STRATEGIC MANAGEMENT

OF
INFORMATION TECHNOLOGY
Unit - 1

Introduction Forces that Shape Business Strategy

Forces that Shape Business Strategy, Analyzing the Impact of IT on
Strategic Decision Making IT Evolution and its Implications for Business
(Business—IT Alignment)Technology trends and models for
management of information technology. Information Systems Strategy
Formulation; CSF/KPI Theory.

NOT FOR COMMERCIAL PURPOSE

Compiled By
Abhishek Chakraborty MBA PhD.
BIT Durg

Compiled By - Abhishek Chakraborty MBA PhD. Page 1

Analyzing the Impact of IT on Strategic Decision Making

Over the years, technology has caused an explosion in commerce and trade.
Because of technology, many traditional business models and concepts were
revolutionized. Technology gave us the opportunity to see things from a new
perspective, and to approach what we were already doing from a new perspective.
Technology also gave us greater efficiency for conducting business.

Some of the areas in which technology is crucial to business include point of sales
systems, the use of ICT in management, accounting systems, and other complex
aspects of everyday business activities. Even something as simple as the calculator,
which was revolutionary in its time, came about because of technology. It is tough
to imagine going back to performing tasks manually.

Technology as a Source of Support and Security

Technology enables us to automate numerous processes, which thereby increases
our productivity. This is possible because it enables us to use fewer resources,
thereby enabling us to improve on quality at a low cost and to improve the speed

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with which we can deliver to customers. In the process, it has become possible to
serve even more clients.

Technology also makes it easy to store more information while maintaining the
integrity of that information. We are better able to store sensitive and confidential
information in a way that makes it less vulnerable to a data breach. The
information can be retrieved instantly when needed, and it can be analyzed not
only to study past trends but also to forecast the future. In turn, this can help with
the decision-making process.

Technology as a Link to the World

Communication is a part of business. So, transportation and processes make

business a web of complicated processes that interplay with each other. With
technology, it has been possible to globalize business operations. Now, just about
anyone can do business practically anywhere, from any room in their house..

Technology has made it possible for businesses to have a wider reach in the world.
The best example of this is the internet and the World Wide Web. The internet is
now a crucial part of any businesses’ marketing campaign, as it enables the
business to attract customers worldwide.

Technology, when well-integrated with business, has made life itself worth living. It
would be foolish to deny, however, that there are also threats to business brought

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about by technology. These include malicious activities by activities and
organizations, such as hacking. Because of this, it is important for businesses to
exercise responsibility when using technology to conduct business. With the good
that technology brings, there is some bad that must also be dealt with. All the
same, it is something that's worth all of the baggage, and we must acknowledge
and responsibly utilize it to make our businesses better.

How Does Information Technology Affect Business?

The Industrial Revolution changed things in the business world, making a lot of
processes more efficient and increasing productivity a hundred-fold. However, the
business world remained somewhat stagnant for a century after. With the
technological revolution, and the use of technology in business, however, things
changed even more disruptively than during the Industrial Revolution and it
would be safe to say that things will never be the same again. The rate at which
technology is evolving and adapting is exponential to the point where all
businesses are being swept by the wave, whether they are ready for it or not. It
might not seem like we’ve made that much progress, but even just 5 years ago,
social media did not have any consumerism, mobile phones weren’t used for
business, cloud-based solutions did not exist, the App Generation was not born yet,
and omni-channel marketing was taking its baby steps.

Technology has just about changed every aspect of business in a big way and this
has never happened this fast before in history. To be more specific, here are a few
ways in which information technology has affected business:

The Advent of Mobile Solutions

Mobility is seen by many as the next great frontier for businesses. Google’s
algorithms reflect this, as they make mobile websites a priority. Your business, and
every aspect of it can be handled, using nothing more than a tablet or smartphone.
From content marketing to customer relations, to sales, the back-end stuff like
invoicing and shipping , all of that power is in your hands.

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But mobile solutions aren’t just about businesses; they are also about consumers.
The millennial generation uses their phones to do everything from buying and
selling to sharing their experiences with their friends and finding local businesses.

The Phenomenon of Cloud Computing

Cloud computing has made it possible for businesses to outsource many of their
functions to third parties using the internet. It makes it possible for variable data
packages to be handled but also makes it possible for businesses to expand rapidly
and embrace mobility without having to worry about such things as crashes,
downtime, and lost data. This has enabled small and medium-sized businesses to

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gain access to resources that would have cost them a fortune only a few years ago.
In effect, the playing field has been leveled.

