LECTURE 1

Business Strategy for the

Digital World
 LEARNING OUTCOMES
 To appreciate the evolution and development of strategic
management thinking
 To develop an understanding the key developments in the
digital economy
TABLE OF CONTENTS
• Review of The Digital Organization
• Review Role of IT/IS in organization
• Understanding Organizations
• Understanding Business Environment
• Understanding Business Strategy
• How IT/IS Help Organizations to Achieve Business
Strategy
• Different IT/IS Strategy Frameworks
• Different IT/IS Strategy Applications
• IT Strategy at National & International Level
• The CIO and the IS Organization
3
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.”

 Source: Johnson and Scholes, 1999, p 10

RESOURCE BASED VIEW VS
POSITION VIEW OF STRATEGY
 Resource Based View
 Think of rugby or a football team who has one star player
an the how they play the game and the opposition is
based on that star player been given the ball by the other
players and then they do what they do best and win
games
 Position View
 Think of your local high street and see which ‘shop’ has
the prime location and notice how often say travel agents
are all ‘bunched together’
around the prime spot to entice customers in
 1990’S
BACKGROUND STRATEGY ASSESSING STRATEGY FORMULATION IMPLEMENT STRATEGY
DEVELOPMENTS PERSPECTIV ENVIRONMENT
E
Further globalisation and Concentration Globalisation and Realisation that unrelated Decentralisation.
development of multi- on core focus on quality diversification add s little value, Flattening organisation
nationals. business / and simple resulting in a focus on core structures.
New outlets for research Develop less statement of products / markets eg sticking Organic and confused
emerged eg. strategic analytical content. to the knitting. management approaches
management journal. more people Still a focus on critical mass but relevant to more rapid change
Theoretical developments oriented alternatives to scale economies eg Chaos theory.
occurred in related approaches eg scope.
disciplines. Strategies for competitiveness
and renewal (low growth but
(Economies of sustainability).
scope)

New priorities : Core Analysing Founded on value creation, Refinement of 1980’s

- deregulation competencies Internationalisatio sustainability, outsourcing and concepts with further
- new information / Holistic and n, dynamism and focus on distinctive capabilities. attention to cognitive
- manufacturing / industrial information volatility of the dimensions.
technology approaches environment.
- globalisation of competition
- unprecedented level of
dynamism and volatility (Economies of
throughout international expertise)
economy
CURRENT THINKING
2000’S
Dominant approach – dynamic capabilities

Themes – Innovation, creativity, change

Key issues – Agility, opportunistic, speed

Techniques – Collaboration, knowledge management

Organization effects – Global networks, flat structures

ITS ALL ABOUT VALUE!
 Businesses create value
 Threshold value is expected

 Value is directed from three perspectives

 Cost
 Scope
 Differentiation
VALUE CREATION
 Types of Value :
 Economic value : wealth, resources
 Physical value : well-being, rest, comfort
 Emotional value : security, contentment, excitement
 Social value : effective relationships among people
 Cognitive value : knowledge, wisdom, lower attention
demands
 Political value : power, control, influence
 THE PROCESS
Understand the business – what is it? what does it do? What value does it add?

Understand the nature of the environment – dynamic, complex, simple, static

External Environment Internal Environment

General Specific Mission, purpose and values

PESTL Stakeholders and Power

Industry Structure

Cultural Web
The threshold requirements and CSFs

Organisational Balance
Issues Opportunities

Competitive Position and Sustainability Processes and Competences

Opportunities and Threats Strengths, Weaknesses and Core Competences

SWOT, Strategic Position and Strategic Capabilities

THE DIGITAL ECONOMY
 The digital economy is characterised by the use ICT’s to
undertake business processes (e-business); effect
transactions along the supply chain (e-commerce) and the
coordination of entrepreneurial activities based on
knowledge, innovation and creativity
 COMPETITION

One advantage when you’re No. 1 or 2 in an industry is that you can

really have a hell of a lot of say in what the future’s going to be like by
what you do. I’m not a believer in always forecasting the future. But if
you take actions that can create that future, at least shape it, then you
can benefit from it.

They say: ‘Do you sleep well at night with all the competition?’ I say:
‘I sleep like a baby’. They say: ‘That’s wonderful’. I say: ‘No, no. I
wake up every two hours and cry!’ Because it’s true, you know. You
have to feel that restlessness.

Roberto Goizueta, late Chief Executive, Coca-Cola Corporation

 COMPETITION: AN INTRODUCTION
The skills required by organizations are:

 the ability to discern patterns in this dynamic

environment and competitive chaos, and spot
opportunities ahead of their rivals
 the ability to anticipate competitor actions and
reactions
 the ability to use this intelligence and insight to
lead customer opinion and outperform competitors.
KEY QUESTIONS REGARDING THE
INDUSTRY AND COMPETITIVE ENVIRONMENT
What are the
industry’s
dominant
economic
traits?

How strong What forces

are are driving
competitive change in the
forces? industry?
How
What market What are the attractive is
positions do key factors for the industry
rivals occupy? competitive from a profit
What moves will perspective?
success?
they make next?
 Advantages/Disadvantages of Models

• convince the business world it’s real

• may not represent the complexity of the real world
• don’t take account of gaps in data
• ‘strategy process’ can take too long
• models only give a ‘snap-shot’, things change!
• depends on quality of analysis
• but can show relative positions if done properly!
 GENERIC STRATEGIES FOR COMP ADV
Competitive Advantage
Competitive Scope Lower Cost Differentiation

Broad
Target Cost
Leadership Differentiation

Cost Differentiation
Narrow
Target Focus Focus
How do Internet &
WWW developments
fit in? Source (Porter 1985)