful errors,
side effects, by-product etc. In other words, patterns that would not be recognised were it
for very narrow environmental scanning activities further constrained through steps
towards variety attenuation.

This type of extensive exploration (March, 1991) has to be matched with the ability to
exploit the value of the information resources acquired. March (1991: 71) defines
exploitation as the “refinement, efficiency, reverse production and execution of routines
already located in the organisational knowledge base”. This means that newly acquired
information resources have to be integrated with existing structures – or, simply put,
people have to draw the right conclusions from what they see, thereby turning
information into actionable insight.

This has important implications for Information Processing. Due to the amount and
complexity of information flowing into an adhocracy, such an organisation needs greater
absorptive capacity (Soosay & Highland, 2008) than traditional organisational forms.
According to Bessant and Boer (2002), knowledge-based organisations need to innovate
continuously while being both operationally effective in exploitation and strategically
flexible in exploration (Soosay & Highland, 2008: 24). Absorptive capacity “consists of
the capabilities to recognise the value of new information, to assimilate it, and to apply it
to commercial ends or to evaluate and utilise outside knowledge” (2008: 25). Soosay and
Highland argue that an organisation’s absorptive capacity can be considered a potential
competitive advantage and is determined largely by an organisation’s existing knowledge
stock (Soosay & Highland, 2008: 24).

The selective integration of new knowledge with an organisation’s existing knowledge

base is not a new concept. The idea of the “learning organisation” has been around for
more than two decades. What all the above quotes are merely hinting at is explicitly
stated in Peter Senge’s 1990 publication “The Leader’s New Work – Building Learning
Organizations”: organisations have to embrace adaptive and generative learning (Senge,
1990: 8). Senge argues that adaptive learning is about coping, while generative learning
is about creating – one might also say adaptive learning is reactive, while generative
learning is proactive. This latter mode of learning is based on the ability to see “the
systems that control events” (1990: and is related to our earlier discussion of
adhocracies and their need to keep pace with changes in their environment, as well as the
value of pattern perception in creating competitive advantages by driving innovation and
proactive operations.
Finally, the implications for Information Distribution essentially revolve around
information sharing. The discussion so far has emphasised learning as the path to
competitive advantage for adhocracies. The discussion that follows will show that, due to
this emphasis on learning, knowledge management plays a much larger role than it might
play in traditional organisational forms. The effective distribution and sharing of
knowledge is therefore a critical element in creating a successful learning organisation.
Information Distribution activities should thus focus on building networks of people and
focusing on dialogue between individuals not knowledge objects in a database (Hansen,
1999: 108). (Refer to section 4.1.2 of this paper for further discussion of knowledge
management.)

2.1.2 Implications for Information Value Chain Secondary Activities

Since all activities in the Information Value Chain are connected through linkages
(Schwolow & Jungfalk, 2009: 38) the specific configuration of a primary activity
influences that of one or more support activities. In an adhocracy, two out of the four
support activities in the Information Value Chain seem particularly important in ensuring
the continuous and effective executability of the three primary activities. The two support
activities are Human Resource Management and Knowledge Management.

The idea that “people have to draw the right conclusions from what they see, thereby
turning information into actionable insight” has a number of implications for the selection
of suitable staff. Of course, the intellectual capacity for identifying patterns, drawing the
right conclusions and discriminating between useful and useless information is a
prerequisite for the learning organisation. More than in any other context, Senge’s
proposition of systems thinking – ie, seeing interrelationships, focusing on areas of high
leverage, and avoiding symptomatic solutions (Senge, 1990: 15) – is of fundamental
importance here. Mintzberg (1985) himself emphasises this by pointing out that
adhocracies depend on highly trained staff and experts (1985: 161). Since adhocracies
encourage the personal autonomy of its staff members and discourage traditional control
mechanisms, such organisations should be careful to select staff that can actually handle
the resulting freedoms and responsibilities.

While information resources in Schwolow & Jungfalk’s original paper on the Information
Value Chain exist mainly in the form of tangible information products (Orna, 2004), the
above discussion increasingly referred to information resources that exist as knowledge
in people’s heads. Therefore, the Knowledge Management support activity gains in
relative importance. According to Hansen (1999: 109), there are two basic approaches to
knowledge management strategy: codification and personalisation. While codification
would be suitable in the context of standardised business process, the application of the
Information Value Chain to a non-standard business process calls for the use of
personification. In practical terms, this translates to person-to-person (rather than person-
to-document) communication and, as pointed out before, the creation of networks for
knowledge sharing.

Finally, in line with the above discussion, adhocracies should consider Information
Governance activities that manage the security and confidentiality of its information
resources – since information is an “experience good” (Shapiro & Varian, 1999: 22)
competitive advantages based on information asymmetries are only sustainable so long as
these asymmetries exist. With regard to IT Infrastructure, the emphasis would be on
innovation support and the facilitation of knowledge exchange rather than automation
and business process support (Schwolow & Jungfalk, 2009: 30).

2.2 Grass-roots model and strategy-making in

adhocracies
This final part looks at Mintzberg & McHugh’s grass-roots model and examines its
implications with regard to strategy-making. These implications are then translated into
specific suggestions on how managers should use the information value chain for
strategy-making. The following paragraphs thus attempt to synthesise a model of
emergent strategy-making with one of deliberate strategy-making.

Below, the six components of Mintzberg & McHugh’s grass-roots model are summarised
and discussed in three sections:
1. Emerging patterns
2. Pattern proliferation
3. Management in an adhocracy

1. Emerging patterns
The first two premises of the grass-roots model (1985: 194-195) explain that it is often
impossible to plan strategies or where they will emerge, which is why its is sometimes
“more important to let patterns emerge than to force an artificial consistency upon an
organisation prematurely” (1985: 194).

