INFORMATION SYSTEMS STRATEGY

Def. Strategy
This is an integrated set of actions aimed at increasing the long-term well-being and strength
of an enterprise.

Through in-depth analyses of the business environment and the strategy of the business as
well as an examination of the role that information and systems can and could fulfill in the
business, a set of known requirements and potential opportunities can be identified. These
needs and options will result from business pressures, the strategy of the business and the
organization of the various activities, resources and people in the organization. Information
needs and relationships can then be converted into systems requirements and an
appropriate organization of data and information resources.

To enable these 'ideal applications to be developed and managed successfully, resources and
technologies will have to be acquired and deployed effectively. In all cases, systems and
information will already exist, and, normally, IS resources and technology will already be
deployed.

Any strategy, therefore, must not only identify what is eventually required and must also
understand accurately how much has already been achieved.

The IS/IT strategic plan must therefore define a migration path that overcomes existing
weaknesses, exploits strengths and enables the new requirements to be achieved in such a
way that it can be resourced and managed appropriately.

The IS/IT strategy must be integrated not only in terms of information, systems and
technology via a coherent set of actions but also in terms of a process of adaptation to meet
the changing needs of the business as they evolve.

Information Systems Strategy

Def

IS strategy is the investment in, deployment, use, and management of information

systems.

IS strategy is a plan the company uses to provide its information services and allows it to
complete its business strategy

We note that the term of IS strategy is chosen to embrace rather than to exclude the
meanings of the other terms. With this definition, we do not regard the notion of IS strategy
as an ex post only or “realized IS strategy” as defined in the IS strategic.
There are four IS infrastructure components including
 Hardware – physical components like computers,
  Software – programs on the computers,
 Network – how the information is exchanged with others and
 Data – how it is stored.

The Information Systems Strategy Triangle

In the business world, managers must take a part in their decisions about information
systems, but do not have to understand the total concepts of it. If managers leave it up to
other people to make their IT decisions, it could cause problems for their company.
Information systems or IS manages the company’s infrastructure and must be aligned the
same way it manages its employees.

A framework for understanding IS’s impact on companies is called Information Systems

Strategy Triangle that relates business, organization and IS strategies. Companies try to
balance and compliment these three strategies. If you make a change in one strategy, you
must reflect a change in the other two. Also all three strategies must constantly be adjusted
to keep up with the changing world.
These strategies, in order to work, must be aligned.
Alignment in this sense means, the companies’ current business strategy is enabled,
supported and unconstrained by technology.
Two other concepts that are similar are synchronization and convergence. Synchronization
means technology helps current business strategies and helps create new ones to use for the
future. Convergence means that business and IS strategies are combined and the leaders of
these two understand both concepts. Alignment is the most important concept of these and
is important in achieving harmony in organization, business and IS strategies.

A strategy is a coordinated set of actions to fulfill goals, objectives and purposes. You must
set certain limits on what you want to achieve. To formulate a strategy you must have a
mission, a clear and compelling statement that unifies your effort and describes what your
organization is about. A mission statement describes what your company can do and why it
exists. A business strategy is a strategy stating where the business is going and how it
expects to achieve its results.

It also shows how a company can communicate its goals. A business strategy is formulated
in response to market forces, customer demands and organizational capabilities.
There are two well-accepted business strategy models:
i) The generic strategies framework
ii) The hyper-competition model.

i) The generic strategies framework

Michael Porter created the generic strategies framework. This framework helps managers
learn new strategies to enhance their competitive advantage. All businesses must sell their
products against other competitors.
There are three primary strategies in Porter’s framework.
 1. cost leadership, which results when the companies’ goal is to have the lowest costs
without diminishing quality in their products. Only one leader in cost cutting can
emerge and if everyone starts cutting costs a price war can start. This can eventually
lead to higher costs or loss of profit.
2. The second Porter framework is differentiation, where the company’s products
or services are unique to others in the marketplace. In order to work, the price for
the unique product/service must be important enough to the consumer.
3. The third Porter framework is focus, which a company will limit its scope to a
smaller segment of the market. Focus has two variants, cost focus – where the goal is
to seek a cost advantage within that group and differentiation focus – where it
distinguishes its products/services within the same group. By doing this, the goal is
to have a local competitive advantage over a larger one in the entire market.

i) The hyper-competition model.

