Managing and Using Information Systems:

A Strategic Approach – Sixth Edition

Keri Pearlson, Carol Saunders,

and Dennis Galletta

© Copyright 2016
John Wiley & Sons, Inc.
 Chapter 1
The Information
Systems Strategy
Triangle
 Kaiser Permanente (KP)
Opening Case
• What was KP’s business strategy in 2015?
• On what were bonuses to doctors based under the “fix me” system?
• What would the new idea be called instead of a “fix me” system?
• What is the new basis for end-of-year bonuses?
• What goal alignment has helped KP’s success?
• What IS components are part of this?
• Could only the IS components be changed to achieve their success?
• Could only the strategy be changed to achieve their success?

© 2016 John Wiley & Sons, Inc. 3

 The Information Systems Strategy Triangle
Business Strategy

Organizational Strategy Information Strategy

These need to be balanced.

© 2016 John Wiley & Sons, Inc. 4
 What is a “Strategy?”
• Coordinated set of actions to fulfill objectives, purposes, or goals
• It sets limits on what the organization seeks to accomplish
• Starts with a mission

Company Mission Statement

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

Amazon  We seek to be Earth’s most customer-centric company for three

primary customer sets: consumer customers, seller customers and
developer customers.
L.L. Bean  Sell good merchandise at a reasonable profit, treat your customers
like human beings and they will always come back for more.

© 2016 John Wiley & Sons, Inc. 5

Business Strategy
 What is a business
strategy?
• It is where a business seeks to go and how it expects to get
there
• It is not a business model, although it includes business
models as one component of a business strategy
• Business models include subscriptions, advertising, licenses,
etc.
• Business models do not include where the business seeks to
go, and only the revenue portion of how it expects to get
there

© 2016 John Wiley & Sons, Inc. 7

 Generic Strategies
Framework
• Michael Porter: How businesses can build a competitive
advantage
• Three primary strategies for achieving competitive advantage:
• Cost leadership – lowest-cost producer.
• Differentiation – product is unique.
• Focus – limited scope – can accomplish this via cost leadership or
differentiation within the segment

© 2016 John Wiley & Sons, Inc. 8

 Three Strategies for
Achieving Competitive
Advantage
 
Strategic Advantage
Uniqueness
Strategic Target

Perceived by Low Cost Position

Customer

Industry Wide Differentiation Cost Leadership

Particular
Segment Only Focus

© 2016 John Wiley & Sons, Inc. 9

Three Strategies for Achieving
Competitive Advantage
Examples
 
Strategic Advantage
Uniqueness
Strategic Target

Perceived by Low Cost Position

Customer

Industry Wide Differentiation Cost Leadership

Apple Wal-Mart
Particular
Segment Only Focus
Marriott Ritz Carlton

© 2016 John Wiley & Sons, Inc. 10

 Dynamic Strategies
• Beware of Hypercompetition
• Can lead to a “red ocean” environment
• Cutthroat competition – zero sum game
• Every advantage is eroded—becoming a cost.
• Sustaining an advantage can be a deadly distraction from creating
new ones.
• D’Avenis says: Goal of advantage should be disruption, not
sustainability
• Initiatives are achieved through series of small steps. Get new
advantage before old one erodes.
• Better to adopt a “blue ocean” strategy
• Change the industry; create new segments/products

© 2016 John Wiley & Sons, Inc. 11

 Creative Destruction
• GE’s Approach under Jack Welch
• Ask people to imagine how to destroy and grow your
business
• DYB: Imagine how competitors would want to destroy your
business.
• GYB: Counteract that by growing the business in some way
to:
• Reach new customers/markets
• Better serve existing customers

© 2016 John Wiley & Sons, Inc. 12

 Summary

Strategic Approach Key Idea Application to

Information Systems

Porter’s generic Firms achieve Understanding which

strategies competitive advantage strategy is chosen by a
through cost leadership, firm is critical to choosing
differentiation, or focus. IS to complement the
strategy.

Dynamic environment Speed, agility, and The speed of change is

strategies aggressive moves and too fast for manual
countermoves by a firm response making IS
create competitive critical to achieving
advantage. business goals.

© 2016 John Wiley & Sons, Inc. 13

Organizational
Strategy
 Organizational Strategy
• What is organizational strategy?
• Organizational design and
• Choices about work processes
• How do you manage organizational, control, and
cultural variables?
• Managerial Levers

© 2016 John Wiley & Sons, Inc. 15

Managerial Levers

© 2016 John Wiley & Sons, Inc. 16

Information Systems
Strategy
 IS Strategy
• What is an IS Strategy?
- The plan an organization uses in providing
information services.
• Four key IS infrastructure components

© 2016 John Wiley & Sons, Inc. 18

 Information systems strategy matrix.

  What Who Where

Hardware The physical devices System users and Physical location of
of the system managers devices (cloud,
datacenter, etc.)

Software The programs, System users and The hardware it

applications, and managers resides on and
utilities physical location of
that hardware

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

Data Bits of information Owners of data; data Where the

stored in the system administrators information resides

© 2016 John Wiley & Sons, Inc. 19

 Illustration in a Consulting Firm
What Who Where
Hardware Laptops, servers to Consultants have Laptops are mobile;
store info and back laptops, managed by servers are
up laptops the IS Dept. centralized

Software Office suite; Software is on Much resides on

collaboration tools consultants’ laptops laptops; some only
but managed resides on servers
centrally

Networking Internet; hard wired ISP offers service; Global access is

connections in Internal IS group needed; Nodes are
office; remote lines provides servers and managed by ISPs
from home, satellite, access
or client offices

Data Work done for Data owned by firm Resides on cloud

clients; personnel but made available to and copies “pulled”
data consultants as into laptops as
needed needed.

© 2016 John Wiley & Sons, Inc. 20

 One IS Strategy: Social
Strategy
• Collaboration
• Extend the reach of stakeholders to find and connect with
one-another
• Engagement
• Involve stakeholders in the business via blogs;
communities
• Innovation
• Identify, describe, prioritize new ideas

© 2016 John Wiley & Sons, Inc. 21

Managing and Using Information Systems:
A Strategic Approach – Sixth Edition

Keri Pearlson, Carol Saunders,

and Dennis Galletta

© Copyright 2016
John Wiley & Sons, Inc.