TOPIC 9
POLICY AND STRATEGIC INFORMATION SYSTEMS
Objectives:
 To define vision, mission, strategy and policy
 To explain the strategic grid framework
 To define what strategic information systems are
 To explain Porter’s competitive forces model
 To describe the value chain and explain how it can be used for identifying IT opportunities
Reading:
 Ahituv et al (1994) Chpt 7
 O’Brien (1996) Management Information Systems Chpt 11
Introduction
This topic covers 2 main areas:



Information systems policy:
the strategy for IS use within an organisation
IS strategy within overall organisational strategy.

Strategic information systems (SIS):
 IS for strategy formulation/maintenance
and/or
 IS that have a large (strategic) impact - SIS can be TPS, MIS, DSS etc – an IS becomes
strategic not because of who uses it but because of how it is used to give the organisation a
competitive advantage.
IS Policy Components
1. Vision: An inspirational image of future direction ….. simple, broad, linking dreams to action,
leading to a mission.
“Microsoft's early vision of a computer on every desk and in every home is coupled today with a
strong commitment to Internet-related technologies that expand the power and reach of the PC and
its users.”
“Microsoft's long-term vision of the personal computer as a tool to empower people and
organizations to do great things drives its development efforts as the next era of personal computing
and communications technology approaches.”
2. Mission – a vision leads to a mission.
A mission statement describes what the company/IS dept is or intends to be, and its distinguishing
features.
A mission statement should exist for an organisation, and for the IS function. The IS mission will
support the organisational mission.
“Since its inception in 1975, Microsoft Corp.'s mission has been to create software for the personal
computer that empowers and enriches people in the workplace, at school and at home.”
http://www.microsoft.com/presspass/corpprof.htm
See the web site below for some humorous examples of mission statements:
http://umweb1.unitedmedia.com/comics/dilbert/career/bin/ms2.cgi
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3. Strategy – the approaches and actions to be taken to achieve mission
Originally a military term, now endemic in the commercial world.
Originally “planning the conquest of enemies by deploying resources”.
Specific and coherent directional statements defining IS in relation to its environment and directing
resource allocation, in line with the mission.
See the following for examples of strategic plans:
1. Organisational strategic plan:
http://www.gatech.edu/techhome/strategic.plan.html
2. IT strategic plan:
http://www.state.ky.us/kirm/sitp/sitp.htm
4. Policies - guidelines detailing how strategy is to be implemented.
Policies are needed to define priorities and direct IS decisions to ensure they are consistent with
strategy.
Areas where IS policy is needed include:

Hardware e.g. standardisation, sourcing decisions,

Software e.g. standards, languages, supported packages

Staffing e.g. training, recruitment

Application development e.g. methodology, prioritisation, documentation

Finance & accounting – funding levels for IS, charge out?
Read example ‘Formulating a Microcomputer Policy’ p208 Ahitiv
Together, vision, mission, strategy and policy provide a framework indicating where the IS
department is going and how it is going to get there
Formulating policy
There are many conceptual frameworks which can help formulate IS policy.
One of the most widely used is the Strategic Grid (McFarlan & McKenny) - See Ahituv Fig 7.1
Grid can be used to analyse an organisation, (as described in text) or to analyse the IS applications
portfolio of a company:
Strategic – applications which are critical to sustaining future business strategy
Factory – dependent upon IT for day to day functions, but no competitive advantage
Support – not highly dependent, valuable, but not critical to success
Turnaround – new applications under development which will have a strategic role
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The Strategic Grid ctd.
The organisation, (and in larger companies, each strategic business unit (SBU)) needs to decide
which category of IT needs it has, so that it can adopt IS strategies that fit it (see Ahituv Table 7.2).
General management and IS management need to agree.
Increasingly, more organisations are falling into the strategic box.
How responses to IS issues may differ depending on placement in strategic Grid (Table 7.2
Ahituv)
IS Issues
CIO reports to
IS planning
IS mission
Investment in IT
Skills of CIO
Focus of IT
Support
Functional manager
Technical
Control
Conservative
Technical
Efficiency (productivity)
Organisational
location of IT
IS management
style
User involvement
Low
Strategic
CEO
Strategic
Technological innovation
Aggressive
Business management
Effectiveness (competitive
advantage)
High
Control
Influence
Low
High
Strategic IS
Defined as any IS which supports the organisations competitive strategy.
The fastest growth area for IS as IT is moving from a support role to a strategic role.
The emphasis has moved from using IT to cut costs, to using IT to develop new products, create
links with customers and suppliers, with an increasing focus on systems that reach beyond the
company boundaries.
IT impacts on an organisation at 3 levels:
 Industry level
 Firm level
 Strategy level
Many industry sectors have been totally transformed by the use of IT.
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Question
What significant changes have occurred from the introduction of IT in the following sectors?
1.
Banking
2.
Air travel
3.
Publishing and Book Retail
Example
Ahituv (p212) gives the following example of types of IS that relate to inventory processing:
TPS – records inventory transactions and updates inventory master file
MIS – manages and controls inventory
DSS – supports managers in determining inventory policy
SIS – processes customers’ inventories and links them to the firm’ s order entry system
1.
Why is the 4th example classified as a SIS?
2.
How else could you classify the SIS?
Effect of IT at firm level
The impact of IT at the individual firm level is determined by the competitive forces the firm faces.
Porters model of competitive forces models these (Ahituv Fig 7.2).
This model revolutionised business theory by focusing not on getting the internal workings of the
firm right, but on the competitive forces a firm has to deal with in its environment.
IT can assist in dealing with all of these forces:
1. Suppliers
 Increase the number and mix of suppliers (e.g., by accessing commercial data bases that
provide information on suppliers).
 Reduce the bargaining power of suppliers by insisting on IT-based linkages (e.g., just-in-time
inventories).
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2. Buyers
 Reduce the bargaining power of buyers by increasing the costs of switching to other suppliers
(e.g., by installing terminals at the buyer's site).
 Increase the number of buyers (e.g., by using electronic markets).
3. New Entrants
 Create barriers to entry (e.g., mandatory heavy investments in hardware and software)
 Be the first to offer a new product or service.
 Control or own vital data bases.
4. Substitutes
 Enrich your product with information-based services.
 Speed up the life cycle of products (e.g., by using CAD/CAM technology).
5. Intra-industry Rivals
 Join forces with rivals (e.g., ATM networks)
 Introduce new information-intensive products
Generic Business Strategies
Porter suggests 3 generic strategies organisations can adopt:

