Information Systems and Organisations NCC Education - Title Master Lecture 4: Organisational Strategy and IS

Scope and Coverage This topic will cover: Strategy and IS/IT Strategy Ensuring alignment of technology with strategy Organisational and stakeholder perspectives Note – we use the terms IS and IT synonymously in this lecture NCC Education - Slide Master

Learning Outcomes By the end of this topic students will be able to: Describe and discuss organisational strategy and IS/IT strategy Consider how IS/IT strategy may be aligned with organisational strategy Appreciate the importance of different organisational and stakeholder perspectives

Contents Organisational strategy Aligning IS/IT to organisational strategy Measuring success in strategy execution Strategy execution and the Balanced Scorecard Emphasis – Technology and Organisations

Strategy – Definition What is Strategy ?

Business Strategy Business strategy (organisational strategy) is the way in which an organisation employs its resources (people, assets and financial resources) ......starting from the premise that it has a purpose Definitions of strategy can be circular, and people (academics) argue about words ... but We can think of an organisations strategy simple as ‘what it does’ to create value

VMOST – Strategy Context Vision – how we want things to be in the future Mission – broadly, what are we going to do to get there Objectives – specific aims/targets 1 to 2 years out Strategy – how will we use our resources Tactics – doing it

Competitive Strategies Michael Porter considers there to be 2 basic business strategies which are: Cost Leadership (having the most cost effective products and/or services) Differentiation (having products/services that are unique or are perceived to be unique) Further - these can be: Broadly applied (across a whole market) Narrowly applied - Focused (concentrating upon specific market niches)

Value Disciplines 1 The 3 disciplines are in conflict so, it is impossible to do all three with equal success in practice; so competing organisations usually aim to excel in 1 or 2 of them, and attempt to reach an ‘industry benchmark’ performance in the 3rd Customer Intimacy Product Leadership Operational Excellence

Value Disciplines 2 Customer Intimacy Knowing and understanding the customer and their buying habits Understanding customers business and selling products and services that meet and anticipate their needs.

Value Disciplines 3 Product Leadership Concentrating upon innovation and brand development. Operating in dynamic and developing markets. Having new and innovative products and services

Value Disciplines 4 Operational Excellence Concentrating upon efficiency of internal operations and supply chain Striping out cost wherever possible and maintaining quality whilst offering competitive prices

Strategy and CSFs How are we going to measure if we are getting there? Objectives 1. Where do we want our organisation to go? Strategy 2. How are we going to get there? J Rockart – 1970’s Critical Success Factors 3. What must be right? Key Performance Indicators 4. How will we know if we have achieved it? How are we going to measure if we are getting there? Critical Information Set 5. So what information is critical to our success? What information do we need?

Critical Success Factors Model OBJECTIVES What are we aiming to do in business terms A business target – for example expressed in terms of growth, market position, reputation, profitability, shareholder value etc. STRATEGY How do we intend to meet our objectives A method of competing, for example based upon cost, differentiation, focus etc CRITICAL SUCCESS FACTORS What must be right if we are to execute our strategy We must be able to say that we have achieved all of our CSF s.. Examples, customer satisfaction, cost leadership KEY PERFORMANCE INDICATORS How will we know that our CSF s are being achieved A performance measure CRITICAL INFORMATION SET What information is needed to provide our KPI s Internal Needed to compute External the KPI s Source; Rockart, 1979

CSF s Example O To be number one in market share by volume S Cost leadership in the market CSFs Lowest priced product in the market Gain market share KPIs Average price ranking against competitors Cumulative market share CIS Internal Product sales by volume and value External Total market sales by volume and value Source; Rockart, 1979

Alignment of IS/IT with Strategy Produce the right information Align investments to ensure that the correct IS/IT is implemented Use the people resources of the organisation to take advantage of IS/IT to further the strategic goals (Donald Marchand – Strategic Information Alignment)

Strategic Information Alignment (SIA) Add Value Customers willing to pay for value added using information 1 2 3 4 5 6 7 Minimise Risks Reduce Costs 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 Information used to enable decisions that reduce costs or to increase efficiencies in processes Information used to help control business risk Information used to help produce innovative products, services and delivery methods Source; Adapted from Donald Marchand, (2000) ‘Competing with Information’ Create New Reality (innovation)

SIA Example - Commodity Add Value Future strategic alignment 1 2 3 4 5 6 7 Current strategic alignment Minimise Risks Reduce Costs 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 Create New Reality (innovate)

Competitive Forces Threat of New Entrants Competition Bargaining Can IT/IS be used To help create barriers to entry? Threat of New Entrants Can IT/IS be used Help do things better and more cost effectively than competitors? Can IT/IS be used to reduce the bargaining power of suppliers? Competition In Market Bargaining Power of Customers Bargaining Power of Suppliers Can IT/IS be used to help ‘lock’ in Customers to our value proposition? Threat of Substitute Products or Services Can IT/IS be used to create better or changed products of services?

Strategy as an Emergent Process A deliberate strategy may be overcome by events and be unrealised An organisation may find itself executing an ‘emergent’ strategy that derives from events Technological change can be a source of both deliberate strategies and emergent ones that evolve because of technological possibilities Realised strategy comes from combination of these influences

Making Strategy Relevance Since organisations are not machines it is important to take a balanced view of strategy execution The organisation needs more than short-term goals (e.g. short term financial success) these need to be balanced by longer term aims This leads to the idea of a balanced scorecard (Kaplan and Norton) incorporating internal, external and stakeholder perspectives

Innovation and Learning Balanced Scorecard Financial Perspective Goals Measures How do we look to Shareholders ? How do Customers see us ? Financial Perspective Goals Measures Customer Perspective Financial Perspective Goals Measures Internal Business Perspective Financial Perspective Goals Measures Innovation and Learning Perspective What must we excel at ? How can we continually improve and create value ?

Strategy - Metaphors Strategy as a formal planning process exhibits a mechanist/structuralist approach The relevance of such an approach in a rapidly changing world is frequently challenged Organicism and contextualism seem best suited to the reality of many modern organisations where emergent strategies are often important ....but a plan is still needed to act as a basis for resource allocation

References Boddy, D., Boonstra ,A., Kennedy, G. (2008) Managing Information Systems : strategy and organisation 3rd ed. FT Pearson. ISBN-13: 978-0273 -71681-5XXX http://hvass.nu/s2/artikler/teori/Misc/porter.pdf www.valuebasedmanagement.net/methods_valuedisciplines.html http://www.businessballs.com/balanced_scorecard.htm

Lecture 4 - Organisational Strategy and IS Any Questions? NCC Education - End Slide Master