Chapter 3

Information Management Strategy &

Information System Strategy
 Objective
• Students should be able to understand:
– the key elements of an Information Management Strategy
(IMS)
– the alternative approaches to develop an Information
Systems Strategies (ISS)
 Learning Outcomes
• After completing this chapter, students should be
able to:
– Define information strategy
– Identify the importance of information for strategic
awareness and for decisions relating to strategic change
– Explain the strategic information challenge facing
organizations in the context of both continuous and
discontinuous change
– Describe the management issues that need to be addressed
in an information management strategy.
– Describe approaches for developing ISS
 Introduction
• Information is needed for, and used in decision
making.
• Information – Information Systems – Information
Technology-> all aids to decision making.
• The more information managers and other
employees have about what is happening in the
organization and the environment, the more
strategically aware they are likely to be.
 Introduction
• However, decisions and decision making involve both
facts and people.
• When the right information available at the right time,
it can be extremely useful.
• The real value of information relates to how it is used
by the decision makers
 Introduction
• In designing and introducing IT and MIS into
organizations, it is necessary to consider the likely
reaction of people as well as potential benefits from
having up-to-date and accurate information available.
• Moreover, it is important to evaluate who actually
needs the information and to ensure that those
people receive it.
 Information Mgmt. Strategy(IMS)
• IMS is one of a series of strategies that organizations
develop and implement to sustain or improve their
position in markets.
• These strategies include:
– Organizational or corporate strategy
– Marketing strategy
– Operation mgmt. strategy
• Organizational strategies defines the future directions
and actions of an organization or part of an
organization.
Information Mgmt. Strategy(IMS)

• Johnson and Scholes (2001) define an organizational

strategy as:

The direction and scope of an organization over the

long term: which achieves advantage for the
organization through its configuration of resources
within a changing environment to meet the needs of
markets and to fulfill stakeholders expectations.
 Information Mgmt. Strategy(IMS)
• This definition highlights:
– Strategies define the future direction of an organization.
– Strategies are devised to achieve advantage for the
organization.
– Strategies define the allocation of resources.
– Strategies are primarily driven by the needs of the
organization and stakeholders.
– Strategies should be responsive to the dynamic
environments in which an organization operates.
• The elements above apply equally to other business
strategies. Therefore an IMS must be aligned with the
organizational objectives and involves in defining how
to manage resources to support the objectives.
 Information Mgmt. Strategy(IMS)

• IMS can be defined as:

Definition of management approaches to the
organization, control and application of organizational
information resources through coordination of people
and technology resources in order to support
organizational strategy and processes (Chaffey,
2004).
 Information Mgmt. Strategy
• IMS is concerned with the effective coordination of
technology, people, and information resources.

• Information strategy also can be defined as :

– a sub-strategy which ensuring that the informational aspects
of a business are being managed and developed in support
of its key process.
 Information Mgmt. Strategy
• This sub-strategy is various referred to as:
– Business information strategy
– Information-business strategy
– Information strategy
• The notion of an information strategy is that the
enterprise should not just be technology-centric but
information- centric.
 Why is an IMS needed?
• One of the way to answer this question is to look at
the problems organizations experience where most of
them have difficulties in managing information
resources such as protecting information from
malicious or accidental events which destroy or
corrupt the data.
• Among other problems are: data quality, data mgmt
and quality are not formally documented.
• On the positive view: IMS is essential to operating,
controlling and improving business processes.
• It also can add value, reduce cost and create
competitive advantage.
 Question:
• In your point of view, how can the information create
the competitive advantage for an organization?
 Why is an IMS needed?
• Orna(1999) has suggested the main benefits from
having a defined IMS as follows:
– It is possible to integrate all information activities and to use
all information quickly and effectively in decision making.
– Promotes openness of communications throughout the
company, between and within levels.
– Will foster a culture of innovation and knowledge sharing.
– Forms a sound strategy for investment in information
systems and technology.
– Ensure awareness of opportunities and threats is
communicated throughout the company, and allows timely
responses to these.
 Consequences of Poor IMS
Mini case 1- The Utility Company
Utility companies are fighting tooth and claw to gain and retain customers.
One utility company estimated that it lost an average of30 customers per day
or more than 10,000 customers per year, because staff did not have access
to the right information to handle customer queries. This was equivalent to
$5.5 million in lost revenue.