Hyper-competition Framework, created by Richard D’Aveni, in contrast to Porter’s
framework, it offers new tools for making competitive strategies in fast-pasted
environments.
The hyper-competition model states that the speed and aggressiveness of moves and
countermoves in any given market create environments where advantages are
created rapidly and erode. Four ways to create the competitive advantages in hyper-
competition are
i. cost/quality,
ii. timing/knowhow,
iii. strongholds and
iv. deep pockets.
Three assumptions of hyper-competition are:
i. Every advantage is eroded,
ii. sustaining an advantage can be a dangerous distraction, the goal of advantage
should be disruption, not sustainability and
iii. Initiative are achieved with a series of small steps.

The D’Aveni framework has seven approaches to where an organization can create their
business strategy:
1. Superior stakeholder satisfaction,
2. Strategic soothsaying,
3. Positioning for speed,
4. Positioning for surprise,
5. Shifting the rules of competition,
6. Signaling strategic intent,
7. Simultaneous and sequential strategic thrusts.

Business Strategy Hierarchy

IS strategy is a plan the company uses to provide its information services and allows it to
complete its business strategy. Business strategy is the function of competition, positioning,
and capabilities.
Strategy can be formulated on three different levels:
a) Corporate level
b) Business unit level
c) Functional or departmental level.
While strategy may be about competing and surviving as a firm, one can argue that products,
not corporations compete, and products are developed by business units. The role of the
corporation then is to manage its business units and products so that each is competitive and
so that each contributes to corporate purposes.

a) Corporate Level Strategy

Corporate level strategy fundamentally is concerned with the selection of businesses in
which the company should compete and with the development and coordination of that
portfolio of businesses.

Corporate level strategy is concerned with:

i) Reach
Defining the issues that are corporate responsibilities; these might include identifying the
overall goals of the corporation, the types of businesses in which the corporation should be
involved, and the way in which businesses will be integrated and managed.
ii) Competitive Contact
Defining where in the corporation competition is to be localized. Take the case of insurance:
In the mid-1990's, Aetna as a corporation was clearly identified with its commercial and
property casualty insurance products. The conglomerate Textron was not. For Textron,
competition in the insurance markets took place specifically at the business unit level,
through its subsidiary, Paul Revere.
iii) Managing Activities and Business Interrelationships
Corporate strategy seeks to develop synergies by sharing and coordinating staff and other
resources across business units, investing financial resources across business units, and
using business units to complement other corporate business activities. Igor Ansoff
introduced the concept of synergy to corporate strategy.
iv) Management Practices
Corporations decide how business units are to be governed: through direct corporate
intervention (centralization) or through more or less autonomous government
(decentralization) that relies on persuasion and rewards.
v) Corporations are responsible for creating value through their businesses
They do so by managing their portfolio of businesses, ensuring that the businesses are
successful over the long-term, developing business units, and sometimes ensuring that each
business is compatible with others in the portfolio.

b) Business Unit Level Strategy

A strategic business unit may be a division, product line, or other profit center that can be
planned independently from the other business units of the firm.
At the business unit level, the strategic issues are less about the coordination of operating
units and more about developing and sustaining a competitive advantage for the goods and
services that are produced. At the business level, the strategy formulation phase deals with:
i) positioning the business against rivals
 ii) anticipating changes in demand and technologies and adjusting the strategy to
accommodate them
iii) Influencing the nature of competition through strategic actions such as vertical
integration and through political actions such as lobbying.

Michael Porter identified three generic strategies (cost leadership, differentiation, and focus)
that can be implemented at the business unit level to create a competitive advantage and
defend against the adverse effects of the five forces.

c) Functional Level Strategy

The functional level of the organization is the level of the operating divisions and
departments.
The strategic issues at the functional level are related to business processes and the value
chain.
Functional level strategies in marketing, finance, operations, human resources, and R&D
involve the development and coordination of resources through which business unit level
strategies can be executed efficiently and effectively.
Functional units of an organization are involved in higher level strategies by providing input
into the business unit level and corporate level strategy, such as providing information on
resources and capabilities on which the higher level strategies can be based. Once the higher-
level strategy is developed, the functional units translate it into discrete action-plans that
each department or division must accomplish for the strategy to succeed.

