2 Copyright ã 2001 John Wiley & Sons, Inc. All rights reserved Copyright ã 2001 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.
3 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.
4 Figure 1.1 The Information Systems Strategy Triangle Business StrategyOrganizationalStrategyInformationStrategy
5 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.
7 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)
8 Figure 1.2 Three strategies for achieving competitive advantage Uniqueness PerceivedBy CustomerLow Cost PositionIndustrywideOverall CostLeadershipDifferentiationFocuson narrowmarketsegmentParticularSegmentOnly
9 Porter’s Competitive Advantage Strategies Cost leadership: be the cheapestDifferentiation: focus on making your product stand out for non-cost reasonsFocus: occupy narrow market niche where the products/services can stand out by virtue of their cost leadership or differentiation.
10 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 marketsUnlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources
11 Hypercompetition and the New 7-S’s framework (D’Aveni) Sustained competitive advantage is not possibleOnly temporary advantages exist, created by a company’s speed and aggressiveness.Assumes:Every advantage becomes erodedSustaining an advantage uses too much time and resources.Instead, companies must seek to stay ahead of its competitors by creating temporary advantagesThese are done in small steps over short competitive cycles. Focus on creating the next temp. advantage.
12 Figure 1.3 Disruption and the new 7-S’s Vision for DisruptionCreate temporary advantage throughunderstanding stakeholder satisfactionor strategic soothsayingMarketDisruptionCapability for DisruptionSustaining momentum through speed and surprise can create temporary advantagesTactics for DisruptionGain advantage by: shifting the rules, signaling, simultaneous and sequential strategic thrusts
13 Figure 1.4 D’Aveni’s new 7-S’s Superior stakeholder satisfaction: maximize cust. satisfaction by adding value strategicallyStrategic soothsaying: use new knowledge to predict new windows of opportunityPositioning for speed: prepare the org. to react as fast as possiblePositioning for surprise: surprise competitorsShifting the rules of competition: serve customers in novel waysSignaling strategic intent: communicate intensions in order to stall competitorsSimultaneous and sequential strategic thrusts: take steps to stun and confuse competitors in order
14 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
15 Why are strategic advantage Models essential to planning? Giving up authority on IS decisions is giving up IS strategyPoorly chosen IS infrastructure undermines strategyBusiness 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?
16 Figure 1.5 Summary of key strategy frameworks Generic Strategies: CA through low cost, differentiation or focusHypercompetition: CA is temporary, created through speed and aggression in the marketCo-opetition: companies create alliances of firms with complementary outputs to better compete
18 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, andcontrol corporate work processes.
19 Figure 1.6 The Business Diamond (Hammer and Champy) ProcessesValues andBeliefsJobs andStructuresManagementand Measurement systems
20 Fig. 1.7 Conventional IT Design Variables (Lucas and Baroudi) Complements Business DiamondStructural: defs. of org. subunits, reporting, linking controlling mechanisms, staffingIT Design vars: Virtual components, e-banking, tech. levelingWork Process: Tasks, Workflows, Dependencies, Output of process, BuffersIT Design variables: Production automation, e-workflows, virtual componentsCommunications: formal, informal communicationsIT Design variables: group support systemsInterorganizational: make vs. buy decisions, exchange of materials, communicationsIT Design variables: e-SCM
23 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?
24 Figure 1.10 Summary of organizational strategy frameworks Usefulness of ISDiscussionsKey IdeaBusinessDiamond4 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.ManagerialLeversOrganizational 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.
26 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.
27 FOOD FOR THOUGHT1. 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.