Transcript Olayele Adelakun (Ph.D)

IS577
IS Strategy and Policy
Olayele Adelakun (Ph.D)
Associate Professor CTI
Office: Room 735 CTI 7th Floor
Phone: 312-362-8231
Fax: 312-362-6116
Email : [email protected]
Web: http://facweb.cs.depaul.edu/yele
Group Assignment 2
 Conducting an Industry Analysis
 See examples
 Deliverables
 Presentation due class 9
 Written analysis 5 pages max.
 Recommendations
 Conclusion
Question
Agenda
 Strategy Summary
Information Technology
Management Challenges
 IT or ICT has always been a source of
opportunity and uncertainty, advantage and
risk.
 Business executives view
 Province of technocrats,
 something with little relevance to real-world business
problems.
 Technology executives View
 Thinks business executives are shortsighted, lacking
the vision to exploit all that IT has to offer
Information Technology
Challenges
The Rapid Evolution of IS/IT
 Hardware constrains
 Software constrains
 Knowledge constrains
 Problem of the 50
 IT directors’ constrains.
Information Technology Challenges
 Integrating Changing Technology Platforms
Administrative
Framework
Primary
Target
Era I
Regulated
Monopoly
Organization
Era II
Free
Market
Era III
Collaborative
Justification/
Purpose
Application
Challenges
Productivity/
Efficiency
?
?
Individual
Individual/Group
Efficiency
?
?
Enterprise and
Industry Integration
Value
Creation
?
?
Market structure and Industry
Dynamics
 The old industry value chain
 Sequential
 Functionally organized and transitional in nature
 Vertical organization structures within
organization boundaries
 The new industry value chain




Process based
Integrating the enterprise activities
Boundaries are becoming fluid
Partnership and the rise of virtually integrated
industry
Evolving business Models
 The emerging networked business
models that are revolutionizing
business and society are different
from the Industrial business models
that defined how companies conduct
business throughout most of the
1990s.
IT Impact
 The goal for technology use
influences Its development, operating
and management
 Impact on core operations
 Impact on core strategy
 Impact
 Support, Factory, Turnaround, Strategic
Categories of Strategic Relevance and Impact
A contingency appropriate to IT management.
High
Factory
Strategic Impact of
existing IT system
IT are important but they
are not fundamental to the
firms ability to compete.
Support
Strategic Impact of IT
on operations and future
strategy is low.
Low
Low
Strategic
Totally depending on it
Turnaround
Not absolutely depending on
totally uninterrupted,
fast response-time.
High
Strategic Impact of IT applications under development
Categories of Strategic Relevance and Impact
A contingency appropriate to IT management.
High
IT Impact on
core operations
Strategic
Factory
Goal: Improve performance of
core processes
Leadership: Business unit
executives
Goal: Transform the
organization or industry
Leadership: Senior executives or
board
Support
Goal: Improve local performance
Leadership: Local level
oversight
Low
Low
Turnaround
Goal: Identify and launch new
Ventures
Leadership: Venture incubation
unit
High
IT Impact on core strategy
Prioritizing IT Investment
 Is IT as a budgeted expense to be
justified on a project-by-project
basis?
 Is IT an investment that must deliver
benefits today and in the future.
 Inside the organization
 Outside the organization
Prioritizing IT Investment:
Aggregate Project Plan
R&D
Projects
Extensive
Process
change
Minor
Process
change
Extensive
Process
change
Breakthrough
projects
Platform Projects
Minor
Process
change
Derivative
projects
Buy Vs. Make
 If I can buy a word-processing package
why can’t I buy an order fulfillment
package
 Do I need to keep all these IT assets on my
book? Or
 Can I outsource my data centers, helpdesk, PC
support etc.
 Can I replace my off-the-shelf applications with
subscriptions to IT services run by network and
hosting services and ASPs?
Make or buy decision
Decision Criteria
Business strategy
Core competence
Information/ process
security and
confidentiality
Availability of suitable
partners
Availability of packaged
software or solutions
Cost/benefit analysis
Time frame for
implementation
Evolution and
complexity of the
technology
Ease of implementation
Pressure to “Make/Own”
IT application or infrastructure
provides proprietary
competitive advantage
Pressure to “Buy”
IT application or infrastructure
supports strategy or operations,
but is not considered strategic in
its own right
Assimilation and Organizational
Learning
 Successful implementation of new
technology often requires that users
learn new ways of doing things.
Assimilating Emerging
Technologies
 Phase I: Technology Identification and Investment
 Identifying of technology of potential opportunity to the
company and funding a pilot project.
 Top down vs. bottom up ISP.
 IS Planning: Impact / Align
 to align MIS objectives with the organizational goals,
 The other approach is to impact the organizational strategy. That is
searching for strategic applications with a high impact and the
ability to create an advantage over competitors.
 Phase II: Technological Learning and Adaptation
 The objective here is to encourage user-oriented
experimentation with the newly identified technology.
 Through a series of user defined pilot project
 To create awareness of the new technology
 The length of phase II depends on type of technology, the characteristics
of users, the nature of users’ tasks, and the organizational context.
Assimilating Emerging
Technologies
 Phase III: Rationalization/Management Control
 At this stage it is reasonably well understood by IT personnel and
users
 The basic challenge is to develop appropriate systems and control
to ensure that the technologies are utilized efficiently as the
diffuse throughout the organization
 Ensure that application are developed economically and can be
maintained over a long period of time
 Failure to maintain these standards can be extraordinarily
expensive
 Phase IV: Maturity/Widespread Technology Transfer
 Required skill are developed, users are aware of IT benefits and
management control are in place.
 Careful vigilance is required to ensure that out-of-date
technologies and applications are not extended beyond their
useful life
Partnership among key
Constituencies as IT evolves
 Much of the complexity of managing IT
arises from the conflicting pressures of
dealing with four different vitally concerned
stakeholder groups:




