Strategic Frameworks for Project Justification PSC 5170

Organization Goals Business Vision Mission Objective Tactic = Business Justification IS Vision Mission Objective Tactic = Project Contribution

Roles Sponsor: funds and champions the project in the organization Client: reviews the project milestones and decision points from the business point of vies User: works with the system on a regular basis

Strategic Information Systems IS that help gain strategic advantage Significantly change manner in which business supported by the system is done Outwardly aimed at direct competition Inwardly focus on enhancing the competitive position Create strategic alliances

Value Chain Model Chain of basic activities that add to firm’s products or services Primary activities Secondary activities

Value Chain

Value Chain Primary Activities Inbound Outbound Operations Marketing and Sales After-Sale Services

Value Chain Support Activities Technology development Procurement Human Resources Management Management Control accounting/finance coordination general management central planning

Porter’s Competitive Forces Model The threat of entry of new competitors The bargaining power of suppliers The bargaining power of customers (buyers) The threat of substitute products or services The rivalry among existing firms in the industry The model recognizes five major forces that could endanger a company’s position in a given industry. External Competitive Forces

Competitive Forces Threat of entry of new competition Bargaining power of suppliers Bargaining power of buyers Threat of substitute products or services Rivalry among existing firms

Strategies for Competitive Forces Note - strength of force is determined by factors in industry Gain a competitive edge Build defenses against forces Formulate actions to influence forces

Three Generic Strategies Cost leadership (lowest cost in industry) Differentiation (of products/services/quality) Focus (finding a specialized niche)

Be Low Cost Producer - IT strategic if it can: Help reduce production costs & clerical work Reduce inventory, accounts receivable, etc. Use facilities and materials better Offer interorganizational efficiencies

Produce Unique Product - IT strategic if it can: Offer significant component of product Offer key aspect of value chain Permit product customization to meet customer’s unique needs Provide higher/unique level of customer service/satisfaction

Fill Market Niche - IT strategic if it can: Permit identification of special needs of unique target market Spot and respond to unusual trends

Strategic Questions Can IT create barriers to entry? (new entrants) Can IT build in switching costs? (buyers) Can IT strengthen customer relationships? (buyers)

Strategic Questions (cont) Can IT change the balance of power in supplier relationships? (suppliers) Can IT change the basis of competition? (competitors) Can IT generate new products?(competitors, substitutes)

Risks of IS Success Change the Basis of Competition Lower Entry Barriers Promote Litigation or Regulation Awake Sleeping Giant Reflect Bad Timing Are Too Advanced

Transformational Information Systems Radical changes in an organization’s business processes Radical changes in an organization’s structure Radical changes in an industry’s value streams

Business Process Reengineering (BPR) Completely changes manner in which business is done Fewer steps, shorter cycle times Complete, more expert handling of events Not incremental improvement Typically uses IT as an enabler Involves discontinuous thinking

Characteristics of BPR Combining jobs Empowering employees Jobs done simultaneously Customizing product/service Work performed where most logical Single point of customer contact

Transformational Information Systems Radical changes in an organization’s structure reduce layers of management empower front-line workers loosely couple work units Radical changes in an industry’s value streams disintermediation creating new markets