R. Ching, Ph.D. MIS Area California State University, Sacramento 1 Week 1 Monday, January 23 Strategy & IT

R. Ching, Ph.D. • MIS Area • California State University, Sacramento 1

Week 1Week 1Monday, January 23Monday, January 23

Strategy & ITStrategy & IT


From Automation to IntegrationFrom Automation to Integration

EDPEDP MIS MIS ReportingReporting

Decision Decision SupportSupport

Enterprise Enterprise SystemsSystems

25 years25 years

AutomationAutomation(Productivity and Efficiency)(Productivity and Efficiency)

Organization IntegrationOrganization Integration


Strategic PlanningStrategic Planning

• What is strategic planning?What is strategic planning?• What is the significance of strategic planning?What is the significance of strategic planning?• How does information technology (IT) fit into a How does information technology (IT) fit into a

strategic plan?strategic plan?• Are all strategic plans the same?Are all strategic plans the same?

– Why do some organizations succeed and other Why do some organizations succeed and other fail? fail?


AmericanAmericanAirlinesAirlines and SABRE: and SABRE:Using IT to Gain a Competitive Using IT to Gain a Competitive AdvantageAdvantage


American American AirlinesAirlines and SABRE and SABRE

• After World War II, air travel in America became After World War II, air travel in America became very popularvery popular

• Large jetliners were soon to replace propeller-Large jetliners were soon to replace propeller-driven airplanesdriven airplanes

• A large number of passengers could be carried A large number of passengers could be carried with one flightwith one flight

• The current method of processing passenger The current method of processing passenger reservations needed to be changed to reservations needed to be changed to accommodate greater demandsaccommodate greater demands


American American AirlinesAirlines and SABRE and SABRE Passenger ReservationsPassenger Reservations

DallasDallas

SacramentoSacramento

New YorkNew York



DallasDallas


New YorkNew York




New YorkNew York

DallasDallas




New YorkNew York

DallasDallas


Problem with Matching Passenger Problem with Matching Passenger Names Names to Seatsto Seats

Reservation ListReservation ListPassenger Flight DatePassenger Flight Date


Problems with Problems with Manual Passenger ReservationsManual Passenger Reservations

• Difficult to match passenger names to seatsDifficult to match passenger names to seats• Resulted in poorly managed inventory (i.e., seats Resulted in poorly managed inventory (i.e., seats

on a flight)on a flight)– Overbooking: Dissatisfied customersOverbooking: Dissatisfied customers– Underbooking: Lost revenueUnderbooking: Lost revenue

• Aircraft with greater seating capacity and greater Aircraft with greater seating capacity and greater frequency of use on the horizonfrequency of use on the horizon– More inventory and passengers to keep track More inventory and passengers to keep track

of of


Capacity ShiftsCapacity Shifts

48-105 passengers48-105 passengers

114-149 passengers114-149 passengers

Douglas DC-7Douglas DC-7

Boeing 707Boeing 707

Cruising speed: 365 mphCruising speed: 365 mph

Cruising speed: 550-600 mphCruising speed: 550-600 mph

Greater Greater number of number of passengerspassengers

Greater Greater

utilization utilization of resourcesof resources


• In 1953, C.R. Smith, president of American In 1953, C.R. Smith, president of American Airlines initiated a five-year study with IBM to Airlines initiated a five-year study with IBM to assess the technical feasibility of an automated assess the technical feasibility of an automated and integrated passenger name reservation and integrated passenger name reservation system.system.

