Strategic Information Systems Frameworks

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STRATEGIC INFORMATION SYSTEMS FRAMEWORKS

A framework for a strategic information system (SIS) is a descriptive structure that helps us understand and

classify the relationships among strategic management, competitive strategy, and information technology. One

reason for the abundance of SIS frameworks is that there are many different types of information systems (see

hapter ! in the te"t). #eumann ($%%&) advocates the use of SIS frameworks and provides a detailed

description of (and references for) the most important ones. 'ere we present only a few of the more important

frameworks, basically to illustrate their role in the study of SIS.

e introduce the following

*hree frameworks that are related to +orters models +orter and -illar, iseman and -ac-illan, and

akos and *reacy

-c/arlans application portfolio framework

A customer resource life0cycle framework

A global business drivers framework for multinational corporations

$. S*1+ $. Assess information intensity. Organi2ations need to assess the information intensity of each

link in each of their value chains. If customers or suppliers are highly dependent on information, then

intensity is high, and strategic opportunities are likely to e"ist. 'igher intensity implies greater

opportunity.

!. S*1+ !. 3etermine the role of I* in the industry structure. An organi2ation needs to know how buyers,

suppliers, and competitors might be affected by and react to I*.

4. S*1+ 4. Identify and rank the ways in which I* can create competitive advantage. An organi2ation

must analy2e how particular links of the value chain might be affected by I*.

&. S*1+ &. Investigate how I* might spawn new businesses. 1"cess computer capacity or large corporate

databases can provide opportunities for spinoff of new businesses. Organi2ations should answer the

following three 5uestions hat information generated (or potentially generated) by the business

should be sold6 hat I* capacities e"ist to start a new business6 3oes I* make it feasible to produce

new items related to the organi2ations current products6

7. S*1+ 7. 3evelop a plan for taking advantage of I*. *aking advantage of strategic opportunities that I*

presents re5uires a plan. *he process of developing such a plan should be business0driven rather than

technology0driven

+orter and -illar ($%87) concluded that competition has been affected by I* in three vital ways. /irst, industry

structure and the rules of competition have changed as a result of new information technologies. Second,

organi2ations have outperformed their competitors by using I*. /inally, organi2ations have created new

businesses by using I*. ased on this conclusion, +orter and -illar developed a five0step framework that

organi2ations can use to e"ploit the strategic opportunities I* creates (see A loser 9ook 4.!.$)

+orter and -illar have developed a matri" that indicates the high and low values of the interrelated

information. *hey use this matri" to identify the role that information plays in product offerings, as well as the

process used to deliver the product to customers. *he framework enables managers to assess the information


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intensity in their businesses. Information intensity measures the level of information used in supporting

business processes. *he basic idea of the framework is to determine how specific I* applications can enhance

various links in the value chain, whether in internal operations or in the e"ternal marketplace, and thus enable

the business to achieve a strategic advantage. *he framework relates the information intensity of a products

value chain to the information content of the product. A number of companies have used +orter and -illars

model successfully.

iseman and -ac-illan ($%8&) revised +orters framework by adding four defense strategies, innovation,

growth, alliance, and time, to +orters three strategies. *hey then created a matri" in which the seven defensestrategies are the rows and the columns are :suppliers,; :customers,; and :competitors.; *he cells in the

matri" can direct I* applications. /or e"ample, in the cell of row differentiation and column customer, one can

utili2e eb0based mass customi2ation. *hus, each cell in the matri" identifies the available I* strategies for an

e"ternal industry force.

COMPETITIVE STRATEGY CONCEPTS


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*he strategic role of information systems involves using information technology to develop products, services

and capabilities that give a company strategic advantages over the competitive forces it faces in the global

marketplace. *his creates strategic information systems, information systems that support or shape the

competitive position and strategies of an enterprise. So a strategic information system can be any kind of

information system (*+S, -IS, 3SS, etc.) that helps an organi2ation

$. ectives

According to -ichael +orter, a firm can survive and succeed in the long run if it successfully develops

strategies to confront five competitive forcesthat shape the structure of competition in its industry. *hese

include

$. =ivalry of competitors within its industry

!. *hreat of new entrants

4. *hreat of substitutes

&. argaining power of customers

7. argaining power of suppliers

A variety of competitive strategiescan be developed to help a firm confront these competitive forces. *hese

include

Cost Leadership Strateg 0 ecome a lowcost producer of products and services

0 /ind ways to help suppliers or customers reduce their costs

0 Increase the costs of competitors.

!i""ere#tiatio# Strateg 03evelop ways to differentiate products and services from competitors.

0 =educe the differentiation advantages of competitors.

I##o$atio# Strateg 0 /ind new ways of doing business

a) develop new products ? services

b) enter new markets or marketing segments.

c) establish new business alliances

d) find new ways of producing products@services

e) find new ways of distributing products@services

Gro%th Strategies 0Significantly e"pand the companys capacity to produce goods and services.


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0 1"pand into global markets

0 3iversify into new products and services

0 Integrate into related products and services.

A&&ia#'e Strategies 1stablish new business linkages and alliances with customers, suppliers,

competitors, consultants and other companies (mergers, ac5uisitions, >oint ventures

forming virtual companies, etc.).

