1. Lecture 2: Strategic Management and Planning, Competitive Advantage and Sustainability, IS strategy implications
Strategic
Management of
Information Systems

2. Roadmap Strategic management and planning
Competitive Advantage and Sustainability
IS/IT strategy implications

3. Strategic Management and Planning

4. Evolution of strategic management

5. Evolution of strategic management

6. Evolution of strategic management
PHASE 1: Financial planning
1 year horizon
Budgeting
Internal
Consolidated
Carried out department by department
Basic financial planning
cash flow and annual financial planning
Focus of planning
Meet the budget

7. Evolution of strategic management
PHASE 2: Forecast-based planning
3-5 year horizon
Analyse and project historical performance into future using internal trends and external parameters (economics and market research data)
Forecast sales, market growth
Predict the effect on income and expenses and changes to the balance sheet
Plans are quantitative, internally orientated
Focus of planning
Predict or forecast
Analyse the gap between what is targeted and the resource available

8. Evolution of strategic management
PHASE 3: Externally-oriented planning
Considers the external environment
To understand the nature of competition
Assess and consider potential threats
Position itself to gain advantage
Dynamic allocation of resources
Top-down strategy with no lower level involvement
Focus of planning
External
Strategic

9. Evolution of strategic management
PHASE 4: Strategic management
Involves various departments and levels
Focus of planning
Continuing innovation
Needs a well-defined strategic management framework

10. Evolution of strategic management

11. Strategic analysis Strategic choice Strategic Management Elements
Strategy
implementation
Strategic choice
Expectation, objectives & power: culture
The environment
Resources
Generation of options
Evaluation of options
Selection of strategy
Resource planning
Organisational structure
People & systems

12. Model of strategic planning process

13. Mission Goal Strategy Policy Decision Action
Simplified example of planning stages
Mission
To be the industry cost leader
Goal
Achieve staff productivity gain of 3 per cent within three years
Strategy
Reduce time lost due to ill health (one of a set)
Policy
Maintain a healthy work place (one of a set)
Decision
Ban smoking (one of a set)
Action
Put up the signs and police the decisions (one of a set)

14. Components of the strategic plan
Mission (statement)
What business are we in?
State the purpose of the organisation
Goals (objectives, aims)
Define desired future positions of the organisation
Goals – broad, timeless statements of the end results
Objectives – quantitative and qualitative, specific and tangible measures of the goals
Strategy
General direction in which organisation chooses to move to meet goals to achieve the mission
Strategy plan should document which of the strategic opportunities are deemed most beneficial to pursue
Policy
Framework for implementation of any major changes needed to be made
Provide key measurements and key ratios that summarise the expected benefits the strategy intended to yield

15. Brigham Young University
Strategic Management in a nutshell
A metaphorical explanation from David Kryscynski: What is strategic management?
Brigham Young University

16. Competitive Advantage and Sustainability

17. Links among resources, capabilities and competitive advantage
Industry key success factors
Competitive
advantage
Strategy
Organisational capabilities
Resources
Tangible
Financial
Physical
Intangible
Technology
Reputation
Culture
Human
Skills/know-how
Capacity for communication and collaboration
Motivation

18. Competitive Advantage
A set of features and/or resources of the company which is rare and not imitable easily and gives a certain business advantage over competitors.
Ability of the firm to outperform rivals on the primary performance goal – profitability
The competitive advantage is not static, i.e. acquired/exists forever. It must be maintained and developed in order to provide its sustainability.

19. People, with knowledge, motivated, and with the capacity to:
Sustainable Competitive Advantage
People, with knowledge, motivated, and with the capacity to:
Learn and to share their learning
Respond to competitive threats
Respond to customers
Ability to innovate or adapt to changes in the environment
Attain, retain, or improve viable position in industry
Implies possession of:
Strategic features that are difficult to copy

20. Based on unique routines:
Sustainable Competitive Advantage
Based on unique routines:
Responses to past problems, challenges
Doing things competitors can’t do –capabilities and competences
Strategic resources:
Reputation / brands
Natural monopolies
Internal and external linkages
Architecture
Culture

21. A “strategic” resource
Rare in the industry
(otherwise, it is only a threshold resource)
Valuable -makes an appreciable difference to:
cost and/or differentiation advantage
capacity to adapt or innovate
(otherwise, just represents wasted effort)
Difficult to acquire, copy or substitute
(otherwise firms will copy or use alternatives)
Few resources satisfy ALL these criteria

22. Sustaining competitive advantage
Depends on the existence of isolating mechanisms: barriers to rivals’ imitation of successful strategies
The greater difficulty that rivals face in accessing the resources and capabilities needed to imitate or substitute the competitive advantage the greater the sustainability of that firm’s competitive advantage

23. Strategic Resources Physical assets –rarely
Financial assets -in some industries
Human resources –possibly
Intellectual assets –frequently
Reputational assets –often
Capabilities and competences –usually
Intangible, knowledge-based resources most likely sources of sustainable advantage

24. Sources of competitive advantage
Cost advantage
Similar product at a lower price
Competitive advantage
Price premium from unique product
Differentiation advantage

25. Features of cost leadership and differentiation strategies
Generic strategy
Key strategy elements
Resource and organisational requirements
Cost leadership
Scale-efficient plants
Design for manufacture
Control of overheads and R&D
Avoidance of marginal customer accounts
Access to capital
Process engineering skills
Frequent reports
Tight cost control
Specialisation of jobs and functions
Incentives for quantitative targets
Differentiation
Emphasis on branding advertising, design, service, and quality
Marketing abilities
Product engineering skills
Strong cross-functional coordination
Creativity
Research capability
Qualitative performance targets and incentives

26. Examples: Generic strategy Key strategy elements Industry examples
Cost leadership
Scale-efficient plants
Design for manufacture
Control of overheads and R&D
Avoidance of marginal customer accounts
IKEA furniture
McDonald’s hamburgers
Differentiation
Emphasis on branding advertising, design, service, and quality

27. Beware of being stuck in a middle
Beware of DOG! 
In most industries market leadership is held by a firm that maximizes customer appeal by reconciling effective differentiation with low cost
HOWEVER beware of
Not me! ..
Beware of being stuck in a middle
Cost leadership
Differentiation

28. Brigham Young University
Alternative competitive advantage
A metaphorical explanation from David Kryscynski: Alternative competitive advantage
Brigham Young University

29. IT/IS strategy implications

30. Evolution of IS

31. Trends in evolution of business IS/IT

32. IS management environment: The Internal Context

33. Relationship between business, IS and IT strategies

34. Future lectures roadmap
Strategic Management of Information Systems
Lec4. IS Strategy formulation
Lec5. Integration with Business strategy
Lec6. Organizational architecture
Lec8. Organizing and resourcing
Lec9. Managing investment
Lec7. IS Strategic Management
Lec10. Managing supply of IT/IS
Lec11. IS security and risk management
Lec3. Strategic Analysis tools

35. Recommended reading W. Robson, Chapter 1 J. Ward, Chapters 1 and 2
R. Grant, Contemporary strategy analysis, Chapter 5, 8, 9