Week 2 Monday, January 30

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Week 2Monday, January 30

• Strategic Risks and Opportunities
• IT and Organization

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Strategic Positioning Choices

• Market/Channel determines the choice of
  customers to serve, the needs and expectations
  that will be met, and the channels to reach those
  customers
• Product Positioning determines the choice of
  products and service to offer, the features of
  those offerings, and the price that will be
  charged
• Value chain/value networking determines the
  role an organization plays and the activities it
  performs within an extended network of suppliers,
  producers and distributors and partners
• Boundary positioning determines markets,
  products, business NOT to be persued

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1. Market/Channel Positioning
E-commerce vs. Bricks and Motar
Peapod.com
Raleys Foods
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2. Product Positioning
Full service vs. Low-cost
United Airlines
Southwest Airlines
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3. Value Chain/Value Network Positioning
Vertical integration vs. Horizontal integration
One World (horizontal integration)
Boeing (vertical integration)
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American Airlines and Strategic Alliances
Co-host
Travel agents, corporate offices, public
Codeshare Alliances
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Boeing Aircraft and SuppliersAssembling an
Aircraft
Boeing 787
Risk sharing partners
Work coordination
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Boeing and Primary Vendors
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4. Boundary Positioning
Mass merchandiser vs. Narrowly defined scope
Amazon.com
Zippys Restaurant
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Strategic Positioning

• Is influenced by and influences the choice of
  business models
• The strategic positioning choice will have an
  impact on how IT is adopted and leveraged
• IT by itself does not provide any competitive
  advantage
• Competitive advantages are realized only when IT
  is used to leverage another business function
• ITs advantages are only short-term
• As the technology matures, it becomes readily
  available to other organizations

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Strategic Shifts

• Enhancements incremental changes to existing
  products, markets, channels or value networks
• Expansions launch of new products or product
  categories, entry into new markets, or launch of
  a new channel to complement an existing channels
• Extensions launch of a new business or business
  model
• Exits drop a product or product category, exit
  a market, and/or close a channel or business

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Strategic Shifts
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Strategic Alignment

• Alignment between the business and IT strategies
• Alignment between strategy and capabilities

Business
IT
Strategy
Strategy
Value

• IT infrastructure
• Technology IT infrastructure
• Human IT infrastructure

Capabilities
Capabilities
Including infrastructure
Including infrastructure
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Strategic Information Systems Planning (SISP)

• Definition... a process conducted within the
  contexts of scope, perspective, time frame, and
  level of abstraction, with any or all of the
  following agenda (1) supporting and influencing
  the strategic direction of the firm through
  identification of value-adding computerized
  information systems, (2) integrating and
  coordinating various organizational technologies
  through development of holistic information
  architectures, and (3) developing general
  strategies for successful systems
  implementation. Segars, Grover and Teng.1998

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SISP Progression
Architectures for sharing organizational and
interorganizational data and integration
technologies
Enabling initiatives for gaining competitive
advantage
Alignment of IS strategy with corporate
strategy
IS viewed as strategic resource
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Context Characteristics of SISP
Scope (broad)
Strategic Information Systems Planning
Perspective (upper management)
Time Frame (long range)

• Supporting and influencing the strategic
  direction of the firm through identification of
  value-adding computerized information systems
• Integrating and coordinating various
  organizational technologies through development
  of holistic information architectures
• Developing general strategies for successful
  systems development

Level of Abstraction (conceptual)
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Six Process Dimensions
Comprehensiveness
Formalization
Focus
Planning Effectiveness
Coalignment
Flow
Participation
Favorable coalignment will lead to effective
planning
Consistency
Alignment of dimensions
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1. Comprehensiveness

• Thoroughly canvassing a wide range of
  alternatives
• Surveying a full range of objectives
• Carefully weighing the costs and risks of various
  consequences
• Intensively searching for information to evaluate
  alternative actions
• Objectively evaluating information or expert
  judgment regarding alternative actions
• Re-examining the positive and negative
  consequences of all known alternatives
• Making detailed plans, including consideration of
  contingencies, for implementing a chosen action

