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Chapter 12
IT & Business Strategy
Overview for Today What is a Strategic Information
System Strategic Advantage & IS Porter’s Competitive Forces For Next Time
Critical Success Factors Porter’s Value Chain Analysis
What is a Strategic IS?
System that significantly improves the manner in which business is conducted: Control a market Larger than average profit margins Significant increases
performance/productivity Contributes to strategic goals (responses
to busn pressures from Ch1)
Two Views of SIS Outwardly Focused SIS
Easy to copy or duplicate, Why? Inwardly Focused SIS
Not as easy to copy or duplicate, Why? Both can focus on new product/service Which can be sustained longer?
Role of IT in Strategic Mgmt Enabler for change! Allows creation of new applications for
strategic advantage: (Fed Ex, SABRE)
Supports strategic changes: BPR Improved communication (FDA) New product development cycles (jeep liberty…)
Increases Competitive Intelligence (next) Benefit comes from being FIRST, everyone
else is just keeping up! But - hard to sustain!
Competitive Intelligence
1. Gathering information about competition Increases market knowledge, improves
internal relationships, raise quality of strategic planning
Frito Lay and Hertz examples…
2. Gathering internal information (BI) About products, customers, suppliers, … Organizational memory or knowledge
base What makes these so easy today?
BI: Been to Disney Recently?
Strategic Alignment Problems
Recent surveys highlight mismatches: ~90% IS critical to strategic success <35% IS is very involved with busn strategy <30% busn strategists work with IS division
What are the likely results? Inadequate IS
Tools for Aligning IS & Strategy
Various tools and methodologies for aligning IS with corporate strategy Porter’s Competitive Forces Critical Success Factors Value Chain Analysis Many more in text – we don’t have time
to discuss all of them…
Porter’s Competitive Forces Model
Used to develop strategies to increase competitive advantage
5 Components to the model: Threat of entry of new competitors Bargaining power of suppliers Bargaining power of customers Threat of substitute products/services Rivalry among existing industry firms
Porter’s Model Applied
List the players in each force Relate the determinants of each
force with the players listed above Devise a strategy to defend against
these forces Use IT to support the strategy
Another Question…
Some argue that an SIS gives a company an unfair advantage and may even cause the demise of smaller, weaker companies that cannot afford to build similar systems.
What is your opinion on the fairness of such systems?
Critical Success Factors (CSFs)
Mission Statement - clear, concise, believable, repeatable!
Business Goals - broad, derived from mission Business Objectives - tangible milestones: growth,
roi Critical Success Factors - make the milestones
happen attractive style of product line, efficient dealer
organization, effective cost control in manufacturing
Identify what is most important to performance, then develop good indicators of this performance: information needs
Determining CSFs:
Lets identify CSFs specifically for: Bank? Ice Cream Manufacturer? Discount Retail Chain? Shipping Firm?
Any observations about these?
Discovering Critical Success Factors
AKA: Things you might ask for your projects: What objectives are central to your organization? What factors are essential to meeting these
objectives? What decisions or actions are key to these critical
factors? What variables underlie these decisions, how are
they measured? How can I use IS to supply these measures?
Porter’s Value Chain Model, I
1: Primary Value Activities (creation, sale, & support of a product) Inbound logistics Operations Outbound logistics Marketing & Sales Service
Each activity adds value to product
Porter’s Value Chain, II 2: Support Value Activities (each
supports Primary Value) Organizational infrastructure Human resource management Research & Development Procurement
3: Margin Revenue generated by above activities
minus costs of each activity
Value Chain At Work
A Few Questions:
What is the purpose of the Value Chain? What types of things might you learn? What do you do with this new
knowledge? Why might this be important?
What category of CI does this fall into?
Important Concepts to Know
What is a Strategic Information System
Role of IT Strategic Management Critical Success Factors Porter’s Competitive Forces Porter’s Value Chain Analysis How do they all fit together?
For Next Time…
Prepare minicases for Ch 12 Will send via e-mail We will discuss these on Friday
Milestone #2 due on Friday EXAM#1 Coming Soon!