THE STRATEGIC PROCESS AND INFORMATION SYSTEM

The concept of Strategic Information Systems or "SIS" was first introduced into the field of
information systems in 1982-83 by Dr. Charles Wiseman, President of a newly formed
consultancy called "competitive applications."
Strategic information systems planning, or SISP, are based on two core arguments.
 The first is that, at a minimum, a firm’s information systems investments should be
aligned with the overall business strategy and in some cases may even become an
emerging source of competitive advantage. While no one disagrees with this,
operations management researchers are just starting to study how this alignment
takes place and what the measurable benefits are. An issue under examination is how
a manufacturer’s business strategy, characterized as either “market focused” or
“operations focused,” affects its ability to garner efficiency versus customer service
benefits from its Economic Resource Planning (ERP) investments.
 The second core argument behind SISP is that companies can best achieve IS-based
alignment or competitive advantage by following a proactive, formal and
comprehensive process that includes the development of broad organizational
information requirements. This is in contrast to a “reactive” strategy, in which the IS
group sits back and responds to other areas of the business only when a need arises.
Such a process is especially relevant to ERP investments, given their costs and long-
term impact. Seegars, Grover and Teng have identified six dimensions that define an
excellent SISP process (notice that many of these would apply to the strategic
planning process in other areas as well):
Characteristics of Strategic IS Planning
Some characteristics of strategic IS planning are:
 Main task: strategic/competitive advantage, linkage to business strategy.
 Key objective: pursuing opportunities, integrating IS and business strategies
 Direction from: executives/senior management and users, coalition of
users/management and information systems.
 Main approach: entrepreneurial (user innovation), multiple (bottom-up
development, top down analysis, etc.) at the same time

Why information systems planning

SISP is a process used by organizations to integrate long-range use of applications to further
their purposes, has become the most critical issue facing executives today.
Lederer and Sethi define SISP as ―the process of identifying a portfolio of computer-based
applications to assist an organization in executing its business plans and realizing its
business goal
 Effective SISP can help organizations to use information systems to reach their goals
and objectives.
 It can also enable organizations to use information systems to significantly affect their
strategies. However, the failure of SISP can result both in lost opportunities and the
waste of expensive information systems resources.
 SISP can assist organizations in perfect (the best) and new ways to build barriers
against new entrants, change the basis of competition, generate new products, use
the most cost- effective methods or strike a balance between the powers of the
suppliers
 SISP also ensures that whenever new systems are built they can communicate or
interface properly with pre-existing systems. It ensures that the information systems
infrastructure is consistent with the strategic vision of the organization. The success,
and even survival, of an organization in today’s markets is largely dependent upon
the development and implementation of a coherent and innovative strategic
information systems plan

Strategic Information Systems Planning Methodologies

The task of strategic information systems planning is difficult and often time organizations
do not know how to do it. Strategic information systems planning is a major change for
organizations, from planning for information systems based on users’ demands to those
based on business strategy. Also strategic information systems planning changes the
planning characteristics in major ways. For example, the time horizon for planning changes
from 1 year to 3 years or more and development plans are driven by current and future
business needs rather than incremental user needs. Increase in the time horizon is a factor
which results in poor response from the top management to the strategic information
systems planning process as it is difficult to hold their attention for such a long period. Other
questions associated with strategic information systems planning are related to the scope of
the planning study, the focus of the planning exercise – corporate organization vs. strategic
business unit, number of studies and their sequence, choosing a strategic information
systems planning methodology or developing one if none is suitable, targets of planning
process and deliverables. Because of the complexity of the strategic information systems
planning process and uniqueness of each organization, there is no one best way to tackle it.
There are two main categories used to classify SISP methodologies:
a) Impact methodologies
b) Alignment methodologies

a) Impact Methodologies
Impact methodologies help create and justify new uses of IT, while the methodologies in the
“alignment” category align IS objectives with organizational goals.
Some of the impact methodologies are discussed below.

