This week: IS Strategy, part I

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This weekIS Strategy, part I

• John Krogstie, IDI
• Partly based on slides by Guttorm Sindre and Jon
  Atle Gulla

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The course so far and the rest

• Focussing on two things
• Available technologies
• Overview in the first weeks of the course
  (Hawryszkiewycz ch. 1-3)
• ERP systems (before Easter)
• Development methods
• Main part of Hawryszkiewycz book
• UML activity diagrams
• Practical exercises in problem analysis,
  modelling, requirements elicitation and
  specification
• Now
• Higher level strategic use of information systems
• Book by Pearlson Saunders

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Overview of the strategy part

• This week
• (Chapter 1 The IS Strategy Triangle)
• Chapter 2 Strategic Use of Information Resources
• Chapter 3 Organizational Impacts of IS Use
• Chapter 4 IT and the Design of Work
• Chapter 5 IT and Changing Business Processes
• Next weeks
• Chapter 9 Funding IT
• Chapter 11 Knowledge Management
• Summary of the entire course
• Many pages lectured in a short time
• But fairly easy-to-read material

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Chapter 1 The Strategy Triangle (fig 1.1)
Business strategy
visions goals business tactics, etc.
Organizational strategy
Information strategy
organizational structure job descriptions competen
ce/training plans hiring practices etc.
applications enterprise architecture information
management hardware, software, networks, etc.

• (Also discussed in the Hawryszkiewycz book)

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Ch.1 Business Strategy Frameworks

• Business strategy
• plan
• well-articulated vision
• where a business seeks to go
• how it expects to get there
• communication of goals
• 2 frameworks
• Achieving competitive advantage
• Hypercompetition

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Strategies for achieving competitive
advantage(fig 1.2)
Low cost position
Uniqueness perceived by customer
Overall cost leadership
Industry wide
Differentiation
Particular segment only
Focus

• M. Porter Competitive Strategies. Free Press,
  1998.

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Differentiation

• Shareholder value
• Unique knowledge -gt timing of use of specialized
  knowledge creates competitive advantage
• Barriers to entry model
• Assessment of competitive threats
• 5 forces suppliers, buyers, substitutes,
  industry competitors, new entrants
• Offer products/services that are difficult to
  displace
• Unlimited resources model
• Utilize large base of resources to outlast
  competitors

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Hypercompetition New 7-Ss (fig 1.3)

• Speed and aggressiveness of moves countermoves
  create advantages
• Advantages rapidly created and eroded

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DAvenis new 7-Ss (fig 1.4)
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Business strategy vs. IS strategy (fig 1.5)
IS usefulness
Framework
Idea
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Organizational Strategies

• How will the company organize in order to
  achieve its goals and implement its business
  strategy?
• Elements organizational design, work processes,
  employees
• Frameworks
• Business diamond
• Role of IT in organization
• Organizational design variables

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The Business Diamond (fig 1.6)
M. Hammer and J. Champy Reengineering the
Corporation, 1994.
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Organizational Strategies

• Summary
• What are the important structures and reporting
  relationships?
• What are the characteristics, experiences, and
  skill levels of employees
• What are the key business processes?
• What control systems are in place?
• What is the culture of the organization?

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Information Systems Strategy

• Definition Plan used by an organization in
  providing IS support
• Elements
• Architecture what
• Responsibilities and resources who
• Arrangements where
• US Large government agencies obliged to maintain
  enterprise IT architecture plans

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IS Strategy Matrix (fig 1.9)
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Chapter 2 Strategic Use of Information Resources

• What is an information resource?
• Evolution of information resources
• Evaluating information resources
• How can information resources be used
  strategically?
• Porters 5 forces
• Value Chain Model
• Wisemans theory of strategic thrusts

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What is an information resource?

• Important information resources
• Information resources create strategic advantages

IS infrastructure Information and
knowledge Proprietary technology Technical skills
of IT staff End-users of the IS Relationship
between IT and business managers Business
processes
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Evolution of Information Resources (fig 2.1)
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Evaluating Information Resources

• What makes the information resource valuable?
• Who appropriates the value created by the
  information resource?
• Is the information resource equally distributed
  across firms?
• Is the information resource highly mobile?
• How quickly does the information resource
  depreciate?

What should our information resources be?
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Porters 5 Forces (fig 2.2)
switching costs access to distribution
channels economics of scale
Potential threat of new entrants
cost-effectiveness market access differentiation
Bargaining power of suppliers
Industry competitors
Bargaining power of buyers
supplier selection backward integration
buyer selection switching costs differentiation
Threat of substitute products
redefine products/services improve
price/performance
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Value Chain Model (fig 2.4)

• Information resources should not be used in
  isolation
• Achieve competitive advantage
• lowering cost
• adding value to product/service

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Value Chain Across Companies (fig 2.5)
buyers value chain
suppliers value chain
firms value chain
channels value chain
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Chapter 3 Organizational Impacts of IS Use

• Organizational Design Variables
• Information technology and organizational design
• Information technology and management control
  systems
• Virtual organizations
• Immediately responsive organizations
• How can IT improve organizational designand
  management control systems?

