Chapter 1 - The Information Systems Strategy Triangle

116 Pages·2009·2.98 MB·English

by  Zaipul Anwar

IInnttrroodduccttiioonn
How knowledgeable must a general
•
mmaannaaggeerr bbee aabboouutt IISS??
CChhaptter 11
What are the ramifications of an
•
TThhe IInfformattiion SSysttems
improperly implemented IS?
SSttrraatteeggyy TTrriiaannggllee
CCan IISS bbe examiinedd iin iisollattiion?? WWhhy or
•
whyy not?
What function does IS play in the business
Managing and Using Information Systems: A •
SSttrraatteeggiicc AApppprrooaacchh
sttrattegy off an organiizattiion??
by Keri Pearlson & Carol Saunders
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Copyright 2006 John Wiley & Sons, Inc.
TThhee IImmppaacctt ooff IISS
• The Information Systems Strategy Triangle is a
simpple framework for understandingg the imppact
of IS on organizations.
• SSuucccceessssffuull ffiirrmmss hhaavvee aann oovveerrrriiddiinngg bbuussiinneessss
strategy.
• This business strategy drives both
OOrrggaanniizzaattiioonnaall aanndd IInnffoorrmmaattiioonn ssttrraatteeggyy..
• All decisions are driven by the firm’s business
Figure 1.1 The Information Systems Strategy Triangle
oobbjjeeccttiivveess.
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IISS SSttrraatteeggyy TTrriiaannggllee
• Business Strategy drives all other strategies.
BBRRIIEEFF OOVVEERRVVIIEEWW OOFF
• OOrrggaanniizzaattiioonnaall aanndd IInnffoorrmmaattiioonn SSttrraatteeggyy aarree
then dependent upon the Business Strategy. BBUUSSIINNEESSSS SSTTRRAATTEEGGYY
• Changes in any strategy requires changes in the
FRAMEWORKS
others to maintain balance.
• IS Strategy is affected by the other strategies a
ffiirrmm uusseess.
• IS strategy always involves consequences.
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TThhiinnkk AAbboouutt IITT GGeenneerriicc SSttrraatteeggiieess FFrraammeewoorrkk
• What is a business strategy? • Michael Porter describes how businesses
WWhhiichh ffacttors iinfflluences a bbusiiness can bbuiilldd a susttaiinabblle compettiittiive
•
strateggyy? advantagge.
How does a business change its strategy
• He identified three primary strategies for
•
wwiitthhoouutt lloossiinngg bbaallaannccee wwiitthhiinn iittss
achhiieviing compettiittiive addvanttage:
organization and IS structure?
• CCoosstt lleeaaddeerrsshhiipp – lloowweesstt-ccoosstt pprroodduucceerr.
Are there specific events that induce a
•
• Differentiation – product is unique.
bbuussiinneessss ttoo cchhaannggee iittss ssttrraatteeggiieess aanndd wwhhaatt
are they? • Focus – limited scope.
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PPoorrtteerr’’ss CCoommppeettiittiivee AAddvaannttaaggee
• Remember that a companies overall business
strateggyy will drive all other strateggies.
• Porter defined these competitive advantages to
reppresent various business strateggies found in
the marketplace.
• Cost leadershipp strateggyy firms include Walmart,,
Suzuki, Overstock.com, etc.
• Differentiation strateggyy firms include Coca Cola,,
Progressive Insurance, Publix, etc.
• Focus strateggyy firms include the Ritz Carlton,,
Marriott, etc.
Figure 1.2 Three strategies for achieving competitive advantage.
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IISS PPllaannnniinngg aanndd SSttrraatteeggiicc
DDiiffffeerreennttiiaattiioonn SSttrraatteeggy VVaarriiaannttss
AAddvvaannttaaggee MMooddeellss
• Shareholder value model: create advantage
througgh the use of knowledgge and timingg • General Managgers cannot afford to relyy solelyy
on IS personnel to make IS decisions.
(Fruhan)
•• UUnnlliimmiitteedd rreessoouurrcceess mmooddeell:: ccoommppaanniieess wwiitthh aa • Business strateggyy drives IS decision makingg.
large resource can sustain losses more easily • Changes in IS potential should trigger business
reassessments ((i.e. the Internet)).
tthhaann oonneess wwiitthh ffeewweerr rreessoouurrcceess ((CChhaaiinn SSttoorree vvss
Mom & Pop). • Information Systems Strategy Triangle shows
the ppropper balance of strateggies.
