Strategic Information Systems

Todays Learning
Objectives
What is the nature of competition facing
todays firms?
How can we analyze a company and
industry in order to determine their best
strategy?
How can information systems support
corporate strategy?
What is the character of a digital
corporation?
What is the role of managers in fostering IT-
based innovation and leveraging IT value?
Strategic Information Systems
Information systems at any level that have
a strategic impact
change goals, operations, products, services or
relationships
improve decision making
help develop or maintain competitive advantage
support a new business model
 Porters 5 Forces Model
New entrants

Threat of
new entrants

Bargaining power Industry Bargaining power

Suppliers of suppliers competitors of customers Customers

Intensity of
rivalry

Potential development
of substitute products

Substitutes
Porters competitive
forces
Bargaining Power of Buyer: Where there are only a few customers, they can exert
a strong influence over their suppliers, causing them to undercut each other.

Bargaining Power of Supplier: Similar to that of buyer but from the opposite
perspective. If suppliers are in a strong position they can increase the firms costs by
extracting a higher price.

Threat of New Entrants: New competitors bring capacity, often with substantial
resources to compete with. Unless market is expanding faster than new entrants
arrive, they will be competing away profits and profitability will decline. (Entry barriers
include brand names and loyalty).

Substitute Products: The propensity of buyers to switch to alternative products is

affected by both price and performance of substitute products. Can offer substitution
to others.

Rivalry Between Competitors: Employ competitive strategy to improve their

position and competitive edge, by offering buyers something their competitors can
not duplicate easily or cheaply.
Competitive forces
questions Can IS Build Barriers
to Entry ?

Can IS Build in
Can IS Change the
Switching Cost
Balance of Power
Can IS Change the Which Tie a
with Suppliers ?
basis of Competition? Supplier to a
Customer ?

Can IS Generate New

Products or Services ?
 A Value Chain Framework
Products flow through a value chain channel to
reach a customer
Raw material producer
Producer (manufacturer for hard products)
Wholesaler (usually more than one)
Retailer (many)
Customers
How does an organization take advantage of
the technology to change internal and external
processes?
Information that is a byproduct of the internal
value chain can be made visible and accessible
 Porters Value Chain
Firm infrastructure
Activities
Support

Ma
Human resource management

rgi
Technology development

n
Procurement

n
rgi
Inbound Opera- Outbound Marketing Ser-
logistics tions logistics and vice

Ma
sales

Primary Activities
Value Chain Definition
Strategic collaboration of organizations for
the purpose of meeting specific market
objectives over the long term and for the
mutual benefits of all links of the chain.
 Levi Strauss
Value-Delivery Network

Order Order Order Order

Du
Du Pont
Pont Milliken
Milliken Levis
Levis Sears
Sears Customer
Customer
(Fibers)
(Fibers) (Fabric)
(Fabric) (Apparel)
(Apparel) (Retail)
(Retail)

Delivery Delivery Delivery Delivery

Competition is between networks,

not companies. The winner is
the company with the better
network.
Managers can use three generic strategies
to achieve competitive advantage
Value chain and generic
strategy questions
Can IS contribute to performing an activity
more quickly or more efficiently or at a
cheaper cost than before (cost leadership)?
Can IS improve information flow through the
primary activities?
Can IS be used to affect how support activities
assist primary activities (finance, budget control)?
Can IS help differentiate the product or
service
Can IS help develop a niche?
 What is a Digital
Corporation? Businessstrategy

Business strategy
Where do you want to be tomorrow? Organizational ISstrategy
Plan how to get there strategy
How do market forces affect my strategy?
Organizational strategy
Structure, Control practices, coordination means, staffing plan,
and culture
IS strategy
How does an organization plan to use IT to implement its
business strategy and support its organizational form
Hardware, software, networks, data collection and information
management
 Strategic IT Framework

Suppliers

Finance/Accounting/Auditing
Logistics Production Distribution
HRMS / E-Procurement
Administrative Content

Management Control
Enterprise Resource Planning

Stakeholders
Employees

Customer Relationship Management

Marketing Sales Customer

Service

Customers
Source: Kalakota and Robinson
Some problems
Most IT developments can easily be copied
by competitors
Sometimes there is less risk attached to being
second
Productivity paradox large scale IT
investment rarely translates into substantial
cost savings
Sustainability
Move to a search for sustainable
competitive advantage via
Barriers to duplication such as patents, secrecy,
legislation, monopoly situations, technical
expertise
High switching costs helped by being first (e.g.
Sabre)
Innovation changes underlying shape of industry
(e.g. Napster)
Sustainability
It may be that only IS management skills,
rather than particular IT applications, can
be the source of sustainable competitive
advantage
the ability to learn faster than competitors

may be the only truly sustainable

competitive advantage
What does Leadership do to
Facilitate IT Leverage?
Believe in the information age
IT as first-order thinking
Co-evolve: IT and business shape each
other
Live the information age
Create a context for stretch and IT use
Set priorities to direct IT innovation and
investments
Signal continuously and positively
Invest quality time in IT
Make the CIO a member of the top
management team
What does Leadership do to
Facilitate IT Leverage?
Practice the information age
Scan and understand new technologies
Form a vision of the future
Sponsor internal and external IT
architectures
Embed information management
processes
How are IT strategies created?
How IT investments are approved?
What is the governance arrangement?
Wrap - up
Strategy
5 forces
Value chain
Strategic information systems