University of Bahrain

College of Information Technology

Department of Information Systems

IT IS 343

Compiled from:

© 2004 Managing the Information Technology Resource, Jerry N. Luftman

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 The influence of the 21st century
business environment on IT strategy
 Some definitions of strategy in
general, and IT strategy in particular
 The role of IT strategy in your firm
 The concept of Strategic Alignment
and the Strategic Alignment Model
 The processes and considerations
involved in developing an IT strategy

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 One of the most important missions for IT
management in the 21st century is to be
architects of alignment linking business
and IT.
 The metaphor of architecture is chosen
because IT strategy is not just about
technology - it is about the purposeful
creation of integrated environments that
leverage human skills, business processes,
organizational structures, and
technologies to transform the competitive
position of the business.

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 Beknowledgeable about how the new IT
technologies can be integrated into the
business as well as among the different
technologies and architectures
 Beprivy to senior management's tactical
and strategic plans
 Bepresent when corporate strategies
are discussed, and
 Beaware of the strengths and
weaknesses of the technologies in
question and its corporate-wide
implications.
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 Enablers Inhibitors
 Senior executive support for IT  IT/business lack close relationships

 IT involved in strategy development  IT does not prioritize well

 IT understands the business  IT fail to meet commitments

 Business-IT partnership  IT does not understand business

 Well-prioritized IT projects  Senior executives don’t support IT

 IT demonstrates leadership  IT management lacks leadership

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 IT as a Driver
 IT spearheads the organization’s strategies
 IT drives organization strategic direction can be
intrinsically motivated (e.g. Executive Decision) or
extrinsically enforced (e.g. Industry Competition)
 IT as an Enabler
 IT provides the means for the organization’s
objectives to happen
 IT only provides the necessary infrastructure and
platform for business processes to occur smoothly
 E.g. High-speed network infrastructure, CMS etc.
IT can be both a driver and an enabler

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 The word strategy is derived from Greek, where it
means “art of the general" Until recently, even in the
English language, strategy was a military term. It has
only been since the 1960s that the business world has
adopted the term.(Luftman, 2004)
 "Every organization operates on a Theory of the
Business.
 a set of assumptions as to what its business is, its objectives, how
it defines and measures results, who its customers are, and what
its customers value and pay for.

 A business strategy converts this Theory of the

Business into action by enabling an organization to
achieve its goals in an increasingly unpredictable
business environment. (Drucker)
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• The selection of business goals
• The choice of products and services to offer
• The design and configuration of policies that
determine how the firm positions itself to
compete in its markets
• The appropriate level of scope and diversity
(e.g., specialization)
• The design of organization structure,
administrative systems, and policies used to
define and coordinate work

Exercise: What are the choices established for UoB?

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 Imaginable: Conveys a picture of what the future will look like
 Desirable: Appeals to the long-term interests of employees,
customers, stockholders, and others who have a stake in the
enterprise
 Feasible: Comprises realistic, attainable goals
 Focused: Is clear enough to provide guidance in decision making
 Flexible: Is general enough to allow individual initiative and
alternative responses in light of changing conditions
 Communicable: Is easy to convey to the public; can be successfully
explained within five minutes
 Measurable: Stakeholders will clearly see that they have attained the
goal
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 Effective strategies begin with the creation of
a vision.
 Vision is a concise, measurable statement of
where the company wants to go and what it
aspires to be. Ideally, this vision should be
clear, compelling, and exciting to everyone in
the firm.
 Examples of short vision statements:
 To help people be healthy.
 To have our product in every home in the Kingdom of Bahrain.
 To help people enjoy life, or offer an affordable solution to
health care.

