Why is it important for business strategy to drive organizational strategy and IS strategy? What might happen if the business strategy was not the driver?

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Managing and Using Information Systems:
A Strategic Approach – Sixth Edition

Keri Pearlson, Carol Saunders,
and Dennis Galletta

© Copyright 2016
John Wiley & Sons, Inc.

Chapter 1
The Information Systems Strategy Triangle

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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?
© 2016 John Wiley & Sons, Inc.
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To promote better health care at lower cost
Billings
Proactive health system
Improved health of patients
Alignment between business strategy, organizational design, and information systems strategy
Fast communication with patients outside of face-to-face appointments; automatic email reminders to patients for exercise or medications
No, the business strategy must be aligned with the IS, in addition to incentives
No, without the new incentives and new IS, employees would not wish to cooperate, nor would they be able to do so.
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The Information Systems Strategy Triangle
These need to be balanced.
Business Strategy
Organizational Strategy
Information Strategy
© 2016 John Wiley & Sons, Inc.

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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.

© 2016 John Wiley & Sons, Inc.
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Business Strategy

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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
© 2016 John Wiley & Sons, Inc.
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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
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© 2016 John Wiley & Sons, Inc.

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Three Strategies for Achieving Competitive Advantage
  Strategic Advantage
Strategic Target Uniqueness Perceived by Customer Low Cost Position
Industry Wide Differentiation Cost Leadership
Particular Segment Only Focus

© 2016 John Wiley & Sons, Inc.
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Three Strategies for Achieving
Competitive Advantage
Examples
  Strategic Advantage
Strategic Target Uniqueness Perceived by Customer Low Cost Position
Industry Wide Differentiation Cost Leadership
Particular Segment Only Focus

Apple
Wal-Mart
Marriott
Ritz Carlton
© 2016 John Wiley & Sons, Inc.
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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
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© 2016 John Wiley & Sons, Inc.

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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
© 2016 John Wiley & Sons, Inc.
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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.

© 2016 John Wiley & Sons, Inc.
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Organizational Strategy

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Organizational Strategy
What is organizational strategy?
Organizational design and
Choices about work processes
How do you manage organizational, control, and cultural variables?
Managerial Levers
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© 2016 John Wiley & Sons, Inc.

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Managerial Levers
© 2016 John Wiley & Sons, Inc.

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Information Systems Strategy

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IS Strategy
What is an IS Strategy?
– The plan an organization uses in providing information services.
Four key IS infrastructure components
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© 2016 John Wiley & Sons, Inc.

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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

© 2016 John Wiley & Sons, Inc.

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Second level
Third level
Fourth level
Fifth level

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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.

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Illustration in a Consulting Firm
© 2016 John Wiley & Sons, Inc.

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Second level
Third level
Fourth level
Fifth level

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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
© 2016 John Wiley & Sons, Inc.
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Managing and Using Information Systems:
A Strategic Approach – Sixth Edition
Keri Pearlson, Carol Saunders,
and Dennis Galletta

© Copyright 2016
John Wiley & Sons, Inc.