Increased Customer Segmentation

Since more and more data is flowing, it is now much easier to analyze and gain
deep insight into the things that customers are looking for. Analytics services are
expanding by the day and are allowing businesses to segment their prospects into
more and more specific groups, making it much easier to target them and get more
value for their advertising money. Something as simple as having a Google
account can let a business know where a user is from, the kind of browser they’re
using, how they stumbled upon a website, What they do on that website, how long
they are likely to stay and at what point they decide to leave. There are even more
advanced analytics services that allow businesses to become even more refined with
this segmentation in order to improve their conversions drastically.

Increased Connectivity
Technology has made it easier for people to stay in touch. Whether you’re looking
to communicate with your employees and colleagues via video chat or sending
email blasts to leads, mobile technology and the constant innovation that takes
place within the space has made it possible for communication to take on a new
level of hyper-realism.

Decreasing Costs and Increasing Utility

There are two main things that have come together to make what is called a
“buyer’s market” possible. These are the fact that both hardware and software that
are needed in creating the necessary software solutions have become more
affordable and the fact that more and more entrepreneurs who are also tech-savvy
are appearing by the day to make use of these technologies. There was a time when
it would take a large company about a year to build a back-end inventory system.
Now it takes a few college graduates a matter of weeks to build the same thing.
Since the solutions are offered affordably and very easy to use, businesses do not
have to invest too much money into them and that has made business easier.

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A Changing Consumer Base
Millennial have come of age and they are now the force driving the modern
economy. Pretty soon, over half the American workforce will consist of millennial
and pretty soon they will also be coming into their peak affluence, where they will
have a lot of money to spend and very few financial obligations, give them a lot of
disposable income. They are greater in number than the baby boomers and are a
lot more liberal with their wallets. They are also all about instant gratification.
They have also been raised with the internet. They are connected, tech-savvy, and
ready to spend. Businesses have to adapt to this new customer base if they are
going to thrive.

Greater Consideration for the Social Impact of Business

You can’t just assume your business operates in a vacuum anymore. Social
networking has made the world a smaller place where users can connect regardless
of who they are, where they’re from, and how wealthy they are. Only a few years
ago you could have gotten by if your customer service was just okay. Now you have
to put in the extra effort if you don’t want unfavorable ratings on review sites and
people going on rants on social media about your service. Businesses, therefore,
need to be careful about their online reputation and need to work on their digital
footprint.

The End of Downtime

This is actually a negative effect of technology. With increased connectivity,
individuals have less and less time to themselves now. Vacation seems to have all
but become a thing of the past, with most people working even when they’re on
vacation. Since we can always access our emails, texts, and social media through
our phones and laptops, it is harder and harder to just disconnect and wind down.

Why Is Information Technology Important to an organization?

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It might be a little difficult to fathom the importance of information technology to
an organization if you’re not an IT professional. However, there are numerous ways
in which information technology is crucial to an organization .

Business : The business world changed forever when computers were

introduced onto the scene. Businesses can utilize information technology through
the use of computers and different software to run their operations in a smoother
fashion. They use it in different departments, including finance, manufacturing,
human resources, and security.
Education : Education is one of the frontiers of technology and is growing with
technology every day. It’s important that education be able to keep up with the
progress happening in technology by reaching students in a way that adequately
helps them to prepare for the future. The students in our classrooms today are
meant to be the thought leaders, business people, teachers, and investors of
tomorrow, so technology should be used to prepare them. This includes the use of
gadgets in teaching, such as computers, mobile phones, and tablets, as well as the
use of the internet as a medium of learning.
Finance :With an increasing number of transactions happening online, it is
important that financial and security institutions work together to make the
internet a safe place. As more transactions are done on the internet, there will be a
need for more networks and greater security, making it possible for banks to keep
purchases and sales secure.
Health :With improvements in information technology, it is becoming easier to
reform the health sector. Medical offices are now able to share medical information
with each other, and they can get your health data from your previous doctors. This
makes it possible for timely care to be delivered, as well as for costs to be reduced.
Security :With an increasing number of transactions being done online, there is
an ever-increasing need for safety. Information technology is what makes it
possible to keep your data and information safe and only accessible by you.
Through the use of encryption and passwords, your digital data is safely hidden
away and can only be accessed by those who have your permission.

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21st century has been defined by application of
and advancement in information technology.
Information technology has become an integral part of our daily life. According to
Information Technology Association of America, information technology is
defined as “the study, design, development, application, implementation, support or
management of computer-based information systems.”

Information technology has served as a big change agent in different aspect of

business and society. It has proven game changer in resolving economic and social
issues.

