Informational System Strategy and Business Goals and Strategy
Table of
Contents:
Executive
Summary:
Information
system is becoming an essential integrated part of organizations as a source of
competitive advantage in this innovative and changed world. Firms’ IS strategy
is designed to support their Business strategies and operations in order to
produce business solutions e.g. low cost, high quality or increase market share.
Effective IS strategy should be flexible and updated with the change in environment
and business strategies. To support decision making and business operations IS
strategies are designed at organizational, business and functional levels. Multiple
methodology frameworks where managers consider multiple influences framework to
develop IS strategy will lead to design better and appropriate IS strategy.
Beside these internal factors some external influences also drive IS strategy.
Introduction:
Today
information technology has become an essential need for organizations to
survive in a highly competitive environment. Firms use information system to
support their business processes and Decision making processes that leads to a
competitive advantage for them (O’Brien, 2006:59). Organization is a set of
people that work together to achieve a common goal with limited resources. Firms
develop its long run strategies to meet those goals after analyzing its internal
strengths and weaknesses and external opportunities and threats. Today
information technology has change the way of decision making processes and
decisions itself as firms can get real time data and communicate all over the
world easily. In conclusion we can say that information system affects the long
run strategies of firms that lead to achieve their organizational goal in an
efficient way. So firms’ information system strategy should be deployed
according to its long run strategies that lead to organizational performance.
Firms usually formulate their information system strategy
to acquire, deploy and support its information system that ultimately aim to
fulfill their business needs through partnership/collaboration and exploiting
new opportunities available in market to compete in a global perspective
(Porter & Miller, 1985). Scope of information system strategy is positively
correlated with the change in size and line of business e.g. large firms with
large information needs a wider information system. This paper tries to define
the firms’ information system strategies and the frameworks that illustrate
that how to plan these information system strategies.
Information System
Strategy (ISS):
Information
system strategy is a set of plans and actions to design an information system
that meet the requirement of your strategic goals and increase organizational
performance (Laudon & Laudon, 2006:123). IS strategy is also defined as the
plan that guide in providing information services (ISS Triangle, 2011). Strategic
information system changes the products & services, operations,
environmental relationships and goal of organizations into new ways to gain
competitive advantage. Strategic information system can be used at all
organizational strategic levels i.e. organizational level, Business Level and functional
level strategies. In fact IS strategy should develop at each strategic level
separately as each level needed different level of flow of information (Loudon
& Loudon, 2006:123). Business strategies are formulated to cater
competition (customers’ needs and competitors’ actions), positioning (way of
competition) and capabilities (ISS Triangle, 2011). An appropriate information
system strategy increases the required firm’s capabilities in term of reduce
cost, high quality or capturing high market share that help the company to
fulfill their customers’ needs and response to competitors.
RBV and ISS:
According
to resource based theory firms got competitive advantage when they have
resources with the following characteristics (Barney, 1993)
- Valuable
(add value to the firm)
- Rare
- Imitable
- No
substitute
Information
system brings these qualities in firms’ operations and helps Company to
differentiate its products and services with respect to its competitors (Wade
& Hulland, 2004). For example FedEx a courier service provider is known
from its quality service. They get this milestone by using information system
strategy. Information technology is divided into three assets i.e. Human Assets
(Skilled Personnel), Technological Assets (physical IT assets) and relationship
(Collaboration with other stockholders) that can be a source of sustainable
competitive advantage (Rose et al., 1996)
Generic Strategies and ISS:
Firms
can also gain competitive advantage through cost competitiveness where firms
produce at lower cost than its competitors and from differentiation strategy where
firms pose some distinguish quality than its competitors. Information system
strategy can play a very important role in this respect. Internet is the cheap
source of communication and managers can reduce their cost through internet as
many companies take online orders to reduce their ordering costs. Priceline.com
use internet in its operations and bring seller bidding online that reduce
their auction cost. On the other hand ISS also can be used for differentiation
as FedEx did in its operations and their customers can rightly track their
shipment online and Google.com provides unique services like google translator
or google map that differentiate it from other search engines.
Multiple Methodology Frameworks and ISS:
In developing information
system managers should consider multiple methodology frameworks instead of a
single one and should integrate that IS strategy with those frameworks.
Business Goals and IS strategy:
In
developing IS strategy business strategy play an important role and drive to IS
strategy. In developing IS strategy first of all managers should not give al
authority to IS personnel as it could be insufficient to fulfill business needs
(IS Triangle, 2011). Relationship of business strategy and IS strategy can be
explained through Information System Triangle.
