Lecture 1a it and strategy
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This document provides an overview and summary of a lecture on IT strategy. It discusses identifying strategies and the role of IT in business strategy. Some key points covered include: - Porter's competitive model and how it can be applied to analyze an industry and a company's strategic position - The different types of competitive strategies such as cost leadership, differentiation, and innovation strategies - How technology can potentially change the basis of competition, balance of power, and barriers to entry in an industry - The importance of understanding customers, competitors, markets, and partnerships for strategic analysis - Potential opportunities and risks of emerging technologies for business strategies and models
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Lecture 1a it and strategy
- 1. ISM 158 Business Information Strategy Lecture 2 IT Strategy
- 2. Introductions • Kevin Ross • kross@soe.ucsc.edu • Office hours: Tuesday 3:30pm – 5pm – (or by appointment) • E2 room 559
- 3. Overview and update • Website now has schedule of presentations and readings • Any questions from last week? – Quizzes – Projects – Presentations – Cases/Reading
- 4. ISM 158: Lecture 2 “This class considers the role of information in business strategy. In particular, we focus on decisions regarding information technology and information systems to give a business competitive advantage over other companies” • Today we focus on identifying strategies and the role of IT in strategy
- 5. The Embedding of IT • IT now embedded in: – Definition and execution of strategy – Organization and leadership of businesses – Definitions of unique value propositions • Every business definition is morphing before our eyes – – – – Markets Industries Strategies Firm designs • Information is now a major economic good
- 6. What is a Business Model? • Defines how enterprise relates to environment – Strategy aligns organization with environment – Resources in and out – How value is created for stakeholders – Sets goals and ways to achieve them
- 7. Fig 1.1 Components of a Business Model
- 8. Porter Competitive Model Potential New Entrants Bargaining Power of Suppliers Intra-Industry Rivalry Strategic Business Unit Substitute Products and Services Bargaining Power of Buyers
- 9. Competitive Model Focus • What is driving competition in the current or future industry? • What are current or future competitors likely to do and how can a company respond? • How can a company best posture itself to achieve and sustain a competitive advantage?
- 10. Competitive Model Forces Intra-industry Rivals: Strategic Business Unit (SBU) and major rivals. Buyers: Categories of major customers. Suppliers: Categories of major suppliers that play a significant role in enabling the SBU to conduct its business. New Entrants: Companies that are new as competitors in a geographic market or existing companies that through a major shift in business strategy will now directly compete with the SBU. Substitutes: An alternative to doing business with the SBU.
- 11. Porter Competitive Model Education Industry – Universities U.S. Market Potential New Entrants Bargaining Power of Suppliers • Faculty • Staff • Equipment and Service Suppliers • Alumni • Foundations • Governments • IT Vendors • Foreign Universities • Shift in Strategy by Universities or Companies Intra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges Substitute Products and Services • Internet Distance Learning • Books and Videotapes • Computer-Based Training • Company Education Programs Bargaining Power of Buyers • Students • Parents • Businesses • Employers • Legislators
- 12. Role of Technology through Porter perspective: Can we… 1. Build barriers to prevent a company from entering an industry? 2. Build in costs that would make it difficult for a customer to switch to another supplier? 3. Change the basis for competition within the industry? 4. Change the balance of power in the relationship that a company has with customers or suppliers? 5. Provide the basis for new products and services, new markets or other new business opportunities
- 13. Porter Competitive Strategies Cost Leadership Strategies Cost Leadership Strategies Differentiation Strategies Differentiation Strategies Primary Strategies Innovation Strategies Innovation Strategies Supporting Strategies Growth Strategies Growth Strategies Alliance Strategies Alliance Strategies
- 14. Strategic Vision Service Concept • What are important elements of the service to be provided, stated in terms of results produced for customers? • How are these elements supposed to be perceived by the target market segment, by the market in general, by employees, by others? • How do customers perceive the service concept? • What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed?
- 15. Strategic Vision Operating Strategy • What are important elements of the strategy: operations, financing, marketing, organization, human resources, control? • On which will the most effort be concentrated? • Where will investments be made? • How will quality and cost be controlled: measures, incentives, rewards? • What results will be expected versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers?
- 16. Strategic Vision Service Delivery System • What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures? • What capacity does it provide, normally, at peak levels? • To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors?