1. Value Chain Analysis

The concept of value chain is considered at length by Michael Porter (1984). According to
him, ‘every firm is a collection of activities that are performed to design, produce, market,
deliver, and support its product. All these activities can be represented using a value chain.’
Porter goes on to explain that information technology is one of the major support activities
for the value chain. “Information systems technology is particularly pervasive in the value
chain, since every value activity creates and uses information. The recent, rapid
technological change in information systems is having a profound impact on competition and
competitive advantage because of the pervasive role of information in the value chain.
Change in the way office functions can be performed is one of the most important types of
technological trends occurring today for many firms, though few are devoting substantial
resources to it. A firm that can discover a better technology for performing an activity than
its competitors thus gains competitive advantage.
Once the value chain is charted, executives can rank order the steps in importance to
determine which departments are central to the strategic objectives of the organization.
Also, executives can then consider the interfaces between primary functions along the chain
of production, and between support activities and all of the primary functions. This helps in
identifying critical points of inter-departmental collaboration. Thus, value chain analysis:
a) Is a form of business activity analysis which decomposes an enterprise into its parts.
Information systems are derived from this analysis.
b) Helps in devising information systems which increase the overall profit available to
a firm.
c) Helps in identifying the potential for mutual business advantages of component
businesses, in the same or related industries, available from information
interchange.
d) Concentrates on value-adding business activities and is independent of
organizational structure.

Strengths
The main strength of value chain analysis is that it concentrates on direct value adding
activities of a firm and thus pitches information systems right into the realm of value adding
rather than cost cutting.
Weaknesses
Although a very useful and intuitively appealing, value chain analysis suffers from a few
weaknesses, namely,
a) It only provides a higher level information model for a firm and fails to address the
developmental and implementation issues.
b) It fails to define a data structure for the firm because of its focus on internal
operations instead of data,
c) The basic concept of a value chain is difficult to apply to non-manufacturing
organizations where the product is not tangible and there are no obvious raw
materials.
d) It does not provide an automated support for carrying out analysis.
Value chain analysis, therefore, needs to be used in conjunction with some other
methodology which addresses the development and implementation issues and defines a
data structure.

2. Critical Success Factor Analysis

Critical success factors analysis can be considered to be both an impact as well as an
alignment methodology. Critical Success Factors (CSF) in the context of SISP are used for
interpreting more clearly the objectives, tactics, and operational activities in terms of key
information needs of an organization and its managers and strengths and weaknesses of the
organization’s existing systems. Rockart (1979) defines critical success factors as being ‘for
any business the limited number of areas in which results, if they are satisfactory, will ensure
successful competitive performance for the organization.’
Consequently, critical success factors are areas of activity that should receive constant and
careful attention from management.

Strengths
CSF analysis provides a very powerful method for concentrating on key information
requirements of an organization, a business unit, or of a manager. This allows the
management to concentrate resources on developing information systems around these
requirements. Also, CSF analysis is easy to perform and can be carried out with few
resources.
Weaknesses
a) Although a useful and widely used technique, CSF analysis by itself is not enough to
perform comprehensive SISP - it does not define a data architecture or provides
automated support for analysis.
b) To be of value, the CSF analysis should be easily and directly related back to the
objectives of the business unit under review. It has been the experience of the people
using this technique that generally it loses its value when used below the third level in
an organizational hierarchy (Ward, 1990, p.164).
c) CSFs focus primarily on management control and thus tend to be internally focused and
analytical rather than creative
d) CSFs partly reflect a particular executive’s management style. Use of CSFs as an aid in
identifying systems, with the associated long lead-times for developing these systems,
 may lead to giving an executive information that s/he does not regard as important
(Ibid.).
e) CSFs do not draw attention to the value-added aspect of information systems. While CSF
analysis facilitates identification of information systems which meet the key information
needs of an organization/business unit, the value derived from these systems is not
assessed.

b) Alignment Methodologies
Some of the alignment methodologies include:
1. Business Systems Planning (BSP)
This methodology, developed by IBM, combines top down planning with bottom up
implementation. The methodology focuses on business processes which in turn are derived
from an organization’s business mission, objectives and goals. Business processes are
analyzed to determine data needs and, then, data classes. Similar data classes are combined
to develop databases. The final BSP plan describes an overall information systems
architecture as well as installation schedule of individual systems.

