1. Chapter I & 1: The Information Systems Strategy Triangle
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258

2. MIS Management Information Systems
Which component is mostly important?

3. INTRODUCTION
Shouldn’t managers rely on experts when it comes to making the decisions on IS for their organizations?
Managers today need to know about their organization’s capabilities and uses of information as much as they need to understand how to obtain and budget financial resources.
A manager who does not understand the basics of managing and using information cannot expect to be successful in today’s business environment.
“NO”
Managing information is a critical skill for success in today’s business environment
All decision made by company include, at some level, the management and use of IS
Managers know –
a) organization’s capabilities, and 2) use of information as much as they need to understand how to obtain and budget financial resources

4. IS must be managed as a critical resource
Figure I.1 - Reasons why business managers should participate in information systems decisions
Reasons:
IS must be managed as a critical resource
IS enables change in the way people work together
IS integrates with almost every aspect of business IS enables business opportunities and new strategies
IS can be used to combat business challenges from competitors

5. A Business View of Why Managers Need to Participate:
IT accounts for more than 50% of the capital-goods dollars spent in the US.
US companies spend $7,500 per employee on IT and use is growing exponentially.
As managers decide which activities receive funding, it is essential that they have a basic grounding in managing and using IS.

6. Information Ecology Data ______ = simple observations
___________ = data endowed with relevance and purpose.
___________ = information that has been situationalized and contextualized to provide value.
Information
Knowledge
Information
-- context-sensitive
-- Information can become knowledge after people use it in ways that create value.
Knowledge
- consensus-oriented
-- Knowledge has been viewed as information in action
KM is not based on information

7. Figure I.9 System Hierarchy
System’s
Architecture
Oversee
Develop
Information
Requirements
Strategies
Design
and
Structure
Management
Infrastructure
Information System
People – Who
Technology – what
Process - How
Technology
Process
People

8. Essential Value Propositions for a Successful Company
Business Model
Core Competency
Outsourcing
Offshoring
Execution
Set corporate goals and get executive sponsorship for the initiative
First, you have to have a business model, then, the company needs to set corporate goals and get executive sponsorship for the initiative."
"Start with your business objectives of the product or service the company is selling, figure out where it is in the lifecycle, and determine which phase of CRM to focus on, for example, the company should determine whether it wants to focus on acquiring customers, retaining customers or up-selling and cross selling to customers."
Examples: Dell vs. Gateway and Toyota vs. GM/FORD

9. WHY STRATEGY? (DBQ)
Why is it important for business strategy to drive organizational strategy and IT strategy? What might happen if business strategy were not the driver?
The primary point in this chapter is that in any well-run organization, the business strategy drives the rest of the operational strategy, and information systems is no different. However, typically, managers seem to think that changing or upgrading an information system (or even a component of an information system) will only positively impact a business. Quite the opposite, in fact, is true. By making changes in organizational strategy or IT strategy first, the triangle is "out of balance" and there will be consequences in the affected areas.
For example, building a virtual organization, but not changing the business strategy to something like "insuring our people are productive and have the widest possible work place opportunities" can lead to significant disconnects between workers, their managers, and their customers. And, worse, without supplying the virtual worker with the appropriate information system (a computer at home, a laptop, etc) will lead to a decrease in productivity by the virtual worker, and a major disruption of business operations.
IBM focused on IT strategy (H/S W) however, did not balance Business and Organizational strategies, it failed in early 1990s.

10. Planning is everything ... What are Two Major Outputs for an organization?
Vision
develop
Mission
Customers,
market,
competition
guide
Strategy
create
Vision statement: one that a company (or projects) would like to be
Mission statement: is about where and what they portray today
Knowledge ---> Intelligence ---> Wisdom
Attention economy:
Time and attention are the scarcest resource. The completion for available attention is heating up; investing it wisely became a competence of increasing value.
Only wisdom can guide effective decisions on how we invest our attention.
Experience economy:
Today’s customers are looking for more than products/services; they want to have a memorable experience of buying and using them for achieving their aspirations.
One of the largest buying powers in the US, “cultural creative” value transformation higher than other types of market offers.
Tactic
Products,
Services N

11. Real World Example
During an ice storm in 2007 many airlines were cancelling flights.
Jet Blue waited to cancel flights and paid a heavy price.
Had to cancel 1,000 flights over 5 days.
Up to 9 planes full of passengers were stranded for up to 6 hours on the tarmac.
An inadequate reservation system and shoestring communication system was blamed for the problems by Neelman.
Changes had to be made. 11 11

12. Why is it important for business strategy to drive organizational strategy and IT strategy? What might happen if business strategy were not the driver?
Typically, managers seem to think that changing or upgrading an information system (or even a component of an information system) will only positively impact a business. Quite the opposite, in fact, is true. By making changes in organizational strategy or IT strategy first, the triangle is "out of balance" and there will be consequences in the affected areas.
For example, building a virtual organization, but not changing the business strategy to something like …
"insuring our people are productive and have the widest possible work place opportunities" can lead to significant disconnects between workers, their managers, and their customers. And, worse, without supplying the virtual worker with the appropriate information system (a computer at home, a laptop, etc) will lead to a decrease in productivity by the virtual worker, and a major disruption of business operations.

