Lecture 4 - 5
STRATEGY
ALIGNMENT
1
Overview
• Why technology fails?
• Why invest in MIS?
• Why NOT TO invest in MIS?
• What is Strategy?
• How to align Business Strategy with IT Strategy.
2
Technology Failure ?
1. Why do some firms invest little and receive a lot of return on IT?
Fact 1: Investing in IT does not itself guarantee good returns.
2. Environment: Supportive Values, Structures, Behavior
Analogy: Plant / Environment (Conducive)
3. Research: Firms investing in Complimentary Assets receive superior
returns on IT
Examples:
Strong MIS team, Training, Good Vendors, Decentralization, Reward System, Senior
Management Support
3
Why invest in MIS?
• Assumption: ROI will be higher than Investment
• Better than Investing in Buildings, Machines, Advertisements etc.
• Increase Productivity, Decrease Cost, Better Quality
• MIS Solution to a problem
• Strategic Choice?
4
Disruptive Technologies
Disruptive Technologies
• “New Technology radically changes the business landscape”
• Substitute products Perform (often much) better / Costs lower
• Entire Industries go out of business
5
Disruptive Technologies
FUTURE
• Chat GPT
PAST
• Self Driving Cars
• Cars
• Virtual Reality
• Digital Photography
• Block Chain
• Mobile Phones
• Electric Vehicles
• Ride Sharing
• Solar Energy
• Air BnB
• Youtube
• Amazon / Daraz / AliExpress
• IoT
• Wikipedia
• NanoTechnology
6
Disruptive Technologies
Four Possible Outcomes
1. Some Firms Learn / Change / Ride The Wave
2. Others become obsolete
(Although they may be very good at what they do)
3. No Firm Benefits / All Gains go to Customers
Barclay Banks’ ATMs Revolutionized Banking
4. “First Mover Advantage” Don’t always Benefit
“Fast Follower” Sometimes have bigger advantage
MITS Altair 8800 Widely regarded as the first PC
7
Disruptive Technologies
Learnings
• Not all Technological Change is Disruptive.
• Environments change faster than Organizations
• Change adds stress on Orgs. Culture, Politics
• Orgs. Unable to adapt rapidly (inertia)
8
Disadvantages of Tech.
• MIS often changes Orgs. Products, Services, SOPs, Structure
• Con: Bringing Orgs. Into unchartered territory – Risk
• Pro: Competitive Advantages Not Always Sustainable
Why?
• Competitors follow / copy
• Globalization Change / Copy Rapid / Unpredictable
• Internet Technology All can use
9
What is a
Strategy?
“the Art of Planning”
Strategy - The Art Of War
• Sun Tzu (500 B.C.)
• Chinese General
• Hidden until 8 A.D Japan
• Leads 30,000 men against 10x
Strategy - The Art Of War
1. Know Your Enemy, Know yourself
2. Avoid What is Strong, Attack What is Weak
3. To subdue the enemy without fighting is height of skill
4. Numbers alone confer no advantage; do not rely on sheer military
power
5. Let your plans be as dark as night then strike like a thunderbolt
Strategy - The Art Of War
6. To move your enemy, entice him with something he is certain to
take
7. Put the army in the face of death, without escape, and they will not
flee or be afraid
8. Winning army realizes the conditions for victory first, then fights..
9. When troops flee, it is the fault of the General
Information Systems
Strategic Business Objectives
1. Operational Excellence
2. New Business Models
3. Customer / Supplier Intimacy
4. Improved Decision Making
5. Competitive Advantage
6. Survival
14
Information Systems
Strategic Business Objectives
1. Operational Excellence
• Efficient Operations Low Cost / Less Time Higher Profit
• How Information Systems & Technology
2. New Business Models
• Definition: How a company produces, delivers, sells a product /
Service
• Discussed in last class; Movies, Books, Music, Newspaper
15
Information Systems
Strategic Business Objectives
3. Customer / Supplier Intimacy
• Know Your Customer Higher Sales
• Engage Suppliers Lower Costs
16
Walmart (Supplier Intimacy)
• Biggest Retailer on Earth
• State-of-the-art MIS “Retail Link”
• Suppliers Monitor Real-time Inventory Levels
• Customer Purchase Supplier Notified Ships replacement
• Objective:
• Restock before last item is picked up
• Small Inventory
• Walmart Not Worried
17
J.C.Penney (Supplier Intimacy)
• American Department Store Chain
• Founded in 1902 (Operated for 118 years)
• 2,053 Stores / Selling Online since 1998
• Supplier (Shirts) TAL Apparel, Hong Kong
• Shirt Sale (Style, Color, Size, Store) TAL Apparel Replacements
Stores
• No Warehouse No Inventory Cost / No Stock-outs
18
Mandarin Oriental (Customer
Intimacy)
• Hotels Asia, Europe, America
• System Records Guests’ Preferences
• Room Temperature
• Check-in Time
• Frequently Dialed Numbers
• TV Channels / Music Preferences
• Light Brightness
19
Information Systems
Strategic Business Objectives
4. Improved Decision Making
Traditionally
• Managers rely Forecasts, Best Guesses, Luck
• Result Stock Outs or Unsold Inventory
• Outcome Permanent Loss of Customer or Higher Costs
Information Systems
• Real-time Data from Marketplace
• Examples: JCPenny, Walmart
20
Information Systems
Strategic Business Objectives
5. Competitive Advantage
• Definition: Doing something better than your competitors
• Examples: Lowest Cost, Highest Quality, New Technology, After Sales
21
Information Systems
Strategic Business Objectives
6. Survival
• Technology Gains Industry-Wide Acceptance
• Barclays Bank first Automated Teller Machine (ATM), London 1967
• Total ATMs (Pakistan) 16,281 (State Bank Of Pakistan)
• All connected 1 One Link Network
22
Disadvantages of Tech.
Who?
• American Airlines SABRE (Semi-Auto Business Research Env.)
• 1953 - President meets IBM salesperson on a flight
• 1960 – 84,000 calls (Reservations) / day
• 1976 – SABRE Access given to Travel Agents
• 1989 – SABRE had 40% market share
• Barclays’ Bank ATM
• FedEx Package Tracking System
• Amazon e-commerce (eBay, Walmart, Google)
23
Business – IT Strategy
Alignment
What?
• So what to do?
• How to make Competitive Advantage sustainable? (Last longer?)
Answer: Align IT Strategy Business Strategy
Step 1: Perform a Strategic Business Analysis
Step 2: Identify MIS Specific Advantages
24
Business – IT Strategy
Alignment
How?
Step 1: Perform a Strategic Business Analysis
1. Industry Analysis
• Competition on Quality, Price or Brand?
• Negotiating Power Supplier, Customers
• Substitute Product & their Prices
2. Company Analysis
• Core Competency?
• Advantage Low Price or High Quality
25
Business – IT Strategy
Alignment
How?
Step 2: Identify MIS Specific Advantages
• Is MIS improving the strategic business advantage?
• Identify the right metrics to measure progress
26
