1 EMBA 226 College of Business Administration California State University, Sacramento Week 1 Friday,...

1EMBA 226 • College of Business Administration • California State University, Sacramento

Week 1Week 1Friday, July 21Friday, July 21

• IntroductionIntroduction• Strategic grid, business modelStrategic grid, business model

• Opportunities and Threats: Porter’s Five Forces ModelOpportunities and Threats: Porter’s Five Forces Model• Strategy and strategic planningStrategy and strategic planning

• IT Doesn’t Matter ArticleIT Doesn’t Matter Article


What This Class is About…What This Class is About…

• Information technology (IT) has become a major driving Information technology (IT) has become a major driving force of today’s businesses. As an enabler (facilitator) and force of today’s businesses. As an enabler (facilitator) and integrator, IT has opened many strategic opportunities and integrator, IT has opened many strategic opportunities and provided the means to seize competitive advantages in provided the means to seize competitive advantages in marketplaces. The topics covered throughout this course marketplaces. The topics covered throughout this course will emphasize IT’s prominent role in business strategy. will emphasize IT’s prominent role in business strategy.


IntroductionsIntroductions

• What is your view on IT in business?What is your view on IT in business?


Which is the Most Versatile Hand Tool?Which is the Most Versatile Hand Tool?

ViseVise

HammerHammer

PliersPliers

SawSaw

Pipe wrenchPipe wrench

Flat bladed screwdriverFlat bladed screwdriver

Bubble levelBubble level

Tape measureTape measure


Flat Bladed ScrewdriverFlat Bladed Screwdriver

• ScrewScrew• HammerHammer• ChiselChisel• Pry barPry bar• Punch holes Punch holes • Set nailsSet nails• Stir liquidsStir liquids• Putty knifePutty knife• Score and cutScore and cut• And the list goes on…And the list goes on…


IT is Similar to a Flat Bladed ScrewdriverIT is Similar to a Flat Bladed Screwdriver

• IT provides the means for businesses to do something better!IT provides the means for businesses to do something better!– Leverages other resourcesLeverages other resources– Enables and enhances business processes – Enables and enhances business processes – Facilitates Facilitates

efficiency and effectivenessefficiency and effectiveness– Seizes competitive advantagesSeizes competitive advantages– Levels the playing field – Levels the playing field – Small businesses can look and Small businesses can look and

behave like big businessesbehave like big businesses– Extends the business beyond its boundaries – Extends the business beyond its boundaries – Strategic Strategic

alliances, strategic outsourcing, supply chain managementalliances, strategic outsourcing, supply chain management– And the list goes on…And the list goes on…


What You Should Take Away from This ClassWhat You Should Take Away from This Class

1.1. Place IT solutions in the strategic grid – Match the Place IT solutions in the strategic grid – Match the solution to the businesssolution to the business

2.2. Businesses do not adopt technology for technology’s sakeBusinesses do not adopt technology for technology’s sake

3.3. Focus on the business and not the technologyFocus on the business and not the technology

4.4. IT leverages other resources and processesIT leverages other resources and processes

5.5. IT introduces organizational changeIT introduces organizational change

6.6. IT integrates the enterpriseIT integrates the enterprise

7.7. Knowledge is an organizational resourceKnowledge is an organizational resource


IT Leverages Other ResourcesIT Leverages Other Resources

CRM CRM leverages leverages Relationship Relationship MarketingMarketing


IT Leverages Other ResourcesIT Leverages Other Resources

Business IntelligenceBusiness Intelligence


IT, the Great IntegratorIT, the Great Integrator

Enables and enhances business processEnables and enhances business process


IT Allows a Business to Seize Competitive IT Allows a Business to Seize Competitive AdvantagesAdvantages

Price CompetitionPrice Competition



ConvenienceConvenience



CustomizationCustomization


Which of these Which of these businesses is larger?businesses is larger?