• TThhee pprroobblleemm wwiitthh PPoorrtteerr aanndd tthheessee vvaarriiaannttss aarree
• The models are helpful in discussing the role of
that the rate of change is no longer easily
IS in buildingg and sustainingg comppetitive
mmaannaaggeedd aanndd ssuussttaaiinneedd.
advantage.
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FFrameworkk KKey IIddea AApplliicattiion tto IInfformattiion SSysttems
Porter’s Firms achieve Understanding which strategy is chosen by
generiic ccoommppeettiittiivvee aa ffiirrmm iiss ccrriittiiccaall ttoo cchhoooossiinngg IISS ttoo
strategies advantage through complement that strategy.
cost leadership, BBRRIIEEFF OOVVEERRVVIIEEWW OOFF
framework
ddiifffferenttiiattiion, or
focus.
OORRGGAANNIIZZAATTIIOONNAALL
DD’’AAvenii’’s SSpeedd andd TThhe 77 SSs giive tthhe manager suggesttiions on
hyper- aggressive moves what moves and countermoves to make. STRATEGIES
ccoommppeettiittiioonn and countermoves IS are critical to achieve the speed needed
by a firm create for these moves.
model
competitive
advantagge
Figure 1.3 Summary of key strategy frameworks.
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OOrrggaanniizzaattiioonnaall SSttrraatteeggyy
• Orgganizational strateggyy includes the
organization’s design as well as the choices it
makes in its work processes.
• How will the company organize in order to
achieve its goals and implement its business
sttrattegy??
• Business Diamond – simple framework for
iiddenttiiffyiing cruciiall componentts off an
organization’s plan (Figure 1.4)
• MManageriiall LLevers – anotthher fframeworkk ffor
organizational design, states that successful
eexxeeccuuttiioonn ooff tthhee ffiirrmm’ss oorrggaanniizzaattiioonnaall ssttrraatteeggyy iiss
the best combination of organizational, control, Figure 1.4 The Business Diamond
aanndd ccuullttuurraall vvaarriiaabblleess ((FFiigguurree 11.55)).
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UUnnddeerrssttaannddiinngg OOrrggaanniizzaattiioonn SSttrraatteeggyy
TTo unddersttandd organiizattiionall sttrattegy we mustt
answer the following questions:
1. What are the important structures and reporting
relationshipps within the orgganization?
2. What are the characteristics, experiences, and
sskkiillll lleevveellss ooff tthhee ppeeooppllee wwiitthhiinn tthhee oorrggaanniizzaattiioonn??
3. What are the key business processes?
44. WWhhaatt ccoonnttrrooll ssyysstteemmss aarree iinn ppllaaccee??
5. What is the culture of the organization?
Figure 1.5 Managerial Levers
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Framework Key Idea Usefulness in IS Discussions
Business There are 4 key Using IS in an organization will affect
DDiiamondd ccoommppoonneennttss ooff aann eeaacchh ooff tthheessee ccoommppoonneennttss. UUssee tthhiiss
organization: business framework to identify where these
processes, values and impacts are likely to occur
BBRRIIEEFF OOVVEERRVVIIEEWW OOFF
bbelliieffs, managementt
control systems, and
tasks and structures. IINNFFOORRMMAATTIIOONN SSYYSSTTEEMMSS
Managerial Organizational This is a more detailed model than
levers variables, control the Business diamond and gives SSTTRRAATTEEGGYY
variiabblles, andd culltturall speciiffiic areas whhere IISS can bbe usedd
variables are the levers to manage the organization and to
managers can use to change it
affect change in their
organizations
Figure 1.6 Summary of organizational strategy frameworks
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What Who Where
IISS SSttrraatteeggy
Hardware List of physical Individuals who use it Physical location
components of the Individuals who
ssyysstteemm mmaannaaggee iitt
• The plan an organization uses in providing Software List of programs, Individuals who use it What hardware it
iinnffoorrmmaattiioonn sseerrvviicceess. applications, and Individuals who resides upon and
utilities manage it where that hardware
is located
• IS allows business to implement its business
NNeettwwoorrkkiinngg DDiiaaggrraamm ooff hhooww IInnddiivviidduuaallss wwhhoo uussee WWhheerree tthhee nnooddeess aarree
strategy.
hardware and it/ Individuals who located, where the
software manage it/ wires and other
•• IISS hheellppss ddeetteerrmmiinnee tthhee ccoommppaannyy’ss ccaappaabbiilliittiieess. ccoommppoonneennttss aarree CCoommppaannyy sseerrvviiccee ttrraannssppoorrtt mmeeddiiaa aarree
connected obtained from located
• Four key IS infrastructure components are key to
Data Bits of information Individuals who use it Where the
IISS sttrattegy ((FFiigure 11.77)) stored in the system Individuals who information resides
manage it
• These keyy compponents are sufficient to allow the
general manager to assess critical IS issues. Figure 1.7 Information systems strategy matrix.
