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.

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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.

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

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.

BRIEF OVERVIEW OF BUSINESS STRATEGY FRAMEWORKS

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)

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

Porter’s Competitive Advantage Strategies Cost leadership: be the cheapest Differentiation: 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.

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

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.

Figure 1.3 Disruption and the new 7-S’s Vision for Disruption Create temporary advantage through understanding stakeholder satisfaction or strategic soothsaying Market Disruption 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

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

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

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?

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

BRIEF OVERVIEW OF ORGANIZATIONAL STRATEGIES

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.

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

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

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

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

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?

Figure 1.10 Summary of organizational strategy frameworks Usefulness of IS Discussions Key Idea 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.

BRIEF OVERVIEW OF INFORMATION SYSTEMS STRATEGY

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.

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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