Strategy and IS
Describe the roles of business, organizational
and IS strategy
Compare and contrast: Porter’s three generic
strategies model, D’Aveni’s hypercompetion
model, and Brandenburger and Nalebuff’s coopetition model
Describe the major components and apply the
value chain, competitive forces and strategic
thrusts models
Discuss risks of IS success
Discuss eras of IT use
Strategic Advantage
Does an organization need Information
Systems to gain strategic advantage?
Strategy - A Plan
Business strategy drives organizational and
information systems strategy
Information systems strategy - plan the
organization uses in providing information
services
Information systems strategy is affected by a
firm’s business and organizational strategies
Organizational 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
Strategies
Cost leadership (lowest cost in
industry)
Differentiation of products/services
Focus (finding a specialized niche)
cost
differentiation of product or services
Be Low Cost Producer IT strategic if it can:
Help reduce production costs &
clerical work
Reduce inventory, accounts
receivable, etc.
Use facilities and materials better
Offer interorganizational efficiencies
Produce Unique Product
- IT strategic if it can:
Offer significant component of
product
Offer key aspect of value chain
Permit product customization to meet
customer’s unique needs
Provide higher/unique level of
customer service/satisfaction
Fill Market Niche - IT
strategic if it can:
Permit identification of special needs
of unique target market
Spot and respond to unusual trends
D’Aveni’s
Hypercompetition Model
Focused on turbulent environment
Advantages are rapidly created and
eroded
Sustaining an advantage can be a
deadly distraction
The goal is disruption, not
sustainability, of advantage
Initiatives are achieved with a series
of small steps
Four Arenas of
Competitive Advantage
Cost/quality
Timing/know-how
Strongholds
Deep pockets (short-term only)
Seven S’s
Superior Stakeholder Satisfaction
Strategic 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-opetition
Optimally combining cooperation and
competition
Valu Net of competitors and
complementors
Strategic Information
Systems
IS that help gain strategic advantage
Significantly change manner in which
business supported by the system is done
Outwardly aimed at direct competition
Inwardly focus on enhancing the
competitive position
Create strategic alliances
IS can support business strategies
Eras of IT
Era I
1960s
Era II
1970s
Era III
1980s-1990s
Era IV
1990s-2000
Primary Role
of IT
Justify IT
Expenditures
Effectiveness:
Ind & group
effectiveness
Strategic:
Org & Industry
Transformation
Value creation:
Partnerships
Increasing
productivity and
better decisions
Competitive
position
Efficiency:
Automate
ROI
Adding value
Eras of IT
Era I
1960s
Era II
1970a
Era III
1980s-1990s
Era IV
1990s-2000
Target of
Systems
Dominate
Technology
Individual/
manager
Minicomputer
“Decentralized”
Business
Process
Client/Server
“Distributed”
Customer,
Supplier,
Ecosystem
Internet
“Ubiquitous”
Organization
Mainframe
“Centralized”
Unusual Suspects:
Information Resources
Information systems infrastructure
Information and knowledge
Proprietary technology
Technical skills of the IT staff
End users of the information system
Relationship between IT and business
managers
Business processes
Strategy Axioms
Axiom: 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?
Support Activities
Primary Activities
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)
Inbound
Logistics
(raw
materials
handling
and
warehousing)
Operations
(machine
assembling,
testing)
Outbound
Logistics
(warehousing and
distribution
of finished
product)
Marketing
and Sales
(advertising,
promotion,
pricing,
channel
relations)
Service
(installation,
repair,
parts)
Value Chain Model
Chain of basic activities that add to
firm’s products or services
Primary activities
Secondary activities
Value Chain Primary
Activities
Inbound
Outbound
Operations
Marketing and Sales
After-Sale Services
Value Chain Support
Activities
Technology development
Procurement
Human Resources Management
Management Control
accounting/finance
coordination
general management
central planning
Competitive Forces
Threat of entry of new competition
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products or
services
Rivalry among existing firms
Strategies for
Competitive Forces
Note - strength of force is
determined by factors in industry
Gain a competitive edge
Build defenses against forces
Formulate actions to influence forces
Strategic Questions
Can 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 Thrusts
Strategic purposes that drive the use of
the firm’s resources
Differentiation
Cost
Innovation
Growth
Alliance
Searching for Specific
Opportunities
What 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 Success
Change the Basis of Competition
Lower Entry Barriers
Promote Litigation or Regulation
Awake Sleeping Giant
Reflect Bad Timing
Are Too Advanced