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Organizational Design Variables (fig 3.1)
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IT and Organizational Design

• Essential impacts of IT
• Information technology allows companies to hire
  differently
• Information technology allows organizations to be
  structured differently

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IT Hiring

• People
• competence needed
• fewer non-skilled employees needed
• fewer managers needed
• more independent employees
• single manager can monitor more people
• Work processes
• new tasks and processes
• often centralization of certain functions
• Organizational effects
• technical capacity incorporated in work process
• IT function high on organizational chart
• IT function fully integrated with non-technical
  units

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IT and Organizational Structures
1. Hierarchical organization
2. Flat organization
often entrepreneurial organizations IS for
routine tasks
3. Matrix organization
often project based IS for information
sharing control challenge
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IT and Organizational Structures (cont.)
4. Networked organization

• flat and hierarchical
• formal/informal communication networks connect
  all parts of company
• IS control, process design, communications

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IT and Organizational Structures
5. T-form organization

• technologically based
• feels flat
• IT replacing organizational components
• technological leveling
• automatic work coordination
• central repositories
• more inclusive responsibilities
• Integration with customers and suppliers
  E.g. Proctor Gamble and and Wal-Mart

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IT and Management Control Systems

• Management control activities
• monitoring
• evaluating
• providing feedback
• compensating
• rewarding
• Roles of information systems
• Enable collection of information
• Speed the flow of information
• Facilitate the analysis of information

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Virtual Organizations

• Networked structures
• IT the basis for all communication and
  coordination
• Information sharing with IT
• Monitoring results rather than process
• Collaboration with anyone anywhere
• E.g. some consulting and software firms

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Immediately Responsive Organizations

• Zero-time organizations
• Capabilities needed
• Instant value alignment understanding the
  customers needs
• Instant learning built into processes
• Instant involvement IS for communication with
  suppliers, customers, employees, etc.
• Instant adaptation culture and structure for
  instant changes
• Instant execution processes with few people and
  short cycle times

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Chapter 4 IT and the Design of Work

• Job design framework (fig 4.1)
• What tasks will be performed?
• How will tasks be performed? (auto/manual)
• Who will do the work?
• Where will it be performed?
• How can the IS increase performance, satisfaction
  and effectiveness of the work?
• How IT changes the nature of work
• New types of work
• New ways to do traditional work
• Changing communication patterns collaboration
• Changing decision making / info processing

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New challenges in managing people

• Cf. Fig 4.2

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Changing where work is done

• Drivers for telecommuting mobile work
• Knowledge-based work
• Flexible life-style and work-schedules
• Save commuting time
• Better, cheaper and more mobile technology
• Disadvantages of telecommuting / mobile work
• Harder to manage
• High demands on self-discipline
• Lack of social communication
• Outsourcing
• E.g., programming, tech support

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Gaining acceptance for IT-induced change

• Employee resistance a major challenge
• For instance in ERP projects
• Managers and developers must be devoted to the
  organizational change process
• Not just the technology, but also employee
  exptectations and attitudes
• Involve employees in the project
• Technology acceptance model (TAM), fig 4.7

Perceived usefulness
Intention to use
Actual use
Perceived ease of use
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Chapter 5 IT and Changing Business Processes

• Function perspective vs. process perspective
• What is a business process?
• Philosophies
• Total Quality Management
• Business Process Reengineering
• IT as enabler

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Cross-functional Processes (fig 5.3)

• Traditionally silo-view, one IS per functional
  department
• Problem local optimization
• Business processes cut across this
• Main focus value to customer, IS supporting
  processes

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Total Quality Management

• Incremental changes to processes
• Procedure
• Choose business process to improve
• Choose a metric by which to measure the business
  process
• Enable personnel involved with the process to
  find ways to improve it
• Evaluation
• Personnel in control of improvements
• Changes less threatening
• Often positively received
• What if radical changes are needed?

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Business Process Reengineering

• Key aspects
• The need for radical change
• Thinking from a cross-functional process
  perspective
• Challenging old assumptions
• Networked organization
• Empowerment of individuals
• Measurement of success tied directly to business
  goals
• Approach (fig 5.7)

New process
Current process
vision
measure
change
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BPR is NOT TQM
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Why BPR is Necessary

• The Virtual Organization Three Cs Driving
  Change
• Customers take charge.
• Mass market v. a market of one
• Backward integration
• Informed consumers
• Competition intensifies.
• More and different kinds
• Big is not better
• Technology changes the nature of competition.
• Change becomes constant.
• reduced product cycles
• reduced time to develop new products
• more environment scanning

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Information Technology Enabler
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Information Technology Enabler
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Characteristics of Reengineered Processes

• Several jobs are combined into one
• Workers make decisions
• The process steps are performed in a natural
  order
• Eliminate process linearity and sequence where
  possible
• Perform tasks concurrently to reduce process
  cycle time
• Processes have multiple versions
• Work is performed where it makes the most sense
• Checks and controls are reduced. (Tricky)
• Reconciliation is minimized. (Carefully)
• A case manager provides a single point of contact
• Hybrid centralized/decentralized operations are
  prevalent.
• Reap the advantages of both operating modes!

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IT Standards and Strategic Decisions

• Strategic advantage of process redesign?
• no Enterprise system must be the solution
• yes ES might hurt organization?
• no ES might be the solution
• yes Change management program reasonable?
• no ES package probably not the solution
• yes ES might be the solution

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Summary

• IS strategy must be aligned with business
  strategy and organizational strategy (ch.1)
• Striving for competitive advantage (ch.2)
• IT has an impact on the organization (ch 3)
• Structure and management
• IT affects how work is done (ch 4)
• New jobs, new ways to do old jobs
• Telecommuting, mobile work
• IT enables changing business processes (ch 5)
• Focus on value to customer
• TQM (gradual optimization) vs BPR (radical
  change)
• ERP (and similar) applications are vital here