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Chapter 1. The Information Systems Strategy Triangle

Managing and Using Information Systems: A Strategic Approach by

Keri PearlsonPowerPoint Slides prepared by Gene Mesher

Copyright © 2001 John Wiley & Sons, Inc.

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Copyright John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the United States Copyright Act without the express written consent of the copyright owner is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. Adopters of the textbook are granted permission to make back-up copies for their own use only, to make copies for distribution to students of the course the textbook is used in, and to modify this material to best suit their instructional needs. Under no circumstances can copies be made for resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

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Intro: National Linen Svc.

Motivated by increased competition and the weak economy,

Brought in new IS system (Boss) to lower costs.

Boss dropped expired accounts without notifying the contract department.

Effect was to worsen company’s bottom line.

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Figure 1.1 The Information Systems Strategy Triangle

Business Strategy

OrganizationalStrategy

InformationStrategy

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The Information Systems Strategy Triangle

Successful firms’ business strategy drives both their organizational and IS strategies. Firms must seek to balance business,

organizational, and IS strategies. IS Strategy is affected by the other

strategies a firm uses. Changes in IS strategy must be accompanied by changes in the other two.

IS strategy has (sometimes unintentional) consequences on the business and organizational strategies.

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BRIEF OVERVIEW OF BUSINESS STRATEGY FRAMEWORKS

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Business Strategy Frameworks

Porter’s Generic Strategies Framework (and its variants)

Hypercompetition and the New 7-S’s framework (D’Aveni)

Co-opetition (Brandenburg and Nalebuff)

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Figure 1.2 Three strategies for achieving competitive advantage

DifferentiationOverall CostLeadership

Focuson narrow

marketsegment

Industrywide

ParticularSegmentOnly

Uniqueness PerceivedBy Customer

Low Cost Position

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Porter’s Competitive Advantage Strategies

Cost leadership: be the cheapestDifferentiation: focus on making

your product stand out for non-cost reasons

Focus: occupy narrow market niche where the products/services can stand out by virtue of their cost leadership or differentiation.

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Variants on Differentiation Strategy

Shareholder value model: create advantage through the use of knowledge and timing (Fruhan)

Barriers to entry model: firms create barriers to entry to keep competitors out of their markets

Unlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources

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Hypercompetition and the New 7-S’s framework (D’Aveni)

Sustained competitive advantage is not possible

Only temporary advantages exist, created by a company’s speed and aggressiveness.

Assumes: Every advantage becomes eroded Sustaining an advantage uses too much time and

resources. Instead, companies must seek to stay ahead of its

competitors by creating temporary advantages These are done in small steps over short competitive

cycles. Focus on creating the next temp. advantage.

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Figure 1.3 Disruption and the new 7-S’s

Vision for DisruptionCreate temporary advantage through

understanding stakeholder satisfaction or strategic soothsaying

Capability for DisruptionSustaining momentum through speed and surprise can create temporary advantages

Tactics for DisruptionGain advantage by: shifting the rules, signaling, simultaneous and sequential strategic thrusts

MarketDisruption

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Figure 1.4 D’Aveni’s new 7-S’s

Superior stakeholder satisfaction: maximize cust. satisfaction by adding value strategically

Strategic soothsaying: use new knowledge to predict new windows of opportunity

Positioning for speed: prepare the org. to react as fast as possible

Positioning for surprise: surprise competitors Shifting the rules of competition: serve

customers in novel ways Signaling strategic intent: communicate

intensions in order to stall competitors Simultaneous and sequential strategic thrusts:

take steps to stun and confuse competitors in order

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Co-opetition

More about forming alliances to better compete.

Companies, competitors, customers and suppliers are participate in (and compete in) “the value net”.

Key concept is “complementors”, companies that sell complementary products and services.

These can often gain advantage by forming an alliance to provide a more competitive

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Why are strategic advantage Models essential to planning?

