IS/IT Roles in Organizaon and Their Relaonship to Business...
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IS/IT Roles in Organiza2on and Their Rela2onship to Business Strategy By: Zainal A. Hasibuan Faculty of Computer Science University of Indonesia
Transcript of IS/IT Roles in Organizaon and Their Relaonship to Business...
IS/IT Roles in Organiza2on and Their Rela2onship to Business Strategy
By: Zainal A. Hasibuan Faculty of Computer Science
University of Indonesia
Session Objec2ves
• Understand the strategic context of IS/IT in organiza2on
• Understand the business strategy formula2on • Understand the impact of business strategy to IS/IT strategy development.
• Widening horizon on how IS/IT plays its role in an organiza2on.
Agenda • Strategic Context of IS/IT in Organiza2on • Evolu2on of IS in Organiza2on • Success Factors of Strategic Informa2on Systems • The Rela2onship of IS/IT Strategy and Business Strategy
• IS/IT Strategy • Evolu2on of Business Planning • Framework of Business Planning • Compe22ve Forces in Industry • Compe22ve Strategy and Its Implica2on to IS/IT Strategy
• SPIS in Indonesia: Local point of view
Strategic Context of IS in Organiza2on • More products available in digital form – Hence e‐
delivery through an IS (give some examples e‐products?)
• More commerce takes place electronically (e‐commerce‐create new opportuni2es, online transac2on)
• More ac2vi2es geVng more complex, need various of data and informa2on (data mining, enterprise informa2on systems ‐ ERP)
• Interrelatedness of Business ac2vi2es within and between companies (improve efficiency and produc2vity)
• Technology advancement that can processes data in a large volume in a rela2vely short 2me (SPMB data).
The Evolution of Information Systems
Year 1960 – Data processing (DP) era Year 1970 – Management IS (MIS) era Year 1980 – Strategic IS (SIS-EIS) era Year 1990 – E-business & e-commerce era Year 2000 – Enterprise Resource Planning
era Each era has different characteristics of IS.
Characteris2c of DP Era
• Centralized processing • Using mul2‐purpose Mainframe computer
• Batch processing • Data storage: magne2c disk, tape
• Programming language: Cobol, Basic, etc.
• Automa2ng informa2on‐based processes
Characterize the nature of business at DP era?
Characteris2cs of MIS Era • Introducing minicomputer • Using variety business applica2ons • S2ll centralized • Used a hierarchical applica2on porYolio model based on a stra2fica2on of management ac2vity: – Strategic planning – Management control – Opera2onal control
• Increase management effec2veness by sa2sfying their informa2on requirements for decision making – to help manager
Characterize the nature of business at MIS era?
Characteris2cs of SIS Era
• Introducing Personal Computer (PC) • Introducing office automa2on
• Introducing new capabili2es: flexible access and decision support
• Improving compe22veness by changing the nature or conduct of business (i.e. IS/IT investments can be a source of compe22ve advantage)
Characterize the nature of business at SIS era?
Sales forecasting operating plans capacity planning, profit/earnings forecasts, business mix analysis, manpower planning, financial modeling
Sales analysis budgetary control, management accounting, inventory management, quality analysis, expense reporting, market research/statistics, WIP control, requirements planning, supplier analysis, etc.
Order entry, processing, tracking shipping documents, vehicle scheduling/loading, invoicing, sales and purchase ledgers, cost accounting, stock control, shop-floor scheduling, bill of materials, purchase orders, receiving, employee records, payroll, word processing
Planning systems examples
Control systems example
Operational systems examples
Early Views and Models of IS/IT in Organizations (Anthony, 65)
SIS
MIS
DP
Types of SIS • Those that link the organiza2on to its customers or suppliers to share informa2on
• Those that effec2vely integrate the use of informa2on in the organiza2on value chain
• Those that enable the organiza2on to develop new or enhanced products or services based on informa2on
• Those that provide managers with be^er informa2on for strategy development
• Example: Tradenet, SABRE (American Airlines), Valuelink (Baxter Healthcare).
