Evaluation of the IT Alignment in Cirque Du Soleil - Case Study Example

Cirque Du Soleil Investigation of Current and Potential Future use of Information System/Information Technology (IS/IT) PART A Outline of the Proposal Document Introduction This part of the tender document provides some basic information on the prospective client Cirque Du Soleil Competitive Advantage A competitive advantage can be defined to include an advantage that a firm enjoys over its competitors. (tutor2u) This advantage can be gained by the firm through product or service offerings that have greater value and this greater value is derived by means of offering lower prices or by offering greater benefits and services that has a clear justification for the customer to pay higher price. Porter (1980) argues that it is imperative for the firms to adopt one of the alternative generic strategies of cost leadership or product differentiation in order to build and sustain a distinct competitive advantage. . Source: 12manage.com Both the strategies can be approached narrowly or broadly and in either case there is the third viable competitive strategy that is ‘focus’. (12manage.com) Ward and Peppard (2002) have identified that IS/IT strategy formulation and planning will help an organization to gain competitive advantage in the existing market by enabling the organization to develop a flexible and cost effective technology infrastructure which in turn will lead to the deployment of resources and competencies that are needed to accomplish the organizational goals effectively and efficiently. Strategic Use of Technology in Entertainment Services By using latest technology Cirque du Soleil could develop a new intellectual and dramatic entertainment project that made the company stand out unique. The use of technology has helped the company to reduce its cost structure and the organization could increase the ticket prices beyond the amount charged by the traditional circuses. This also made the organization compete with the Broadway theatre prices. (Chan Kim and Renee Mauborgne, 2005) Cirque du Soleil The success of Cirque du Soleil lies in their ability to create a new and compelling product rather than creating a new market. It cannot be said the business of Cirque is an alternative to traditional circus business (Blue Ocean Strategy) but through a product differentiation as advocated by Porter (1980) Cirque competes in the existing market with a brand new product having different characteristics. This makes the product of Cirque unique. The strengths and weaknesses of Cirque du Soleil can be analyzed using a SWOT analysis. Strengths All the shows produced by Cirque results in profits Organization encourages creativity among the employees Product is a niche one without effective competition Financial soundness supports the competitive strength Good reputation Great marketing efforts resulting in successful shows Use of technology throughout the organization Shows running for longer time periods Talented people recruited from allover the world Organization is creative with support from excellent leadership Great locations Availability of Creative production staff Weaknesses High employee turnover with people getting older and unable to perform Higher production costs leading to higher ticket prices With more movements of staff, they remain uncontrollable Opportunities New tours to different parts of the world will bring in new business Creation of new permanent facilities may provide additional sources of revenue Shows possible in more prime locations Threats There is likelihood of stiff competition from the competitors in different show businesses There is no barrier to new entrant which may pose a threat to the business of Cirque Partners in some cases would like to buy out which would disintegrate the business. (Mgt 6450) Competitive Advantage of Cirque du Soleil Cirque du Soleil is able to have distinct competitive advantageous position due to three fundamental reasons. They are: (i) Product differentiation advantage – by employing innovative production techniques the organization is able to make shows that evoke awe, wonder, inspiration and reflection among the customers, (ii) Niche competitive advantage – the production of Cirque has distinct personalities and the shows have a different language which enters into a conversation with the audience and (iii) Sustainable competitive advantage – there are shows produced that result in revenues far more than the cost. For example the show ‘Mystere’ that cost $ 45 million was able to provide revenue of $ 430 million. (Mgt 6450) Actions Required in Cirque Du Soleil as a Business Currently Cirque is in a high growth stage in which if the company is planning to introduce some ad-hoc systems it may not well meet the system requirements of the company in the next two years time. Therefore as a growing business Cirque should attempt to take the following actions: Make a forecast of future growth plan at least for next five year period Review the existing IS/IT strategies as to their compatibility with the directions of growth of the business Evaluate in terms of cost/benefit analysis the existing SAP and IBM information support systems to assess their relative contributions to the business for improving the competitive edge considering the growth prospects – as to whether they can sustain the increased needs of the business Technologies to be used by Cirque Du Soleil It is important that the Strategic Information System Planning (SISP) for Cirque is attempted with due care as there should be proper linkage of the SISP with business planning for an effective strategy formulation and performance measures especially for a high growth company like Cirque. In this connection the company can consider the following changes in technology. 