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2. Formalization

• Existence of structures, techniques, written
  procedures and policies that guide the planning
  process
• Written policies that structure the process of
  planning
• Formalized techniques adopted for the purpose of
  conducting strategic planning
• Known procedures for initiating the planning
  process
• Processes systemize information collection and
  dissemination
• Formalization vs. Flexibility

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3. Focus

• The balance between creativity and control
  orientations inherent within the strategic
  planning system
• Innovation vs. Integration
• Innovative orientation nurtures creativity
  (innovative, novel solutions)
• Integrative orientation focuses more on control
  (budgetary, cost performance, controlled
  diffusion of assets within the organization)

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4. Flow

• Locus of authority or devolution of
  responsibilities for strategic planning
• Roles played by corporate and divisional managers
  in the initiation of the planning process
  (vertical orientation)
• Top-down vs. Bottom-up
• Top-down limited participation of lower level
  managers in the initiation of the strategic
  planning process
• Bottom-up functional management involvement in
  the initiation of strategic planning

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5. Participation

• Breadth of organizational involvement in
  strategic planning
• Representation from the functional areas
• Narrow vs. Broad
• Narrow fosters an isolated approach to plan
  formulation with little involvement or
  interaction among various functional or
  operational managers
• Broad a variety of functional and operational
  areas help offset bounded rationality of top
  managers

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6. Consistency

• Concerned with the frequency of planning
  activities or cycles, and evaluation /revision of
  strategic choices
• Frequent vs. Infrequent
• Infrequent time frame longer, face-to-face
  meetings tend to be ad hoc or sporadic, planning
  cycles may be year-to-year (vs. continuous or
  consistent process)
• Frequent high levels on consistency
  characterized by continuous planning process with
  frequent meetings, constant communication among
  planning participants, and frequent assessment
  and revision of strategic direction

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Proposition

• Strategic IS planning systems that reflect a
  profile of rational adaptation will be positively
  associated with planning effectiveness. The
  structure or internal coalignment of a rational
  adaptive planning system includes
• higher levels of comprehensiveness
• higher levels of formalization
• a focus on control vs. creativity
• a top-down vs. bottom-up planning flow
• higher levels of participation
• higher levels on consistency

Segars, Grover and Teng.1998
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Coalignment

• Coalignment strongly associated with planning
  effectiveness
• If dimensions of strategic planning systems
  favorably align, the planning system as a
  structure should be more successful than its
  individual dimensions
• Effectiveness may be beyond performance
  measurement (e.g., ROI, ROE)
• Alternative value-added approach
• Improved management making
• Lower costs of development
• Plans that are actionable and implemented

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Internal Planning System Coalignment

• The planning system should be structured process
  of opportunity search that adapts through
  consistent feedback and wide participation
• Rational planning tendencies of extensive
  alternative generation and solution search,
  formalized procedures and policies for planning,
  a focus on control, and top-down planning flow
• Adaptive tendencies of wide participation
  profiles and high levels of planning consistency

Planning effectiveness
Rational adaptation
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Implications for Strategic IS Planning

• Planning must be designed, evaluated, and refined
  such that the overall activity of planning does
  not become dysfunctional
• Emergent systems of planning should reflect the
  environmental and organizational context within
  which they function

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Source Strategic Information Systems Planning
Planning System Dimensions, Internal Coalignment
and Implications for Planning Effectiveness,
Albert H. Segars, Varun Grover, and James T.
Teng. Decision Sciences (journal), vol. 29, no. 2
(Spring 1998).
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Opportunities
Crisis (weiji)
Opportunity (jihui)
Opportunities grow out of crises
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Search for Opportunities

• Can IT change the basis of competition?
• Can IT change the nature of relationships and the
  balance of power among buyers and suppliers?
• Can IT build or reduce barriers of entry?
• Can IT increase or decrease switching costs?
• Can It add value to existing products and
  services or create new ones?

