TDT4175 - Information Systems, Spring 2006
This week:
IS Strategy, part I
John Krogstie, IDI
Partly based on slides by Guttorm Sindre and Jon Atle Gulla
Strat1.ppt
1
TDT4175 - Information Systems, Spring 2006
The course so far – and the rest

Focussing on two things



Available technologies

Overview in the first weeks of the course
(Hawryszkiewycz ch. 1-3)

ERP systems (before Easter)
Development methods

Main part of Hawryszkiewycz book

UML activity diagrams

Practical exercises in problem analysis, modelling,
requirements elicitation and specification
Now:

Higher level strategic use of information systems

Book by Pearlson & Saunders
2
TDT4175 - Information Systems, Spring 2006
Overview of the strategy part



This week

(Chapter 1: The IS Strategy Triangle)

Chapter 2: Strategic Use of Information Resources

Chapter 3: Organizational Impacts of IS Use

Chapter 4: IT and the Design of Work

Chapter 5: IT and Changing Business Processes
Next weeks

Chapter 9: Funding IT

Chapter 11: Knowledge Management

Summary of the entire course
Many pages lectured in a short time

But fairly easy-to-read material
3
TDT4175 - Information Systems, Spring 2006
Chapter 1: The Strategy Triangle (fig 1.1)
Business strategy

visions
goals
business tactics,
etc.
Organizational strategy
Information strategy
organizational structure
job descriptions
competence/training plans
hiring practices
etc.
applications
enterprise architecture
information management
hardware, software, networks,
etc.
(Also discussed in the Hawryszkiewycz book)
4
TDT4175 - Information Systems, Spring 2006
Ch.1: Business Strategy Frameworks

Business strategy:

plan

well-articulated vision



where a business seeks to go

how it expects to get there
communication of goals
2 frameworks

Achieving competitive advantage

Hypercompetition
5
TDT4175 - Information Systems, Spring 2006
Strategies for achieving competitive advantage
(fig 1.2)
Low cost
position
Uniqueness perceived
by customer
Industry wide
Particular
segment only

Overall cost
leadership
Differentiation
Focus
M. Porter: Competitive Strategies. Free Press, 1998.
6
TDT4175 - Information Systems, Spring 2006
Differentiation

Shareholder value



Unique knowledge -> timing of use of specialized knowledge
creates competitive advantage
Barriers to entry model

Assessment of competitive threats

5 forces: suppliers, buyers, substitutes, industry competitors,
new entrants

Offer products/services that are difficult to displace
Unlimited resources model

Utilize large base of resources to outlast competitors
7
TDT4175 - Information Systems, Spring 2006
Hypercompetition & New 7-S’s (fig 1.3)

Speed and aggressiveness of moves & countermoves create advantages

Advantages rapidly created and eroded
Vision for disruption
- stakeholder satisfaction
- strategic soothsaying
Market
disruption
Capability for disruption
- speed
- surprise
Tactics for disruption
- shifting the rules
- signalling
- simultaneous and sequential
strategic thrusts
8
TDT4175 - Information Systems, Spring 2006
D’Aveni’s new 7-S’s (fig 1.4)
Superior stakeholder
satisfaction
Strategic soothsaying
Positioning for speed
Position for surprise
Shifting the rules of
competition
Signaling the rules of
competition
Simultaneous and sequential
strategic thrusts
Understanding how to maximize customer
satisfaction by adding value strategically
Seeking outnew knowledge that can
predict or create new windows of
opportunities
Preparing the organization to react as
quickly as possible
Preparing the organization to respond to
the marketplace in a manner that will
surprise competitors
Finding new ways to serve customers
which transform the industry
Communicating the intended actions of a
company
Taking a series of steps designed to stun
and confuse competitors in order to
disrupt or block their efforts.
9
TDT4175 - Information Systems, Spring 2006
Business strategy vs. IS strategy (fig 1.5)
Framework
IS usefulness
Idea
Porter’s generic
strategies
framework
Achieve competitive
advantage through
cost leadership,
differentiation or
focus
D’Aveni’s
Speed and aggressive
hypercompetition moves and
model
countermoves create
competitive
advantage
Co-opetition
Companies cooperate
model
and compete at the
same time
10
Understanding which strategy is
chosen is critical to choosing IS to
complement that strategy
The 7-S’s give suggestions on what
moves and countermoves to make
and IS are critical to achieve the
speed needed for these moves
Being cooperative and competitive
at the same time requires that IS can
manage these two roles
TDT4175 - Information Systems, Spring 2006
Organizational Strategies

“How will the company organize in order to
achieve its goals and implement its business
strategy?”

