Chapter One

The evolving role of

Information Systems and
Technology in organization:
The Strategic Perspective
Information Systems
in Global Business
Today
 The Role of Information Systems in Business
Today

• How information systems are transforming

business
• Increase in wireless technology use, Web sites
• Shifts in media and advertising
• New federal security and accounting laws
• Globalization opportunities
• Internet has drastically reduced costs of operating on
global scale
• Presents both challenges and opportunities
 The Role of Information Systems in Business Today

In the emerging, fully digital firm

◦ Significant business relationships are digitally enabled and mediated
◦ Core business processes are accomplished through digital networks
◦ Key corporate assets are managed digitally
The Role of Information Systems in Business Today
Information Technology Capital Investment

Information technology investment, defined as hardware, software, and

communications equipment, grew from 32% to 51% between 1980 and 2008.
Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis,
National Income and Product Accounts, 2008.
The Role of Information Systems in Business Today
 The Role of Information Systems in Business Today

Operational excellence:
◦ Improvement of efficiency to attain higher profitability
◦ Information systems, technology an important tool in
achieving greater efficiency and productivity

◦ Wal-Mart’s RetailLink system links suppliers to stores for

superior replenishment system
 The Role of Information Systems in Business Today

New products, services, and business models:

◦ Business model: describes how company produces,

delivers, and sells product or service to create wealth
◦ Information systems and technology a major enabling tool
for new products, services, business models
◦ Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-
based DVD rentals
 The Role of Information Systems in Business Today

Customer and supplier intimacy:

◦ Serving customers well leads to customers returning,
which raises revenues and profits
◦ Example: High-end hotels that use computers to track customer
preferences and use to monitor and customize environment

◦ Intimacy with suppliers allows them to provide vital inputs,

which lowers costs
◦ Example: J.C.Penney’s information system which links sales
records to contract manufacturer
The Role of Information Systems in Business Today

Improved decision making

◦ Without accurate information:
◦ Managers must use forecasts, best guesses, luck
◦ Leads to:
◦ Overproduction, underproduction of goods and services
◦ Misallocation of resources
◦ Poor response times
◦ Poor outcomes raise costs, lose customers
◦ Example: Verizon’s Web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.
•Improving customer experience—they provided a more flexible and predictable
service and lead times. 
•ALIBABA (online retailer)
•Monitoring the productivity and efficiency of your workforce can drive the
company’s success.
•AIRBAB (online marketing)
•Fulfilling orders at a predictable cost base.
•Using IT to manage the ordering and pricing of products, make stocking and
marketing decisions, and balance your inventory
•Using CRM to customize their product
•Fast-track employee onboarding and training. 
How role of IS has evolved: 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
Information Technology in business: from data processing to
strategic information systems
Three Era Model
 EXPLAIN WHY IS APP IN SECOND
ERA(MIS) IS SOFTWARE LIMITATION
while its People/vision limitation in the
SIS ERA?

Compare between the three IS ears in

term of : Impact, use, Computing and
infrastructure, limitation, management
level, people and some IS example?
IS era Impact Managemen Use of IT example PEOPL
t level E
DP Efficiency operational Cost reduction TPS TECH
ROI AUTOMATION POS PROGR
FINACIAL SYSTEMS AMME
R
NETW
ORK
MIS Effective Middle PRODUCTIVITY INVENTORY
ROA ROA SYSTEM
MIS
HRMS
SCM
FMS, DSS
SIS Competitivene top COMPETITIVE FORECASTING, CIO
ss ADVANTAGE MA, CRM, SENIO
Strategic BUSINESS AI,EIS,ES R
GROWTH MANG
AEME
NT
 Information Technology
and Competitive advantage
 Competitive advantage

PESTEL

VRIO:
Valuable, rare,
inimitable
resource of
organization
 Tacit AND EXPLICIT
EXPERIENCES AND MEETING MINUTS
KNOW HOW, KNOW WHAT, KNOW WHY
External based Competitive advantage
1- Business Generic Strategies: Porter
Generic Strategies (1980)