Advancement and application of information technology are ever changing. Some

of the trends in the information technology are as follows:

1. Cloud Computing

One of the most talked about concept in information technology is the cloud
computing. Clouding computing is defined as utilization of computing
services, i.e. software as well as hardware as a service over a network.
Typically, this network is the internet.

Cloud computing offers 3 types of broad services mainly Infrastructure as a

Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS).

Some of the benefit of cloud computing is as follows:

 Cloud computing reduces IT infrastructure cost of the company.

 Cloud computing promotes the concept of virtualization, which enables
server and storage device to be utilized across organization.
 Cloud computing makes maintenance of software and hardware easier
as installation is not required on each end user’s computer.

Some issues concerning cloud computing are privacy, compliance, security,

legal, abuse, IT governance, etc.

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 2. Mobile Application

Another emerging trend within information technology is mobile

applications (software application on Smart phone, tablet, etc.)

Mobile application or mobile app has become a success since its introduction.
They are designed to run on Smartphone, tablets and other mobile devices.
They are available as a download from various mobile operating systems like
Apple, Blackberry, Nokia, etc. Some of the mobile app are available free
where as some involve download cost. The revenue collected is shared
between app distributor and app developer.

3. User Interfaces

User interface has undergone a revolution since introduction of touch screen.

The touch screen capability has revolutionized way end users interact with
application. Touch screen enables the user to directly interact with what is
displayed and also removes any intermediate hand-held device like the
mouse.

Touch screen capability is utilized in smart phones, tablet, information kiosks

and other information appliances.

4. Analytics

The field of analytics has grown many folds in recent years. Analytics is a
process which helps in discovering the informational patterns with data. The
field of analytics is a combination of statistics, computer programming and
operations research.

 The field of analytics has shown growth in the field of data analytics,
predictive analytics and social analytics.
 Data analytics is tool used to support decision-making process. It
converts raw data into meaningful information.

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  Predictive analytics is tool used to predict future events based on
current and historical information.
 Social media analytics is tool used by companies to understand and
accommodate customer needs.

The every changing field of information technology has seen great

advancement and changes in the last decade. And from the emerging trend,
it can be concluded that its influence on business is ever growing, and it will
help companies to serve customers better.

Advancement in communication and information technology has further

strengthen the role of the internet in business. The internet is widely used in
organization for marketing and promotion of products and services. The internet is
used to deliver customer support, share information and provide training to
employees.

With the internet becoming a powerful tool for employees, the impact on business
is undeniable.

Internet and Porter’s Five Force Model

Porter’s five force model is a framework for industry analysis, business strategy
development and study competition. The five forces of the model are the threat
from upcoming and future competition, threat from existing substitute, bargaining
power of consumers, negotiating power of suppliers and threat of competition.
Internet has great Impact on all five force of the model:

Threat of new entrants: The internet has considerably lowered entry barrier in
setting up new enterprise. The setting up of a new company does not require much
capital investment, for example, online retail sites, etc. Ever increasing competition
has lowered the margins.

Threat of new substitute: The Internet has reduced the product life cycle; shelf life
of products and encouraged innovation is customer serving.

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Bargaining power of customers: The internet has made the customer well informed
about products and available substitute. Companies have to be careful in
presenting differentiation and pricing.

Bargaining power of suppliers: Suppliers are well informed about happening in the
industry thanks to the internet.

Threat of competition: The internet has made transparency and honest important
factor in success of the company. Customers tend to know more about the
company. The internet has lowered the cost of searching new available products.

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 Internet and the way business is conducted

The internet has changed the face of business. It has opened up new avenues of
conducting business. Below are some impacts of the internet on business:

 Communication: communication technology combined with the internet has

given a new dimension to connectivity and dispersion of information.
Employees are in constant touch through email, instant messaging, office
intranet, etc.

 Collaboration: The internet has facilitated collaboration among employees of

organization. Geographical boundaries no longer hamper project work and
sharing of information.

 Business Transaction: The internet has encouraged the culture of online

business or e-commerce. In recent years many players have opened shops
through e-commerce. Internet banking, payment gateways, etc. are part of
normal supply chain transaction.

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  Work Flexibility: The internet has enabled workers to log in from remote
location and home. It has helped on the move employees by remaining in
touch with happenings of work.

 Web based application: The internet has facilitated the development of concept
like cloud computing, which has enabled process and storing of data in large
proportion. The internet has helped reduce infrastructure cost of the company.

The internet thus has made a big impact in the way the business gets conducted in
both positive as well as a negative way. The internet has made many business
obsolete example post offices. Online security issues like hacking, identity theft, etc.
are a constant threat to internet users.

