Chapter 3

Information Management Strategy & Information System Strategy

Objective Students should be able to understand: the key elements of an Information Management Strategy (IMS) the alternative approaches to develop an Information Systems Strategies (ISS)

Learning Outcomes After completing this chapter, students should be able to: Define information strategy Identify the importance of information for strategic awareness and for decisions relating to strategic change Explain the strategic information challenge facing organizations in the context of both continuous and discontinuous change Describe the management issues that need to be addressed in an information management strategy. Describe approaches for developing ISS

Introduction Information is needed for, and used in decision making. Information Information Systems Information Technology-> all aids to decision making. The more information managers and other employees have about what is happening in the organization and the environment, the more strategically aware they are likely to be.

Introduction However, decisions and decision making involve both facts and people. When the right information available at the right time, it can be extremely useful. The real value of information relates to how it is used by the decision makers

Introduction In designing and introducing IT and MIS into organizations, it is necessary to consider the likely reaction of people as well as potential benefits from having up-to-date and accurate information available. Moreover, it is important to evaluate who actually needs the information and to ensure that those people receive it.

Information Mgmt. Strategy(IMS) IMS is one of a series of strategies that organizations develop and implement to sustain or improve their position in markets. These strategies include: Organizational or corporate strategy Marketing strategy Operation mgmt. strategy

Organizational strategies defines the future directions and actions of an organization or part of an organization.

Information Mgmt. Strategy(IMS) Johnson and Scholes (2001) define an organizational strategy as: The direction and scope of an organization over the long term: which achieves advantage for the organization through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholders expectations.

Information Mgmt. Strategy(IMS) This definition highlights: Strategies define the future direction of an organization. Strategies are devised to achieve advantage for the organization. Strategies define the allocation of resources. Strategies are primarily driven by the needs of the organization and stakeholders. Strategies should be responsive to the dynamic environments in which an organization operates.

The elements above apply equally to other business strategies. Therefore an IMS must be aligned with the organizational objectives and involves in defining how to manage resources to support the objectives.

Information Mgmt. Strategy(IMS) IMS can be defined as: Definition of management approaches to the organization, control and application of organizational information resources through coordination of people and technology resources in order to support organizational strategy and processes (Chaffey, 2004).

Information Mgmt. Strategy IMS is concerned with the effective coordination of technology, people, and information resources. Information strategy also can be defined as : a sub-strategy which ensuring that the informational aspects of a business are being managed and developed in support of its key process.

Information Mgmt. Strategy This sub-strategy is various referred to as: Business information strategy Information-business strategy Information strategy The notion of an information strategy is that the enterprise should not just be technology-centric but information- centric.

Why is an IMS needed? One of the way to answer this question is to look at the problems organizations experience where most of them have difficulties in managing information resources such as protecting information from malicious or accidental events which destroy or corrupt the data. Among other problems are: data quality, data mgmt and quality are not formally documented. On the positive view: IMS is essential to operating, controlling and improving business processes. It also can add value, reduce cost and create competitive advantage.

Question: In your point of view, how can the information create the competitive advantage for an organization?

Why is an IMS needed? Orna(1999) has suggested the main benefits from having a defined IMS as follows: It is possible to integrate all information activities and to use all information quickly and effectively in decision making. Promotes openness of communications throughout the company, between and within levels. Will foster a culture of innovation and knowledge sharing. Forms a sound strategy for investment in information systems and technology. Ensure awareness of opportunities and threats is communicated throughout the company, and allows timely responses to these.

Consequences of Poor IMSMini case 1- The Utility Company Utility companies are fighting tooth and claw to gain and retain customers. One utility company estimated that it lost an average of30 customers per day or more than 10,000 customers per year, because staff did not have access to the right information to handle customer queries. This was equivalent to $5.5 million in lost revenue.

Mini case 2- The Insurance Company An insurance company spent $67 million developing a replacement information system. After the acquisition of another company, they found it would cost nearly the same amount to adapt the system to their new requirements. If the previous system had had an adaptive information architecture this effort and cost would have been avoided.

Information Systems Strategies(ISS) ISS development is fundamentally concerned with: Defining how IS will be used to support an organizations strategy The impact of IS in generating new opportunities for an organization

Doherty et al.(1999) describe ISS development as:The process of identifying a portfolio of computer-based applications to be implemented, which is both highly aligned with corporate strategy and has the ability to create an advantage over competitors.