Strengths
Because BSP combines a top down business analysis approach with a bottom up
implementation strategy, it represents an integrated methodology. In its top down strategy,
BSP is similar to CSF method in that it develops an overall understanding of business plans
and supporting IS needs through joint discussions. IBM being the vendor of this
methodology, it has the advantage of being better known to the top management than other
methodologies.

Weaknesses
Some of the weaknesses of this type of methodology include:
1. BSP requires a firm commitment from the top management and their substantial
involvement.
2. It requires a high degree of IT experience within the BSP planning team.
3. There is a problem of bridging the gap between top down planning and bottom up
implementation.
4. It does not incorporate a software design methodology.
5. Major weakness of BSP is the considerable time and effort required for its successful
implementation.

2. Strategic Systems Planning (SSP)

Also known as PRO planner and developed by Robert Holland, this methodology is similar to
BSP. A business functional model is defined by analyzing major functional areas of a business.
A data architecture is derived from the business function model by combining information
requirements into generic data entities and subject databases. New systems and their
implementation schedules are derived from this architecture. This architecture is then used
to identify new systems and their implementation schedule. Although steps in the SSP
procedure are similar to those in the BSP, a major difference between SSP and BSP is SSP’s
automated handling of the data collected during the SISP process. Software produces reports
in a wide range of formats and with various levels of detail. Affinity reports show the
frequencies of accesses to data and clustering reports give guidance for database design.
Users are guided through menus for on-line data collection and maintenance. The software
also provides a data dictionary interface for sharing SSP data with an existing data dictionary
or other automated design tools.
In addition to SSP, Holland System’s Corporation also offers two other methodologies - one
for guiding the information system architecture and another for developing data structures
for modules from the SISP study. The strengths and weaknesses of BSP apply to SSP as well

3. Information Engineering (IE)

This methodology was developed by James Martin (1982) and provides techniques for
building enterprise, data and process models. These models combine to form a
comprehensive knowledge base which is used to create and maintain information systems.
Basic philosophy underlying this technique is the use of structured techniques in all the tasks
relating to planning, analysis, design and construction of enterprise wide information
systems.
Such structured techniques are expected to result in well integrated information systems. IE
relies on an information systems pyramid for an enterprise. The pyramid has three sides
which represent the organization’s data, the activities the organization carries out using the
data and the technology that is employed in implementing information systems. IE views all
three aspects of information systems from a high-level, management oriented perspective at
the top to a fully detailed implementation at the bottom. The pyramid describes the four
levels of activities, namely, strategy, analysis, systems design and construction, that involve
data, activities and technology in addition to information engineering, Martin advocates the
use of critical success factors. A major difference between IE and other methodologies is the
automated tools provided by IE to link its output to subsequent systems development efforts,
and this is the major strength of this methodology. Major weaknesses of IE have been
identified as difficulty in securing top management commitment, difficulty in finding the
team leader meeting criteria, too much user involvement and that the planning exercise
takes long time.

ALIGNING INFORMATION SYSTEM STRATEGY TO THE ORGANIZATION’S CORPORATE

STRATEGY
In the digital age, information technology plays an important role in the success of an
organization. Technology provides edge in this globalized world. Companies are facing
competition not only from local companies but from international companies as well.
In such a scenario, it is important that company invest in technology which is aligned with
overall strategy of the company. This calls for technology strategy formulation.

Technology Strategy Formulation

Technology strategy formulation talks about alignment between technology strategy and the
overall strategy of the organization. Here the role of the Chief Information Officer (CIO)
comes into prominence. The CIO should have short term as well as long term vision of
technology advancement. CIO should bridge implication of technology advancement and
organization strategy. A clear communication of technology impact on organization needs to
reach executive leadership.
This alignment between CIO and CEO revolves around issues like:
 CIO roles and involvement in overall strategy formulation of organization.
 Financial resources available to make investment in technology.
 Earlier results of alignment between technology and organization strategy.
 External business conditions.
CIO faces challenge to provide technology value adds for organization in achieving its
objective.