2- Porter’s Five Forces Model of

Competitive Advantage

3- PESTEL
Competitive Strategies for
competing in marketplace
Businesses can use four basic competitive strategies to deal
with these competitive forces:
1. Product Differentiation
2. Cost leadership
3. Focused differentiation
4. Cost Focus
External based of competitive
advantage
1. Differentiation
Competitive strategy for creating brand loyalty
Develop products & services which are different
from what the competition offers
. Superior attributes
. Distinguishing features
2. Cost leadership
To prevent new competitors from entering their
markets, businesses produce goods/services at
lower price than competition
based on efficient operations
based on effective operations
economies of scale
3. Focused differentiation
Develop new market niche for specialized products
or services
So that business can compete in target market
better than its competitors
4. Cost Focus
Company serves narrow market segment with
product/service
which it offers at a significantly lower cost than
competitors
 External based Competitive advantage
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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Switching cost

For example, if a grocery store offers free delivery service and their
competitors don't, it makes their service hard to replicate. Therefore, the
grocery store has a high switching cost since there's more money, time
and effort involved in consumers going to a different grocery store that
doesn't offer free delivery.
Internal based of competitive advantage

1- Resource based
view
2- Value chain analysis
Internal
Resourcebased of competitive advantage
based
view
The resource-based view (RBV)
is a managerial framework used to
determine the strategic resources
a firm can exploit to achieve
sustainable competitive advantage.
The RBV focuses managerial
attention on the firm's internal
resources in an effort to identify
those assets, capabilities and
competencies with the potential to
deliver superior competitive
advantages.
Internal
Resourcebased of competitive advantage
based
view
 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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Internal based of competitive
advantage

• Value chain analysis is a way to visually analyze a

company's business activities to see how the
company can create a competitive advantage for
itself.
• Value chain analysis helps a company understands
how it adds value to something and subsequently
how it can sell its product or service for more than
the cost of adding the value, thereby generating a
profit margin.
Internal based of competitive
advantage
Porter (1980) Value Chain Analysis
 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
Missions vs. Visions
A mission statement focuses on
current business activities
◦ For example: Customer
needs currently being
served
A vision concerns a firm’s future business
path
◦ The kind of company it is trying
to become
◦ Customer needs to be satisfied in
the future
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.
to help people and businesses throughout the world realize their
full potential.
 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 with guides to choose among
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
competing priorities & guidelines
about how people will work together.
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Delicion Caterers : Conservation, animal care, compassion,
sustainability and quality
Nike: Bring inspiration and innovation to every athlete in the
world
Delicion Caterers : A world built on strong, sustainable
foodservice practices.
Health company: Every body matters, and every mind needs the
same level of care.
Health company: Fitness, mental health, personal care, integrity
and progress
JetBule: to inspire humanity — both in the air and on the ground.
Recycling company: One day, we return to the Earth, so we must
be better stewards.
PayPaL: To build the web’s most convenient, secure, cost-
effective payment solution.”
Recycling company: Recycling, sustainability, compassion,
courage and conservation
TED: Spread ideas
Delicion Caterers : Conservation, animal care, compassion, sustainability and quality VL
Nike: Bring inspiration and innovation to every athlete in the world -M
Delicion Caterers : A world built on strong, sustainable foodservice practices. VI
Health company: Every body matters, and every mind needs the same level of care. VI
Health company: Fitness, mental health, personal care, integrity and progress VL
JetBule: to inspire humanity — both in the air and on the ground.- M
Recycling company: One day, we return to the Earth, so we must be better stewards. VI
PayPaL: To build the web’s most convenient, secure, cost-effective payment solution.”-M
Recycling company: Recycling, sustainability, compassion, courage and conservation VL
TED: Spread ideas -M.
Kowloon Canton Railway Corporation (KCRC
Different between goals and
objectives
Examples of Goals and Objectives
Goals:
1.I want to be the best musician in the school
2.We will be the number 1 supplier of….
3.I want to maintain a good knowledge of the profession.
Objectives
1.we will sell xxx units by June next year.
2.I will pass my stage 3 business French assessment.
3.We will deliver 90% of the contract by…
 IS strategy
IS Strategy (Information Technology Strategy or
Technology Strategy or ICT Strategy or IS Strategy)
IS strategy: It is a plan of action to create an information
technology capability for maximum, and sustainable
value for an organization .
IS Strategy helps create shareholder value. In other
words, it helps maximize the return on IT investments,
ROA, and business growth
 IS strategy
IT strategy ------------------- what (HW.SW, NETWORK AND
COMMUNICATION)(TECHNICAL) (IM STRATEGY, HW STRATEGY,
SW STRATEGY COMMUNICATION STRATGEY)
IS STRATEGY ------------------- WHAT (IT STRATEGY)
HOW (PROCEDURE, POLICIES, CHANGE

