MGMT 6180

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MGMT 6180 Strategic Information Systems
Management
Course Convenor Houman Younessi Tel
860-548-7880 Email youneh_at_rpi.edu
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Course objectives The major objective of this
course is to construct a solid foundation for
understanding the role of information systems in
formulating and executing business strategy and
application of information systems principles,
techniques and technologies used by progressive
organizations in the development of effective
business strategy.
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Key textbook Applegate, Austin, and McFarlan
Corporate Information Strategy and Management
8th Edition McGraw Hill
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Teaching Method The principal teaching is
through lectures and discussions. There will be
11 lectures during the semester. While formal
attendance is not taken, attending all lectures
is expected of students and is deemed a critical
success factor. Assessment Semester assignment
and presentation 50 percent Case
presentations 40 percent Class
participation 10 percent
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• Syllabus
• Introduction, Strategic management and
  planning
• What are Information Systems?
• Crafting strategy based business models
• Strategic planning for IS and the IS strategy
  toolkit
• Frameworks for cogenerating IS strategy within
  business strategy
• Managing and IS organization
• The IS profession

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STRATEGIC Information Systems Management
Strategy
A rule for making decision under conditions of
partial ignorance. (Ansoff, 1965, Corporate
Strategy) Formulation of basic organizational
missions, purposes and objectives..(Steiner and
Miner, 1977, Management Policy and
Strategy) Interpretation of the environment and
the development of consistent patterns in streams
of organizational decisions. (Mintzberg, 1979,
The structuring of Organizations) A Broad-based
formula for how business is going to compete.
(Porter, 1980, Competitive Startegy)
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STRATEGIC Information Systems Management
Strategy
Strategy comes from the Greek Stratos (camp), and
Ago (to lead). In short it means leading the
camp. It is a military term and in leading the
camp is latent leading it to victory.
Business is often compared to war. But, perhaps
similarly to war, it is not very clear when
victory is attained.
The first thing we have to do is to define
victory In other words Where do we want to get
from here?
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STRATEGIC Information Systems Management
Strategy
So, great strategists first identify their
specific and measurable overall goals.
Only when the overall goal is identified, can we
then decide how we are going to get there.
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STRATEGIC Information Systems Management
Strategy
Great leaders are prepared for the challenges
they have to face in order to get to their
objectives.
We need to know what resources we need for
victory and how much of those resources are
available to us.
We then create the means of acquiring the
additional resources we need but lack
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STRATEGIC Information Systems Management
Strategy
So, very simply, strategy is
The Way to a Victorious Future.
Make sure you have a great future, you will be
spending the rest of your life there!
Make sure your business has a great future, you
will be responsible for where it is in the market
forever.
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STRATEGIC Information Systems Management
Strategy
So in terms of business and business leadership,
strategy is
The overall plan of how we will attain our
overall business objectives given the reality of
our present resource set.
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STRATEGIC Information Systems Management
Strategic Planning
The project management of developing the strategy
We need to
Make our goal measurable
Set our overall goal
Determine the best process available to achieve
our goal
Clearly formulate and communicate the strategy
Determine the resources needed for achieving our
goal
Determine what resources are currently available
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STRATEGIC Information Systems Management
Strategic Planning
Observations

• Strategic planning is
• Complex
• Cyclical (evolving)
• Itself just a phase (still must be implemented)

• Do not confuse strategy with
• Strategic planning (strategizing),
• The business model (process methodology), or
• The implementation plan

