Managing and Using

Information Systems:
A Strategic Approach –
Seventh Edition Chapter 1
Keri Pearlson, Carol Saunders,
and Dennis Galletta
The Information Systems
Strategy Triangle

© Copyright 2020
John Wiley & Sons, Inc.

Modified by Asst. Prof. Dr. Jittima W.

Objectives
• To understand the alignment necessary between business
strategy, information systems, and organizational design
• To describe the models of business strategy
• To understand the organizational strategy and design
• To understand the information system strategy
• To understand a simple framework for creating a social business
strategy

© 2020 John Wiley & Sons, Inc. 2

 Kaiser Permanente (KP) Opening Case
1. What was KP’s business strategy in 2015?
2. On what were bonuses to doctors based under the “fix me” system?
3. What would the new idea be called instead of a “fix me” system?
4. What is the new basis for end-of-year bonuses?
5. What goal alignment has helped KP’s success?
6. What IS components are part of this?
7. Could only the IS components be changed to achieve their success?
8. Could only the strategy be changed to achieve their success?
9. Have they been successful through 2019?

© 2020 John Wiley & Sons, Inc. 3

 The Information Systems Strategy Triangle

 Information Systems Strategy

Business Strategy
Triangle is a simple framework
used for describing the alignment
necessary with business systems
and for understanding the impact of
IS on organization
• It relates business strategy with IS
strategy and organizational
strategy Organizational Information
• These 3 types of strategy need to Strategy Strategy
be balanced
Figure 1.1 The Information Systems Strategy Triangle
© 2020 John Wiley & Sons, Inc. 4
 What is a “Strategy?”
• A Strategy is a coordinated set of actions to fulfill objectives, purposes, or goals
• It sets limits on what the organization seeks to accomplish
• Starts with a mission: a clear and compelling/convincing statement that unifies an
organization’s effort and describes what the organization is all about (its purpose)

Company Mission Statement

Zappos To provide the best customer service possible. Internally we call this our WOW philosophy.

Amazon To be Earth’s most customer-centric company, where customers can find and discover
anything they might want to buy online, and endeavors to offer its customers the lowest
possible prices. . .(recognizing the importance of). . .Consumers, Sellers, Content Creators,
and Developers & Enterprises.
L.L. Bean Being outside brings out the best in us. That’s why we design products that make it easier
to take longer walks, have deeper talks and never worry about the weather.

© 2020 John Wiley & Sons, Inc. 5

Business Strategy
 What is a business strategy?
• Business Strategy is the coordinated set of actions used to meet the
business goals/objective; or a plan expressing where a business seeks to
go and how to get there
• This plan is constructed in response to market forces, customer demands, and
organizational capabilities (skill and experience used to add value in the
marketplace
• It includes business models (a blueprint of how a company does business) as
one component of a business strategy
• Business model can be used to create new product/services that add value to its
customer/partner (include subscriptions, advertising, licenses, etc.).
• Business model is the outcome of strategy
• Business models do not include where the business seeks to go, but only
the revenue portion of how it expects to get there
© 2020 John Wiley & Sons, Inc. 7
 What is a business strategy? (cont)
Example as Dell Company
 Dell’s business strategy was to sell PCs directly to the customer without out going through
an intermediary
 The Internet combined with Dell’s IS infrastructure allowed:
• Customer to contact Dell electronically,
• Customer can designed a PC for individual needs
• Dell’s ordering sys was integrated with production sys and shared info automatically with each supplier
• The system enabled the assembly of current computers without the expense of storing large and
uncertainties inventories.
• Cost saving were passed on to customer,
• The direct-to-customer model allowed Dell to focus its production capacity on building
only the most current products.
• With small profit margins and new products quickly able to replace existing products.
• IS aligned with Dell’s business strategy to provide low-cost PCs
• Dell executives achieved a strategic advantage in reducing response time, building custom
computers with lowest costs, eliminating inventories that could become obsolete
© 2020 John Wiley & Sons, Inc. 8
Generic Strategies Framework
 Michael Porter: helps understanding how businesses can build a
competitive advantage
 Three primary strategies for achieving competitive advantage:
• Cost leadership – organization aims to be the lowest-cost producer.
 Use IS to generate operating efficiencies such Walmart
• Differentiation – organization offers unique product
 Identify qualitative dimensions to its customer.
• Focus – organization needs to limit its scope to a narrower segment, can be
accomplished by:
 Cost focus - via cost leadership or
 Differentiation focus - seek to distinguish its products/services within the segment
 Ex. Marriott--Cost focus, using kiosks to provide services
 Ex. Ritz-Carlton--Differentiation focus, using employee to provide services
© 2020 John Wiley & Sons, Inc. 9
 Three Strategies for Achieving Competitive Advantage

Strategic Advantage

Uniqueness Perceived by
Low Cost Position
Strategic Target

Customer

Industry Wide Differentiation Cost Leadership

Particular Segment
Focus
Only

© 2020 John Wiley & Sons, Inc. 10

 Three Strategies for Achieving Competitive Advantage
Examples
Strategic Advantage

