Information Technology for Competitive Advantage 1

CHAPTER 2

Information Technology for

Competitive Advantage

Outline
Introduction
Firm in Its Environment
Competitive Advantage
What are the Information Resources?
Who Manages the Information Resources?
Strategic Planning
Strategic Planning for Information Resources
End-User Computing as a Strategic Issue
Information Resources Management Concept
Summary
Key Terms
Key Concepts
Questions

Learning Objectives
After studying this chapter, you should be able to

Understand the relationship between a firm and its environment.

Be familiar with a popular view of competitive advantage.
Appreciate that competitive advantage can be achieved by managing the information flows that
connect the firm to all environmental elements.
Know what the information resources are, and who manages them.
Understand the meaning of the chief information officer concept.
Be aware that the firm's executives chart its course through its competitive environment by
engaging in long-range, strategic planning.
Appreciate why it is so important that the top-level managers in each functional area cooperate
while developing their own strategic plans.
Have an idea of the content of a firm's strategic plan for its information resources.
Know the ingredients that comprise the modern concept of information resources management.
2 Management Information Systems

Introduction
In seeking success, managers are especially aware of the influence of the firm's environment. The firm is
connected to the elements in its environment by flows of both physical and conceptual resources. Firms
attempt to gain a competitive advantage by managing the resource flows, including those of information.
The most complete descriptions of competitive advantage strategy focus on the incoming flows from
suppliers and the outgoing flows through distribution channels to customers.

The firm's information resources include more than the information. They also include hardware, facilities,
software, data, information specialists, and users of the information.

Managers on all levels engage in planning, but the plans of the top-level managers extend far into the
future. These strategic plans identify what the firm is to achieve five, ten, or more years in the future and
spell out how these objectives are to be met. After the executives prepare the strategic plan for the firm,
similar plans are made for each of its functional areas. Functional strategic plans describe how each of
these areas will contribute to the achievement of the firm's objectives.

The activity of identifying the information resources that the firm will need in the future, acquiring those
resources, and managing them is called strategic planning for information resources (SPIR). SPIR is a
responsibility of all managers, but the manager of the information services organization plays the key role.
The title CIO, for chief information officer, has become increasingly popular to describe the information
services manager.

Of all the recent innovations in computer use, none has had a greater impact than end-user computing. End
users are now developing many of their own applications. This trend will continue and will produce overall
benefits for the firm, although not without some serious risks. The risks can be minimized through proper
management controls.

When the firm's managers recognize information as a strategic resource, establish policies to apply that
resource in a strategic way, and follow up to ensure that the policies are carried out, the activity is called
information resources management, or IRM. IRM is a concept that integrates the other concepts of
competitive advantage, CIO, SPIR, and end-user computing. As such, IRM provides a framework for
effective computer use.

Firm in Its Environment

We have seen that a firm is a physical system, which is managed through the use of a conceptual system.
The physical system of the firm is a closed-loop system insofar as it is controlled by management, using
feedback information to ensure that the objectives are met. The firm is also an open system in that it
interfaces with its environment. A firm takes resources from its environment, transforms the resources into
products and services, and returns the transformed resources to its environment.

The environment is of great importance to the firm. The environment is the very reason for the firm's
existence. The firm's owners see a need to provide products and services to meet specific environmental
needs, and they invest money so that the firm can perform this activity. The environment then provides the
resources that are required to produce the products and services.

Environmental Elements
The environment of one firm is not exactly the same as the environment of another. A bank has a different
environment than does a sporting goods store or a church, for example. However, we can lend some order
to this variability by identifying eight major types of elements that exist in the environments of all firms.
These environmental elements are organizations and individuals that exist outside the firm and have a
direct or indirect influence on the firm. These eight elements exist in a larger system called society. Figure
2.1 depicts the firm in its environmental context.
 Information Technology for Competitive Advantage 3

Society

Government
Financial Global
community community

Suppliers The Customers

firm

Labor
unions Competitors
Stockholders
or owners

Figure 2.1 Eight Environmental elements

Suppliers, also called vendors, supply the materials, machines, services, and information that are used by
the firm to produce its products and services. These products and services are marketed to the firm's
customers, which include both current and prospective users. Labor unions are the organizations of both
skilled and unskilled workers. The financial community consists of institutions that influence the money
resources that are available to the firm. Examples include banks, savings and loan associations, credit
unions, and other lending institutions and investment firms. Stockholders or owners are the persons who
invest money in the firm and represent the highest level of management. Competitors include all of the
organizations that compete with the firm in its marketplace. The government, on the national, state or
province, and local levels, provides constraints in the form of laws and regulations, but it also provides
assistance in the form of purchases, information, and funds. The global community is the geographic
area where the firm performs its operations. The firm demonstrates its responsibility to the global
community by respecting the natural environment, providing products and services that contribute to quality
of life, and conducting its operations in an ethical manner.