13. Information System Strategy Triangle
Business (Firm)
Strategy
Where is the business going and why?
Direction for business
Needs and priorities
IT impact and potential
Infrastructure and services
Supports business
Organizational Strategy
IS/IT Strategy
Fail to balance these three strategies
IS fail to support business goals
IS fail to support organizational system
Misalignment between business & org. strategies
A business strategy is a well-articulated vision of where the business seeks to go and how it expects to get there; An organizational strategy is the organization’s design, as well as the choices it makes to define, set up, coordinate, and control its work processes; IS strategy is the plan the organization uses in providing information systems and services.
IS strategy can itself affect and is affected by changes in a firm’s business and organizational strategies. Moreover, IS strategy always has consequences – intended or not – on business and organizational strategies.
Business strategy
business decisions; -- Objective and direction; -- Change;
Organizational strategy
-- A plan that answers the question: How will the company organize in order to achieve its goals and implement its business strategy?
Thus, it is a plan for organizational design, and choices the firm makes that define, set up, coordinate, and control its work processes.
business based; - Demand oriented; - Application focused
IS/IT strategy
activity based; -Supply oriented; -Technology focused
Gain strategic advantage by using IT …
It consists of four major elements: 1) Architecture/Infrastructure, 2) MIS Organization, 3) Funding and 4) Project Management
What is required?
How it can be delivered?
1. Architecture/Infrastructure
2. MIS organization
3. Funding
4. Project Management N

14. Information System Strategy Triangle
A business strategy is a well-articulated vision of where the business seeks to go and how it expects to get there.
An organizational strategy is the organization’s design, as well as the choices it makes to define, set up, coordinate, and control its work processes.
IS strategy is the plan the organization uses in providing information systems and services.

15. The Information Systems Strategy Triangle
Successful firms’ business strategy drives both their organizational and IS strategies:
They must, therefore, 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 constant adjustments in the other two
IS strategy can have (sometimes unintentional) consequences on business and organizational strategies

16. Example
Give an example in which a company fails to perform well because it does not align its three strategies.
Any?
too much focus on IT
used to be considered as a “hardware” company (PC, DOS etc.)
new division established in early 1990: GLOBAL SERVICIE DIVISION
it now becomes a “Service” corp. – “TOTAL solution”
IBM
too much focus on IT
Used to be considered “hardware” company (PC, DOS etc.)
New division established in early 1990: GLOBAL SERVICIE DIVISION
“Service” corp. – “TOTAL solution”

17. Louis V. Gerstner, Jr. IBM former CEO and president (1992-2002)
Prior to joining IBM, Mr. Gerstner served for four years as chairman and chief executive officer of RJR Nabisco, Inc. This was preceded by an 11-year career at American Express Company, where he was president of the parent company and chairman and CEO of its largest subsidiary, American Express Travel Related Services Company. Prior to that, Mr. Gerstner was a director of the management consulting firm of McKinsey & Co., Inc., which he joined in 1965.
In January 2003 he assumed the position of chairman of The Carlyle Group, a global private equity firm located in Washington, DC.

18. BRIEF OVERVIEW OF BUSINESS STRATEGY FRAMEWORKS

19. Striving for Competitive Advantage
Firm level: Industry & Competitive Analysis
Business level
Competitive Forces Model (discussed in chap.2)
Competitive Strategy
D’Aveni’s Hypercompetition Model (7s)
FIRM LEVEL – INTERNAL
BUSINESS LEVEL - EXTERNAL
Value-Chain Analysis

