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THE STRATEGIC MANAGEMENT OF INFORMATION SYSTEMS AND
SUMMARY OF THE LECTURES
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,CHAPTER 1: THE EVOLVING ROLE OF INFORMATION SYSTEMS AND
TECHNOLOGY IN ORGANIZATIONS: A STRATEGIC PERSPECTIVE
1.1 INFORMATION SYSTEMS (IS), INFORMATION TECHNOLOGY(IT) AND
‘DIGITAL’
The ubiquity of mobile devices and the internet open up all kinds of new products and
services, operational efficiencies and new types of businesses and business models but are
also raising customer demands and expectations for immediacy of access and speed of
response.
One of the most important aspects of strategic management is learning from the past –
mistakes and successes.
A clear understanding and differentiation of the terms Information Systems (IS) and
Information Technology (IT) is necessary to develop successful IS/IT strategies.
• IT: technology of all kinds: hardware, software, telecommunications, computers, sensors, phones
IT facilitates the acquisition and collection, processing, storing, delivery, sharing and presentation of
information.
• IS: the means by which people and organizations, increasingly utilizing technology, gather, process,
store, use and disseminate information.
Technology investments are often made without understanding or identifying the business
benefits that could or should result from improving the performance of activities by using IT,
because the Technology obscures the business information system that the technology is
indented to support or enable.
Difference between an application and an app:
• Application: refers to software (maybe combined with hardware), used to address or enable a business
or personal activity. It may handle a wide variety of functions.
• App: designed for a single purpose, i.e., it has one piece of functionality. Can usually perform things
that a web browser also could.
Digital: in building a digital strategy it is imperative to understand how information and systems (IS) will be
leveraged and used as well as the underpinning technological (IT) capabilities that will be required.
1.2 DIGITAL DISRUPTION: THE IMPACT OF IS/IT
Changes (disruptions) to organizations and the economy due to the internet:
• Before the commercialization of the internet, transaction costs (i.e., acquiring information) were very
high and defined a company’s success. Since this commercialization of the internet, all these
transaction costs have dropped massively as technology made it easier to search for information and
transact with workers, suppliers and customers – what has ben referred to as a frictionless economy.
Because of this, companies are also more able to focus more on their core competencies.
• Due to commercialization of the internet, distinctions between physical and online retailing/stores
are disappearing.
• New business models that are being shaped by the capabilities of new technologies are also disrupting
industries; in particular, harnessing information to deliver new value propositions to customers.
There are a number of fundamental pillars that characterize digital disruption. Those who
build the IT/IS strategy must be aware of these:
1. From marketplace to marketspace: more and more is sold online instead of physically at a store,
which massively decreases transaction costs.
2. Blurring of physical/digital divide: with digital tools, even physical problems can be solved
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, 3. Move from push to pull economy: by gathering data, organizations can predict what the consumer
wants or needs and can offer it directly
4. Development of open standards: customer lock-in and network effects
1.3 A THREE-ERA MODEL OF EVOLVING IT APPLICATION IN ORGANIZATIONS
The evolution of the role of information systems and technology in organizations can be described as
encompassing three eras:
1. Data Processing (DP) era: to improve operational efficiency by automating information flows and
processes
2. Management Information Systems (MIS): to increase management effectiveness by satisfying their
information requirements for decision making
3. Strategic Information Systems (SIS): to improve competitiveness by changing the nature or conduct
of business
The DP and MIS eras provided valuable lessons – in particular, regarding how to plan, develop and manage new
applications and the associated projects and for supporting infrastructure, specialist skills and managerial
competences needed. The SIS era offered bigger prizes and, reciprocally, greater risks. As businesses became
critically dependent on their investments in both IS applications and IT infrastructure, not just for success but, in
many cases, for their very survival, IS/IT planning also became strategic for many organizations.
