MEIE881 Information Systems Strategy and

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  • MEIE881 Information Systems Strategy and

    1. 1. MEIE881 Information Systems Strategy and Strategic Use of IS
    2. 2. Strategy and IS <ul><li>Describe the roles of business, organizational and IS strategy </li></ul><ul><li>Compare and contrast key strategy frameworks: Porter’s three generic strategies and D’Aveni’s hypercompetition model </li></ul><ul><li>Compare and contrast key organizational strategy frameworks: Business Diamond, Managerial Levers </li></ul><ul><li>Discuss evolution of Information Resources </li></ul><ul><li>Compare, contrast and apply: Porter’s competitive forces model, value chain model </li></ul><ul><li>Define strategic alliances, CRM, SCM, co-opetition </li></ul>
    3. 3. Strategic Advantage <ul><li>Does an organization need Information Systems to gain strategic advantage? </li></ul>
    4. 4. Information Systems Strategy Triangle Business Strategy Organizational Strategy Information Strategy
    5. 5. Where to Go and How to Get There <ul><li>Vision – describes the organization’s set of ideals and priorities and paints a picture of its future (direction) </li></ul><ul><ul><li>realistic, credible, attractive, future-oriented </li></ul></ul><ul><li>Mission – a clear and compelling statement that unifies an organization's effort and describes what organization is all about (purpose) </li></ul><ul><li>Strategy – Plan with details about how to move toward the vision </li></ul>
    6. 6. Differences in Mission and Vision Statements: Quorum Health Group, Inc. MISSION STATEMENT Quorum Health Group, Inc., is a hospital company committed to meeting the needs of clients as an owner, manager, consultant or partner through innovative services that enhance the delivery of quality healthcare. VISION STATEMENT Quorum Health Group, Inc., will be valued for its expertise in hospital management and its ability to positively impact the delivery of quality healthcare.
    7. 7. UCF’s Mission The University of Central Florida is a major metropolitan research university whose mission is to deliver a comprehensive program of teaching, research, and service. It provides intellectual leadership through quality undergraduate and graduate programs. It proudly identifies with its geographic region while striving for national and international excellence in selected programs of teaching and research. It serves students who are diverse in age, ethnic, and racial identity, and socioeconomic background. It supports the cultural vitality of our region, serves as a major intellectual and creative resource, develops creative partnerships with public and private enterprise, and participates fully in the economic development of Florida.
    8. 8. Strategy - A Plan <ul><li>Business strategy drives organizational and information systems strategy </li></ul><ul><li>Information systems strategy - plan the organization uses in providing information services </li></ul><ul><li>Information systems strategy is affected by a firm’s business and organizational strategies </li></ul><ul><li>Organizational strategy - organization’s design as well as the choices it makes to define, set up, coordinate and control its work processes </li></ul><ul><li>Remember interdependency! </li></ul>
    9. 9. Porter’s Three Generic Strategies <ul><li>Cost leadership (lowest cost in industry) </li></ul><ul><li>Differentiation of products/services </li></ul><ul><li>Focus (finding a specialized niche) </li></ul><ul><ul><li>cost </li></ul></ul><ul><ul><li>differentiation of product or services </li></ul></ul>
    10. 10. Competitive Advantage and Scope ADVANTAGE Lower Cost Differentiation SCOPE Broad Target Cost Leadership Differentiation Narrow Target Cost Focus Differentiation Focus
    11. 11. Basic Principles of Generic Strategies <ul><li>Competitive advantage is goal of any strategy </li></ul><ul><li>A firm must define the type of competitive advantage it seeks to obtain </li></ul>
    12. 12. Be Low Cost Producer - IT strategic if it can: <ul><li>Help reduce production costs & clerical work </li></ul><ul><li>Reduce inventory, accounts receivable, etc. </li></ul><ul><li>Use facilities and materials better </li></ul><ul><li>Offer interorganizational efficiencies </li></ul>
    13. 13. Produce Unique Product - IT strategic if it can: <ul><li>Offer significant component of product </li></ul><ul><li>Offer key aspect of value chain </li></ul><ul><li>Permit product customization to meet customer’s unique needs </li></ul><ul><li>Provide higher/unique level of customer service/satisfaction </li></ul>