20. PORTER’S FIVE COMPETITIVE FORCES MODEL
Threats
NEW MARKET ENTRANTS
SUBSTITUTE PRODUCTS & SERVICES
Switching cost
Access to distribution channels
Economies of scale
Redefine products and services
Improve price/performance
Selection of suppler
Threat of backward integration
Buyer selection
Switching costs
Differentiation
Cost-effectiveness
Market access
Differentiation of product or service
THE FIRM
INDUSTRY COMPETITORS
According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force (Porter, 1985). Under the perspective of market structure, Porter’s competitive forces model (Porter, 1985; Applegate et al., 1999) has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats.
Contemporary strategic planning frameworks
-- 1) too narrow and pessimistic
-- 2) they are based on projections of market share and market growth
COMPETITIVE FORCES that SHAPE strategy
-- depends on the type of the industry
The ability to manage complexity and responsiveness has become a powerful source of competitive advantage.
Internal Forces: 1.customer focus, 2.communication, 3.core competencies, 4.complexity, 5.Quality
Due to characteristics of the instability of the markets in e-Commerce, Downes and Mui (1998) show that there are three forces that must be added to Porter’s five forces model: globalization, digitalization, and deregulation.
digitalization – the improvement and cost reductions in digital technology have had significant impact in business for many years now. The Internet has simply accelerated much of what was already happening and spread it into other industries across the world (esp. the information-based industries).
Deregulation and liberalization – it opened up new opportunities for many firms, and recent years have seen an increase in the number of related diversifications. (e.g., UK companies in the energy sector have branched out into related markets such as other forms of energy or telecommunications, making use of their physical distribution networks).
Globalization – an international level of many industries and liberalization of many markets (e.g., Eastern Europe) have opened up new foreign markets for Western firms while bringing Western firms into competition with multinationals based in other countries.,
Such international competition is likely to accelerate following political moves, such as the signing of the General Agreement on Trade and Tariffs by the leading industrial nations which promise to reduce barriers to international trade. Concept of “glocalization” where organizations must be a part of the local environmental setting. That is to think global and act according to local customs to survive and thrive in local conditions.
SUPPLIERS
CUSTOMERS
Bargaining power N
Dr. Chen, The Trends of the Information Systems Technology
TM -20

21. Business Strategy Frameworks
Porter’s Generic Strategies Framework (and its variants)
Hypercompetition and the New 7-Ss framework (D’Aveni)
Porter’s Generic Strategies Framework (and its variants)
-- Porter’s generic strategies model and its variants are useful for diagnostics or understanding how a business seeks to profit in its chosen marketplace, and for prescriptions, or building new opportunities for advantage.
-- The models were developed at a time when competitive advantage was sustainable because the rate of change in any given industry was relatively slow and manageable.
Hypercompetition and the New 7-S’s framework (D’Aveni)
-- The models suggest that the speed and aggressiveness of the moves and countermoves in any given market create an environment in which advantages are “rapidly created and eroded.” N

22. Competitive Advantage Focus
Figure 1.2: Porter’s Generic Strategy Framework –
3 Strategies for achieving Competitive Advantage
Competitive Advantage
Uniqueness
Perceived by
Customer
Lower Cost
Position
Industrywide (Broad Target)
Overall Cost Leadership
Differentiation
Competitive Scope
Three generic strategies
Cost leadership
differentiation (internal differentiation [e.g., stock option, bonus, salary increase] is good for building performance culture within the organization) From PRODUCT differentiation to SERVICE differentiation (BLUE OCEAN)
Focus (focused strategy is to develop a new market niches for specialized products/services where a target area better than its competitors) means an appropriate position/market
a. cost or
b. differentiation
PRODUCT differentiation  SERVICE differentiation  INNOVATION (BLUE OCEAN STRATEGY)
Core concept of this strategy are two basic principles:
1. Competitive advantage is believed to be the GOAL of any strategy
2. It is to be believed that a firm must define the TYPE of CA it seeks to attain and the scope within which it will be attained.
From “all things to all people” (a below-average performance) to a focus on core competencies.
Particular Segment only (Narrow Target)
Focus
Competitive Mechanism N
Dr. Chen, The Trends of the Information Systems Technology
TM -22

23. Porter’s Competitive Advantage Strategies
Cost leadership: be the cheapest
Differentiation: focus on making your product and/or service 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.

24. Variants on Differentiation Strategy
Shareholder value model: create advantage through the use of knowledge and timing
Unlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources (deep pocket advantage)
Shareholder value model: timing of the use of specialized knowledge can create a differentiation advantage as long as the knowledge remains unique (Fruhan)
-- for small company
Unlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources
-- (e.g., INTEL, M/S, CISCO) N

25. Relationship between profits and time of market introduction
300
Profits relative to competitions (%)
250
200
150
100
Speed of Change (p.225) Figure (p.227)
Apart from the instability of the market, one of the greatest challenges for firms engaged in e-commerce is the sheer speed of change.
Speed is all the more critical in the case of Internet start-ups that need to match the “burn rate”, the rate at which the firm uses up its initial financing, or where the company needs to capture a large share of the market quickly before competitors catch up. (Economy of Scale)
Speed to market is also important where products rapidly become obsolete. In consumer electronics, if a firm is able to launch a product 6 months earlier than it rivals, this result in profits that are three (3) times as large over its lifetime; however, a product that is 6 months later than its rivals earns negligible profits (p.227)
Peek point occurred in 4 months earlier than competitors. After 4 months, perhaps, less VC invested or other competitors catch up. 50
Time of market introduction relative to competition (months)