For a manager using the Information Value Chain as an approach to devising an

information management strategy, this seems to indicate that rather than dictating specific
guidelines with regard to, for instance, information requirements, the manager should
leave it up to his or her employees to define and determine the relevance of information
resources. This approach requires the effective selection of employees who are
conscientious and responsible in handling the autonomy granted them, and have the
intellectual capacity to face the challenges their job entails.
2. Pattern proliferation
Patterns turn into strategies when they proliferate across the organisation to become
collective and affect the behaviour of the organisation at large (1985: 195). “The process
of proliferation may be conscious, but need not be; likewise, it may be managed but need
not be” (1985: 195).

For the manager these premises indicate that for patterns to proliferate the company’s
mechanisms of control have to allow for best practices to emerge from everyday work.
However, while conceivable in the context of a relatively small business process with few
people involved, this approach is bound to become unwieldy with scale. The more people
there are working on a specific business process, the more important it seems that the
support activities, ie Human Resources and Knowledge Management are properly
managed. Arguably, emergent and informally shaped best practices seem possible on a
large scale only if the right kind of people share their expertise and collaborate in
tailoring emergent patterns that are something greater than the sum of its parts. The
proliferation process itself might be compared with a bottom-up approach of strategy
formulation where the “wisdom of crowds” is the catalyst and critical mass the threshold
of acceptance.

3. Management in an adhocracy
The final three premises of Mintzberg & McHugh’s grass-roots model state that to
manage the proliferation process “is not to preconceive strategies, but to recognise their
emergence and intervene when appropriate” (1985: 195). Managing in the context of an
adhocracy is about creating the climate within which a variety of strategies can grow.
Here, it is important for the manager to balance responses to external demands for change
with internal stability as the basis of productivity: managers must keep an eye on the
cycle of strategic convergence and divergence, “knowing when to promote change for the
sake of external adaptation and when to resist it for the sake of internal efficiency” (1985:
196),

This means in effect that while granting enough leeway for patterns to emerge and
proliferate, managers still have the responsibility to exercise proper judgement as to when
managerial intervention is necessary in order to prevent the deterioration of overall
productivity due to the uncoordinated emergence and proliferation of patterns. Similarly,
on a larger scale, recognising emergent patterns and evaluating their merit within the
context of strategic convergence (or divergence) with what the environment demands.
For example, the emergence of patterns whose ramifications beyond the individual
business process run contrary to what the organisation as a whole requires might be
subjected to managerial guidance. Finally, this suggests that managers of adhocracies
should strive to be what Senge (1990: 10) calls “Leaders as Designer” who design “the
governing ideas of purpose, vision and core values by which people live” and work,
while at the same time recognising that “the key is not the right strategy, but fostering
strategic thinking” (1990: 11).
Link: Conclusion and Final Discussion
References
Barney, Jay. “Firm Resources and Sustained Competitive Advantage.” Journal of
Management 17.01 (1991): 99-120. Print.

Buchanan, S., and F. Gibb. “The Information Audit: An Integrated Strategic Approach.”
International Journal of Information Management 18.1 (1998): 29-47. Print.

Choo, Chun Wei. Information Management For The Intelligent Organization The Art Of
Scanning The Environment (Asis Monograph Series). Wylie: Information Today, 2002.
Print.

“Data, Data Everywhere: A Special Report on Managing Information.” The Economist

27 Feb. 2010: 1-14. Print.

Hansen, M. T., N. Nohria, and T. Tierney. “What’s Your Strategy for Managing
Knowledge?”Harvard Business Review 77.2 (1999): 106-16. Print.

Johnson, Gerry, and Kevan Scholes. Exploring Corporate Strategy: Text & Cases. 7th ed.
Harlow, England: Financial Times Prentice Hall, 2006. Print.

Jungfalk, M., and S. Schwolow. “The Information Value Chain: Strategic Information
Management for Competitive Advantage.” Bachelor’s project. Copenhagen Business
School, 2009. Information Value Chain. 2009. Web. 13 Mar. 2010.
<www.informationvaluechain.com/information-value-chain.pdf>

March, J. “Exploration and Exploitation in Organizational Learning.” Organizational

Science 2.1 (1991). Print.

Mintzberg, H., and A. McHugh. “Strategy Formation in an Adhocracy.” Administrative

Science Quarterly 30.2 (1985): 160-95. Print.

Mintzberg, H. “The Design School: Reconsidering the Basic Premises of Strategic

Management.” Strategic Management Journal 11.3 (1990): 171-95. Print.

Orna, Elizabeth. Information Strategy in Practice. Aldershot, Hants, England: Gower,

2004. Print.

Orna, Elizabeth. Making Knowledge Visible : Communicating Knowledge through

Information Products. Hants (England): Gower, 2005. Print.

Porter, Michael E. “Changing Patterns of International Competition.” California

Management Review XVVII (1985): 9-40. Print.

Senge, Peter M. “The Leaders New Work: Building Learning Organisations.” Sloan
Management Review (1990): 7-23. Print.
Shapiro, Carl, and Hal R. Varian. Information Rules: a Strategic Guide to the Network
Economy. Boston, Mass.: Harvard Business School, 1999. Print.

Soosay, Claudine, and Paul Hyland. “Exploration and Exploitation: the Interplay between
Knowledge and Continuous Innovation.” International Journal of Technology
Management 42.1/2 (2008): 20-35. Print.

Van Andel, Pek. “Anatomy of the Unsought Finding. Serendipity: Origin, History,
Domains, Traditions, Appearances, Patterns and Programmability.” The British Journal
for the Philosophy of Science 45.2 (1994): 631-48. Print