C3 Information Systems, Organizations,
and Strategy
IS and the Organization
• Influences each other
• A organization is a stable, formal social structure
that takes resources from the environment and
processes them to produce outputs
• Organizations need to be aware of influences of IS to
benefit from new technologies
• Many factors: organization's structure, standard
operating procedures, politics, culture etc.
IT often change Organizations
• change organizational balance of rights,
responsibilities established over long period of
time
• Key elements:
– who owns information
– who has access to and can update information
– = who makes decisions about whom, what, when and
how
Structural characteristics
• Clear division of labour
• Hierarchy
• Explicit rules and
procedures
Features
– Routines and business
processes
– Organizational politics
– Organizational culture
– Organizational
environments
– Organizational structure
– Other organizational
features
Additional Features of
Organizations - I
• Routines and business processes = standard
operating procedures: precise rules to cope with
all expected situations; BPs as collections of
routines
• in this course: examine business processes to
understand how they might be changed or
replaced by using IT to achieve greater
efficiency
Additional Features of
Organizations - II
• Organizational politics = political struggle for
resources
• IT investments bring about significant changes =
politically charged events
• managers need to know how to work with the
politics
Additional Features of
Organizations - III
• Organizational culture = set of fundamental
assumptions about what products organization
should produce
• if IT change threatens commonly held cultural
assumptions --> resistance
Unique Features of
Organizations
• Different organizational types: eg. large, small
firms
• Environments: be sensitive to and can influence
= government, competitors, customers, financial
institutions
• IT helps organizations to act on environment
• new technology puts strains on culture, politics
and people
Figure 3-5
3-11
IS Impact
• Economic impacts
• Organizational and behavioral impacts
– IT flattens organizations
– Postindustrial organizations
– Understanding organizational resistance to change
• The Internet and organizations
• Implications for the design and understanding of
information systems
3-11
How IS Affects Organizations
• Economic impacts
• IT can help lower transaction costs e.g.
computer links to external suppliers
• agency theory: those who are employed by
manager require supervision
• can reduce agency costs with IT: e.g. lower cost
of acquiring information
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Figure 3-7 Agency Costs
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Flattening Organizations
Information systems can
reduce the number of levels in
an organization by providing
managers with information to
supervise larger numbers of
workers and by giving lowerlevel employees more decisionmaking authority.
Figure 3-8
3-15
3-16
• The Internet
– important impact on relation between firms and
external entities and on the organization of business
processes, inside a firm
• Prior to the Internet
– business decisions had limited, delayed or inaccurate
knowledge of customers, delivery etc.
– large warehouses of information used
Planning for an IS- Factors
• Organizational environment
• Organizational structure: hierarchy,
specialization, routines, and business processes
• Organizational culture and politics
• The type of organization and its style of
leadership
• Groups affected by the system and the attitudes
of workers who will be using the system
• The kinds of tasks, decisions, and business
processes that the IS is designed to assist
Characteristics of IT
Keep in mind when designing systems:
• They are flexible and provide many options for
handling data and evaluating information
• They are capable of supporting a variety of
management styles, skills, and knowledge
• They are sensitive to the organization’s
bureaucratic and political requirements
IS for Competitive Advantage
Porter’s
Competitive
Forces
Model
Traditional competitors
New market entrants
Substitute products and services
Customers
Suppliers
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Using Information Systems to Achieve Competitive Advantage
Porter’s Competitive Forces Model
In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not only by
competition with its traditional direct competitors but also by four forces in the industry’s environment: new market
entrants, substitute products, customers, and suppliers.
Figure 3-10
3-18
IS strategies- dealing with
competitive forces
•
•
•
•
Low-cost leadership
Product differentiation
Focus on market niche
Strengthen customer and supplier intimacy
Competitive Advantage
is gained when organizations provide more value to customers or same
value at lower price
The Internet’s impact on competitive
advantage
3-22
Value Chain Model - II
• Primary activities
– products and services, value for customers
• Secondary activities
– infrastructure: administration, human resources, etc.
• Competitive Forces Model
• firm faces external threats
Competitive advantage can be achieved through IT including the Internet
Using Information Systems to Achieve Competitive Advantage
Figure 3-11 Value Chain Model
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The Value Chain
• Specific activities in the business where
competitive strategies can best be applied
– Primary activities: sales and marketing, production
– Support activities: administration, decision making
about IT, HR
• How can we use information systems to
– Improve efficiency, cost
– Improve relations with those outside the firm:
customers, suppliers, etc.
Extending the value chain:
The value web
The Value Web
The value web is a networked system
that can synchronize the value chains of
business partners within an industry to
respond rapidly to changes in supply
and demand.
Figure 3-13
3-25
• Synergies, core competencies, and networkbased strategies
• Synergies
• Enhancing core competencies
Network-based strategies
• network economics
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INFORMATION SYSTEMS
AND BUSINESS STRATEGY
• Thinking about strategy takes place at three
different levels:
• Business: a single firm producing a set of related
products and services
• Firm: a collection of businesses that make up a
single, multidivisional firm
• Industry: a collection of firms that make up an
industrial environment or ecosystem
•
•
•
•
•
Firm Level Strategy
firm as collection of businesses
IT to improve each business unit
synergies
core competencies
• Industry Level Strategy
• firms together --> industry
• information partnerships: eg Air Canada, CIBC
(Aeroplan)