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1 Chapter 1. The Information Systems Strategy Triangle Managing and Using Information Systems: A Strategic Approach by Keri Pearlson PowerPoint Slides.

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Presentation on theme: "1 Chapter 1. The Information Systems Strategy Triangle Managing and Using Information Systems: A Strategic Approach by Keri Pearlson PowerPoint Slides."— Presentation transcript:

1 1 Chapter 1. The Information Systems Strategy Triangle Managing and Using Information Systems: A Strategic Approach by Keri Pearlson PowerPoint Slides prepared by Gene Mesher Copyright © 2001 John Wiley & Sons, Inc.

2 2 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.

3 3 Intro: National Linen Svc. zMotivated by increased competition and the weak economy, zBrought in new IS system (Boss) to lower costs. zBoss dropped expired accounts without notifying the contract department. zEffect was to worsen company’s bottom line.

4 4 Figure 1.1 The Information Systems Strategy Triangle Business Strategy Organizational Strategy Information Strategy

5 5 The Information Systems Strategy Triangle zSuccessful firms’ business strategy drives both their organizational and IS strategies. yFirms must seek to balance business, organizational, and IS strategies. yIS Strategy is affected by the other strategies a firm uses. Changes in IS strategy must be accompanied by changes in the other two. yIS strategy has (sometimes unintentional) consequences on the business and organizational strategies.


7 7 Business Strategy Frameworks zPorter’s Generic Strategies Framework (and its variants) zHypercompetition and the New 7-S’s framework (D’Aveni) zCo-opetition (Brandenburg and Nalebuff)

8 8 Figure 1.2 Three strategies for achieving competitive advantage Differentiation Overall Cost Leadership Focus on narrow market segment Industry wide Particular Segment Only Uniqueness Perceived By Customer Low Cost Position

9 9 Porter’s Competitive Advantage Strategies zCost leadership: be the cheapest zDifferentiation: focus on making your product stand out for non-cost reasons zFocus: occupy narrow market niche where the products/services can stand out by virtue of their cost leadership or differentiation.

10 10 Variants on Differentiation Strategy zShareholder value model: create advantage through the use of knowledge and timing (Fruhan) zBarriers to entry model: firms create barriers to entry to keep competitors out of their markets zUnlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources

11 11 Hypercompetition and the New 7-S’s framework (D’Aveni) zSustained competitive advantage is not possible zOnly temporary advantages exist, created by a company’s speed and aggressiveness. zAssumes: yEvery advantage becomes eroded ySustaining an advantage uses too much time and resources. yInstead, companies must seek to stay ahead of its competitors by creating temporary advantages yThese are done in small steps over short competitive cycles. Focus on creating the next temp. advantage.

12 12 Figure 1.3 Disruption and the new 7-S’s Vision for Disruption Create temporary advantage through understanding stakeholder satisfaction or strategic soothsaying Capability for Disruption Sustaining momentum through speed and surprise can create temporary advantages Tactics for Disruption Gain advantage by: shifting the rules, signaling, simultaneous and sequential strategic thrusts Market Disruption

13 13 Figure 1.4 D’Aveni’s new 7-S’s zSuperior stakeholder satisfaction: maximize cust. satisfaction by adding value strategically zStrategic soothsaying: use new knowledge to predict new windows of opportunity zPositioning for speed: prepare the org. to react as fast as possible zPositioning for surprise: surprise competitors zShifting the rules of competition: serve customers in novel ways zSignaling strategic intent: communicate intensions in order to stall competitors zSimultaneous and sequential strategic thrusts: take steps to stun and confuse competitors in order

14 14 Co-opetition zMore about forming alliances to better compete. zCompanies, competitors, customers and suppliers are participate in (and compete in) “the value net”. zKey concept is “complementors”, companies that sell complementary products and services. zThese can often gain advantage by forming an alliance to provide a more competitive

15 15 Why are strategic advantage Models essential to planning? zGiving up authority on IS decisions is giving up IS strategy zPoorly chosen IS infrastructure undermines strategy zBusiness strategy needs to address: yWhat is the business goal or objective? yWhat is the plan for achieving it? What is the role of IS in this plan? yWho are the crucial competitors and cooperators,and what is required of a successful player in this value net?

16 16 Figure 1.5 Summary of key strategy frameworks zGeneric Strategies: CA through low cost, differentiation or focus zHypercompetition: CA is temporary, created through speed and aggression in the market zCo-opetition: companies create alliances of firms with complementary outputs to better compete


18 18 What is Organizational Strategy? zHow to organize to implement corporate goals and business strategy. zOrganizational Strategy includes the design choices that: ydefine, yset up, ycoordinate, and ycontrol corporate work processes.

19 19 Figure 1.6 The Business Diamond (Hammer and Champy) Jobs and Structures Management and Measurement systems Business Processes Values and Beliefs

20 20 Fig. 1.7 Conventional IT Design Variables (Lucas and Baroudi) zComplements Business Diamond zStructural: defs. of org. subunits, reporting, linking controlling mechanisms, staffing IT Design vars: Virtual components, e-banking, tech. leveling zWork Process: Tasks, Workflows, Dependencies, Output of process, Buffers IT Design variables: Production automation, e-workflows, virtual components zCommunications: formal, informal communications IT Design variables: group support systems zInterorganizational: make vs. buy decisions, exchange of materials, communications IT Design variables: e-SCM

21 21 Figure 1.8 Managerial Levers Business Processes Decision Rights Data Planning Performance Measurement And evaluation Formal Reporting Relationships Informal Networks Values Incentives And Rewards People, Information and Technology Strategy Org. effectiveness Culture Control Organization

22 22 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

23 23 Understanding Organizational Strategy Means answering the following: z1. What are the important structures and reporting relationships within the organization? z2. What are the characteristics, experiences and skill levels of the people within the organization? z3. What are the key business processes? z4. What control systems are in place? z5. What is the culture of the organization?

24 24 Figure 1.10 Summary of organizational strategy frameworks Business Diamond 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. Managerial Levers 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 IS Discussions


26 26 Figure 1.1 IS Strategy Matrix zHardware: physical components in a physical location. Used by system users and system managers. zSoftware: programs, applications and utilities that reside on the hardware. Used by system users and system managers. zNetworking: 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. zData: information stored in the system. Used by individuals who own the data. Managed by system managers.

27 27 FOOD FOR THOUGHT z1. 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. z2. Org.strategy must complement business strategy. Business organization either supports business strategy or gets in the way. z3. Likewise, IS strategy must complement business strategy. When IS support business goals, the business appears to be working well. z4. Org. strategy and info. strategy must complement each other. They must be designed so that they support, rather than hinder each other. z5. 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.

28 28 End of Chapter 1

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