    14. 14. Fill Market Niche - IT strategic if it can: <ul><li>Permit identification of special needs of unique target market </li></ul><ul><li>Spot and respond to unusual trends </li></ul>
    15. 15. D’Aveni’s Hypercompetition Model <ul><li>Focused on turbulent environment </li></ul><ul><li>Advantages are rapidly created and easily eroded </li></ul><ul><li>Sustaining an advantage can be a deadly distraction </li></ul><ul><li>The goal is disruption, not sustainability, of advantage </li></ul><ul><li>Initiatives are achieved with a series of small steps </li></ul>
    16. 16. Four Arenas of Competitive Advantage <ul><li>Cost/quality </li></ul><ul><li>Timing/know-how </li></ul><ul><li>Strongholds </li></ul><ul><li>Deep pockets (short-term only) </li></ul>
    17. 17. Seven S’s <ul><li>Superior Stakeholder Satisfaction </li></ul><ul><li>Strategic Soothsaying </li></ul><ul><li>Positioning for Speed </li></ul><ul><li>Positioning for Surprise </li></ul><ul><li>Shifting the rules of competition </li></ul><ul><li>Signaling strategic intent </li></ul><ul><li>Simultaneous and Sequential Strategic Thrusts </li></ul>
    18. 18. Organizational Strategy Frameworks <ul><li>Business Diamond </li></ul><ul><li>Managerial Levers </li></ul>
    19. 19. Business Diamond: Hammer & Champy, 1994 Business Processes Jobs & Structures Values & Beliefs Management & Measurement Systems
    20. 20. Managerial Levers <ul><li>Organizational Variables </li></ul><ul><ul><li>Decision rights </li></ul></ul><ul><ul><li>Business processes </li></ul></ul><ul><ul><li>Formal Reporting Relationships </li></ul></ul><ul><ul><li>Information Networks </li></ul></ul><ul><li>Control Variables </li></ul><ul><ul><li>Data </li></ul></ul><ul><ul><li>Planning </li></ul></ul><ul><ul><li>Performance Measurement & Evaluation </li></ul></ul><ul><ul><li>Incentives & Rewards </li></ul></ul><ul><li>Cultural Variable: Values </li></ul>
    21. 21. Information Today <ul><li>Costly to produce but cheap to reproduce </li></ul><ul><li>Once the first copy of information good has been produced, most costs are sunk and can’t be recovered </li></ul><ul><li>Multiple copies can be produced at roughly constant per unit costs (especially when separating economics of things from economics of information) </li></ul><ul><li>There are no natural capacity limits for additional copies </li></ul><ul><li>Price based on value to consumer, not production costs </li></ul>
    22. 22. Information <ul><li>Price based on value to consumer, not the production costs </li></ul><ul><li>BUT </li></ul><ul><ul><li>value varies </li></ul></ul><ul><ul><li>how do you know value before you have experienced it? </li></ul></ul>
    23. 23. Comparison of Economics of Things vs. Information <ul><li>THINGS </li></ul><ul><li>Wears out </li></ul><ul><li>Replicated at expense of manufacturer </li></ul><ul><li>Exist in tangible location </li></ul><ul><li>When sold, seller ceases to own </li></ul><ul><li>Price based on production costs </li></ul><ul><li>INFORMATION </li></ul><ul><li>Doesn’t wear out, but may become obsolete or untrue </li></ul><ul><li>Replicated at almost zero cost without limit </li></ul><ul><li>May exist in ether </li></ul><ul><li>When sold, seller may still possess & sell again </li></ul><ul><li>Price based on value to consumer </li></ul>
    24. 24. Evolution of Information Resources Era I (1960s) Era II (1970s) Era III (1980s) Role of IT Efficiency Effectiveness Strategic IT Justification ROI Productivity & decision qlty Competitive Position Target of Systems Organization Organization/ group Individual mgr/group Information Models Application Specific Data-driven User-driven Value Basis Scarcity Scarcity Scarcity
    25. 25. Evolution of Information Resources Era IV (1990s) Era V (2000+) Role of IT Strategic Value Creation IT Justification Competitive Position Adding value Target of Systems Business processes, ecosystem Customer, supplier, ecosystem Information Models Business-driven Knowledge-driven Value Basis Plentitude Plentitude
    26. 26. Strategic Information Systems <ul><li>IS that help gain strategic advantage </li></ul><ul><li>Significantly change manner in which business supported by the system is done </li></ul><ul><li>Outwardly aimed at direct competition </li></ul><ul><li>Inwardly focus on enhancing the competitive position </li></ul><ul><li>Create strategic alliances * </li></ul><ul><li>IS can support business strategies </li></ul>