IT the Great Equalizer: IT the Great Equalizer: IT Evens the Playing FieldIT Evens the Playing Field


Extends the Business Beyond Its Extends the Business Beyond Its BoundariesBoundaries

Horizontal integrationHorizontal integration


Extends the Business Beyond Its Extends the Business Beyond Its BoundariesBoundaries

Vertical integrationVertical integration


Supply Chain ManagementSupply Chain ManagementInter-Organizational ITInter-Organizational IT

• Coordinating suppliersCoordinating suppliers– From EDI (electronic data interchange) to the InternetFrom EDI (electronic data interchange) to the Internet

• Establishing close and tight relationshipsEstablishing close and tight relationships– Loose integration – ad hoc and occasionalLoose integration – ad hoc and occasional

– Close integration – formal exchange of information between Close integration – formal exchange of information between businessesbusinesses

– Tight integration – sharing a business processes (e.g., UPS)Tight integration – sharing a business processes (e.g., UPS)

• Becoming a customer-centric value chain (virtual enterprise)Becoming a customer-centric value chain (virtual enterprise)– Risk sharingRisk sharing

– Supply chain (Supply chain (supplierssuppliers) vs. demand chain () vs. demand chain (distributors and distributors and retailersretailers))


Rules, Enabling, Business Models and Rules, Enabling, Business Models and IT Adoption…IT Adoption…


IT and Business: Two Golden RulesIT and Business: Two Golden Rules

• IT does not (directly) increase productivityIT does not (directly) increase productivity

• Businesses do not adopt new technology for technology’s Businesses do not adopt new technology for technology’s sakesake

– What value does it add to the business?What value does it add to the business?

– How does it support the business’ strategy, goals and How does it support the business’ strategy, goals and objectives?objectives?

– Can it be linked to competitive advantage?Can it be linked to competitive advantage?

– What’s the bottom line?What’s the bottom line?


IT and BusinessIT and Business

Briefly…Briefly…

• IT enables fundamental changes in the way work is doneIT enables fundamental changes in the way work is done

• IT enables the integration of business functions at all IT enables the integration of business functions at all levels within and between organizationslevels within and between organizations

• IT causes shifts in the competitive climate of many IT causes shifts in the competitive climate of many industries (i.e., industries (i.e., breakthrough technologybreakthrough technology))

• IT presents new strategic opportunities for organizations IT presents new strategic opportunities for organizations that reassess their mission and goalsthat reassess their mission and goals

• Successful application of IT requires changes in Successful application of IT requires changes in management and organization structuremanagement and organization structure


IT and Business IT and Business (cont.)(cont.)

• A major challenge exists for management to lead their A major challenge exists for management to lead their organizations through the transformation necessary to organizations through the transformation necessary to prosper in the globally competitive environmentprosper in the globally competitive environment


Business ModelBusiness Model

• Defines how an enterprise interacts with its environment to Defines how an enterprise interacts with its environment to define a unique strategy, attract the resources and build the define a unique strategy, attract the resources and build the capabilities to execute itcapabilities to execute it

• Creates values for all stakeholdersCreates values for all stakeholders

Inputs Processes Outputs

Simply put, the business model defines how inputs are converted to outputs


IT and the BusinessIT and the Business

• Adoption of IT must be within the capabilities of the Adoption of IT must be within the capabilities of the businessbusiness

• There must be a clear vision of how technology will be There must be a clear vision of how technology will be used for a clear used for a clear profitableprofitable gain gain

• A proposed IT solution must take into account A proposed IT solution must take into account organizational factors organizational factors

– Strategic gridStrategic grid


Business Models and IT AdoptionBusiness Models and IT Adoption

For example…For example… Two successful grocers taking two Two successful grocers taking two different approaches to businessdifferent approaches to business


