Strategic information system (SIS)
They are systems that support and shape competitive strategy in a business unit (Callon 1996, Newman 1994).
An SIS is characterized by its ability to significantly change the way a business is run to give the business strategic advantage (VE).
Any Information System (SI) –EIS, OIS, TPS, KMS- that changes the objectives, processes, products, or environmental relationships to help an organization gain competitive advantage (CV) or reduce a competitive disadvantage (DC) is a Strategic Information System.
A competitive strategy is a general formula of how a business is going to compete, what its objectives are, and what plans and policies it will need to reach those objectives (Porter, 1985).
Through its competitive strategy, an organization seeks a competitive advantage - an advantage over its competitors - such as cost, quality or speed.
CV is the cause of the success or failure of a company (Porter & Millar, 1985); such advantage seeks to lead the control of the market.
An SIS helps an organization earn a CV with its contribution to its strategic objectives and its ability to increase its performance and productivity.
A SIS allows a company to earn VC and benefit it at the expense of those that have DC.
Frequent changes in technology and markets and the emergence of new business models introduce radical changes in the industrial structure (Deise, 2000) and the nature of competition can change rapidly (Afuah & Tucci, 2003).
To better understand SIS, we will examine the role IT plays in strategic management.
The role that it plays in strategic management (GE)
Strategic Management (GE) is the way that an organization plans the strategy of its future operations. IT helps GE in many ways (Kemerer, 1997), consider these eight:
Innovative applications (AI).
IT creates AI to give direct EV to the organization. For example, FedEx was the first to use IT to locate each package in its system. He was also the first to make a DB accessible to his clients over the Internet.
Competitive weapons.
ISs have been recognized as a competitive weapon (Ives, 1984, Callon, 1996). Amazon.com's one-click shopping system is considered so important to the company's reputation for superior customer service that it has been patented. Michael Dell said bluntly: "The Internet is like a weapon sitting on the table, ready to be raised by you or your competitors" (Dell, 1999).
Changes in processes.
IT supports business process changes that result in VE (Davenport, 1993). Berri is the largest manufacturer and distributor of fruit juice products, the main goal of its ERP system was "to turn its branch-based business into a national organization with a single group of unified business processes to obtain millions of dollars in savings of costs ”. Other ways IT changes business processes include better control in remote offices or warehouses, fast communication tools, optimized time on product design with computerized engineering tools, and a better decision-making process by providing managers with reports of timely information.
Liaison with business partners.
IT links a company with its business partners effectively and efficiently. Rosenbluths GDN, allows to connect agents, clients and providers of travel services around the world, an innovation that allowed them to broaden their marketing range (Clemons & Hann, 1999).
Costs reduction.
IT enables companies to cut costs. A Booz-Allen & Hamilton study found that: a traditional bank transaction costs $ 1.07 while the same transaction on the Web costs about 1 cent. A plane ticket costs $ 8 to process, an e-ticket costs $ 1 (ibm.com).
Relations with suppliers and clients. IT can be used to lock in customers and suppliers or to build a switching cost (making it more difficult for customers and suppliers to switch to other competitors).
New products. A firm can leverage its investment in IT to create new products that the market demands. One example is FedEx parcel tracking software.
Competitive intelligence (IC)
IT provides business CI by collecting and analyzing information on products, markets, competitors and environmental changes (Guimaraes, 1997). For example, a company knows something important before its competitors, or if it can make the correct interpretation of information before them, then it can act first, earning EV through the first mover advantage (being the first to offer a product or particular service that customers consider valuable).
Competitive intelligence
As in war, information about one of your competitors can be the difference between winning and losing a battle in business. Many companies continually monitor the activities of their competitors to acquire IC, such information drives business performance by increasing market knowledge, leveraging KM, and raising the quality of strategic planning.
Examples of IC:
CI can be done with technologies such as OCR, smart agents (Desouza, 2001), and especially the Internet.
The Internet is the most important tool of a company to support CI (Buchwitz, 2002). The visibility of information that a competitor places on the Internet and the power of Web tools to interrogate Web sites for information on prices, products, services, have generated an increase in interest in these intelligence activities.
Pawar and Sharda (1997) proposed a diagram showing the capabilities of the Internet to provide information for strategic decisions. According to the diagram, the required external information and information acquisition methods can be supported by Internet tools for communication, search and information retrieval. They emphasize that the search capacity of the various Internet tools. Using these tools, an organization can implement specific search strategies, as illustrated in a Closer look.
