Term/Case study
Chapter 7
Determining the Business Information Systems Strategy
Outline
Business Strategy and IS/IT
Tools for IS/IT Strategy Formulation and Their Relationships
A Framework for Using the Tools and Techniques Effectively
Identifying how IS/IT Could Impact the Business Strategy
Establishing the Relative Priorities for IS/IT Investments
Large Organizations, Multiple SBUs and Strategy Consolidation
Business Strategy and IS/IT
IS/IT can also be used to shape or even change the strategy of a business – ‘digital business transformation’ in today's language
There is another set of tools and techniques which can help tease out opportunities or explore the potential business impact of innovative ideas, by addressing the first two of the five strategy questions – where to compete and how to gain an advantage.
An application portfolio model for categorizing organizational IS/IT investments suggested they can be described in terms of being ‘strategic’, or ‘high potential’, or ‘key operational’ or ‘support’ based on the nature of the business contribution they make.
Tools for IS/IT Strategy Formulation and Their Relationships
Tools for IS/IT Strategy Formulation and Their Relationships
External long term – economic and business environment
The state of the industry in terms of profitability, growth, competitive dynamics, regulation and structure
How IS/IT is, or is capable of, changing the products and services, markets and business relationships of the industry
External short term – the IS/IT environment
The actual use of IS/IT by competitors and others in the industry to gain a relative advantage
IS/IT-based opportunities to change the balance of competitive forces in the industry, both in the existing value chain and by new entrants or product/service substitution
Tools for IS/IT Strategy Formulation and Their Relationships
Internal long term – business and organizational environment
How new applications could more effectively support or enhance the business strategy or enable a new strategy to be followed
How new applications could enable the business model to be changed to improve operational performance or the customer value proposition
Internal short term – IS/IT capability and current application portfolio
How well existing applications support the current strategy and either prevent business disadvantages and/or sustain existing advantages
The IS/IT resources and competences the organization has, or can easily acquire, and the effectiveness of the relationship between IS/IT and business management
A Framework for Using the Tools and Techniques Effectively
Three separate portfolios, which capture
Existing applications (Now)
Currently in place or already being provisioned in the near future
Should be assessed in terms of their contribution to current business strategy via existing business processes and performance levels and how well they support the achievement of known future requirements
Strengths and weaknesses of each must be understood both in current AND future context
Current developments that no longer clearly contribute to the strategy should be stopped
A Framework for Using the Tools and Techniques Effectively
Required applications (Now - 12 Months)
Essential to achieve the existing business objectives
Create changes that can achieve required levels of performance
Potential applications (6-24 Months)
Might be valuable in the future
Identifying how IS/IT Could Impact the Business Strategy
Understanding the Industry, Competitive Forces and the Potential IS/IT Impact
Key issues to be considered are
The business units and their relationships to each other and to the corporate body
The stage of maturity of the industry or industries within which the businesses compete
The product and customer portfolios of the business units, their contributions to revenues and profits and the demands on resources that each group of products/markets makes
The competitive forces affecting the business units and the corporation and their current and potential impact on the business's positions, to identify areas of greatest concern and need for action
A customer PUV analysis to determine product and/or service attributes that customers most value and the implications for the intended value proposition and supporting business model
The key capabilities and strategic assets required to succeed in the industry.
Understanding the Industry, Competitive Forces and the Potential IS/IT Impact
This set of assessments leads in two directions (Chapter 2)
To considering the current business strategy and objectives in the established business environment (Chapter 4)
To identifying ways in which IS/IT could impact the industry in terms of products/services/economics and be used to affect the relative strengths of the competitive forces (Chapters 2, 5 and 6)
Interpreting Business Objectives and Strategy
Business objectives and strategies are the products of a number of considerations
What the organization might do
What the organization wants to do
What the organization must do if it is to survive in its environment
What the organization can do, based on its resources, assets and capabilities.
