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Where we are
Corporate Aligning Organizing
& business IS/IT with Managing the
strategy business the app. strategic
and IS/IT strategy portfolio managmnt
implications of IS/IT

Key ideas
A strategic Business Determine & the future
perspective innovation the IS of IS/IT
of IS/IT with IS/IT strategy strategy

Establish Search for Justifying & The strat.

IS/IT competitive managing Managmnt
strategy opportunit. IS/IT of IT
process to shape investment service &
strategy s infrstructur

strategic management IS/IT strategy IS/IT strategy execution

concept & IS/IT implications formulation & planning
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Session Objectives
Learn about the evolution of IS/IT in
Understand the strategic context of
IS/IT in organization
Understand the concept of IS/IT
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Information Systems (IS), Information Technology (IT), & Digital
Digital Disruption: The Impact of IS/IT
The Three-era Model of Evolving IT Application in Organizations
A Classification of the Strategic Uses of IS/IT
Success Factors in Strategic Information Systems
A Portfolio Management Perspective on IS/IT Investments
What Is an IS/IT or Digital Strategy?
From Strategic Alignment to Strategy Co-evolution
Digital Strategies for the 21st Century: Building a Dynamic Capability
to Leverage IS/IT
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IS, IT, Digital

UKAIS defines information systems as the means by which
people and organizations , utilizing technology , gather , process ,
store , use and disseminate information.
It is thus concerned with the purposeful utilization of information technology.
IT refers specifically to technology, essentially hardware, software
and telecommunications networks. It is thus both tangible (e.g. with
servers, PCs, routers and network cables) and intangible (e.g. with
software of all types).
IT facilitates the acquisition, processing, storing, delivery and sharing of
information and other digital content.
an application refers to the use of IT to address a business activity
or process.
Digital has both IS & IT components
Imperative to understand how IS will be leveraged and used as well as the IT
capabilities to develop digital strategy
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Digital Disruption
From marketplace to marketspace
Gojek, Uber, Buka Lapak, eBay, Bhineka, Amazon,
Blurring of physical/digital divide
Cloud business (computing resource instead of computing
Move from push to pull economy
Using analytics, sellers can make the customers ask for
products/services instead of selling them
Development of open standards
To enable interconnection of various systems from different
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Digital Markets
More commerce takes place electronically (e-commerce-
create new opportunities, online transaction)
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Digital Products
More products in digital forms

Software Uang

Musik Video e-Book

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The Power Information

Technology advancement that can processes data
in a large volume in a relatively short time
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The 3 era - Type of applications based on

management activity



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The 3 era - IS/IT Contributions

data processing to improve operational efficiency by
automating information-based processes;
Increased by 5 10 %
management information systems to increase
management effectiveness by satisfying their information
requirements for decision making;
Less consistent improvement; depends on the managers!
strategic information systems to improve
competitiveness by changing the nature or conduct of
business (i.e. IS/IT investments can be a source of
competitive advantage).
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The 3 era

DP & MIS eras still coexist

SIS app relies on good DP & MIS apps!
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A Classification of the Strategic Uses of IS/IT

1. those that share information via technology-based systems
with customers/consumers and/or suppliers and change the
nature of the relationship; [American Hospital Supplies;
American Airlines]
2. those that produce more effective integration of the use of
information in the organizations value-adding processes; (use
of ERP, CRM, etc.)
3. those that enable the organization to develop, produce,
market and deliver new or enhanced products or services
based on information; [Merrill Lynch]
4. those that provide executive management with information to
support the development and implementation of strategy (in
particular, where relevant external and internal information are
integrated in analysis). (use of EIS, BI, etc.)
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IT-Enabled Business Transformations

The upper three levels of impact of
IS/IT on business, described in MITs
Management in the 1990s Research
Programme, requiring revolutionary
change or transformation include
twoprocess redesign and network
redesignthat imply changing the
internal or external value chain
components and relationships.
many organizations have
implemented enterprise systems
software packages (e.g. ERP and
CRM) to obtain those new business
processes and modern, upgradeable
software. These solutions involve
adopting a value-chain-driven
approach to understanding how the
business works
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Examples of Strategic Use of IS/IT