However, just collecting information from a competitor is not enough. It is more important to analyze and interpret it than to collect it. For this, IT tools can be used, such as intelligent agents (software tools that allow the automation of tasks that require intelligence), data mining (search in large DBs for relationships between data bits, using specialized logic tools), for example. Data mining is used to track various sources of information in order to determine the possible impact of the information on the Bank, on clients or on the industry.
Another, more sinister, aspect of CI is industrial espionage. Corporate spies do exist in some industries, looking for confidential market projects, cost analysis, proposed services / products, or strategic projects.
Industrial espionage is considered unethical and often illegal. One type of industrial espionage is the theft of laptops at airports, hotels, and conferences.
Many of the thefts are due to an interest in information stored in computers, not the computer itself. Protecting yourself from such activities is an important part of maintaining CV.
Competitive intelligence on the internet
The Internet can be used to help a company develop CI easily, quickly and relatively cheaply in the following ways:
Checking the competitor's pages. Such visits can reveal information about new products or projects, budget trends, and much more. Potential customers and business partners can be found using the link: URL to find which companies visit the competitor's page.
Analyzing related electronic discussion groups. It helps to find out what people think about a company and its products. What products do they like or don't like.
Examining public financial documents. Payroll documents
Doing market research on your own page. Visitor surveys.
Using an information search service to collect news about the competition and their products. Yahoo, Google.
Porter's competitive forces model and strategies
It has been used by companies to develop strategies to increase their competitive profile. It also demonstrates how IT can enhance the competitiveness of corporations.
The model recognizes 5 main forces that can jeopardize the position of a given company. Although the details of the model differ from industry to industry, its overall structure is universal. The 5 main forces can be generalized as follows:
The threat of the entry of new competitors
The bargaining power of suppliers
The bargaining power of customers (buyers)
The threat of substitute services or products
The rivalry between companies in the industry
The power of each force is determined by factors related to the structure of the industry.
Just as the Internet has changed the nature of doing business, so has the nature of competition. Some have suggested changes to Porter's model. Harmon (2001) proposes adding a sixth force, the bargaining power of employees.
Porter argues that the Internet does not change the model, but is another tool to be used in the search for CV. In other words, the Internet itself will rarely be a competitive advantage.
Many of the companies that are successful will be the only ones using the Internet as a complement to traditional ways of competing (Porter, 2001).
Porter (2001) and Harmon (2001) suggest some ways the Internet influences competition in all five factors:
The threat of new competitors.
The Internet increases the threat of new competitors. First, it dramatically reduces traditional barriers to entry. Second, the geographic reach of the Internet allows distant competitors to compete in the local market.
The power of provider's negociation.
The impact of the Internet on providers is mixed. On the one hand, buyers can find alternative suppliers and compare prices more easily, reducing the bargaining power of suppliers. On the other hand, as companies use the Internet for their supply chains and link digital exchanges, participating providers will prosper by creating captive customers and increasing switching costs.
The bargaining power of customers (buyers).
The Web dramatically increases buyers' access to product and vendor information. The Internet can reduce customer switching costs, and customers can more easily buy from different providers.
The threat of substitute services or products.
Information-driven industries are in the greatest danger here. Any industry in which digitized information can replace material goods (music, books, software) may see the Internet as a threat.
The rivalry between existing firms in the industry.
The visibility of Internet applications on the Web makes proprietary systems more difficult to keep secrets, reducing differences between competitors.
Porter concludes that the global impact of the Internet is increased competition, which negatively impacts profitability. “The great paradox of the Internet is that its many benefits - available information, less difficulty in purchasing, marketing and distribution; allowing buyers and sellers to find and do business with each other more easily - they also make it more difficult for companies to take those benefits as profits ”(2001, p.66).
Strategies for competitive advantage
Porter's model identifies the forces that influence CV in the marketplace. For most managers, the development of a strategy aimed at establishing a sustainable and reliable position against these 5 forces is of great interest. For this, a company needs to develop a strategy of functional activities different from its competitors.
Porter (1985) proposed leadership in cost, differentiation, and niche strategy. Other authors have proposed additional strategies (Neumann, 1994, Wiseman, 1998 and Frenzel, 1996).
We cite twelve strategies for competitive advantage:
Cost leadership strategy: Produce products and / or services at the lowest cost in the medium. A firm achieves cost leadership by saving on purchases, efficient business processes, forcing higher prices paid by competitors, and helping customers or suppliers reduce their costs.
Differentiation strategy: Offer different types of products or services by offering something different like Dell's strategy, which offers product adaptation.