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 “A world-class college that is recognized for the
excellence in learning, research and entrepreneurship
in information technology.”
 “To be the world's best quick service restaurant
experience. Being the best means providing
outstanding quality, service, cleanliness, and value,
so that they make every customer in every restaurant
smile.”
 “To be Earth’s most customer-centric company, where
customers can find and discover anything they might
want to buy online.”
 “Empowering Bahrainis to prosper and contribute to
the national economy.”
 “To provide access to the world’s information in one
click.”
 “to help people and businesses throughout the world
realize their full potential.”
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 Articulate how the vision will be accomplished over the
time period identified in the vision.
 Effective strategies use mechanisms of phased
implementation or checkpoints to allow for
"midcourse corrections" and also incorporate
measurements or benchmarks to check the
effectiveness of the strategy and its implementation.
 Most importantly, an effective strategy is aligned with
the mission and core values of the company and
provides the "architectural bridge" between the mission
and vision of the company.

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 Strategy formulation is not a single step or a standalone
process, but begins with the mission of the IT function; the
reasons the IT function exists.
 A mission statement for Information Technology is a
concise statement of what business the group is in.
 It is a statement of why the Information Technology group
exists and the purpose and function it provides for the
company.
 The company mission should be reviewed to identify ideas
or themes for the IT mission. The mission of the
company defines why it exists, what its purpose is,
and what its core values are.

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 Examples:
 “to provide the latest NVIDIA news on products, technologies, and
events. To highlight and engage with our fans.” (Nvidia)

 At Microsoft, our mission and values are to help people and businesses
throughout the world to realize their full potential. We consider our
mission statement a promise to our customers. We deliver on that
promise by striving to create technology that is accessible to everyone
—of all ages and abilities. Microsoft leads the industry in accessibility
innovation and in building products that are safer and easier to
use. (Microsoft)

 Apple designs Macs, the best personal computers in the world, along
with OS X, iLife, iWork and professional software. Apple leads the digital
music revolution with its iPods and iTunes online store. Apple has
reinvented the mobile phone with its revolutionary iPhone and App
Store, and is defining the future of mobile media and computing
devices with iPad. (Apple)
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 Set of beliefs an individual or organization
base their purpose and aids in
differentiating right and wrong course of
actions.
 One can have multiple core values; but it is
recommended to focus on three.
 Examples:
 Commitment for Environmental Sustainability
 Commitment for Innovation
 Commitment for Customers
 Integrity (Honest, fair, ethical)
 Simplicity
 Get it done
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 Google has the following Core Values:
 It’s best to do one thing really, really well.
 Fast is better than slow.
 You don’t need to be at your desk to need an
answer.
 You can make money without doing evil.
 There’s always more information out there.
 You can be serious without a suit.
 Great just isn’t good enough.

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 IT strategy is therefore a set of decisions made by IT
and functional senior management that either enable
or drive the business strategy.
 It leads to the deployment of technology
infrastructure and human competencies that will
assist the organization in becoming more competitive.
 IT strategy must be concerned not just about
technology choices, but also about the relationship of
technology choices to business strategy choices.
 The selection of appropriate technologies can, in
many situations, have substantial influence on or even
drive the transformation of the business strategy.

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1. Regardless of whether the business is
in the manufacturing or service sector,
most business is information-
based. Information has become the
glue that binds organizations with
their customers, suppliers, and
partners.

2. the market value of physical

products and processes became
less important than the knowledge
and information embedded in
them.
 This phenomenon, called
"dematerialization“.
 Competitors can emerge from any part
of the globe.
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3. Maintaining competitive advantage requires business to
continuously innovate strategically relevant new processes.
Process innovation refers to the radical design of new processes
that include new approaches to work, new organizational
structures, and new relationships with customers, suppliers,
partners, and employees.
4. Business processes are coordinated activities that involve
people, procedures, and technology. Organizations make
choices about which parts of their operations (i.e., processes)
they will handle internally and which processes they will
outsource according to one theory of why firms exist. Make-or-
buy decisions are central to the formulation of strategy as they
affect not only the internal processes an organization chooses to
focus on, but also the external partnerships and alliances it will
need to outsource.