• In 1958, American and IBM sign an agreement to In 1958, American and IBM sign an agreement to develop and implement America’s first automated develop and implement America’s first automated passenger reservation systempassenger reservation system

• The system is named SABER The system is named SABER (Semi Automated Business Environment (Semi Automated Business Environment Research)Research)

American American AirlinesAirlines and SABRE and SABRE


• Match passenger to seatsMatch passenger to seats• Contain seat availability on all the carrier’s Contain seat availability on all the carrier’s

schedulesschedules• Print passenger itinerariesPrint passenger itineraries• Issue boarding passesIssue boarding passes• Perform all of the above in a travel agent’s officePerform all of the above in a travel agent’s office

American American AirlinesAirlines and SABRE: and SABRE: System ObjectivesSystem Objectives


American American AirlinesAirlines and SABRE: and SABRE: Initial SystemInitial System

• Installation begins 1961Installation begins 1961• System comprised ofSystem comprised of

– Two IBM 7090 mainframe Two IBM 7090 mainframe computerscomputers

– Six magnetic drums with Six magnetic drums with 7.2 megabytes of storage7.2 megabytes of storage• Records of seat inventoryRecords of seat inventory• Flight schedulesFlight schedules• Application programsApplication programs• Memory to handle 1,100 concurrent Memory to handle 1,100 concurrent

customerscustomers

IBM 7090 Processing System


American American AirlinesAirlines and SABRE: and SABRE: Initial SystemInitial System

• Cont.Cont.– Sixteen disk storage units Sixteen disk storage units

with 800 megabytes of with 800 megabytes of storagestorage• Passenger reservationsPassenger reservations• Duplicate copies of all Duplicate copies of all

information stored on information stored on the drumsthe drums

• The system was fully The system was fully operational by 1964operational by 1964


• Subsequent upgrades included:Subsequent upgrades included:– Fare quotationFare quotation– Advance check-inAdvance check-in– Boarding pass issuanceBoarding pass issuance– Stand-by passenger handlingStand-by passenger handling– Itinerary generationItinerary generation

American American AirlinesAirlines and SABRE: and SABRE: Upgraded SystemUpgraded System


Retail Automation and theRetail Automation and theAirline Deregulation Act of 1978Airline Deregulation Act of 1978

• Retail automationRetail automation– Objective: Extend the reach of the reservations Objective: Extend the reach of the reservations

system beyond the airline's organizational system beyond the airline's organizational boundaries to the industry's distribution systemboundaries to the industry's distribution system

– Operationalize:Operationalize:Placed reservation system terminals in travel Placed reservation system terminals in travel agencies agencies and in large corporate officesand in large corporate offices

– Cooperation:Cooperation:Formed a joint task force with travel agencies and Formed a joint task force with travel agencies and hardware vendors to solicit further specifications hardware vendors to solicit further specifications of the system (1974)of the system (1974)

– Use the system to exploit the deregulated marketUse the system to exploit the deregulated market


• American installs SABRE terminals with American installs SABRE terminals with specifications made by the joint task force in specifications made by the joint task force in travel agencies travel agencies

• Reservations centralized in Tulsa, OklahomaReservations centralized in Tulsa, Oklahoma

Retail AutomationRetail Automation

Tulsa, OklahomaTulsa, Oklahoma


American American AirlinesAirlines and SABRE: and SABRE: Retail AutomationRetail Automation


Co-Host ProgramsCo-Host Programs

• American would display the schedules of other American would display the schedules of other airlines on SABRE for a feeairlines on SABRE for a fee

• Intended to increase SABRE’s presence in Intended to increase SABRE’s presence in markets American did not servicemarkets American did not service

• Extended American’s reach to markets served by Extended American’s reach to markets served by rival Unitedrival United


• In 1984, eleven domestic airlines filed a suit In 1984, eleven domestic airlines filed a suit against American and United claiming they against American and United claiming they possessed a monopoly in the electronic booking possessed a monopoly in the electronic booking of seat reservations of seat reservations – Involved anti-trust violationsInvolved anti-trust violations

• No carrier could afford to give up the No carrier could afford to give up the chance to sell tickets to customers of travel chance to sell tickets to customers of travel agents booking a large portion of its agents booking a large portion of its revenues in the region it servesrevenues in the region it serves

Anti-Trust Law SuitAnti-Trust Law Suit


• Both American and United required travel agents Both American and United required travel agents using their systems to become franchised using their systems to become franchised dealers, selling tickets on other carriers only to dealers, selling tickets on other carriers only to the extent the host permittedthe extent the host permitted

• The systems were powerful, anti-competitive The systems were powerful, anti-competitive weaponsweapons

Anti-Trust Law Suit (Cont.)Anti-Trust Law Suit (Cont.)