Elements: organizational design, work processes,
employees

Frameworks:

Business diamond

Role of IT in organization

Organizational design variables
11
TDT4175 - Information Systems, Spring 2006
The Business Diamond (fig 1.6)
Business processes
Job and structures
Values and beliefs
Management and
measurement systems
M. Hammer and J. Champy: Reengineering the Corporation, 1994.
12
TDT4175 - Information Systems, Spring 2006
Organizational Strategies

Summary:

What are the important structures and reporting
relationships?

What are the characteristics, experiences, and skill
levels of employees

What are the key business processes?

What control systems are in place?

What is the culture of the organization?
13
TDT4175 - Information Systems, Spring 2006
Information Systems Strategy

Definition: Plan used by an organization in
providing IS support

Elements:


Architecture: what

Responsibilities and resources: who

Arrangements: where
US: Large government agencies obliged to
maintain enterprise IT architecture plans
14
TDT4175 - Information Systems, Spring 2006
IS Strategy Matrix (fig 1.9)
Ele ment
Hardware
Software
Networking
Data
What
List of physical
components
List of programs,
applications, and
utilities
Who
Individuals who use
it or manage it
Individuals who use
it or manage it
Diagram of how
hardware and
software
components are
connected
Bits of information
Individuals who use
it or manage it
Company from
whom service is
obtained
Individuals who
own it or manage it
15
Where
Physical location
What hardware it
resides upon and
where that hardware
is located
Where the nodes are
located, where the
wires and other
transport media are
located
Where the
information resides
TDT4175 - Information Systems, Spring 2006
Chapter 2: Strategic Use of Information Resources

What is an information resource?

Evolution of information resources

Evaluating information resources

How can information resources be used
strategically?
1.
Porter’s 5 forces
2.
Value Chain Model
3.
Wiseman’s theory of strategic thrusts
16
TDT4175 - Information Systems, Spring 2006
What is an information resource?

Important information resources
IS infrastructure
Information and knowledge
Proprietary technology
Technical skills of IT staff
End-users of the IS
Relationship between IT and business managers
Business processes

Information resources create strategic
advantages
17
TDT4175 - Information Systems, Spring 2006
Evolution of Information Resources (fig 2.1)
Primare role
of IT
1960s
Efficiency
Automate
exisiting paperbased processes
Justify IT
expenditures
ROI
Target of
system
Organization
Information
model
Dominate
technology
Application
specific
Mainframe
centralized
intelligence
1970s
Effectiveness
Increase
individual and
group
effectiveness
Increasing
productivity
and better
decisions
Individual
manager /
group
Data-driven
1980s
Strategic
Industry/
organization
transformation
2000
Value creation
Collaborative
partnerships
Competitive
position
Adding value
Business
processes
Customer,
supplier,
ecosystem
Knowledgedriven
Internet
ubiquitous
intelligence
Businessdriven
Microcomputer Client-server
decentralized
distribution
intelligence
intelligence
18
TDT4175 - Information Systems, Spring 2006
Evaluating Information Resources

What makes the information resource valuable?

Who appropriates the value created by the
information resource?

Is the information resource equally distributed
across firms?

Is the information resource highly mobile?

How quickly does the information resource
depreciate?
What should our information resources be?
19
TDT4175 - Information Systems, Spring 2006
Porter’s 5 Forces (fig 2.2)
cost-effectiveness
market access
differentiation
Bargaining power
of suppliers
Potential threat of
new entrants
switching costs
access to distribution channels
economics of scale
Industry
competitors
supplier selection
backward integration
Threat of substitute
products
redefine products/services
improve price/performance
20
Bargaining power
of buyers
buyer selection
switching costs
differentiation
TDT4175 - Information Systems, Spring 2006
Value Chain Model (fig 2.4)
Management & Administrative Services
Hum an Resources Management
Support
Activities
Technology Developm ent
Procurement of Resources
Competitive
Advantage
Primary
Activities
Inbound
Logistics
Outbound
Operations Logistics
Marketing
& Sales
Service
-Information resources should not be used in isolation
-Achieve competitive advantage
-lowering cost
-adding value to product/service
21
TDT4175 - Information Systems, Spring 2006
Value Chain Across Companies (fig 2.5)
suppliers’
value chain
firm’s
value chain
channel’s
value chain
22
buyers’
value chain
TDT4175 - Information Systems, Spring 2006
Chapter 3: Organizational Impacts of IS Use