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 IT strategy becomes the business strategy; offering novel
and competitively differentiating ways of doing business. In
its role as transformation driver IT can create and exploit new
markets, link customers more tightly to the firm, and define
new standards of operational excellence for the industry.
 Examples of firms that have used IT as a transformation
driver (in this case, Web-enabling their businesses) include
Dell, Cisco, and Amazon.com- all of whom have established
the operational process "bar" over which all potential
competitors must now jump to even consider competing in
their markets.

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 • Interconnect people and
processes
• Span organizational and inter-
organizational boundaries
• Quickly bridge geographical

distances
IT's capabilities can help organizations explore new
markets and customer segments, create new processes,
and provide a critical supporting role in the
implementation of business transformation strategies.
 Example of IT as an enabler of transformation is Federal
Express' use of IT to track packages; supporting its
revolutionary concept of airline hubs for overnight
package delivery.

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 When the IT strategy is  Failure of IT and business
not aligned with the management to
business strategy recognize that effective
use of IT requires
business process
change.

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 It is the overemphasis by IT management and
business management on technology.
 Can misdirect the focus of transformation or
improving critical business processes towards
implementation of technology infrastructure for
its own sake.
 E.g. Zheng et al (2016)
▪ About education technology giving each student laptop in
school
▪ "Just putting a laptop before a student doesn't really help
them with anything,"
 E.g. Markus (1994)
▪ About using email as only means of communication
▪ The compulsory use of email as only mode of
communication led to unnecessary miscommunication,
stress and anxiety
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 Stresses the harmonization of the
goals and implementation plans of
IT with the goals and organizational
structure of the business.
 Today's IT executives must concern
themselves not just with
technology, but also must
understand the strategic goals of
the business in a dynamic and
uncertain environment.

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 At a high level, the IT strategy formulation
process can be described as a sequence of
activities that transforms the current
alignment state to the envisioned future
alignment state. The future alignment state
has the required condition that it enables
sustainable competitive advantage.

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1.Obtaining An Executive
Champion/Sponsor.
2. Forming the Team
3. Describing the “As is” state.
4. Doing a SWOT Analysis

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1. Obtaining An Executive Champion/Sponsor.
It cannot be emphasized too strongly that the
sponsorship of a senior executive is essential to
the successful formulation of IT strategy. The
first step in the formulation of a viable IT
strategy is obtaining the sponsorship of a senior
business executive for the effort.
 E.g. Bahrain e-Government
transformation was championed by
Supreme Committee for Information and
Communication Technology (SCICT)
comprising of top executive leaders
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• Power: The organizational power to legitimize the change with
targets.
• Pain: A level of discomfort with the status quo that makes change
attractive.
• Vision: A clear definition of what change must occur.
• Resources: A thorough understanding of the organizational
resources (time, money, people) necessary for successful
implementation and the ability and willingness to commit them.
• The Long View: An in-depth understanding of the effect the change
will have on the organization.
• Sensitivity: The capacity to fully appreciate and empathize with the
personal issues major change raises.
• Scope: The capacity to understand thoroughly the size of the group
to be affected by the change.

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• A Public Role: The ability and willingness to demonstrate the public
support necessary to convey strong organizational commitment to
the change.
• A Private Role: The ability and willingness to meet privately with
key individuals or groups to convey strong personal support for the
change.
• Consequence Management Techniques: Preparation to reward
promptly those who facilitate acceptance of the change or to
express displeasure with those who inhibit it.
• Monitoring Plans: The determination to ensure that monitoring
procedures are established that will track both the transition's
progress and problems.
• Willingness to Sacrifice: The commitment to pursue the transition,
knowing that a price will most often accompany the change.
• Persistence: The capacity to demonstrate consistent support for the
change and reject any short-term action that is inconsistent with
long-term change goals.
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 Describes a person (typically a senior business
executive) who has the compelling vision of the "To Be"
state of affairs.
 They serve as the project evangelist, and are trusted
and respected by the organization implementing the
change.
 This person is willing to lend his/her organizational
credibility and reputation to the idea being advocated
and communicates this vision of a future state to all
levels of the organization.
 Ideally, a champion has the "power" and "vision“
attributes described above. Champions tend to be more
focused on communicating the vision and driving the
organization to embrace his/her vision.

