The Role of I.S.the University of California

Berkeley Extension

pmcdermott@msn.com

Copyright © 2008 Patrick McDermott

Porter’s Competitive Forces

IndustryCompetitors

Suppliers

Substitutes

Buyers

PotentialEntrants

Threatof substitute productsor services

Bargaining powerof suppliers

Bargaining powerof buyers

Threatof new entrants

Rivalry AmongExisting Firms

Edwards, Chris, John Ward & Andy Bytheway, The Essence of Information Systems, Second Edition, London: Prentice Hall (0-13-359308-8), 1995 (1991) , p. 58.

Can IT change the suppliers’ bargaining power?

Can IT build barriers to entry?

Can IT generate new products or services?

Can IT reduce buyers’ bargaining power?

Or keep ahead

Or keep satisfied Or keep happy

Or keep ahead

Can IT buildSwitching Costs?

Can IT changethe basis of Competition?

Emerging Competitive Strategy & IT Management

• Future strategy pivots on two competitive planes:• Competitive strategy– offensive and defensive– designed to operate within traditional and

clearly defined boundaries• Cooperative strategy– fluid, flexible, adaptable to changing markets, and

poised to take advantage of sudden market opportunities through partnering

• “IT professionals will asked to generate, transmit and interpret information to support both endeavors.” James Shaw, Ph.D.

University of San Francisco

Stag

es o

f Inn

ovati

onI. Build Knowledge• Get an Idea

II. Determine Feasibility• Prove it Works

III. Test Practicality• Develop & Test

IV. Prove Probability• Scale it Up

V. Commercialize• Launch

VI. Sustain Ongoing Improvement• Continued Improvement 改善

Transaction Cost & I.S.• Technology connects buyers and sellers across

geographies, time, and national borders. Search Costs

• Technology creates standard data structures that can be searched and consolidated over a growing network of computers.

Information Costs

• Much of the exchange of information can now take place virtually, and is standardized in databases for easy reuse in subsequent transactions.

Bargaining Costs

• Visibility to expanded virtual markets gives both buyers and sellers a truer picture of market conditions from minute to minute.

Decision Costs

• Transactions conducted with system-to-system data transfers create a more complete record of performance which can be captured & queried.

Policing Costs

• Electronic records can simplify the process of resolving disputes over what was agreed, what did or did not occur.

Enforcement Costs

45% of All Costs

A Sound Technology StrategyReinforces the business's competitive strategyEnhances the role of technology in the firm's

competitive positioningCovers both the short and long term Identifies major projects with goals and milestones Identifies necessary resources and is consistent

with the business's financial plan and budgetHas a method for measuring accomplishment Is well understood and communicatedHas the commitment of key people who must carry

it out

I.S.

Systems

Shared Values

Structure

Style

Staff

Skills

Strategy

7 S’s & I.S.

Systems

Shared Values

Structure

Style

Staff

Skills

Strategy

It’s Recursive:I.S. itself is organized

Exercise1. What is a strategic information system?2. What relationship does a strategic

information system have to Michael Porter’s competitive force model?

3. Which organization do you think has the best information technology and strategy and why?

4. Which organization do you think has the worst information technology and strategy and why?