Strategic Frameworks for Project Justification

PSC 5170

Organization Goals

Business Vision Mission Objective Tactic

= Business Justification

IS Vision Mission Objective Tactic

= Project Contribution

Roles Sponsor: funds and champions the

project in the organization Client: reviews the project

milestones and decision points from the business point of vies

User: works with the system on a regular basis

Strategic Information Systems IS that help gain strategic advantage Significantly change manner in which

business supported by the system is done

Outwardly aimed at direct competition

Inwardly focus on enhancing the competitive position

Create strategic alliances

Value Chain Model Chain of basic activities

that add to firm’s products or services

Primary activities Secondary activities

Value Chain

Value Chain Primary Activities Inbound Outbound Operations Marketing and Sales After-Sale Services

Value Chain Support Activities Technology development Procurement Human Resources Management Management Control

accounting/finance coordination general management central planning

Porter’s Competitive Forces Model

The threat of entry of new competitors The bargaining power of suppliers The bargaining power of customers (buyers) The threat of substitute products or services The rivalry among existing firms in the industry

The model recognizes five major forces that could endanger a company’s position in a given industry.

External Competitive External Competitive ForcesForces

Competitive Forces Threat of entry of new

competition Bargaining power of

suppliers Bargaining power of buyers Threat of substitute products

or services Rivalry among existing firms

Strategies for Competitive Forces

Note - strength of force is determined by factors in industry

Gain a competitive edge Build defenses against forces Formulate actions to

influence forces

Three Generic Strategies Cost leadership (lowest

cost in industry) Differentiation (of

products/services/quality) Focus (finding a specialized

niche)

Be Low Cost Producer - IT strategic if it can: Help reduce production costs &

clerical work Reduce inventory, accounts

receivable, etc. Use facilities and materials

better Offer interorganizational

efficiencies

Produce Unique Product - IT strategic if it can: Offer significant component of

product Offer key aspect of value chain Permit product customization

to meet customer’s unique needs

Provide higher/unique level of customer service/satisfaction

Fill Market Niche - IT strategic if it can: Permit identification of

special needs of unique target market

Spot and respond to unusual trends

Strategic Questions Can IT create barriers to

entry? (new entrants) Can IT build in switching

costs? (buyers) Can IT strengthen customer

relationships? (buyers)

Strategic Questions (cont)

Can IT change the balance of power in supplier relationships? (suppliers)

Can IT change the basis of competition? (competitors)

Can IT generate new products?(competitors, substitutes)

Risks of IS Success

Change the Basis of Competition Lower Entry Barriers Promote Litigation or

Regulation Awake Sleeping Giant Reflect Bad Timing Are Too Advanced

Transformational Information Systems Radical changes in an

organization’s business processes

Radical changes in an organization’s structure

Radical changes in an industry’s value streams

Business Process Reengineering (BPR)

Completely changes manner in which business is done

Fewer steps, shorter cycle times Complete, more expert handling

of events Not incremental improvement Typically uses IT as an enabler Involves discontinuous thinking

Characteristics of BPR Combining jobs Empowering employees Jobs done simultaneously Customizing product/service Work performed where most

logical Single point of customer

contact

Transformational Information Systems

Radical changes in an organization’s structure reduce layers of management empower front-line workers loosely couple work units

Radical changes in an industry’s value streams disintermediation creating new markets