Aligning IS and Organizational Strategy
for
MBAC 6080
Kenneth A. Kozar
Spring, 1998

IS Issues - What IS Managers Think?

CSC Index '95
Beyond Computing '95

CSC Index '95 Issues

1. Aligning IS and corporate goals
2. Instituting cross-functional IS
3. Organizing and utilizing data
4. Implementing bus. reengineering
5. Improving the IS human resource
6. Enabling change and nimbleness
7. Connecting to customers/suppliers
8. Creating an IS architecture
9. Updating obsolete systems
10. Improving the systems dev. process

Beyond Computing '95 Issues

1. Integrating IT/corporate strategies
2. Finding/training qualified personnel
3. Budget cutbacks
3. Downsizing/cutbacks
3. Pace of technological change

Classic IS/Enterprise Link
"Bill, the bosses upstairs want a realtime online personnel information system. Run up there and get some details while I get the staff coding or we'll never make the deadline they have set for us."
What are areas of concern?

Assumptions About Systems

Built by people, for people
People must operate in teams
Plagued by bugs, cobblers, hydras, +451F, Userlessness
Technology more manageable than people and organizations
Never know when done
IS -> org. no Direct Value

Bus./IS - What's Important?

Business Objectives (Revenues or Costs?)
Business Tactics (Tasks performed?)
System Objectives (IS Outputs?)
System Tactics (Technologic activity?)

"more valid and comprehensive information with a high degree of accuracy and much quicker response"
Can you manage this? Measurements?

Putting It all Together

BUSINESS OBJECTIVES

Focus on Cost or Revenues
Must examine vision, mission
Unconstrained thinking

Classic Costs
Include overtime, waste/spoilage, losing discounts, cash flow loan charges, turnover, absenteeism, fines, space charges, lawsuits, uncollected debts, rework

Classic Revenues

include new markets, repeat customers, new products, product returns, inventory outages, "dunning" improperly, alliances, quick funds recovery, etc.

Searching for Clues

Changes in product line, product quality, product characteristics, markets, price, customers, market position, market share, company size, ROI, profitability, dividends, leadership, .........

BUSINESS TACTICS

Means of accomplishing objectives
Performable by organizational members?
Tactics specify how IS is used

Changed Tactics could mean: Business process reengineering, changed job descriptions, changed job entry qualifications, changed compensation, changed training, changed union contracts

SYSTEM OBJECTIVES

Usually stated in terms of reports, screens, or processing results or communication capability
Some objectives may look like constraints
Must specify availability times, content, order, time period, format, circulation, etc.

What Information?

Information about us (internal)
Information about others (external)
info about suppliers, customers, government, political influences, competitors, economics

Specifying System Objectives

Data from where? (sales reps, customers, etc.)
To whom?
In what form?
How often?
For what time period
How fast?

SYSTEM TACTICS

Preliminary design with no vendor, hardware specifics, or physical details
System tactics cost $
Are combined into a system strategy or architecture including distributed databases, processing, data entry, etc.

Link Between Data Flow and Requirements Model?

Outputs go to External Entities
Outputs are System Objectives
Network ties together Entities
Expand The Boundaries
Think Mgmt, Not Acct

Gumption Traps

Intangibles - do they really exist?
Quantification - is it measurable?
Are all constituencies considered?
Should we always do this?
Goal setting - science or art?

Why Try?

Links IS to Organization
Common Language
Meas. Targets (know when done)
Cost/Benefit Analysis Possible
Ensures IS is useful and used
Ensures IS and Users know their role
Basis for Job Redesign

Does this technique apply to Amazon?

AMAZON.COM

Jeff Bezos, 32, a former hedge-fund manager founded Amazon.com in 1994. Amazon.com sold its first book in July, 1995. This virtual bookstore with 1.1 million titles allows "chats" with authors and readers' reviews. This "community" and amenities led to estimated $17 million sales in 1996. The biggest book chain, Barnes and Noble, accounts for under 12% of the bookstore industry's $25 billion in annual sales. Thus, there is no overwhelming market dominator.

Amazon.com has no storefront and little inventory. Online forms allow web ordering with use of encryption or the phone for credit card transmission. Ordered books come from a publisher or distributor and go to Seattle where orders are packed and shipped to reach the customer in a order to receipt time of five days. Paying extra means faster receipt.

All books are discounted 10-30%. Orders are growing about 34% a month and 44% of the customers are repeats. Customers can be notified if they like when their chosen authors have a new book.

Communities of interest can create websites to share information with others who share their interest. Amazon.com will pay your community of interest a 3-8% commission if they link to Amazon.com through your website. Amazon.com has over 1800 of these associates.

The biggest bugaboo in the publishing business is return books. The industry overall average is 30% returns but Amazon.com has a return rate of .25% due their selling practices. Plus, other bookstores have no idea who they are selling to and what a customer profile looks like.

For more on Amazon.com, see their website or an article by Michael H. Martin in Fortune, December 9, 1996, pages 169-170 where much of the above information was gathered.

NEWS FROM EDUPAGE, JANUARY 28, 1997
AMAZON TO GET COMPETITION FOR ONLINE BOOK-SELLING
Amazon.com, Inc., which pioneered the business of using the Internet for book-selling, will soon face competition from online bookselling services being developed by traditional bookstore companies Barnes & Noble and the Borders Group Inc. The Barnes & Noble service will begin on AOL and will extend access to all Internet users in the Spring. The company will offer 30% discounts on the cover price of hardcover books, which is a steeper discount than its own stores offer. (Wall Street Journal 28 Jan 97)

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Part of MBA 6080 Exercise
Find a WWW site that you feel adds value to an organization through increased revenues or reduced costs. Apply the alignment model explaining what you feel are the business objectives, business tactics, and system objectives. System tactics are optional.