IT Strategy
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Transcript of IT Strategy
IT Strategy
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Today
• Three eras of IT/IS revolution
• Strategic Information Systems
• The role of IT/IS in competition
• Porter’s 5 competitive forces
• Porter’s value chain
• Some other academic views
• Cases
• Managerial issues
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Three eras of I.T. evolution
• Mainframe Era– (1950’s-1970’s)
• Microcomputer Era– (late 1970’s to 1980’s)
• Network Era– (late 1980’s to present)
• Ubiquitous computing (wireless)
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Strategic Information Systems (SISs)
SISs provide strategic solutions to the 5 Business Pressures:
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
The Role of IT in Business Innovation
• IT creates applications that provide strategic advantages to companies
• IT is a competitive weapon
• IT supports strategic change, e.g, re-engineering
• IT networks with business partners
• IT provides cost reduction
• IT provides competitive business intelligence
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Competitive Intelligence
The Internet is central to supporting competitiveintelligence
Such activities drive business
performance by:
•Increasing market knowledge
•Improving internal relationships
•Raising the quality of strategic planning
Many companies monitor the activities of competitors
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
• It changes industry structure and alters the rules of competition...– by increasing the power of buyers, – raising barriers to entry and – influencing the threat of substitution
• It creates competitive advantage by giving companies new ways to out-perform their rivals...– lowering costs, – enhancing differentiation and – changing competitive scope
HOW IT/IS AFFECTS THE NATURE OF COMPETITION
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
• It spawns whole new businesses, often from within a company's own operations... by making
– new businesses technologically feasible
– creating derived demand for new products and
– creating new businesses within old ones.
HOW IT/IS AFFECTS THE NATURE OF COMPETITION
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Technology versus Management of technology
• I.T. is so accessible today that organisations cannot compete on technology alone.
• The competitive advantage is derived from how the technology is used.
• Today the management of technology has become a critical issue in competing more effectively.
• The issue is not whether to invest in I.T. but where and how.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
• What can help us:
– think and
– analyse situations
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
•Porter’s 5 Competitive Forces (1985)
• The threat of entry of new competitors.
• The bargaining power of suppliers.
• The bargaining power of customers (buyers).
• The threat of substitute products or services.
• The rivalry among existing firms in the industry.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Porter’s 5 Competitive Forces (1985)
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Porter’s Model in Action
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Response Strategies (Porter, 1985)
FOCUS
Selecting a niche market
and achieving cost leadership
and/or differentation.
DIFFERENTATION
Being unique in the industry
COST LEADERSHIP
Providing products and/or services at the
lowest cost in the industry.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
More Response Strategies (added by Porter and others)
INNOVATIONDeveloping new products & services
GROWTHIncreasing market share, acquiring more customers or selling more products
IMPROVE INTERNAL EFFICIENCY
To improve employee and customer satisfaction
ALLIANCESWorking with business partners to create synergy & provide opportunities for growth
CRMCustomer-oriented approaches, e.g. the customer is king (queen)
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Firm Infrastructure
Human Resources Management
Technology Department
Procurement
Inbound Logistics
Operations
Outbound Logistics
Sales and
Mkting
Service
Porter’s Value Chain Model - Graphically
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Porter’s Value Chain Model (1985)
PRIMARY ACTIVITIES • Inbound logistics (inputs)• Operations (manufacturing & testing)• Outbound logistics (storage & distribution)• Marketing & sales• Service
Supply Chain
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Porter’s Value Chain Model
SUPPORT ACTIVITIES • Firm Infrastructure• Human Resources Management • Technology Development• Procurement
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
VALUE SYSTEM
• A firm’s value chain is part of a larger stream of activities, which Porter calls a “Value System”
• Includes the suppliers that provide the necessary inputs AND their value chains
• Applies to both products & services, for any organization, PUBLIC or PRIVATE
• The basis for the Supply Chain Management
• Think about UPSTREAM and DOWNSTREAM