Environmental Resource Flows

The firm is connected to these environmental elements by means of resource flows. The resources include
personnel, material, machines, money, and information. Resources flow to the firm from the elements,
through the firm, and back to the elements. All resources that enter the firm from the environment eventually
return to the environment.

Some of the resources flow more frequently than do others. Very common flows include information flow
from customers, material flow to customers, money flow to stockholders, machine flow from suppliers, and
personnel flow from labor unions. Less frequent flows include money flow from the government (for
research, for example), material flow to suppliers (returned merchandise), and personnel flow to
competitors (employees "pirated" by other firms).

Not all resources flow between the firm and all environmental elements. For example, machines normally
do not flow from the firm to stockholders, money should not flow to competitors, and material should not
flow to labor unions. The only resource that connects the firm with all of the elements is information.

Competitive Advantage
An environment-related term that emerged during the late 1980s is competitive advantage. Competitive
advantage can be achieved in many ways, such as by providing products and services at a low price,
4 Management Information Systems

providing products and services that are better than those of the competitors, and meeting the special
needs of certain market segments. In the computer field, competitive advantage refers to the use of
information to gain leverage in the marketplace. The idea is that the firm does not have to rely entirely on
superior physical resources when engaged in competition. Rather, superior conceptual resources -- data
and information -- can be used as well. The firm's managers use conceptual as well as physical resources
in meeting the strategic objectives of the firm.

Porter's Value Chains

Harvard professor Michael E. Porter is the person who is most often identified with the topic of competitive
advantage. His books and articles have provided guidelines and strategies for firms attempting to gain an
advantage over their competitors .

Central to Porter's theory is the concept of margin. Margin is the value of the firm's products and services,
as perceived by the firm's customers, less the costs. Firms create value by performing activities, which
Porter calls value activities. Value activities fall into two major categories -- primary and support. Primary
value activities are those associated with producing and offering greater value to their customers than do
their competitors. Value can be produced by delivering products and services to customers and by
providing support after the sale. Manufacturing and sales activities are good examples. Support value
activities provide the inputs and the infrastructure that allow the primary activities to take place. The firm's
stockholder relations department, marketing research group, and accounting department are examples of
organizational units that perform such support activities.

The primary and support value activities are integrated by linkages to form a value chain, as illustrated in
Figure 2.2. The chain is shaped like an arrow, with margin as its tip. The primary activities are shown on the
lower layer and include inbound logistics that obtain raw materials and supplies from suppliers, the firm's
operations that transform the raw materials into finished goods, outbound logistics that transport the goods
to customers, marketing and sales operations that identify customer needs and obtain orders, and service
activities that maintain good customer relationships after the sale.

Firm infrastructure
activities
Support

Human resource management

Ma
r gi
Technology development
n

Procurement
Ma

Inbound Operations Outbound Marketing Service

r gi

logistics logistics & Sales

n

Primary activities

Figure 2.2 A Value Chain

The support value activities appear on the upper layer and include the firm infrastructure -- the
organizational setting that influences all of the primary activities in a general way. In addition there are three
activities that can influence the primary activities separately or in some combination. Human resources
management consists of all those activities related to managing the firm's personnel, including those
functions that managers perform and the roles that they play. Technology development includes all
 Information Technology for Competitive Advantage 5

activities that involve technology, including the application of that technology in an effective manner. The
development of computer-based information systems is an example. Procurement is concerned with
obtaining such resources as material and machines, which are used by the primary activities. The firm's
purchasing department performs many of these procurement activities.

Each value activity, whether it be primary or support, contains three essential ingredients -- purchased
inputs, human resources, and technology. Also, each activity uses and creates information. For example,
information specialists in the information services unit combine purchased commercial databases, leased
computing equipment, and custom-developed programs to produce decision-support information for the
firm's executives.

Value Systems
Ten or twenty years ago it might have been adequate for management to concentrate on creating the firm's
value chain. Today, however, management is alert to additional advantages that can be achieved by linking
the firm's value chain to those of other organizations. The linkage of value chains of multiple firms is called
a value system.