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STRATEGIC Information Systems Management
Strategic Planning
Business Model The best process available to
achieve our goal.
Determine the best process available to achieve
our goal
A business model defines how and organization
(should) interact with its environment to
(execute) a unique (approach/set of tactics),
attract the resources and build the capabilities
required to execute the (model and therefore the
overall) strategy, and create value for all
stakeholders (page 43 of Applegate et al)
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STRATEGIC Information Systems Management
Strategic Planning
Does it have to be unique? Sometimes established
ways are as good if not better
A business model defines how and organization
(should) interact with its environment to
(execute) a unique (approach/set of tactics),
attract the resources and build the capabilities
required to execute the (model and therefore the
overall) strategy, and create value for all
stakeholders (page 43 of Applegate et al)
Do we/should we create value for ALL
stakeholders? Sometimes we intentionally do not
create value or actually create dis-value for
some stakeholders (think of war strategy)
Do you buy it?
Overall, not a bad definition and the one we more
or less use (with the provisos here) for the rest
of the course
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STRATEGIC Information Systems Management
Strategic Planning
We must first analyze where we are. We must
analyze our

• Current goal
• Current environment
• Current resources

These each have several dimensions
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STRATEGIC Information Systems Management
Strategic Planning
GOAL

• Market Positioning (Determine whom to serve)
• Product Positioning (Determine what to offer)
• Boundary Positioning (Determine what not to
• offer, whom not to serve)
• Value Positioning (Determine what added value
  to deliver to what internal stakeholder)

Each positioning implies doing some analysis
to determine the correct positioning
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STRATEGIC Information Systems Management
Strategic Planning
ENVIRONMENT

• Socio-cultural Positioning
• Economic Positioning
• Technological Positioning
• Political and legal Positioning
• Competitive Positioning

with respect to forces that impact our goal from
these perspectives
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STRATEGIC Information Systems Management
Strategic Planning
Socio-cultural Positioning Life-style
changes Career expectations Rate of family
formation Population growth rates Regional shifts
in population and taste Life expectancies Race Par
ty and organizational affiliation Etc.
Technological Positioning Total organization
RD spending Total Industry RD spending Patent
protection New product innovation
programs Technology transfer programs Productivity
improvement programs Industry technology base
(how sophisticated) Organization technology
base Level of technology and likely change Cost
structure, economies of scale Dependence on
particular raw materials Etc.
Economic Positioning GNP trends Interest
rates Money supply Inflation rates Wealth
profile Unemployment levels Wage/price
controls Devaluation/revaluations Energy
availability Etc.
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STRATEGIC Information Systems Management
Strategic Planning
Political and Legal Positioning Antitrust
regulations Environmental protection laws Tax
laws Technology specific special
incentives Foreign trade regulations FDI special
incentives Attitude towards global/foreign/your
company(ies) HR laws and regulations Government
stability Stability of special incentives Etc.
Competitive Positioning Number of
competitors Size of competitors Distribution of
competitors Barriers to entry Barriers to exit
(Cost of exit) Your products unique
characteristics Marketing incentives
possible Segmenting and sealing potential Size
and growth of existing market Product demand
elasticities Number, potential and distribution
of customers Market structure (monopolistic/perfec
t competition) Etc.
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STRATEGIC Information Systems Management
Strategic Planning
RESOURCES

• Marketing and Sales Capability Positioning
• Production Capability Positioning
• Financial Capability Positioning
• Technological Capability Positioning (our
  technology)
• Organizational and Human Resource Capability
  Positioning
• Leadership Capability Positioning

NOW

• Marketing and Sales Capability Positioning
• Production Capability Positioning
• Financial Capability Positioning
• Technological Capability Positioning (our
  technology)
• Organizational and Human Resource Capability
  Positioning
• Leadership Capability Positioning

NEEDED TO ATTAIN GOAL
And then we need a GAP ANALYSIS
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Silk, Sword and SUV Global Business The
interaction of enterprise, markets and the
environment.
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• Providing Value need for high quality products
  and services
• Why do business at all?
• What products should we make and where should we
  sell them?
• How do I get the most reward for my enterprising
  effort?
• How long can I/ should I continue in that
  enterprise?

