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Managing and Using Information Systems:

A Strategic Approach – Sixth Edition

Keri Pearlson, Carol Saunders, and Dennis Galletta

Chapter 1 The Information Systems

Strategy Triangle

Kaiser Permanente (KP) Opening Case

• What was KP’s business strategy in 2015?

• On what were bonuses to doctors based under the “fix me” system?

• What would the new idea be called instead of a “fix me” system?

• What is the new basis for end-of-year bonuses?

• What goal alignment has helped KP’s success?

• What IS components are part of this?

• Could only the IS components be changed to achieve their success?

• Could only the strategy be changed to achieve their success?

The Information Systems Strategy Triangle

These need to be balanced.

Business Strategy

Organizational Strategy Information Strategy

What is a “Strategy?”

• Coordinated set of actions to fulfill objectives, purposes, or goals

• It sets limits on what the organization seeks to accomplish

• Starts with a mission

Company Mission Statement

Zappos To provide the best customer service possible. Internally we call this our WOW philosophy.

Amazon We seek to be Earth’s most customer-centric company for three primary customer sets: consumer customers, seller customers and developer customers.

L.L. Bean Sell good merchandise at a reasonable profit, treat your customers like human beings and they will always come back for more.

Business Strategy

What is a business strategy?

• It is where a business seeks to go and how it expects to get there

• It is not a business model, although it includes business models as one component of a business strategy

• Business models include subscriptions, advertising, licenses, etc.

• Business models do not include where the business seeks to go, and only the revenue portion of how it expects to get there

Generic Strategies Framework

• Michael Porter: How businesses can build a competitive advantage

• Three primary strategies for achieving competitive advantage: • Cost leadership – lowest-cost producer.

• Differentiation – product is unique.

• Focus – limited scope – can accomplish this via cost leadership or differentiation within the segment

Three Strategies for Achieving Competitive Advantage

Strategic Advantage

St ra

te gi

c Ta

rg et

Uniqueness Perceived by

Customer Low Cost Position

Industry Wide Differentiation Cost Leadership

Particular Segment Only

Focus

Three Strategies for Achieving Competitive Advantage

Examples

Strategic Advantage

St ra

te gi

c Ta

rg et

Uniqueness Perceived by

Customer Low Cost Position

Industry Wide Differentiation Cost Leadership

Particular Segment Only

Focus

Apple Wal-Mart

Marriott Ritz Carlton

Dynamic Strategies

• Beware of Hypercompetition • Can lead to a “red ocean” environment

• Cutthroat competition – zero sum game

• Every advantage is eroded—becoming a cost.

• Sustaining an advantage can be a deadly distraction from creating new ones.

• D’Avenis says: Goal of advantage should be disruption, not sustainability

• Initiatives are achieved through series of small steps. Get new advantage before old one erodes.

• Better to adopt a “blue ocean” strategy • Change the industry; create new segments/products

Creative Destruction

• GE’s Approach under Jack Welch

• Ask people to imagine how to destroy and grow your business

• DYB: Imagine how competitors would want to destroy your business.

• GYB: Counteract that by growing the business in some way to:

• Reach new customers/markets

• Better serve existing customers

Summary

Strategic Approach Key Idea Application to Information Systems

Porter’s generic strategies

Firms achieve competitive advantage through cost leadership, differentiation, or focus.

Understanding which strategy is chosen by a firm is critical to choosing IS to complement the strategy.

Dynamic environment strategies

Speed, agility, and aggressive moves and countermoves by a firm create competitive advantage.

The speed of change is too fast for manual response making IS critical to achieving business goals.

Organizational Strategy

• What is organizational strategy? • Organizational design and • Choices about work processes

• How do you manage organizational, control, and cultural variables?

• Managerial Levers

Managerial Levers

Information Systems Strategy

IS Strategy

• What is an IS Strategy? - The plan an organization uses in providing information services.

• Four key IS infrastructure components

Information systems strategy matrix.

What Who Where Hardware The physical devices

of the system

System users and

managers

Physical location of

devices (cloud,

datacenter, etc.)

Software The programs, applications, and

utilities

System users and

managers

The hardware it

resides on and

physical location of

that hardware

Networking The way hardware is connected to other

hardware, to the

Internet and to other

outside networks.

System users and

managers; company

that provides the

service

Where the nodes,

wires, and other

transport media are

Data Bits of information stored in the system

Owners of data; data

administrators

Where the

information resides

What Who Where

Hardware Laptops, servers to store info and back

up laptops

Consultants have

laptops, managed by

the IS Dept.

Laptops are mobile;

servers are

centralized

Software Office suite; collaboration tools

Software is on

consultants’ laptops

but managed

centrally

Much resides on

laptops; some only

resides on servers

Networking Internet; hard wired connections in

office; remote lines

from home, satellite,

or client offices

ISP offers service;

Internal IS group

provides servers and

access

Global access is

needed; Nodes are

managed by ISPs

Data Work done for clients; personnel

data

Data owned by firm

but made available to

consultants as

needed

Resides on cloud

and copies “pulled”

into laptops as

needed.

Illustration in a Consulting Firm

One IS Strategy: Social Strategy

• Collaboration • Extend the reach of stakeholders to find and connect with

one-another

• Engagement • Involve stakeholders in the business via blogs;

communities

• Innovation • Identify, describe, prioritize new ideas

Managing and Using Information Systems:

A Strategic Approach – Sixth Edition

Keri Pearlson, Carol Saunders, and Dennis Galletta