Figure 2.3 illustrates Porter's view of a value system. A firm can link its value chain to those of its suppliers
by implementing systems that make input resources available when needed. An example is a just-in-time
(JIT) agreement with a supplier to ship raw materials so that they arrive just hours before they are to be
used in the production process, thus minimizing storage costs. A firm can also link its value chain with those
of its distribution channel members. An example is an airline that allows travel agents to access the airline's
computerized reservation system to make it easier for the agents to book passengers on the airline's flights.

Firm Value
Supplier chain Channel Buyer
value chains Value chains Value chains

Figure 2.3 A Value System

When the buyers of the firm's products are also organizations, their value chains can also be linked to those
of the firm and its channel members. For example, a pharmaceutical manufacturer can attach retailers'
price labels to its products prior to shipment, thus saving the retailers that expense.

The value chains of firms within an industry can be very similar, but most likely the chains of each firm will
be unique in some way. Since each value activity includes an informational component, managing the firm's
information resources is a key step to achieve competitive advantage.

What Are the Information Resources?

The first efforts to engage in information management focused on data. These efforts occurred in
conjunction with the widespread adoption of database management systems (DBMSs) during the 1970s
and 1980s. Firms reasoned that if they managed their data by implementing computer-based DBMSs, they
would, in effect, manage their information. The view that data and information are resources to be managed
much like any other resource is still prevalent and represents a positive approach to computer use.

Another, supplementary view has emerged, however, and that is the view that you can manage information
by managing the resources that produce the information. In other words, rather than concentrate on the
input (the data) and the output (the information), attention should also be given to the information processor
that transforms the input into the output. This processor includes the hardware and software, as well as the
persons who develop, operate, and use the systems. Also included are the facilities that house the
resources.
6 Management Information Systems

Types of Information Resources

A firm's information resources therefore consist of:

Computer hardware
Computer software
Information specialists
Users
Facilities
The database
Information

When a firm's managers decide to use information to achieve competitive advantage, they must recognize
each of these elements as information resources. For example, the managers must understand that
personnel who are capable of applying the computer to business problems are a valuable resource, just like
environmental users. Then, the firm must manage these resources in order to achieve the desired results.

Who Manages the Information Resources?

The first computer-using firms placed the responsibility for managing the information resources in the hands
of a special unit of computer specialists. This unit, which we call information services (IS), is managed by a
manager who may have vice-presidential status. The accepted practice today is to establish information
services as a major functional area and include its top manager in the select group of executives, such as
the executive committee, who make the key decisions of the firm.

Chief Information Officer

The term CEO, for chief executive officer, is firmly implanted in the vocabulary of business; everyone knows
that the CEO is the person who exerts the strongest influence on the firm's operations, and this person
usually has the title of president or chairperson of the board. Terms such as CFO, for chief financial officer,
and COO, for chief operating officer, have been coined as well. The 1980s saw similar terminology created
for the information services manager. The term is CIO, for chief information officer.

The term CIO implies more than simply a title. It implies a recommended role that the top information
services manager should play. As intended by the concept, the chief information officer is the manager of
information services who contributes managerial skills to solve problems relating not only to the information
resources but also to other areas of the firm's operations.

An information services manager can perform as a chief information officer by taking the following advice:

Spend time with the business and in business training. Learn the business, not just the technology.
Build partnerships with business units and line management; do not wait to be invited.
Focus on improving basic business processes.
Explain IS costs in business terms.
Build credibility by delivering reliable IS services.
Be nondefensive.

From this point on in the text, we will use the term CIO when describing the top-level manager of
information services. We will assume that this person performs as intended by the CIO concept.

Increasing Complexity of Information Management

For the first ten or so years of the computer era, all of the information resources were centrally located in
the firm's information services unit. Beginning with the installation of keyboard terminals in user areas in the
 Information Technology for Competitive Advantage 7

mid-1960s, and continuing with the spread of microcomputers in the 1980s, more and more of the hardware
has been located outside of information services.

As firms acquire more information resources and as those resources are disbursed throughout the
organization, the task of information resource management becomes more complex. The management
responsibility falls on the shoulders of not just the CIO but all managers in the firm.

Strategic Planning
Henri Fayol defined five management functions -- plan, organize, staff, direct, and control. These functions
are performed in the order given, with the plan providing the basis for all of the subsequent activity.

