Lecture #6

Developing Sector Strategies

SYED ABDULLAH HAYAT

AIOU FALL 2015
Learning Objectives
 Market Strategies
 Channel Enhancement Strategies
 Organizational Impacts
 Evolution of Strategic Information Systems Planning

(SISP) Approaches
 How IS. Planning has evolved
 The data processing age
 The rise of Management Information Systems (MIS)
 Planning for SIS
 Strategic Planning for Emerging Business Models
 IT implications of network and alliance planning
Market Strategies
 Companies generally seek to build competitive strength and barriers to
entry on either a global brand or a web of intimate customer/supplier
relationships, or both, but always with profound knowledge of the industry
in which they operate. Strategies will be very different in different market
sectors, and so this whole spectrum needs to be considered from
manufacturing to the least inventory-dependent service industry.
Manufacturing
 Traditionally this industry has been characterized by the extensive chain of
intermediaries along the distribution chain from manufacturer to customer.
This is now undergoing rapid change as manufacturers realize that they can
disintermediate and sell direct to customers. Unfortunately, this is not as
easy as it seems, since few manufacturers are likely to have the marketing
and selling expertise previously supplied by retail outlets. Further, small
manufacturers need a broker of some kind to act on their behalf within a
much larger marketplace.
Mixed Goods and Service Organizations

 One step away from the manufacturers are those businesses dealing in the
mixed goods and services sector. Supermarkets for example, are occupied
with provision of items on the supermarket shelf but also in the provision
of added-value services to the customer. Tesco, www.tesco.co.uk, is an
excellent example of a successful e-enterprise.
Service Organizations
 For most service industries, the customer can now attain access directly
over the Internet 24 hours per day. Perhaps the best known examples have
been in the brokerage industry and financial services industries. It is
important to recognize that most of these offer low switching costs for the
customers and it may well be difficult to build brand loyalty.
Service Organizations
 The strategy you use to position yourself in the marketplace will reflect the
industry in which you operate, the type of product you deliver and the
customer you service. It will also reflect the stage of growth of e-business
development in your organization. Typically the first step for an
organization will be to use e-business technology as an enabler to modify
existing processes and to create new ones targeted at improving business
performance.
Channel Enhancement Strategies
 In the e-business world, channel enhancement means using Internet
technologies to enhance sales or client services by adding an electronic
Sell channel and enhance the corporation’s ability to Buy through e-
procurement systems. In other words, they will be starting to implement
B2C and B2B systems (perhaps not both simultaneously). Typically
companies will be choosing to implement a new business model with the
emphasis on incremental change, cost efficiencies and process re-
orientation. At this stage, back-end integration with front-end processing is
critical.
Sell Channels
 There are probably three convincing reasons to justify the expenditure
(possibly over $US 10 million) to establish an electronic sell-channel:
 •Enhancing the sell channel through technology will
lower costs
 An e-commerce sell channel has become a ‘must’ in
most industries and is the price to be paid to enter into
the competitive world of 21st century business
 An enabled sell channel allows for much more efficient
collection and aggregation of customer information.
Sell Channels
There
 are seven components of an enabled sell site:
Catalogue:
 e-catalogues typically provide more information than paper
catalogues: they can include links to photographs, product or engineering
specifications, demonstrations and videos. There are many software
packages to choose from, and it is important to match the catalogue design
and functionality to the company’s goals.
Merchandising: sales promotion and affinity programs such as frequent-

flyer offers, with additional promotions such as electronic coupons
distributed via e-mail, are becoming increasingly common.
Configuration: this is used for more complex products. It means allowing

users to define a product that meets given criteria or needs and whose
features and options can be combined to work together. The site may allow
buyers to calculate price and choose the best payment option (leasing or
buying/repairing, etc.).
Sell Channels
Shopping
 cart: Pioneered by Open Market, this features allows
the shopper to maintain multiple items before deciding to buy.
The software can also remember buyers’ selections between
sessions (known as a persistent shopping cart).
Tax calculation: particularly relevant to US sites, where these

software packages calculate Local, State or Federal taxes
Shipping/Logistics: not only determines shipping means and

costs but can also keep track of logistics and interact with the
buyer regarding the current whereabouts of the order.
Payment systems: this is mostly by credit card with secure

