Hoorcollege 4 Flashcards
Business strategy
A business model is basically the strategy you make around your innovation. The strategy of
the organization is quite similar. But a strategy is about:
- The future direction and actions of a company
- Approaches to achieve specific objectives
- Fundamental choices about your organization
- Fit between organization & strategy
Difference business strategy and business model
Strategy:
-Future direction and actions of a company
-Approaches to achieve specific objectives
-Fundamental choices
-Fit between organization & strategy
Model:
-Value proposition: customer needs
-Economic value
Strategy: Complex environment
A strategy is important for the company because a strategy is very complex. There are internal and external stakeholders:
- Internal stakeholders
Employees, owners, board of directions, etc. - External stakeholders (the task environment)
Customers, competitors, media, governments, etc.
The task environment affects the current workings and the
immediate future of the organization. - External stakeholders (the general environment)
Economic force, technological force, international force, etc.
The more general factors affect the task environment and therefore affect the
organization.
In order to define the strategy, the organization must take a lot of factors into account. All the things mentioned above, are influences defining a strategy.
Strategy
The definition of the future direction and actions of a company defined as approaches to specific objectives.
Mission
A statement of what a business wants to achieve and what business it is in reasons for being and in addressing stakeholders.
Vision
The image of the future direction. This is derived from the mission and an input for strategy.
Strategy: Strategic process
Mission and vision are often intertwined and not separated in mission/vision statements.
However, the main goal of every organization is to keep on existing. The mission and vision statements are basically what you do as an organization.
On top is the mission and vision statements, that is basically what you do as an organization. From that, an organization derives its strategic objectives. And from that the goals and objectives are derived. It can also be the other way around.
Mission and vision statements are important because it says something about what the company is and what they want to become. This leads to strategy and goals & objectives.
Examples of mission and vision statements are:
- Apple:
The statement is to bring the best user experience to its customers through its innovative hardware, software, and services. - Ahold/Delhaize:
The statement is to lead together, to eat well, save time and to live better. - Google:
The statement is to organize the world’s information and make it universally accessible and useful. Also, to provide access to the world’s information in one click.
Strategy: Emergent
Finally, the story discussed now is the perfect story
In reality, the strategy is influenced by a lot of factors. That is what we call an emergent strategy.
Strategy: Why important for innovation & IT
If you take the mission and vision (which leads to strategy and goals & objectives) a step further, the innovations a
company wants to make also depend on the general strategy and mission and vision statements.
IT/Innovation strategy (IS)
IS/IT strategy:
A portfolio of IS to be implemented, which is both highly aligned with business strategy and may have the ability to create an advantage over competitors. (Based on Ward and Peppard, 2002, p. 118)
The organizational strategy is input for what you are going to do with the IS strategy. An IS
strategy is highly aligned with the business strategy and may have the ability to create an advantage over competitors. You can think of three different ways:
-Business aligning
-Business impact
-Interaction model
Business aligning
You have a general strategy for the organization in the
coming years, from that you derive what you should do with the technology. For example, an organization wants to
improve their customer service and they will use technology to do that.
Business impact
You observe changes in technology, which forces you to redefine the strategy of the organization. The technology impacts the strategy of the organization. For example, every newspaper now has a strategy for how to deliver newspapers online. Technology has redefined the newspaper organization.
Interaction model
In reality, the most IS-strategies of organizations are an interaction model between the first two options. Sometimes, organizations observe a technological change and
sometimes organizations determine their strategy.
General tools to think about the strategy of the organization
There are general strategic tools:
- PEST(EL) analysis
- Porter’s five forces
- Porter’s competitive strategies
- Tracy & Wiersema Value Disciplines
- SWOT analysis
- Balanced scorecard
- McFarlan’s strategic grid (specifically for IT)
These tools can be used to develop an innovation strategy, but they can also be used to define an IT strategy.
Why use the general tools?
Developing an innovation strategy
-Matching the innovation with the organization’s strategy
-Developing new innovations
Defining an IT strategy
-Matching IT with the organization’s strategy
-Investing in new technologies
PEST(EL) analysis
This is a tool to think about what kind of business an organization is in, what kind of
innovations an organization has, and with what factors an organization has to take into account. PESTEL is an abbreviation for:
- P → Policy
Political factors such as political stability, tax policy, trade restrictions. - E → Economy
Economic factors such as economic growth/depression, interest rates. - S → Socio/demographic
Socio/demographic factors such as age distribution, cultural barriers, health
consciousness. - T → Technology
Technological factors such as the level of innovation, automation, R&D activity. - E → Environment
Environmental factors such as weather, climate, climate change. - L → Legal
Legal factors such as laws, consumer protection, copyright, safety.
Porter’s five forces
Porter defined five forces that can affect an organization. Organizations must think about how to counter these forces.
The five forces are:
- Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Rivalry among existing competitors (competitive rivalry)
How to counter existing threats (Porter’s five forces)
There are many existing threats for each of these five forces. It is important for organizations to think about how to counter these forces. Possible counters are:
- Bargaining power of suppliers → Connect systems
Make connections with your suppliers. - Competitors → Innovate to become better, cheaper, etc.
- Bargaining power of buyers → Lock-in buyers
Make sure customers only buy products of your organization (e.g., Apple).
Porter’s generic competitive strategies
This is a way to classify the type of business your
organization is in. As you can see right, there are 4 business distinguished. Normally, there are three strategies distinguished:
- Cost
Aiming at having the lowest cost (and be the
cheapest) across the industry. In terms of
supermarkets, this would be Aldi. - Differentiation
The main strategy is to be better than the competitors. In terms of supermarkets this would be Albert Heijn. - Focus
The organization wants to focus on a specific industry segment or a specific customer group.
Tracy & Wiersema’s value disciplines
This model is the same as Porter’s generic competitive strategies. However, this model says you have to focus on all
three strategies (Cost, Differentiation, Focus) a bit (threshold value). You have to do that to be the best in one of the three categories (leadership value).
SWOT analysis
SWOT is an abbreviation for:
- S → Strengths
- W → Weaknesses
- O → Opportunities
- T → Threat
Balanced Scorecard
Developed to…
-Translate strategic objectives into concrete
projects
-Set clear objectives, measures, targets &
initiatives
-Not only focus on financial aspects of strategic
objectives
Can be used to initiate innovation and IT projects
based on strategy or assess innovation and IT
projects.
McFarlan’s strategic grid
McFarlan’s Strategic Grid is a framework that helps organizations evaluate the strategic importance of their IT projects and systems. It categorizes IT initiatives based on their impact on current operations and their potential to shape future strategy. Developed by F. Warren McFarlan in the 1980s, the grid provides a way to prioritize IT investments and align them with business objectives.
Different IS have different role in different organizations:
-Organization A ≠ organization B
-Situation at time x ≠ situation time y
-IS management and use differ
-Role IS differs → Do not generalize
Examples:
-Online purchasing 1995 vs. online purchasing now
-Social media advertising for Facebook vs social media advertising for
Heineken
