Chapter One

The evolving role of

Information Systems and
Technology in organization:
The Strategic Perspective
Forces Affecting the Speed & Effectiveness of
Progress in Using IT/IS in Delivering Business
Benefits:-
1. The capabilities of the technology;
2. The economics of deploying the technology;
3. The applications that are feasible;
4. The skills and abilities available – in-house or
external sources to develop the applications;
5. The skills and abilities within the organization to
use the applications;
6. The pressures on the particular organization or its
industry to improve performance.
Information Technology and Strategy

IS/IT offers new management and business

opportunities and can be applied strategically in
at least four different ways:
◦ To gain competitive advantage
◦ To improve productivity and performance
◦ To facilitate new ways of managing and organizing
◦ To develop new business

3
Competitive Advantage: A superiority gained by an organization when it can
provide the same value as its competitors but at a lower price, or can charge
higher prices by providing greater value through differentiation. Competitive
advantage results from matching core competencies to the opportunities.

Productivity describes various measures of the efficiency of

production. A productivity measure is expressed as the ratio of output
to inputs used in a production process, i.e. output per unit of input.

Organizational performance comprises the actual output or results of

an organization as measured against its intended outputs (or goals and
objectives)
 Levels of Management
Strategic Planning
"Strategic planning is the process of deciding on objectives of
the organization, on changes in these objectives, on the
resources used to attain these objectives, and on the policies
that are to govern the acquisition, use, and disposition of these
resources."
Management control
"Management control is the process by which managers assure
that resources are obtained and used effectively and efficiently
in the accomplishment of the organization's objectives.“
Operational control
"Operation control is the process of assuring that specific tasks
are carried out effectively and efficiently."
Planning within the
Organization
Planning Strategic Plan
Strategic

Management Tactical Plan

Control
Operational
Control Operational Plan
 Differences in Activities
Strategic Planning Management Control Operational Control

Choosing company Formulating budgets

objectives
Setting personnel Formulating personnel Implementing policies
policies practices
Setting financial policies Working capital Controlling credit
planning extension
Setting marketing Formulating advertising Controlling placement
policies programs of advertisements

Choosing new product Choosing product

lines improvements
Acquiring a new Deciding on a plant Schedule production
division rearrangement
Some Distinctions Between Strategic
Planning and Management 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 Rhythmic; prescribed
irregular; each problem procedures
different
Nature of information Tailor made for the Integrated; more
problem; more external internal and historical;
and predictive; less more accurate
accurate
 Some Distinctions Between
Strategic Planning and
Management Control
Characteristic Strategic Planning Management Control
Mental activity Creative; analytical Administrative;
persuasive
Planning and control Planning dominant, but Emphasis on both
some control planning and control
Time horizon Tends to be long Tends to be short
End result Policies and precedents Action within policies
and precedents

Robert Anthony
Some Distinctions Between Management
Control and Operational Control
Characteristics Management Control Operational Control
Focus of activity Whole operation Single task or
transaction
Judgment Relatively much; Relatively little;
subjective decisions reliance on rules
Nature of structure Psychological Rational
Nature of information Integrated; financial Tailor-made to the
data throughout; operation; often
approximations non-financial; precise;
acceptable; future and often in real time
historical
Some Distinctions Between Management
Control and Operational Control
Characteristics Management Control Operational Control
Persons primarily Management Supervisors (or none)
involved
Mental activity Administrative; Follow directions (or
persuasive none)
Time horizon Weeks, months, years Day-to-day
Typical Planning, Control and
Operational Systems
Information Technology in business: from data
processing to strategic information systems
Three Era Model
Information Technology in business: from data processing to
strategic information systems
Three Era Model
 Information Technology in business: from data processing to
strategic information systems
Three Era Model

Data Processing (DP) Era

◦ To improve operational efficiency by automating information-based
processes

Management Information Systems (MIS) Era

◦ To increase management effectiveness by satisfying their information
requirements for decision making

Strategic Information Systems (SIS) Era

◦ To improve competitiveness by changing the nature or conduct of business
–IS/IT as a source of competitive advantage
Main Types of Strategic System
1- Linking to Customers and Suppliers
Share information via technology-based systems with customers/consumers
and/or suppliers and change the nature of the relationship
2- Improved Integration of Internal Processes
Produce more effective integration of the use of information in the
organization’s value-adding processes
3- Information-based Products and Services
Enable the organization to develop, produce, market and deliver new or
enhanced products or services based on information
4- Executive Information Systems
Provide executive management with information to support the development
and implementation of strategy.
 IT strategy and
organization/business
strategy
What is Strategy
Strategy is the direction and scope of an
organisation over the long term which
achieves advantage for the organisation
through its configuration of resources within
a changing environment to meet the needs
of markets and to fulfil stakeholder
expectations.
Purpose of strategy
1. To position or set direction within environment
2. To focus effort within the organization
3. To define the organization, to give meaning to
the organization’s activities
4. To provide consistency
5. For efficiency & focus
TERM DEFINITION