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 Describes a person (typically a business executive)
who uses his/her organizational influence to obtain
the resources needed to implement the champion's
vision.
 Sponsors tend to be more focused on the aspects and
details of strategy execution, including monitoring of
progress against objectives.
 They typically are the source of funding and play an
important role in ensuring cross-organizational
change.

 E.g. Netflix founders strongly backed the transformation from

DVD postage rental to a subscription-based streaming service.
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2. Forming the Team. IT management
should form a team of senior decision-makers
from the corporate IT and (if applicable)
business unit IT organizations as well as senior
business management from the business units.
Minimally, the corporate CIO and respective
divisional or business unit CIO's should be part
of this team. It is also strongly recommended
that the team include the corporate systems
architect if the organizational structure
accommodates this role.

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3. Describing the "As-Is" State. This
activity describes the current state of the firm in
terms of the components of the Strategic
Alignment Model. The "As-Is" description of the
firm needs to specify both the business strategy
and organization infrastructure and process
domains as well as the domains that pertain to
the IT organization (i.e., IT strategy and IT
infrastructure and processes).

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4. "SWOT" Analysis. This set of activities
is designed to generate a detailed analysis of
the strengths, weaknesses, opportunities, and
threats confronting the firm. The SWOT analysis
identifies factors that may affect desired future
outcomes for the company.

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 The "Strengths" component of the "SWOT" analysis is
formed by two important components from the "as-is"
description of the firm:
 Distinctive Competencies. The critical success factors
and core competencies that provide a firm with a
potential competitive edge. These include brand,
research, manufacturing and product development, cost
and pricing structure, and sales and distribution
channels.
 Systemic Competencies. Those capabilities (e.g.,
access to information about customers) and critical
success factors that are important to the creation!
achievement of a company's strategies and that
distinguish the IT services of the firm.

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 Ability to control distribution of products
 Ability to drive or influence industry standards
 Ability to innovate (and continuously innovate)
 Brand and reputation
 Customer intimacy and customer knowledge
 Enabling of new strategies
 First to market or proprietary products
 Price and cost leadership
 Proprietary technology
 Skilled employees

 Class discussion: What are the competencies of each: UoB, Apple,

and Google?

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• Ability to withstand risk
• Inadequately trained staff
• Change management
• Decreasing demand for products Of services
• Inadequate finances
• Narrow product line (or a product line that's too broad)
• Obsolete products, facilities or processes
• Poor brand image or quality
• Poor skills
• Price and cost laggards
• Vulnerability to price changes or suppliers
• Weak market share or distribution system
• Weak management team

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5. The "Opportunities" component of the
SWOT analysis is completed by using the Ansoff
Matrix -a model that examines the competitive
positioning of a firm based on the relationship
between new and current products (or services)
in new and current markets.

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6. The "Threats" portion of the SWOT
analysis employs an expanded model of
"Porter's Five Forces Model of Industry
Profitability" to identify the threats facing a firm
from external sources.

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1. Rivalry Between Existing Firms. This is usually the
strongest of the threats. Market growth, the number of
competing firms in the industry, or commodity like
products are just some of the factors that effect rivalry
among industry competitors. Each firm employs its own
strategy in an effort to gain competitive advantage.
 High if current competition is too intense

2. The Risk of New Entrants. New entrants to a market

bring new production capacity, new business models, a
desire to establish a secure place in the market, and
(sometimes) substantial resources with which to compete.
 High if it is demanding to enter a new market
 E.g. Microsoft entered new IT markets including: Cloud (Azure), Gaming
(Xbox), Tablets (Surface), Search Engine (Bing), Voice Recognition
(Cortana) and others...

