CISB444 - Strategic Information Systems Planning Chapter 5 : IS/IT Strategic Analysis: Determining Future Potential

CISB444 - Strategic Information CISB444 - Strategic Information Systems PlanningSystems Planning

Chapter 5 : Chapter 5 : IS/IT Strategic Analysis:IS/IT Strategic Analysis:

Determining Future PotentialDetermining Future Potential

Chapter 5 : OverviewChapter 5 : Overview

• Chapter 5 describe the tools and techniques that can be used in determining future potential of IT/IS in organizations

• Introduced concepts for the more creative dimension, by exploring external IS/IT opportunities, the competitive environment and the industry ‘value system’.

22CISB414 - Strategic Information Systems PlanningCISB414 - Strategic Information Systems Planning

Chapter 5 : Main TopicsChapter 5 : Main Topics

• Dimensions of Competency• Value Chain Analysis

– Information Systems and the Value Chain– The Use of Value Chain Analysis– Business Re-engineering and the Value Chain

CISB414 - Strategic Information Systems PlanningCISB414 - Strategic Information Systems Planning 33

IntroductionIntroduction

• The analytical technique described in this chapter, offer a more creative analysis approach– have often been successfully adopted in assessing the

potential future impact of IS/IT on many organizations.

• In terms of the application portfolio, the focus of this part of the assessment is primarily to identify strategic investments in relation to the competency levels and the influence from the external resources


IntroductionIntroduction

• The technique may– suggest high-potential possibilities that need further

investigation, before their contribution can be decided.– establish whether existing operational systems either

provide a good basis for exploitation or could be a constraint to future business options (provided through IS/IT)

– assess the role of IS/IT in terms of its use in the industry, by competitors, suppliers and customers as well as the effectiveness of its use within the business unit.


Analysing Competency Level - Three Paths to Analysing Competency Level - Three Paths to market leadershipmarket leadership

Useful concepts in enabling the management to define business and IS/IT strategy • Operational (Process) Excellence – enabling products and

services to be obtained reliably, easily and cost-effectively by customers

• Customer Intimacy – targeting markets very precisely and tailoring products and services to suit the needs of particular individuals/groups

• Product Leadership – continuing product innovation meeting customers‘ needs


Dimensions of competencyDimensions of competency


Treacy and Wiersma (1995)

Dimensions of competencyDimensions of competency• If the organisation is beyond the ‘success’ line in at least one

competency and equal to competitors in the other(s), it should deliver above-average profits in the industry

• However, if any of the competencies are within the ‘success’ circle, any potential advantage is likely to be offset by poor performance elsewhere.


• Where the organisation is outside the ‘success’ line (i.e. is outperforming most others in one dimension), more creative thinking is needed to identify how IS/IT can be used to develop the competency further and sustain the advantage

Dimensions of competency : Aligning the IS/IT Dimensions of competency : Aligning the IS/IT Investment Strategy to the BusinessInvestment Strategy to the Business

• Competency analysis can help identify how IS investments are essential to avoid competitive disadvantages.

• For example, having established ‘operational excellence’ with its book-buying customers, Amazon.com is able to analyse purchase patterns and identify other books of potential interest to an individual customer, which will lead to increase of competency level for other dimension (customer intimacy)


Dimensions of competency : Aligning the IS/IT Dimensions of competency : Aligning the IS/IT Investment Strategy to the BusinessInvestment Strategy to the Business

• Strategic applications should relate to the dimension in which the organisation seeks to excel in the next 1 to 3 years (through product leadership, customer intimacy or operational excellence)

• The objective is to gain advantage in the marketplace• Key operational application improvements are essential in any

dimension if the systems are causing performance levels to fall below those essential to success (i.e. are causing disadvantage).


Value Chain ConceptValue Chain Concept

• “Every firm is a collection of activities that are performed to design, produce, market, deliver and support its products or services. All these activities can be represented using a value chain”

• The value chain model (Porter, 1985) is used to classify, analyse, and understand the translation of resources through processes into final products and services

• This is a generic model in which all enterprises are viewed as acquiring materials (which may be physical, financial or informational) and converting these into a desired product or service which will be sold and distributed to customers.