Long-range planning is also known as strategic planning, since it identifies objectives that are intended to
give the firm the most favorable position in its environment and specifies the strategies for achieving those
objectives. The importance of strategic planning on the upper-management level is no doubt the reason
why Robert Anthony named that level the strategic planning level.

When a firm organizes its executives into an executive committee, this group invariably assumes
responsibility for strategic planning.

Functional Strategic Planning

When a firm's executives are fully committed to strategic planning, they see a need for each functional area
to develop its own strategic plan. The functional plans detail how those areas will support the firm as it
works toward its strategic objectives.

One approach to functional strategic planning would be for each area to establish its own plan
independently of the others. However, that approach does not ensure that the areas will work together as
synchronized subsystems. Figure 2.4 shows how all of the functional areas should cooperate in their
strategic planning processes. The arrows represent flows of information and influence.

Strategic
planning for
information
resources

Strategic Strategic
planning for planning for
marketing financial
resources resources

Strategic Strategic
planning for planning for
manufacturing human
resources resources

Figure 2.4 The Functional Areas Should Cooperate in Developing Their Strategic
Plans
8 Management Information Systems

Strategic Planning for Information Resources

During the past few years, information services has probably devoted more attention to strategic planning
than have most of the other areas. The first term used to describe this activity was strategy set
transformation. More recently the term strategic planning for information resources has become popular.

Strategy Set Transformation

When information services began to develop strategic plans, the recommended approach was to base
those plans entirely on the firm's strategic objectives, which were termed the organizational strategy set.
As a second, separate step, an information services plan was devised to support the firm's objectives. The
information services plan was called the MIS strategy set, and it consisted of objectives, constraints, and
strategies. This approach, called strategy set transformation, is illustrated in Figure 2.5.

Organizational MIS
strategy set strategy set

Mission
System objectives
Objectives MIS
strategic planning System constraints
Strategy process
System design
Other strategic
strategies
organizational
attributes

Figure 2.5 Strategy set transformation

A basic flaw in strategy set transformation is that the functional areas do not always have the resources to
ensure the accomplishment of the firm's strategic objectives. However, the approach is still being practiced,
very often by highly successful firms.

SPIR Approach
A solution to the problem of inadequate information resources is strategic planning for information
resources (SPIR). When a firm embraces SPIR, the strategic plans for information services and the firm
are developed concurrently. The firm's plan reflects the support that can be provided by information
services, and the information services plan reflects the future demands for systems support. Figure 2.6
illustrates the manner in which each planning process influences the other.

Content of a Strategic Plan for Information Resources

Each firm will develop a strategic plan for information resources that meets its own particular needs.
However, we can identify some major topics that should be included. Essentially, the plan should specify:
(1) the objectives to be achieved by each CBIS subsystem during the time period covered by the plan, and
(2) the information resources necessary to meet the objectives. This content is illustrated in Figure 2.7.
 Information Technology for Competitive Advantage 9

Influence on Information
information resources
Business
resources

and
Strategy
Influence on IS strategy
business strategy

Figure 2.6 Strategic planning for information resources

Strategic
plan for
information
resources

Knowledge-
Virtual
AIS MIS DSS based
office
objectives objectives objectives systems
objectives
objectives

Required Required Required Required Required

information information information information information
resources resources resources resources resources

Human Human Human Human Human

resources resources resources resources resources

Hardware Hardware Hardware Hardware Hardware

Software Software Software Software Software

Information Information Information Information Information

and data and data and data and data and data

Figure 2.7 Basic framework of a strategic plan for information resources

10 Management Information Systems

As an example of how the plan can consider the needs of a particular CBIS subsystem, assume that an
inventory system is to be modified to allow customer orders to be filled more quickly. Increased speed can
be achieved by locating the inventory items in the warehouse in such a fashion that the order fillers pick the
items from the shelves in the most efficient sequence. The next step in the planning process is to identify
the information resources that will be necessary to accomplish the objective. Figure 2.8 provides a sample
of the manner in which the objectives and resource requirements can be spelled out.

Figure 2.8 Example of a Strategic Plan for an Inventory System

System: Inventory
Subsystem: Warehouse layout
Objective: Implement a program on October 1st of next year that determines the location
of items in the warehouse to best facilitate order filing.
The program will be run quarterly.