Merrill Lynch: product innovation
In the USA, Merrill Lynch launched its cash-management account back in 1978. This combined
traditionally separate banking products such as line of credit, cheque, investment and equity accounts
into a single monthly statement, with idle funds being swept automatically into a high-interest-bearing
account. The new accounts attracted US$1 billion of assets in the first year. Merrill Lynch set out to
change the shape of the financial marketplace permanently by taking several existing but separate
services and tying them together through information technology to create a new service that shattered
the traditional boundaries between the banking and securities industries.
American Hospital Supply: innovation in the customer interaction using IS
American Hospital Supply competed in the wholesale health-care industry in the 1970s and 1980s. To
gain an important edge over its rivals, AHS pioneered an order entry distribution system that linked
most of the firms customers to its computers. AHS-owned terminals were placed directly in the
purchasing departments of hospitals, giving them an early mover advantagehospitals didnt wish to
have multiple terminals from different vendors cluttering up their offices. In addition to ordering
merchandise, the system allows customers to control their inventories by having direct access to AHSs
stock records, increasing the likelihood of their coming to rely upon AHS as a key supplier. The fact that
the companys initial move to electronic ordering was spearheaded by a regional manager seeking to
meet the needs of a single customer suggests that starting small may be the key to success.
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Examples of Strategic Use of IS/IT

American Airlines: back-end inventory provided a marketing & sales advantage
AA gained a lead over the competition as the first US carrier to offer an online reservation system
(Sabre) to travel agents. Sabre captured 10.000 of the 24.000 travel agents in the US at that time.
Sabre listed the flight schedules of over 400 airlines, but when launched, it gave AA a crucial edge by
displaying its own flights first.Other US carriers persuaded the Government to intervene. AA still
benefited, however, by charging for every booking made, bringing in significant revenue. In fact, Sabre
was more profitable than the airline itself.
Otis Elevators: can be seen as an early example of IoT
In the 1980s Otis Elevators identified customer services as being a key element of its customer
strategy. It decided that one of the aspects of its service that would give its customers most satisfaction
was the prompt lift repairt service. So it built an automated system (Otisline) to dispatch repairmen.
When something stgarted to go wrong with Otiss lifts, they (the lifts!) automatically called in their
complaint to a computer and an engineer was dispatched without human intervention.
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Examples of Strategic Use of IS/IT

Amazon: new entrant online business that disrupted the retail industry was launched in July 1995 and has probably become the most famous site in
cyberspace ... The initial idea behind Amazon was to exploit the Internet to deconstruct traditional
bookselling, with a catalogue 10 times larger that that of the largest Main Street superstore, at prices 10
to 15 per cent cheaper. But that was not a sustainable advantage: competitors such would
rapidly establish comparable selections and price points. Amazon went on to exploit the emerging
economics of community with its curated reviewer community, encouraging the rating of reviews and
awarding badges to the best-rated reviewers. It has also pioneered technologies such as customer
profiling and 1-click shopping Over the year, the company has also expanded into other areas and
now sells a huge range of products from consumer electronics, toys, and games to foods. Today,
Amazon earns <7% of its revenue from books. it seizes the strategic opportunities presented by
technology, ruthlessly cannibalizing its own business where necessary. E-books were inevitable, so it
launched the Kindle. Given the scale of its own IT infrastructure, it now sells cloud computing services.
Ryanair: using Internet to support its low cost strategy
Ryanair is one of the worlds most successful low fares airlines. To support this strategy, the company
looked to the Internet to provide a low cost distribution channel for its seats In addition to booking
flights, the site also sells trave insurance, car hire and hotel accomodation. Customers can now check
in for their flights online or using an app on a smartphone.
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Examples of Strategic Use of IS/IT

Uber: an example of a platform company, facilitating a two-sided market that brings customers
& suppliers together
Uber, the ride-hailing app provider, has become Silicon Valleys poster child for disruption. It has
revolutionized the taxi market in more than 230 cities in 51 countries without owning a single car. Its
marketplace connects drivers of regular cars and taxis with passengers through smartphone app,
backed by a big data team that tries to ensure a ride is never more that five minutes away.
Zopa: an example of a Fintech company, disrupting financial industry
In March 2005, Zopa became the first company in the world to launch a P2P lending operation. It
implemented a radical concept: the Zone of Possible Agreement. The term refers to the price point
where both borrower and lenders agree that a particular interest rate is fair to both sides. Borrowers are
credit-checked using a credit reference agency as well as the platforms own credit test. Zopa links
parties up to this price and facilitates the actual transaction. No bank is involved.
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Instant courier
Get anything Transport
Track your items
delivered and Go-food and speak to
instantly Shopping your driver
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The Changing Role of IS/IT

