Agenda:

1
Agenda Introduction to management IT
strategy
2
Famous IT Strategy Models 3 Era model
McFarlan s Strategic grid model Porters
value chain model (Homework)
Warren McFarlan
Michael E. Porter
3
Group work
Wal-Mart
Amazon.com
FedEx And/or UPS
MasterCard
Company
Value Chain
Inbound Logistics
x



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. This is an
individual assignment.  
Operations

x

x
Outbound Logistics
x



Marketing and Sales

x


Service


x

4
The evolving role of IS IT in
organizations 3-ERA MODEL
DP Era
MIS Era
SIS Era
computers fragmented (hardware limitation
Nature of Technology
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 /
projectmanagement)
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)
accommodating / control
flexible / strategic? (external?)
Trends in the evolution of business IT Source
Ward / Griffiths, 1997, p. 19
5
Information Technology Challenges

• Integrating Changing Technology Platforms

Administrative Framework
Primary Target
Justification/ Purpose
Application
Challenges
Regulated Monopoly
Productivity/ Efficiency
Organization
Era I
?
?
Free Market
Individual/Group Efficiency
Era II
?
?
Individual
Enterprise and Industry Integration
Value Creation
Collaborative
Era III
?
?
6
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

7
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

8
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.

9
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.

10
The Three-era Model - Lessons Learned from DP and
MIS Eras

• Cons contd
• 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 users
  information accessibility

11
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 organizations
  competitive strategy or it provide it with
  competitive advantage.

12
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.

13
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

14

• 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

15
Spending on Information Technology and
Profitability
Return on Equity -
16
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

17

• How you gather, manage, and use information will
  determine whether you win or lose
• - Bill Gates

18
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

19
McFarlans Strategic Grid
LOW
HIGH
Strategic impact of future systems
LOW
Strategic impact of existing systems
HIGH
20
The Strategic Grid Organisations
LOW
HIGH
Strategic impact of future systems
LOW
Strategic impact of existing systems
HIGH
21
The Value Chain
Support activities
Primary activities
Inbound logistics Materials receiving, storing,
and distribution to manufacturing
premises Operations Transforming inputs into
finished products. Outbound logistics Storing
and distributing products Marketing and
Sales Promotions and sales force Service Servic
e to maintain or enhance product value Corporate
infrastructure Support of entire value chain,
e.g. general management planning, financing,
accounting, legal services, government affairs,
and QM Human resources management Recruiting,
hiring, training, and development Technology
Development Improving product and manufacturing
process Procurement Purchasing input
22
Porters Value Chain
Competitive Advantage
Administrative Coordination and Support
Services SIS Collaborative Work Systems
Human Resources Management SIS Employee Skills
Database Systems
Support Processes
Technology Development SIS Computer-Aided
Engineering and Design
Procurement of Resources SIS Electronic Data
Interchange with Suppliers
Inbound Logistics SIS Automated Just-in-Time
Warehousing
Operations SIS Computer-Aided Flexible
Manufac- turing
Outbound Logistics SIS Online Point-of-Sale and
Order Processing
Marketing and Sales SIS Interactive Targeted
Marketing
Customer Service SIS Help Desk Expert System
Primary Business Processes
23
Porters 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.

24
Porters 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.

25
Porters 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
suppliers outbound logistics is the firms
inbound logistics. The Distributors inbound
logistics is the firms 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 Hemmingways 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