Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model

Many companies that have made considerable investments in IT applications to support their product development activities have realized limited value from such efforts. In this chapter, we argue that a deep understanding of the complementarities that exist in the product development context is critical to ensure that business value is derived from the IT applications. We propose a multi-level complementarities-based model of IT innovation and business value to explain the factors that shape the success of IT-enabled product development. Our model posits that firms will obtain more value from innovative IT investment initiatives when the resulting IT applications are fitted into a system of initiative or product development context-specific complementary organizational elements (strategies, structures, processes, etc.). Further, firms will get more value from IT initiatives when investment is combined with certain firm-level elements such as a business strategy that is especially amenable to IT support, strong IT capabilities, and a modern organizational architecture that incorporates a cluster of practices associated with “digital” organizations. The model can guide researchers and managers in identifying the firm-level pre-conditions for realizing value from investments in IT to support product development and specifying necessary complementary investments in organizational change associated with product development.