Information System Information Technology IS/IT strategy aims to align the external and internal factors with the fast changing environment. An Organisation without any clear strategic plan can and will be adversely impacted in today's economic climate, resulting in sub-optimal performances. "Innovation is the central issue in economic prosperity" Dr Michael Porter.
Several articles I have read indicates, markets crashing daily, and reports of corporate failure. One can only hope for survival, very few companies will survive the impact of increasing cost, little or no growth and the changing demand.
Economic downturns are the external factors that have a powerful influence on the business strategy. The changes will affect current situations. "Change brings opportunities. On the other hand, change can be confusing". Dr Michael Porter.
During an economic downturn there are many challenges and many opportunities. Creating more opportunities than challenges will be the mandate of the IS/IT plan. For some companies depending on the size and strength of the company the strategic plan will be different. The timeframe for strategy formulation will vary. Current and sustainable developments must always be part of an IS/IT plan. The company's existing plans will be reviewed and a short term plan will have to be created from the long term plan. The first step is the overall business plan as it relates to the external environment. (See W & P pg. 283)
1.3 Challenges
1.3.1 Growth: During a recession, resources are limited and the issue will be to expand in geography or increase productivity, to meet different segments. .( W & P pg.261)
1.3.2 Cost Control: For some companies the main focus will be to reduce cost within an organisation for it's survival. Senior management will look for ways to trim excessive spending. The first and sometimes largest budgets are that of IS/IT projects, however the budget reduction must be done to improve the situation not hurt it more. As explained by Dr. Mike Teng " The key here is how the costs can be cut to restore financial health in the short term without hurting the ailing company in the long term". "Sometimes cost reduction can be achieve by streamlining procedures and processes"
1.3.3 Innovation : The IS/IT strategy will have to change in order to stream-line certain projects. Research and Development will be side lined, priority will be given to other IT related cost reduction projects. The introduction of new products, services and processes to transform the business with competitive forces within the industry. (W&P pg.261)
1.3.4 Restructuring: Organisation restructuring, down-sizing, business process re-engineering and strategy review will be a huge task the company must implement. The changes should start with the existing business strategic plan. Implementing direction change should be a part of the existing plan, to effectively make the transition easier, If not more effort for change will be required.
1. 4 Opportunities
IS/IT strategies creates opportunities for companies to increase sales, gain a competitive advantage , Improve the customers experience with value add services. IS/IT strategies aligns the business needs to priorities for investments. (see W& P pg.119) .
Researches have shown the impact of a recession, has increased the need for IS/IT projects. According to (Keystone Strategy) 2005: IT Drives Growth. "They suggests that depending on how well equip the company is with Information Technology (IT), it will become the one of the more important factors for increasing profitability".
1.5 Using technology to promote growth:
Base on articles and case studies reviewed, companies have used Information Technology (IT) to enhance their productivity. "IT is critical to a firm's growth because it enables firms to scale: an ability to manage, increases in the complexity of their business processes, organization, and business model". (Keystone Strategy 2005).
Another case reviewed was American Airlines, This company used an IS/TS strategy to increase their profit margins and diversify the core business. American Airlines is the world's largest airline.
American Eagle and the American Connection® airlines serve 250 cities in over 40 countries with more than 4,000 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's award-winning Web site, AA.com, provides users with easy access to check and book fares, plus personalized news, information and travel offers.
American Airlines is a founding member of the one world® Alliance, which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any other airline can provide on its own through the company's website.
Sabre, a computer reservation system developed by American Airlines, evolved into a Global Distribution System (GDS) that became the primary channel for travel suppliers like airlines, railways, car rental companies and tour operators to distribute their travel offerings to customers. Sabre's evolution presents the changes brought about by the internet in a Sabre's operating environment and examines the strategies adopted by the company to remain competitive.
1.5.1 Increasing Profitability with the use of IS/IT strategy was Schneider National Inc. success story, which was due to the company producing a supply chain management technology, managed services, engineering services and freight payment. Schneider National Inc.. Implemented strategic information systems.
This company's Internal strategy focused on the organisation core operations and management that depended on IS/IT to function. They applied IT to the business opportunities; which enabled them to keep ahead of the competition. The use of new technology redesigns the operation.
1.6 Adapting to the Current Developments
All companies should have a review of their business strategic plans at specific time frames, in order to achieve flexibility of current developments, in the external and internal business environment. Making changes according to the framework portfolio, when done properly the business can take advantage of threats and less missed opportunities.
