1. IS577 IS Strategy and Policy Olayele Adelakun (Ph.D) Associate Professor CTI Office: Room 735 CTI 7th Floor Phone: 312-362-8231 Fax: 312-362-6116 Email : yele@cs.depaul.edu Web: http://facweb.cs.depaul.edu/yelehttp://facweb.cs.depaul.edu/yele

2. Group Assignment 2  Conducting an Industry Analysis Conducting an Industry Analysis See examples  Deliverables Presentation due class 9 Written analysis 5 pages max.  Recommendations  Conclusion

3. Question

4. Agenda  Strategy Summary

5. Information Technology Management Challenges  IT or ICT has always been a source of opportunity and uncertainty, advantage and risk.  Business executives view Province of technocrats, something with little relevance to real-world business problems.  Technology executives View Thinks business executives are shortsighted, lacking the vision to exploit all that IT has to offer

6. Information Technology Challenges  The Rapid Evolution of IS/IT Hardware constrains Software constrains Knowledge constrains Problem of the 50 IT directors’ constrains.

7. Information Technology Challenges Regulated Monopoly Organization Productivity/ Efficiency Free Market Individual Individual/Group Efficiency Collaborative Enterprise and Industry Integration Value Creation Era I Era II Era III Administrative Framework Primary Target Justification/ Purpose ? ? ? ApplicationChallenges ? ? ?  Integrating Changing Technology Platforms

8. Market structure and Industry Dynamics  The old industry value chain Sequential Functionally organized and transitional in nature Vertical organization structures within organization boundaries  The new industry value chain Process based Integrating the enterprise activities Boundaries are becoming fluid Partnership and the rise of virtually integrated industry

9. Evolving business Models  The emerging networked business models that are revolutionizing business and society are different from the Industrial business models that defined how companies conduct business throughout most of the 1990s.

10. IT Impact  The goal for technology use influences Its development, operating and management Impact on core operations Impact on core strategy  Impact Support, Factory, Turnaround, Strategic

11. Categories of Strategic Relevance and Impact Factory Support Strategic Turnaround Strategic Impact of existing IT system Low High A contingency appropriate to IT management. Strategic Impact of IT applications under development Totally depending on it Not absolutely depending on totally uninterrupted, fast response-time. IT are important but they are not fundamental to the firms ability to compete. Strategic Impact of IT on operations and future strategy is low.

12. Categories of Strategic Relevance and Impact Factory Support Strategic Turnaround IT Impact on core operations Low High A contingency appropriate to IT management. IT Impact on core strategy Goal: Transform the organization or industry Leadership: Senior executives or board Goal: Identify and launch new Ventures Leadership: Venture incubation unit Goal: Improve performance of core processes Leadership: Business unit executives Goal: Improve local performance Leadership: Local level oversight

13. Prioritizing IT Investment  Is IT as a budgeted expense to be justified on a project-by-project basis?  Is IT an investment that must deliver benefits today and in the future. Inside the organization Outside the organization

14. Prioritizing IT Investment: Aggregate Project Plan Minor Process change Extensive Process change Minor Process change Extensive Process change R & D Projects Breakthrough projects Platform Projects Derivative projects

15. Buy Vs. Make  If I can buy a word-processing package why can’t I buy an order fulfillment package Do I need to keep all these IT assets on my book? Or Can I outsource my data centers, helpdesk, PC support etc. Can I replace my off-the-shelf applications with subscriptions to IT services run by network and hosting services and ASPs?

16. Make or buy decision Business strategyIT application or infrastructure provides proprietary competitive advantage IT application or infrastructure supports strategy or operations, but is not considered strategic in its own right Core competence Information/ process security and confidentiality Availability of suitable partners Availability of packaged software or solutions Cost/benefit analysis Time frame for implementation Evolution and complexity of the technology Ease of implementation Decision Criteria Pressure to “Make/Own” Pressure to “Buy”

17. Assimilation and Organizational Learning  Successful implementation of new technology often requires that users learn new ways of doing things.

18. Assimilating Emerging Technologies  Phase I: Technology Identification and Investment Identifying of technology of potential opportunity to the company and funding a pilot project.  Top down vs. bottom up ISP.  IS Planning: Impact / Align to align MIS objectives with the organizational goals, The other approach is to impact the organizational strategy. That is searching for strategic applications with a high impact and the ability to create an advantage over competitors.  Phase II: Technological Learning and Adaptation The objective here is to encourage user-oriented experimentation with the newly identified technology.  Through a series of user defined pilot project  To create awareness of the new technology  The length of phase II depends on type of technology, the characteristics of users, the nature of users’ tasks, and the organizational context.

19.  Phase III: Rationalization/Management Control At this stage it is reasonably well understood by IT personnel and users The basic challenge is to develop appropriate systems and control to ensure that the technologies are utilized efficiently as the diffuse throughout the organization Ensure that application are developed economically and can be maintained over a long period of time Failure to maintain these standards can be extraordinarily expensive  Phase IV: Maturity/Widespread Technology Transfer Required skill are developed, users are aware of IT benefits and management control are in place. Careful vigilance is required to ensure that out-of-date technologies and applications are not extended beyond their useful life Assimilating Emerging Technologies

20. Partnership among key Constituencies as IT evolves  Much of the complexity of managing IT arises from the conflicting pressures of dealing with four different vitally concerned stakeholder groups: Business executives IT executives IT users IT Vendors, Partners and competitors

21. Protecting IT Assets and Managing Risks  Reliable, secure IT infrastructure  Integrating IT into core business processes introduces a host of new and challenging issues  IT vs. electricity

22. Discussion  How important is IT to the success of your industry / organization Is the firm being affected competitively either by failing to implement required IT applications or by faulty implementation of strategic application If the firm missing opportunities that, if properly executed, would give it a competitive edge or, more pessimistically, enable it to survive.  Is the firm targeting its IT application development efforts effectively? Targeting the right systems and spending appropriate amount of dollar  Is the IT asset of a firm being managed efficiently?  Is the firm’s IT activity sufficiently insulated against the risks of a major operational disaster?  Are IT and business leaders capable of dealing with the IT-related management challenges?  Are IT resources appropriately placed in the firm?