Organizational Design Variables

Information technology and organizational design

Information technology and management control
systems

Virtual organizations

Immediately responsive organizations

How can IT improve organizational design
and management control systems?
23
TDT4175 - Information Systems, Spring 2006
Organizational Design Variables (fig 3.1)
Variable
Organizational variables
Decision rights
Business processes
Formal reporting
relationships
Informal networks
Control variables
Data
Planning
Performance
measurement and evaluation
Incentives
Cultural variables
Values
Description
Decision authority for planning and running company
Set of ordered tasks to complete business objectives
Structure to ensure coordination among all units
Other forms of communication/coordination
Information collected, stored and used
Process by which future direction is established,
communicated and implemented
Measures for assessing and improving quality of work
Monetary and non- monetary devices used to motivate
behavior
Implicit and explicit beliefs that underlie decisions and
behavior
24
TDT4175 - Information Systems, Spring 2006
IT and Organizational Design

Essential impacts of IT:

Information technology allows companies to hire
differently

Information technology allows organizations to be
structured differently
25
TDT4175 - Information Systems, Spring 2006
IT & Hiring



People

competence needed

fewer non-skilled employees needed

fewer managers needed

more independent employees

single manager can monitor more people
Work processes

new tasks and processes

often centralization of certain functions
Organizational effects

technical capacity incorporated in work process

IT function high on organizational chart

IT function fully integrated with non-technical units
26
TDT4175 - Information Systems, Spring 2006
IT and Organizational Structures
1. Hierarchical organization
2. Flat organization
often entrepreneurial organizations
IS for routine tasks
3. Matrix organization
often project based
IS for information sharing
control challenge
27
TDT4175 - Information Systems, Spring 2006
IT and Organizational Structures (cont.)
4. Networked organization
- flat and hierarchical
- formal/informal communication networks connect all parts of company
- IS: control, process design, communications
28
TDT4175 - Information Systems, Spring 2006
IT and Organizational Structures
5. T-form organization
- technologically based
- feels flat
- IT replacing organizational components
- technological leveling
- automatic work coordination
- central repositories
- more inclusive responsibilities
- Integration with customers
and suppliers
E.g. Proctor & Gamble and
and Wal-Mart
29
TDT4175 - Information Systems, Spring 2006
IT and Management Control Systems


Management control activities

monitoring

evaluating

providing feedback

compensating

rewarding
Roles of information systems:

Enable collection of information

Speed the flow of information

Facilitate the analysis of information
30
TDT4175 - Information Systems, Spring 2006
Virtual Organizations

Networked structures

IT the basis for all communication and
coordination

Information sharing with IT

Monitoring results rather than process

Collaboration with anyone anywhere

E.g. some consulting and software firms
31
TDT4175 - Information Systems, Spring 2006
Immediately Responsive Organizations

Zero-time organizations

Capabilities needed

Instant value alignment: understanding the customer’s
needs

Instant learning: built into processes

Instant involvement: IS for communication with
suppliers, customers, employees, etc.

Instant adaptation: culture and structure for instant
changes

Instant execution: processes with few people and short
cycle times
32
TDT4175 - Information Systems, Spring 2006
Chapter 4: IT and the Design of Work


Job design framework (fig 4.1)

What tasks will be performed?

How will tasks be performed? (auto/manual)

Who will do the work?

Where will it be performed?

How can the IS increase performance, satisfaction and
effectiveness of the work?
How IT changes the nature of work

New types of work

New ways to do traditional work

Changing communication patterns & collaboration

Changing decision making / info processing
33
TDT4175 - Information Systems, Spring 2006
New challenges in managing people

Cf. Fig 4.2
Trad. Approach
Newer approach
(subj. observation)
(obj. assessment)
Supervision
Personal and
informal
Electronic or by
deliverable
Evaluation
By direct
observation
By deliverable
Compensation and
rewards
Often individually
based
Often team-based
or contractual
Hiring
Personal. Clerical
Often electronic.
skills rather than IT Require IT skills
34
TDT4175 - Information Systems, Spring 2006
Changing where work is done



Drivers for telecommuting & mobile work

Knowledge-based work

Flexible life-style and work-schedules

Save commuting time

Better, cheaper and more mobile technology
Disadvantages of telecommuting / mobile work

Harder to manage

High demands on self-discipline

Lack of social communication
Outsourcing

E.g., programming, tech support
35
TDT4175 - Information Systems, Spring 2006
Gaining acceptance for IT-induced change

Employee resistance a major challenge



For instance in ERP projects
Managers and developers must be devoted to the
organizational change process

Not just the technology, but also employee exptectations
and attitudes

Involve employees in the project
Technology acceptance model (TAM), fig 4.7
Perceived
usefulness
Intention
to use
Perceived
ease of use
36
Actual use
TDT4175 - Information Systems, Spring 2006
Chapter 5: IT and Changing Business Processes

Function perspective vs. process perspective

What is a business process?

