Strategy and IT

McKinsey 7S Framework:
Implementing change in organizations can be difficult. There are thousands of things to be

overlooked and even if one is ignored, the entire plan comes crashing to the ground. Tom
Peters and Robert Waterman, two consultants from McKinsey & Company, developed the
McKinsey 7S Framework in the early 1980s to solve this problem and ensure that all parts of
an organization work in harmony. They proposed that there are seven elements of an
organization that must be aligned for that organization to be successful. These elements must
also be consistent when trying to implement any change in the organization. These elements
form the framework as shown in the below representation called the managerial molecule
that depicts the inter-dependency among the variables and how changing one affects the
others.
The McKinsey 7S framework

These seven elements are divided into two categories- hard and soft. "Hard" elements are
easier to define or identify and the management can directly influence them. The three hard
elements are strategy, structure and systems. "Soft" elements, on the other hand, can be more
difficult to describe, and are less tangible and more influenced by culture. The four soft
elements are shared values, skills, style and staff. Shared values form the centre of this
framework. This is because the organizations shared values determine how people behave in
the organization. But all of these seven elements are inter-dependent. Changing one, will
change them all. And, neglecting one will affect all of the others.
The seven elements can be described as below:
Strategy: the plan devised to maintain and build competitive advantage over the competition.
Structure: the way the organization is structured and who reports to whom.
Systems: the daily activities and procedures that staff members engage in to get the job done.
Shared Values: called "superordinate goals" when the model was first developed, these are
the core values of the company that are evidenced in the corporate culture and work ethic.
Style: the style of leadership adopted.
Staff: the employees and all their capabilities.

Skills: the actual skills and competencies of all the employees in the organization.
The 7S model can be used in a wide variety of situations where an alignment perspective is
useful. Some of the application are as follows:
1. Spot what needs to be done to improve the performance of an organization
2. Change management- examine where the organization is right now and how the
elements might be affected by the proposed change to make adjustments ahead of
time
3. Align departments and processes during a merger or acquisition
4. Determine how best to implement a proposed strategy
Historical application of this framework can be seen in the works of Peters and Waterman
where they applied it to analyze over 70 large organizations such as General Motors, IBM,
HP and DuPont in the early 1980s.
Coca Cola has extensively used this framework to make changes in its strategy when it
entered Europe and started expanding. This framework helped Coca Cola to analyze the
evolving organization and align the changes with one another.
IT Applications Value Framework

Business value of IT in organizations transcends beyond economic value and includes aspects
such as customer value, employee value, supplier value, partner value, managerial value and
societal value. The IT Applications Value Framework developed by Kwon, Watts-Sussman,
and Collopy is useful in describing the complex nature of IT business value assessment.
The inventors propose that IT business value is plural and driven by multiple perspectives
and also changes over time as the organization and its environment evolves. IT value is also
described as paradoxical since even though IT can contribute to increasing efficiency gains
for the organization, the value brought to the organization is easy for competitors to replicate.
IT can also reduce competitors profits rather than increase overall output for the industry.
For IT value interpretation, the business value of IT is considered across two dimensions, one
being the deployment focus (endogenous or exogenous) and the other being the choice
between efficiency and effectiveness.
Primarily, IT is used by organizations to automate internal functions resulting in routinization

of internal operations, an endogenous perspective. IT can also assist in increasing efficiency
across the supply chain resulting in an exogenous efficiency perspective benefitting the
players involved by providing cost advantage.
On the effectiveness frontier, IT can enable the firms competitiveness through superior
positioning with respect to competitors. IT systems that bring value related to endogenous
effectivess increase the dynamic capability gained by the organization through accumulated
first and higher order learning effect. The ultimate goal of all IT systems is to find
collaborative platforms that increase the effectiveness of the entire industry together.
An application of the IT Applications Value Framework can be seen in the Airline
Reservation Systems of American and United Airlines i.e. Sabre and Covia as depicted below.
In the 1960s-1970s, the primitive SABRE system initiated the humble beginning for airline
reservation systems by automating inventory management of seats leading to routinization of
bookings. In the early 1980s, ARS was viewed as a competitive weapon for increasing market
share, locking-in customers and increasing switching costs. ARS enabled American and
United airlines to reach the travel agents desk and position their products better than
competitors. In the late 1980s, ARS was viewed as a source of scale and scope economies.
American and United airlines achieved cost advantages by creating co-host agreements that
allowed for optimal price structuring by reducing transaction costs. In the 1990s, the value
derived from ARS was not limited to creation of static advantage for airline companies, but
the view of IT value was that it enabled changes in the nature of airlines business itself
through learning effect. For example, American Airlines tailors its services for its business
travel customers. The databases built through ARS assist in this type of niche marketing by
providing American with information to learn from itself and make informed marketing
decisions to provide enhanced value to customers by understanding their needs.

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McKinsey 7S Framework:

Implementing change in organizations can be difficult. There are thousands of things to be

The McKinsey 7S framework

Staff: the employees and all their capabilities.

IT Applications Value Framework

Primarily, IT is used by organizations to automate internal functions resulting in routinization

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