26. Business Strategies and its Competitive Advantage Innovation Alliance
Uniqueness
Perceived by
Customer
Lower Cost
Position
Industrywide (Broad Target)
Cost Leadership
Differentiation
Alliance
Innovation
Growth
Competitive Scope
Particular Segment only (Narrow Target)
Cost Focus
Differentiation Focus
Three generic strategies
Cost leadership
differentiation (internal differentiation [e.g., stock option, bonus, salary increase] is good for building performance culture within the organization) From PRODUCT differentiation to SERVICE differentiation (BLUE OCEAN)
Focus (focused strategy is to develop a new market niches for specialized products/services where a target area better than its competitors) means an appropriate position/market
a. cost or
b. differentiation
PRODUCT differentiation  SERVICE differentiation  INNOVATION (BLUE OCEAN STRATEGY)
Core concept of this strategy are two basic principles:
1. Competitive advantage is believed to be the GOAL of any strategy
2. It is to be believed that a firm must define the TYPE of CA it seeks to attain and the scope within which it will be attained.
From “all things to all people” (a below-average performance) to a focus on core competencies.
Knowledge-based economy
Industrial economy
Competitive Mechanism N
Dr. Chen, The Trends of the Information Systems Technology
TM -26

27. Figure I.6 (2.4) Business Level: The Value Chain
Competitive
Advantage
(Value)
A company’s value activities fall into nine generic categories.
-- Primary activities are those involved in the physical creation of the product, its marketing and delivery to buyers, and its support and servicing after sale.
-- Support activities provide the inputs and infrastructure that allow the primary activities to take place.
IT can profoundly affect one or more of these activities -
- sometimes simply by improving effectiveness,
- sometimes by fundamentally changing the activity, and
- sometimes by altering the relationship between activities.
In addition, the actions of one firm can significantly affect the value chain of key customers and suppliers.
Operations: Boeing -- Lean Manufacturing
After-Sale Service - maintenance technology
Devices identify potential problems before the customer notices a difficulty and enable the service representative to fix the elevator before it breaks down, reducing repair costs and increasing customer satisfaction.
Corporate Infrastructure
- on-line links to integrate remote locations (27% sales growth)
MANAGEMENT CONTROL
- more sophisticated reward systems software (sales commission on each
product sold by its sales force; thus
(a) maximum incentive: sales force; (b) NO incentive: ensure the customer continued to be satisfied with the
services coordination of activities
- coordination of activities
airline, truck, railroad: optimizing schedule, fueling, cargoes by using , groupware, videoconferencing: a networked “workflow” system.
Technology Development
support for research and development; CHINA(SPARK MIS)
Procurement
market knowledge (purchase price, exert pressure on --> supplier N

28. Manufacturing Industry Value Chain Product and Service Flow
Support Activities
Administrative and Other
Indirect Value Added
Firm as a value chain – describe the firm as a set of interrelated activities (value chain).
-- Every firm is a collection of activities performed to design, produce, market, develop, and support its product.
-- it is a reflection of
its history,
2) its decision making, and
3) its approach to implementing its decisions and
4) underlying economic of the activities themselves.
Primary activities are those involved in taking the raw materials and developing the products and services for the customers. There are five generic sets of primary activities.
Support activities can be divided into four generic categories.
Though firms in the same industry may have similar value chains, the value chains of competitors often differ.
First of all, the value chains help the firm deliver products and services to its customers.
From the customer’s point of view, the value delivered by a firm (to the customers) depends on the superiority of its products or service relative to the price paid by the customer.
The value appropriated by the firm, on the other hand, depends on the value created by the customers, but in relationship to the firm’s cost structure.
In general, the value appropriated should exceed the opportunity cost of capital.
Research and
Development
Engineering
Production
and Manufacturing
Marketing
Sales and
Distribution
Service
Primary Activities N
Dr. Chen, The Trends of the Information Systems Technology

29. Interconnecting relationships between organizations
The Value System:
Interconnecting relationships between organizations
The direction of flow of the goods is usually referred to as “downstream.”
Def. The value system is a collection of firm value chains connected through a business relationship.
The value chain for a company in a particular industry is embedded in a larger stream of activities that we term the “value system”.
The value system includes the value chains of suppliers, who provide inputs (such as raw materials, components, and purchased services) to the company’s value chain.
The company’s product often passes through its channels’ value chains on its way to the ultimate buyer.
Finally, the product becomes a purchased input to the value chains of its buyers, who use it to perform one or more buyer activities.
A company can create competitive advantage by optimizing or coordinating these links to the outside.
The company, suppliers, and channels can all benefit through better recognition and exploitation of such linkages. Every value activity has both a physical and an information-processing component.
The physical component includes all the physical tasks required to perform the activity.
The information-processing component encompasses the steps required to capture, manipulate, and channel the data necessary to perform the activity. Every value activity creates and uses information of some kind. E.g., logistics activity (p.152) and service activity
Value system analysis (p.218)
Value chain analysis can be extended beyond the company to include other firms in the industry, such as suppliers and customers, in a “value system” analysis. E.g. revenue streams for websites can also be added potentially profitable opportunities in support services, infrastructure provision, security software and venture capital. The value system analysis is particularly useful in e-business as it can highlight one of the key strategic opportunities, restructuring an existing industry.
“Value innovation” meaning that strategy is driven by what is valued the customer without being constrained by existing industry rules. Since one of the most striking features of competition in e-business is that new entrants have often been able with limited resources to undermine existing competition in an industry through the use of new business models.
Downstream
value
Upstream
value
Firm
value N

