Chapter 9 information system Strategy
- 1. CHAPTER 2 IS STRATEGY AHMAD JAINI INFORMATION SYSTEM E-mail: ahmadjainisif@gmail.com
- 3. Overview 12/26/2018 3 Firms frequently face difficult decisions about the scope of activities to perform inhouse, and whether to perform them alone as a solo venture or to perform them collaboratively with one or more partners. As mentioned in Chapter Two, a significant portion of innovation arises not from any single individual or organization, but instead from the collaborative efforts of multiple individuals or organizations. Collaboration can often enable firms to achieve more, at a faster rate, and with less cost or risk than they can achieve alone. However, collaboration also often entails relinquishing some degree of control over development and some share of the expected rewards of innovation, plus it can expose the firm to risk of malfeasance by its partner(s). In this chapter, we will first consider the reasons that a firm might choose to engage in collaborative development or might choose to avoid it. We will then review some of the most common types of collaborative arrangements and their specific advantages and disadvantages.
- 4. REASONS FOR GOING SOLO 12/26/2018 4 1. Availability of Capabilities Whether a firm chooses to partner on a project is largely determined by the degree to which it possesses all of the necessary capabilities in-house and the degree to which one or more potential partners have necessary capabilities 2. Protecting Proprietary Technologies Firms sometimes avoid collaboration for fear of giving up proprietary technologies. Working closely with a partner might expose the company’s existing proprietary technologies to the prying eyes of a would-be competitor. 3. Controlling Technology Development and Use Sometimes firms choose not to collaborate because they desire to have complete control over their development processes and the use of any resulting new technologies. This desire might be for pragmatic reasons (e.g., the new technology is expected to yield high margins and the firm does not wish to share rents with collaborators) or cultural reasons (e.g., a company’s culture may emphasize independence and selfreliance).
- 5. TYPES OF COLLABORATIVE ARRANGEMENTS 12/26/2018 5 1. Strategic Alliances Firms may use strategic alliances to access a critical capability that is not possessed in-house or to more fully exploit their own capabilities by leveraging them in another firm’s development efforts 2. Joint Ventures Joint ventures are a particular type of strategic alliance that entails significant structure and commitment. While a strategic alliance can be any type of formal or informal relationship between two or more firms, a joint venture involves a significant equityminvestment from each partner and often results in establishment of a new separate entity. Outsourcing Firms that develop new technological innovations do not always possess the competencies,mfacilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently. Such firms might outsource activities to other firms.
- 6. CHOOSING AND MONITORING PARTNERS 12/26/2018 6 Partner Selection The success of collaborations will depend in large part on the partners chosen. A number of factors can influence how well suited partners are to each other, including their relative size and strength, the complementarity of their resources, the alignment of their objectives, and the similarity of their values and culture.45 These factors can be boiled down to two dimensions: resource fit and strategic fit.46 a. Impact on Opportunities and Threats in the External Environment b. Impact on Internal Strengths and Weaknesses c. Impact on Strategic Direction
- 7. Partner Monitoring and Governance 12/26/2018 7 Successful collaboration agreements typically have clear, yet flexible, monitoring and governance mechanisms.50 Not surprisingly, the more resources put at risk by the collaboration (for example, the greater the upfront investment or the more valuable the intellectual property contributed to the collaboration), the more governance structure partner firms are likely to impose on the relationship.51
- 8. Summary Of Chapter 12/26/2018 8 1. A number of factors will influence whether a firm chooses to collaborate on an innovation. Some of the most important include whether the firm (or a potential partner) has the required capabilities or other resources, the degree to which collaboration would make proprietary technologies vulnerable to expropriation by a potential competitor, the importance the firm places on controlling the development process and any innovation produced, and the role of the development project in building the firm’s own capabilities or permitting it to access another firm’s capabilities. 2. Firms may choose to avoid collaboration when they already possess the necessary capabilities and other resources in-house, they are worried about protecting proprietary technologies and controlling the development process, or they prefer to build capabilities in-house rather than access a partner firm’s capabilities. 3. Some of the advantages of collaboration include sharing costs and risks of development, combining complementary skills and resources, enabling the transfer of knowledge between firms and the joint creation of new knowledge, and facilitating the creation of shared standards. .
- 9. Summary Of Chapter 12/26/2018 9 4. The term strategic alliances refers to a broad class of collaboration activities that may range from highly structured (e.g., joint ventures) to informal. Strategic alliances can enable simple pooling of complementary resources for a particular project, or they may enable the transfer of capabilities between partners. The transfer of capabilities often requires extensive coordination and cooperation 5. A joint venture is a partnership between firms that entails a significant equity investment and often results in the creation of a new separate entity. Joint ventures are usually designed to enable partners to share the costs and risks of a project, and they have great potential for pooling or transferring capabilities between firms. 6. Licensing involves the selling of rights to use a particular technology (or other resource) from a licensor to a licensee. Licensing is a fast way of accessing (for the licensee) or leveraging (for the licensor) a technology, but offers little opportunity for the development of new capabilities. 7. Outsourcing enables a firm to rapidly access another firm’s expertise, scale, or other advantages. Firms might outsource particular activities so that they can avoid the fixed asset commitment of performing those activities in-house. Outsourcing can give a firm more flexibility and enable it to focus on its core competencies. Overreliance on outsourcing, however, can make the firm hollow.
- 10. 12/26/2018 10 8. Groups of organizations may form collective research organizations to jointly work on advanced research projects that are particularly large or risky. 9. Each form of collaboration mode poses a different set of trade-offs in terms of speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, or potential for accessing another firm’s competencies. An organization should evaluate these trade-offs in formulating a collaboration strategy. 10. Successful collaboration requires choosing partners that have both a resource fit and a strategic fit. 11. Successful collaboration also requires developing clear and flexible monitoring and governance mechanisms to ensure that partners understand their rights and obligations, and have methods of evaluating and enforcing each partner’s adherence to these rights and obligations.