Niche strategy: select a narrow market and focus on them and try to be the best in quality, speed and cost in the market
Growth strategy: Increase the market and get more customers or sell other products. This type is for companies that think long term, the Internet is a good marketing channel for this type of strategy.
Strategic alliance: works with partners, has alliances with other companies or virtual companies. This type of strategy helps companies to focus on the core business. This type of strategy occurs mainly among electronic type companies.
Innovation strategy: Introduce new products and services, apply more applications to existing items or services, or develop new ways of making the product. Something to keep in mind is that when introducing an innovation it is necessary to continue innovating or someone else will copy the innovation and improve it
Operational effectiveness strategy: It improves the way in which the internal processes of the company are executed so they carry out similar activities as their rivals but with improvements. These improvements increase worker and customer satisfaction, quality, and productivity.
Customer orientation strategy: This strategy focuses on making customers happy with the policy that the customer is king like RadioShack online did.
Time strategy: The time resource is used and managed in such a way that it is used as an advantage, time is money, concepts such as first mover advantage, just in time delivery or manufacturing are handled, these are the main concepts in which base the strategy
Barriers to entry strategy: Create barriers to entry through the introduction of innovative products or using IT as an exceptional service, in this way companies can create barriers since they have a better service, as in the case of Cisco that can receive information compatibility and order when testing the product.
Strategy of (lock in) tie to the supplier or the client: What this achieves is that clients do not change suppliers but stay with themselves instead of choosing the competitor, having a lock in reduces the ability to obtain a discount to the clients. An example of this may be the airline miles program.
Switching cost increase strategy: This strategy creates dependency with the provider, since it makes the economic changes to migrate to another company very high costs, forcing customers to stay with the provider.
The strategies can be interrelated and this helps a company to position itself in the market.
Value chain
According to the value chain model, the activities carried out in any manufacturing organization can be divided into two: primary activities and support activities.
Primary activities are those in which the material is purchased, processed, and delivered to customers.
Logistics
operations
distribution and warehousing
marketing and sales
service
The primary activities are aided by the support activities:
Infrastructure (finance administration, accounting)
Human resource management
Technology development
Delivery
Each of the support activities can help one or all of the primary or even support activities.
A value system includes suppliers who make the necessary inputs available to the company and its value chain. Once the company creates the products, they pass through the value chain to the distributors, and thus all the way to the buyers. All parts of the chain are included in the value chain.
The initial purpose of the value chain is to analyze the internal operations of the corporation in order to increase efficiency, effectiveness and competitiveness.
Porter's model in the digital age
Porter's model is still valid, but it needs some adjustments to accommodate the new economy.
Inter-organizational strategic information systems.
In the 70's, companies only looked within the company, but with the emergence of the Internet in the 90's, companies began to create alliances with other companies, alliance partners, etc., all this based on connectivity, these systems are called information systems interorganizational (IOSs) and are considered as part of e-commerce.
At first, the exchange of information was very difficult since there was no standard, now with the emergence of XML and current standards it is very easy, fast and convenient to make these connections.
Another way in which companies are using IT and the Internet to create inter-organizational information systems in order to have sustainable competitiveness includes creating consortia.
There are two types of consortiums, Horizontal and Vertical:
The vertical consortium is organized, operated and controlled by the majority of the industry stakeholders. These exchanges are used primarily for purchasing and are designed to reduce haggling on the part of suppliers.
The horizontal consortium is organized by large companies from different types of industries for the purpose of purchasing maintenance, replacement and operation items.
In our time the phenomenon of globalization is taking place, global businesses provide a tool that makes customers, suppliers, projects, orders, etc., generally affected and benefited by means of a comprehensive and globalized IT.
Strategic Information Systems: Examples and Analysis
One approach is to compete against yourself. The objectives of each year are more demanding than those made last year, and "competitive strategies" are put in the right place to achieve those objectives. Organizations are essentially competing against their old ways. This was the approach adopted by the state of Wisconsin Department of Revenue for collecting taxes.
Some advantages of DTS when implemented have been increased productivity, ease of access to case information in geographically remote offices, huge price reductions, and standard case handling. In a competitive spirit, this has reached its greatest advantage in the results this has produced.
Time is one of the main strategies to achieve competitive advantage. Just as speed allows your sports engine customers to win races.