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Integrated Value System
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
The Value Chain Model
• The Value System Model is used to:
• Evaluate a company’s process and competencies
• Investigate whether adding IT supports the value chain
• Enable managers to assess the information intensity and the role of IT
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
McFarlan’s Portfolion Framework (1984)
Key OperationalApplications upon
which the organisation currently depends for
success
StrategicApplications that are
critical for future business strategy
SupportApplications that are
currently valuable and desirable but not critical
for future business success
High PotentialApplications that may be
important in achieving future business success
High
Current
LowLow HighFuture
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
McFarlan’s Portfolion Framework (1984)
Key OperationalScheduling on-lineOnline parts orderingMaintenance online
Strategice-procurementElectronic ticketingAgent’s management
Supportfrequent flyer account trackingTraining on-lineWireless SMS info
High PotentialIntelligent data mininge-mail direct marketing
High
Current
LowLow HighFuture
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
CASE: Mobile Oil Moves to Web-based System
• Problem: • Largest marketer of lubricants in the USA• In 1995, introduced EDI system
• Used to place orders, submit invoices & exchange business documents
• It was too expensive, too complex to use• Solution:• In 1997, moved to web-based extranet-supported B2B
system• Results:• Reduced transaction cost from $45/order to $1.25• Fewer shortages, better customer service• decline in distributor administration costs
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Examples of EDI/Internet-based SIS (for individual Companies)
• Electronic Auctions
• Electronic Biddings
• Buyer-Driven Commerce
• Single Company Exchange
• Direct Sales
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
CASE: Total Quality Management at FPL• Florida Power & Light largest US utility company
• Leader in implementing total quality management
• Several successful SIS programs:• Generation Equipment Management System (GEMS)
• Tracks electrical generators, saving $5 million/ yr.
• 20 different quality control applications• Reduced customer complaints by 50%
• Trouble Call Management System• Reduced black out time from 70 to 48 min.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
CASE: Geisinger Implements an Intranet
• Problem:• As a result of mergers & acquisitions, Geisinger (a
health maintenance organization) had 40 different IT legacy systems in need of an upgrade & integration.
• Solution:• In 1993, Geisinger implemented an innovative
Intranet: with the following features:• “Tel-a-Nurse”• Clinical Management System• Human Resource Management
• Results:• Geisinger reduced costs and unnecessary medical
work.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
CASE: Caltex Corporation
• Major multinational company selling gasoline & petrol products.
• In 2000, created a centralized e-purchasing corporate exchange (www.caltex.com)
• Suppliers build electronic catalogues with Ariba’s software. • Many benefits to buyers and suppliers, particularly in Asia,
Africa & the Middle East.• System enables Caltex to successfully handle complex
multinational business environments.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
CASE : Port of Singapore
• Problem:• The Port of Singapore, the world’s largest
international port, faced increased global competition.
• Solution:• Implementation of Intelligent Systems
• Results:• Reduction in Cycle Time
• 4 hours versus 16 - 20 hours in neighboring ports• Reduction in uploading/ loading time
• 30 sec. versus 4-5 min./ truck in neighboring ports
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
SIS Implementation
• Major Issues to be Considered:• Justification
• Justifying SIS may be difficult due to the intengible nature of their benefits.
• Risks & Failures• The magnitude, complexity, continuous changes in
technology and business environment may result in failures.
• Finding appropriate SIS• Identifying appropriate SIS is not a simple task.
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Managerial Issues (cont.)
Sustaining Competitive Advantage Is Challenging
• As companies become larger and more sophisticated, they develop resources to duplicate the systems of their competitors quickly
Ethical Issues
• Gaining competitive advantage through the use of IT may involve unethical or even illegal actions
• Companies can use IT to monitor the activities of other companies and may invade the privacy of individuals working there
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Suggested Reading
• Information Technology for Management• Old Book
• Chapter 3 – Information Systems for Competitive Advantage pp 80 to 119
• New Book• Chapter 12 – Information Systems for
Competitive Advantage pp 505 to 518
• Computing Press – read it
PGMIT StrategyCE52801-2 Information Systems Organizations and Management
Q & A