Mini case 2- The Insurance Company

An insurance company spent $67 million developing a replacement information
system. After the acquisition of another company, they found it would cost
nearly the same amount to adapt the system to their new requirements. If the
previous system had had an adaptive information architecture this effort and
cost would have been avoided.
 Information Systems Strategies(ISS)

• ISS development is fundamentally concerned with:

– Defining how IS will be used to support an organization’s
strategy
– The impact of IS in generating new opportunities for an
organization
• Doherty et al.(1999) describe ISS development as:
The process of identifying a portfolio of computer-based
applications to be implemented, which is both highly aligned
with corporate strategy and has the ability to create an
advantage over competitors.
 Information Systems Strategies(ISS)
• The emphasis is on delivering an applications
portfolio of appropriate software tools and systems
that support the future direction of the organization
and achieve the strategic objectives.
• ISS also determines the quality of services delivered
to end-users
• ISS can support in various way such as:
– Information systems planning(ISP)
– Information systems strategic planning(ISSP)
– Strategic information systems planning(SISP)
 Information Systems Strategies(ISS)
• Ward and Peppard(2002) suggest that ISS must
consider both IS/IT strategy formulation and IS/IT
planning.
– IS/IT strategy formulation
• Involves exploration for the opportunities to employ IS
• Analysis of the competitive environment
• The need for alignment with business strategy
– IS/IT planning
• An implementation plan to achieve the IS strategy.
 Information Systems Strategies(ISS)
• Key output of ISS process:
– IS/IT mgmt strategy- describe an overall ISS for the
organization, current situation, vision and rationale for
change and plans.
– Business IS strategies – specify how each business unit will
use IS/IT to deliver its business objectives.
– IT strategy – policies for specific hardware and software
resources that comprising the IT infrastructure such as
helpdesk and support.
The McFarlan & McKenney Strategic
IT/IS Grid
• The McFarlan & McKenney model (1992) is a much
quoted and typical example of a 2x2 business
analysis matrix.
• The strategic grid model analyses the applicability of
IT as a strategic weapon on the industry level.
• The model classifies the industries according to their
present and medium-range affectedness by the
strategic impact of IT applications.
 The McFarlan & McKenney
Strategic IT/IS Grid
Strategic impact of IS development
portfolio
low high
low Support Turnaround
Aim: Reduce costs Aim: often uncertain
Approach: reactive with Approach: competitive
effectiveness focus proactive focus
Ex: payroll Ex: supermarket
Strategic impact retailing
on current Factory/
Information Production Strategic
Aim: competitive
Systems Aim: improve
Advantage
Performance
Approach: reactive with Approach: competitive/
technology and effectiveness focus
efficiency focus Ex: Financial
Ex: steel services
high production
The McFarlan & McKenney Strategic
IT/IS Grid
• The business analysis can be positioned under 4
classification:
– Support
– Factory/production
– Turnaround
– Strategic
The McFarlan & McKenney Strategic
IT/IS Grid
• Support
– The impact of IS in existing / future application development
is low
– IT/IS is used essentially for administrative systems to
improve internal efficiency.
The McFarlan & McKenney Strategic
IT/IS Grid
• Factory / Production
– IT/IS is critical to current operations but is not at the heart of
the company’s strategic development
– Reliable information systems are required for administrative
and process management.
– Future IT applications are not the critical factor for future
business success.
The McFarlan & McKenney Strategic
IT/IS Grid
• Turnaround
– IT is becoming more pervasive and is recognized as a tool
for transformation
– The systems that have being planned and developed may
be critical to the enterprise’s survival or growth
– However there is uncertainty as the capabilities of the
company in terms of delivery and support are untested
The McFarlan & McKenney Strategic
IT/IS Grid
• Strategic
– Some enterprise will be operating in conditions where IT is
already a central and their future are depending upon and
shaped by development in information systems
– Business operation are not possible without the use of
advanced information systems.
– The products and services tend to be computer based.
The McFarlan & McKenney Strategic
IT/IS Grid
• The grid has four quadrants built around two
straightforward questions:
– How important does management feel the current IT
systems are to the company?
– How important does the company think future developments
in IT will be for the company i.e. the impact of future IT
developments on its way of doing business?
The McFarlan & McKenney Strategic
IT/IS Grid
• Depending on the responses to these questions, a
company can be placed in the four quadrants as follows:
– Low Current: Low Future Impact. IT has little relevance and
simply supports existing processes.
– Low Current: High Future Impact. IT will feature more on the
business agenda in the future. The company believes that IT
will have a major impact on their business model in the future
and IT is in a turnaround role i.e. IT will be a key feature of
future strategic planning. It may not have played such a role in
the past.
 Example- Supermarket retailing
process
• The retailing industry is often given as an example of how IT has
become critical to operations.
• EFTPOS technology (i.e. Electronic Funds Transfer at Point of Sales) is
the scanning technology we all see at the checkout counter.
• However, this technology not only indicates the price of the goods
being purchased and computes the bill, it also updates the
supermarket’s stock records and may be on-line to the supermarket’s
suppliers who are immediately notified of the levels of stock (Electronic
Data Interchange).
• The supermarket can also use the data collected from loyalty cards at
the point of sale for marketing purposes. Payments both from the
customer and to the supplier are automated electronically. So IT is a
key part of operations.
The McFarlan & McKenney Strategic
IT/IS Grid
• High Current: Low Future Impact. Here IT is said to have a
Factory Role. It is important in terms of day-to-day operations
but it is not felt that there are any major IT developments on
the horizon that will fundamentally alter the nature of the
business. Here, the key issue is the maintenance of existing
systems.
• For companies in the Factory Role, the key issue will be the
security of their systems, back-up procedures, standby
arrangements and disaster recovery plans
The McFarlan & McKenney Strategic
IT/IS Grid
• High Current: High Future Impact. In this quadrant, IT plays a
crucial role both in terms of its current role and in terms of how
future IT developments are viewed as impacting on the
organization. IT is said to have a strategic significance.
• It is mission critical (i.e. the company is not going to be in
business at all without using IT effectively to deliver its products
and services both now and in the future). The role IT strategy
plays in the formulation of the overall business strategy is
critical.
• Example: financial services
The McFarlan & McKenney Strategic
IT/IS Grid
• 3 factors that drive the position of the firm on the grid:
– The ability of management to match the potential of IT with
the firm’s operations and strategy.
– The strategic choices that management makes with respect
to IT such as, cut cost, improve quality or to develop new
businesses.
– What is happening in the firm’s competitive environment.
 Phases of Information Strategy
• In general, the management of information, IT and IS
may go through 4 main phases:
– Operation
– Utility
– Services
– Strategic
 Phases of IT and IS Mgmt

