Strategy and IS Describe the roles of business, organizational and IS

strategy Compare and contrast key strategy frameworks:

Porter’s three generic strategies and D’Aveni’s hypercompetition model

Compare and contrast key organizational strategy frameworks: Business Diamond, Managerial Levers

Discuss evolution of Information Resources Compare, contrast and apply: Porter’s competitive

forces model, value chain model and and Brandenburger and Nalebuff’s co-opetition model

Discuss the risks of using IS

Strategic Advantage

Does an organization need Information Systems to gain strategic advantage?

Information Systems Strategy Triangle

Business Strategy

Organizational Strategy

Information Strategy

Strategy - A PlanBusiness strategy drives organizational and

information systems strategy Information systems strategy - plan the

organization uses in providing information services Information systems strategy is affected by a firm’s

business and organizational strategiesOrganizational strategy - organization’s design as

well as the choices it makes to define, set up, coordinate and control its work processes

Remember interdependency!

Porter’s Three Generic Strategies

Cost leadership (lowest cost in industry)

Differentiation of products/servicesFocus (finding a specialized niche)

cost differentiation of product or services

Be Low Cost Producer - IT strategic if it can:

Help reduce production costs & clerical work

Reduce inventory, accounts receivable, etc.

Use facilities and materials betterOffer interorganizational

efficiencies

Produce Unique Product - IT strategic if it can:

Offer significant component of product

Offer key aspect of value chainPermit product customization to

meet customer’s unique needsProvide higher/unique level of

customer service/satisfaction

Fill Market Niche - IT strategic if it can:

Permit identification of special needs of unique target market

Spot and respond to unusual trends

D’Aveni’s Hypercompetition ModelFocused on turbulent environmentAdvantages are rapidly created and

easily erodedSustaining an advantage can be a

deadly distractionThe goal is disruption, not

sustainability, of advantageInitiatives are achieved with a series

of small steps

Four Arenas of Competitive Advantage

Cost/qualityTiming/know-howStrongholdsDeep pockets (short-term only)

Seven S’s

Superior Stakeholder SatisfactionStrategic Soothsaying Positioning for Speed Positioning for Surprise Shifting the rules of competition Signaling strategic intent Simultaneous and Sequential Strategic

Thrusts

Organizational Strategy Frameworks

Business DiamondManagerial Levers

Business Diamond: Hammer & Champy, 1994

Business Processes

Jobs & Structures Values & Beliefs

Management & Measurement Systems

Managerial Levers

Organizational Variables Decision rights Business processes Formal Reporting Relationships Information Networks

Control Variables Data Planning Performance Measurement & Evaluation Incentives & Rewards

Cultural Variable: Values

Evolution of Information Resources

Era I (1960s)

Era II (1970s) Era III (1980s)

Role of IT Efficiency Effectiveness Strategic

IT Justification

ROI Productivity & decision qlty

CompetitivePosition

Target ofSystems

Organization

Organization/group

Individual mgr/group

InformationModels

ApplicationSpecific

Data-driven User-driven

Value Basis

Scarcity Scarcity Scarcity

Evolution of Information Resources

Era IV (1990s) Era V (2000+)

Role of IT Strategic Value Creation

IT Justification

CompetitivePosition

Adding value

Target of Systems

Business processes, ecosystem

Customer, supplier, ecosystem

Information Models

Business-driven Knowledge-driven

Value Basis Plentitude Plentitude

Strategic Information Systems

IS that help gain strategic advantageSignificantly change manner in which

business supported by the system is done

Outwardly aimed at direct competitionInwardly focus on enhancing the

competitive positionCreate strategic alliances *IS can support business strategies

Unusual Suspects: Information Resources

Information systems infrastructureInformation and knowledgeProprietary technologyTechnical skills of the IT staffEnd users of the information systemRelationship between IT and business

managersBusiness processes

Firm Infrastructure(general management, accounting, finance, strategic planning)

Human Resource Management(recruiting, training, development)

Technology Development(R&D< product and process improvement)

Procurement(purchasing of raw materials, machines, supplies)

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InboundLogistics(rawmaterialshandlingandwarehous-ing)

Operations

(machineassembling,testing)

OutboundLogistics(warehous-ing anddistributionof finishedproduct)

Service

(installation,repair,parts)

Marketingand Sales(advertising,promotion,pricing,channelrelations)

Value Chain Model

Chain of basic activities that add to firm’s products or servicesPrimary activitiesSecondary activities

Includes firm’s larger value system (i.e., suppliers, buyers, channels)

Value Chain Primary Activities

InboundOutboundOperationsMarketing and SalesAfter-Sale Services

Value Chain Support Activities

Technology developmentProcurementHuman Resources ManagementManagement Control

accounting/finance coordination general management central planning

Competitive Forces

Threat of entry of new competition

Bargaining power of suppliersBargaining power of buyersThreat of substitute products or

servicesRivalry among existing firms

Strategies for Competitive Forces

Note - strength of force is determined by factors in industry

Gain a competitive edgeBuild defenses against forcesFormulate actions to influence

forces

Strategic Questions

Can IT create barriers to entry? (new entrants)

Can IT build in switching costs? (buyers)

Can IT strengthen customer relationships? (buyers)

Strategic Questions (cont)Can IT change the balance of

power in supplier relationships? (suppliers)

Can IT change the basis of competition? (competitors)

Can IT generate new products?(competitors, substitutes)

Searching for Specific Opportunities

What is the mode of the thrust? (offensive, defensive)

What is the direction of the thrust? (use, provide)

What is the strategic target of the thrust? (supplier, customer, competitor)

Brandenburger and Nalebuff’s Co-opetition

Optimally combining cooperation and competition

Value Net of competitors, complementors, customer, suppliers

Risks of IS SuccessChange the Basis of CompetitionPromote Litigation or RegulationAwake Sleeping GiantReflect Bad TimingAre Too Advanced Fail to Deliver What Users WantAre Implemented Poorly