Mission Overriding purpose in line with the

values or expectations of
stakeholders
Vision or strategic Desired future state: the aspiration
Vision of the organisation
General statement of aim or
Goal purpose
Resources, processes or skills which
Core competences provide ‘competitive advantage’
 Missions vs. Strategic Visions

A mission statement focuses on A strategic vision concerns a firm’s

current business activities future business path
◦ For example: ◦ The kind of company it
Customer needs is trying to become
currently being ◦ Customer needs to be
served satisfied in the future
 Strategic Vision

A Strategic vision is a roadmap

of a company’s future --
◦ Direction it is headed
◦ Business position it intends to
stake out
◦ Capabilities it plans to develop
◦ Customer needs it intends to
serve
 Examples: Mission and
Vision Statements

Otis Elevator
Our mission is to provide any customer a means of moving people
and things up, down, and sideways over short distances with higher
reliability than any similar enterprise in the world.

Microsoft Corporation
One vision drives everything we do: A computer on every desk and
in every home using great software as an empowering tool.
 Vision & Values Statements
Vision Statement
The most powerful motivator in
an organization
bright description of the
organization as it effectively
carries out its operations.
Forceful description of the state
& function of the organization
once it had implemented the
strategic plan
Values Statement
Represent the core priorities in the
organization’s culture, including what
drives members’ priorities and how they
truly act in the organization
Establish core values from which the
program would like to operate
Articulating values provides everyone
with guides to choose among competing
priorities & guidelines about how people
will work together.
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 Core Competencies
A unique ability that a company acquires from its
founders or develops and that cannot be easily
imitated. Core competencies are what give a company
one or more competitive advantages, in creating and
delivering value to its customers in its chosen field. Also
called core capabilities or distinctive competencies.
Core Competencies

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 Porter’s Five Forces Model of
Competitive Advantage
Porter’s Five Forces Model divides entities in the competitive landscape
into five groups as follows:
◦ Threat of New Entrants: new firms that may enter a companies market.
◦ Bargaining Power of Buyers: the ability of buyers to use their market
power to decrease a firm’s competitive position
◦ Bargaining Power of Suppliers: the ability suppliers of the inputs of a
product or service to lower a firm’s competitive position
◦ Threat of Substitutes: providers of equivalent or superior alternative
products
◦ Industry Competitors: current competitors for the same product.

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Business Generic Strategies

1. Porter Generic Strategies (1980)

2. Miles and Snow Typologies 91983)
Porter Generic Strategies (1980)
Three generic strategies to achieve competitive advantage
◦ Overall cost leadership
◦ Low-cost-position relative to a firm’s peers
◦ Manage relationships throughout the entire value chain
◦ Differentiation
◦ Create products and/or services that are unique and valued
◦ Non-price attributes for which customers will pay a premium
◦ Focus strategy
◦ Narrow product lines, buyer segments, or targeted geographic markets
◦ Attain advantages either through differentiation or cost leadership
 Porter Generic Strategies (1980)
Competitive Advantage
Uniqueness Perceived Low Cost
by the Customer Position

Industry-wide
Strategic Target

Particular
Segment Only
 Miles and Snows Typologies 1983

Miles & Snow classify organizations as:

Defenders: conservatives, valuing low-risk strategies,
secure markets, & well-tested potential solutions.
Prospectors: innovative, ground breaking, valuing risk
& pay off.
Analyzer : organizations that are in the middle.

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 Miles and Snow Typologies 1983
Defender: Rather than seeking new growth opportunities and innovation,
an organization that follows a defender strategy concentrates on
protecting its current markets, maintaining stable growth, and serving its
current customers.

Prospector: An organization that follows a prospector strategy is a

highly innovative firm that is constantly seeking out new markets and new
opportunities and is oriented toward growth and risk taking.

Analyzer: An organization that follows an analyzer strategy both maintains

market share and seeks to be innovative, although usually not as innovative as an
organization that uses a prospector strategy. Most large companies fall into the
third category, because they want both to protect their base of operations and to
create new market opportunities. 
 IS Strategy
Generic IS strategies or Generic Application Management Strategies
(Parsons , 1983)
Parsons has described 5 strategies that are prevalent as the means by which
organizations link the management of IS/IT to the corporate or business
management processes. These ‘linking strategies’ are general
frameworks/generic strategies which guide:
• the opportunities for IT which are identified
• the IT resources which are developed
• the rate at which new technologies are adopted
• the level of impact for IT within the firm

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 IS Strategy

Generic IS strategies (Parsons, 1983)

◦ Like Porter but for IS not business
◦ They are six not three, as follow.