30. Hypercompetition and the New 7-S’s framework (D’Aveni)
Every advantage is eroded.
_______________________
Sustaining an advantage uses too much time and resources that can be a deadly distraction.
The goal should be___________, not _______________ of advantage.
Initiatives are achieved with a series of small steps.
Hypercompetiton occurs when technologies or offerings are so new that standards and rules are influx, resulting in competitive advantages that cannot be sustained. It is characterized by intense and rapid competitive moves, in which competitors must move quickly to build new advantages and erode the advantages of their rivals.
disruption
sustainability
Hypercompetiton occurs when technologies or offerings are so new that standards and rules are influx, resulting in competitive advantages that cannot be sustained. It is characterized by intense and rapid competitive moves, in which competitors must move quickly to build new advantages and erode the advantages of their rivals.
Speed of the disruptive turbulence created by hypercometition is driven by globalization, more appealing substitute products, more fragmented customer tastes, deregulation, and the invention of new business models – all contributing to structural disequilibrium, falling barriers to market entry, and the dethronement of industry leaders.
In the age of turbulence, the competitive environment shifts dramatically from slow-moving incumbents attempting to protect their positions to fast –moving attackers with strategies targeted specifically at disrupting the competitive advantage of market leaders.

31. D’Aveni’s Disruption and 7-S’s
Vision for Disruption
Identifying and creating opportunities for
temporary advantage through understanding
Stakeholder satisfaction
Strategic Soothsaying
directed at identifying new ways to serve existing
customers better or new customers that are not
currently served by others
Old 7Ss:
structure, strategy, system, style, skills, staff, and super-ordinate goals.
Market Disruption
This framework helps 1) assess competitors’ strengths and weaknesses, as well as 2) build a roadmap for the company’s strategy itself.
D’Aveni identified four arenas in which firms seek to achieve competitive advantage under hypercompetition:
cost/quality; 2) timing/know-how
3) strongholds, and 4) deep pockets
The 7Ss are a useful model for
identifying different aspects of a business strategy and
aligning them to make the organization competitive in the hypercompetitive arena of business in the millennium.
The model is particularly useful in markets where the rate of change makes sustaining a business strategy difficult.
It also suggests that a business strategy must be continuously redefined in order to be successful.
The “old” 7 Ss of competitive advantage
-- structure, strategy, systems, style, skills, staff, and super-ordinate goals
Tactics for Disruption
Seizing the initiative to gain advantage by
Shifting the rules
Signaling
Simultaneous and sequential strategic
thrusts
With actions that shape, mold, or influence
the direction or nature of the competitor’s
response
Capability for Disruption
Sustaining momentum by developing
flexible capacities for
Speed
Surprise
That can be applied across actions to
Build temporary advantage
By Richard D’Aveni, professor of business strategy at Dartmouth College N

32. D’Aveni’s Hypercompetition Model (cont.)
Hypercompetiton Strategies for Disruption
1. Stakeholder satisfaction is key to winning each dynamic interaction with competitors
2. Strategic soothsaying is the process for seeking out new knowledge for predicting what customers will want in the future
3. Speed is crucial to take advantage of opportunities and respond to counterattacks by competitors
4. Surprise enhances a company’s ability to stun a competitor, to build up superior position before a competitor can counterattack.
Hypercompetition Tactics for Disruption
1. Shifting rules of the market to create tremendous disruption for competitors.
2. Signals out to (a) make announcements of strategic intent to dominate a marketplace, or (b) manipulate the future moves of rivals.
3. Simultaneous or sequential strategic thrusts using several moves to mislead or confuse a competitor.
Hypercompetiton occurs when technologies or offerings are so new that standards and rules are influx, resulting in competitive advantages that cannot be sustained. It is characterized by intense and rapid competitive moves, in which competitors must move quickly to build new advantages and erode the advantages of their rivals.
Speed of the disruptive turbulence created by hypercometition is driven by globalization, more appealing substitute products, more fragmented customer tastes, deregulation, and the invention of new business models – all contributing to structural disequilibrium, falling barriers to market entry, and the dethronement of industry leaders.
In the age of turbulence, the competitive environment shifts dramatically from slow-moving incumbents attempting to protect their positions to fast –moving attackers with strategies targeted specifically at disrupting the competitive advantage of market leaders.
Speed of the disruptive turbulence created by hypercometition is driven by globalization, more appealing substitute products, more fragmented customer tastes, deregulation, and the invention of new business models – all contributing to structural disequilibrium, falling barriers to market entry, and the dethronement of industry leaders

33. Example:
At General Electric, Jack Welch, implemented a DYB (“Destroy Your Business”) approach by placing employees in the shoes of competitors to highlight weaknesses and find fresh ways of meeting customer needs.
Similarly GE’s Medical Systems Division used DYB to respond to the challenges posed by the Internet.
The goal of the DYB planning approach is the complete disruption of current practices, so that GE can take actions to protect its business before competitors hone in on its weaknesses. N

34. be greedy when others are fearful.”
“Be fearful when others are greedy, and
be greedy when others are fearful.”
-- Warren E. Buffett, CEO, Berkshire Hathawy, Inc.