    27. 27. Unusual Suspects: Information Resources <ul><li>Information systems infrastructure </li></ul><ul><li>Information and knowledge </li></ul><ul><li>Proprietary technology </li></ul><ul><li>Technical skills of the IT staff </li></ul><ul><li>End users of the information system </li></ul><ul><li>Relationship between IT and business managers </li></ul><ul><li>Business processes </li></ul>
    28. 28. Firm Infrastructure (general management, accounting, finance, strategic planning) Human Resource Management (recruiting, training, development) Technology Development (R&D< product and process improvement) Procurement (purchasing of raw materials, machines, supplies) Support Activities Primary Activities Inbound Logistics (raw materials handling and warehous- ing) Operations (machine assembling, testing) Outbound Logistics (warehous- ing and distribution of finished product) Service (installation, repair, parts) Marketing and Sales (advertising, promotion, pricing, channel relations)
    29. 29. Value Chain Model <ul><li>Chain of basic activities that add to firm’s products or services </li></ul><ul><ul><li>Primary activities </li></ul></ul><ul><ul><li>Secondary activities </li></ul></ul><ul><li>Includes firm’s larger value system (i.e., suppliers, buyers, channels) </li></ul>
    30. 30. Value Chain Primary Activities <ul><li>Inbound </li></ul><ul><li>Outbound </li></ul><ul><li>Operations </li></ul><ul><li>Marketing and Sales </li></ul><ul><li>After-Sale Services </li></ul>
    31. 31. Value Chain Support Activities <ul><li>Technology development </li></ul><ul><li>Procurement </li></ul><ul><li>Human Resources Management </li></ul><ul><li>Management Control </li></ul><ul><ul><li>accounting/finance </li></ul></ul><ul><ul><li>coordination </li></ul></ul><ul><ul><li>general management </li></ul></ul><ul><ul><li>central planning </li></ul></ul>
    32. 32. Competitive Forces <ul><li>Threat of entry of new competition </li></ul><ul><li>Bargaining power of suppliers </li></ul><ul><li>Bargaining power of buyers </li></ul><ul><li>Threat of substitute products or services </li></ul><ul><li>Rivalry among existing firms </li></ul>
    33. 33. Strategies for Competitive Forces <ul><li>Note - strength of force is determined by factors in industry </li></ul><ul><li>Some industries are more competitive than others (i.e., airlines vs. </li></ul><ul><li>Gain a competitive edge </li></ul><ul><li>Build defenses against forces </li></ul><ul><li>Formulate actions to influence forces </li></ul><ul><li>Use competitive forces to exploit industry change; shape industry structure </li></ul>
    34. 34. Strategic Questions: Can IT create barriers to entry? <ul><li>Supply-side economies of scale (firms producing larger volumes have lower costs) </li></ul><ul><li>Demand-side benefits of scale (network effects) </li></ul><ul><li>Customer switching costs (ERPs) </li></ul><ul><li>Capital requirements (large investments) </li></ul><ul><li>Incumbency advantages (independent of size) </li></ul><ul><li>Unequal access to distribution channels </li></ul><ul><li>Restrictive government policy (regulated industries: liquor retailing, taxis, airlines) </li></ul><ul><li>EXPECTED RETALIATION </li></ul>
    35. 35. Strategic Questions: Power of Suppliers <ul><li>Can IT change the balance of power in supplier relationships? </li></ul><ul><li>A supplier group is powerful if: </li></ul><ul><ul><li>It is more concentrated than the industry it sell to (i.e., Microsoft’s monopoly in operating systems) </li></ul></ul><ul><ul><li>The supplier group does not depend heavily on the industry for revenues </li></ul></ul><ul><ul><li>Industry participants face switching costs in changing suppliers </li></ul></ul><ul><ul><li>Suppliers offer differentiated products </li></ul></ul><ul><ul><li>There is no substitute for what supplier offers </li></ul></ul>
    36. 36. Strategic Questions: Power of Buyers <ul><li>Can IT build in switching costs? (buyers) </li></ul><ul><li>Can IT strengthen customer relationships? </li></ul><ul><li>Customer group has more negotiating leverage when there are </li></ul><ul><ul><li>Few buyers </li></ul></ul><ul><ul><li>Buyers purchase large volumes </li></ul></ul><ul><ul><li>Industry’s products are standardized </li></ul></ul><ul><ul><li>Buyer threatens to integrate backward </li></ul></ul>