MANAGEMNT, CORE COMP …)

WHO (IT , CIO, TOP MANAGEMNT …)
Generic IS Strategy

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Porter business generic strategies
Generic IS strategies or
1. Product Differentiation Generic Application
Management Strategies
2. Cost leadership
(Parsons , 1983)
3. Focused differentiation 1- centrally planned
2- leading edge
4. Cost Focus 3- Free market
4-monopoly
5- scarce resources
 Generic IS Strategy

Generic IS strategies (Parsons, 1983)

◦ Like Porter but for IS not business

◦ They are 5 not three, as follow.

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 Generic 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

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 Generic IS Strategy

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

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 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

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 Generic 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
requirements management
• Integrated IS and
business planning
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

Planning and control: centralize , decentralized

Budget: decided by the SISP
 Generic IS 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 • Acceptance of policy on
requirements single sourcing
• Good forecasting of
resource usage

Role of IS • Profit oriented to achieve • Satisfy requirements of

a return on resources
Role of managers• Identify, source, and
and users control applications
development
users and non-directive in
IS usage
• Understand business needs
and present them to obtain
resources
 Generic IS 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
Explain why:
Top management in the company that adopted a centrally planned IS strategy
should be IT knowledgeable, and should involve in the IT planning.
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
Stages of Growth Model

 Basic premise: Any organization will move thru stages of

maturity with respect to the use & management of IS

 It helps interpret the position & its meaning of the organization

with respect to IS. See the tables 5.18a and 5.18b

 Provides better understanding of the factors influencing the

strategy. So, it helps devise suitable strategy to the organization
& the change required.

 Many versions for the model have emerged: 4 stages model; 6

stages; the repeating curves – with new technology requiring
new curve … etc.

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 Stages of Growth Model … con.
Stages Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
Initiation Contagion Control Integration Data Maturity
Factors administration

Rational of
having
IT/objective
of this stage
Planning negligent More Formalized Tailored Shared data Strategic
and negligent planning and plans and and common planning
control control control systems
systems
IS Specialized User Middle User/IS Data Data
organization for oriented management account administration resource
technology programmes teams management
learning
User ‘hands off’ Superficially randomly Accountability Effectively Acceptance
awareness enthusiastic held learning accountable of joint user
accountable and IS
accountability
Expenditure Steady from Steep rise Steady rise Steep rise Steady rise Appropriate
level zero base

Impact of
it/perception 71
of IT
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
The relationship between business, IS and IT strategies

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
ENHANCE THE RELATION WITH CUSTOMER
DIFFERENTIATE OUR PRODUCT
Information Systems Strategy
Step2
• Business-based
What is • Demand-oriented
required? 1- CRM
• Application-focused
2- AUTO CAD
3- AI
Infrastructur Needs and
e and priorities
services
IT Strategy
Step 3
• Activity-based
How can it
be delivered? • Supply oriented
• Technology-focused

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