IS/IT Roles in Organiza2on and Their Rela2onship to Business Strategy. By: Zainal A. Hasibuan Faculty of Computer Science University of Indonesia

Transcription

1 IS/IT Roles in Organiza2on and Their Rela2onship to Business Strategy By: Zainal A. Hasibuan Faculty of Computer Science University of Indonesia

2 Session Objec2ves Understand the strategic context of IS/IT in organiza2on Understand the business strategy formula2on Understand the impact of business strategy to IS/IT strategy development. Widening horizon on how IS/IT plays its role in an organiza2on.

3 Agenda Strategic Context of IS/IT in Organiza2on Evolu2on of IS in Organiza2on Success Factors of Strategic Informa2on Systems The Rela2onship of IS/IT Strategy and Business Strategy IS/IT Strategy Evolu2on of Business Planning Framework of Business Planning Compe22ve Forces in Industry Compe22ve Strategy and Its Implica2on to IS/IT Strategy SPIS in Indonesia: Local point of view

4 Strategic Context of IS in Organiza2on More products available in digital form Hence e delivery through an IS (give some examples e products?) More commerce takes place electronically (ecommerce create new opportuni2es, online transac2on) More ac2vi2es gevng more complex, need various of data and informa2on (data mining, enterprise informa2on systems ERP) Interrelatedness of Business ac2vi2es within and between companies (improve efficiency and produc2vity) Technology advancement that can processes data in a large volume in a rela2vely short 2me (SPMB data).

5 The Evolution of Information Systems Year 1960 Data processing (DP) era Year 1970 Management IS (MIS) era Year 1980 Strategic IS (SIS-EIS) era Year 1990 E-business & e-commerce era Year 2000 Enterprise Resource Planning era Each era has different characteristics of IS.

6 Characteris2c of DP Era Centralized processing Using mul2 purpose Mainframe computer Batch processing Data storage: magne2c disk, tape Programming language: Cobol, Basic, etc. Automa2ng informa2on based processes Characterize the nature of business at DP era?

7 Characteris2cs of MIS Era Introducing minicomputer Using variety business applica2ons S2ll centralized Used a hierarchical applica2on poryolio model based on a stra2fica2on of management ac2vity: Strategic planning Management control Opera2onal control Increase management effec2veness by sa2sfying their informa2on requirements for decision making to help manager Characterize the nature of business at MIS era?

8 Characteris2cs of SIS Era Introducing Personal Computer (PC) Introducing office automa2on Introducing new capabili2es: flexible access and decision support Improving compe22veness by changing the nature or conduct of business (i.e. IS/IT investments can be a source of compe22ve advantage) Characterize the nature of business at SIS era?

9 SIS Planning systems examples Sales forecasting operating plans capacity planning, profit/earnings forecasts, business mix analysis, manpower planning, financial modeling MIS Control systems example Sales analysis budgetary control, management accounting, inventory management, quality analysis, expense reporting, market research/statistics, WIP control, requirements planning, supplier analysis, etc. DP Operational systems examples Order entry, processing, tracking shipping documents, vehicle scheduling/loading, invoicing, sales and purchase ledgers, cost accounting, stock control, shop-floor scheduling, bill of materials, purchase orders, receiving, employee records, payroll, word processing Early Views and Models of IS/IT in Organizations (Anthony, 65)

10 Types of SIS Those that link the organiza2on to its customers or suppliers to share informa2on Those that effec2vely integrate the use of informa2on in the organiza2on value chain Those that enable the organiza2on to develop new or enhanced products or services based on informa2on Those that provide managers with be^er informa2on for strategy development Example: Tradenet, SABRE (American Airlines), Valuelink (Baxter Healthcare).

11 Success Factors of SIS External in nature instead of internal focus: i.e image building Adding value instead of cost reduc2on: i.e e 2cket Sharing the benefits internally and externally: i.e ATM Understanding customers and their needs: i.e customized product Business instead of technology driven innova2on: i.e covering a wider customers Incremental instead of total development: i.e web based applica2on Using informa2on gained to develop business: i.e learning organiza2on Exercise your critical thinking by giving more examples to those success factors!!

12 Trends in the evolution of business IS/IT (source: adapted from R.D. Galliers and E. Somogyi)

13 Different views of strategic information systems

14 The Relationship Between the Business, SIS, MIS, and DP Business Strategic Management Executive Management Impact Analysis Information Analysis IS/IT Strategic Management IS Management User Management User Operations Systems Design Project and Computer Management

15 The relationship between business, IS and IT strategies

16 An Applications Portfolio for the Combined Era McFarlan 84

17 So What s an IS/IT Strategy? IS/IT strategy is composed of two parts IS component IT component IS strategy defines the organiza2on s requirement for informa2on systems to support the overall strategy of the business The IT strategy is outlining the vision of how the organiza2on s demand for informa2on and systems will be supported by IT It addresses the provision of ICT capabili2es and resources and services such as IT opera2ons, systems development and user support Start thinking about the example of IS/IT Strategy!!