- 17. Competitive Strategies (Overall Cost Leadership) • Seeking Out Low-cost Customers • Standardizing a Custom Service • Reducing the Personal Element in Service Delivery (promote selfservice) • Reducing Network Costs (hub and spoke) • Taking Service Operations Off-line
- 18. Competitive Service Strategies (Differentiation) • • • • • Making the Intangible Tangible (memorable) Customizing the Standard Product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.
- 19. Competitive Role of Information in Services Strategic Focus Competitive Use of Information On-line (Real time) Internal (Operations) Creation of barriers to entry: Data base asset: Reservation system Frequent user club Switching costs External (Customer) Off-line (Analysis) Selling information Development of services Micro-marketing Revenue generation: Productivity enhancement: Yield management Point of sale Expert systems Inventory status Data envelopment analysis (DEA)
- 20. Limits in the Use of Information • Anti-competitive (Barrier to entry) • Fairness (Yield management) • Invasion of Privacy (Micro-marketing) • Data Security (Medical records) • Reliability (Credit report)
- 21. Strategy Audit of Company • Market/Channel position – Who are customers? – How to reach them • Product position – What products/services to offer – Features, price • Value chain/value network position – Role with respect to suppliers, producers, distributors, partners • Boundary Position – What won’t you do?
- 22. Fig 1.2 Analyzing Competitive Forces and Strategic Positioning
- 25. Understand Market and Product
- 26. Fig 1.3 Product/Market Positioning in the US Retail Financial Services Industry, 1990
- 29. Strategic Shifts • Strategy changes over time • Flow of information makes this possible – Enhancement (improve existing) – Expansion (launch new) – Extension (new business or business model) – Exit (drop product/category/market/channel)
- 30. Fig 1.4 Options for Evolving Strategy
- 31. Fig 1.5 Categories of Strategic Risk
- 32. Fig 1.6 McFarlan’s Strategic Grid
- 33. Fig 1.7 Strategic Alignment Model Ideally, all four quadrants align to create value
- 34. Opportunities • Can IT change basis for competition? • Can IT change balance of power among buyers and supplyers? • Can IT build or reduce barriers to entry? • Can IT increase or decrease switching costs? • Can IT add value to existing products and services or create new ones?
- 35. Risks • Can emerging technologies disrupt current business models? • Are we too early or too late to exploit IT opportunity? • Does IT lower entry barriers? • Does IT trigger regulatory action?
- 36. Fig 1.8 Analyzing Disruptive Technologies
- 37. Fig 1.9 Analyzing Cash Flow Curve
- 38. Questions
- 40. Tips for Reading Cases
Editor's Notes
- {"16":"<number>\n","5":"However divided business leaders may be on the subject of technology, it has become embedded in the way we define and execute strategy, in how we organize and lead businesses, and in how we define a unique value proposition. No longer is IT just a tool to support back-office transactions. IT is strategic with a capital “S”: It is forcing the redefinition of markets and industries as well as the strategies and designs of firms competing within those industries. We are becoming increasingly used to a world in which information zooms around the world in seconds. Time zones are collapsed. Information itself has become a major economic good, frequently exchanged along with, or even in place of, tangible goods and services.\n","11":"<number>\n","17":"<number>\n","12":"<number>\n","18":"<number>\n","13":"<number>\nCompanies may counter the competitive forces they face with one or more of five competitive strategies:\nCost Leadership Strategies. This involves becoming a low-cost producer of products and services in the industry. Such firms can also help their suppliers or customers reduce costs.\nDifferentiation Strategies. This involves making the products of the firm distinct from those of the competition in the marketplace. Differentiation variables valued by the market reduce the threat of substitution. \nInnovation Strategies. This involves finding new ways of doing business. This may involve developing new products, entry into new markets or radical change in business processes for production or distribution.\nGrowth Strategies. This involves significantly expanding a company's capacity to produce goods and services, expanding into global markets, diversifying into new products or services, or integrating into related products and services. \nAlliance Strategies. This involves forming new business relationships or new ways of doing business with existing suppliers, customers, consultants, or even competitors. Such linkages may include mergers, acquisitions, joint ventures, or "virtual companies" (the pooling of resources on a per project basis).\nTeaching Tips\nThis slide relates to the material on pp. 50-51.\n","19":"<number>\n","8":"<number>\n","14":"<number>\n","31":"What are some examples in each quadrant?\n","20":"<number>\n","9":"<number>\n","15":"<number>\n","10":"<number>\n"}