Resource requirements
Hardware: Approximately two hours of mainframe time per quarter, including
program maintenance and testing. Mainframe configuration
requires approximately 20 MB of disk space, one keyboard
terminal, a line printer, and a plotter.
Facilities: Use existing facilities.
Software: Modified linear programming program that provides for both graphic
graphic and tabular interface. Estimated coding requirement is 1000 lines.
Database: Use existing inventory master file.
Information Approximately 18 person months of development time by
Specialist: information services personnel are allocated as follows:
systems analyst (6), database administrator (4), programmer
(6), console operator (2). In addition, the warehouse
systems staff will contribute approximately two person months.
Information: Warehouse stock clerks require warehouse location code on
picking tickets. The code is included in the inventory master record.
Users: Warehouse systems staff will provide information services with
layouts of all screens, plus a statement of the objective function and
a list of all constraints in mathematical notation. The warehouse
manager will require two days of hands-on training is use of the
system, administered by a member of the warehouse systems staff.
Information services will provide the user terminal

Attention is carefully paid to the role that the users will play in the project. This attention is especially
important when the users are expected to do some or all of the developmental work.

End-User Computing as a Strategic issue

Not all of the persons who engage in end-user computing have the same level of computer literacy. It is
possible to classify end users into four categories, based on their computer capabilities.

Menu-Level End Users Some end users are unable to create their own software, but they can
communicate with prewritten software by means of menus such as those featured by Mac and
Windows-based software.
Command-Level End Users Some end users have capabilities for using prewritten software that
go beyond menu selection. These end users can use the command language of the software to
perform arithmetic and logical operations on the data. For example, users of Microsoft Excel can
use special commands to accomplish processes not possible through the use of the menus.
End-User Programmers Some end users can use programming languages such as BASIC or
C++, and they can develop custom programs to meet their own needs.
Functional Support Personnel In some firms, information specialists are members of functional
units rather than information services. These functional support personnel are information
 Information Technology for Competitive Advantage 11

specialists in every sense of the word, but they owe their allegiance to their particular user areas
and report to their functional managers.

Two key ingredients characterize all four levels of end-user capability. First, all levels have an ability to
develop applications, and second, none are members of the information services organization.

Types of End-User Applications

Thus far, EUC has affected the major CBIS subsystems in varying degrees. Most end-user computing
applications have been restricted to:

Relatively simple DSSs

Virtual office applications that meet individual needs

This leaves the information specialists with the responsibility for working with users in developing:

AIS and MIS applications

Complex DSSs
Virtual office applications that meet organizational needs
Knowledge-based systems

As long as this variability in the impact of EUC continues, which it should, there will always be a need for
information specialists.

Benefits of End-User Computing

EUC benefits the firm in two primary ways: It matches developer capabilities to system challenges, and it
eliminates or reduces the communications gap between the user and the information specialist.

Matches Capabilities and Challenges The shift in the workload for systems development to user
areas frees up the specialists to concentrate on the organizational and complex systems, enabling
the specialists to do a better job in these areas. The specialists also have more time to devote to
maintain existing systems -- an important area of responsibility.
Reduce Communications Gap A difficulty that has plagued systems development since the first
days of computing has been the communications between the user and the information specialist.
The user understands the problem area better than the computing technology. The specialist, on
the other hand, is expert in the technology but not in the problem area. By letting the users develop
their own applications, there is no communications gap, because there is no need for
communication. Similarly, when users develop a portion of their systems, the gap is reduced.

Both of these benefits result in the development of better systems than those produced by information
specialists trying to do the majority of the work themselves.

Risks of End-User Computing

The benefits of EUC have a price. When end users develop their own systems, they expose the firm to a
number of risks.

Poorly Aimed Systems End users may apply the computer to applications that should be
performed some other way, such as manually.
Poorly Designed and Documented Systems End users, although they may have high levels of
computer literacy, cannot match the professionalism of information specialists when it comes to
designing systems. Also, in the rush to get systems up and running, end users tend to overlook the
need to document their designs so that the systems can be maintained.
Inefficient Use of Information Resources When there is no central control over acquisition of
hardware and software, the firm can end up with incompatible hardware and redundant software.
12 Management Information Systems

For example, different brands of personal computers may be acquired that cannot be linked to form
a network, and multiple copies of software are purchased when a single copy could be shared.
Also, end users may "reinvent the wheel" by developing systems that have already been
developed.
Loss of Data Integrity End users may not exercise the necessary care in entering data into the
firm's database. Other users use this erroneous data, assuming it to be accurate. The result is
contaminated output that can cause managers to make the wrong decisions.
Loss of Security In a similar fashion, end users may not safeguard their data and software.
Diskettes are left lying on desktops, printouts are tossed in wastebaskets, and doors to computer
rooms are left unlocked. Computer criminals can gain access to the system and harm the firm in
many ways.
Loss of Control Users develop systems to meet their own needs without conforming to a plan that
ensures computer support for the firm.