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IInnffoorrmmaattiioonn vss TThhiinnggss
• Every business is in the information business
FFOOOODD FFOORR TTHHOOUUGGHHTT::
((EEvvaannss aanndd WWuurrsstteerr))..
• All forms of industry rely heavily on IS.
EECCOONNOOMMIICCSS OOFF
• MMerceddes cars computtiing power.
INFORMATION VS.
• Marketing research, logistics, advertising, inventory
management all rely on IS.
ECONOMICS OF THINGS
• Thinggs wear out.
• Information never wears out.
• FFiigure 11.88 compares tthhiings wiitthh iinfformattiion.
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Things Information
Wear out Doesn’t wear out, but can become
obsolete or untrue
Are replicated at the expense of Is replicated at almost zero cost
SSUUMMMMAARRYY
the manufacturer without limit
Exist in a tangible form May exist in the ether
When sold, seller ceases to own When sold, seller may still
possess and sell again
PPriice bbasedd on prodducttiion costts PPriice bbasedd on vallue tto consumer
Figure 1.8 Comparison of the economics of things with the economics of information
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SSummmmaarry
• Competitive advantage is gained through cost
lleeaaddeerrsshhiipp, ddiiffffeerreennttiiaattiioonn, oorr ffooccuuss.
• The Information Systems Strategy Triangle
shows that business strategy always drives
orgganizational and information strateggies.
• Hypercompetition defines competitive advantage
aass tteemmppoorraarryy.
• Understanding the influence of IS in
organizational strategy is paramount.
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Copyright 2006 John Wiley & Sons, Inc.
IInnttrroodduuccttiioonn
•• HHooww hhaavvee ssuucccceessssffuull bbuussiinneesssseess uuttiilliizzeedd IISS
strategically?
CChhaapptteerr 22
• What resources are involved in crafting a
SSttrraatteeggiicc UUssee ooff ssttrraatteeggiicc IISS ppoolliiccyy?? WWhhiicchh oonnee iiss mmoosstt
important?
IInnffoorrmmaattiioonn RReessoouurrcceess
• MMaannyy ooff ttooddaayy’’ss mmoosstt ssuucccceessssffuull ccoommppaanniieess
have created strategic alliances. How has this
Managing and Using Information helped them to create strategic advantage?
Systems: A Strategic Approach
by Keri Pearlson & Carol Saunders
2
Copyright 2006 John Wiley & Sons, Inc.
RReeaall WWoorrlldd EExxaammpplleess
•• IInn 11999944 DDeellll ffiinnaallllyy ssttooppppeedd sseelllliinngg PPCCss tthhrroouugghh
retail stores.
EEVVOOLLUUTTIIOONN OOFF
• It moved completely to using an integrated IT
platform that allow the order of customized systems.
IINNFFOORRMMAATTIIOONN
• Strategic use of IS produced Cost savings from
reduced inventories ppassed on to customers. RREESSOOUURRCCEESS
• This innovation created a competitive advantage for
DDeellll, wwhhiicchh uusseedd iittss iinnffoorrmmaattiioonn rreessoouurrcceess ttoo aacchhiieevvee
high volumes without the high costs of the industry’s
ttrraaddiittiioonnaall ddiissttrriibbuuttiioonn cchhaannnneellss ((sseeee wwwwww.ddeellll.ccoomm))
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1960s 1970s 1980s 1990s 2000+
IInnffoorrmmaattiioonn RReessoouurrcceess Primary Efficiency Effectiveness Strategic Strategic Value creation
AAutomate SSollve probbllems IIncrease iinddiiviidduall TTransfform CCreate
Role of IT
existing paper- and create and group industry/organizati collaborative
based opportunities effectiveness on partnerships
•• OOvveerr tthhee ppaasstt ddeeccaaddeess tthhee uussee ooff iinnffoorrmmaattiioonn processes
resources has changed. Justify IT ROI Increasing Competitive Competitive Adding
expenditure productivity and position position Value
decision making
• OOrganiizattiions hhave movedd ffrom an ““effffiiciiency
Target of Organization Individual Business Business Customer,
model” of the 1960’s to a “value creation model” systems manager/ processes processes supplier,
Group ecosystem ecosyystem
off tthhe 22000000’’s.
