C3 Information Systems, Organizations, and Strategy

IS and the Organization Influences each other A organization is a stable, formal social structure that takes resources from the environment and processes them to produce outputs Organizations need to be aware of influences of IS to benefit from new technologies Many factors: organization's structure, standard operating procedures, politics, culture etc.

IT often change Organizations change organizational balance of rights, responsibilities established over long period of time Key elements: –who owns information –who has access to and can update information –= who makes decisions about whom, what, when and how

Structural characteristics Clear division of labour Hierarchy Explicit rules and procedures Features –Routines and business processes –Organizational politics –Organizational culture –Organizational environments –Organizational structure –Other organizational features

Additional Features of Organizations - I Routines and business processes = standard operating procedures: precise rules to cope with all expected situations; BPs as collections of routines in this course: examine business processes to understand how they might be changed or replaced by using IT to achieve greater efficiency

Additional Features of Organizations - II Organizational politics = political struggle for resources IT investments bring about significant changes = politically charged events managers need to know how to work with the politics

Additional Features of Organizations - III Organizational culture = set of fundamental assumptions about what products organization should produce if IT change threatens commonly held cultural assumptions --> resistance

Unique Features of Organizations Different organizational types: eg. large, small firms Environments: be sensitive to and can influence = government, competitors, customers, financial institutions IT helps organizations to act on environment new technology puts strains on culture, politics and people

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IS Impact Economic impacts Organizational and behavioral impacts –IT flattens organizations –Postindustrial organizations –Understanding organizational resistance to change The Internet and organizations Implications for the design and understanding of information systems

How IS Affects Organizations Economic impacts IT can help lower transaction costs e.g. computer links to external suppliers agency theory: those who are employed by manager require supervision can reduce agency costs with IT: e.g. lower cost of acquiring information

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Figure 3-7 Agency Costs 3-14

Flattening Organizations Figure 3-8 Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower- level employees more decision- making authority. 3-15

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The Internet –important impact on relation between firms and external entities and on the organization of business processes, inside a firm Prior to the Internet –business decisions had limited, delayed or inaccurate knowledge of customers, delivery etc. –large warehouses of information used

Planning for an IS- Factors Organizational environment Organizational structure: hierarchy, specialization, routines, and business processes Organizational culture and politics The type of organization and its style of leadership Groups affected by the system and the attitudes of workers who will be using the system The kinds of tasks, decisions, and business processes that the IS is designed to assist

Characteristics of IT Keep in mind when designing systems: They are flexible and provide many options for handling data and evaluating information They are capable of supporting a variety of management styles, skills, and knowledge They are sensitive to the organization’s bureaucratic and political requirements

3-17 IS for Competitive Advantage Porter’s Competitive Forces Model Traditional competitors New market entrants Substitute products and services Customers Suppliers

Porter’s Competitive Forces Model Figure 3-10 In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four forces in the industry’s environment: new market entrants, substitute products, customers, and suppliers. Using Information Systems to Achieve Competitive Advantage 3-18

3-22 IS strategies- dealing with competitive forces Low-cost leadership Product differentiation Focus on market niche Strengthen customer and supplier intimacy The Internet’s impact on competitive advantage Competitive Advantage is gained when organizations provide more value to customers or same value at lower price

Value Chain Model - II Primary activities –products and services, value for customers Secondary activities –infrastructure: administration, human resources, etc.

Competitive Forces Model firm faces external threats

Figure 3-11 Value Chain Model 3-19 Competitive advantage can be achieved through IT including the Internet Using Information Systems to Achieve Competitive Advantage

The Value Chain Specific activities in the business where competitive strategies can best be applied –Primary activities: sales and marketing, production –Support activities: administration, decision making about IT, HR How can we use information systems to –Improve efficiency, cost –Improve relations with those outside the firm: customers, suppliers, etc.

The Value Web Figure 3-13 The value web is a networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand Extending the value chain: The value web

3-26 Synergies, core competencies, and network- based strategies Synergies Enhancing core competencies Network-based strategies network economics

INFORMATION SYSTEMS AND BUSINESS STRATEGY Thinking about strategy takes place at three different levels: Business: a single firm producing a set of related products and services Firm: a collection of businesses that make up a single, multidivisional firm Industry: a collection of firms that make up an industrial environment or ecosystem

Firm Level Strategy firm as collection of businesses IT to improve each business unit synergies core competencies

Industry Level Strategy firms together --> industry information partnerships: eg Air Canada, CIBC (Aeroplan)