• The government ruled:The government ruled:– When a vertically integrated monopolist When a vertically integrated monopolist

controls a non-duplicable resource at one level controls a non-duplicable resource at one level that is essential to competition at a second that is essential to competition at a second level, it must offer the resource to all on the level, it must offer the resource to all on the same termssame terms

Anti-Trust Law Suit (Cont.)Anti-Trust Law Suit (Cont.)


• Competitive AdvantagesCompetitive Advantages• Accurate passenger inventories allowed American Accurate passenger inventories allowed American

to manage under/overbookings to jointly optimize to manage under/overbookings to jointly optimize passenger service and capacity utilization levelspassenger service and capacity utilization levels

• Reduced labor content in the reservations Reduced labor content in the reservations process while increasing the productivity of the process while increasing the productivity of the remaining reservation personnel (efficiency)remaining reservation personnel (efficiency)

• Increased their presence in current marketsIncreased their presence in current markets• Increased their presence in markets not servedIncreased their presence in markets not served

American American AirlinesAirlines and SABRE: and SABRE:SummarySummary


Business Model and StrategyBusiness Model and Strategy

• What is a business model?What is a business model?• What is strategy and strategic planning?What is strategy and strategic planning?• What is the significance of strategic planning?What is the significance of strategic planning?• How does information technology (IT) fit into a How does information technology (IT) fit into a

strategic plan?strategic plan?• Are all strategic plans the same?Are all strategic plans the same?

– Why do some organizations succeed and other Why do some organizations succeed and other fail?fail?


Anthony's Levels of ManagementAnthony's Levels of Management

Management Management ControlControl

Operational ControlOperational Control

Strategic PlanningStrategic Planning


StrategicStrategic

OperationalOperational

TacticalTactical

ReservationsReservations

American Airlines and SABREAmerican Airlines and SABRE


StrategicStrategic

OperationalOperational

TacticalTactical

American Airlines and SABREAmerican Airlines and SABRE

Marketing ToolMarketing Tool

Retail AutomationRetail AutomationCo-hostingCo-hosting


Business ModelBusiness Model

• Defines how an enterprise interacts with its Defines how an enterprise interacts with its environment to define a unique strategy, attract environment to define a unique strategy, attract the resources and build the capabilities to the resources and build the capabilities to execute itexecute it

• Creates values for all stakeholdersCreates values for all stakeholders

Inputs Processes Outputs

Defines how inputs are converted to outputs


What are strategy, strategic plans What are strategy, strategic plans and strategic management?and strategic management?


What is Strategy?What is Strategy?

• Strategy is the pattern of missions, objectives, Strategy is the pattern of missions, objectives, policies, and significant resource utilization plans policies, and significant resource utilization plans stated in such a way as to stated in such a way as to define what business the define what business the company is incompany is in (or is to be in) and (or is to be in) and the kind of the kind of company it is or is to becompany it is or is to be. It defines:. It defines:– The product line, markets and market segments The product line, markets and market segments

for which products are to be designedfor which products are to be designed– The channels through which these markets will be The channels through which these markets will be

reachedreached– The means by which the operation is to be The means by which the operation is to be

financedfinanced– The profit objectivesThe profit objectives



Cont.Cont.– The size of the organizationThe size of the organization– The The imageimage which it will project to employees, which it will project to employees,

suppliers and customerssuppliers and customers Bullen and Rockart, Bullen and Rockart,

19811981



• Defines the revenue and growth potential of the Defines the revenue and growth potential of the organizationorganization

• Focuses attention and resources on a specific set Focuses attention and resources on a specific set of goals and the projects required to achieve of goals and the projects required to achieve themthem

Applegate, Austin and Applegate, Austin and McFarlanMcFarlan


Mission, Goal and ObjectivesMission, Goal and Objectives

Target MarketTarget Market

What segment of the market do we want to target?What segment of the market do we want to target?


