Tietojärjestelmien peruskurssiStrategic Information Systems &Business Process Reengineering

Malin Brännback

Strategic Information Systems

Management Information Systems (MIS) management strategy strategic management, strategic market management strategic planning

Decision support systems (DSS) decision-making

Executive Information systems (EIS)

SIS

What makes information systems strategic? How are strategic information systems

managed?

What????!?

Management strategy for IT Information technology in a global

environment Strategic Management Support Systems

There is universal confusion on how to define these terms - here is one attempt again to sort things out!

Management

Three possible views: an activity people who direct the organisation role-playing perspective

Activity-oriented

Management is the direction of the firm through the planning, organising, co-ordinating, and controlling of its human and material resources towards the achievement of pre-determined corporate objectives

added to this list comes motivates, develops people, communicates,

measures performance

Human-oriented view

Management is a body of executives collectively responsible for running and enterprise

Anthony (1965): strategic planning; defining the objectives of an

organisation; mission and vision management control; obtaining and deploying and

using the resources effectively operational control; assuring that the specific tasks

are carried out effectively and efficiently

The pyramid

Top

Middle

Bottom

Corporate

Business-unit

Line

Strategic

Tactical

Operational

The role-playing view

General roles adopted by management personnel when performing their work (Mintzberg):

figurehead, liaison, leader monitor, spokesman, disseminator entrepreneur, disturbance handler, resource

allocator, negotiator

Links between perspectives

Activity

Person

Role

Literature

Anthony, R. N.: Planning and Control Systems, a Framework for Analysis, 1965

Mintzberg, H.: The Nature of Managerial Work, 1973 Gorry, G. A., Scott Morton, M.: A Framework for

Management Information Systems, Sloan Management Review, Vol 13, No. 1, pp. 55-70, 1971

Management as: decision making and information handling

Simon (1960)– intelligence

– design

– choice

Long (1989)– set objectives

– identify constraints

– identify alternatives

– gather appropriate information

– choose the best alternative

Three views

Observe/monitor

Recognise problemIntelligence

Set Objectives Set objectives

Understand Problem Understand Problem

Determine Options Determine OptionsDesign

Evaluate Options Evaluate Options

Choice Choice Choice

Implement

Problem-solving Decision-making Simon’s model

Types of situations and associated situations and terminology (decision situations)

Simon, 1960 Gorry & Scott Keen & ScottMorton, 1971 Morton, 1978

Nonprogrammed Unstructured Unstructured

Semi-structured

Programmed Structured Structured

Issues influencing the d.m.

The policies of the company the time available the experience the environment in which the decision is

being made the influence of past and future decisions the difference between individuals

Management support system

A CBIS that supports management via support of decision-making and/or information handling activities

Simon’s model Passive decisionsupport

Active support

Intelligence reports on aspects ofbusiness

report on competitors

Interactive data-analysis concerningcurrent state

forecastingDesign report on an

alternative comparison/bench-

marking

What if/what’s best simulation of

expected outcome ranking and scoring

Choice information toconfirm and justifyselection ofalternative

result of analysis group negotiation

support

Strategic Information Systems

The transaction processing systems did not involve changing the nature of the business

Changes usually concerned the tool by which existing activities were undertaken

computerisation aimed at improving efficiency, thus reducing costs; savings could be quantified, often exaggerated and costs of staff often underestimated or ignored

Cost savings

The costs of a computer with a constant processing power of 4.5 millions of MIPS in three points; 1980, 1990, and 2000.

In 1980 this computer cost $4.5 million = annual salary of 210 employees

In 1990 the decrease was projected to $300 000 = annual salary of 6 workers; the actual cost was closer to $100 000, i.e. 2 workers

In 2000 the cost was estimated to $10 000 = the cost of a fraction of a worker - has been achieved already

The hunt for cost cut

Labour costs have been used as a justification argument for a transfer from existing systems to newer improved (?)

More recently an argument for cost reduction in managerial work, especially middle management

“How information changes the way you compete” (Porter & Millar, 1985)

– Labour costs the largest and easiest part to displace using IT

– Paper and postage costs and some logistics cost have been displaced by electronic data interchange (EDI) and e-mail

– Property costs

– Inventory costs; (JIT)

The efficiency of the cost savings is doubtful IT can be tool for obtaining competitive advantage

IT as basis for competitive advantage

Redefine the boundaries of particular businesses

convergence

Develop new products or services Change the relationships between suppliers

and customers Establish barriers to deter new entrants to

marketplace

IT as basis for competitive advantage

The basic objectives of these IS is to identify better ways of doing things leading to increased revenues greater functionality improved presentation or image improving the competitive positioning

Bargainingpower

of suppliers

A framework of competitive strategy (Porter, 1980)

Competi-torsSupplier

Substitutes

Potentialentrants

Customers

Threats of new entrants

Threat of substitutes

Bargainingpower

of customers

The strategic role of IT

Competitive force Potential of IT Mechanism

New entrants Barriers to entry erect or erode

Suppliers reduce bargainingpower

erode or share

Customers lock in switching costs orcustomer information

Substitute product Innovation New product or addvalue

Rivalry Change of relationship compete or collaborate

What drives competition?

Technology-driven IT-investments will result in business success

Competitor-driven copying competitors

Aligning business strategy and IT strategy

Approach: top-down or bottom-up or creative Techniques: CSFs, SWOT, 5 forces, audit grid People: senior managers, users/professionals,

technical business, line champions

Critical Success Factors

Factors critical to all organisations in the same industry Issues related to the particular organisation and to its

position in the industry environmental factors, such as legal, political, economic

and social aspects Activities within the firm that are proving to be short-term Monitoring and control procedures relating to the

operations of the firm Factors which take into account the changes in the

business environment

Examples

Cortal versus Crédit Commercial France in June 1992 Cortal employed 140 people, 24

working at the IT department, the bank was serving 80,000 customers up from 5,000 in 1985, to whom it offered 12 different products. Total managed deposits was FF11.3 billion in 1991, up from 0,3 in 1984

profile of a typical customer is 55 yrs, quite rich who has a deposit of roughly FF200,000

in 1992 it increased its customer base by 1,000 per week

Access methods

Client

Phone

Customeradvisor

IBMmainframe

ClientServer

Minitel

Credit Cortal

Success of Home Banking in France is because of Minitel Videotex-based access

IT impact on Cortal’s business Process IS influence on 4 customer-related factors: product,

distribution, price, communication

4 factors

Customised information was an integral part distribution was achieved through the IS prices were defined after analysing internal

and external information sets aquired and presented through the IS

communication with the client especially in the form of direct marketing was accomplished via the IS

Cortal’s top management concluded

The IS was strategic and of utmost important in

keeping in touch with customers and sustaining their contracts

using the database effectively, e.g. to target promising customers

analysing the results of direct marketing campaigns providing the flexibility needed to introduce new

products in a timely fashion