Giving up authority on IS decisions is giving up IS strategy

Poorly chosen IS infrastructure undermines strategy

Business strategy needs to address: What is the business goal or objective? What is the plan for achieving it? What is the

role of IS in this plan? Who are the crucial competitors and

cooperators,and what is required of a successful player in this value net?

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Figure 1.5 Summary of key strategy frameworks

Generic Strategies: CA through low cost, differentiation or focus

Hypercompetition: CA is temporary, created through speed and aggression in the market

Co-opetition: companies create alliances of firms with complementary outputs to better compete

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BRIEF OVERVIEW OF ORGANIZATIONAL STRATEGIES

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What is Organizational Strategy?

How to organize to implement corporate goals and business strategy.

Organizational Strategy includes the design choices that: define, set up, coordinate, and control corporate work processes.

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Figure 1.6 The Business Diamond(Hammer and Champy)

Jobs andStructures

Managementand Measurement systems

BusinessProcesses

Values andBeliefs

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Fig. 1.7 Conventional IT Design Variables (Lucas and Baroudi)

Complements Business Diamond Structural: defs. of org. subunits, reporting, linking controlling

mechanisms, staffing

IT Design vars: Virtual components, e-banking, tech. leveling Work Process: Tasks, Workflows, Dependencies, Output of

process, Buffers

IT Design variables: Production automation, e-workflows, virtual components

Communications: formal, informal communications

IT Design variables: group support systems Interorganizational: make vs. buy decisions, exchange of

materials, communications

IT Design variables: e-SCM

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Figure 1.8 Managerial Levers

BusinessProcesses

DecisionRights

Data

Planning

PerformanceMeasurementAnd evaluation

Formal ReportingRelationships

InformalNetworks

Values

IncentivesAnd Rewards

People,Information andTechnology

Strategy

Org.effectiveness

Culture

Control

Organization

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Figure 1.9 Organizational Design Variables

Organizational Variables

Decision rights

Business processes

Formal reporting relationships

Informal networks

Control Variables Data

Planning

Performance and evaluation measurement

Incentives

Cultural Variables Values

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Understanding Organizational Strategy Means answering the following:

1. What are the important structures and reporting relationships within the organization?

2. What are the characteristics, experiences and skill levels of the people within the organization?

3. What are the key business processes?4. What control systems are in place?5. What is the culture of the organization?

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Figure 1.10 Summary of organizational strategy frameworks

BusinessDiamond

4 key organizational components: 1) business processes, 2) values and beliefs, 3) management control systems, and 4) tasks and structures.

Using IS in an organization will affect each of these components. Use this framework to identify where these impacts are likely to occur.

ManagerialLevers

Organizational variables, control variables, and cultural variables are the levers managers can use to affect change in their organization.

This is a more detailed model than the business diamond and gives specific areas where IS can be used to manage the organization and to change the organization.

Key Idea Usefulness of ISDiscussions

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BRIEF OVERVIEW OF INFORMATION SYSTEMS STRATEGY

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Figure 1.1 IS Strategy Matrix

Hardware: physical components in a physical location. Used by system users and system managers.

Software: programs, applications and utilities that reside on the hardware. Used by system users and system managers.

Networking: hardware and software that interconnects other IS components located where the networks and cables are. Used by system users and system managers, networking services also obtained from outside sources.

Data: information stored in the system. Used by individuals who own the data. Managed by system managers.

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FOOD FOR THOUGHT

1. Business strategy drives organizational strategy and IS strategy. It is important to design the organization and its IS they support clearly defined business goals and objectives.

2. Org.strategy must complement business strategy. Business organization either supports business strategy or gets in the way.

3. Likewise, IS strategy must complement business strategy. When IS support business goals, the business appears to be working well.

4. Org. strategy and info. strategy must complement each other. They must be designed so that they support, rather than hinder each other.

5. If a decision is made to change one corner of the triangle, it s necessary to evaluate the other two corners to ensure that the balance is preserved. Changing business strategy without about thinking about the effects on org. and IS strategies will cause the business to struggle until balance is restored. Likewise, changing IS or the organization alone will cause an imbalance.

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End of Chapter 1