Planning
Corporate planning plays an important role in alignment of technology with organization
strategy. In a perfect scenario CIO and CEO will have a same planning horizon. However, it is
observed that the CEO and CIO do not share same vision, from planning to execution.
This introduces the concept of planning lead time. In some organization, strategy execution
does not match to technology planning horizon and execution. By the time technology
strategy is executed, more advancement is observed in that system, thus competitive edge is
lost.
In the above scenario, companies become reactive rather than pro-active. Companies need
to adjust with challenges posed by market leaders and trend setters. A strong CIO-CEO
relationship ensure organization develop understanding of technological challenges and its
impact on overall organization.

Organizational Structure
Organization needs to ensure that their structure is agile and flexible as to accommodate
changes in the technology. They should be efficient and effective enough to deal demands of
the market change.
Organization needs to develop and maintain technology systems, which are flexible and
adaptive. There are three types of technology infrastructure available with companies’ ERP,
data warehousing and knowledge management.
All three dimensions ERP, Data Warehousing and Knowledge Management provide cutting
edge to the organization.

Organizational Systems
Organization invests in technology looking at its present needs; future requirements and its
capability to provide a competitive edge. Systems can be classified into three categories
depending upon technology timeline, new systems, matured systems and declining systems.
New systems have latest technology and provide a competitive edge. As time progresses
system and technology are adopted by more companies, thus losing competitive edge.
Finally, systems and technology reach the obsolete stage where its usage has declined and is
to be phased out.
Executive leadership of organizations is responsible to manage new systems range as to
enjoy competitive edge. However, this requires substantial investment and clear vision of
future technology state. Therefore, organization has to walk a tight rope in investment in
new technology and phasing out the obsolete.

Information System for Business Effectiveness

In this digital age with fierce competition, it is essential that managers within organization
are completely aware and receptive to evolving changes. One the quickest evolving change
is within information systems. This change in information systems is contributed to
advances in computing and information technology.
Applying a concept that information system is strictly under the purview of IT department
can lead to adverse situation for the company. Therefore, it is essential for organization to
recognize information systems contribution in business effectiveness.

Systems and Innovation Opportunities

Development in information systems has brought opportunities but also threats. The onus is
on the organization to identify opportunity and implement it. Organization needs to develop
strategies, which can best utilize information systems to increase overall productivity.
The most common practice with regards to information systems is automation. Though
automation is helpful, innovation using information systems give the organization a
competitive edge.

Systems and Customer Delight

Organizations are fully aware that proliferation of information systems has reduced product
life cycle, reduced margin and brought in new products. In such scenario customer
satisfaction alone will not suffice, organization needs to strive for customer delight.
Information systems with data warehousing and analytics capability can help organization
collect customer feedback and develop products, which exceed customer expectation. This
customer delight will lead to a loyal customer base and brand ambassador.

Systems and Organizational Productivity

Organizations require different types of information systems to mitigate distinctive process
and requirements. Efficient business transaction systems make organization productive.
Business transaction systems ensure that routine process are captured and acted upon
effectively, for example, sales transaction, cash transaction, payroll, etc.
Further, information systems are required for executive decision. Top leadership requires
precise internal as well as external information to devise a strategy for organization.
Decision support systems are designed to execute this exact function.
Business transaction systems and executive decision support systems contribute to overall
organizational productivity.

System and Workers Productivity

Information systems have facilitated the increase in workers’ productivity. With
introduction of email, video conferencing and shared white board collaboration across
organization and departments have increased. This increased collaboration ensures smooth
execution and implementation of various projects across geographies and locations.

Information systems as a Value Add for Organization

Organization use information systems to achieve its various strategy as well as short-term
and long-term goals. Development of information systems was to improve productivity and
business effectiveness of organization. Success of information systems is highly dependent
on the prevalent organization structure, management style and overall organization
environment.
With correct development, deployment and usage of information systems, organization can
achieve lower costs, improved productivity, growth in top-line as well as the bottom-line and
competitive advantage in the market.

The readiness of workers into accepting the information systems is the key in realizing the
full potential of them.
Development and deployment of information systems have revolutionized the way business
is conducted. It has contributed to business effectiveness and increased in productivity.