Success Factors of SIS • External in nature instead of internal focus: i.e image
building • Adding value instead of cost reduc2on: i.e e‐2cket • Sharing the benefits internally and externally: i.e ATM • Understanding customers and their needs: i.e customized
product • Business instead of technology driven innova2on: i.e
covering a wider customers • Incremental instead of total development: i.e web‐based
applica2on • Using informa2on gained to develop business: i.e learning
organiza2on Exercise your critical thinking by giving more examples to those success factors !!
Trends in the evolution of business IS/IT (source: adapted from R.D. Galliers and E. Somogyi)
Different views of strategic information systems
The Relationship Between the Business, SIS, MIS, and DP
Business Strategic Management
IS/IT Strategic Management
IS Management
Project and Computer Management
Executive Management
User Management
User Operations
Impact Analysis
Information Analysis
Systems Design
The relationship between business, IS and IT strategies
An Applications Portfolio for the ‘Combined Era’ McFarlan ‘84
So… What’s an IS/IT Strategy?
• IS/IT strategy is composed of two parts – IS component – IT component
• IS strategy defines the organiza2on’s requirement for informa2on systems to support the overall strategy of the business
• The IT strategy is outlining the vision of how the organiza2on’s demand for informa2on and systems will be supported by IT
• It addresses the provision of ICT capabili2es and resources and services such as IT opera2ons, systems development and user support
Start thinking about the example of IS/IT Strategy!!
The Context of IS/IT Strategy (Sullivan, 1985)
Opportunistic
Traditional
Complex
Backbone Low
Low
High
High Infusion-degree of dependence of IS/IT of the business
External competitive pressures: increasing the criticality of IS/IT to the business
Diffusion: degree of decentrali- zation of IS/IT control in the organization
Internal organization pressures: demanding further distribution of IS/IT control
Evolu2on of Business Planning (Welleck, dkk.,1980)
Stage 1 Stage 2 Stage 3 Stage 4 Financial Forecast-based Externally Strategic planning planning oriented management (meet budget) (predict the (think (create the
future) strategically) future)
Effectiveness of strategic decision making
Annual budgets Functional focus
Multi-year budgets Gap analysis Static allocation of resources
Situation analysis and competitive assessments Evaluation of strategic options Dynamic allocation of resources
Well defined strategic framework Strategically focused organization Widespread strategic thinking capability Reinforcing management processes Supportive value system and climate
Framework for Business Planning
External Environments Economic Political Ecological Technological Social Legal
Customers Suppliers Shareholders Employees Unions Government Public
Stake Holder
Pressure Groups Competitors Customers Suppliers Shareholders Employees Unions Public Media Financial Ins.
Values
Objectives Identify current Identify future Threats and strategies strategies opportunities
Evaluate Analyze Evaluate feedback internal strategies resources Monitor Implement Select Strategies Strategies Strategies
Input to Business Planning
• External environments ‐ sources of important signals to organiza2ons
• Pressure groups ‐ demand recogni2on and rapid management response
• Stakeholders ‐ demand fair share of created wealth • Business planning is usually carried out for each strategic business unit – A unit that sells a dis2nct set of products or services, serve a specific set of customers, and competes with a well‐defined set of compe2tors
Defini2on of Business Strategy
• Defini2on of business strategy: – An integrated set of ac2ons aimed at increasing the long‐term well‐being and strength of the organiza2on rela2ve to its compe2tors
Process of Business Planning
• Define mission and objectives • Assess situation and options • Select options
Strategic planning of options selected Implement strategies
Strategic thinking and opportunistic decision making
Establish strategic direction
Define strategies
Achieve strategies
feedback
Technique to Develop Business Strategy: Compe22ve Forces in Industry (Porter, 1980)
Threat of new entrants
Bargaining power of suppliers
Rivalry among existing competitors
Threat of substitute product
Bargaining power of buyers
Factors Affec2ng The Impact of Compe22ve Forces
• New entrants – Capital requirements – Patents and specialists skill required – Distribu2on channels available – Achieved/required economies of scale and resultant cost advantages
– Number and size of exis2ng rivals and intensity of compe22on
– Differen2a2on and brand establishment/loyalty
– Access to raw materials/cri2cal resources etc.