Carrying out and sustaining SIS
SIS implementation
The implementation of strategic information systems can be highly complex due to the magnitude and complex nature of the systems. In this section we will briefly study several related publications: (1) The implementation of the SIS, (2) Risks and failures of the SIS, (3) Finding the appropriate SISs, and (4) Sustaining the SIS and its strategic advantage.
The magnitude and complexity of the continuous changes that occur both in technology and in the business environment can cause partial or total failure of the SIS. When SISs are successful, it can bring huge benefits and profits. But when it fails, the cost can be extremely high. In some cases, the failure of the SIS can be so high that it can bankrupt a company as a result.
Identifying appropriate strategic information systems is not a simple task. There are two main points: One point is to start with known issues or areas where improvements can provide a strategic advantage, decide on a strategy, and then build appropriate IT support. This is a reactive approach.
The second approach is to start with available IT technologies, such as Web-based EDI or e-achievement, and try to match the technologies with the current organization or business models. This is an active approach. In either case, a SWOT (strengths, weaknesses, opportunities, threats) analysis or an analysis instrument of an application portfolio, such as an Internet portfolio, (Tjan, 2001) can be used to decide which systems to implement. practice and in what order.
SIS Sustainment and Strategic Advantage
Strategic information systems are designed to establish a profitable and sustainable position against the forces that determine industry competition. A sustainable strategic advantage is a strategic advantage that can be maintained for some time.
However, in the first decade of the twenty-first century, it has become increasingly difficult to sustain an advantage over an extended period. Due to advances in systems development, external systems can now quickly be duplicated, sometimes in months rather than years. Also innovations in technology can make new systems quickly out of date.
Therefore, the main problem that companies now face is how to sustain their competitive advantage. A popular approach is to use inward systems that are not visible to competitors.
If a company uses external systems to sustain competitive advantage, one way to protect those systems is to patent them. Another approach to sustaining competitive advantage is to develop a comprehensive, innovative, and expensive system, as it is very difficult to duplicate.
Finally, experience indicates that information systems, by themselves, can rarely provide a sustainable competitive advantage. Therefore, a modified approach that combines SISs with structural business changes may be likely to provide a sustainable strategic advantage.
Directive publications
Risk in realization of strategic information systems.
The complicated investment in realization as SIS is high. These systems often represent stepping up and using new technology. Considering the competing business forces, the probability of success, and the cost of investment, a company considering a new strategic information system should undertake a formal risk analysis.
Planning.
Planning for SIS is a primary concern of organizations (Earl, 1993). Exploiting IT for competitive advantage can be viewed as one of four main SIS planning activities. The other three align the investment in IS with business objectives, maintaining the efficient and effective direction of IS resources, and the technology policy that is developed and the architecture.
Sustaining competitive advantage.
As companies get bigger and more sophisticated, they develop sufficient resources to quickly duplicate the successful systems of their competitors. Sustaining strategic systems becomes more difficult and is related to the question of being a risk-taking leader versus a follower in developing innovative systems.
Ethical issues.
Gaining competitive advantage from using IT can involve actions that are unethical, illegal, or both. Companies use it to monitor the activities of other companies, which can invade the privacy of the individuals who work there. In the use of business intelligence (eg spying on competitors), companies can engage in tactics such as pressure from competitors' employees to reveal information or use software that is the intellectual property of other companies without the knowledge of these other companies. Businesses can post questions and post comments about their competitors in Internet discussion groups.
Many of these actions are not technically illegal, due to the fact that the Internet is new and its legal environment is not well developed yet, but many people would surely find them unethical.
Important points of the article
Strategic information systems (SISs) support or shape competitive strategies.
SIS can be external (the customer) oriented or inward (the organization).
Information technology can be used to support a variety of strategic objectives, including creating innovative applications, changing business processes, linking with business partners, reducing expenses, gaining competitive intelligence, and others.
The Internet has changed the nature of competition (competition), changing the traditional relationships between customers, suppliers, and recoveries within an industry.
Cost control, differentiation, and place were the Porter's first strategies to gain a competitive advantage, but today many other strategies exist. All competitive strategies can be supported by IT.
Porter's value chain model can be used to identify areas in which IT can provide strategic advantage.
Inter-organizational information systems offer business opportunities to work together in partnerships to achieve strategic objectives.
Multinational corporations and international traders need a special IT approach to support their business strategies.
Strategic information systems can be found in all types of organizations around the globe.
Some SIS are expensive and difficult to justify, and others turn out to be failures. Therefore, careful planning and implementation are essential.
Acquiring competitive advantage is difficult, and sustaining it can be just as difficult due to the innovative nature of technology advancements.