Levels of ManagementLevels of Management

• Strategic PlanningStrategic Planning

""Strategic planning is the process of deciding on Strategic planning is the process of deciding on objectives of the organization, on changes in these objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, on the resources used to attain these objectives, and on the policies that are to govern the objectives, and on the policies that are to govern the acquisition, use, and disposition of these resourcesacquisition, use, and disposition of these resources."."

• Management controlManagement control

""Management control is the process by which Management control is the process by which managers assure that resources are obtained and managers assure that resources are obtained and used effectively and efficiently in the used effectively and efficiently in the accomplishment of the organization's objectivesaccomplishment of the organization's objectives."."


Levels of Management Levels of Management (Cont.)(Cont.)

• Operational controlOperational control

""Operation control is the process of assuring that Operation control is the process of assuring that specific tasks are carried out effectively and specific tasks are carried out effectively and efficientlyefficiently."."

Anthony, 1965Anthony, 1965


Differences in ActivitiesDifferences in Activities

Strategic Planning Management Control Operational Control

Choosing company objectives

Formulating budgets

Setting personnel policies

Formulating personnel practices

Implementing policies

Setting financial policies Working capital planning

Controlling credit extension

Setting marketing policies

Formulating advertising programs

Controlling placement of advertisements

Choosing new product lines

Choosing product improvements

Acquiring a new division

Deciding on a plant rearrangement

Schedule production


Some Distinctions Between Some Distinctions Between Strategic Planning and Strategic Planning and Management ControlManagement Control

Characteristic Strategic Planning Management Control

Focus of plans One aspect at a time On whole organization

Complexities Many variables Less complex

Degree of structure Unstructured and irregular; each problem different

Rhythmic; prescribed procedures

Nature of information Tailor made for the problem; more external and predictive; less accurate

Integrated; more internal and historical; more accurate


Some Distinctions Between Some Distinctions Between Strategic Planning and Strategic Planning and Management Control (Management Control (cont.cont.))

Characteristic Strategic Planning Management Control

Mental activity Creative; analytical Administrative; persuasive

Planning and control Planning dominant, but some control

Emphasis on both planning and control

Time horizon Tends to be long Tends to be short

End result Policies and precedents Action within policies and precedents

Robert AnthonyRobert Anthony


Some Distinctions Between Some Distinctions Between Management Control and Management Control and Operational ControlOperational Control

Characteristics Management Control Operational Control

Focus of activity Whole operation Single task or transaction

Judgment Relatively much; subjective decisions

Relatively little; reliance on rules

Nature of structure Psychological Rational

Nature of information Integrated; financial data throughout; approximations acceptable; future and historical

Tailor-made to the operation; often non-financial; precise; often in real time


Some Distinctions Between Some Distinctions Between Management Control and Management Control and Operational Control (Operational Control (cont.cont.))

Characteristics Management Control Operational Control

Persons primarily involved

Management Supervisors (or none)

Mental activity Administrative; persuasive

Follow directions (or none)

Time horizon Weeks, months, years Day-to-day

Robert AnthonyRobert Anthony


Operational PlanOperational Plan

Planning within the OrganizationPlanning within the Organization

Tactical PlanTactical Plan

Strategic PlanStrategic Plan

ManagementManagement Control Control

OperationalOperational Control Control

StrategicStrategic

PlanningPlanning


Information TechnologyInformation Technology

• Coordinated application of Coordinated application of – HardwareHardware– SoftwareSoftware– NetworksNetworks– WorkstationsWorkstations– RoboticsRobotics– Smart chipsSmart chips

ElementsElements


IT and the OrganizationIT and the Organization

• IT enables fundamental changes in the way work is IT enables fundamental changes in the way work is donedone

• IT enables the integration of business functions at all IT enables the integration of business functions at all levels within and between organizationslevels within and between organizations

• IT causes shifts in the competitive climate of many IT causes shifts in the competitive climate of many industriesindustries

• IT presents new strategic opportunities for IT presents new strategic opportunities for organizations that reassess their mission and goalsorganizations that reassess their mission and goals