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Success Factors in SIS

1. External, not internal, focus: looking at customers, competitors,
suppliers, even other industries and the businesss relationships and
similarities with the outside business world.
2. Adding value, not cost reduction: although cost reductions may accrue
due to business expansion at reduced marginal costs, doing it better, not
cheaper seems to be the maxim.
3. Sharing the benefits: within the organization, with suppliers, customers,
consumers and even competitors on occasion!
4. Understanding customers and what they do with the product or service:
how they obtain value from it, and the problems they may encounter in
gaining that value.
5. Business-driven innovation, not technology-driven: the pressures of the
marketplace drove developments in most cases.
6. Incremental development, not the total application vision turned into
7. Using the information gained from the systems to develop the business.
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A Portfolio Management Perspective on IS/IT




High Strategic Low/Unce

Impact rtain
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What IS an IS/IT or Digital Strategy?

Activities directed toward (1) recognizing organization
opportunites for using IT, (2) determining the resource
requirements to exploit these opportunities, (3) and developing
strategies and action plans for realizing these opportunities
and for meeting the resource needs. [Boynton & Zmud, 1987].

Long term, directional plan which decides what to do with IT

that is concerned primarily with aligning IS development with
business needs and seeking advantage from IT. [Earl, 198x]

Thinking strategically and planning for the effective long-term

management and optimal impact of information in all its forms:
IS & IT.
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Environments of IS/IT Strategies

Low diffusion/low infusion the

tradional environment typical of
companies using IT solely to
improve efficiency on an
application-by-application basis.

High diffusion/high infusion this is

a complex environment that is
difficult to manage: too much central
control to avoid poor investments
will limit innovation (hence new
strategic opportunities may be
missed); too little control and the
core systems may disintegrate.
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Alignment Business Strategy and IS/IT Strategy

Business Strategy
External &
Internal Business decisions Where is the
Objectives and direction business going &
Factors Change why?
Direction for
business business

IS Strategy What is required?

Business based
Demand orientation
Application focused

Needs &
& service

IT Strategy
How can it be
Activity Based
Supply oriented realized?
Technology focused
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From Strategic Alignment to Strategy Co-evolution

Strategic Alignment Model
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From Strategic Alignment to Strategy Co-evolution

Strategic Alignment Model

Business driven Technology driven

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Why Have an IS/IT Strategy?

consequences of not having an IS/IT strategy are:
Systems investments are made that do not support business
Loss of control of IS/IT, leading to individuals often striving to
achieve incompatible objectives through IS/IT.
Systems are not integrated. This can also lead to duplication of
effort and data leading to inaccuracy and no coherent information
No means of setting priorities for IS projects/resources and
constantly changing plans leading to lower productivity, etc.
Poor management information; it is either not available,
inconsistent, inaccurate or too slow.
Technology strategy is incoherent and constrains options.
Inadequate infrastructure investments made.
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Digital Strategies for the 21st Century:

The External Context for IS/IT Strategy

Enabled by
or aligns (a)
or shapes (b)
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Digital Strategies for the 21st Century:

The Internal Context for IS/IT Strategy
IT alone is not enough IT advantage is gained by using IT to leverage
intangibles, complementary human and business resources such as
organizational flexibility, integrating business strategy and IS/IT strategy, and
supplier relationships.
Internal firm resources of capablities (valuable, rare, inimitable and not
3 dimensions of IS/IT capability:
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Some Research Findings on

IT & Competitive Advantage
Companies must do more than excel at investing in and deploying IT. They must
combine those capabilities with excellence in collecting, organising and
maintaining information, and with getting their people to embrace the right
behaviours and values for working with information (Marchand et al. , 2000)
What distinguishes companies deriving significant value from IT is not technical
wizardry but the way they handle their IT activities (Dvorak et al. , 1997)
Some firms have gained advantage by using IT to leverage intangibles,
complementary human and business resources, such as flexible culture, strategic
planningIT integration, and supplier relationships (Powell and Dent-Micallef,
The attainment of sustained IT-based competitive advantage may be more a
process of building organisational infrastructure in order to enable innovative
action strategies as opposed to being first on the scene (Kettinger et al. , 1994)
When every leading firm in an industry has access to the same technology
resource, the management difference determines competitive advantage or
disadvantage (Keen, 1993)
End of Presentation