IS Strategy: Part I - The Strategy Triangle

1. This week:IS Strategy, part I John Krogstie, IDI Partly based on slides by Guttorm Sindre and Jon Atle Gulla

2. The course so far – and the rest • Focussing on two things • Available technologies • Overview in the first weeks of the course (Hawryszkiewycz ch. 1-3) • ERP systems (before Easter) • Development methods • Main part of Hawryszkiewycz book • UML activity diagrams • Practical exercises in problem analysis, modelling, requirements elicitation and specification • Now: • Higher level strategic use of information systems • Book by Pearlson & Saunders

3. Overview of the strategy part • This week • (Chapter 1: The IS Strategy Triangle) • Chapter 2: Strategic Use of Information Resources • Chapter 3: Organizational Impacts of IS Use • Chapter 4: IT and the Design of Work • Chapter 5: IT and Changing Business Processes • Next weeks • Chapter 9: Funding IT • Chapter 11: Knowledge Management • Summary of the entire course • Many pages lectured in a short time • But fairly easy-to-read material

4. Chapter 1: The Strategy Triangle (fig 1.1) Business strategy visions goals business tactics, etc. • (Also discussed in the Hawryszkiewycz book) Organizational strategy Information strategy organizational structure job descriptions competence/training plans hiring practices etc. applications enterprise architecture information management hardware, software, networks, etc.

5. Ch.1: Business Strategy Frameworks • Business strategy: • plan • well-articulated vision • where a business seeks to go • how it expects to get there • communication of goals • 2 frameworks • Achieving competitive advantage • Hypercompetition

6. Strategies for achieving competitive advantage(fig 1.2) • M. Porter: Competitive Strategies. Free Press, 1998. Low cost position Uniqueness perceived by customer Overall cost leadership Industry wide Differentiation Particular segment only Focus

7. Differentiation • Shareholder value • Unique knowledge -> timing of use of specialized knowledge creates competitive advantage • Barriers to entry model • Assessment of competitive threats • 5 forces: suppliers, buyers, substitutes, industry competitors, new entrants • Offer products/services that are difficult to displace • Unlimited resources model • Utilize large base of resources to outlast competitors

8. Vision for disruption • stakeholder satisfaction • strategic soothsaying Market disruption • Capability for disruption • speed • surprise • Tactics for disruption • shifting the rules • signalling • simultaneous and sequential strategic thrusts Hypercompetition & New 7-S’s (fig 1.3) • Speed and aggressiveness of moves & countermoves create advantages • Advantages rapidly created and eroded

9. D’Aveni’s new 7-S’s (fig 1.4)

10. Business strategy vs. IS strategy (fig 1.5) IS usefulness Framework Idea

11. Organizational Strategies • “How will the company organize in order to achieve its goals and implement its business strategy?” • Elements: organizational design, work processes, employees • Frameworks: • Business diamond • Role of IT in organization • Organizational design variables

12. Business processes Job and structures Values and beliefs Management and measurement systems The Business Diamond (fig 1.6) M. Hammer and J. Champy: Reengineering the Corporation, 1994.

13. Organizational Strategies • Summary: • What are the important structures and reporting relationships? • What are the characteristics, experiences, and skill levels of employees • What are the key business processes? • What control systems are in place? • What is the culture of the organization?

14. Information Systems Strategy • Definition: Plan used by an organization in providing IS support • Elements: • Architecture: what • Responsibilities and resources: who • Arrangements: where • US: Large government agencies obliged to maintain enterprise IT architecture plans

15. IS Strategy Matrix (fig 1.9)

16. Chapter 2: Strategic Use of Information Resources • What is an information resource? • Evolution of information resources • Evaluating information resources • How can information resources be used strategically? • Porter’s 5 forces • Value Chain Model • Wiseman’s theory of strategic thrusts

17. What is an information resource? • Important information resources • Information resources create strategic advantages IS infrastructure Information and knowledge Proprietary technology Technical skills of IT staff End-users of the IS Relationship between IT and business managers Business processes

18. Evolution of Information Resources (fig 2.1)

19. Evaluating Information Resources • What makes the information resource valuable? • Who appropriates the value created by the information resource? • Is the information resource equally distributed across firms? • Is the information resource highly mobile? • How quickly does the information resource depreciate? What should our information resources be?

20. Porter’s 5 Forces (fig 2.2) switching costs access to distribution channels economics of scale Potential threat of new entrants cost-effectiveness market access differentiation Bargaining power of suppliers Industry competitors Bargaining power of buyers supplier selection backward integration buyer selection switching costs differentiation Threat of substitute products redefine products/services improve price/performance

21. Value Chain Model (fig 2.4) • Information resources should not be used in isolation • Achieve competitive advantage • lowering cost • adding value to product/service

22. Value Chain Across Companies (fig 2.5) buyers’ value chain suppliers’ value chain firm’s value chain channel’s value chain

23. Chapter 3: Organizational Impacts of IS Use • Organizational Design Variables • Information technology and organizational design • Information technology and management control systems • Virtual organizations • Immediately responsive organizations • How can IT improve organizational designand management control systems?