None of these risks is as great when information services develop systems because of the effectiveness of
centralized controls.

Putting End-User Computing in Perspective

End-user computing is a phenomenon that is not going to go away. If anything, its influence will only
increase. Because of the potential benefits, the firm must develop a strategic plan for information resources
that allows EUC to grow and flourish. As far as the risks are concerned, the same types of controls must be
applied to user areas that have worked so well in information services.

Information Resources Management Concept

Viewing information as a resource is nothing new. What has happened in the past decade is the realization
that a firm's information resources go far beyond the information itself. The topics discussed in this chapter
form the basis for managing all of the information resources. Information resources management (IRM) is
an activity that is pursued by managers on all levels of the firm for the purpose of identifying, acquiring, and
managing the information resources needed to satisfy information needs.

Required IRM Elements

Although an individual user can practice IRM, the most effective approach is for the firm to develop a formal
plan for everyone to follow. In order for a firm to fully achieve IRM, it is necessary that a set of conditions
exist. These conditions include:

A recognition that competitive advantage can be achieved by means of superior information

resources The firm's executives and other managers who engage in strategic planning appreciate
that the firm can achieve superiority over competitors by managing information flows.
A recognition that information services is a major functional area The firm's organizational
structure reflects the fact that information services has an importance equal to other major
functional areas.
A recognition that the CIO is a top-level executive The CIO contributes, when appropriate, to
decision making that affects all of the firm's operations, not just those of information services. This
recognition is most easily demonstrated by including the CIO on the executive committee.
A consideration of the firm's information resources when engaging in strategic planning
When executives engage in strategic planning for the firm, they consider the information resources
necessary to achieve the strategic objectives.
A formal strategic plan for information resources A formal plan exists for acquiring and
managing information resources. The resources should include those in user areas as well as
information services.
A strategy for stimulating and managing end-user computing The strategic plan for
information resources addresses the issue of making information resources available to end users,
while at the same time maintaining control over those resources.
 Information Technology for Competitive Advantage 13

IRM reflects an appreciation for the value of information and those resources that produce the information.
Managers on all levels contribute to IRM, but the attitude of top executives, such as the CEO and other
members of the executive committee, is the key. The full benefit of IRM is possible only when the top
leaders recognize that conceptual resources are just as important as physical resources.

1. The environment of the firm

Environmental
influences

The firm's executives

2.
CIO Other executives

Firm's
Internal strategic plan
influences
Functional areas
3.

Information Human Manufactur-

Finance Marketing
services resources ing

Information
4. Central resources Disbursed
computing computing
resources resources

Data and information

Users
Other
5. engaged in
users
end-user computing

Figure 2.9 The IRM Model

IRM Model
The required IRM conditions do not exist separately but work together in a coordinated way, as shown by
the model in Figure 2.9. The numbered paragraphs that follow match the numbers in the model.

1. The environment of the firm The eight environmental elements provide the setting for achieving
competitive advantage. Executives are aware of the need to manage resource flows as a means of
meeting the needs of the environmental elements in a competitive market.
14 Management Information Systems

2. The firm's executives The CIO is included among the group of executives who guide the firm
towards its objectives. One of the key activities of this group is strategic planning.
3. Functional areas Information services is included as a major functional area, and each of these
areas jointly develops strategic plans that support the strategic plan of the firm. One of these
functional plans is the strategic plan for information resources, which is prepared by information
services working with the other functional areas.
4. Information resources The strategic plan for information resources describes how all information
resources will be acquired and managed. Some of these resources are centralized in information
services, and some are disbursed throughout the firm in user areas.
5. Users Data and information flow between the information resources and the users. Some users
engage in end-user computing.

Figure 2.9 illustrates how levels of systems influence information resources management. The environment
forms the supersystern of the firm. The firm's managers on the top level plan the strategy that enables the
firm as a system to achieve its objectives. The functional areas represent the firm's subsystems, and their
strategic plans support that of the firm. All of the functional strategic plans specify how information
resources are to be made available to users on all levels.