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Strategic Risks

• Can emerging technologies disrupt current
  business models?
• Asset specificity Can investments be reused?
• Are we too early or too late to exploit an IT
  opportunity?
• Leaders vs. followers
• Does IT lower barriers of entry?
• Does IT trigger regulatory action?

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IT and Organizations

• Control
• Organizational Redesign

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Control

• Ensures the organizations goal and objectives
  are met
• Mechanisms for monitoring the differences between
  desired and actual performance (i.e., checks and
  balances)
• Types of controls
• Action controls operational control level
• Result controls toward the strategic planning
  level
• Personnel controls Recruiting, hiring and
  retaining the right people with the right skills
• Transaction controls accurate and complete
  documentation of financial and legal
  transactions with regular review to ensure risk
  and asset management

Design into the Organiza-tion
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Ad Hoc Planning and Organizational Redesign
Volume increases by its cube (v3), area by its
square (a2)
Duck Tongues A Tale of Redesigning the Duck
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Common ProblemsWith Organizational Redesign

• Failure to redesign end-to-end processes
• Failure to realign operations with other
  components of the organizational redesign

Piece-meal approach
Business cycle

• Operating processes activities that define how
  a firm designs, produces, distributes, markets,
  sells and supports its products and services
• Management processes activities that define
  strategic direction and coordinate and control
  operations

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MIT90 FrameworkFive Inter-Related Components
Organization and coordination
Structure
Information Technology
Vision and direction
Planning and control
Strategy
Management Processes
Technology
Individuals and Roles
Human resources
Dynamic Equilibrium Any change to a component
requires an adjustment to the others
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MIT90 Framework

• Strategy - pattern of missions, objectives,
  policies, and significant resource utilization
  plans stated in such a way as to define what
  business the company is in (or is to be in) and
  the kind of company it is or is to be. It
  defines
• The product line, markets and market segments for
  which products are to be designed
• The channels through which these markets will be
  reached
• The means by which the operation is to be
  financed
• The profit objectives
• The size of the organization
• The image which it will project to employees,
  suppliers and customers Bullen and Rockart,
  1981

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MIT90 Framework

• Technology - encompasses all of the factors that
  directly enter into the transformation of
  organizational inputs into organizational outputs
• Tools, equipment and machinery used in the
  transformation process
• Technical procedures and systems
• Porras and Robertson (1990)

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MIT90 Framework

• Information Technology - comprises those
  technologies engaged in the operation,
  collection, transport, retrieval, storage, access
  presentation, and transformation of information
  in all its forms Boar (1997)

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IT and the Organization
Technology Push
Competitive Pull

• Cost performance trends
• Connectivity capabilities

Innovative IT-enabled applications to obtain
differential benefits in the marketplace to stay
competitive
IT as a Strategic Resource
Leveraging IT
Enhancing Productivity
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IT Application Framework
Strategic Application of IT
IT to differentiate the organization from others
Reengineering Business Processes
Basic IT to remain competitive in industry
IT Infrastructure
Basic IT to do business
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MIT90 Framework

• Management Processes - Ensure the orderly
  production of goods and services
• Planning is the process of deciding on
  objectives, on changes in these objectives, on
  the resources used to attain these objectives,
  and on the policies that are to govern the
  acquisition, use, and disposition of these
  resources.
• Control is the process by which managers assure
  that
• Resources are obtained and used effectively and
  efficiently in the accomplishment of the
  organization's objectives
• Specific tasks are carried out effectively and
  efficiently
• Anthony (1965)

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MIT90 Framework

• Structure - organization and coordination
• Communication
• Authority
• Workflow
• Leavit (1965)

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MIT90 Framework

• Individuals and Roles - people and skills
  necessary to utilize the technology
• Designs of jobs required to use the technology
• Technical expertise of organizational members
• Porras and Robertson (1990)

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IT Infrastructure

• Technology IT infrastructure Hardware and
  software
• Human IT infrastructure People to make the IT
  work
• Without the right people, an organization would
  not benefit from the most advanced IT

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Influence of IT on Organizational Resign
Structure
Technology
Successful Business Model
Management Processes
Strategy
Individuals and Roles
Strategy incorporates a vision of technology
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