Chapter 12

IT & Business Strategy

Overview for Today What is a Strategic Information

System Strategic Advantage & IS Porter’s Competitive Forces For Next Time

Critical Success Factors Porter’s Value Chain Analysis

What is a Strategic IS?

System that significantly improves the manner in which business is conducted: Control a market Larger than average profit margins Significant increases

performance/productivity Contributes to strategic goals (responses

to busn pressures from Ch1)

Two Views of SIS Outwardly Focused SIS

Easy to copy or duplicate, Why? Inwardly Focused SIS

Not as easy to copy or duplicate, Why? Both can focus on new product/service Which can be sustained longer?

Role of IT in Strategic Mgmt Enabler for change! Allows creation of new applications for

strategic advantage: (Fed Ex, SABRE)

Supports strategic changes: BPR Improved communication (FDA) New product development cycles (jeep liberty…)

Increases Competitive Intelligence (next) Benefit comes from being FIRST, everyone

else is just keeping up! But - hard to sustain!

Competitive Intelligence

1. Gathering information about competition Increases market knowledge, improves

internal relationships, raise quality of strategic planning

Frito Lay and Hertz examples…

2. Gathering internal information (BI) About products, customers, suppliers, … Organizational memory or knowledge

base What makes these so easy today?

BI: Been to Disney Recently?

Strategic Alignment Problems

Recent surveys highlight mismatches: ~90% IS critical to strategic success <35% IS is very involved with busn strategy <30% busn strategists work with IS division

What are the likely results? Inadequate IS

Tools for Aligning IS & Strategy

Various tools and methodologies for aligning IS with corporate strategy Porter’s Competitive Forces Critical Success Factors Value Chain Analysis Many more in text – we don’t have time

to discuss all of them…

Porter’s Competitive Forces Model

Used to develop strategies to increase competitive advantage

5 Components to the model: Threat of entry of new competitors Bargaining power of suppliers Bargaining power of customers Threat of substitute products/services Rivalry among existing industry firms

Porter’s Model Applied

List the players in each force Relate the determinants of each

force with the players listed above Devise a strategy to defend against

these forces Use IT to support the strategy

Another Question…

Some argue that an SIS gives a company an unfair advantage and may even cause the demise of smaller, weaker companies that cannot afford to build similar systems.

What is your opinion on the fairness of such systems?

Critical Success Factors (CSFs)

Mission Statement - clear, concise, believable, repeatable!

Business Goals - broad, derived from mission Business Objectives - tangible milestones: growth,

roi Critical Success Factors - make the milestones

happen attractive style of product line, efficient dealer

organization, effective cost control in manufacturing

Identify what is most important to performance, then develop good indicators of this performance: information needs

Determining CSFs:

Lets identify CSFs specifically for: Bank? Ice Cream Manufacturer? Discount Retail Chain? Shipping Firm?

Any observations about these?

Discovering Critical Success Factors

AKA: Things you might ask for your projects: What objectives are central to your organization? What factors are essential to meeting these

objectives? What decisions or actions are key to these critical

factors? What variables underlie these decisions, how are

they measured? How can I use IS to supply these measures?

Porter’s Value Chain Model, I

1: Primary Value Activities (creation, sale, & support of a product) Inbound logistics Operations Outbound logistics Marketing & Sales Service

Each activity adds value to product

Porter’s Value Chain, II 2: Support Value Activities (each

supports Primary Value) Organizational infrastructure Human resource management Research & Development Procurement

3: Margin Revenue generated by above activities

minus costs of each activity

Value Chain At Work

A Few Questions:

What is the purpose of the Value Chain? What types of things might you learn? What do you do with this new

knowledge? Why might this be important?

What category of CI does this fall into?

Important Concepts to Know

What is a Strategic Information System

Role of IT Strategic Management Critical Success Factors Porter’s Competitive Forces Porter’s Value Chain Analysis How do they all fit together?

For Next Time…

Prepare minicases for Ch 12 Will send via e-mail We will discuss these on Friday

Milestone #2 due on Friday EXAM#1 Coming Soon!