PeapodPeapod


Virtual storeVirtual store

PeapodPeapod


Select by flavorSelect by flavor

Select by brandSelect by brand


Shopping basketShopping basket

Running totalRunning total


Check Out: Pick a Delivery DateCheck Out: Pick a Delivery Date


Enter Account Enter Account


Due to the nature Due to the nature of the merchandise of the merchandise

(i.e., highly (i.e., highly perishable, low perishable, low profit margin), profit margin),

customer customer expectations and expectations and the high cost of the high cost of fuel, logistics fuel, logistics

becomes an major becomes an major concernconcern

PeapodPeapod


PeapodPeapod

Customer sends order via WebCustomer sends order via Web

Peapod receives the orderPeapod receives the order

Peapod Peapod assembles assembles the orderthe order

Peapod delivers Peapod delivers the orderthe order

Customer receives orderCustomer receives order

Suppliers maintain Peapod’s inventory Suppliers maintain Peapod’s inventory

Peapod bills the Peapod bills the customer’s credit customer’s credit cardcard


"Bricks and mortar" "Bricks and mortar" retailerretailer

Raley's FoodsRaley's Foods


Limited web shoppingLimited web shopping

Raley's FoodsRaley's Foods


Business ModelBusiness Model

Discussion…Discussion…

• Define the business modelDefine the business model

• Identify the market segments, opportunities and threatsIdentify the market segments, opportunities and threats

• What role does IT play in the business model?What role does IT play in the business model?

• What is the effect of IT in the business model?What is the effect of IT in the business model?

• How does IT impact the business?How does IT impact the business?


Opportunities and ThreatsOpportunities and Threats

““Crisis” (weiji)Crisis” (weiji)

““Opportunity” (jihui)Opportunity” (jihui)

Opportunities grow out of crisesOpportunities grow out of crises(Necessity is the mother of invention -- Plato)(Necessity is the mother of invention -- Plato)

How does the business capitalize on its threats?How does the business capitalize on its threats?


Strategy and Strategy and Four Models and FrameworksFour Models and Frameworks

• Strategic GridStrategic Grid

• Porter’s Five Forces ModelPorter’s Five Forces Model

• Richard Nolan’s Stages TheoryRichard Nolan’s Stages Theory

• Strategic AlignmentStrategic Alignment


1. Strategic Grid1. Strategic Grid


Strategic GridStrategic Grid

HighHigh

LowLowHighHighLowLow

Impact on Impact on Existing Existing

Business Business OperationsOperations

Impact on Strategy (future Impact on Strategy (future competitive environment)competitive environment)

FactoryFactoryOperational ITOperational IT

SupportSupportBasic elementsBasic elements

TurnaroundTurnaroundGradual adoptionGradual adoption

StrategicStrategicStrategic IT plan, Strategic IT plan,

initiativesinitiatives

Management of IT depends on how the business views ITManagement of IT depends on how the business views ITManagement of IT depends on how the business views ITManagement of IT depends on how the business views IT

IT has little relevance to existing or IT has little relevance to existing or future successfuture success

Current IT important but future IT Current IT important but future IT developments are unlikely to developments are unlikely to

improve competitive advantageimprove competitive advantageExisting and future IT developments Existing and future IT developments

critical to successcritical to success

Existing IT is unimportant but future Existing IT is unimportant but future developments are crucial to survivaldevelopments are crucial to survival

McFarlan and McKinney (1983)McFarlan and McKinney (1983)


Placing a Business in a QuadrantPlacing a Business in a Quadrant

• How important does management feel the How important does management feel the currentcurrent IT IT systems are to the business?systems are to the business?

• How important does the business think How important does the business think futurefuture developments in IT will be for the business?developments in IT will be for the business?