24. Crafting the Network Economy Business Model  Some of the best innovations involve a paradigm shift, a real mental change of assumptions and certainties. In fact, the process of innovating and entrepreneuring is much less about invention or new ideas. It’s much more about rethinking and questioning the assumptions people already make… The ability to rethink fundamental assumptions and take what people accept as certain and question it [is the central] talent of being an entrepreneur.  Scott Cook, Founder of Intuit Inc.  If there is one lesson we can learn from continuing evolution of work and competition in the new economy, it’s this … Change the question and you change the game…  Slywotsky and Morrison, Profit patterns (NY Times Business, 1999)

25. Crafting the Network Economy Business Model  Old economy question What business am I in?  New network economy question What is my business model?  Emerging networked technology enable us to create new business model and redefine existing ones. IT can provide flexible channel for procuring and distributing products and services As well as the tools to create and package content in all its many forms Data, voice, video

26. Crafting the Network Economy Business Model Concept describes the opportunity and strategy Value Measures the benefits to investors and other stakeholders Capabilities define resources needed to execute strategy

28. Crafting the Network Economy Business Model

29. Classifying the Business Models

30. Focused Distributor Business Models Models and Examples Own Inventory Sell Online Price set Online Physical product or service Likely Revenues Likely costs Retailer ToysRus.com Staples.com Yes NoYesProduct/service sales Advertising and marketing; physical facilities; inventory and customer services; R&D; IT infrastructure Marketplace Eloan.com nsweb.com PossibleYesNo Transaction fees; service fees; commissions Advertising and marketing; R&D; IT infrastructure Aggregator Internet Securities No PossiblyReferral fees; advertising and marketing fees Advertising and marketing; R&D; IT infrastructure Exchange ebay.com freemarket.com Possibly YesPossiblyDepends on model Advertising and marketing; staff support for auctions (especially B2B)R&D; IT infrastructure; inventory control; R&D; technical infrastructure.

31. Portal Business Models Models and Examples Gateway Access Deep Content and Solutions Affinity Group Focus Likely Revenues Likely costs Horizontal Portal AOL.com Yahoo.com Quicken.com Small business YesPossibly; often through partnership with vertical and affinity portals Possibly; often partnersh ips Advertising, affiliations and slotting fees; possibly subscription or access fees Advertising, marketing and sales; content/information asset management; R&D; IT infrastructure Vertical Portal WebMD.com Covisint.com LimitedYesNoTransaction fees; commissions; advertising, affiliation and slotting fees Advertising, marketing and sales; content/information asset management; R&D; IT infrastructure; legacy system integration to support transactions Affinity Portals Realtor.com iVillage.com PossiblyFocused on affinity group YesReferral fees; advertising and slotting fees Advertising, marketing and sales; content/information asset management; R&D; IT infrastructure

32. Evolving Business Models  Network Businesses Are built by artfully combining a variety of business models. By incorporating multiple business models that generate revenue streams from the same infrastructure, a network of businesses can  more efficiently use resources  More effectively meet customer needs for integrated solutions,  and drive additional value from the same level of investment When the network of businesses inside a firm is linked with a business network composed of a much larger network of businesses, an organization can leverage the resources of the community to further enhance the value delivered to all the members

33. Evolving Business Models  The four approaches to evolving a business model serve as a road map for evolving networked businesses. Enhance Expand Extend Exit

34. Enhance Add functionality or features to current product/services offering or improve performance of existing business Extend Enter into a new line of business and/or add new business model Exit Exit a business or market or drop a product/service offering Expand Add new product/service offering or enter new geographic market

35. Evolving Amazon.com: Product/Service Enhancements

36. Evolving Amazon.com: Category and Geographic Expansion

37. Evolving Amazon.com: Business Model Extension

38. Evolving Amazon.com: An Integrated View

39. Evolving Network Economy Business Models  It is just an incredible time to be in business and have the rules of business changing… For many years we operated under a pretty consistent set of rules. They evolved may be… but now they’re morphing and that presents a situation that challenges entrepreneurs to figure out: Are these rules real, or are they temporary? Should we respond to them? Do we create new rules? How do we run a company in a world like this when we have 13,000 employees trying to figure out where we are going and what we should do?  David Pottruck, President and co-CEO of Charles Schwab 1999.  We are searching for new business models that enables a company to achieve the efficiency, power, resources, and reach of being big and the speed, agility, and responsiveness that come from being small.

40. Evolving Network Economy Business Models  The following questions can be used by executives to evaluate current and evolving business models 1.What business model/models is your organization using today? 2.Does your business infrastructure enable you to evolve your business model to increase revenue generated per customer and to respond quickly to opportunity and threats 3.Do you have the capabilities and resources that you need today and in the future? How will you build capabilities and acquire resources to reduce gaps? 4.Are you delivering benefits to all stakeholders? Can you demonstrate and communicate those benefits in ways that are objective and easy to evaluate and measure?

41. New Networked Economy  Continuous business redesign  Partnership  Technology  Strategy