electronic transaction (SET) processing. Paymentech and
iCOMS are two vendors in this market.
Organizational Impacts
 E-business is a disruptive technology and has serious implications for the
way that organizations manage their day-to-day operations and also for
their staff and the overall organizational business model. At this stage of e-
business, the greatest change impact is on business processes. There is a
need to re-engineer such processes as:
 Marketing—a strategy is needed to lure customers to the site and consolidate a
purchase
Organizational Impacts
 Sales and Order Management—the emphasis will shift to real time updating of
prices and product specifications
 Customer Service—this is likely to be through e-mail and must be managed
effectively and promptly
 •Procurement—leads to reduced requisition times but also to less inventory
  All of these changes will affect employees and require a redefinition of
roles. There may also be a need to engineer new processes and job
descriptions.
Organizational Impacts
 New Information Systems will be required, and these will have to be
managed for content not just across the organization but also for IOS. The
systems will have to be integrated with back-end processes, and this
integration between new and legacy systems can be fraught with
difficulties. As the number of systems requiring integration increases, so
does the risk of data integrity problems. For many organizations, this
becomes the critical issue. Understandably it is a significant factor for ERP
suppliers, who must ensure compatibility with myriad platforms.
 Evolution of Strategic Information
Systems Planning (SISP) Approaches

 As the use of computers and telecommunications have changed over

time, so too have the approaches to planning the utilization of an
organization’s information, information systems (IS), and information
technology (IT).
 The established approaches to information systems suitable to an era
of inward-focused automation of basic activities are unlikely to be
suited to an age where a major role of IS is to connect the
organization to others in the business environment. The business and
IS/IT planning approaches that were appropriate in the 1960s era of
hierarchical integrated organizations were found wanting in the
emerging, interconnected business environments of the 1990s. This is
even more the case in the coming environment of highly
interdependent firms. Each will focus on core competencies and each
will be increasingly dependent on IS/IT to support and manage core
business activities and maintain alliances.
How IS. Planning has evolved

 The evolution of IS planning is somewhat linked to the

spread and development of computer-based IS in
organizations. We can identify four eras or stages of
computing in organizations to date. The first was the data
processing (DP) era, followed by the development of
Management Information Systems, and thirdly the growing
importance of Strategic Information Systems (SIS). Finally
we have the current stage of interorganizational operating
systems (IOS) or extended business networks.
The data processing age
 The data processing (DP) era is generally identified as beginning in the
1960s, when the
 emphasis was primarily on applying the newfound technologies of
computing to the automation of basic business transactions and so
achieving efficiency gains for the organization.
 Typically, this process of automation took place function by function, and
the planning horizons were primarily constrained by a project-by-project
outlook and system implementation. At this time systems were developed
according to simple economic criteria (can we automate this process to do
it more cheaply?) with little regard to related systems. The subsequent
planning efforts were remedial in that their aim was to develop interfaces
between these disparate systems.
 The rise of Management Information
Systems (MIS)
 As more data became stored across the organization and with the advent of
more flexible and user-friendly tools, managers were encouraged and
increasingly enabled to access data from more than one of the ‘islands of
automation’ that created, manipulated and stored records for the
organization. They were provided with new tools for the job through what
were called management information systems (MIS).
 As well as continuing the task of business process automation
characteristic of the DP era, the new MIS thinking took a broader view of
organizational activity. Within MIS systems the effectiveness of
managerial performance and decision making was highlighted, with IS
planning focusing more on developing a portfolio of information systems
that supported and facilitated management decision making and the
effective monitoring and control of employee activities.
The rise of Management Information
Systems (MIS)