Operation Utility Service Strategic

 Operation Phase
• Characterized by a piecemeal, application specific
approach to the implementation of systems.
• It is placed in the support quadrant in Mc Farland and
McKenney’s strategic grid.
• Decisions; short term basis and reactive manner
• Priorities: operational (rather than organizational
needs)
• The results are costly and inflexible structures that
are difficult to manage and control.
 Operation Phase
• This phase tend to see the development of isolated
systems for specific applications, which lead to
ineffective utilization and wastage of scarce
resources through diseconomies of scale.
• Responsibilities for systems may be fragmented
within the enterprise
 Operation Phase
• This result is significant resistance to any attempts to
integrate or co-ordinate system activities within the
enterprise because managers are reluctant to
relinquish control, over budget, personnel, and
services that are geared to their specific needs.
 Utility Phase
• Characterized by being driven by technological
capability and the realization that economies of scale
can be achieved by addressing enterprise wide
requirements for information transfer.
• It is placed in the factory quadrant in Mc Farland and
McKenney’s strategic grid.
• With the economies of scale and technological
capabilities, it has generally led to the implementation
of an IT infrastructure.
 Utility Phase
• This infrastructure will be more flexible, provide
access to share and become information resources.
• The effort involved at this phase become more
concentrated and costs become easier to control.
• A degree of pro-activity is introduced through the
recognition that systems must be built to ensure that
they can can cope with the growth of users, hardware
and services.
 Service Phase
• Characterized by being user-oriented rather than
technological oriented.
• It is placed in the turnaround quadrant in Mc Farland
and McKenney’s strategic grid.
• Most established enterprise have reached this phase of
IS management.
• Once management controls have been put in place to
help keeping the operating costs to a minimum, the
focus will be shifted to extract values from the system.
 Service Phase
• Concern with ensuring that appropriate services and
resources are available to the enterprise’s personnel.
• Ensure the user to get the right information, in the
right format and at the right time.
• Providing advisory as well as technical services in
order to develop systems that are based on users’
requirements.
 Strategic Phase
• Characterized by the recognition that an enterprise-
wide views of information processing need to be
established.
• It is placed in the strategic quadrant in Mc Farland
and McKenney’s strategic grid.
• Involved an understanding of the interdependency of
processes, information and technologies which are
needed to support these processes.
 Strategic Phase
• In this phase the medium to long term needs of the
enterprise become the focal point in planning
purposes.
• Requires close co-ordination between process
owners and service managers.
• This is to ensure that the long term goals of the
enterprises are reflected in these integrated
information strategy
 Strategic Phase
• Strassmann (1990) suggested a top-down approach
to IT/IS investment that involves the following steps:
– Business diagnosis
– Business function analysis
– Information systems analysis
– Computer application
Strategic Phase- Strassmann IT/IS
Investment Approach
Total business
Step 1: Business diagnosis

Business function
Step 2: Business function analysis
Information system
Step 3: Information system

Information Technology
Step 4: Computer application
Strategic Phase- Strassmann IT/IS
Investment Approach
• This framework begins with analyzing the firm’s
business environment in search of competitive
opportunities and evaluating financial conditions.
• The analytic understanding will be translated into
operating priorities in form of information systems
and applications.
Strategic Phase- Strassmann IT/IS
Investment Approach
• The alignment of information strategy with business
strategy is more difficult in a rapidly change
environment as the goal of the organization may
have shifted radically by the time the information
strategy has been articulated.
• Effective information strategies should not simply
reactive but should offering a proactive solutions.
 Conclusion: Information Strategy
• Information strategy is a key to the delivery of the
business processes as they are valuable and
dependent.
• If Information Strategy + Business Strategy
-> form and shape a better choice and definition of
business goals.
• This is because management will have a greater
understanding of the opportunities to create new IT
based capabilities rather than just focusing on
improving existing operations.
 Activity
• Evaluating the impact of the Internet on the five
competitive forces
• Purpose: Using Porter’s Five Forces model to assess
the impact of a technology on an industry.