Successful
businesses maintain balanced strategies between these three strategies and
business objective, strategies and tactics make decision about components and
application of information system. On the other hand information strategies
should be change if any change occurs in business strategy. Constant innovation
is the only source of leadership, if firms use information strategy to gain
strategic advantage.
Current Systems:
In
order to develop informational strategy firms should evaluate its current
system. Firms can do so by using surveys from its and through internal audit
reports. Here firms should critically define the deficiency areas that current
system lacks to fulfill. In this framework we use bottom-top relationship where
we identify the need first and then take appropriate actions. Business Process
Reengineering is a process to redesign the business processes radically that
leads to improvement in operations in the form of cost, quality, speed and
service. In doing so firms called cross-functional specialists from different
departments and the users of IS to find the exact need of IS. Because in many
cases IS of firms become failed as IS personnel didn’t find the exact need for
their operations.
IT opportunities:
New
technologies came and change the way of life continuously. Information
technology provides opportunities for the managers that change the way of
information system. It is also found that first mover got the advantage as the
time period of these new technologies are small. Many changing trends are
evidenced in Information System field during last 50 years. In 1950s IS was
just restricted to Data Processing systems in record keeping that converted to
management reporting systems to support decision making in 1970s. 1980s era
expanded the role of IS to strategic and end user support systems in designing
executive information systems, knowledge based proficient recommendations to
customers and strategic Information to gain competitive advantage (O’Brien
& Marakas, 2004:11). So new changing trends and opportunities to become
first mover from IS effect the IS strategies of a firm. Before exploiting IT
opportunities managers should know their requires need that whether they want
increase in productivity, profits or consumer surplus because research reveals
that IT increases productivity and consumer surplus but it doesn’t mean that it
will lead to very high profits (Hitt & Brynjolfsson, 1995).
Other Organizations:
Collaboration
with other firms like with suppliers to make strong its value chain can change
the information strategies in this respect. These collaborations can also allow
the firm to leverage IS resources i.e. people, hardware, software, databases
and network when firms can’t afford new requires IS. Firms are also
collaborating to form a portal where a customer can find all thing he needed at
one place. This led to small firms to operate in large market. For example in
2005 American West line and US Airways merged for a new collaborative firm that
could better control over cost and performance (Laudon & Laudon, 2006:81).
External Drivers to Information system
strategy:
External
Environmental variables strongly influence the firms’ IS strategies than
internal factors. In designing IS strategies these factors can play an
important role. These external drivers are also integrated to each other that
makes a complex relationship between these factors and firm’s IS strategy. Following
are nine external drivers that can influence IS strategy.
- Globalization
- Industrialization
to knowledge based economies
- Competition
- De-regulation
- Up to date
technologies
- Transformation of
the business enterprise
- Changed customers’
attitude
- Ethical and
Environmental issues
- Intellectual
Assets
Competitors:
According
to Porter’s five forces model firms have to construct strategies to cater five
forces of (1) rivalry of competition (2) threats of new entrants (3) threats of
substitute (4) bargaining power of customers and (5) suppliers’ bargaining
power. As this is a world globalization and firms are expanding their operation
that increases the extent of competition. Firms have to respond to these forces
in order to survive themselves. In order to differentiate himself companies has
to differentiate him self from its competitors. Firms make distinguish
themselves from their competitors by using information technology (Bakos & Treacy,
1986). They can do so in following five ways
Cost Leadership:
By
using information technology firms should become a low producer or they should
find the ways to reduce the costs from their suppliers in order to decrease
cost and to become cost leader to gain competitor advantage. Following cost
leadership strategies information technology can play important part as in the
case of DELL or E.BAY who decreases their costs by installing online order form
system and online auction system respectively (O’Brien. 2004:49).
Differentiation:
Differentiating
product or services through focus strategy can lead to a competitive advantage.
Use IT features to differentiate product and services or focus to specific
products or services at market niches or at least try to reduce the
differentiation effect from competitors. For example AVNET Marshall increases
their market share through developing customer/supplier E-Commerce system that
differentiate AVNET from its competitors or at least minimize the
differentiation effect from its competitors (O’Brien. 2004:49).
Innovation:
This
kind of strategy leads to enter into unique markets or entering into unique
market segments along with some unique product to gain competitive advantage
over competitors. For this purpose make changes in business processes to
improve quality and efficiency. Information technology plays an important role
for innovation and helps to bring uniqueness in business operations (Alter,
2002:49). For example Amazaon.com has developed a fully online customer service
system that makes whole the world in their range and make Amazon.com market
leader.
