MIS625 Session #2

What is Strategy? (Porter 1996) An organization’s primary goal is superior performance. Two key components of performance. –Operational effectiveness –Strategy The two are often confused

Operational Effectiveness Performing similar activities better than rivals TQM, benchmarking, and BPR aimed at operational effectiveness Operational effectiveness is not sustainable because improvements in activities can be copied

Effectiveness Frontier

Strategy Involves –Performing different activities than rivals or –Performing similar activities in different ways Aims at creating a sustainable competitive advantage

Competitive Forces Model

Strategic Positioning Strategy is about uniqueness – choosing a particular set of activities to provide a distinct value Three types of position –Variety based positioning –Needs based positioning –Access based positioning

Trade-offs to Achieve Strategic Positioning Trade-offs occur when activities are incompatible Incompatible activities require compromise if both activities are retained Choosing where to trade-off is a choice about fit

Strategic Fit First order fit – consistency between each activity and strategy Second order fit – a set of reinforcing activities Third order fit – optimization of effort (in support of strategic goals)

Strategic Fit and Sustainability Fit engenders operational effectiveness and a differentiation of product/service offerings Fit includes a bundle of related activities Copying a single activity is easy whereas copying a set of related activities is much more difficult

How does IS relate to this?

The Information Economy (Shapiro and Varian) Definitions of information –In terms of decision-making –Anything that can be digitized Information based goods are expensive to produce but inexpensive to reproduce Information and intellectual ‘property’ Information as an experience good Information and the economics of attention

IT in the Information Economy Systems competition and integration – complex functions may require the use and integration of multiple products Potential for lock-in or switching costs to avoid lock-in Role of network effects Importance of standards – de facto and de jure Government policies –IBM, Microsoft, and antitrust –The EU

Strategic Information Systems Pervasiveness of IT in firms means: –Investment in IT is no assurance of benefit –Applications that provide strategic advantage are often the result of serendipity –Specific applications can often be copied easily and as a consequence sustainable competitive advantage is elusive –Sustainable advantage may result from infrastructure capabilities, management, mature processes, and the ability to leverage IT capability for the development of unique offerings and capabilities

Resource Based Theory (RBT) Resources –Available factors owned or controlled by the organization For the IS function, this includes infrastructure and knowledge and skills –Central point is that resources per se do not create value. Value is created by an organization’s ability to utilize those resources.

RBT Competencies The ability within the firm to use resources to accomplish a given task This can include processes, procedures, systems, technology in the broad sense, and other means to carry out important tasks

RBT Capabilities The strategic application of competencies to accomplish organizational goals. –Note scale up from resources to competencies to capabilities Future goals define future required capabilities and this should scale down to competencies and resources.

Resource-based Theory

Domains of IS Competence Formulate strategy – business strategy, technology use, IT investment criteria, Information governance Define IS contribution – prioritization, alignment, BP design and management Define IT capability – infrastructure, technology analysis, sourcing Exploitation – benefits planning and delivery, change management Supply – supplier relationships, standards, staff development Deliver solutions – management of IS processes, security

IS Capability = IS Competencies + Resources

IS Capability and Performance

Reality Check Is this fact or fiction? –If fact, give me an example –If fiction, where does it break down Strategy is dependent on leadership. What leadership actions are necessary for this sort of model to work?