Transcript Agenda: • Introduction to management IT strategy

Agenda:
• Introduction to management
• IT strategy
1
Famous IT Strategy Models
• 3 Era model
• McFarlan s Strategic grid model
• Porter’s value chain model (Homework)
Warren McFarlan
Michael E. Porter
2
Company
Group work
Wal-Mart
Amazon.com
FedEx
And/or
UPS
MasterCard
Value Chain
Read Supplemental Reading #1.
For each Company and Value
Chain combination that is checked,
write a paragraph explaining how
that company company uses
technology to support that portion
of the value chain. For example,
explain how Wal-Mart uses
technology to support the Inbound
Logistics portion of the value chain.
There should be six short
paragraphs in total.
Submit this assignment as a
Microsoft Word document through
the Distance Learning and Course
on Line system or turn it in on
paper.
Inbound
Logistics
x
Operations
Outbound
Logistics
Marketing
and
Sales
x
x
x
x
This is an individual assignment.
Service
x
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The evolving role of IS & IT in organizations
3-ERA MODEL
DP Era
MIS Era
SIS Era
Nature of
Technology
computers
fragmented
(hardware limitation
“distributed process”
interconnected
software limitation
“networks”
integrated
people / vision limitation)
Nature of
Operation
remote from users
controlled by DP
regulated by
management services
available and supportive
to users
Issues in System
Development
technical issues
(programming / project
management)
support business
users’ needs
(info management)
related to business
strategy
Reasons for Using
the Technology
reducing costs
(esp. administrative)
(technology driven)
supporting the
business (manager)
(user driven)
enabling the
business?
(business driven)
Characteristics of
Systems
regimented /
operational
(internal)
Trends in the evolution of business IT
Source: Ward / Griffiths, 1997, p. 19
accommodating /
control
flexible /
strategic?
(external?)
4
Information Technology Challenges
• Integrating Changing Technology Platforms
Administrative
Framework
Primary
Target
Era I
Regulated
Monopoly
Organization
Era II
Free
Market
Era III
Collaborative
Justification/
Purpose
Application
Challenges
Productivity/
Efficiency
?
?
Individual
Individual/Group
Efficiency
?
?
Enterprise and
Industry Integration
Value
Creation
?
?
5
Transition from DP to MIS
• Change in how IS/IT resources were
managed
• Change in how the role of IS/IT is evaluated
• Strategy for management of IS/IT
6
The Three-era Model - DP and MIS Eras
• Three threads of evolution have enabled the development
of the information systems during three eras:
– Hardware: reducing cost and size
– Software: increasing availability, more flexible OS,
more quickly developed business application, and
greater accuracy with less experience required from the
users
– Methodology: improved ways of organizing,
coordinating, and implementing multiples projects
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The Three-era Model - Lessons Learned
from DP and MIS Eras
• Pros:
– Automation through Data Processing (DP) does not
fundamentally alter the business process, however,
produces a competitive advantage over the operational
efficiency.
– DP provides the means for managers to make better
decisions regarding business activities.
– MIS enables more efficient information processing and
better ways of communicating and presenting
information to typical managers.
8
The Three-era Model - Lessons Learned
from DP and MIS Eras
• Cons:
– DP needs to understand the process to design
entire information systems, not just the
programs to process data;
– needs to involve requirements and more
through data analysis;
– needs project management on extended level to
recognize both user and DP functions;
– needs better planning.
9
The Three-era Model - Lessons Learned
from DP and MIS Eras
• Cons cont’d:
– Return to investment is not necessary the goal of the
MIS;
– MIS should involves heavy user requirement study and
corporation;
– MIS should be service oriented to enable user’s
information accessibility
10
The Three-era Model
Strategic Information Systems Era
• Objectives of three eras:
– DP era: improve operational efficiency by
automation of processes
– MIS: increase management efficiency
– SIS: improve competitiveness by changing the
nature or conduct of business.
• SIS are systems whose unique functions or specific
applications shape an organization’s competitive
strategy or it provide it with competitive advantage.
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The Three-era Model
Strategic Information Systems Era
• Relationship between the three eras:
– MIS relies on good operational DP systems; SIS relies
on good DP and (or) DP for appropriate information
provisioning;
– The difference between SIS and DP/MIS is not the
functions of each, it is the impact on the business that
makes the difference;
– Strategic applications may put so much stress on DP
and MIS applications that they may need to be
redeveloped.
