Strategy and ISDescribe the roles of business, organizational and IS

strategyCompare and contrast: Porter’s three generic

strategies model, D’Aveni’s hypercompetion model, and Brandenburger and Nalebuff’s co-opetition model

Describe the major components and apply the value chain, competitive forces and strategic thrusts models

Discuss risks of IS successDiscuss eras of IT use

Strategic Advantage

Does an organization need Information Systems to gain strategic advantage?

Strategy - A PlanBusiness strategy drives organizational and

information systems strategyInformation systems strategy - plan the

organization uses in providing information servicesInformation systems strategy is affected by a firm’s

business and organizational strategiesOrganizational strategy - organization’s design as

well as the choices it makes to define, set up, coordinate and control its work processes

Remember interdependency!

Porter’s Three Generic StrategiesCost leadership (lowest cost in

industry)Differentiation of products/servicesFocus (finding a specialized niche)

cost differentiation of product or services

Be Low Cost Producer - IT strategic if it can:Help reduce production costs &

clerical workReduce inventory, accounts

receivable, etc.Use facilities and materials betterOffer interorganizational efficiencies

Produce Unique Product - IT strategic if it can:Offer significant component of

product Offer key aspect of value chainPermit product customization to

meet customer’s unique needsProvide higher/unique level of

customer service/satisfaction

Fill Market Niche - IT strategic if it can:Permit identification of special

needs of unique target marketSpot and respond to unusual

trends

D’Aveni’s Hypercompetition ModelFocused on turbulent environmentAdvantages are rapidly created and erodedSustaining an advantage can be a deadly

distractionThe goal is disruption, not sustainability, of

advantageInitiatives are achieved with a series of

small steps

Four Arenas of Competitive AdvantageCost/qualityTiming/know-howStrongholdsDeep pockets (short-term only)

Seven S’sSuperior Stakeholder SatisfactionStrategic Soothsaying Positioning for Speed Positioning for Surprise Shifting the rules of competition Signaling strategic intent Simultaneous and Sequential Strategic

Thrusts

Brandenburger and Nalebuff’s Co-opetitionOptimally combining cooperation

and competitionValu Net of competitors and

complementors

Strategic Information SystemsIS that help gain strategic advantageSignificantly change manner in which

business supported by the system is doneOutwardly aimed at direct competitionInwardly focus on enhancing the

competitive positionCreate strategic alliancesIS can support business strategies

Eras of ITPrimary Roleof IT

Justify ITExpenditures

Era I1960s

Efficiency:Automate

ROI

Era II1970s

Effectiveness:Ind & groupeffectiveness

Increasingproductivity andbetter decisions

Era III1980s-1990s

Strategic:Org & IndustryTransformation

Competitiveposition

Era IV1990s-2000

Value creation:Partnerships

Adding value

Eras of ITTarget ofSystems

DominateTechnology

Era I1960s

Organization Mainframe“Centralized”

Era II1970a

Individual/manager

Minicomputer“Decentralized”

Era III1980s-1990s

BusinessProcess

Client/Server“Distributed”

Era IV1990s-2000

Customer,Supplier,Ecosystem

Internet“Ubiquitous”

Unusual Suspects: Information ResourcesInformation systems infrastructureInformation and knowledgeProprietary technologyTechnical skills of the IT staffEnd users of the information systemRelationship between IT and business

managersBusiness processes

Strategy AxiomsAxiom: A scarce resource adds value

Corollary: only if there is a need

Altnernative axiom: Value is derived from plentitude What good is a single fax machine?

Firm Infrastructure(general management, accounting, finance, strategic planning)

Human Resource Management(recruiting, training, development)

Technology Development(R&D< product and process improvement)

Procurement(purchasing of raw materials, machines, supplies)

Supp

ort A

ctiv

ities

Prim

ary

Act

iviti

es InboundLogistics(rawmaterialshandlingandwarehous-ing)

Operations

(machineassembling,testing)

OutboundLogistics(warehous-ing anddistributionof finishedproduct)

Service

(installation,repair,parts)

Marketingand Sales(advertising,promotion,pricing,channelrelations)

Value Chain ModelChain of basic activities that

add to firm’s products or services

Primary activitiesSecondary activities

Value Chain Primary ActivitiesInboundOutboundOperationsMarketing and SalesAfter-Sale Services

Value Chain Support ActivitiesTechnology developmentProcurementHuman Resources ManagementManagement Control

accounting/finance coordination general management central planning

Competitive ForcesThreat of entry of new competitionBargaining power of suppliersBargaining power of buyersThreat of substitute products or

servicesRivalry among existing firms

Strategies for Competitive ForcesNote - strength of force is

determined by factors in industry Gain a competitive edgeBuild defenses against forcesFormulate actions to influence

forces

Strategic QuestionsCan IT create barriers to entry?

(new entrants)Can IT build in switching costs?

(buyers)Can IT strengthen customer

relationships? (buyers)

Strategic Questions (cont)Can IT change the balance of

power in supplier relationships? (suppliers)

Can IT change the basis of competition? (competitors)

Can IT generate new products?(competitors, substitutes)

Wiseman’s Theory of Strategic ThrustsStrategic purposes that drive the use

of the firm’s resourcesDifferentiationCostInnovationGrowthAlliance

Searching for Specific OpportunitiesWhat is the mode of the thrust?

(offensive, defensive)What is the direction of the

thrust? (use, provide)What is the strategic target of

the thrust? (supplier, customer, competitor)

Risks of IS SuccessChange the Basis of CompetitionLower Entry BarriersPromote Litigation or RegulationAwake Sleeping GiantReflect Bad TimingAre Too Advanced