What is a KPI?
A key performance indicator (KPI) is a measurable value that demonstrates
how effectively a company is achieving key business objectives. Organizations use
KPIs to evaluate success at reaching targets. High-level KPIs may focus on the
overall performance of the business, while low-level KPIs may focus on processes
across departments like sales, marketing, HR, or support.

Definition of a Key Performance Indicator (KPI)

KPI, or a key performance indicator, are measurable values used to evaluate how
successful a person or organization is at reaching a target. You can have high-level
KPIs that look at the performance of your business, or KPIs that drill down into
processes at the individual or departmental level, too.

"A quantifiable measure used to evaluate the success of an organization,

employee, etc. in meeting objectives for performance."- Oxford's
Dictionary

"A set of quantifiable measurements used to gauge a company’s overall

long-term performance."- Investopedia
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"A way of measuring the effectiveness of an organization and its progress
towards achieving its goals."- Macmillan Dictionary

How to create a KPI:

1. Establish a clear objective.

If a goal of the business is to be the 'market leader', then a KPI objective maybe
to 'increase revenue by 10% this financial year' or 'Expand our product lines to
20'. State clearly, and in simple terms the purpose of the KPI. This provides
guidance for anyone viewing the KPI to interpret the data in the correct
context.
2. Outline the criteria for success.
What will the target be? Is it attainable? when should it be accomplished? and
how will progress be monitored? Targets should be realistic, changes to
business processes take time to implement. In the initial stages of KPI
monitoring it's best to focus on long-term targets with midterm monitoring.
3. Collect the data.
Investigate the availability and accuracy of the data. Data may be available
automatically from existing systems or hidden in reports and databases. This

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 data will all need to be pulled together at regular intervals for reporting in one
central place.
4. Build the KPI formula.
Some KPIs contain but a single metric or measure. However most rely on a
combination brought together under a single calculated formula. For example,
a KPI that measures productivity in revenue by machine would look like this:
Total Revenue divided by the total number of machines. Build formulas and
create calculations with test data to see if the results are what you would
expect.
5. Present your KPIs.
To efficiently communicate your KPIs you'll need to translate the data into
understandable visuals such as graphs and charts. Dashboards for Operational
KPIs, or Reports for Strategic KPIs offer a convenient way to create, track and
distribute your KPIs.

Managing with the use of KPIs includes setting targets (the desired level of
performance) and tracking progress against that target. Managing with KPIs often
means working to improve leading indicators that will later drive lagging benefits.
Leading indicators are precursors of future success; lagging indicators show how
successful the organization was at achieving results in the past.

Every organization needs both strategic and operational measures, and some
typically already exist. Figure 2 depicts strategic, operational and other measures as
described below:

1. Strategic Measures track progress toward strategic goals, focusing on

intended/desired results of the End Outcome or Intermediate Outcome. When
using a balanced scorecard, these strategic measures are used to evaluate the
organization’s progress in achieving its Strategic Objectives depicted in each of
the following four balanced scorecard perspectives:

 Customer/Stakeholder
 Financial

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  Internal Processes
 Organizational Capacity

2. Operational Measures, which are focused on operations and tactics, and

designed to inform better decisions around day-to-day product / service
delivery or other operational functions

3. Project Measures, which are focused on project progress and effectiveness

4. Risk Measures, which are focused on the risk factors that can threaten our
success

5. Employee Measures, which are focused on the human behavior, skills, or

performance needed to execute strategy

6. An entire family of measures, including those from each of these categories,

can be used to help understand how effectively strategy is being executed.

Critical Success Factor

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Critical Success Factors (CSFs) are every bit as important and straightforward as they
sound! They are the areas of your business or project that are vital to its success.
They also give your people focus, and ensure that tasks and projects are aligned
across teams and departments. In this article, we explore how to identify your CSFs,
how they should relate to your business objectives.

The Four Main Types of Critical Success Factors

Rockart identified four main types of CSFs that businesses need to consider:

1. Industry factors result from the specific characteristics of your industry. These are
the things that you must do to remain competitive within your market. For
example, a tech start-up might identify innovation as a CSF.
2. Environmental factors result from macro-environmental influences on your
organization. For example, the business climate, the economy, your competitors,
and technological advancements. A PEST Analysis can help you to understand
your environmental factors better.
3. Strategic factors result from your organization's specific competitive strategy.
They might include the way your organization chooses to position and market
itself. For example, whether it's a high-volume, low-cost producer; or a low-
volume, high-cost one.
4. Temporal factors result from your organization's internal changes and
development, and are usually short-lived. Specific barriers, challenges and
influences will determine these CSFs. For example, a rapidly expanding business
might have a CSF of increasing its international sales.

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