    37. 37. Strategic Questions: Can IT generate new products? <ul><li>“ A substitute performs the same or a similar function as an industry’s product by a different means.” </li></ul><ul><li>The threat of a substitute is high if: </li></ul><ul><ul><li>It offers attractive price-performance tradeoff </li></ul></ul><ul><ul><li>Buyer’s switching cost is low </li></ul></ul><ul><li>IT can often create new substitutes or shift price-performance tradeoff </li></ul>
    38. 38. Strategic Questions: Rivalry among existing competitors <ul><li>Can IT change the basis of competition? (competitors) </li></ul><ul><li>Can IT generate new products? competitors, substitutes) </li></ul><ul><li>Intensity in rivalry is greatest if: </li></ul><ul><ul><li>Numerous competitors or equal in power </li></ul></ul><ul><ul><li>Industry growth is slow </li></ul></ul><ul><ul><li>Exit barriers are high. </li></ul></ul><ul><ul><li>Rivals are highly committed to business </li></ul></ul><ul><ul><li>Firms cannot read each other’s signals well </li></ul></ul>
    39. 39. Searching for Specific Opportunities <ul><li>What is the mode of the thrust? (offensive, defensive) </li></ul><ul><li>What is the direction of the thrust? (use, provide) </li></ul><ul><li>What is the strategic target of the thrust? (supplier, customer, competitor) </li></ul>
    40. 40. Brandenburger and Nalebuff’s Co-opetition <ul><li>Optimally combining cooperation and competition </li></ul><ul><li>Value Net of competitors, complementors, customer, suppliers </li></ul>
    41. 41. Risks of IS Success <ul><li>Change the Basis of Competition </li></ul><ul><li>Promote Litigation or Regulation </li></ul><ul><li>Awake Sleeping Giant </li></ul><ul><li>Reflect Bad Timing </li></ul><ul><li>Are Too Advanced </li></ul><ul><li>Fail to Deliver What Users Want </li></ul><ul><li>Are Implemented Poorly </li></ul>
    42. 42. Strategic Alliances <ul><li>An interorganizational relationship that affords one or more companies in the relationship a strategic advantage </li></ul><ul><li>Supply chain management – links company’s customers and suppliers through a single network that benefits all in the supply chain </li></ul><ul><ul><li>Why are they formed? </li></ul></ul><ul><ul><li>How are they formed? </li></ul></ul>
    43. 43. Interorganizational Alliances <ul><li>Describe the negotiating, commitment, execution and assessment stages in the development of interorganizational alliances (IOA) </li></ul><ul><li>Discuss the balance between trust and contracts in IOA </li></ul><ul><li>Discuss the relationship between interpersonal and role relationships in IOA formation </li></ul>
    44. 44. Developing Cooperative IOAs <ul><li>Ring & Van de Ven, 1994, Academy of Management Review </li></ul><ul><li>Cooperative IOAs are socially contrived mechanisms for collective action which are continually shaped and restructured by actions and symbolic interpretations of the parties involved </li></ul><ul><li>Repetitive sequence of negotiations, commitments and executions </li></ul>
    45. 46. Negotiating Stage of IOA Development <ul><li>Parties develop joint expectations about motivations and investments </li></ul><ul><li>Formal bargaining and selection </li></ul><ul><li>Underneath - psychological sensemaking </li></ul><ul><li>Individual choices, values, expectations must be congruent </li></ul><ul><li>May emerge from preexisting friendship ties, need for resources, institutional mandate, brokered deals, etc. </li></ul>
    46. 47. Commitment Stage of IOA Development <ul><li>Terms and governance structures are established </li></ul><ul><li>Formal contracts or informally understood psychological contracts </li></ul><ul><li>Trust + Legal agreement </li></ul>
    47. 48. Execution Stage of IOA Development <ul><li>Commitments are carried into effect </li></ul><ul><li>Initially formally designated role behavior reduces uncertainty </li></ul><ul><li>Increasing reliance on interpersonal relationships </li></ul><ul><li>Psychological contracts increasingly substitute for formal legal contracts </li></ul><ul><li>Assessments are made about efficiency and effectiveness of IOA </li></ul>
    48. 49. Turnover in IOAs <ul><li>Replacements may not have prior relationship </li></ul><ul><li>Some flexibility is lost as new “agents” rely on formal agreement and role designations </li></ul><ul><li>Clock restarted on psychological contracts </li></ul><ul><li>Trust must be developed interpersonally </li></ul>
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