BUSINESS STRAGEGY & BUSINESS

INFORMATION SYSTEMS STRATEGY

Topic 2.
Mr. Moses Serugo Mr. Ali Balunywa, Mr.
Edrisa Tebandeke, Mr. Bernard Ogut, Mr.
Albert Miwanda,, Ms. Nakawoya Fatuma.

BBA III ICT III

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Val IT and slides copyright © 2006 IT Governance Institute. Used with permission.
 Learning Objectives
• To understand the information systems strategy (ISS) triangle.
• To know the relationship between organizations & information
systems.
• Strategic business objectives.
• Strategy: Why information systems?
• To analyze generic Information System (IS) strategies/tools
– Porter’s competitive strategies.
– Porters and Millers five forces model.
– McFarlan’s strategic grids.
– Nolan’s stage model.
– Value chain analysis.
– Critical success factors (CSF) analysis.
– Parsons six generic Information System (IS) strategies

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The Information Systems Strategy
(ISS) Triangle
 The information systems
strategy (ISS) triangle includes
business, organization and
information strategy.
 It symbolizes how a company
must align all three of these
strategies together to use
information systems for the
company's benefit.
 The ISS triangle is a simple
framework for understanding
the impact of information
systems on organizations.
 Successful firms have an
overriding business strategy.
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 IS Strategy Triangle
• The business strategy drives all other
strategies.
• Changes in any strategy requires changes in
the others to maintain balance.
• IS strategy always involves consequences.

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 Real World Example
• During the ice storm in 2009, many airlines were
cancelling flights.
• Jet Blue waited to cancel flight and paid a heavy
price.
• Jet Blue had to cancel over 1,000 flights over 5
days.
• Up to 9 planes full of passengers were stranded for
up to 6 hours on the tarmac.
• An inadequate reservation system and shoestring
communication system was blamed for the
problems by Neelman.
• Changes had to be made. 5
 The Impact of Information Systems
• Companies are out of alignment when their
business strategy is not supported by their
information system (IS).
• The ISS triangle is a simple framework for
understanding the impact of IS on
organizations and overriding business strategy.
• This business strategy drives both
organizational and information strategy.
• All decisions are driven by the firm’s business
objectives.
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 Business Strategy
• Business Strategy (BS) is concerned with taking the
organization from it’s current position to the required
position as defined by the business objectives.
• A BS is the means by which business or an organization
sets out to achieve its desired ends (objectives).
• It can simply be described as a long-term
business planning. Typically a BS will cover a period of
about 3-5 years (sometimes even longer).
• IS will usually contribute to that strategy especially in
improving on business processes within the organization .
• Starts with a mission statements.

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Mission Statement

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 Organization Strategy
• An organizational strategy is the sum of the
actions a company intends to take to achieve
long-term goals.
• The organization system strategy is rooted in
four areas that include: the vision, mission,
strategies and policies.
• Together, these actions make up a
company's strategic plan. Strategic plans take
at least a year to complete, requiring
involvement from all company levels.
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 Information Systems Strategy (ISS)
• The ISS is concerned with how information
systems (IS) and the technical infrastructure
that supports IS will be organized and
delivered in the enterprise to achieve the
business and organization objectives and
gains of competitive advantage.
• The plan an organization uses in providing
information services.
• Effective use of ISS can result into increased
efficiency of the internal & external processes.
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 IS Strategy cont.’
• IS allows business to implement its business
strategy.
• IS helps determine the company’s capabilities
• Four key IS infrastructure components, in the
information systems strategy matrix, are key
to IS strategy. (See figure)
• These key components are sufficient to allow
the top managers to assess critical IS issues.

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Information Systems Strategy Matrix

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 The Relationship between Organizations
& Information Systems
• There is a growing interdependence between
a firm’s information systems and its business
capabilities.
• Such relationships indicate the extent of
maturity of an organization in the use of IS.
• Changes in strategy, rules, and business
processes increasingly require changes in
hardware, software, databases, and
telecommunications.
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 Strategic Business Objectives
• Operational excellence: Efficiency, productivity, and
improved changes in business practices and
management behavior.
• New products, services, and business models: A
business model describes how a company produces,
delivers, and sells a product or service to create wealth.
Information systems and technologies create
opportunities for products, services, and new ways to
engage in business.
• Customer and supplier intimacy: Improved
communication with the customers raises revenues, and
improved communication with suppliers lowers costs.

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 Strategic Business Objectives – Cont.’
• Improved decision making: Without accurate and timely
information, business managers must make decisions based on
forecasts, best guesses, and luck, a process that results in over
and under-production of goods, raising costs, and the loss of
customers.
• Competitive advantage: Implementing effective and efficient
information systems can allow a company to charge less for
superior products, adding up to higher sales and profits than their
competitors.
• Survival: Information systems can also be a necessity of doing
business. A necessity may be driven by industry-level changes,
for example the implementation agency banking in the retail
banking industry.

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Strategy: Why information systems?

Improving Promote Locking in

Business Business Customers
Strategy Process Innovation and Suppliers

IT Role Use IT to reduce costs Use IT to create new •Use IT to improve quality
of doing business products or services •Use IT to link business to
customers and suppliers

Create New Maintain Valuable

Outcome
Enhance Business Customers and
Efficiency Opportunities Relationships

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Strategy: Why information systems?