35. BRIEF OVERVIEW OF ORGANIZATIONAL STRATEGIES

36. Figure 1.6 Summary of Key Strategy Frameworks
Generic Strategies: Competitive Advantage (CA) through low cost, differentiation or focus
Hypercompetition: CA is temporary, created through speed and aggression in the market

37. Porter’s Model vs. Hypercompetition Model Competitive Advantage
Industries
Competitive Advantage
(Characteristics)
(How to)
Porter’s Model
Relatively stable
Establish a strong, long-term position and defend it.
Attain a fit with the environment as in traditional markets
Hyper-competition Model
Dynamic
1) Ever-increasing competition
2) Changing power between players
Short-lived, take advantage of any small window of opportunity that arises (thru speed and aggression)
1) change rules of competition
2) create disruptions (during which temporary advantages can be exploited)
Due to characteristics of the instability of the markets in e-Commerce, Downes and Mui (1998) show that there are three forces that must be added to Porter’s five forces model: globalization, digitalization, and deregulation.
digitalization – the improvement and cost reductions in digital technology have had significant impact in business for many years now. The Internet has simply accelerated much of what was already happening and spread it into other industries across the world (esp. the information-based industries).
Deregulation and liberalization – it opened up new opportunities for many firms, and recent years have seen an increase in the number of related diversifications. (e.g., UK companies in the energy sector have branched out into related markets such as other forms of energy or telecommunications, making use of their physical distribution networks).
Globalization – an international level of many industries and liberalization of many markets (e.g., Eastern Europe) have opened up new foreign markets for Western firms while bringing Western firms into competition with multinationals based in other countries.,
Such international competition is likely to accelerate following political moves, such as the signing of the General Agreement on Trade and Tariffs by the leading industrial nations which promise to reduce barriers to international trade.

38. Figure 1.6 The Business Diamond
Business Process
Tasks and Structure
Values and Beliefs
p. 29 of Pearlson’s text
-- The business diamond model identifies the crucial components of an organization’s plan as its business processes, its values and beliefs, its management control systems, and its tasks and structures.
-- it is useful for designing new organizations and for diagnosing organizational troubles.
-- eg., organizations that try to change their cultures but fail to change the way they manage and control cannot be effective.
Using IS in an organization will affect each of these components. Use this framework to identify where these impacts are likely to occur
Management and Measurement Systems
(control)
(Source: Hammer et al, 1994) N

39. Figure 1.7 Managerial Levers
Execution
Informal
networks
Formal
reporting
relationships
Business
processes
Decision
rights
Organization
Control
Performance
measurement
and
evaluation
Incentives
rewards
Data
Planning
Organizational
effectiveness
People,
Information, and
Technology
Strategy
The three variables (organization, control, culture) are managerial levers used by decision makers to effect changes in their organizations.
The objective is to give the manager a set of frameworks to use in evaluating various aspects of organizational design.
Using these frameworks, the manager can
review the current organization and
2) assess which components may be missing and what option are available looking forward.
(p.29)
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 it
Values
Culture
Source: Cash, et al., 1994 N

40. Figure 1.8 Summary of Org. Strategy Frameworks
Key Idea
Usefulness in IS Discussions
Business Diamond
Management levers
There are 4 components of an organization: business processes, values and beliefs, management control systems, and tasks and structures.
Organizational variables, control variables, and cultural variables are the levers manager can use to affect change in their organizations
Using IS in an organization will affect each of these components. Use this framework to identify where these impacts are likely to occur
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 it

41. Summary of Key Strategy Frameworks
Usefulness in Information Systems
Discussions
Framework
Key Idea
Porter’s generic
strategies
framework
Firms achieve
competitive advantage
through cost leadership,
differentiation, or
focus.
Understanding which strategy is chosen
by a firm is critical to choosing IS to
complement that strategy.
Speed and aggressive
moves and counter-
moves by a firm
create
competitive advantage.
The 7-S’s give the manager suggestions
on what moves and counter moves to
make and IS are critical to achieve the
speed needed for these moves.
D’Aveni’s
hypercompetition
model
Brandenberg and
Nalebuff’s
co-opetition model
Companies cooperate
and compete at the
same time.
Being cooperative and competitive at the
same time requires IS that can manage
these two roles.