 In addition, IS planning came to involve the development of

organizational policies to prioritize organizational
information requirements and to coordinate the roles of
empowered end users and the IT department in an
increasingly complex IT environment. IS planning was thus
concerned with an explicit attempt to integrate at both a
technical and informational level, and thus changes
envisaged for the organization would involve elements of
internal integration.
 It is important to note that planning during both the DP and
MIS eras was primarily internally oriented.
Strategic Information Systems (SIS)
 Extending the scope and range of existing DP and MIS-type systems, the
1980s and 1990s saw the advent of strategic IS (SIS) systems geared to
improving an organization’s competitive position, to changing the way
business is conducted, and/or to establishing close links to business
partners and customers. SIS are viewed as flexible, externally focused, and
driven by business initiatives and requirements. The emphasis in planning
thus shifts to understanding customer requirements and the business
environment, with efforts directed to aligning IT efforts with the articulated
business strategy. Instead of using IT essentially to plan basic support
services, planners and other managers recognized the potential of IT to
offer competitive advantage and began relying on ISP as a key enabling
factor in the achievement of business strategy. Another important shift
involved the recognition that process design considerations would often be
woven into the nexus of business strategy-IS strategy.
Planning for SIS
 The emerging tools, unprecedented scope of systems thinking, and intense
management interest in IT caused planning thinking to change significantly
during the SIS era. Such thinking was still focused primarily on structures
internal to the organization. For the first time, however, planners were
encouraged to look outwards from their organization into the external
business and IT environments. The external environments were believed to
offer insights into appropriate developments to protect, defend and
reposition the organization. The IT lens was newly seen as relevant to
identifying particular business opportunities, as well. External forces could
sometimes even have the effect of initiating an investment decision.
Planning for SIS
 ISP was now underpinned by the recognition that success in the modern
business environment might be contingent upon strategic and appropriate
IS/IT investments. The power of capital had a new face: if invested in IT, if
could transform existing business processes. Lest the breadth of the SIS
Era network illustration suggest otherwise, note in passing that although
SISP planners made gestures of concern regarding the external
environment, they did not usually or routinely engage with the external
environment in the planning of interorganisational systems
Planning for SIS
 By the mid-1990s, it was reasonably well established that some sort of
formalized SISP was an appropriate undertaking for most organizations.
SISP was to be closely allied to the organization’s business planning
activity. The accepted wisdom at that time suggested, however, that SISP
should only be attempted once a business strategy had been developed and
articulated, and hence an understanding reached of the direction the
organization was planning to follow for the next few years—its goals, its
objectives, its core business processes and its change agenda.
Planning for SIS
 With this business strategy established and a shared
understanding reached amongst executives, an IS plan could
be developed, determining the information and information
systems needed to support the business strategy, and thus
guiding investment decisions into the future. Once an IS
plan was defined, an organization’s technology requirements
could be articulated, such that the technological
infrastructure and hardware would be made available to
support and enable the provision of relevant information and
information systems.
Planning for SIS
 An iterative and generative process was envisaged, recognizing
a general trend of establishing a business strategy, then an IS
strategy, and finally an IT strategy, but acknowledging the
constraints and pressures in the real world which might act to
limit the strategies somewhat. Given the rate of technological
change, and the potential and impact that modern IT could have
directly on business strategy, at the outset of this process it was
important to be aware of technological advances that might
affect or alter the chosen or desired course for an organization
(Henderson and Venkatraman, 1994). Issues of strategic
alignment between the business and IS/IT came under increased
scrutiny, with frameworks developed to help alignment or ‘fit.’
 Strategic Planning for Emerging
Business Models
 Adopting a Business Network Focus for Strategic Planning
 We move now to consider the changing realities of the business environments
in which many organizations now operate. From this assessment, we question
the appropriateness of the SISP framework to support and inform IS planning
activities in emerging business forms.
Strategic Planning for Emerging
Business Models
 The word ‘bureaucratic’ has been used advisedly to describe
a formal and methodologically-based strategic and IS/IT
planning regimen. Its pace and complexity have chafed
many managers wishing to see their firms readier for the
increasing pace of change and the concomitant need to
reposition organizations in an increasingly interconnected
and dynamic business environment. A typical response has
been to move to a more flexible, lighter and less
bureaucratic mode of strategic thinking. This move also
includes a move from rigor and analysis in strategic
planning towards a softer, more creative, intelligently-
opportunistic and more collaborative strategic thinking
mode that emphasizes values and culture along with
business goals, objectives and directions.
Strategic Planning for Emerging
Business Models
 The business environment that is rapidly developing is one
in which distinct boundaries between organizations diminish
and dissolve as organizations enter into a variety of possible
relationships of varying degrees of strength and
commitment with their suppliers, their business customers,
their business partners, their end consumers, and even their
business competitors. The respective fates of collaborating
enterprises become increasingly intermingled; these
interdependent business environments being described as an
‘interconnected ecology of firms,’ or ‘symbiotic networks.’
IT implications of network and
 alliance
Two considerations go hand inplanning
hand: the SISP required for strategic
business networks, and internal and external IT environments. Each
organization individually possesses an IS/IT maturity and legacy which
they bring to the strategic business network. Issues to do with the
compatibility of the respective IT technical infrastructures, compatibility of
management attitudes to IS/IT, and stages of maturity with respect to IT
need to be addressed here. So too does the use of and reliance on
consultants, as individually, the organizations may have had very different
histories and experiences in this regard.
IT implications of network and
Stage alliance planning
Web site
   
Presentation Static web site - brochureware
   
Communication Tailored to trading partner- View inventory/orders in hand
 
Interaction Order placement or bids
   
Fulfillment Links to back-end fulfillment systems
Collaboration Dynamic interaction and virtual decision making
   
Review of Lecture
 Market Strategies
 Channel Enhancement Strategies
 Organizational Impacts
 Evolution of Strategic Information Systems Planning
(SISP) Approaches
 How IS. Planning has evolved
 The data processing age
 The rise of Management Information Systems (MIS)
 Planning for SIS
 Strategic Planning for Emerging Business Models
 IT implications of network and alliance planning
The End