Raise Build a Build a

Barriers Strategic IT Strategic
Strategy to Entry Platform Information Base

IT Role Increase amount of

investment or
Leverage investment in
IS resources from
Use IT to provide
information to support
complexity of IT operat- ional uses to firm’s competitive strategy
needed to compete strategic uses

Create New Enhance

Outcome
Increase Business Organizational
Market Share Opportunities Collaboration

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 Tools for Strategic Analysis
Porter’s competitive strategies. Assess
how the external competitive forces can be
harnessed.
Porters and Millers five forces model. The
model for analyzing the different external
competitive forces that affect an
organization and how the information
systems / ICT can be used to counter
them.
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 Tools for Strategic Analysis cont.’

McFarlan’s strategic grids. A model for

assessing the current and the future
importance of IT/IS applications portfolio
with in the organization.
Nolan’s stage model. An evolutionary
maturity model to assess the current
development of information systems with
in the organization

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 Tools for Strategic Analysis cont.’
Value chain analysis. A tool for analyzing
the value adding of information systems
with in an organization. Note that the value
chain can also be used to asses value.
Adding activities outside the organization.
Critical success factors (CSF) analysis. A
model assessing those factors with in an
organization that can be required to
achieve strategic objectives.
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 BRIEF OVERVIEW OF BUSINESS
STRATEGY FRAMEWORKS
(GENERIC STRATEGIES FRAMEWORK)

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1. PORTER’S COMPETITIVE STRATEGIES

• Michael Porter describes how

businesses can build a sustainable
competitive advantage.
• He identified three primary strategies
for achieving competitive advantage:
– Cost leadership-- lowest cost producer.
– Differentiation – product is unique.
– Focus – limited scope.
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Three strategies for achieving
competitive advantage.

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2. PORTER’S 5 COMPETITIVE FORCES MODEL

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 Potential Entrants
• IS can be used to defend a position or to
penetrate the barriers that others have built
around a specific industry. Therefore,
• IS can have two roles, defensive or offensive.
• In the defensive role, IS can create barriers that
new entrants into the market must overcome. e.g.
use of information systems is to lock suppliers
and customers into a supply chain.
• The offensive role of information system is
breaking down the barriers of entry into certain
markets.
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 Competitive Rivalry
• The intensity of rivalry between competitors is
usually greater in mature or declining
industries.
• This rivalry is between organizations making
similar products, or offering the same services
to the same market.
• There are several approaches to this situation
that can be adopted and supported by IS.
• Cost-leadership can be exploited by IS.

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 Threats from Substitutes
• Substitute products or services are those
that are within the industry, but are
differentiated in some way.
• Technology may be used to provide
differentiated products swiftly by the use of
(CAD/CAM), for example personal
specifications for a car.

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 Buyers’ Bargaining Power
• Buyers can exert power over a business
by purchasing the product or service from
another provider. One way in which a
business can try to deter a customer from
transferring their business is by
introducing switching costs.
• E.g. telecommunication companies and
also attempting to lock customers-in
through the use of CRM systems.
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 Suppliers’ Bargaining Power
• The suppliers can exert their bargaining
power on an organization by pushing up
their prices or taking their supplies
elsewhere to a competitor business in the
same or similar industry.
• The bargaining power of suppliers can be
eroded in several ways using IS. The
implementation of EDI systems is one of
the ways of establishing good relations
with suppliers that benefit both parties.
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 3. PORTER AND THE VALUE CHAIN
• The primary activities of Michael Porter's value
chain are inbound logistics, operations,
outbound logistics, marketing and sales, and
service.
• The goal of the five sets of activities is to create
value that exceeds the cost of conducting that
activity, therefore generating a higher profit.
• A value chain is the series of activities
performed to create the value for which
customers pay.
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 THE VALUE CHAIN – Cont.’
• Emphasis is on the value chain and its
activities or components and their
relationships.
• Appropriate IS that can support the activity.
• Considers how the set of activities create
products and services and how they can be
delivered to customers.
• Secondary activities or the support activities
include firm infrastructure, human resources
management, and procurement.
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THE VALUE CHAIN – Cont.’

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 THE VALUE CHAIN – Cont.’
• For each primary activity in Porter’s Value Chain,
in your discussion groups, discuss the activity and
suggest at least two appropriate information
system that could support the activity within an
organization of your choice.
• From the point of view of the Board of Directors,
discuss the impact of the need to develop a range
of new information systems to support electronic
commerce on the four support activities in Porter’s
Value Chain.

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 4. MCFARLAN’S STRATEGIC GRID

• McFarlane's strategic grid model is used

to indicate the strategic importance of IS to
a company now and in the future.
• It is sometimes referred to as an
application portfolio model since it
assesses the current mix of business
information systems within an
organization.

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 MCFARLAN’S STRATEGIC GRID
It is also useful for IS planning in the future
It is suggested in the original model that
any business will occupy one of the
segments in the matrix, as indicated in the
figure.