24. Organizational Design Variables (fig 3.1)

25. IT and Organizational Design • Essential impacts of IT: • Information technology allows companies to hire differently • Information technology allows organizations to be structured differently

26. IT & Hiring • People • competence needed • fewer non-skilled employees needed • fewer managers needed • more independent employees • single manager can monitor more people • Work processes • new tasks and processes • often centralization of certain functions • Organizational effects • technical capacity incorporated in work process • IT function high on organizational chart • IT function fully integrated with non-technical units

27. IT and Organizational Structures 1. Hierarchical organization 2. Flat organization often entrepreneurial organizations IS for routine tasks 3. Matrix organization often project based IS for information sharing control challenge

28. IT and Organizational Structures (cont.) 4. Networked organization • flat and hierarchical • formal/informal communication networks connect all parts of company • IS: control, process design, communications

29. IT and Organizational Structures 5. T-form organization • technologically based • feels flat • IT replacing organizational components • technological leveling • automatic work coordination • central repositories • more inclusive responsibilities • Integration with customers and suppliers E.g. Proctor & Gamble and and Wal-Mart

30. IT and Management Control Systems • Management control activities • monitoring • evaluating • providing feedback • compensating • rewarding • Roles of information systems: • Enable collection of information • Speed the flow of information • Facilitate the analysis of information

31. Virtual Organizations • Networked structures • IT the basis for all communication and coordination • Information sharing with IT • Monitoring results rather than process • Collaboration with anyone anywhere • E.g. some consulting and software firms

32. Immediately Responsive Organizations • Zero-time organizations • Capabilities needed • Instant value alignment: understanding the customer’s needs • Instant learning: built into processes • Instant involvement: IS for communication with suppliers, customers, employees, etc. • Instant adaptation: culture and structure for instant changes • Instant execution: processes with few people and short cycle times

33. Chapter 4: IT and the Design of Work • Job design framework (fig 4.1) • What tasks will be performed? • How will tasks be performed? (auto/manual) • Who will do the work? • Where will it be performed? • How can the IS increase performance, satisfaction and effectiveness of the work? • How IT changes the nature of work • New types of work • New ways to do traditional work • Changing communication patterns & collaboration • Changing decision making / info processing

34. New challenges in managing people • Cf. Fig 4.2

35. Changing where work is done • Drivers for telecommuting & mobile work • Knowledge-based work • Flexible life-style and work-schedules • Save commuting time • Better, cheaper and more mobile technology • Disadvantages of telecommuting / mobile work • Harder to manage • High demands on self-discipline • Lack of social communication • Outsourcing • E.g., programming, tech support

36. Gaining acceptance for IT-induced change • Employee resistance a major challenge • For instance in ERP projects • Managers and developers must be devoted to the organizational change process • Not just the technology, but also employee exptectations and attitudes • Involve employees in the project • Technology acceptance model (TAM), fig 4.7 Perceived usefulness Intention to use Actual use Perceived ease of use

37. Chapter 5: IT and Changing Business Processes • Function perspective vs. process perspective • What is a business process? • Philosophies • Total Quality Management • Business Process Reengineering • IT as enabler

38. functions o p e r a t i o n s m a r k e t i n g a c c o u n t i n g p u r c h a s i n g s a l e s business processes Cross-functional Processes (fig 5.3) • Traditionally: silo-view, one IS per functional department • Problem: local optimization • Business processes cut across this • Main focus: value to customer, IS supporting processes

39. Total Quality Management • Incremental changes to processes • Procedure: • Choose business process to improve • Choose a metric by which to measure the business process • Enable personnel involved with the process to find ways to improve it • Evaluation: • Personnel in control of improvements • Changes less threatening • Often positively received • What if radical changes are needed?

40. Business Process Reengineering • Key aspects: • The need for radical change • Thinking from a cross-functional process perspective • Challenging old assumptions • Networked organization • Empowerment of individuals • Measurement of success tied directly to business goals • Approach (fig 5.7) New process Current process vision measure change

41. BPR is NOT TQM

42. Why BPR is Necessary • The Virtual Organization: Three C’s Driving Change • Customers take charge. • Mass market v. a “market of one” • Backward integration • Informed consumers • Competition intensifies. • More and different kinds • Big is not better • Technology changes the nature of competition. • Change becomes constant. • reduced product cycles • reduced time to develop new products • more environment scanning

43. Information Technology = Enabler

44. Information Technology = Enabler

45. Characteristics of Reengineered Processes • Several jobs are combined into one • Workers make decisions • The process steps are performed in a natural order • Eliminate process linearity and sequence where possible • Perform tasks concurrently to reduce process cycle time • Processes have multiple versions • Work is performed where it makes the most sense • Checks and controls are reduced. (Tricky) • Reconciliation is minimized. (Carefully) • A case manager provides a single point of contact • Hybrid centralized/decentralized operations are prevalent. • Reap the advantages of both operating modes!

46. IT Standards and Strategic Decisions • Strategic advantage of process redesign? • no: Enterprise system must be the solution • yes: ES might hurt organization? • no: ES might be the solution • yes: Change management program reasonable? • no: ES package probably not the solution • yes: ES might be the solution

47. Summary • IS strategy must be aligned with business strategy and organizational strategy (ch.1) • Striving for competitive advantage (ch.2) • IT has an impact on the organization (ch 3) • Structure and management • IT affects how work is done (ch 4) • New jobs, new ways to do old jobs • Telecommuting, mobile work • IT enables changing business processes (ch 5) • Focus on value to customer • TQM (gradual optimization) vs BPR (radical change) • ERP (and similar) applications are vital here