Business executives
IT executives
IT users
IT Vendors, Partners and competitors
Protecting IT Assets and Managing
Risks
 Reliable, secure IT infrastructure
 Integrating IT into core business
processes introduces a host of new
and challenging issues
 IT vs. electricity
Discussion
 How important is IT to the success of your industry / organization
 Is the firm being affected competitively either by failing to implement required
IT applications or by faulty implementation of strategic application
 If the firm missing opportunities that, if properly executed, would give it a
competitive edge or, more pessimistically, enable it to survive.
 Is the firm targeting its IT application development efforts effectively?
 Targeting the right systems and spending appropriate amount of dollar
 Is the IT asset of a firm being managed efficiently?
 Is the firm’s IT activity sufficiently insulated against the risks of a major
operational disaster?
 Are IT and business leaders capable of dealing with the IT-related
management challenges?
 Are IT resources appropriately placed in the firm?
Crafting the Network Economy
Business Model

Some of the best innovations involve a paradigm shift, a real
mental change of assumptions and certainties. In fact, the
process of innovating and entrepreneuring is much less about
invention or new ideas. It’s much more about rethinking and
questioning the assumptions people already make… The ability
to rethink fundamental assumptions and take what people
accept as certain and question it [is the central] talent of being
an entrepreneur.


Scott Cook, Founder of Intuit Inc.
If there is one lesson we can learn from continuing evolution of
work and competition in the new economy, it’s this … Change
the question and you change the game…