Philosophies


Total Quality Management

Business Process Reengineering
IT as enabler
37
TDT4175 - Information Systems, Spring 2006
Cross-functional Processes (fig 5.3)
•Traditionally: silo-view, one IS per functional department
•Problem: local optimization
•Business processes cut across this
•Main focus: value to customer, IS supporting processes
functions
o
p
e
r
a
t
i
o
n
s
m
a
r
k
e
t
i
n
g
a
c
c
o
u
n
t
i
n
g
p
u
r
c
h
a
s
i
n
g
38
s
a
l
e
s
business
processes
TDT4175 - Information Systems, Spring 2006
Total Quality Management

Incremental changes to processes

Procedure:


Choose business process to improve

Choose a metric by which to measure the business
process

Enable personnel involved with the process to find
ways to improve it
Evaluation:

Personnel in control of improvements

Changes less threatening

Often positively received

What if radical changes are needed?
39
TDT4175 - Information Systems, Spring 2006
Business Process Reengineering


Key aspects:

The need for radical change

Thinking from a cross-functional process perspective

Challenging old assumptions

Networked organization

Empowerment of individuals

Measurement of success tied directly to business goals
Approach (fig 5.7)
Current
process
vision
measure
change
40
New
process
TDT4175 - Information Systems, Spring 2006
BPR is NOT TQM
Degree of Change
Process Improvement
(TQM)
Incremental
Process Innovation
(BPR)
Radical
Starting Point
Existing Process
Clean Slate
Frequency of Change
Continuous
One-Time
Time Required
Short (weeks-months)
Inception/Participation
Top-Down/Bottom-Up
Medium to long (depending
on scope of BPR effort)
Top-Down
Scope
Broad; Process-oriented
Risk
Narrow; Task- or Functionoriented
Moderate
Primary Enabler
Statistical Control
Information Technology
Type of Change
Cultural
Cultural and Structural
Source: Adapted from [Davenport 1993]
41
High
TDT4175 - Information Systems, Spring 2006
Why BPR is Necessary

The Virtual Organization: Three C’s Driving Change



Customers take charge.

Mass market v. a “market of one”

Backward integration

Informed consumers
Competition intensifies.

More and different kinds

Big is not better

Technology changes the nature of competition.
Change becomes constant.

reduced product cycles

reduced time to develop new products

more environment scanning
42
TDT4175 - Information Systems, Spring 2006
Information Technology = Enabler
Old Rule
Information must be
processed
sequentially.
Only experts can
perform complex
work.
Business must
choose a centralized
or decentralized
structure.
Only managers have
access to
information.
Technology
Shared databases
& imaging
technology
Expert Systems
Telecomm
networks
New Rule
Information can be
processed
concurrently.
A generalist can do
the work of an
expert.
Businesses can reap
the benefits of both
structures.
Decision support Decision making is
tools
part of everyone’s
job.
43
TDT4175 - Information Systems, Spring 2006
Information Technology = Enabler
Old Rule
Technology
Field personnel
Wireless data
need offices to send communications &
and receive
portable computers
information.
The best contact is
Interactive
personal contact.
videodisc & WWW
You have to find
out where things
are.
New Rule
Field personnel can
send and receive
information from
anywhere.
The best contact is
effective contact.
Automatic identifi- Things tell you
cation & tracking where they are.
technology
44
TDT4175 - Information Systems, Spring 2006
Characteristics of Reengineered Processes

Several jobs are combined into one

Workers make decisions

The process steps are performed in a natural order

Eliminate process linearity and sequence where possible

Perform tasks concurrently to reduce process cycle time

Processes have multiple versions

Work is performed where it makes the most sense

Checks and controls are reduced. (Tricky)

Reconciliation is minimized. (Carefully)

A case manager provides a single point of contact

Hybrid centralized/decentralized operations are prevalent.

Reap the advantages of both operating modes!
45
TDT4175 - Information Systems, Spring 2006
IT Standards and Strategic Decisions

Strategic advantage of process redesign?

no: Enterprise system must be the solution

yes: ES might hurt organization?

no: ES might be the solution

yes: Change management program reasonable?

no: ES package probably not the solution

yes: ES might be the solution
46
TDT4175 - Information Systems, Spring 2006
Summary

IS strategy must be aligned with business
strategy and organizational strategy (ch.1)


IT has an impact on the organization (ch 3)



Striving for competitive advantage (ch.2)
Structure and management
IT affects how work is done (ch 4)

New jobs, new ways to do old jobs

Telecommuting, mobile work
IT enables changing business processes (ch 5)

Focus on value to customer

TQM (gradual optimization) vs BPR (radical change)

ERP (and similar) applications are vital here
47