Planning is continuous and continuing process. (W & P pg. 297)This will allow the company to understand the relationships between its core competencies, competitive advantage and corporate success. In an economic downturn companies senior management are looking for ways to trim excessive spending, The main focus is on budget cut and maximizing the bottom line
One of the top SMEs of Sinapore explains, Mr. Chen Yew Nah, Managing Director of the DP Information Group, stated "the increase in turnover of best performing SMEs in Singapore shows that most small businesses have displayed remarkable skill and dexterity in restructuring their business in order to weather the tough times".
1.7 Tools and Technique used in a framework
There are many tools and techniques to analyse the situation, that can be used to understand the industry and the impact on the implementation of IS/IT strategies. There are the SWOT, and the value chain system analysis methods that can be used to assess the business. The SWOT, Strengths, Weaknesses, Opportunities and Threats. This analysis is an important tool for auditing the company's overall strategic position in its market environment The value chain analysis; Dr Porter classifies the activities in five grouping. Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business The template consist of five primary activities and four support activities. The nine activity groups are:
By subdividing an organisation into its key processes or functions, Porter was able to link classical accounting to strategic capabilities by using value as a core concept, i.e. the ways a firm can best position itself against its competitors given its relative cost structure, how the composition of the value chain allows the firm to compete on price, or how this composition allows the firm to differentiate its products to specific customer segments using the same logic it can be applied to any type of business. (W & P pg.264) (See appendix 1)
To create the difference in an economic downturn, the organisation is dependant on management approach to the framework formulation for the tools and technique available. The applications of the strategy as planned. The IS/IT strategy will need to be revised to know if it is still relevant to the current situation. Managements must be accurate in the formula. The entire strategy should not have to be changed, (W & P pg. 297). According to Dr Porter , "the underlying principles of strategy are enduring, regardless of technology or the pace of change".
In conclusion my observation is not to change your IS/IT strategy according to external forces but change your strategy to work indirectly with the business strategy. The success of the IS/IT strategy will depend on the re-alignment to assist the business to achieve its objectives.
Many companies will try to survive and may not make it, while in other cases the difference is made by the approach of the management. Rapid decision to minimize threats and capitalize on opportunities will be the requirement for survival.
1.8 APENDIX
This diagram displays Porter's strength to condense this activity based cost analysis into a generic template consisting of five primary activities and four support activities. The nine activity groups are:
Primary activities:
1. inbound logistics: materials handling, warehousing, inventory control, transportation;
2. operations: machine operating, assembly, packaging, testing and maintenance;
3. outbound logistics: order processing, warehousing, transportation and distribution;
4. marketing and sales: advertising, promotion, selling, pricing, channel management;
5. service: installation, servicing, spare part management;
Support activities:
6. firm infrastructure: general management, planning, finance, legal, investor relations;
7. human resource management: recruitment, education, promotion, reward systems;
8. technology development: research & development, IT, product and process development;
9. procurement: purchasing raw materials, lease properties, supplier contract negotiations.
1.9 BIBLOGRAPHY
Keystone Strategy is a global research organization formed by professors from the Harvard University Business School
(http://www.microsoft.com/midsizebusiness/businesssummit/keystone.mspx)
http://www.keystonestrategy.com/pdf/IT_Matters_Enterprise.pdf
http://www.articlesnatch.com/Article/Cost-Control-Is-An-Important-Antidote-In-Corporate-Turnaround/104478 Article written by Dr Mike Teng author of "Corporate Turnaround"
Readings: http://www.adb.org/default.asp access on 15/5/2010
www.cioinsight.com/c/a/IT-Management/10-MustListen-Podcasts-for-CIOs/?kc=GOOCIO02042009POD1&gclid=COHAjouDhaICFQdS2godfEK6DQ
http://www.articlesbase.com/business-articles/best-performing-singaporean-smes-successful-in-beating-recession-1797335.html#ixzz0pq1AxjA6
http://www.aa.com/i18n/amrcorp/corporateInformation/facts/history.jsp
http://www.sabre-holdings.com/aboutUs/history.html
http://www.schneider.com/About_Schneider/index.htm
http://www.DHPinformationgroup.com
http://blogs.hbr.org/hmu/2009/01/how-to-manage-your-business-in.html Harvard Business Review site access on the 3/6/2010