Planning a future for ITPlanning a future for IT


Strategic GridStrategic Grid

Quadrants:Quadrants:• Support – goals target local improvements and incremental Support – goals target local improvements and incremental

cost savings (e.g., office automation)cost savings (e.g., office automation)• Factory – designed to reduce costs and improve performance Factory – designed to reduce costs and improve performance

of the core operationsof the core operations– Automation and computerize functionsAutomation and computerize functions

• Turnaround – designed to exploit emerging strategic Turnaround – designed to exploit emerging strategic opportunities opportunities – Integration of the organizationIntegration of the organization

• Strategic – commitment to use IT to enable both core Strategic – commitment to use IT to enable both core operations and core strategyoperations and core strategy– IT an integral part of strategyIT an integral part of strategy


2. Porter’s Five Forces Model2. Porter’s Five Forces Model


Porter’s Five Forces ModelPorter’s Five Forces ModelForces that Shape StrategyForces that Shape Strategy

Industry Industry CompetitorsCompetitors

Rivalry among Rivalry among existing firmsexisting firms

SuppliersSuppliersSuppliersSuppliers Customers and Customers and BuyersBuyers

Customers and Customers and BuyersBuyers

Potential Potential EntrantsEntrantsPotential Potential EntrantsEntrants

SubstitutesSubstitutesSubstitutesSubstitutes

Bargaining power of buyersBargaining power of buyers

Threat of substitute products or Threat of substitute products or servicesservices

Bargaining power of Bargaining power of supplierssuppliers

Threat of new entrantsThreat of new entrants

How will the business How will the business react to threats (and react to threats (and

opportunities)?opportunities)?


Contending ForcesContending Forces

• The state of competition depends on the five forcesThe state of competition depends on the five forces

• The collective strength of these forces determines the The collective strength of these forces determines the ultimate profit potential of an industryultimate profit potential of an industry

– Strongest force or forces determine the profitability of Strongest force or forces determine the profitability of an industry and are of greatest importance in strategy an industry and are of greatest importance in strategy formulationformulation


1. Threat of Entry1. Threat of Entry

• New entrants bring new capacity, desire to gain market New entrants bring new capacity, desire to gain market share, and often substantial resourcesshare, and often substantial resources

• Barriers:Barriers:– Economies of scaleEconomies of scale– Product differentiationProduct differentiation– Capital requirementsCapital requirements– Cost disadvantages independent Cost disadvantages independent

of sizeof size– Access to distribution channelsAccess to distribution channels– Government policyGovernment policy

Seriousness of the Seriousness of the threat depends on the threat depends on the barriers and the barriers and the reaction of the reaction of the incumbentsincumbents


Power of Buyers and SellersPower of Buyers and Sellers

• Suppliers – Can exert bargaining power on participants by Suppliers – Can exert bargaining power on participants by raising prices or reducing the quality of the goods and raising prices or reducing the quality of the goods and servicesservices

• Buyers – Can force down prices, demand higher quality or Buyers – Can force down prices, demand higher quality or more service, and play competitors against each othermore service, and play competitors against each other


2. Suppliers are powerful if…2. Suppliers are powerful if…

• Dominated by a few companiesDominated by a few companies

• Products is unique or well differentiated, or has built-up Products is unique or well differentiated, or has built-up switching costsswitching costs

• Not obligated to content with other products for sale to the Not obligated to content with other products for sale to the industryindustry

• Poses a credible threat of integrating forward into the Poses a credible threat of integrating forward into the industry’s businessindustry’s business

• Industry is not an important customer (of the supplier Industry is not an important customer (of the supplier group)group)


3. Buyers are powerful if…3. Buyers are powerful if…

• Concentrated or purchases in large volumesConcentrated or purchases in large volumes• Products/services are standard or undifferentiatedProducts/services are standard or undifferentiated• Products form a component of its product and represent a Products form a component of its product and represent a

significant fraction of its costsignificant fraction of its cost• Earns low profits, which create great incentive to lower its Earns low profits, which create great incentive to lower its

purchasing costspurchasing costs• Industry’s product is unimportant to the quality of the Industry’s product is unimportant to the quality of the

buyer’s products or servicesbuyer’s products or services• Industry’s product does not save the buyer moneyIndustry’s product does not save the buyer money• Pose a credible threat of integrating backward to make the Pose a credible threat of integrating backward to make the

industry’s productindustry’s product


4. Threat of Substitutes4. Threat of Substitutes

• Substitutes limit the potential of an industry, particularly Substitutes limit the potential of an industry, particularly profitsprofits