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22 The Context of IS/IT Strategy (Sullivan, 1985) Internal organization pressures: demanding further distribution of IS/IT control Diffusion: degree of decentralization of IS/IT control in the organization High Low Opportunistic Traditional Low Complex Backbone Infusion-degree of dependence of IS/IT of the business High External competitive pressures: increasing the criticality of IS/IT to the business

23 Evolu2on of Business Planning (Welleck, dkk.,1980) Effectiveness of strategic decision making Annual budgets Functional focus Multi-year budgets Gap analysis Static allocation of resources Situation analysis and competitive assessments Evaluation of strategic options Dynamic allocation of resources Well defined strategic framework Strategically focused organization Widespread strategic thinking capability Reinforcing management processes Supportive value system and climate Stage 1 Stage 2 Stage 3 Stage 4 Financial Forecast-based Externally Strategic planning planning oriented management (meet budget) (predict the (think (create the future) strategically) future)

24 Framework for Business Planning External Environments Economic Political Ecological Technological Social Legal Customers Suppliers Shareholders Employees Unions Government Public Stake Holder Values Pressure Groups Objectives Identify current Identify future Threats Competitors and strategies strategies opportunities Customers Suppliers Evaluate Analyze Evaluate Shareholders feedback internal strategies Employees resources Unions Monitor Implement Select Public Strategies Strategies Strategies Media Financial Ins.

25 Input to Business Planning External environments sources of important signals to organiza2ons Pressure groups demand recogni2on and rapid management response Stakeholders demand fair share of created wealth Business planning is usually carried out for each strategic business unit A unit that sells a dis2nct set of products or services, serve a specific set of customers, and competes with a welldefined set of compe2tors

26 Defini2on of Business Strategy Defini2on of business strategy: An integrated set of ac2ons aimed at increasing the longterm well being and strength of the organiza2on rela2ve to its compe2tors

27 Process of Business Planning Establish strategic direction Define strategies feedback Achieve strategies Define mission and objectives Assess situation and options Select options Strategic planning of options selected Implement strategies Strategic thinking and opportunistic decision making

28 Technique to Develop Business Strategy: Compe22ve Forces in Industry (Porter, 1980) Threat of new entrants Bargaining power of suppliers Rivalry among existing competitors Threat of substitute product Bargaining power of buyers

29 Factors Affec2ng The Impact of New entrants Compe22ve Forces Capital requirements Patents and specialists skill required Distribu2on channels available Achieved/required economies of scale and resultant cost advantages Number and size of exis2ng rivals and intensity of compe22on Differen2a2on and brand establishment/loyalty Access to raw materials/cri2cal resources etc. Business strategy: how to discourage new entrants to come into the business

30 Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces Subs2tute products/services Customer awareness of needs and means of sa2sfac2on Customer sensi2vity to value for money and ability to compare Exis2ng loyalty of customer impact of industry promo2on Ability to differen2ate products etc. Business strategy: how to create a loyal customers?

31 Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces Compe22ve rivalry will be intensified by: Market growth slow (or in decline) Small number of similar sized compe2tors dominate High fixed costs and/or high exit barriers for all rivals Overcapacity and/or capacity increments are large units Commodity like, undifferen2ated products. Business strategy: how to differentiate your products?

32 Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces Buyers power will be increased by: Concentrated/few buyers making high volume and/or high value of purchases Low switching costs across suppliers Price sensi2ve and many alterna2ve sources of supply Weak brand iden22es, products not differen2ated Buyers capable of backward integra2on due to low entry cost. Business strategy: how to make the buyers depend on your business

33 Strategic Choices: Factors Affec2ng The Impact of Compe22ve Forces Suppliers power will be increased by: Few suppliers high switching costs for rivals and suppliers deal with many small customers Poten2al subs2tute supplier/resources not easily available Supplied goods make up large part of firm s costs Suppliers capable of forward integra2on or bypass to customers Business strategy: how to make the suppliers depend on your business

34 Generic Compe22ve Strategy Low Cost Competitive Advantage Differentiation

35 Characteris2cs of Generic Strategies Generic Strategies Overall cost leadership Differentiation Focus Commonly Required Skills and Resources Sustained capital investment and access to capital Process engineering skills Intense supervision of labor Strong marketing abilities and creative flair. Product engineering skills. Strong capability in basic research. Corporate reputation for quality or technological leadership. Strong cooperation from distribution channels. Combination of the above policies directed at the particular strategic target. Commonly Organizational Requirements Tight cost control, frequent, detailed control reports. Structured organization and responsibilities. Incentives based on meeting strict quantitative targets Strong coordination among functions in R&D, product development, and marketing. Subjective measurement and incentives instead of quantitative measures (market based incentives). Amenities to attract highly skilled labor or creative people. Looser, more trusting organizational relationships. Combination of the above policies directed at the particular strategic target.