Information Systems Strategies(ISS) The emphasis is on delivering an applications portfolio of appropriate software tools and systems that support the future direction of the organization and achieve the strategic objectives. ISS also determines the quality of services delivered to end-users ISS can support in various way such as: Information systems planning(ISP) Information systems strategic planning(ISSP) Strategic information systems planning(SISP)

Information Systems Strategies(ISS) Ward and Peppard(2002) suggest that ISS must consider both IS/IT strategy formulation and IS/IT planning. IS/IT strategy formulation Involves exploration for the opportunities to employ IS Analysis of the competitive environment The need for alignment with business strategy

IS/IT planning An implementation plan to achieve the IS strategy.

Information Systems Strategies(ISS) Key output of ISS process: IS/IT mgmt strategy- describe an overall ISS for the organization, current situation, vision and rationale for change and plans. Business IS strategies specify how each business unit will use IS/IT to deliver its business objectives. IT strategy policies for specific hardware and software resources that comprising the IT infrastructure such as helpdesk and support.

The McFarlan & McKenney Strategic IT/IS Grid The McFarlan & McKenney model (1992) is a much quoted and typical example of a 2x2 business analysis matrix. The strategic grid model analyses the applicability of IT as a strategic weapon on the industry level. The model classifies the industries according to their present and medium-range affectedness by the strategic impact of IT applications.

The McFarlan & McKenney Strategic IT/IS GridStrategic impact of IS development portfolio low high lowSupport TurnaroundAim: Reduce costs Aim: often uncertain Approach: reactive with Approach: competitive effectiveness focus proactive focus Ex: payroll Ex: supermarket retailing

Strategic impact on current Information Systems

Factory/ Production

Strategic

high

Aim: competitive Aim: improve Advantage Performance Approach: reactive with Approach: competitive/ effectiveness focus technology and Ex: Financial efficiency focus services Ex: steel production

The McFarlan & McKenney Strategic IT/IS Grid The business analysis can be positioned under 4 classification: Support Factory/production Turnaround Strategic

The McFarlan & McKenney Strategic IT/IS Grid Support The impact of IS in existing / future application development is low IT/IS is used essentially for administrative systems to improve internal efficiency.

The McFarlan & McKenney Strategic IT/IS Grid Factory / Production IT/IS is critical to current operations but is not at the heart of the companys strategic development Reliable information systems are required for administrative and process management. Future IT applications are not the critical factor for future business success.

The McFarlan & McKenney Strategic IT/IS Grid Turnaround IT is becoming more pervasive and is recognized as a tool for transformation The systems that have being planned and developed may be critical to the enterprises survival or growth However there is uncertainty as the capabilities of the company in terms of delivery and support are untested

The McFarlan & McKenney Strategic IT/IS Grid Strategic Some enterprise will be operating in conditions where IT is already a central and their future are depending upon and shaped by development in information systems Business operation are not possible without the use of advanced information systems. The products and services tend to be computer based.

The McFarlan & McKenney Strategic IT/IS Grid The grid has four quadrants built around two straightforward questions: How important does management feel the current IT systems are to the company? How important does the company think future developments in IT will be for the company i.e. the impact of future IT developments on its way of doing business?

The McFarlan & McKenney Strategic IT/IS Grid Depending on the responses to these questions, a company can be placed in the four quadrants as follows: Low Current: Low Future Impact. IT has little relevance and simply supports existing processes. Low Current: High Future Impact. IT will feature more on the business agenda in the future. The company believes that IT will have a major impact on their business model in the future and IT is in a turnaround role i.e. IT will be a key feature of future strategic planning. It may not have played such a role in the past.

Example- Supermarket retailing process The retailing industry is often given as an example of how IT has become critical to operations. EFTPOS technology (i.e. Electronic Funds Transfer at Point of Sales) is the scanning technology we all see at the checkout counter. However, this technology not only indicates the price of the goods being purchased and computes the bill, it also updates the supermarket s stock records and may be on-line to the supermarket s suppliers who are immediately notified of the levels of stock (Electronic Data Interchange). The supermarket can also use the data collected from loyalty cards at the point of sale for marketing purposes. Payments both from the customer and to the supplier are automated electronically. So IT is a key part of operations.