• Industry must upgrade the quality or differentiate the Industry must upgrade the quality or differentiate the product/serviceproduct/service

• Substitutes that deserve the most attention are those that:Substitutes that deserve the most attention are those that:

– Subject to trends improving their price-performance Subject to trends improving their price-performance trade-offtrade-off

– Produced by industries earning high profitsProduced by industries earning high profits


5. Rivalry Among Competitors5. Rivalry Among CompetitorsJockeying for PositionJockeying for Position

Intensity depends on…Intensity depends on…• Competitors are numerous or roughly equal in size and Competitors are numerous or roughly equal in size and

powerpower• Industry growth is slow, precipitating fights for market Industry growth is slow, precipitating fights for market

share share • Product/service lacks differentiation or switch costsProduct/service lacks differentiation or switch costs• Fixed cost are high or the product is perishable Fixed cost are high or the product is perishable • Capacity normally augments in large incrementsCapacity normally augments in large increments• Exit barriers are high Exit barriers are high • Rivals are diverse in strategies, origins and “personalities”Rivals are diverse in strategies, origins and “personalities”


Strategy FormulationStrategy Formulation

• Strategy depends on the company’s strengths and Strategy depends on the company’s strengths and weakness relative to the threatsweakness relative to the threats

• Strategic plan may…Strategic plan may…

– Position the company so its capabilities provide the Position the company so its capabilities provide the best defense against competitive forcesbest defense against competitive forces

– Influence the balance of forces through strategic movesInfluence the balance of forces through strategic moves

– Anticipate and respond to shifts in factors underlying Anticipate and respond to shifts in factors underlying forces to exploit changeforces to exploit change


Approaches to StrategyApproaches to Strategy

• Positioning the company so it is the least vulnerable to its Positioning the company so it is the least vulnerable to its competitive forcescompetitive forces

• Taking the offensive and alter the marketTaking the offensive and alter the market

• Exploiting industry evolution (change)Exploiting industry evolution (change)

How can IT make a difference?How can IT make a difference?


• ““How Competitive Forces Shape Strategy,” Michael E. How Competitive Forces Shape Strategy,” Michael E. Porter, Harvard Business Review, March-April 1979.Porter, Harvard Business Review, March-April 1979.


3. Nolan’s Stages Theory3. Nolan’s Stages Theory


Nolan's Stage TheoryNolan's Stage Theory

• All organizations go through four stages for IT adoptionAll organizations go through four stages for IT adoption

– IntroductionIntroduction

– ContagionContagion

– ControlControl

– IntegrationIntegration

IT is recognized as a resourceIT is recognized as a resource


IT ResourceIT Resource

Nolan's Stages TheoryNolan's Stages Theory

IntroductionIntroduction

ContagionContagion

ControlControlIntegrationIntegration

TimeTime

Investment Investment in ITin IT

Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3 Stage 4Stage 4

An organization’s experience with adopting ITAn organization’s experience with adopting IT

DiffusionDiffusion


4. Strategic Alignment4. Strategic Alignment


IT’s Role In Business: IT’s Role In Business: Strategic Alignment ModelStrategic Alignment Model

Str

ateg

ic I

nfo

rmat

ion

Str

ateg

ic I

nfo

rmat

ion

Functional IntegrationFunctional IntegrationBusiness domainBusiness domain IT domainIT domain