42. Strategic Competitive Advantages and creating values
Figure. Enhanced Model of “Built To Last”:
Continuity and Change in Visionary Companies
Strategic Competitive Advantages and creating values
Preserve
Core Values
Core Purpose
Change
Culture &
Operating Practices
Specific Goals
and Strategies
Processes
Create consistent, powerful alignment mechanisms to preserve the core and to simulate progress. IT
Efficiency
Effectiveness
Innovation
Safety
Quality Care
Management
(tangible, strategic mechanism)

43. What is Web 2.0?
"Web 2.0" refers to the second generation of web development and web design.
It is characterized as facilitating communication, information sharing, interoperability, user-centered design and collaboration on the World Wide Web. It has led to the development and evolution of web-based communities, hosted services, and web applications.
Examples include social-networking sites, video-sharing sites, wikis, blogs, mashups and folksonomies.
Web 2.0 is the business revolution in the computer industry caused by the move to the Internet as a platform, and an attempt to understand the rules for success on that new platform.
What Is Web 2.0
Design Patterns and Business Models for the Next Generation of Software
by Tim O'Reilly The bursting of the dot-com bubble in the fall of 2001 marked a turning point for the web. Many people concluded that the web was overhyped, when in fact bubbles and consequent shakeouts appear to be a common feature of all technological revolutions. Shakeouts typically mark the point at which an ascendant technology is ready to take its place at center stage. The pretenders are given the bum's rush, the real success stories show their strength, and there begins to be an understanding of what separates one from the other.
The concept of "Web 2.0" began with a conference brainstorming session between O'Reilly and MediaLive International. Dale Dougherty, web pioneer and O'Reilly VP, noted that far from having "crashed", the web was more important than ever, with exciting new applications and sites popping up with surprising regularity. What's more, the companies that had survived the collapse seemed to have some things in common. Could it be that the dot-com collapse marked some kind of turning point for the web, such that a call to action such as "Web 2.0" might make sense? We agreed that it did, and so the Web 2.0 Conference was born.
Source:

44. Major Issues for the Next Society
1. Internationalization
4I + 1K
2. Technology
Internationalization
Integration
Innovation
Information
and
Knowledge
Population might determine the “Standards” (e.g., Cellular phone protocol etc.)
3. Population

45. Mini Case Study
Case Study 1-1: Roche’s new scientific method (p.41-43)
Form Groups
Group discussion and work on the case and answers to questions
Questions #1 thru #4

46. #1. IS/IT Strategy Triangle
Each group:
Complete the case using “Strategy Triangle” model

47. Information System Strategy Triangle
Business (Firm)
Strategy
Organizational Strategy
IS/IT Strategy
The "last mile" is the final leg of delivering connectivity from a communications provider to a customer. The phrase is therefore often used by the telecommunications and cable television industries. The actual distance of this leg may be considerably more than a mile, especially in rural areas. It is typically seen as an expensive challenge because "fanning out" wires and cables is a considerable physical undertaking. In countries employing the metric (as opposed to the imperial) measurement system, the phrase last kilometre is sometimes used. Because the last mile of a network to the user is also the first mile from the user to the world, "first mile" is sometimes used. N

48. Information System Strategy Triangle for Roche’s new scientific method
1. Genomics Revolution/ Breakthroughs
2. First to the Market with a new drug to cure cancer or other diseases (First Mover)
Business (Firm)
Strategy
1. Culture of failure is alright (Fail Fast Approach)
2. Hire people who can adapt to changing
3. Build Teams
4. Reward system
Fail Fast Approach (FFA) vs. GBG (Grow Big Fast, Get Broken Fast)
How does the business strategy affect information systems and organizational decisions?
In order to take advantage of advances in the genomics revolution, Roche is rethinking the way it builds teams (organizational strategy), rewards teams (organizational strategy), hires people (organizational strategy), creates a culture (organizational strategy) and processes data (IS strategy). In particular, it is shedding its ultracompetitive approach in favor of culture-changing collaborative approaches. It is now recruiting through advertisements run on the back pages of Science magazine. Its IS strategy incorporates the GeneChip and FailFast approach to speed the screening of compounds that are tested. IS must be designed to handle the large volume of data that must be analyzed.
How do information systems support Roche’s business strategy?
IT revolution (otherwise, the company will run the risks of collapsing data system).
The article discusses a number of ways in which IS supports Roche’s business strategy: to screen compounds, to run simulations or GeneChip experiments with potential new drugs, and to identify and locate genes that are associated with stroke using Decode.
Organizational Strategy
IS/IT Strategy
IT revolution (Process voluminous data fast)
1. To screen compounds
2. To run simulations or GeneChip experiments
3. To identify and locate genes that are associated with stroke using Decode N

49. Q#1: According to Case Study 1-1 (Pearlson’s text, pp
Q#1: According to Case Study 1-1 (Pearlson’s text, pp ), how and what does the business strategy affect information systems and organizational decisions?
In order to take advantage of advances in the genomics revolution, Roche is rethinking the way it builds teams (organizational strategy), rewards teams (organizational strategy), hires people (organizational strategy), creates a culture (organizational strategy) and processes data (IS strategy).
In particular, it is shedding its ultracompetitive approach in favor of culture-changing collaborative approaches. It is now recruiting through advertisements run on the back pages of Science magazine. Its IS strategy incorporates the GeneChip and Fail Fast approach to speed the screening of compounds that are tested. IS must be designed to handle the large volume of data that must be analyzed.