The McFarlan & McKenney Strategic IT/IS Grid High Current: Low Future Impact. Here IT is said to have a Factory Role. It is important in terms of day-to-day operations but it is not felt that there are any major IT developments on the horizon that will fundamentally alter the nature of the business. Here, the key issue is the maintenance of existing systems. For companies in the Factory Role, the key issue will be the security of their systems, back-up procedures, standby arrangements and disaster recovery plans

The McFarlan & McKenney Strategic IT/IS Grid High Current: High Future Impact. In this quadrant, IT plays a crucial role both in terms of its current role and in terms of how future IT developments are viewed as impacting on the organization. IT is said to have a strategic significance. It is mission critical (i.e. the company is not going to be in business at all without using IT effectively to deliver its products and services both now and in the future). The role IT strategy plays in the formulation of the overall business strategy is critical. Example: financial services

The McFarlan & McKenney Strategic IT/IS Grid 3 factors that drive the position of the firm on the grid: The ability of management to match the potential of IT with the firms operations and strategy. The strategic choices that management makes with respect to IT such as, cut cost, improve quality or to develop new businesses. What is happening in the firms competitive environment.

Phases of Information Strategy In general, the management of information, IT and IS may go through 4 main phases: Operation Utility Services Strategic

Phases of IT and IS Mgmt

Operation

Utility

Service

Strategic

Operation Phase Characterized by a piecemeal, application specific approach to the implementation of systems. It is placed in the support quadrant in Mc Farland and McKenneys strategic grid. Decisions; short term basis and reactive manner Priorities: operational (rather than organizational needs) The results are costly and inflexible structures that are difficult to manage and control.

Operation Phase This phase tend to see the development of isolated systems for specific applications, which lead to ineffective utilization and wastage of scarce resources through diseconomies of scale. Responsibilities for systems may be fragmented within the enterprise

Operation Phase This result is significant resistance to any attempts to integrate or co-ordinate system activities within the enterprise because managers are reluctant to relinquish control, over budget, personnel, and services that are geared to their specific needs.

Utility Phase Characterized by being driven by technological capability and the realization that economies of scale can be achieved by addressing enterprise wide requirements for information transfer. It is placed in the factory quadrant in Mc Farland and McKenneys strategic grid. With the economies of scale and technological capabilities, it has generally led to the implementation of an IT infrastructure.

Utility Phase This infrastructure will be more flexible, provide access to share and become information resources. The effort involved at this phase become more concentrated and costs become easier to control. A degree of pro-activity is introduced through the recognition that systems must be built to ensure that they can can cope with the growth of users, hardware and services.

Service Phase Characterized by being user-oriented rather than technological oriented. It is placed in the turnaround quadrant in Mc Farland and McKenneys strategic grid. Most established enterprise have reached this phase of IS management. Once management controls have been put in place to help keeping the operating costs to a minimum, the focus will be shifted to extract values from the system.

Service Phase Concern with ensuring that appropriate services and resources are available to the enterprises personnel. Ensure the user to get the right information, in the right format and at the right time. Providing advisory as well as technical services in order to develop systems that are based on users requirements.

Strategic Phase Characterized by the recognition that an enterprisewide views of information processing need to be established. It is placed in the strategic quadrant in Mc Farland and McKenneys strategic grid. Involved an understanding of the interdependency of processes, information and technologies which are needed to support these processes.

Strategic Phase In this phase the medium to long term needs of the enterprise become the focal point in planning purposes. Requires close co-ordination between process owners and service managers. This is to ensure that the long term goals of the enterprises are reflected in these integrated information strategy

Strategic Phase Strassmann (1990) suggested a top-down approach to IT/IS investment that involves the following steps: Business diagnosis Business function analysis Information systems analysis Computer application

Strategic Phase- Strassmann IT/IS Investment ApproachTotal business Step 1: Business diagnosis Business function Step 2: Business function analysis Information system Step 3: Information system Information Technology Step 4: Computer application

Strategic Phase- Strassmann IT/IS Investment Approach This framework begins with analyzing the firms business environment in search of competitive opportunities and evaluating financial conditions. The analytic understanding will be translated into operating priorities in form of information systems and applications.

Strategic Phase- Strassmann IT/IS Investment Approach The alignment of information strategy with business strategy is more difficult in a rapidly change environment as the goal of the organization may have shifted radically by the time the information strategy has been articulated. Effective information strategies should not simply reactive but should offering a proactive solutions.

Conclusion: Information Strategy Information strategy is a key to the delivery of the business processes as they are valuable and dependent. If Information Strategy + Business Strategy -> form and shape a better choice and definition of business goals. This is because management will have a greater understanding of the opportunities to create new IT based capabilities rather than just focusing on improving existing operations.

Activity Evaluating the impact of the Internet on the five competitive forces Purpose: Using Porters Five Forces model to assess the impact of a technology on an industry.