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3. The Power of Buyers. Buyers are a strong competitive force
when they are large and purchase a sizeable portion of a
firm's output, when they buy in large volumes, when their
costs of switching are low, when they can purchase from
several sellers, or when the industry's product is standardized
or commoditized.
 High if there are many customers
 E.g. PC peripheral companies such as Logitech, Creative, AmazonBasics etc.

4. The Power of Suppliers. Suppliers are a strong competitive

force when it is costly for the firm to switch suppliers, when
suppliers have an excellent brand reputation, when switching
suppliers may affect the quality of the firm's products or
services, when they do not have to contend with substitutes,
or when the demand for their products is high.
 High if there are one or very few suppliers
 E.g. Difficult and tricky to switch Enterprise Systems vendor
 Power of Suppliers position themselves behind the saying “Hold on to your
crazy …”
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5. Threat of Substitution.
This refers to the threat of products and
services which can easily replace or
obsolete your products and services.
Also, it is the likelihood of your
customers finding a alternative ways of
so as not to depend on you.
▪ High if the new ways have high potential to
replace our business model
▪ E.g. VHS was replaced by DVD which is
threatened by Blu-Ray, which in turn in under
threat with Streaming services.
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1. Political and Legal Environment. The regulatory,
political, and legal environment can have substantial
impact on an organization's markets and its customers.
Strategy alternatives need to factor in such
considerations as the stability of governments (especially
important when considering strategies that involve
globalization), the strength of legal institutions and
business law (especially troublesome in the former Soviet
Union and African nations), the impact of regulatory
requirements on producing or distributing certain
products (e.g., pharmaceutical regulatory requirements
in the U.S. may restrict what can be produced or
marketed if the product has a therapeutic purpose).
e.g. The General Data Protection
Regulation (EU) are policies that govern
the handling of Europeans’ personal data.
Any organization obtaining such data from
EU citizens has to abide by the GDPR
policies and regulations.
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2. Macroeconomic Environment. Strategy
alternatives need to consider the state of the
overall economy in short and long terms,
especially when considering alternatives that
involve international scope. Considerations such
as the direction of interest rates, the availability
of capital, the level of inflation, the state of the
industry sector, long-term prospects for the
Gross Domestic Product and recent trends of the
equity and bond markets may substantially
 E.g.the
Oil choice
Prices Crisis ofstrategy alternative.
impact of
2014 due to Fracking
a
Technology, directly and
indirectly, led to the
cancelation of IT projects
in the Middle East 47
3. Social Environment. Planners must consider the
social implications of a strategy alternative, especially
when considering other countries. Considerations such
as the dominant religion, prevailing attitudes on the
use of foreign products and services, the impact of
language on the diffusion of the product or service
into the local economy, the amount of leisure time
consumers have (and how they spend it), the roles of
men and women in the society, and the attitudes of
countries and people on environmental ("green")
issues can play an important part in the acceptance or
rejection of a product or service.
▪ E.g. Introna and Hayes (2011) discovered that it is socially acceptable to
share original content by non-Western international students. Sharing is
caring is a cultural trait not tolerated by plagiarism detection systems like
Turnitin, which in turn designed with copyright and intellectual property
protection.
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4. Technical Environment. Technology is critical for
competitive advantage and is a major driver of
globalization. In evaluating strategy alternatives one
needs to consider whether technology (not just IT) can
drive the development and distribution of products
faster and more cheaply; whether it can offer customers
access to products and services that are more
innovative and flexible; how distribution mechanisms
may be changed by technology (e.g., Amazon.com); or
how technology may effect improved communication
between organizations and their customers and
suppliers.
• e.g. Amazon gradually moving
towards being a platform where
suppliers and buyers complete
their transaction. Moreover,
Amazon is purchasing its on
Amazon Prime fleet of airplanes to
reach international markets.