• Successful application of IT requires changes in Successful application of IT requires changes in management and organization structuremanagement and organization structure

• A major challenge exists for management to lead their A major challenge exists for management to lead their organizations through the transformation necessary organizations through the transformation necessary to prosper in the globally competitive environmentto prosper in the globally competitive environment


Changes in Information TechnologyChanges in Information Technology

• Three major advances in technology of the 1990sThree major advances in technology of the 1990s– TelecommunicationsTelecommunications– Storage devicesStorage devices– Desktop computingDesktop computing

We have the ability to access, store and process more We have the ability to access, store and process more data faster and in different ways.data faster and in different ways.

We have the ability to access, store and process more We have the ability to access, store and process more data faster and in different ways.data faster and in different ways.


Model of Strategic IT PlanningModel of Strategic IT Planning

HighHigh

LowLowHighHighLowLow

Impact on Impact on Business Business

OperationsOperations

Impact on StrategyImpact on Strategy

FactoryFactoryOperational ITOperational IT

SupportSupportBasic elementsBasic elements

TurnaroundTurnaroundGradual adoptionGradual adoption

StrategicStrategicStrategic IT plan, Strategic IT plan,

initiativesinitiatives

Management of IT depends on how the business views ITManagement of IT depends on how the business views ITManagement of IT depends on how the business views ITManagement of IT depends on how the business views IT


Strategic GridStrategic Grid

Quadrants:Quadrants:• Support – goals target local improvements and Support – goals target local improvements and

incremental cost savings (e.g., office automation)incremental cost savings (e.g., office automation)• Factory – designed to reduce costs and improve Factory – designed to reduce costs and improve

performance of the core operationsperformance of the core operations– Automation and computerize functionsAutomation and computerize functions

• Turnaround – designed to exploit emerging Turnaround – designed to exploit emerging strategic opportunities strategic opportunities – Integration of the organizationIntegration of the organization

• Strategic – commitment to use IT to enable both Strategic – commitment to use IT to enable both core operations and core strategycore operations and core strategy– IT an integral part of strategyIT an integral part of strategy


For example…For example…


PeapodPeapod


PeapodPeapod

Virtual storeVirtual store


PeapodPeapod


PeapodPeapod

Due to the nature Due to the nature of the merchandise of the merchandise

(i.e., highly (i.e., highly perishable, low perishable, low profit margin), profit margin),

customer customer expectations and expectations and the high cost of the high cost of fuel, logistics fuel, logistics

becomes an major becomes an major concernconcern


Raley's FoodsRaley's Foods

"Bricks and mortar" "Bricks and mortar" retailerretailer


Raley's FoodsRaley's Foods

Limited web shoppingLimited web shopping


Role of ITRole of IT

• Defined by the organization’s business model and Defined by the organization’s business model and strategystrategy– Peapod – IT is embedded in its business model Peapod – IT is embedded in its business model

and strategy (i.e., web-enabled)and strategy (i.e., web-enabled)– Raley’s – IT plays a supporting role in providing Raley’s – IT plays a supporting role in providing

efficient and product operationsefficient and product operations


Introducing Strategy into the Introducing Strategy into the OrganizationOrganization

Operational PlanOperational PlanOperational PlanOperational Plan

Tactical PlanTactical PlanTactical PlanTactical Plan

Strategic PlanStrategic PlanStrategic PlanStrategic Plan

Mission StatementMission StatementMission StatementMission Statement

StrategyStrategyStrategyStrategy

PolicyPolicyPolicyPolicy

ImplementationImplementation& Adoption& Adoption

ImplementationImplementation& Adoption& Adoption

Top-DownTop-Down Bottom-UpBottom-Up

Mission StatementMission StatementMission StatementMission Statement

ContextContext

InitiativesInitiatives

Inductive ChangeInductive Change Deductive ChangeDeductive Change

How does an organization introduce changes in IT?How does an organization introduce changes in IT?