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Why do business at all?
Profit
What is Profit?
Accounting profit versus economic profit
Opportunity cost
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What products should we make and where should we
sell them?
Demand
If you are certain that there will not be ever
- anyone out there who wishes to buy the product
under question, then it should not be offered
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How do I get the most reward for my enterprising
effort?
Determining which item should be sold where and
when
Demand manipulation Price setting, Advertising,
Market generation, Income, Wealth, etc
Elasticity of Demand
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How do I get the most reward for my enterprising
effort?
Supply
Supply management Amount of supply, Competing
Products, Complementary products, etc.
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How long can I/ should I continue in that
enterprise?
Risk
Opportunity
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Profit
p r - c
Profit is the difference between revenue and cost
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Value
P0 Current profit figure
P0 Value of current profit now
P1 Profit next year
Value of next years profit now
Value now of profit earned in two years time,
P2 Profit year after next
Value now of profits earned in two consecutive
years
So,
Represents the present value of all profits
earned over n years
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The Value of Firm Model
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r
Firms would have revenue if there was demand for
their products. There will be demand only if the
product
Satisfies a need or want
Represents an adequate level of quality
The required quality is offered at an acceptable
price
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INFORMATION on
Obtain
Retain
What products and, products that we contemplate
offering in the future are (or will be) needed?
What level(s) of quality of products will be
demanded by the market and where?
What is the quality level of the products we
currently make and how much does it take to
improve that quality?
What level of demand will there be for our
products and when will that demand manifest
itself?
What prices should the firm set for their
products, and should the prices be uniform or
vary in their different markets?
Process
Disseminate
use
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c
Capability
Production
Quality
Technology
Resources
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i
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n
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Element Concept Information Category Information System
Revenue Demand Market trends and marketing Product quality Pricing Data Acquisition Data Analysis Control Forecasting Optimization
Cost Production Process capability Technology Forecasting Estimating Optimization Control
Risk Uncertainty Macroeconomic Environment Internal control Forecasting Control
Longevity Sustainability Environment Integration and systemicity Forecasting Optimization
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Aggregate Demand and Aggregate Supply
Demand and Supply
Supply Side
Demand Side
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Demand and the Concept of the Market
Market A group of organizations and individuals
that are in touch with each other in order to buy
or sell some good.
Every market has a demand side and a supply side
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Demand Side of the Market
At Price ()
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6
4
2
0
Buyers would buy Quantity (ton)
10
20
30
40
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Supply Side of the Market
At Price ()
8
6
4
2
0
Sellers would sell Quantity (ton)
10
20
30
40
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Equilibrium Price
Price ()
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Excess Supply
6
4
2
Excess Demand
0
Quantity (ton)
10
20
30
40
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Decline in Demand
Price ()
8
6
4
2
0
Quantity (ton)
10
20
30
40
44
Rise in Demand
Price ()
8
6
4
2
0
Quantity (ton)
10
20
30
40
45
Decline in Supply
Price ()
8
6
4
2
0
Quantity (ton)
10
20
30
40
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Rise in Supply
Price ()
8
6
4
2
0
Quantity (ton)
10
20
30
40
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Functional Relationship
Qf(P)
Qf(P,I,T,PA,A,)
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Marginal Value
The change in a dependent variable associated
with a ONE UNIT change in a particular
independent variable
As such Marginal profit is the change in total
profit associated with a one unit change in output
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Number of units of output
Total Profit
Average Profit
Marginal Profit
0
0
---
100
1
100
100
150
2
250
125
350
3
600
200
400
1000
250
4
350
1350
270
5
150
6
1500
250
50
7
1550
221.4
(-50)
8
1500
187.5
(-100)
9
1400
155.5
(-200)
120
10
1200
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Marginal Change
Profit
Marginal profit is the change in profit with
respect to change in quantity
Total Profit
Q0
Q1
Q2
Q3
Number of units of output
Profit per unit of output
Marginal Profit
Q0
Q1
Q2
Q3
Number of units of output
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(P2-P1) / (Q2-Q1)
Profit
C
B
P2
(P3-P1) / (Q3-Q1)
P3
A
P1
Marginal value is the slope of the tangent of the
curve
0
Q1
Q2
Q3
Number of units of output
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Profit
A
0
Q1
Number of units of output
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Profit
A
0
Q1
Number of units of output
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Total Cost

Total Revenue
Number of units of output
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