STRATEGIC ROLES FOR INFORMATION SYSTEMS(

'ow can the preceding competitive strategy concepts be applied to the strategic role ofinformation systems6

Information technology can be used to implement a variety of competitive strategies. *hese include the five

basic competitive strategies (differentiation, cost, innovation, growth, alliance), as well as other ways that

companies can use information systems strategically to gain a competitive edge. /or e"ample

$. 9ower osts!. 3ifferentiate

4. Innovate

&. +romote


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!. 1nable a firm to enter new markets

4. 1nable a firm to enter into new market segments of e"isting markets.

"OC# IN CUSOMERS $ SUPP"IERS

Investments in information technology can also allow a business to loc% in c&stomers an' s&ppliers(and lock

out competitors) by building valuable new relationships with them. *his can be accomplished by

$. 3eters both customers and suppliers from abandoning a firm for its competitors or intimidating a firm into

accepting less profitable relationships.

!. Offer better05uality service to customers allows a company to differentiate themselves from their

competitors.

4. reate interorgani(ational information systemsin which telecommunications networks electronically link

the terminals and computers of businesses with their customers and suppliers, resulting in new business

alliances and partnerships.

CRE!ING S)IC*ING COSS

A ma>or emphasis in strategic information systems is to build s+itc,ing costsinto the relationships between a

firm and its customers or suppliers. *hat is, investments in information systems technology can make

customers or suppliers dependent on the continued use of innovative, mutually beneficial interorgani2ational

information systems. *hen, they become reluctant to pay the cost in time, money, effort, and inconvenience

that it would take to change to a firms competitors. 1"ample A+O99O (DSA) airline reservation system, an


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Information systems allow a firm to develop a strategic information .asethat can provide information to

support the firmEs competitive strategies. A firms database is considered a strategic resource which is used to

support strategic planning, marketing, and other strategic initiatives. *hese resources are being used by firms

in such areas as

$. Strategic planning

!. -arketing campaigns

4. 1recting barriers to entry for competitors

&. /inding better ways to lock in customers and suppliers

)REAKING )*SINESS )ARRIERS(

Several vital capabilities of information technology that break traditional barriers to strategic business success

include

$. reak time barriers.

!. reak geographic barriers.

4. reak cost barriers.

&. reak structural barriers.

BRE!#ING IME B!RRIERS

Information technology is used to shorten the intervals between the various critical steps in a business process

*elecommunications is a lot faster than most other forms of communications, thus, it provides information to

remote locations immediately after it is re5uested.

BRE!#ING GEOGR!P*IC B!RRIERS

*elecommunications networks enable you to communicate with people almost anywhere in the world.

*elecommunications and computing technologies make it possible to distribute key business activities to wher

they are needed, where they are best performed, or where they best support the competitive advantage of a

business.

BRE!#ING COS B!RRIERS

omputers and telecommunications can often significantly reduce the cost of business operations when

compared with other means of information processing and communications. /or e"ample, they can reduce

costs in such areas as production, inventory, distribution, or communications. Information technologies have

also helped companies cut labour costs, minimi2e inventory levels, reduce the number of distribution centres,

and lower communications costs.

BRE!#ING SRUCUR!" B!RRIERS


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omputers and telecommunications networks can help a business develop strategic relationships by

establishing new electronic linkages with customers, suppliers, and other business entities. /or e"ample,

telecommunications networks can support innovations in the delivery of services, increase the scope and

penetration of markets, and create strategic alliances with customers, suppliers, and even a firms competitors.

T+E VAL*E C+AIN AN! STRATEGIC IS

An important concept that can help a manager identify opportunities for strategic information systems is theval&e c,ainconcept as developed by -ichael +orter. *his concept

$. Fiews a firm as a series or Gchain,; of basic activities that add value to its products and services and thus,

add a margin of value to the firm.

!. Some business activities are viewed as primary activities, and others are support activities. *his framework

can highlight where competitive strategies can best be applied in a business.

4. -anagerial end users should try to develop strategic information systems for those activities that add the

most value to a companys product or services, and thus to the overall business value of the firm.

#NO)"E0GE M!N!GEMEN S-SEMS

Hnowledge management has become one of the ma>or strategic uses of information technology. -any

companies are building %no+le'ge management systemsto manage organi2ational learning and business

know0how. *he goal of H-Ss is to help knowledge workers create, organi2e, and make available important

business knowledge, wherever and whenever its needed in an organi2ation. *his includes processes,

procedures, pattens, reference works, formulas, :best practices,; forecasts, and fi"es. Internet and intranet web

sites, groupware, data mining, knowledge bases, discussion forums, and videoconferencing are some of the ke

information technologies for gathering, storing, and distributing this knowledge.

C+ARACTERISTICS OF KMSS(

$. H-Ss are information systems that facilitate organi2ational learning and knowledge creation.

!. H-Ss use a variety of information technologies to collect and edit information, assess its value,disseminate it within the organi2ation, and apply it as knowledge to the processes of a business.

4. H-Ss are sometimes calledadaptive learningsystems. *hats because they create cycles of organi2ationa

learning called learning loops, where the creation, dissemination, and application of knowledge produces aadaptive learning process within a company.

&. H-Ss can provide rapid feedback to knowledge workers, encourage behaviour changes by employees, and

significantly improve business performance.7. As an organi2ational learning process continues and its knowledge base e"pands, the knowledge0creating

company integrates its knowledge into its business processes, products, and services. *his makes it a highl

innovative and agile provider of high 5uality products and customer services, and a formidable competitor

in the marketplace.

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Strategic Information Systems Frameworks