1. Introduce Oracle being one of the best available Data Base Management Software (DBMS) 2. Develop tailor made programs for the system needs of the company (taking into account the specific information requirements of various functional divisions) working out with Oracle – going by the forecast business growth and the areas where increase in activity is expected 3. Review the number of outsourcing jobs with CIG so that some of them may be integrated with the proposed Oracle technology Strategic Alignment of IT/IS and Business Strategies Going by the above analysis it can be observed that there is a clear need for bringing in a strategic alignment between IT/IS and the overall business strategies of Cirque. Therefore it is highly recommended that Cirque make a critical analysis of the current IT/IS strategies and evolve a master plan by which the company can integrate the IT/IS strategies and the overall business strategies. The company can achieve better competitive edge by aligning the IT/IS mainly in the area of program management where there is the urgent need to integrate activities like the data base of performers on roll, database of performers who are in the active consideration for recruitment, information and data on movements of performers, information and data on make up of artistes and information and data on costumes Strategic alignment of other regular IT/IS activities should also be taken on priority. A detailed analysis of the strategies to be adopted in respect of SISP for Cirque is presented in Part B of this presentation (Narrative Account) Part B Narrative Account Entertainments to-day have become a multi million dollar business and is being run by global firms like Cirque Du Soleil. In the same way other large business corporations need these business houses also need customer databases and other routine computer system software and packages. In addition they are also in the look out for their business-specific software to maintain their competitive advantage over the competitors. Based on the outline generated in Part A this section of the report provides a theoretical base for reviewing the strategic alignment of the IT/IS strategies of Cirque Du Soleil. Need for Strategic Alignment of IT/IS in Cirque Du Soleil With due regard to the actions taken by the CIO of Cirque Du Soleil it has been found that in order to meet the IT/IS demands of the rapid growth the organization has been implementing different options of IS plans. This approach may provide only a temporary solution to the issue as the organization is in a high growth process and there will be a continuous demand for newer systems and applications of IT. Therefore it would be advisable if a proper alignment of the business strategies and the IT/IS strategies is made so that the IT/IS would provide an unhindered support to the growth of the organizational performance. This calls for an assessment of the current status of the IT/IS strategies in place and the future strategic IT requirements along with an in-depth study of the future growth plans of the organization. Before that it is of critical importance that a sound theoretical knowledge on the strategic information system planning is acquired. Some of the views on this topic is presented below for the information of the reader. Focus of Strategic Alignment The focus of strategic alignment is to enable the management to achieve cohesive goals across the information technology (IT) and other functional organizations like finance, production, sales and marketing, and human relations. (Jerry Luftman, 2000) There are studies conducted to prove that IT has the power to transform the whole industries and market. (e.g Luftman et al 1993; Robson 1994; Luftman Brier 1999) The emphasis of this strategic alignment is to assess and implement the ways IT can help the organization achieve competitive differentiation and top line growth. (IBM, 2004) This is particularly essential in the case of companies like Cirque Du Soleil where the core competitive strength is product differentiation. In the present business environment the IT organization in Cirque is facing challenges in the broader perspective of (i) achieving business growth goals, (ii) enterprise transformation into a high growth organization, (iii) coping with technical and relationship complexity, (iv) facilitating innovation and knowledge development, and (v) managing an increasingly mobile and virtual workforce. (Smith and McKeen, 2005) These challenges can be addressed with a strategic information system alignment and this phenomenon has been subjected to a number of studies to show the positive impact of information systems (IS) on business success. (Chan and Huff 1993; Sabherwal and Chan 2001) Hirschheim and Sabherwal (2001) have on the basis of previous literature on the subject identified three central arguments on which the notion of strategic alignment is built. They are: (i) Structures and capabilities existing in the organization that support the successful realization of strategic decisions basically decide the level of organizational performance, (ii) it is to be recognized that IS and business strategies are interdependent and can act as mutual drivers, and (iii) Strategic IS alignment “is not an event but a process of continuous adaptation and change” (Henderson and Venkatraman, 1993) IT Alignment The strategic alignment model developed by Henderson and Venkatraman (1993) has identified four fundamental domains of strategic choice. They are: (i) business strategy, (ii) IT strategy, (iii) Organizational infrastructure and (iv) IT infrastructure. The authors argue that strategic alignment requires the organizations to cope up with the fit between strategy and structure as well as the fit between the business and IT. A number of studies have been centred round the model developed by Henderson and Venkatraman (1993). For instance Chan et al (1997) analyzed the relationship between business strategy and IT strategy. Raymond et al (1995) studied the relationship between the organizational structure and IT structure. Bergeron et al (2001) have made a further study into the area by including environmental uncertainty in exploring the nexus between all the four domains and business performance, thus making an analysis on the basis of six different perspectives. However various studies have pointed out that there are challenges in making IT alignment. (Baets, 1992; Chan et al (1997) Luftman 1996) Reich and Benbasat (1996) have arrived at an intellectual and social dimension to the linking process among all the four domains. The methods and techniques involved in the linking is covered by the intellectual dimension and factors like the personalities involved and the ways in which they are involved are dealt with by social dimension aspect. Several other dimensions of IT alignment have also been identified by the literature like strategic/intellectual, structural, social and cultural. Although there is an enhanced focus on the strategic IT alignment both strategic and structural alignment has their influence on the organizational performance. In addition there are other social and cultural factors existing within an organization that have an impact on the IT alignment. (Chan 2001) Strategic alignment covers the level up to which the business