Strategy and IS

1. Strategy and IS • Describe the roles of business, organizational and IS strategy • Compare and contrast: Porter’s three generic strategies model, D’Aveni’s hypercompetion model, and Brandenburger and Nalebuff’s co-opetition model • Describe the major components and apply the value chain, competitive forces and strategic thrusts models • Discuss risks of IS success • Discuss eras of IT use

2. Strategic Advantage Does an organization need Information Systems to gain strategic advantage?

3. Strategy - A Plan • Business strategy drives organizational and information systems strategy • Information systems strategy - plan the organization uses in providing information services • Information systems strategy is affected by a firm’s business and organizational strategies • Organizational strategy - organization’s design as well as the choices it makes to define, set up, coordinate and control its work processes • Remember interdependency!

4. Porter’s Three Generic Strategies • Cost leadership (lowest cost in industry) • Differentiation of products/services • Focus (finding a specialized niche) • cost • differentiation of product or services

5. Be Low Cost Producer - IT strategic if it can: • Help reduce production costs & clerical work • Reduce inventory, accounts receivable, etc. • Use facilities and materials better • Offer interorganizational efficiencies

6. Produce Unique Product - IT strategic if it can: • Offer significant component of product • Offer key aspect of value chain • Permit product customization to meet customer’s unique needs • Provide higher/unique level of customer service/satisfaction

7. Fill Market Niche - IT strategic if it can: • Permit identification of special needs of unique target market • Spot and respond to unusual trends

8. D’Aveni’s Hypercompetition Model • Focused on turbulent environment • Advantages are rapidly created and eroded • Sustaining an advantage can be a deadly distraction • The goal is disruption, not sustainability, of advantage • Initiatives are achieved with a series of small steps

9. Four Arenas of Competitive Advantage • Cost/quality • Timing/know-how • Strongholds • Deep pockets (short-term only)

10. Seven S’s • Superior Stakeholder Satisfaction • Strategic Soothsaying • Positioning for Speed • Positioning for Surprise • Shifting the rules of competition • Signaling strategic intent • Simultaneous and Sequential Strategic Thrusts

11. Brandenburger and Nalebuff’s Co-opetition • Optimally combining cooperation and competition • Valu Net of competitors and complementors

12. Strategic Information Systems • IS that help gain strategic advantage • Significantly change manner in which business supported by the system is done • Outwardly aimed at direct competition • Inwardly focus on enhancing the competitive position • Create strategic alliances • IS can support business strategies

13. Eras of IT

14. Eras of IT

15. Unusual Suspects: Information Resources • Information systems infrastructure • Information and knowledge • Proprietary technology • Technical skills of the IT staff • End users of the information system • Relationship between IT and business managers • Business processes

16. Strategy Axioms • Axiom: A scarce resource adds value • Corollary: only if there is a need • Altnernative axiom: Value is derived from plentitude • What good is a single fax machine?

17. Firm Infrastructure(general management, accounting, finance, strategic planning) Support Activities Human Resource Management (recruiting, training, development) Technology Development (R&D< product and process improvement) Procurement (purchasing of raw materials, machines, supplies) Inbound Logistics (raw materials handling and warehous- ing) Outbound Logistics (warehous- ing and distribution of finished product) Marketing and Sales (advertising, promotion, pricing, channel relations) Service (installation, repair, parts) Operations (machine assembling, testing) Primary Activities

18. Value Chain Model • Chain of basic activities that add to firm’s products or services • Primary activities • Secondary activities

19. Value Chain Primary Activities • Inbound • Outbound • Operations • Marketing and Sales • After-Sale Services

20. Value Chain Support Activities • Technology development • Procurement • Human Resources Management • Management Control • accounting/finance • coordination • general management • central planning

21. Competitive Forces • Threat of entry of new competition • Bargaining power of suppliers • Bargaining power of buyers • Threat of substitute products or services • Rivalry among existing firms

22. Strategies for Competitive Forces • Note - strength of force is determined by factors in industry • Gain a competitive edge • Build defenses against forces • Formulate actions to influence forces

23. Strategic Questions • Can IT create barriers to entry? (new entrants) • Can IT build in switching costs? (buyers) • Can IT strengthen customer relationships? (buyers)

24. Strategic Questions (cont) • Can IT change the balance of power in supplier relationships? (suppliers) • Can IT change the basis of competition? (competitors) • Can IT generate new products?(competitors, substitutes)

25. Wiseman’s Theory of Strategic Thrusts Strategic purposes that drive the use of the firm’s resources • Differentiation • Cost • Innovation • Growth • Alliance

26. Searching for Specific Opportunities • What is the mode of the thrust? (offensive, defensive) • What is the direction of the thrust? (use, provide) • What is the strategic target of the thrust? (supplier, customer, competitor)

27. Risks of IS Success • Change the Basis of Competition • Lower Entry Barriers • Promote Litigation or Regulation • Awake Sleeping Giant • Reflect Bad Timing • Are Too Advanced