Summary
The environment of a firm consists of eight elements. The elements represent organizations or individuals
and include suppliers, customers, labor unions, the financial community, stockholders or owners,
competitors, the government, and the global community. These elements compose a larger supersystern
called society. Resources flow between the firm and the environmental elements.

A firm can achieve a competitive advantage by producing a margin greater than that of its competitors. The
margin is the excess of product and service value over cost. The activities that produce value are of two
types -- primary and support. Primary activities deliver products and services to customers, whereas
support activities make the direct activities possible. A firm's value activities are integrated to form a value
chain. Managers can achieve additional competitive advantage by linking their value chains with those of
suppliers, distribution channel members, and customers to form value systems.

Information resources include hardware, facilities, software, the database, information specialists,
information, and users. The resources that are located in information services are managed by the CIO.
The CIO concept recognizes the information services manager as an executive. The information resources
located outside of information services are managed by managers of the user areas.

All managers plan, but executives engage in long-range, strategic planning. The first efforts to develop a
strategic plan for information services were called strategy set transformation. Although this methodology is
still being practiced, there is no assurance that the required information resources will be present. This
problem can be solved by developing the strategic plans for the firm and for information services
concurrently. This approach is known as strategic planning for information resources, or SPIR. The product
of SPIR is a plan that identifies the information resource needs of each CBIS subsystem for the time period
covered by the strategic plan.

The SPIR task has been complicated by the boom in end-user computing. End users do not all possess the
same capabilities. Some are only able to use menus, some can use command languages, and some have
programming skills. Still others are information specialists located in user areas. Although more and more
systems are being developed by end users, the systems tend to be relatively simple DSSs and OA systems
intended for individual support. The remaining systems continue to be developed jointly by users working
with information specialists.

EUC is here to stay; it benefits the firm by shifting part of the system development workload to the users
and by bridging the communications gap. The risks that are inherent in EUC have to do with poorly aimed
systems, poorly designed and documented systems, inefficient use of hardware and software resources,
loss of data integrity, and loss of security. These risks can be minimized by management control.
 Information Technology for Competitive Advantage 15

The idea that all of the firm's managers should engage in information management is a recent revelation,
one that is called information resources management, or IRM. IRM flourishes when: (1) the firm strives to
use information to achieve competitive advantage, (2) executives recognize information services as a major
functional area, (3) executives admit the CIO to their elite circle, (4) executives consider information
resources while conducting strategic planning, (5) a formal strategic plan for information resources exists,
and (6) the plan addresses end-user computing.

IRM is an integrating concept that ties together the environment, levels of management, functional areas,
information resources, and users. The achievement of IRM has characterized the 1990s.

Key Terms
value chain just-in-time (JIT) strategy set transformation
value system strategic planning

Key Concepts
The firms environment, composed of eight elements existing in society
How the environmental elements are connected to the firm by means of resource flows
Competitive advantage
The broad range of information resources
The chief information officer (CIO)
Strategic planning for information resources (SPIR), strategic planning for information systems (SPIS)
Levels of end-user capabilities
Information resources management (IRM)

Questions
1. What provides the connections between the firm and its environment?
2. What are the eight environmental elements?
3. What is margin and how does it relate to competitive advantage?
4. What are Porter's primary value activities? What are his support value activities?
5. What is a value chain?
6. What is a value system?
7. List the seven types of information resources. Place an asterisk next to those that are always located in
information services.
8. Could a manager be a CIO even though he or she does not have that title? Explain your reasoning.
9. Would a degree in business administration help a CIO? Explain.
10. Has information management become more or less complex during the past decade? Explain.
11. Why might executives come up with an unworkable plan when they engage in top-down strategic
planning?
12. Why might lower-level managers come up with a plan that is unacceptable to executives when a
bottom-up planning approach is followed?
13. Name a major weakness of strategy set transformation.
14. What are the two basic elements that should be included in a strategic plan for information resources?
15. What are the four classes of end users?
16. The text states that end users are not likely to develop complex DSSs. Would there be any limitations
on the systems that functional support personnel develop? If so, explain.
17. What are the main benefits of EUC? What are the main risks? How can the risks be minimized?
18. How could an inspection of the firm's organization chart provide an indication that the firm is striving to
achieve IRM?
19. If the top manager in the information services area has the title of CIO, does this automatically mean
that the firm is practicing IRM? Explain.
20. Where are the information resources located that are the subject of the strategic plan for information
resources?