ExternalExternal

InternalInternal

Business Business strategystrategy

Business Business strategystrategy

Organizational Organizational infrastructureinfrastructure

Organizational Organizational infrastructureinfrastructure

IT IT strategystrategy

IT IT strategystrategy

IS IS infrastructureinfrastructure

IS IS infrastructureinfrastructure

Administrative infrastructure, Administrative infrastructure, processes, skillsprocesses, skills

Applications infrastructure, Applications infrastructure, processes, skillsprocesses, skills

CoalignmentCoalignment

Business scope, competencies, Business scope, competencies, business governancebusiness governance

Technology scope, Technology scope, competencies, IT governancecompetencies, IT governance


In a Nutshell…In a Nutshell…

BusinessBusiness ITIT

StrategyStrategy StrategyStrategy

CapabilitiesCapabilities CapabilitiesCapabilities

AlignmentAlignment

AlignmentAlignmentIT infrastructureIT infrastructure

Process ReengineeringProcess Reengineering(Control, enhancing, leveraging)(Control, enhancing, leveraging)

Business networksBusiness networks(Competitive Advantage)(Competitive Advantage)

ValueValue

VisionVision


A Few More Factors to ConsiderA Few More Factors to Consider

IT Planning DilemmaIT Planning Dilemma

Investments in ITInvestments in IT


What Does It Take to Become Strategic?What Does It Take to Become Strategic?

Basic IT for operationsBasic IT for operations

IT to competeIT to compete

IT for competitive IT for competitive advantageadvantage


IT Planning Dilemma IT Planning Dilemma

Organization Strategic Organization Strategic PlanPlan

Organization Strategic Organization Strategic PlanPlan

Information Technology Information Technology Strategic PlanStrategic Plan

Information Technology Information Technology Strategic PlanStrategic Plan

Should the strategic plan Should the strategic plan specify the technologies to specify the technologies to

adopt?adopt?

Should an IT strategic plan Should an IT strategic plan precede an organizational precede an organizational

strategy?strategy?

??DirectionDirection

Enabling Enabling technologiestechnologies

Which should come first?Which should come first?


Introducing IT into the OrganizationIntroducing IT into the Organization

Operational PlanOperational PlanOperational PlanOperational Plan

Tactical PlanTactical PlanTactical PlanTactical Plan

Strategic PlanStrategic PlanStrategic PlanStrategic Plan

Mission StatementMission StatementMission StatementMission Statement

StrategyStrategyStrategyStrategy

PolicyPolicyPolicyPolicy

ImplementationImplementation& Adoption& Adoption

ImplementationImplementation& Adoption& Adoption

Top-DownTop-Down Bottom-UpBottom-Up

Mission StatementMission StatementMission StatementMission Statement

ContextContext

InitiativesInitiatives

Inductive ChangeInductive Change Deductive ChangeDeductive Change

How does an organization introduce changes in IT?How does an organization introduce changes in IT?


Strategy and ThreatsStrategy and Threats

ThreatsThreats OpportunitiesOpportunities StrategyStrategy

How does the business capitalize on its threats?How does the business capitalize on its threats?


What are strategy and strategic planning?What are strategy and strategic planning?


StrategyStrategy

• ““The essence of strategy formulation is coping with The essence of strategy formulation is coping with competition.”competition.”

Michael Porter, 1979Michael Porter, 1979


What is Strategy?What is Strategy?

• Strategy is the pattern of missions, objectives, policies, and Strategy is the pattern of missions, objectives, policies, and significant resource utilization plans stated in such a way significant resource utilization plans stated in such a way as to as to define what business the company is indefine what business the company is in (or is to be in)(or is to be in) and and the kind of company it is or is to bethe kind of company it is or is to be. It defines:. It defines:

– The product line, markets and market segments for The product line, markets and market segments for which products are to be designedwhich products are to be designed

– The channels through which these markets will be The channels through which these markets will be reachedreached

– The means by which the operation is to be financedThe means by which the operation is to be financed

– The profit objectivesThe profit objectives



Cont.Cont.