Business strategy: “how to discourage new entrants to come into the business”
Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces
• Subs2tute products/services – Customer awareness of needs and means of sa2sfac2on
– Customer sensi2vity to value for money and ability to compare
– Exis2ng loyalty of customer—impact of “industry” promo2on
– Ability to differen2ate products etc.
Business strategy: “how to create a loyal customers?”
Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces
• Compe22ve rivalry will be intensified by: – Market growth slow (or in decline) – Small number of similar sized compe2tors dominate
– High fixed costs and/or high exit barriers for all rivals
– Overcapacity and/or capacity increments are large units
– Commodity‐like, undifferen2ated products. Business strategy: “how to differentiate your products?”
Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces
• Buyers’ power will be increased by: – Concentrated/few buyers making high volume and/or high value of purchases
– Low switching costs across suppliers – Price sensi2ve and many alterna2ve sources of supply – Weak brand iden22es, products not differen2ated
– Buyers capable of backward integra2on due to low entry cost.
Business strategy: “how to make the buyers depend on your business”
Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces
• Suppliers’ power will be increased by: – Few suppliers—high switching costs for rivals and suppliers deal with many small customers
– Poten2al subs2tute supplier/resources not easily available
– Supplied goods make up large part of firm’s costs – Suppliers capable of forward integra2on or bypass to customers
Business strategy: “how to make the suppliers depend on your business”
Generic Compe22ve Strategy
Low Cost
Differen- tiation
Competitive Advantage
Characteris2cs of Generic Strategies
Generic Strategies
Commonly Required Skills and Resources
Commonly Organizational Requirements
Overall cost leadership
Sustained capital investment and access to capital
Process engineering skills Intense supervision of labor
Tight cost control, frequent, detailed control reports. Structured organization and responsibilities. Incentives based on meeting strict quantitative targets
Differentiation Strong marketing abilities and creative flair. Product engineering skills. Strong capability in basic research. Corporate reputation for quality or technological leadership. Strong cooperation from distribution channels.
Strong coordination among functions in R&D, product development, and marketing. Subjective measurement and incentives instead of quantitative measures (market based incentives). Amenities to attract highly skilled labor or creative people. Looser, more trusting organizational relationships.
Focus Combination of the above policies directed at the particular strategic target.
Combination of the above policies directed at the particular strategic target.
Implica2ons of Compe22ve Business Strategy to IS/IT Strategy
• How can IS/IT affect the nature and value of the product or service and its life cycle? – Generate a new product or a new line of business
– Enable products to be designed or delivered more quickly
– Be used to add addi2onal features or services to increase the product’s value
• How can IS/IT affect the demand for products and services, segments more effec2vely, extend them geographically, or provide new distribu2on channels to reach the market? – Enable to reach more appropriate customers – Enable to match our different products/services to customer appropriately
– Enable the product/service to be distributed in new ways to the customers
– Enable to get closer to the market‐place rather than deal through intermediaries
Continued..
• How can IS/IT affect the cost base of the key processes in the industry or change the balance in the trade‐off between flexibility and standardiza2on? – Enable the product/service to be produced more economically
– Enable produc2on and associated logis2cs to be integrated to produce greater flexibility of resource use
– Enable a higher quality of product or service to be offered at a much lower cost than tradi2onally
Continued..
Examples of How IS/IT has affected the compe22ve forces in the airline industry
How can IS/IT build barriers to new entry?
By increasing IT entry cost for reservation systems. By tying in distribution channels (travel agencies).