strategy and plan and the IT strategy and plan are complementing to each other. (Chan and Reich 2007) Reich and Benbasat (2000) defines intellectual alignment to describe “a state in which a high quality set of inter-related IT and business plans exist”. Therefore a proper IT alignment calls for a proper, formal and documented plan of action without which it would be difficult for IT alignment to take place. (Vitale et al 1986; Lederer and Mendelow 1989; Wang and Tai 2003) Structural alignment covers the degree of structural fit that exists between IT and business. There are a number of factors that have a bearing on the structural alignment of IT. They are: (i) location of IT decision-making rights, (ii) reporting relationships, (iii) centralization or decentralization of IT and (iv) deployment of IT personnel (Chan 2002) Earl (1989) found IT alignment can be facilitated by establishing five ideal ‘IT arrangements’ in the form of centralized function, as a business unit, as a business venture, as a decentralized function or as a federal set up. These ‘arrangements’ represent the structures, processes and accommodations that take place while organizing the IT function. However due to the complexity of this arrangement, Brown and Magill (1994) have evolved a simpler structural typology involving centralized, decentralized or hybrid. This structure gives rise to the concept of outsourcing. It is also important to consider the business competencies of the IT staff while considering the IT alignment. Bassellier G and Benbasat I (2004) define business competence in IT staff as “the set of business and interpersonal knowledge and skills possessed by IT professional that enable them to understand the business domain, speak the language of business and interact with their business partners”. Application of Theory of Strategic IT/IS Alignment to Cirque Du Soleil Based on the above theoretical discussions it is observed that there is the need for an evaluation of the IT alignment in Cirque Du Soleil. Presently the information systems present in the company although meet most of the information requirements of the management as well as staff from a study of the number and utility of the systems there appears to be a large gap still in the integration of different systems, especially in the area of program management. With the need for all the programs in-charge touring in different parts of the world to access the database on the performers, costumes, movements of artistes and make up with the present systems may not fully meet their requirements. Moreover since the business of Cirque is growing at a rapid pace the existing systems may not have the potential capabilities to meet the future information needs of the company. Therefore it is suggested that the organization makes a thorough study of its capabilities on both strategic and structural alignments in line with the above discussion. A study of the current IT infrastructure and systems clearly indicate the scope for a complete re-evaluation of the strategic IT needs of the firm taking into account the future growth plans. It is sure that the implementation of any new IT/IS process without considering the alignment of such initiatives with the overall organizational business strategies such initiatives may not result in the expected benefits taking the long-term IT needs of the organization. It is suggested that the company prepares a five year forecast business plan detailing the new lines of businesses the company proposes to venture in, the new locations where the company would like to expand, the likely addition to the human resources and the potential functions where IT can be used for improvement in organizational performance. This forecast needs to be prepared on estimations that align to the growth strategies of the organization as nearly as possible. Based on the forecasted business plan, the IT needs need to be established for a possible alignment of the IT. This calls for an analysis of the strategic and structural requirements and the organization has to undertake a thorough analysis of the existing infrastructure, IT hardware and software availability from the point of view of the possible future extensions. The peculiar conditions that characterize the show business like that of Cirque requires a lot of efforts to get their IT/IS strategies aligned with business strategies especially when the business circumstances change every day due to the rapid growth level of the organization. The company has to review all the processes and governance models and the business requirements to have an effective alignment of both the IT/IS and the business strategies. The main elements that need to be considered in addition to the forecast growth are: There three permanent offices at the moment with the headquarters in Montreal. Most of the staff are on tour for longer duration of time. The projected increase in the number of offices and number of employees are worth considering. Routine accounting including payroll – to check what are the problems being encountered in accessing data by individuals and in the creation of statutory financial statements and reports for information of top management Program management – data base on the performers on roll, those talents that the company screen and found fit with the nationality and immigration status, systems to track the performing movements of artistes and reasons for injuries while performing, systems for keeping record of make up of all artistes, systems to keep track of the costumes (presently estimated at 15,000 with 3,300 sets of instructions – it is for sure that these numbers will go doubling the next year), systems to help technicians to ensure an efficient stage management. The company can consider the outsourcing of some of the activities and in this connection the existing arrangement with CGI needs to be reconsidered to increase or decrease the number of functions that can be outsourced. In conclusion this report suggests that in view of the high growth potential of the business of Cirque Du Soleil it is advisable that a complete evaluation of the existing IT infrastructure from the point of view of aligning the IT/IS with the overall business strategies is made so that there will be no need to consider changing the platforms within a shorter duration due to the expansion of the business. This report has provided the theoretical support that evinces the need for a Strategic Information System Planning in Cirque Du Soleil. 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