36 Implica2ons of Compe22ve Business Strategy to IS/IT Strategy How can IS/IT affect the nature and value of the product or service and its life cycle? Generate a new product or a new line of business Enable products to be designed or delivered more quickly Be used to add addi2onal features or services to increase the product s value

37 Continued.. How can IS/IT affect the demand for products and services, segments more effec2vely, extend them geographically, or provide new distribu2on channels to reach the market? Enable to reach more appropriate customers Enable to match our different products/services to customer appropriately Enable the product/service to be distributed in new ways to the customers Enable to get closer to the market place rather than deal through intermediaries

38 Continued.. How can IS/IT affect the cost base of the key processes in the industry or change the balance in the trade off between flexibility and standardiza2on? Enable the product/service to be produced more economically Enable produc2on and associated logis2cs to be integrated to produce greater flexibility of resource use Enable a higher quality of product or service to be offered at a much lower cost than tradi2onally

39 Examples of How IS/IT has affected the compe22ve forces in the airline industry How can IS/IT build barriers to new entry? By increasing IT entry cost for reservation systems. By tying in distribution channels (travel agencies). How can IS/IT build in switching costs for customer? How can IS/IT change the basis of competition? How can IS/IT change the balance of power in supplier/customer relationship? How can IS/IT generate new products/ services? By linking purchasing and remittance systems to reduce overheads of customer. Discount/volume packages to discourage piecemeal purchase. Lower costs: optimize yield per aircraft. Differentiate service:reconfiguring aircraft due to demand. Niche/focus service into high yield sectors (business travel) Agent is constantly aware of seat availability of competing airlines. Airline can readily promote unsold capacity via chosen agents. Integrated travel package to high mileage business customers by passing agencies. New routes/schedule to cater for demand.

40 Impact of Compe22ve Forces and Poten2al IS/IT Opportuni2es Key force impacting the industry Threat of new entrants Buyer power high Supplier power high Substitute products threatened Intense competition from rivals Business implications Additional capacity Reduced prices New basis for competition Forces prices down Demand higher quality Require service flexibility Encourage competition Raises prices or costs Reduced quality of supply Reduced availability Limits potential market and profit Price ceilings Price competition Product development Distribution and service critical Customer loyalty required Potential IS/IT effects Provide entry barriers or reduce access by: exploiting existing economies of scale, differentiate products or services, control distribution channels, segment markets Differentiate products or services and improve price or performance Increase switching costs of buyer Facilitate buyer product selection Supplier sourcing systems Extended quality control into suppliers Forward planning with supplier Improve price or performance Redefine products and services to increase value Redefine market segments Improve price or performance Differentiate products and services in distribution channel and to consumer Get closer to the end consumer understand the requirements

41 Why is IS/T Planning Important? IT Strategy is the process of defining the strategic use of technology in an organiza2on. The IS/T Planning process ensures efficient and effec2ve investment of IT to support the business IT is More Cri2cal to Corporate Success The use of IT is increasingly pervasive Enterprises are discovering that IT can influence the rela2ve performance of most departments

42 Indonesia and IS Planning There is a tendency not to pay a^en2on for planning The avtude extends to IS/T planning Part of the problem is that there is no tangible or less realizable outcome resul2ng from IS/T planning We see more Indonesian organiza2ons conduct IT projects not preceded by formal IS/T Planning

43 Results of Lack of IS/T Planning Failed of IS/T projects We see IT projects which lacks direc2on, weak in scope, have li^le of no iden2fica2on of Cri2cal Success Factors. Inefficient use of investment in IT Bad name for IT professionals and due to failed IT implementa2ons

44 IS/IT Planning for the Indonesian Need processes which are more facilitatordriven, higher involvement of consultants who has psychological and cultural sensi2vity Need processes which are a combina2on between verbal (direct) and in direct interac2ons to ensure that ideas and opinions are fully expressed

45 IS/T Planning in Indonesian Organiza2ons: Reali2es Jus2fica2on for audi2ng purposes Idea omen comes bo^om up: hence the challenges Do not believe in documenta2on: hence the approach is omen less formal Difficult to get buy in from management who would rather see IT implementa2on projects Who s project is this: an IT department project?

46 Trends in IS/T Planning We will see more formal IS/T Planning ac2vi2es with increase of IS/T dominance as an integral part of business IS/T Planning will need to be done faster, with the faster trend of technology development Clear defini2on between business plan, IS/T planning and IT implementa2on will become more and more blurred as technology will con2nue to drive businesses stronger

47 Exercise Your Thought Explain the evolution roles of IT/IS in an organization? What are Business and IS/IT strategies? Explain the relationship of Business, IS/IT strategies? How external forces influence business strategy and IS/IT strategies What are the challenges of IS/IT Plan in Indonesia?