Overall cost leadership

Differentiation of products/services -distinguishing your firm's products/services from
competitors

Focus - differentiation or low cost in a narrow segment (niche)
Other widely suggested strategies:
 Innovation - introducing a product or process change that results in a fundamental
transformation in the way business is conducted

Growth - achieve advantage by volume or geographical expansion, backward or forward
integration, product-line diversification

Alliance - achieve advantage by forging marketing agreements, forming joint ventures
Value chain analysis
The value chain (also developed by Porter) is a framework that can be used to analyse the activities
of a firm. It can be used to identify ways to cut costs or enhance the value of products.
The value chain consists of:

Primary activities - those that transform raw materials into dispatched product – ie inbound
logistics, operations, outbound logistics, marketing and sales, after sales service.

Support activities – those that provide the organisational infrastructure - ie corporate
infrastructure, human resources management, R&D, procurement.
Each activity adds value, at a cost. If the total cost of added values is less than the customer pays
then there is a profit
Value chain analysis can be used to identify and target points in the chain where costs can be reduced
or value can be added, and for the IT department, where IT can be used to do this. (Ahituv Fig 7.3)
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The activities in the chain are interdependent, and analysis should also look at the links in the chain e.g.
communications from customer support can be fed back into production or marketing.
To fully understand the organisation’s environment, we also need to look at our company in relation
to the chains of others, as a value system (fig 7.4)
Value chain analysis is often used in conjunction with CSF (Critical Success Factors) analysis to
determine the critical activities in the system.
Risks with SIS
SIS are often large, complex and use cutting edge technology, all factors which imply high project
risk.
Other risk factors include:
1.
Continued investment for sustainability
2.
By making IS the major vehicle for producing or delivering its product, a company may risk
opening its primary line of business to competitors who have underutilized IS resources.
3.
SIS may trigger monopoly litigation.
4.
Investments in SIS may simply not pay off competitively.
5.
Companies developing and implementing SIS may give their customers or suppliers the IT
know-how to get along without them in the long run.
6.
By increasing the strategic importance of IT, companies may increase the relative strength
of suppliers of hardware and software, thus establishing a very powerful supplier.
7.
Companies may divert resources and management attention away from their main line of
business.
8.
The SIS may fail to meet real customer's needs (conceptualization failure).
9.
Information about a new SIS is prematurely leaked to a competitor.
10.
The SIS may be too easy, or require low investment by a competitor, to replicate.
Historically, successful innovations are always copied.
11.
Sometimes a SIS may be pushed too fast, before the requisite organisational changes are
made.
12.
The SIS may lower entry barriers of potential new entrants to the industry (e.g., it educates
customers to other alternatives of doing business).
13.
A firm may join an inadequate SIS alliance that dissolves after a short life.
Guidelines for SIS
1.
Evaluate the impact of SIS at the firm and industry level before a decision is made to proceed.
2.
Reduce the risk of being bypassed by continually adopting and adding features to meet
additional or changing customers' needs (let the competitors play catch-up).
3.
Carefully consider the resources and capabilities of current and potential competitors.
4.
Promote technical partnership between general management, user management, and
skilled IS professionals in SIS projects.
5.
Verify commitment and support of top management.
6.
Verify that the organization's culture provides for willingness to entertain innovative ideas.
7.
Build on internal IT knowledge and IS capabilities and systems.
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