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 IS Strategy
1- Centrally planned
◦ Significant degree of involvement & IT knowledge on the part
of senior management
◦ IS strategic significance is well understood
◦ Planning cycle of business and IS are closely integrated.
IS strategic planning should be embedded within business
strategic planning
◦ Centrally planning ± centrally controlled
◦ IS role is a service provider. User role is an opportunity
spotter

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 Generic IS strategies

2- Leading edge
◦ Technology led not business motivated
◦ Concentrate on innovative technology use
◦ Believe on highly risky investment to generate huge payback
◦ Ability to commit large amounts of money & resources for
innovative IS mgt
◦ IS role is experimenter & promoter
◦ Support technology scanning, & in-house development
initiatives

37
 Generic IS strategies

3- Free Market
◦ Users make the decisions concerning IS as a free market
◦ No centrally planned integration or tightly controlled budget
◦ A great need for knowledge users
◦ Organizational acceptance of a degree of duplication of
effort
◦ IS function is a competitive BU. Probably a profit center. It
achieves retunes on its resources
◦ Users are service negotiators to get IS services

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 Generic IS strategies

4- Monopoly
◦ Opposite of free market
◦ IS is a corporate asset not a BU
◦ Single sourcing policy, with tight policing to force it thru
◦ Good customer service
◦ Negotiation of users is for better service & a share of
resources not for a service contract as in the “Free Market”
strategy
◦ Tight financial budgeting and integration
◦ Could be very bureaucratic, providing standard solutions

39
 Generic IS strategies

5- Scarce Resources
◦ Based on a belief that information is finite &
requirements need clear justification
◦ Very tight budgetary controls
◦ Role of IS is being very efficient in the use of scarce
resources
◦ Role of users is providing clear justification of their
requirements
◦ It has a negative influence on information exploitation

40
 IS Strategies
Strategy Centrally planned Leading edge

Management • Central coordination of • Technology can create

rationale all requirements will business advantages and
produce better risks are worth taking
decisions
Organizational • Knowledgeable top • Commitment of resources
requirements management and funds
• Integrated IS and • Innovative management
business planning and strong technical skills
processes
Role of IS • Provide services to • Push forward boundaries
match business of technology usage
demands
Role of managers• Identify applications to • Use technology and identify
and users meet business needs the advantages
 Generic Management Strategies
Strategy Free market Monopoly

Management • Market makes the best • Information is a corporate

rationale decisions and users are good and an integrated
responsible for business resource for users to employ
results
Organizational • Knowledgeable and • Acceptance of policy on
requirements accountable users single sourcing
• Willingness to duplicate • Good forecasting of
efforts with lose budget resource usage
control
Role of IS • Profit oriented to • Satisfy requirements of
achieve a return on users and non-directive in
resources IS usage
Role of managers• Identify, source, and • Understand business needs
and users control applications and present them to obtain
development resources
 Generic Management Strategies
Strategy Scarce resource

Management • Information is a limited resource and its

rationale development must be clearly justified

Organizational • Tight budget control of all IS expenses

requirements • Policies to control and justify IS usage

Role of IS • Control costs tightly to optimize use of

limited resources

Role of managers • Identify and justify applications using

and users costs and benefits
Evolution of IS Strategies
Increasing
IS usage

Free market

Leading edge

Monopoly Centrally planned

Scarce resource
or free market

DP era MIS era SIS era Time

Business and IT alignment
Business and IT alignment

Creating and managing a business driven IT

organization for which the primary focus is
implementing information oriented solutions that are
most important to meeting the business goals,
objectives, and strategies of the enterprise.
Business and IT alignment
What is necessary to align IT with the Business?
1.Assure that all IT activities contribute to the goals,
objectives, and strategies of the business.
2.Encourage Executive Business Management to become
continuously involved in plans and decisions regarding the
use of information technology.
3.Position the IT organization to best address the needs of the
business
4.Enhance the awareness of the value of IT to the business
 Business Strategy
Step 1
• Business decisions IT impact
Where is the • Objectives and direction and potential
business
• Change
going and
why?
Supports Direction
business for IS

Systems Strategy
Step2
• Business-based
What is • Demand-oriented
required?
• Application-focused

Infrastructur Needs and

e and priorities
services
IT Strategy
Step 3
How can it
• Activity-based
be delivered? • Supply oriented
• Technology-focused

The relationship between business, IS and IT strategies

48
Henderson & Venkatraman’s take home
message

Information
Business
External technology
strategy
strategy

Strategic
integration

Information
Organizational
Internal Systems,
Infrastructure and
Infrastructure and
processes
processes

Business domain IT domain

Functional integration

49
 Henderson & Venkatraman’s take home
message

Taken from: Henderson, & Venkatraman, (1993). Strategic alignment: Leveraging information technology for transforming organisations. IBM Systems Journal, 32(1):472-484. 50/36
Goal Henderson & Venkatraman The GRAAL framework Observations Conclusion