50. Q#2: What “generic” strategy (by Porter) does Roche appear to be using based upon this case? Provide a rationale for your response.
Roche’s business strategy appears to be first to market with a new drug to cure cancer or other diseases whose genes are identified in through the genomics project.
Thus, they appear to be applying the differentiation strategy of having a drug that adds value in the cure of a disease. (It could be argued, though, that Roche is applying a focus/differentiation strategy by concentrating on cancer or strokes… it is not entirely clear what Roche’s overarching business strategy is from the case).

51. Q#3: Apply the Hypercompetition model to Roche
Q#3: Apply the Hypercompetition model to Roche. Which of the 7 Ss are demonstrated in this case?
The hypercompetition model suggests that speed and aggressiveness of moves and countermoves in any given market can create strategic advantage. Clearly this case demonstrates Roche’s concern with a speedy discovery.
An example is its ‘Fail Fast’ philosophy. To uncover successful drugs, it is conducting thousands of experiments… a series of small steps. To compete, Roche is taking advantage of its deep pockets and is relying on its timing and know-how. Below are some possible applications of D’Aveni’s 7-Ss:

52. 7-S Application Superior stakeholder satisfaction
Maximizing customer satisfaction by adding value through the discovery of breakthrough drugs to cure cancer, stroke, or other disabling diseases
Strategic soothsaying
Seeking new knowledge in a variety of ways: applying new technologies such as GeneChip; advertising for new employees in a wide range of sources, including Science magazine; leveraging on the knowledge of it employees through more collaboration and teamwork
Positioning for speed
Using IS to process large volumes of data more efficiently; applying ‘Fail Fast’ philosophy to identify winners more speedily
Positioning for surprise
Altering its organizational and IS strategies to speed the discovery of new breakthrough drugs
Shifting the rules of competition
Using breakthrough discoveries of revolutionary drugs to treat major diseases can result in new ways to serve customers that transforms the industry; Trying to take advantage of discoveries in the genomics projects
Signaling strategic intent ?
Simultaneous and sequential strategic thrusts

53. Q#4: How do information systems support Roche’s business strategy?
The case discusses a number of ways in which IS supports Roche’s business strategy:
to screen compounds,
to run simulations or GeneChip experiments with potential new drugs, and
to identify and locate genes that are associated with stroke using Decode.

54. Q#5 (Extra) What is the risk(s) of using/adopting the information systems?
Roche may awaken a sleeping giant with better resources for implementing a better system (and/or reverse engineering of their system)
Concern of loss of data will cause disaster to the company (e.g., 10 people are using 90% of the company total computer capacity)

55. Potential Risks
There are many potential risks that a firm faces when attempting to use IT to outpace their competition.
Awakening a sleeping giant – a large competitor with deeper pockets may be nudged into implementing IS with even better features
Demonstrating bad timing – sometimes customers are not ready to use the technology designed to gain strategic advantage
Implementing IS poorly – information systems that fail because they are poorly implemented
Failing to deliver what users want – systems that don’t meet the firm’s target market likely to fail
Web-based alternative removes advantages – consider risk of losing any advantage obtained by an information resource that later becomes available as a service on the web
Running afoul of the law – Using IS strategically may promote litigation
When IS are chosen as the tool to outpace their firm’s competitors, executives should be aware of the many risks that may surface.
Awakening a sleeping giant
-- FedEx (trace the transit and delivery info.) -(nudge) UPS; late-comers (sleeping giant) might override first-mover advantage as they have more resources
Demonstrating bad timing
s Pen-based computing (now, PDA)
-- too early to enter the market and become a test site for a new IT
Implementing IS poorly: originally not only streamline the supply chain communication, but also lower operating costs
-- 1) Nike implemented the system beyond the software supplier (i2) suggestions - failed
-- 2) Hershey brought the complex system up too quickly
Failing to deliver what users want
-- e-Grocers (Streamline.com, WebVan) home delivery once every week: less frequent and customers would like to inspect the produce when bags were dropped off (culture, life style)
Running afoul of the law
Web-based alternative removes advantages
-- web-based apps becomes less expensive then all investments will be wasted
Every business decision has risks associated with it. However, with the large expenditure of IT resources needed to create sustainable, strategic advantages, the manager will want to carefully identify and then design a mitigation strategy to manage the associated risks. N

56. End of Chapter 1