1.4 A CLASSIFICATION OF THE STRATEGIC USES OF IS/IT
Venkatraman: how the strategic benefits from IT resulted from increasing the extent of
business change (and risk). He describes 4 types of revolutionary uses of IT, which require
considerable transformation in terms of what the organization does or how it does it:
1. Business process redesign: using IS/IT to realign business activities and their relationships to achieve
performance breakthroughs
2. Business network redesign: changing the way information is used by the organization and its trading
partners, thereby changing how the industry overall carries out the value-adding processes
3. Business scope redefinition: extending the market or creating new products, based on information, or
changing the role of the organization in the industry such as with the introduction of a new information-
enabled business model
4 types of strategic IS/IT applications:
• Linking to customers, business partners and suppliers: strategic IS/IT applications that share
information via technology-based systems with customers/consumers and/or suppliers and change the
nature of the relationship
o Second-economy: technology today enables organizations to connect cheaply and easily with
customers, business partners and suppliers almost anywhere in the world.
• Improved integration of internal processes: strategic IS/IT applications that produce more effective
integration of the use of information in the organization’s value-adding processes
• Information-based products and services: strategic IS/IT applications that enable organizations to
create, develop, produce, market and deliver new or enhanced products or services or new value
propositions based on information
• Augmenting human cognitive processes to support strategic decision making: strategic IS/IT
applications that augment people’s cognitive processes in generating knowledge and insight from
information; they provide executives, management and professionals with the information to support
the development, implementation and evaluation of strategies
1.5 SUCCESS FACTORS IN STRATEGIC INFORMATION SYSTEMS
Key factors that seem to recur frequently and underpin success with strategic information
systems:
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, 1. External, not internal, focus: looking at customers, competitors, suppliers, even other industries and
what is happening in the outside world – both business and social
2. Adding value, not cost reduction: although cost reductions may increase due to business expansion at
reduced marginal costs, ‘doing it better, not cheaper’ seems to be the motto.
3. Sharing the benefits: within the organization, with suppliers, customers, consumers and even
competitors.
4. Understanding customers and what they do with the product or service: how they obtain value from it,
and the problems they may encounter in gaining that value.
5. Business-driven innovation, not technology-driven: the pressures of the marketplace drove
developments in most cases.
6. Incremental development, not the total application vision turned into reality
7. Using the information gained from the systems to develop the business
8. Monetizing information
1.6 A PORTFOLIO MANAGEMENT PERSPECTIVE ON IS/IT INVESTMENTS
The application portfolio: understanding and classifying IS/IT investments to get an overview
of the current or future systems in the organization, and to be able to make decisions about
IS/IT investments.
This model proposes an analysis of all existing, planned and potential applications into one of
the four categories, defined as strategic, high potential, key operational, and support,
depending on each application’s current or expected contribution to business performance and
the organization’s future strategy.
• Strategic applications and investments: critical for future
business success; they create or enable changes in how the
organization conducts its business
• High potential is (risk) investments in innovative applications
of IS/IT which may create opportunities to gain future
advantage but are as yet unproven in terms of either the
benefits they produce or the capabilities and performance of
the technology, or both.
• Key operational applications and investments sustain the
existing business operations, helping to avoid any
disadvantage. These are often referred to as the organization’s
‘core’ systems, such that any unavailability or failure of key
operational applications will have a serious negative impact on business performance.
• Support applications and investments reduce costs by increasing business efficiency or improve
management effectiveness, but do not sustain the business or provide any competitive advantage.
Unavailability does not have immediate negative effects.
1.7 WHAT IS AN IS/IT OR DIGITAL STRATEGY?
1.8 FROM STRATEGIC ALIGNMENT TO STRATEGY CO-EVOLUTION
1.9 DIGITAL STRATEGIES FOR THE 21 S T CENTURY: BUILDING A DYNAMIC
CAPABILITY TO LEVERAGE IS/IT
Irrelevant?
CHAPTER 2: AN OVERVIEW OF STRATEGIC MANAGEMENT AND THE IS/IT
STRATEGY IMPLICATIONS
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