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 MCFARLAN’S STRATEGIC GRID
HIGH
Impact on Factory Strategic
Business
Operations
It reduces cost and improves Firms which have moved in to
the performances of the core this quadrant are committed to
operations of an organization. use IT to enable both the core
operations and core strategy.

Support Turn round.

Low improvements and Exploit emerging strategic
incremental cost saving. opportunities from new IT

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LOW Impact on strategy HIGH
 MCFARLAN’S STRATEGIC GRID
 The strategic segment: Indicates that the business
depends on both its existing IS and its continued
investment in new IS to sustain continued
competitive advantage. (High now and future)
 The turn around segment: suggests that while a
business in this position does not currently derive
significant competitive benefits from its current IS,
future investment in this area has the potential to
positively affect the business`s competitive position.
(Low currently, High Impact in the Future)

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 MCFARLAN’S STRATEGIC GRID

 On the other hand, a business operating in the

factory segment while depending on its current
IS to operate competitively does not envisage
further IS Investment having a positive impact on
its competitive position. (Currently High, Low in
the Future)
 Finally a business in the support segment does
not and believes it will not derive significant
competitive advantage from IS. (low, low). IT has
little relevance and simply supports existing
processes.
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 Applications of the Model
 Across industries for analyzing the strategic
importance that particular industries attach to IS;

 Within an industry, different competitors can be

plotted according to the relative significance they
attach to IS.

 Within a company different departments within an

organization can be classified and goals set in
relation to the future planned importance of IS.

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 5. NOLAN`S STAGE MODEL.
 Nolan`s stage model is a six stage maturity
model for the application of information systems
to a business.
 The model demonstrates that over time and with
experience, an organization`s approach to
computer applications, specialist IS personnel
and methods of management will evolve to a
level of maturity.
 Maturity Level is where the planning and
development of IS are embedded into the
strategic planning of the Business as a whole
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Nolan S-curve

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 Nolan Stages
1.Initiation. The first cautious use of a strange
technology characterized by:

Low expenditures for data processing;

Small user involvement;

Lax management control;

Emphasis on functional applications to reduce costs

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 Nolan Stages Con’t
2. Contagion-The enthusiastic adoption of
computers in a range of areas:
Multiplying of applications
Users quickly enthusiastic about using data
processing systems.
Management control even more lax
Rapid growth of budgets
Treatment of the computer by management as just
a machine
Rapid growth of computer use thought out the
organization`s functional area
Computer use is plagued by crisis after crisis
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 Nolan Stages Cont,
3. Control. A reaction against excessive and
uncontrolled expenditures of time and money on
computer systems.

IS raised higher in the organization

Centralized controls placed on the systems
Applications often incompatible or inadequate
Use of database and communications often with
negative general management reaction;
End user frustration

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 Nolan Stages Cont
4. Intergration.Using new technology to bring about the
integration of previously un integrated systems.
Rise of control by the users
Large DP (data processing) budget growth.
Demand for database and online facilities.
DP department operates like a computer utility
Formal planning and control within the DP
Users more accountable for their applications
Use of steering committees ,applications financial
planning
DP has better management controls, standards, project
management
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 Nolan Stages Cont
5. Data administration. There is a new emphasis
on managing corporate data rather than IT;

Identification of data similarities, their usage and

meanings within the whole organizations.
The applications portfolio is integrated into the
organization
DP (MIS-management information systems)
department serves more as an administrator of data
resources than of machines.
The emphasis changes to IS rather than DP
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 Nolan Stages Cont
6. Maturity .ISs are put in place that reflect the real
information needs of the organization.

Use of data resources to develop competitive and

opportunistic applications.
MIS organization viewed solely as a data resource
function.
MIS emphasis on data resource strategic planning.
Ultimately users and MIS department jointly
responsible for the use of data resources within the
organization.
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 Implications of Nolan`s model
 Verify the state of IS development in order to
plan for the future.
 Recognize the fundamental organizational
transition from computer management to
information resource management.
 Recognize the importance of and the future
trends in the information technology.
 Introduce and maintain the appropriate
planning and control devices for the IS
function(steering committees etc)
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 6. PARSONS
• Parsons identified six possible generic Information
System (IS) strategies.
– Centrally planned
– Leading edge
– Free market
– Monopoly
– Scarce resource
– Necessary evil
• The 6 generic ISS is applied to an organization and
linked to the strategy with the role of the IS function
and the user.
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 Take-home Assignment - Rules
• In a group of 10 students.
• Appearance in two or more groups attracts NO
Mark (Zero mark).
• In Time New Roman, font 13.
• In less than 1400 words.
• To be submitted STRICTLY through hard copy
on Monday December 13, 2021 during the period
2:00pm – 5pm EAT.
• Use APA referencing style and avoid
PLAGIARISM. In an event, where groups will
submit similar work, both/all will obtain NO mark.
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 Take-home Question
Parsons identified six possible generic
Information System strategies (ISS).
Describe the six Parsons generic
information system strategies, linking the
strategy with the role of the information
systems function and the user and discuss
the information systems strategy that best
applies to an organization of your choice.
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 ??????
• Questions
• Comments
• Improvement

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