Uniqueness Perceived by
Low Cost Position
Customer
Strategic Target

Industry Wide Differentiation Cost Leadership

Progressive (Car Insurance); Wal-Mart
Apple

Particular Segment Only Focus

Marriott Ritz Carlton

© 2020 John Wiley & Sons, Inc. 11

 Dynamic Strategies
• Organization must respond instantly and change rapidly, which requires
dynamic structures and processes - need Hypercompetition framework:
• Speed and aggressiveness of the moves in a highly competitive market
• Advantages are rapidly created and eroded because market change rapidly
• Successful concepts in hypercompetitive markets include:
 Dynamic capabilities: a firm can integrate, build, and reconfigure internal and external
capabilities to address rapidly changes
 Creative destruction: Steve Jobs at Apple felt that “if a company was not willing to
cannibalize its own products, competitors would come along and do it” Ex., iPod was
cannibalized by the iPhone and iPad while it was selling extremely well!
 Blue ocean strategy: a firm create new demand in untapped marketspaces where they have
the “water” to themselves, Ex., Dell sold PCs for 40% less than IBM while still making money.
? Red ocean strategy: firm gain competitive advantage in existing industries/marketspaces,
compete to earn a larger share
 Digital strategies: a business strategy inspired by capabilities of powerful and accessible
digital technologies.
© 2020 John Wiley & Sons, Inc. 12
 Summarized Strategies
Strategic Approach Key Idea Application to Information
Systems
Porter’s generic Firms achieve competitive Understanding which
strategies advantage through cost strategy is chosen by a firm
leadership, differentiation, or is critical to choosing IS to
focus. complement the strategy.

Dynamic environment Speed, agility, and aggressive The speed of change is too
strategies moves and countermoves by a fast for manual response
firm create competitive making IS critical to
advantage. achieving business goals.

© 2020 John Wiley & Sons, Inc. 13

 Why are Strategic Advantage Models Essential
to Planning for ISs?
 Understanding business strategy means answering the following
questions:
1. What is the business goal or objective?
2. What is the plan for achieving it? What is the role of IS in this plan?
3. Who are the crucial competitors and partners, and what is required of
a successful player in this marketplace?
4. What are the industry forces in this marketplace?

© 2020 John Wiley & Sons, Inc. 14

Organizational Strategy
 Organizational Strategy
 Organizational strategy: includes the organizational design and the choices it
makes to define, set up, coordinate, and control its work processes
• A plan that answers the question: how will the company organize to achieve its
goals and implement it business strategy?
• It comprises the combination of 3 variables:
 Organizational: decision rights, business processes, formal reporting relationships,
and informal networks
 Control: include the availability of data, nature and quality of planning, effectiveness
of performance measurement and evaluation systems, and incentives of doing work
 Cultural: include the values of the organization
• These organizational, control, and cultural variables are Managerial Levers used
by decision makers to effect changes.
© 2020 John Wiley & Sons, Inc. 16
 Figure 1.5 Managerial Levers model
© 2020 John Wiley & Sons, Inc. 17
 Organizational Strategy (cont)

 To understand organizational design means answering the following questions:

1. What are the important structures and reporting relationships within the
organization?
2. Who holds the decision rights to critical decisions?
3. What are the important people-based networks (social and informational), and
how can we use them to get work done better?
4. What control systems (management and measurement systems) are in place?
5. What are the culture, values, and beliefs of the organization?
6. What is the work that is performed in organizations, who performs it, and where
and when is it performed?
7. What are the key business processes?
© 2020 John Wiley & Sons, Inc. 18
Information Systems
Strategy
 IS Strategy
• IS Strategy is a plan an organization uses in providing information services.
(JetBlue VP: “we define what the business needs and then go find the technology
to support that”)
• Four key IS infrastructure components
What Who Where
Hardware The physical devices of the System users and Physical location of devices
system managers (cloud, datacenter, etc.)
Software The programs, applications, System users and The hardware it resides on and
and utilities managers physical location of that hardware

Networking The way hardware is System users and Where the nodes, wires, and
connected to other hardware, managers; company that other transport media are located
to the Internet and to other provides the service
outside networks.

Data Bits of information stored in Owners of data; data Where the information resides
the system administrators
© 2020 John Wiley & Sons, Inc. Figure 1.6 IS Strategy Matrix. 20
 Illustration in a Consulting Firm

What Who Where

Hardware Laptops, servers to store Consultants have laptops, Laptops are mobile; servers
info and back up laptops managed by the IS Dept. are centralized

Software Office suite; collaboration Software is on consultants’ Much resides on laptops;

tools laptops but managed centrally some only resides on
servers

Networking Internet; hard wired ISP offers service; Internal IS Global access is needed;
connections in office; group provides servers and Nodes are managed by ISPs
remote lines from home, access
satellite, or client offices

Data Work done for clients; Data owned by firm but made Resides on cloud and copies
personnel data available to consultants as “pulled” into laptops as
needed needed.

© 2020 John Wiley & Sons, Inc. 21

 One IS Strategy: Social Strategy
 Social business strategy: a plan of how the firm will use social IT
that is aligned with its organizational strategy and IS strategy
 Most social business opportunities fall into one of three categories:
• Collaboration: Using social IT (ex. Social network) to extend the reach of
stakeholders to find and connect with one-another to share ideas, info,
and expertise
• Engagement: Using social IT to involve stakeholders in the business via
blogs; to join in conversations, offer support to each other
• Innovation: Using social IT to Identify, describe, prioritize new ideas;
individual suggest new ideas, comment, vote - giving manager a new ideas
to generate and decide products/services
© 2020 John Wiley & Sons, Inc. 22
Summary
• The Information Systems Strategy Triangle represents a simple framework
for understanding the impact of IS on businesses.
• It related business strategy with IS strategy and organizational strategy and
implies the balance that must be maintained in business planning.
• Business Strategy drives organizational strategy and IS strategy. The
organization and its IS should clearly support defined business goals and
objectives.
• Organizational Strategy must complement business strategy.
• IS Strategy must complement business strategy. IS strategy can itself affect
and is affected by changes n a firm’s business and organizational strategies.

© 2020 John Wiley & Sons, Inc. 23