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5. Demographic Environment. The different
stratifications of the consumer population should also be
taken into account for any strategy alternative.
Considerations such as the expected lifetimes of the
consumer, distribution of wealth, religious preference
(and its impact on product acceptance), distribution of
age groups and their preferences, birthrate trends, etc.,
can dramatically influence the success of an
organization's strategy. For example: a globalization
strategy alternative for a major toy distributor should
consider the impact of falling birth rates in western
Europe and Japan before it makes major investments in
physical infrastructure in these countries.
 E.g. According to Global Media
Insights, 90% of KSA population use
the Internet. The very high IT
penetration entails organizations to
direct their efforts towards reaching
Saudi consumers digitally.
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7. Strategy Alternatives Analysis. This
step in the IT Strategy Formulation Process
involves several discrete activities:
a) The threat posed by each one of these forces should be ranked on a scale
of 1 (weak) to 5 (strong) to determine the role each competitive threat
plays in the IT strategies identified. In general, a company whose strategy
and market position provide a good defense against the forces can earn
above-average profits even when some or all of the five forces are strong.
b) The most promising 3-4 IT strategies should be identified as those having:
1. The lowest potential vulnerabilities to the threats identified in the Competitive
Forces analysis.
2. The highest potential ability to leverage the strengths identified in the SWOT
Analysis.
3. The highest potential to close the gaps identified between the "As-Is" and "To-
Be“.
4. The highest potential to mitigate the weaknesses identified in the SWOT Analysis.

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 c) Articulating the potential costs and benefits of each of the
alternative IT strategies. This should not be an exhaustive
time-consuming exercise, but should attempt to quantify
broad dimensions of cost and benefit (and dependencies) for
each IT strategy such that reasonable conclusions can be
reached about the attractiveness of a particular approach.

d) Another technique that can be used to evaluate alternative IT

strategies is scenario planning. Scenario planning involves
mapping each gap identified in comparing the "As-Is" state of
the firm to the "To-Be" envisioned state of the firm on a 2 by 2
matrix that examines the "Probability of Occurrence" of each
scenario against its "Potential Impact to the Firm" (see Figure 2-
12).

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8. IT Strategy Implementation
Planning.
 Surveys of strategy practitioners have revealed
that less than 10 percent of effectively
formulated strategies are actually implemented

 Further analysis on the failure of CEO's concluded

that their failures were due less to the
formulation of brilliant strategies than it was to
e.g. Kodak invested millions to invent digital camera in 1975.
the lack
Senior of ability
management of their
decided not tofirms to execute
commercialize on it the
fearing to cannibalize its film roll based cameras. Fujifilm,
strategy.
the Japanese archcompetitor of Kodak, capitalized on the
potential of digital photography early on and escaped Kodak
fate, which is, bankruptcy.
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 Commitment and engagement of senior
business management. This is an absolutely
essential component and precondition for the
successful implementation of an aligned IT strategy.
Extensive studies on the enablers and inhibitors to
strategic alignment have repeatedly identified support
of senior management as the leading enabler to
achieving strategic alignment. It is equally important
to note that the absence of close relationships with IT
is the leading inhibitor to strategic alignment!
 Strategic Alignment Maturity. This concept, to be
discussed in greater detail in Chapter 3, addresses the
ability of organizations to adapt their IT and business
strategies in a harmonious fashion.
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 Adoption of Measurement Criteria. The
execution of strategy must be measurable in
meaningful business terms, and the most
effective measurement systems and criteria are
those that can measure the effects of
implementing strategy in several different
dimensions.

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9. Periodic Review. All strategies need to be
periodically reviewed to ensure that:

 The initial assumptions made about markets and external

forces are still correct, especially if the company exists in an
environment of significant uncertainty.

 Implementation plans are on schedule and meeting

established milestones.

 Measurements are being captured and reported and that

these measurements support ongoing alignment of IT
strategy with the business.

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