The Strategic Role of

Information Systems

Prof. Drakoulis Martakos

University of Athens
Department of Informatics
Dr. Panagiotis Kanellis Email: martakos@di.uoa.gr

Business Consulting
Email: panagiotis.kanellis@gr.arthurandersen.com
Objectives

■ what is ‘strategy’
■ six major types of IS in
organizations
■ relationship between the types of
IS
■ information as a strategic resource
■ how IS support the three levels of
strategy
■ issues in developing a strategic IS
What is Strategy?

■ “Operational Effectiveness” means

performing similar activities better than
rivals do
■ “Strategic Positioning” means
performing different activities from rivals
or performing similar activities in different
ways
■ “Organizations have competitive
advantage when they provide more
value to their customers or when they
provide the same value to customers at
a lower price”
Source: Porter, M.E. HBR November-December 1996
 The Essence of Strategy

“The essence of strategy is

choosing to perform activities
differently than rivals do”
Source: Porter, M.E. HBR November-December 1996
Areas of Agreement on
Strategy (Chaffee, 1985)
■ Strategy concerns both organization and
environment
◆ “A basic premise of thinking about strategy
concerns the inseparability of organization and
environment…the organization uses strategy to deal
with changing environments”
■ The substance of strategy is complex
◆ “Because change brings novel combinations of
circumstances to the organization, the substance of
strategy remains unstructured, un-programmed, non-
routine, and non-repetitive…”
■ Strategy affects overall welfare of the
organization
◆ “Strategic decisions are considered important
enough to affect the overall welfare of the
organization”
Areas of Agreement on
Strategy (Chaffee, 1985)(2)
■ Strategy involves issues of both content and
process
◆ “The study of strategy includes both the actions
taken, or the content of strategy, and the processes
by which actions are decided and implemented”
■ Strategies are not purely deliberate
◆ “Theorists... Agree that intended, emergent, and
realized strategies may differ from one another”
■ Strategies exist on different levels
◆ “…Firms have…corporate strategy (What business
shall we be in?) and business strategy (how shall we
compete in each business?)”
■ Strategy involves thought processes
◆ “Strategy involves conceptual as well as analytical
exercises. Some stress the analytical dimension
more than others, but most affirm that the heart of
strategy making is the conceptual work done by
leaders of the organization”
Different Kinds of
Information Systems
INFORMATION SYSTEM GROUPS SERVED

Strategic Level Senior Managers

Management Level Middle Managers

Knowledge and
Knowledge Level
Data Workers

Operational Level Operational Managers

Sales & Human

Manufacturing Finance Accounting
Marketing Resources
Six Major Types of IS
Strategic-Level Systems
Executive 5-year sales trend 5-year operating plan 5-year budget
Support forecasting forecasting
Systems
Management-Level Systems
Decision Sales region analysis Production scheduling Cost analysis Pricing/profitability
Support analysis
Systems

Management Sales management Inventory control Annual budgeting Capital investment

Information analysis
Systems

Knowledge-Level Systems
Knowledge Engineering Graphics workstations Managerial
Work Systems workstations workstations
I
Office Work processing mage storage Electronic calendars
Automation systems
Systems
Operational Level Systems
Transaction Order processing Plant scheduling Payroll Employee record
Processing keeping
Systems

Sales and Manufacturing Finance Accounting Human

Marketing Resources
 Systems Integration

ESS

Systems Integration is
performed at 3 levels:
M IS DSS
• Business
• Application
• Technology
KW S
& TPS
O AS
 Systems Integration(2)

Business Business Inter-

Architecture Architecture Organizational Processes

* Application Application Enterprise

Architecture Architecture Application Integration

Technology Technology Middleware

** Architecture Architecture Integration

Organizational Unit Organizational Unit

* ‘semantic’ level

** ‘syntactical’ level
 Strategic Information
Systems

• 1950-1960 A Strategic Information System can be

•Necessary evil,
bureaucracy
any IS at any level of an organization
•1960-1970
that change the goals, processes,
•General purpose products, services, or environmental
support, MIS reporting
relationships to help the organization
•1970-1980
gain a competitive advantage”
•Customized
management control
•1985-Today
•strategic resource,
business foundation
 Strategy Levels and IT

Strategies Models ITTechniques

Industry Cooperation Vs Competition Competitive Forces Model Electronic Transactions
Licensing Network economics Communication Networks
Standards Interorganizational Systems
Information Partnerships

Firm Synergy Core Competency Knowledge Systems

Core Competencies Organization-wide Systems

Business LowCost Value Chain Analysis Datamining

Differentiation IT-based Products/Services
Scope Interorganizational Systems
Supply Chain Management
Efficient Customer Response
Business Level Strategy and
the Value-Chain Model

Administration and Management SUPPORT

Scheduling and Messaging Systems ACTIVITIES
Human Resources

M
Work Force Planning Systems

ar
gi
Technology

n
Computer Aided Design Systems

Procurement

n
Computerized Ordering Systems

gi
ar
Inbound Operations Outbound Sales and Service PRIMARY

M
Logistics Logistics Marketing ACTIVITIES
Automated Computer- Automated Computerized Equipment
Warehousing Contolled Shipment Ordering Maintenance
Systems Machining Scheduling Systems Systems
Systems Systems
Firm-Level Strategy and IT

■ Synergies - IT is used to tie

together the operations of
disparate business units so that
they can act as a whole
■ Core Competencies - IT is used
to encourage the sharing of
knowledge across business units
 Industry-Level Strategy and IT
New Market Substitute
• Brand Identity
Entrants Products and
• Switching Costs Services
• Capital Requirements
• Relative Price Performance
• Access to distribution
of Substitutes
• Government Policy
Threat of new entrants
Threat of substitutes • Switching Costs
• Buyer Propensity to
Substitute

Traditional
The Firm
Competitors

Intensity of Rivalry

Bargaining power of suppliers Bargaining power of customers

• Input Differentiation
Suppliers
• Supplier Concentration
• Importance of Volume
to Supplier
• Forward Integration
• Impact of Inputs on
Cost or Differentiation
• Buyer Information
Customers
• Buyer Volume
Competitive Advantage can be achieved by enhancing • Switching Costs
the firm’s ability to deal with customers, suppliers, • Backward Integration
substitute products and services, and new entrants to its • Product Difference
market, which in turn may change the balance of power
between a firm and other competitors in the industry in the
firm’s favor
Strategic Transitions

■ Internal Restructuring
■ Blurring of Organizational Boundaries
■ Redesign of a Firm’s Operating
Procedures
■ Change is constant

SIS are rarely planned -they evolve!

Like most new products, they come from
closely observing real-world situations
Strategic Thinking as Seeing
(Mintzberg)

Beyond

Above
Behind

Through
Ahead

Beside
 And remember...

The competitive value of individual activities

should not be separated from the whole