Information Application Data-driven User-driven Business-driven Knowledge-
• Companies seek to utilize those technologgies that model specific driven
DDomiinantt MMaaiinnffrraammee- MMiinniiccoommppuutteerr- MMiiccrrooccoommppuutteerr CClliieenntt-SSeerrvveerr IInntteerrnneett
give them competitive advantage.
technology based based “decentralized “distribution “ubiquitous
intelligence” intelligence” intelligence”
• MMaaxxiimmiizziinngg tthhee eeffffeeccttiivveenneessss ooff tthhee ffiirrmm’ss
BBaassiiss ooff Scarcityy Scarcityy Scarcityy Plentitude Plentitude
business strategy requires the general manager Value
ttoo iiddeennttiiffyy aanndd uussee iinnffoorrmmaattiioonn rreessoouurrcceess.. Underlying Economic of Economic of Economic of Economic of Economic of
eeccoonnoommiiccss information information information bundled information information
bundled w/ bundled w/ w/ economics of separated f/ separated f/
• Figure 2.1 shows this change. economics of economics of things economics of economics of
things things things things
FFiigure 22.11 EEras off iinfformattiion usage iin organiizattiions
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IInnffoorrmmaattiioonn RReessoouurrcceess
• IInfformattiion resources iis ddeffiinedd as tthhe avaiillabblle
data, technology, and processes available to
perfform bbusiiness processes andd ttaskks.
INFORMATION
• Relationships between general managers and IS
RESOURCES AS managers.
• RReessoouurrcceess aavvaaiillaabbllee iinncclluuddee::
STRATEGIC TOOLS
– IS Infrastructure
– IInnffoorrmmaattiioonn aanndd kknnoowwlleeddggee
– Proprietary technology
– TTeecchhnniiccaall sskkiillllss ooff IITT ssttaaffff
– End users of the IS and more.
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Advantagges or Information
Resources
• General managers evaluating an information
rreessoouurrccee ffoorr ccoommppeettiittiivvee aaddvvaannttaaggee nneeeeddss ttoo
ask: HOW CAN INFORMATION
– WWhhaatt mmaakkeess tthhee iinnffoorrmmaattiioonn rreessoourrccee vaalluaabbllee??
RESOURCES BE USED
– Who appropriates the value created by the
iinnffoorrmmaattiioonn rreessoouurrccee??
STRATEGICALLY?
– Is the information resource equally distributed across
ffiirrmmss??
– Is the information resource highly mobile?
– HHooww qquuiicckkllyy ddooeess tthhee iinnffoorrmmaattiioonn rreessoouurrccee bbeeccoommee
obsolete?
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Usingg Information Resources to
TThhee SSttrraatteeggiicc LLaannddssccaappee
Influence Competitive Forces
• Porter’s five forces model show the major
• Managers confront elements that influence the
forces that shappe the comppetitive environment
ccoommppeettiittiivvee eennvviirroonnmmeenntt.
of the firm.
• Slim tolerance for error. 1. Threat of New Entrants: new firms that may enter a
ccoommppaanniieess mmaarrkkeett.
• Managers must take multiple view of the
2. Bargaining Power of Buyers: the ability of buyers to use their
market power to decrease a firm’s competitive position
ssttrraatteeggiicc llaannddssccaappee, ssuucchh aass::
3. Bargaining Power of Suppliers: the ability suppliers of the
– First view - Porter’s five competitive forces model. inputs of a product or service to lower a firm’s competitive
position
– SSecondd viiew - PPortter’’s vallue chhaiin.
4. Threat of Substitutes: providers of equivalent or superior
alternative products
– Third view – focuses on the types of IS resources
55.. IInndduussttrryy CCoommppeettiittoorrss:: ccuurrrreenntt ccoommppeettiittoorrss ffoorr tthhee ssaammee
needed (Resource Based View).
product.
• Figure 2.2 and 2.3 show this model in detail.
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