Top-Down Planning DilemmaTop-Down Planning Dilemma

Organization Strategic Organization Strategic PlanPlan

Organization Strategic Organization Strategic PlanPlan

Information Technology Information Technology Strategic PlanStrategic Plan

Information Technology Information Technology Strategic PlanStrategic Plan

Should the strategic plan Should the strategic plan specify the technologies to specify the technologies to

adopt?adopt?

Should an IT strategic plan Should an IT strategic plan precede an organizational precede an organizational

strategy?strategy?

??DirectionDirection

Enabling Enabling technologiestechnologies

Should change come from the strategic plan or the IT strategic plan?Should change come from the strategic plan or the IT strategic plan?


Strategic Positioning ChoicesStrategic Positioning Choices

• Market/Channel – determines the choice of Market/Channel – determines the choice of customers to serve, the needs and expectations customers to serve, the needs and expectations that will be met, and the channels to reach those that will be met, and the channels to reach those customerscustomers

• Product Positioning – determines the choice of Product Positioning – determines the choice of products and service to offer, the features of those products and service to offer, the features of those offerings, and the price that will be chargedofferings, and the price that will be charged

• Value chain/value networking – determines the role Value chain/value networking – determines the role an organization plays and the activities it performs an organization plays and the activities it performs within an extended network of suppliers, producers within an extended network of suppliers, producers and distributors and partnersand distributors and partners

• Boundary positioning – determines markets, Boundary positioning – determines markets, products, business NOT to be persuedproducts, business NOT to be persued


1. Market/Channel Positioning1. Market/Channel Positioning

Peapod.comPeapod.com

Raley’s FoodsRaley’s Foods

E-commerce vs. E-commerce vs. Bricks and MotarBricks and Motar


2. Product Positioning2. Product Positioning

United AirlinesUnited Airlines

Southwest AirlinesSouthwest Airlines

Full service vs. Low-costFull service vs. Low-cost


3. Value Chain/Value Network 3. Value Chain/Value Network PositioningPositioning

One World (horizontal One World (horizontal integration)integration)

Boeing (vertical integration)Boeing (vertical integration)

Vertical integration vs. Vertical integration vs. Horizontal integrationHorizontal integration


American Airlines and Strategic American Airlines and Strategic AlliancesAlliances

Travel Travel agents, agents,

corporate corporate offices, offices, publicpublic

Co-hostCo-host

Codeshare AlliancesCodeshare Alliances


Boeing Aircraft and Suppliers:Boeing Aircraft and Suppliers:Assembling an AircraftAssembling an Aircraft

Risk sharing partnersRisk sharing partners

Boeing 787Boeing 787

Work coordinationWork coordination


Boeing and Primary VendorsBoeing and Primary VendorsCompany/Business Unit

Main Location 787 Work Statement

Boeing Commercial Airplanes (announced Nov. and Dec. 2003)

Washington Airplane development, integration, final assembly, program leadership

Alenia/Vought Aircraft Industries (announced Nov. 2003)

Italy, Texas Horizontal stabilizer, center fuselage, aft fuselage

Boeing Fabrication (announced Nov. 2003) Washington, Canada, Australia

Vertical tail assembly, movable trailing edges, wing-to-body fairing, interiors

Spirit Aerosystems Inc. (announced as Boeing - Wichita Nov. 2003; Apr. 2004)

Kansas, Oklahoma

Fixed and movable leading edges, flight deck, part of forward fuselage, engine pylons

Fuji Heavy Industries (announced Nov. 2003) Japan Center wing box, integration of the center wing box with the main landing gear wheel well

Kawasaki Heavy Industries (announced Nov. 2003)

Japan Main landing gear wheel well, main wing fixed trailing edge, part of forward fuselage

Mitsubishi Heavy Industries (announced Nov. 2003)

Japan Wing box

Hamilton Sundstrand (announced Feb. 2004, March 2004, July 2004, Sep. 2004)

Connecticut Auxiliary power unit, environmental control system, remote power distribution units, electrical power generating and start system, primary power distribution, nitrogen generation, ram air turbine emergency power system, electric motor hydraulic pump subsystem