Value Chain ConceptValue Chain Concept

• The Porter and Miller value chain model can be used – to assess the efficiency and effectiveness of the

enterprise’s main processes.– to assess how IT and IS can be applied to a specific activity

to make it more efficient and effective


Value Chain ConceptValue Chain Concept• Needs to be understood as part of the larger system of

related value chains (belonging to suppliers, customers and competitors)

• An enterprise value chain should cooperate with the value chains of its upstream suppliers and downstream customers in order to improve operational efficiency and improve customer service

• The integration of value chains from raw materials to end-user is known as a value system


Business network processes provide the “glue” that links individual value chains

Example : Major Processes in a Manufacturing Example : Major Processes in a Manufacturing CompanyCompany



• Core Processes– Defining

products and markets

– Planning products

– Engineering– Manufacturing– Selling– Distributing



• Support Processes– Managing information

resources– Managing human

resources– Managing financial

resources

• Management – Strategic planning



• Business Network Processes– Concurrent

engineering– Just-in-time

ordering– Coordinating

logistics– Building-to-order– Constant

replenishment


Information Systems and the Value ChainInformation Systems and the Value Chain

• Business performance is dependent on the processes that gather and disseminate information.

• Normal business transactions (invoices, orders, payments, etc,) could be addressed by a company with most of its customers and suppliers who have computers, simply by connection via the Internet.

• This basic use of e-Commerce is spreading through different industries at varying rates.

• It not only improves the economics of transaction processing but also enables the whole chain to respond more effectively to real-time demand and supply changes.


Reduction of Reduction of Intercompany Costs Intercompany Costs Due To Better Due To Better Information Exchange Along The Value Chain - ExamplesInformation Exchange Along The Value Chain - Examples


Alternative Value Configuration ModelsAlternative Value Configuration Models

• The traditional Porter value chain model was based essentially on a manufacturing/retail view of industry and works well for ‘physical goods’.

• It can be applied quite successfully to some service businesses.

• But in many others it does not really represent what the business does or its relationships with customers and suppliers.


Alternative Value Configuration ModelsAlternative Value Configuration Models

• Stabell and Fjeldstad describe 2 alternative value configuration models to address these problems.

• The focus is on the primary value chain activities:– Value shops:

• Businesses that essentially are ‘problem solving’, delivering value by providing solutions for clients.

• E.g. management consultancies – Value networks:

• Businesses that provide exchanges and mediation between buyers and sellers, enabling relationships to be established.

• E.g. Telco companies


The Use of Value Chain AnalysisThe Use of Value Chain Analysis

• It can enable further analysis of:– The information that flows throughout the industry and

how critical that information is to the functioning of the industry and the success of the firms in it

– The information that is or could be exchanged with customers and suppliers throughout the chain to improve the performance of the business or lead to mutually improved performance by sharing the benefits

– Identify IS/IT


Business Re-engineering and the Value ChainBusiness Re-engineering and the Value Chain

• Improving business performance by:– Eliminating unnecessary processes– Rationalise the rest to ensure the value-adding processes

are optimised, integrate to improve responsiveness, and reduce unnecessary effort and error

– Automate where technology can deliver further improvements

• In many organisations, the need for rapid, relatively radical change is now imperative and IT provides a wide range of capabilities to assist in implementation


Business Re-engineering and the Value ChainBusiness Re-engineering and the Value Chain

• These solutions involve adopting a value-chain-driven approach to understanding ‘how the business works’ and hence can be improved via a combination of business reengineering and new IS.


SummarySummary

• To establish a strategic information systems planning, it is important that some analysis is conducted to determine future potential of IT/IS in organizations

• In terms of the application portfolio, the focus of this part of the assessment is primarily to identify strategic investments in relation to the competency levels and the influence from the external resources

• Analysing dimension of competency • Value Chain Analysis


Documents

CISB444 - Strategic Information Systems Planning Chapter 5 : IS/IT Strategic Analysis: Determining Future Potential