Growth Strategy:
In
this strategy firms expands their capacity of production and enters in global
market with related or unrelated diversification. For example Citicorp has
developed global intranet and Wal-Mart designs merchandise ordering system
through global satellite system.
Developing Alliances:
Firms
establish collaborations with its customers, suppliers, consultants and other
companies to make efficient operations. Create virtual organization by using IT
as Procter & Gamble and Wall-Mart has designed automatic inventory
replenishment system that order to their suppliers automatically and reduce the
ordering cost for the company (O’Brien, 2004:49).
Emergence of Global Economy:
In
order to succeed in global economy real time transmission information is very
important that will lead to respond to this changed world quickly. More
capabilities and availabilities of internal digital communication facilities
will increase the participation of economy towards globalization and its
benefits. As more firms enter in globalization through alliances there is more
chance that firms can get accurate and timely information. Information
technology becomes more attractive in capital intensive countries like U.S
where cost of labor is high and new technology might not be that mush important
for labor intensive countries like China India Pakistan
Transformation of Industrial Economies:
Today
Western economies are using knowledge based sources to produce goods and
services for their wealth creation. This transformation to knowledge based
economy augmented the importance of IS as these knowledge based products and
services are delivered digitally. This transformation also changes the source
of competitive advantage and intangible assets of knowledge and intellect
abilities act as the basic supplement to competitive advantage. On the other
hand communication is found the most important operation in this respect and
efficient marketing strategies are needed to find new customers. Small and
medium firms can also access world wide markets as communication over internet
is very cheap. Increased competition has increased innovation that leads to fade
and product life cycles are becoming shorter.
Emerging Technology:
New
technologies are emerging that leads to high quality with low cost that allow
firms to offer low prices to increase their market share. A common agreement
found among researchers that IT provides numerous opportunities for firms to
grow and to compete effectively (martin et
el., 1991). With today’s digital technology firms can better understand
their operations and the individuals’ behavior towards those processes.
Research reveals that firms do not use their information system up to that
potential and a common agreement found
that in many cases managers can utilize their information system more
efficiently. New technology makes it harder to decide whether to act as first
mover which is riskier as in many cases technology fails or to become a
follower. So there is a trade off between risk from new technology or loss of
competitive advantage in case of late deployment. Firms can also better control
their supply chain management through new technology as Wall-Mart did and build
an automatic merchandise system that inform its suppliers immediately when a
customer purchase that product. Though firms are using wireless mobile media to
make their operation efficient but this could lead to security issues that
firms should consider.
Changed customers’ nature:
Communication
media has increased the education level of their customers and customers are
better known to the choices they have. This changed attitude compels the firms
for competitive quality and prices. Customers respond and evaluate products and
services according to its cost, quality, responsiveness (Time to response),
reliability (average time of failure and compliances to order dates) and
conformance to standards and regulations (rate of complaints about
non-conformance) (Alter, 2002:273). On the other hand satisfied and
dissatisfied customers communicate their view over internet that can be
beneficial and harmful as well for a company. So firms have to perform well at
all otherwise they will throw out of business. Supplier-customer relation are
media based irrespective of personal but still customers respond positively and
it is found that 72 percent ideas came from customer side.
Environment & conservation Issues:
Ethical
and Environmental issues regarding firms operations are critical and firms
should protect themselves by communicating these values (O’Brien & Marakas,
2004:493). For example managers have to decide that should they monitor
personal records or mail of their employees or not. Privacy, Cyber Crime,
Working conditions and health are the potential ethical issues that firm faces
in real world.
Conclusion:
In
conclusion managers should develop an information system strategy that fulfills
their both strategic decisional and operational needs that ultimately leads to
competitive advantage. A multiple methodology framework should use in this
respect and not only the business goal but their current information system, IT
opportunities and collaboration with other organization should also consider in
developing IS strategy. Irrespective of these internal forces some external
drivers also influence and lead to IS strategy. Firms can use cost leadership
strategy, differentiating strategy, innovation, growth strategy or can develop
alliances to compete and position themselves as a market leader. Internet
provides a chance to go global to attract new customers from all over the
world. In western knowledge based economies firms should use their intellect
assets for competitive advantage by using appropriate marketing strategies.
Adopting new technology as first mover is riskier as emerging technology fails
many times but late adoption will loose the competitive advantage. Today firms
have to perform better to make happy their customers otherwise they will leave
as more options are available for them due to IT. At last managers should
consider ethical and environmental issues arises from IS strategy and their
potential consequences.
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