Post on 17-Jan-2016
description
Creating Business Advantage with IT
Vision and business models
Demonstration of the telephone in the late 1800s
While it is a wonderful invention, businessmen will never use it.
Rutherford B. Hayes 19th President of the USA
The Impact of Technology on Business and Society DuringThe Industrial Evolution
Chapter 1 Figure 1-1
Figure reprinted with permission from Duke University Rare Book,Manuscript, and Special Collections Library
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate I nformation Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
Technological innovations
Internet and broadband networksWWW and high performance servers Flexible, standardized, powerful platform for
creating and storing information in all its forms
URL Uniform Resource locator and Browser Common approach for identifying and locating
information anywhere on the internet
Multimedia digital devices Portable internet access devices that provide
internet access to voice, television and information
Laptops, palm pilots, cell phones, …
Wireless networks and protocolsJAVA, XML and other OO languages and database technologies
EconomiesEconomy of scale When a participant or network of
participants is able to leverage capabilities and infrastructure to increase its revenues and profitability within a single product line or market.
Economy of scope When a participant or network of
participants is able to leverage capabilities and infrastructure to launch new product lines or enter new markets.
Porter’s Value Chain(well suited for analyzing product/manufacturing firms)
Value Chain Applied to AirlinesIdentifies uses of IT for each element of the value chain
Market Roles
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002. Chapter 1 Figure 1-4
Industrial vs. Network Economy
Characteristics Industrial Economy Network economy
Criteria for economic success
Internal, proprietary and specialized economies, limited by level of infrastructure required
External, networked and shared economies of scale and scope are increased by internet infrastructure
Technological innovations
Production, communication and distribution technologies
Distribution, communication and information technologies;The ability to assemble component pieces
Operating innovations Standardization of work;Job specialization; assembly lines;Value chain industry structure.
Knowledge work; job expansion;Work teams; extended enterprise;Outsourcing and partnerships;Value networks.
Management innovations
Hierarchical coordination;Compliance-based control;Centralized planning and control.
Network coordinating and supervision; ownership incentives;Information-based models of control
Societal/regulatory innovations
Urban growth; mass transportation; social security and welfare; unions, regulations; domestic economy
Work at home; self-employment; global economy
Length of time to achieve economies of scale or scope
Decades Uncertain
Dominant industry power
Producers Solution assemblers and channel managers
Forces Influencing Industry and Competitive Advantage
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarland, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002. Chapter 1 Figure 1-5
Impact of IT: questions 1 of 5.
Can IT be used to reengineer core value acti-vities and change the basis of competition?
Uses IT not just to automate but also to transform and to inform
Benefits of conducting business online AHSC American Hospital Supply
Corporation American Airlines Internet to reengineer value chain and the
basis of competition
Impact of IT: questions 2 of 5.
Can IT change the nature of relationships and the balance of power among buyers and suppliers?
AHSC Customers recognized the value of a
multivendor marketplace but were unwilling to put up with the problems of using multiple different supplier systems
AHSC became channel manager Electronic market places: Oracle,
CommerceOne, Ariba, …
Impact of IT: questions 3 of 5.
Can IT build or reduce barriers to entry?
Consultancy companies: knowledge technology Technology based advantage: AHSC, AA, … The internet can decrease the impact: low
cost, ease of penetration Knowledge and community barriers are more
sustainable Proprietary infrastructure and channels to
market are at a particular disadvantage relative to new entrants when they attempt to create second-order barriers to entry (Amazon.com as new entrant with transaction, information and community infrastructures)
Impact of IT: questions 4 of 5.
Can IT increase or decrease switching costs?
Switching to another system might become difficult and costly in proprietary systems
With the internet switching costs are substantially reduced difficult to achieve customer loyalty
Intuit increased the switching costProvided easy to use inexpensive financial service softwareWon users via ease-of-use Hooked via simple ways of storing the information that should be reentered if the customer switches to a different product
Impact of IT: questions 5 of 5.
Can IT add value to existing products and services or create new ones?
Grocery stores are also in the business of selling information (client profiles)
Information content of existing products (cars)
Digital distribution of books, music, and video will dramatically alter existing publishing and entertainment industries.
Manure and fertilizer company provides information.
Summary
Exploiting the opportunities afforded by IT, while avoiding the pitfalls requires vision, sound execution, and the ability to respond quickly Risks increase when executives Have poor understanding of sources of
competitive dynamics Fail to understand the long-term implications of
a strategic system (their own or a competitor) Launch a system that brings on litigation or
regulation to the detriment of the innovator Fail to account for the time, effort, and cost
required to ensure user adoption, assimilation and effective utilization
Summary (cont)Investments should be examined on sustainable advantage Movement of IT-personnel results in rapid proliferation of strategic ideasQuestions What business are we in? Who are our customers,
suppliers, partners? Who are our biggest competitors, today and in the
future? How effective are our core operating activities and
processes? Are there big changes looming at the horizon and what
can we do? Will changes in related industries influence our industry? Did we identified the strategic risks today and in the
future? Have we appropriately prioritized our business
investments?