– The size of the organizationThe size of the organization

– The image which it will project to employees, suppliers The image which it will project to employees, suppliers and customersand customers

Bullen and Rockart, Bullen and Rockart, 19811981



• Defines the revenue and growth potential of the Defines the revenue and growth potential of the organizationorganization

• Focuses attention and resources on a specific set of goals Focuses attention and resources on a specific set of goals and the projects required to achieve themand the projects required to achieve them

Applegate, Austin and McFarlanApplegate, Austin and McFarlan


StrategyStrategy

StrategyStrategyStrategyStrategy

MissionMissionMissionMission

VisionVisionVisionVision

A strategy incorporates the vision and mission of the businessA strategy incorporates the vision and mission of the business

PurposePurpose

IntrospectIntrospect

AchievementAchievement


• Vision statement reflects the organization’s future aspirations Vision statement reflects the organization’s future aspirations and directionand direction

• Mission statement represents the “intents” or “purpose” of Mission statement represents the “intents” or “purpose” of the organizationthe organization

• Strategy embodies the “image,” customers (markets), Strategy embodies the “image,” customers (markets), business model and measure of achievementbusiness model and measure of achievement– IT as an enabler to proactively implement change (i.e., IT as an enabler to proactively implement change (i.e.,

innovate innovate competitive pull) or reactively adapt to competitive pull) or reactively adapt to change (i.e., Porter’s 5 force model, change (i.e., Porter’s 5 force model, technology technology push) push)

StrategyStrategy


Strategic ManagementStrategic Management

Management Management ControlControl

Operational ControlOperational Control

Strategic PlanningStrategic Planning


Strategic PlanningStrategic PlanningShould…Should…

• Be forward lookingBe forward looking• Focus on external factors and opportunities, and their Focus on external factors and opportunities, and their

impact on the businessimpact on the business• Specify the direction the business should takeSpecify the direction the business should take

– Markets to pursue, image to project, business modelMarkets to pursue, image to project, business model• Be long-termBe long-term

– Depending on the industry, 2 to 5 yearsDepending on the industry, 2 to 5 years• Formal vs. informalFormal vs. informal

– Extent to which is documented and the frequency of Extent to which is documented and the frequency of planningplanning


Levels of ManagementLevels of Management

• Strategic PlanningStrategic Planning– "Strategic planning is the process of deciding on "Strategic planning is the process of deciding on

objectives of the organization, on changes in these objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, on the resources used to attain these objectives, and on the policies that are to govern the objectives, and on the policies that are to govern the acquisition, use, and disposition of these resources."acquisition, use, and disposition of these resources."

• Management controlManagement control– "Management control is the process by which managers "Management control is the process by which managers

assure that resources are obtained and used effectively assure that resources are obtained and used effectively and efficiently in the accomplishment of the and efficiently in the accomplishment of the organization's objectives."organization's objectives."


Levels of Management (Cont.)Levels of Management (Cont.)

• Operational controlOperational control

– "Operation control is the process of assuring that "Operation control is the process of assuring that specific tasks are carried out effectively and specific tasks are carried out effectively and efficiently."efficiently."

Anthony, 1965Anthony, 1965


Gaining a Competitive Advantage with ITGaining a Competitive Advantage with IT

• IT alone is not a strategic differentiatorIT alone is not a strategic differentiator– Enables the business to do thingsEnables the business to do things– Does not have a direct effect on productivityDoes not have a direct effect on productivity

• Must be coupled with other innovative processesMust be coupled with other innovative processesLessons from IT practice…Lessons from IT practice…• Value from IT comes only when it is paired with Value from IT comes only when it is paired with

concurrent innovations in business practiceconcurrent innovations in business practice• IT's economic impact comes from incremental IT's economic impact comes from incremental

improvementsimprovements• Strategic differentiation emerges over timeStrategic differentiation emerges over time

– Short-termShort-term

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