Slywotsky and Morrison, Profit patterns (NY Times Business,
1999)
Crafting the Network Economy
Business Model
 Old economy question
 What business am I in?
 New network economy question
 What is my business model?
 Emerging networked technology enable us to
create new business model and redefine
existing ones.
 IT can provide flexible channel for procuring and
distributing products and services
 As well as the tools to create and package content in
all its many forms
 Data, voice, video
Crafting the Network Economy
Business Model
Concept
describes the
opportunity and
strategy
Value
Measures the
benefits to
investors and
other
stakeholders
Capabilities
define resources
needed to
execute strategy
Crafting the Network Economy
Business Model
Classifying the Business Models
Focused Distributor Business Models
Models and
Examples
Own
Inventory
Sell
Online
Price
set
Online
Physical
product
or service
Likely
Revenues
Likely costs
Retailer
ToysRus.com
Staples.com
Yes
Yes
No
Yes
Product/service
sales
Advertising and marketing;
physical facilities; inventory
and customer services;
R&D; IT infrastructure
Marketplace
Eloan.com
nsweb.com
Possible
Yes
No
No
Transaction fees;
service fees;
commissions
Advertising and marketing;
R&D; IT infrastructure
Aggregator
Internet
Securities
No
No
No
Possibly
Referral fees;
advertising and
marketing fees
Advertising and marketing;
R&D; IT infrastructure
Exchange
ebay.com
freemarket.com
Possibly
Possibly
Yes
Possibly
Depends on
model
Advertising and marketing;
staff support for auctions
(especially B2B)R&D; IT
infrastructure; inventory
control; R&D; technical
infrastructure.
Portal Business Models
Models and
Examples
Gateway
Access
Deep
Content
and
Solutions
Affinity
Group
Focus
Likely
Revenues
Likely costs
Horizontal Portal
AOL.com
Yahoo.com
Quicken.com
Small business
Yes
Possibly;
often
through
partnership
with vertical
and affinity
portals
Possibly;
often
partnersh
ips
Advertising,
affiliations and
slotting fees;
possibly
subscription or
access fees
Advertising, marketing and
sales; content/information asset
management; R&D; IT
infrastructure
Vertical Portal
WebMD.com
Covisint.com
Limited
Yes
No
Transaction
fees;
commissions;
advertising,
affiliation and
slotting fees
Advertising, marketing and
sales; content/information asset
management; R&D; IT
infrastructure; legacy system
integration to support
transactions
Affinity Portals
Realtor.com
iVillage.com
Possibly
Focused on
affinity
group
Yes
Referral fees;
advertising and
slotting fees
Advertising, marketing and
sales; content/information asset
management; R&D; IT
infrastructure
Evolving Business Models
 Network Businesses
 Are built by artfully combining a variety of business
models.
 By incorporating multiple business models that
generate revenue streams from the same
infrastructure, a network of businesses can
 more efficiently use resources
 More effectively meet customer needs for integrated
solutions,
 and drive additional value from the same level of
investment
 When the network of businesses inside a firm is linked
with a business network composed of a much larger
network of businesses, an organization can leverage
the resources of the community to further enhance the
value delivered to all the members
Evolving Business Models
 The four approaches to evolving a
business model serve as a road map
for evolving networked businesses.




Enhance
Expand
Extend
Exit
Approaches to Business Model Evolution
Extend
Enhance
EnterExtend
into a new line of
Enhance
Enhance
Extend
Add functionality
oror features
to
Add functionality
features to current
product/service
offerings
or
improve
current product/services offering
performance of existing business
or improve performance of existing
business
Enter new line of business and/or add new
business
and/or add new
business models
business model
Expand
Exit a business orExit
market
Exit a business or market or drop a
or drop a product/service
product/service offering
offering
Exit
Exit
Expand
Expand
new product/service
product/service offerings
AddAdd
new
or enter new geographic markets
offering or enter new
geographic market
Evolving Amazon.com:
Product/Service Enhancements
Evolving Amazon.com:
Category and Geographic Expansion
Expand
Evolving Amazon.com:
Business Model Extension
Extend
Evolving Amazon.com:
An Integrated View
Extend
Enhance
Expand
Exit
Evolving Network Economy
Business Models
 It is just an incredible time to be in business and have the
rules of business changing… For many years we operated
under a pretty consistent set of rules. They evolved may
be… but now they’re morphing and that presents a
situation that challenges entrepreneurs to figure out: Are
these rules real, or are they temporary? Should we
respond to them? Do we create new rules? How do we
run a company in a world like this when we have 13,000
employees trying to figure out where we are going and
what we should do?
 David Pottruck, President and co-CEO of Charles Schwab
1999.
 We are searching for new business models that enables a
company to achieve the efficiency, power, resources, and
reach of being big and the speed, agility, and
responsiveness that come from being small.
Evolving Network Economy
Business Models

The following questions can be used by executives to
evaluate current and evolving business models
1.
What business model/models is your organization using
today?
2.
Does your business infrastructure enable you to evolve your
business model to increase revenue generated per customer
and to respond quickly to opportunity and threats
3.
Do you have the capabilities and resources that you need
today and in the future? How will you build capabilities and
acquire resources to reduce gaps?
4.
Are you delivering benefits to all stakeholders? Can you
demonstrate and communicate those benefits in ways that are
objective and easy to evaluate and measure?
New Networked Economy




Continuous business redesign
Partnership
Technology
Strategy