Strategic Uses of IS

1. Strategic Uses of IS Dr. Paul Golding

2. Strategy Defined Strategy: Stating the direction you want to go and how to get there. Goal congruence between IS and corporate objectives Focused investments Likelihood of competitive advantage

3. Features of Organizations Structural Characteristics of All Organizations Clear division of labor Hierarchy Explicit rules and procedures Impartial judgments Technical qualifications for positions Maximum organizational efficiency

4. Features of Organizations Standard Operating Procedures (SOPs): Precise procedures to cope with all expected situations Organizational Politics: Struggle to resolve divergent viewpoints within the organization Organizational Culture: Fundamental assumptions about what products the organization should produce

5. Unique Features of Organizations Organizational type Environments Function Leadership Tasks Technology Business processes Goals Power Constituencies

6. How I.S. Affect Organizations Economic Theories Information system technology is a factor of production, freely substituted for capital and labor Transaction cost theory: Information technology can help lower the cost of market participation

7. How I.S. Affect Organizations Economic Theories � The Agency Theory Agents (employees) need supervision As firm grows, agency and coordination costs rise Information technology reduces agency costs because it becomes easier for managers to oversee more employees

8. How I.S. Affect Organizations Behavioral Theories IT could change hierarchy of decision making by lowering costs of information acquisition and distribution Organization shape could �flatten� as decision making becomes more decentralized Growth of �virtual organizations� Information systems seen as outcome of political competition between subgroups

9. Traditional Strategy Making Linear Approach: Business created strategic business plan IS executive create an IS strategic plan to describe how IT would support business plan IT implementation plan created to describe exactly how IS strategic plan would be implemented

10. Strategy and IS Design Environmental Analysis: Stakeholder Approach: Stockholders, Employees, Customers, Suppliers, Government, Unions, Competitors, The Public, Local Communities Porters 5 �Forces Model SWOT PEST/STEP

11. SWOT Is based on the assumption that an effective strategy is derived from a sound fit between a firm internal resources (strengths & weaknesses and its external situations (opportunities and threats) A good fit maximizes a firm opportunities and strengths and minimizes weaknesses and threats

12. Value Chain Analysis Describes a way of looking at a business as a chain of activities that transforms inputs into outputs that the customer value Value is derived from differentiation, lower cost or speed, satisfying customers needs quickly Primary and Secondary activities

13. Firm and Industry Value Chain

14. Value Web Value chain extended by Internet technology that connects all the firm�s suppliers, partners, and customers Collection of independent firms using IT to coordinate value chains to collectively produce a product or service More customer-driven, less linear than value chain Flexible, adaptive to changes in supply and demand

15. The Value Web

16. BCG Matrix BCG Matrix: Seeks to balance the flow of cash resources among their various business. Stars: large market share, rapidly growing market (invest) Cash cow: high market share low growth (minimal investment) Dogs: low market share and low growth (divest) Problem child: high growth rate low market share (high cash requirement, low cash generation)

17. Strategy and IS Design Sense-and-Respond Strategy Making A methodology for strategy making that keeps in close contact with the business world, continually sensing for important changes and then responding quickly to changes by conducting experiments that test different possible futures � as opposed to betting on one strategy for the future

18. Strategy and IS Design New Fundamentals: new way of working, focus is on increasing productivity, low risk Operating Excellence: reengineering work process, increasing customer satisfaction and corporate agility, medium risk Rational experimentation: test new technologies and new ideas, risky but has potential to gain competitive advantage Breakthrough Strategy: could have a huge impact on the company, if they succeed. Risky

19. The Competitive Forces Model Describes the interaction of external influences, specifically threats and opportunities, affecting an organization�s strategy and ability to compete

20. Competitive Forces Model

21. Achieving Competitive Advantage Reduced Cost Raise Barriers to entry Establishing high switching cost Create new products and services Product differentiation Enhance products and services Establish alliances Lock in suppliers or buyers

22. The Bleeding Edge Situation in which business fail because it tries to be on the technological leading edge Competitive advantage is a moving target