How can IS/IT build in switching costs for customer?
By linking purchasing and remittance systems to reduce overheads of customer. Discount/volume packages to discourage piecemeal purchase.
How can IS/IT change the basis of competition?
Lower costs: optimize yield per aircraft. Differentiate service:reconfiguring aircraft due to demand. Niche/focus service into high yield sectors (business travel)
How can IS/IT change the balance of power in supplier/customer relationship?
Agent is constantly aware of seat availability of competing airlines. Airline can readily promote unsold capacity via chosen agents.
How can IS/IT generate new products/services?
Integrated travel package to high mileage business customers—by passing agencies. New routes/schedule to cater for demand.
Impact of Compe22ve Forces and Poten2al IS/IT Opportuni2es
Key force impacting the industry
Business implications Potential IS/IT effects
Threat of new entrants
Additional capacity Reduced prices New basis for competition
Provide entry barriers or reduce access by: exploiting existing economies of scale, differentiate products or services, control distribution channels, segment markets
Buyer power high
Forces prices down Demand higher quality Require service flexibility Encourage competition
Differentiate products or services and improve price or performance Increase switching costs of buyer Facilitate buyer product selection
Supplier power high
Raises prices or costs Reduced quality of supply Reduced availability
Supplier sourcing systems Extended quality control into suppliers Forward planning with supplier
Substitute products threatened
Limits potential market and profit Price ceilings
Improve price or performance Redefine products and services to increase value Redefine market segments
Intense competition from rivals
Price competition Product development Distribution and service critical Customer loyalty required
Improve price or performance Differentiate products and services in distribution channel and to consumer Get closer to the end consumer—understand the requirements
Why is IS/T Planning Important?
• IT Strategy is the process of defining the strategic use of technology in an organiza2on.
• The IS/T Planning process ensures efficient and effec2ve investment of IT to support the business
• IT is More Cri2cal to Corporate Success • The use of IT is increasingly pervasive • Enterprises are discovering that IT can influence the rela2ve performance of most departments
Indonesia and IS Planning
• There is a tendency not to pay a^en2on for ‘planning’
• The aVtude extends to IS/T planning
• Part of the problem is that there is no ‘tangible’ or ‘less realizable’ outcome resul2ng from IS/T planning
• We see more Indonesian organiza2ons conduct IT projects – not preceded by formal IS/T Planning
Results of Lack of IS/T Planning
• Failed of IS/T projects • We see IT projects which lacks direc2on, weak in scope, have li^le of no iden2fica2on of Cri2cal Success Factors.
• Inefficient use of investment in IT
• Bad name for IT professionals and due to failed IT implementa2ons
IS/IT Planning for the Indonesian
• Need processes which are more facilitator‐driven, higher involvement of consultants who has psychological and cultural sensi2vity
• Need processes which are a combina2on between verbal (direct) and in‐direct interac2ons – to ensure that ideas and opinions are fully expressed
IS/T Planning in Indonesian Organiza2ons: Reali2es
• Jus2fica2on for audi2ng purposes • Idea omen comes bo^om up: hence the challenges • Do not believe in documenta2on: hence the approach is omen less formal
• Difficult to get buy‐in from management who would rather see IT implementa2on projects
• Who’s project is this: an IT department project?
Trends in IS/T Planning
• We will see more ‘formal’ IS/T Planning ac2vi2es with increase of IS/T dominance as an integral part of business
• IS/T Planning will need to be done faster, with the faster trend of technology development
• Clear defini2on between business plan, IS/T planning and IT implementa2on will become more and more blurred as technology will con2nue to drive businesses stronger
Exercise Your Thought
Explain the evolution roles of IT/IS in an organization?
What are Business and IS/IT strategies? Explain the relationship of Business, IS/IT
strategies? How external forces influence business
strategy and IS/IT strategies What are the challenges of IS/IT Plan in
Indonesia?