Rockwell Collins (announced Feb. 2004) Iowa Displays, communications/ surveillance systems

Honeywell (announced Feb. 2004, July 2004) Arizona Navigation, maintenance/crew information systems, flight control electronics; exterior lighting

Smiths (announced Feb. 2004, Jun. 2004) United Kingdom Common core system, landing gear actuation and control system, high lift actuation system

Goodrich ( announced March 2004; April 2004, June 2004, Nov. 2004, Dec. 2004)

North Carolina Fuel quantity indicating system, nacelles, proximity sensing system, electric brakes, exterior lighting, cargo handling system

Messier-Dowty (announced March 2004) France Landing gear structure

Dassault Systèmes (announced Feb. 2004) France Global collaboration tools/software

Boeing Interiors Responsibility Center (announced March 2004)

Washington Interior

FR-HiTemp (announced March 2004) United Kingdom Pumps and valves

Rolls-Royce (announced April 2004) United Kingdom Engines


General Electric (announced April 2004) Ohio Engines

Boeing Propulsion Systems Division (announced April 2004) Washington Propulsion systems engineering and procurement services

Moog Inc. (announced May 2004) New York Flight control actuators

Kidde Technologies (announced May 2004) North Carolina Fire protection system

Toray Industries (announced May 2004) Washington Prepreg composites

Kaiser Electroprecision (announced June 2004) California Pilot control system

Thales (announced July 2004, Aug. 2004) France Electrical power conversion, integrated standby flight display

Labinal (announced July 2004) France Wiring

Parker Hannifin (announced Sep. 2004) Ohio Hydraulic subsystem

Messier-Bugatti (announced Nov. 2004) France Electric brakes

Latecoere (announced Nov. 2004) France Passenger doors

Monogram Systems (announced Nov. 2004) California Water and waste system

Air Cruisers (announced Nov. 2004) New Jersey Escape slides

Delmia Corp. (announced Nov. 2004) Michigan Software

Intercim (announced Nov. 2004) Minnesota Software

Panasonic (announced Dec. 2004) Japan Cabin services system

Bridgestone (announced Dec. 2004) Japan Tires

Ultra Electronics Holdings (announced Dec. 2004) United Kingdom Wing ice protection system

GKN Aerospace (announced Dec. 2004) United Kingdom Composite mat for the wing ice protection system

Korry Electronics (announced Jan. 2005) Washington Flight-deck control panels

Ipeco (announced April 2005 United Kingdom Flight-deck seats

Diehl Luftfahrt Elektronik (announced April 2005) Germany Main cabin lighting

Jamco (announced Apr. 2005, May 2005) Japan Lavatories, flight deck interiors, flight deck door and bulkhead assembly

Northwest Composites Inc. (announced April 2005) Washington Sidewalls, window reveals, cargo linings, door linings and door surrounds

Securaplane (announced April 2005) Arizona Wireless emergency lighting system

Donaldson Company, Inc. (announced May 2005) Minnesota Air purification system

Astronautics Corp. of America (announced May 2005) Wisconsin Electronic Flight Bag (EFB)

CTT Systems (announced August 2005) Sweden Zonal Drying system


4. Boundary Positioning4. Boundary Positioning

Amazon.comAmazon.com

Zippy’s RestaurantZippy’s Restaurant

Mass merchandiser vs. Mass merchandiser vs. Narrowly defined scopeNarrowly defined scope


Strategic Positioning Strategic Positioning

• Is influenced by and influences the choice of Is influenced by and influences the choice of business modelsbusiness models

• The strategic positioning choice will have an The strategic positioning choice will have an impact on how IT is adopted and leveragedimpact on how IT is adopted and leveraged– IT by itself does not provide any competitive IT by itself does not provide any competitive

advantageadvantage– Competitive advantages are realized only when Competitive advantages are realized only when

IT is used to leverage another business functionIT is used to leverage another business function• IT’s advantages are only short-termIT’s advantages are only short-term

– As the technology matures, it becomes readily As the technology matures, it becomes readily available to other organizationsavailable to other organizations