12
Towards a Fourth Era
• Distinction between sustainability and
competitive advantage
• Only IS Management skills will be the
source of sustained advantage -Mata
• Organizations must focus less on IT itself
and more on managing IT
13
• Most IT developments can easily be
copied by competitors
– Sometimes there is less risk attached to
being second
• Productivity paradox – large scale IT
investment rarely translates into
substantial cost savings
14
Return on Equity - %
Spending on Information Technology and Profitability
15
Sustainability
• It may be that only IS management
skills, rather than particular IT
applications, can be the source of
sustainable competitive advantage
• The ability to learn faster than
competitors may be the only truly
sustainable competitive advantage
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“How you gather, manage, and use
information will determine whether you
win or lose”
- Bill Gates
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IT is inextricably intertwined
with business
• Technology is an expected way to conduct
business
• Organizations are looking to apply
technology to streamline existing processes
• Organizations are also looking to create new
opportunities which are a source of
competitive advantage
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McFarlan’s Strategic Grid
LOW
LOW
Strategic impact of
existing systems
Strategic impact of future
systems
HIGH
Support
Turnaround
Applications which improve
management and performance
but which are not critical to the
business.
Applications which may be of
future strategic importance.
e.g. Time recording
e.g. Expert systems, MRP II
Factory
Strategic
Applications which are critical to Applications which are crucial
sustaining existing business.
for future success.
HIGH
e.g. Stock Control, MRP
e.g. Computer-Integrated
Manufacturing
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The Strategic Grid Organisations
LOW
LOW
Strategic impact of
existing systems
HIGH
Strategic impact of future systems
HIGH
Support
IT of little impact. Low
spending. Invisible to senior
management. Might have lowlevel office systems specialists.
Turnaround
Education programs in place for
senior management. Move
from back office computing to
center stage.
e.g. Cement Factory
Factory
Applications which are critical to
sustaining existing business.
Have on-line real-time systems
for daily operations.
Significant IT budget.
e.g. Some retailers
Strategic
Applications which are crucial
for future success.
The business is shaped by the
IT systems it uses.
e.g.. Steelworks, oil refinery.
e.g. Banking, credit card
companies, insurance.
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The Value Chain
Support
activities
Primary activities
Inbound logistics
Operations
Outbound logistics
Marketing and Sales
Service
Corporate infrastructure
Human resources management
Technology Development
Procurement
Materials receiving, storing, and distribution to manufacturing premises
Transforming inputs into finished products.
Storing and distributing products
Promotions and sales force
Service to maintain or enhance product value
Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QM
Recruiting, hiring, training, and development
Improving product and manufacturing process
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Purchasing input
Porter’s Value Chain
Administrative Coordination and Support Services
SIS: Collaborative Work Systems
Support
Processes
Human Resources Management
SIS: Employee Skills Database Systems
Technology Development
SIS: Computer-Aided Engineering and Design
Procurement of Resources
SIS: Electronic Data Interchange with Suppliers
Inbound
Logistics
Primary
Business
Processes
SIS:
Automated
Just-inTime
Warehousi
ng
Operations
SIS:
ComputerAided
Flexible
Manufacturing
Outbound
Logistics
SIS: Online
Point-ofSale and
Order
Processing
Marketing
and Sales
Customer
Service
SIS:
Interactive
Targeted
Marketing
SIS: Help
Desk
Expert
System
Competitive
Advantage
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Porter’s Value Chain
Primary Activities:
•
•
•
•
•
Inbound Logistics: ‘Inbound’ activities to receive, store and distribute inputs to the
product, such as material handling, inventory control, warehousing and contact
with suppliers.
Operations: Production activities to create the product such as machining,
packaging, printing and testing.
Outbound Logistics: ‘Outbound’ activities to store and distribute the product to
customers, including warehousing, order processing and vehicle scheduling.
Marketing and Sales: Activities associated with providing a means by which
buyers can purchase the product and be included to do so (advertising, selling,
pricing, merchandising and promotion).
Service: Activities for providing service or maintaining product value, including
installation and training.
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Porter’s Value Chain
Support Activities:
• Procurement: Purchasing input.
• Technology Development: Not just machines and processes but also
expertise, procedures and systems.
• Human Resource Management: Activities involved in recruiting, training
and staff development.
• Infrastructure: General management, finance, planning and quality
assurance. Infrastructure supports the whole value chain.
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Porter’s Value System
SUPPLIER
VALUE
CHAINS
FIRM
VALUE
CHAIN
CHANNEL
VALUE
CHAINS
BUYER
VALUE
CHAINS
In the “value system” supplier, firm, distributor, and buyer value chains overlap.
The supplier’s outbound logistics is the firm’s inbound logistics. The
Distributor’s inbound logistics is the firm’s outbound logistics, etc.
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Why do IT managers care about these models?
Jean Botin founded the world's oldest restaurant
(according to
the Guinness
Book of Records)
on Cuchillero
Street in 1725.
Goya supposedly once washed dishes here, and
the restaurant is mentioned in the last lines of
Hemmingway’s The Sun Also Rises.
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IT managers care about these models because:
The models provide a “map” to help managers
•Find where they are •Find where they should go
You are here
The road to competitive advantage
Goal
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