Interpreting Business Objectives and Strategy
Consider the above at three levels
Permanent objectives
Reflect the mission, values and long-term aims and intentions of the organization
Strategic objectives
Achieve in the foreseeable, medium term
Tactical objectives
Achieve in the short term
Other “Boxes” Identifying how IS/IT Could Impact the Business Strategy
Determining Critical Success Factors (Chapter 4)
Assessing the Potential Impact of Digital Technologies on Industry Products and Services (Chapter 5)
Analyzing the Industry (External) Value Chain/Network and the Information Implications (Chapter 6)
Understanding How IS/IT Could Change the Structure of the Industry Value System and Firms' Value Propositions (Chapter 6)
Assessing Current Capabilities – Strategic Assets and Competences (Chapter 2)
Establishing the Relative Priorities for IS/IT Investments
Analyzing the Internal Value Chain, Business Model and Organization Relationships
The organization structure needs to be examined to identify how the activities of each function or unit contribute to or fulfil a primary role in the business model
Primary and support functions need to be considered separately
The primary value chain activities essentially describe how the business operates, but not how it is controlled or developed
Supporting Activities
Support activities develop
Overcome problems due to poor linkages across primary functions or processes
Evolved due to application or information management weaknesses elsewhere
Often ‘unnecessary’ reconciliation or recovery activities that need to be corrected at source
The value chain is likely to expose such problems, whereas organizational analysis can obscure them
Legitimate support activities
Assist in managing the primary activities
Are key to business and organizational development
Identifying Critical Business Processes and Activities and Implications for the Business Operating Model
CSFs associated with activities and processes
High cost, low value
Only offer cost-reduction possibilities from IS/IT investment
High value-adding activities
Could be made more effective through IS/IT investment, but this will only be worthwhile if their improvement relates directly to agreed business CSFs
Both high cost AND high value-adding activity
IS/IT may still help to reduce the cost
Identifying Critical Business Processes and Activities and Implications for the Business Operating Model
Activities associated with a CSF need to be assessed collectively
Enhancing the value or reducing the cost of each, via IS/IT
Without cost savings in one reducing value added by another
An activity that adds little value and is not associated with any of the CSFs
IS it needed at all?
Do we really need to improve it?
Every organization carries out some activities that actually add no value, and quite a few organizations have even computerized them
Identifying and Assessing New Options for Investment
Immediate impact or longer-term potential
Strategic or high potential in
Innovation-based aspect of the overall approach attempts to answer the following questions
What could IS/IT do for all the firms in the industry, in terms of the products and services offered and changing business relationships and competitive dynamics?
What could IS/IT do for the organization, based on its particular position within the industry and how it intends to achieve advantage?
Could IS/IT enable it to use its capabilities to enter new industries or markets?
Which options offer most immediate benefit in terms of the current business strategy by improving the value proposition, performance or how the company operates and is managed?
Large Organizations, Multiple SBUs and Strategy Consolidation
Factors that can affect the corporate (rather than individual business units) ‘value-added’ of IS/IT investment are whether or not
The units compete in the same or different industries and the similarity or otherwise of their products and services
The units are in similar competitive positions in their industries, the maturity of the industries and the types and mix of competitors
They have a similar capability in each of the three key dimensions – customer, operations and product
They have the same (or similar) customers, distribution channels and/or suppliers, with whom information can be shared and value chain links mutually developed
Large Organizations, Multiple SBUs and Strategy Consolidation
They trade with one
They have internal value chains of the same type which consist of similar primary value chain components in support of similar value propositions
They are of similar sizes and scale of operation
They are adopting similar strategies and have similar CSFs
The parent company requires a consistent, even standard, structure of information from all the units
Support activities are broadly similar and are, or could be, organized in the same basic structure, such as a shared service, or be outsourced together
Sharing “Value-Added” IT/IS Investment
Opportunities for further corporate synergy or economic benefits exist in each of the inputs to the IS/IT strategy process (External and internal, business and IS/IT environments)
A threat or weakness for one business unit may be able to be overcome by transferring/sharing IS/IT
It is, therefore, important to compare the results of the analyses and to share ideas
Results should be ‘pooled’ and made available for others to adapt, adopt or join in, if appropriate
An idea from one part of the business, adapted by another, may even offer more benefits
More to come in Chapters 8 & 11!