Strategic ShiftsStrategic Shifts

• Enhancements – incremental changes to existing Enhancements – incremental changes to existing products, markets, channels or value networksproducts, markets, channels or value networks

• Expansions – launch of new products or product Expansions – launch of new products or product categories, entry into new markets, or launch of a categories, entry into new markets, or launch of a new channel to complement an existing channelsnew channel to complement an existing channels

• Extensions – launch of a new business or business Extensions – launch of a new business or business modelmodel

• Exits – drop a product or product category, exit a Exits – drop a product or product category, exit a market, and/or close a channel or businessmarket, and/or close a channel or business


Strategic ShiftsStrategic ShiftsEnhanceEnhance ExpandExpand ExtendExtend ExitExit

ProductProduct Improve quality, Improve quality, lower cost, lower cost, increase ease-of-increase ease-of-use, add use, add featuresfeatures

Add new Add new products or products or servicesservices

N/AN/A Drop a feature, Drop a feature, service or service or productproduct

MarketMarket Attract new Attract new customers within customers within existing marketsexisting markets

Expand into new Expand into new markets, markets, segments or segments or geographiesgeographies

N/AN/A Exit a market, Exit a market, segment or segment or geographic geographic regionregion

ChannelChannel Improve quality, Improve quality, cost or capacitycost or capacity

Add new Add new channelschannels

N/AN/A Exit a channelExit a channel

Value Value chain/chain/value value networknetwork

Improve Improve operations operations and/or and/or relationships relationships with current with current suppliers, suppliers, partners, etc.partners, etc.

Add new Add new suppliers or suppliers or partners, partners, outsource an outsource an activityactivity

N/AN/A Stop doing Stop doing business with a business with a supplier or supplier or partner, in-partner, in-source an source an activity activity

Business Business modelmodel

Improve Improve alignment or alignment or economics of economics of current business current business modelmodel

Add new Add new revenue streamrevenue stream

Extend into a Extend into a new business or new business or adopt a new adopt a new business modelbusiness model

Exit a business Exit a business or business or business modelmodel


Strategic AlignmentStrategic Alignment

• Alignment between the business and IT strategiesAlignment between the business and IT strategies• Alignment between strategy and capabilitiesAlignment between strategy and capabilities

BusinessBusiness ITIT

StrategyStrategy StrategyStrategy

CapabilitiesCapabilities CapabilitiesCapabilities

ValueValue

Including infrastructureIncluding infrastructure Including infrastructureIncluding infrastructure

IT infrastructureIT infrastructure• Technology IT Technology IT

infrastructureinfrastructure• Human IT Human IT

infrastructureinfrastructure


OpportunitiesOpportunities

““Crisis” (weiji)Crisis” (weiji)

““Opportunity” (jihui)Opportunity” (jihui)

Opportunities grow out of crisesOpportunities grow out of crises


Search for OpportunitiesSearch for Opportunities

• Can IT change the basis of competition?Can IT change the basis of competition?• Can IT change the nature of relationships and the Can IT change the nature of relationships and the

balance of power among buyers and suppliers?balance of power among buyers and suppliers?• Can IT build or reduce barriers of entry?Can IT build or reduce barriers of entry?• Can IT increase or decrease switching costs?Can IT increase or decrease switching costs?• Can It add value to existing products and services Can It add value to existing products and services

or create new ones?or create new ones?


Strategic RisksStrategic Risks

• Can emerging technologies disrupt current Can emerging technologies disrupt current business models?business models?– Asset specificity: Asset specificity: Can investments be reused?Can investments be reused?

• Are we too early or too late to exploit an IT Are we too early or too late to exploit an IT opportunity?opportunity?– Leaders vs. followersLeaders vs. followers

• Does IT lower barriers of entry?Does IT lower barriers of entry?• Does IT trigger regulatory action?Does IT trigger regulatory action?


Documents

R. Ching, Ph.D. MIS Area California State University, Sacramento 1 Week 1 Monday, January 23 Strategy & IT