IN 320 Strategic Use of Information Technology: Class 2

January 14, 2000

Why Classify IT Systems?

We classify IT systems and group them into major types because there is a need to plan the overall information artchitecture of orgzaniations.

Why must we plan information architectues?

Frameworks of Organization Management

To develop an information architecture, we must begin with some views of the structue of the organization.

Management Control Levels

Robert Anthony's Control Levels (ref. Anthony, R.N., Planning and Control Systems: A Framework for Analysis, Boston, Harvard University Press, 1965.)

Managerial Functions

Henry Fayol's 5 Managerial Functions (ref. Fayol, H., General and Industrial Management, trans. C. Storrs. London: Sir Isaac Pitman and Sons, 1949.)

We can combine the two frameworks. Laudon and Laudon also grouped systems by organizational level and by function. Also see figure 2.2.

Major Types of Information Systems

The six major types of systems that are described in Laudon and Laudon are as follows:

Historical Development of IT Systems

The system types that we outlined in the last class can also be viewed along a historical development timeline.

How are Strategic IS different from other systems?

In the first class we listed these differences..

Laudon and Laudon similarly say SIS change the firms...

SIS are desirable because they can be used to gain a competitive advantage. Competitive Advantage means a firm can provide MORE VALUE to its customers and the same price as its rivals. Or, a firm can provide the SAME VALUE to its customers at a LOWER price than its rivals.

How do firms identify and gain a strategic advantage?

Frameworks can be used by managers to understand the firms business environment and to seek opportunities for improvement. This is one way to create categories of frameworks. The book distinguishes some frameworks by Levels of Strategy.

Types of Frameworks

An alternative to strategy formulation frameworks

An alternative to using the stategy formulation approachs listed above is to use a more unplanned approach called Innovative Process. Two types of Innovative Processes are:

The benefits of the more formal strategy formulation frameworks is that they are (1) organized so the management can make a fair evaluation of many complex factors, (2) other people can look back and see the basis for managements decisions. Management can be accountable for their actions. The disadvantage of the stategy formualtion frameworks is they can be inflexible, they sometimes do not account for non-monitary gains to the firm, and using the frameworks can sometimes be seen as immitating the textbook solutions.

Sustaining Competitive Advantage

Strategy Levels and IT Models

In Table 2.4 of the book (6th ed.) there are many strategic information systems and they operate at all different levels of strategy. The three levels of strategy are:Industry, Firm, and Business.

For each level of strategy there are models that can be used to analysis the interactions at that level. We discuss some of the strategic models, that can also be refered to as strategic frameworks.

Value Chain Analysis

This model is by Porter and Miller, 1985. It seeks to identify areas where value is created for the customer. The value created for the customer must exceed the cost to the customer. This is a business level model.

The role of IT at the business level is to help firms reduce costs, differentiate products, serve new markets to change the scope of competition. Examples of IT that has been used is

Enhancing Core Competencies

Enhancing core competnencies is a firm level model. It involves becoming a world class leader in a particular area. The question asked is how can IT be used to create and maintain a core competency? The IT must help in accessing the embedded knowledge gained from experience and accessing the tacit knowledge (implicit in the industry) and making that knowledege shareable and explicit to everyone within the organization.

IT systems that share knowledge across business units help improve core competencies. Also systems that help to take in new external knowledge help to gain core competencies. Knowledge Management systems by Enigma is an example of IT that can help in this area.

Porter's Forces Model

The Porter Competitive Forces Model is an industry level analytical model used to describe the external influences on the firm, especially the theats and opportunities. The model links

Potential New Entrants:

Sources of barriers to entry are:

Industry Rivalry: can be invoked through efforts to compete on low cost strategies, or by differentiation of product or service.

Substitutes or new products: put pressure on providers to improve products. Price can increase if the new product in non-standard. Substitutes can raise the cost to compete. Often they introduce a non-sustainable advantage because others will try to imitate.

Powerful Buyers: can force prices down, can bargain for better service, can improve quality.

A buyers strength is characterized by:

Powerful Suppliers can demand higher prices, or decrease quantity or quality.

Suppliers are powerful if

Network Economics

Network Economics is an area of study that is useful for understanding interactions at the industry level. It is based on the idea that the marginal cost of adding another user to the system (or network) is not as great as the marginal gain of adding the additional user. We will use the example of the public switch telephone networks.

Use of Competitive Strategies

The individual advantages of the firm determine the firms ability to deal with threats from the market. In other words, how do firms compete? Porter has outlined several Competitive Strategies:

Strategic Transition

Adopting SIS will require both social and technical changes in an organization. What are the effects of these Strategic Transitions?

Judith Molka-Danielsen
2000