Session 4 it architecture and competitive advantage

IT & Strategy

2 things

IT-strategy alignment

modularization & IT architecture

how do I align my technology to my firm’s

strategy?

TODAY:conventional views

what does a firm do?

firm needsproduct

mat

eria

lsmarket

money

what is a product?

customer’s needs

a product is a solution package

mobilize commodities to deliver the product

Accounting Finance Sales Human

Resources Production

MIS is the “glue” that ties

businesses together…

…and uses the technology that makes business work.

what dose IS do?

IT reduces communication & coordination cost

IT architecture

shows how hardware, software, database and

network will be coordinated

to achieve strategic goal of the firm

a master plan that provides a technology vision for the company

© copyright 2007, youngjin yoo

more than IT architecture

“A digital nervous system requires a combination of hardware and software; it's distinguished from a mere

network of computers by the accuracy, immediacy, and richness of the information it brings to knowledge

workers and the insight and collaboration made possible by the information.”

Bill Gates, Business @ The Speed of Thoughts


“He is right - I would be very nervous if my systems were based on their (Microsoft’s) platforms

and products!”

Scott McNealy on Gates

also includes

organizational control

funding model

standardization

strategy question

how do you build sustainable competitive advantage?

Michael Porter

it’s all about positioningfive forces

three generic strategies

Bargaining power

of buyers

Bargaining power

of suppliers

Threat of

new entrants

Threat of substitute

products or services

Rivalry among

existing competitors

three generic strategies

cost leadership

differentiation

it is about unique resources

CK Prahalad

capabilities

core competencies

it is about ability to innovate

Kathleen Eisenhardt

dynamic capability

hyper competition

how can you exploit IT to build sustainable

competitive advantage?

it depends!

positioning

Wal-Mart and EDI

create unique resources

unique IT

American Airline

City Bank

IBM-Mayo Clinic

HyperActive Bob

Mrs. Fields Cookie

technology is a commodity utility

others

they will copy it

if not the same system

similar enough is enough

IT value will evaporate

first mover makes all the mistakes

second mover will learn

price will go down

consumer will benefit

ATM

Airline reservation systems

ERP


Managerial Capabilities

(Uniqueness)

Technology(Efficiency)

Sustainable competitive Advantage

IT + culture

IT + ownership structure

IT + access to capital

IT + operation excellence

IT + brand

IT + HR


Some statistics

first mover

Amazon vs

Barns & Noble

Me First vs.

Me Too

Amazon

Introducing new feature

Barns & Noble

integration with inimitable resources (physical stores)

IT-enabled innovation

SustainableCompetitive Advantage

Time &History

it’s like a garden

time matters!

Modularization & IT architecture

mass production

physical machines

maximizing the throughputs

economy of scale

upstream & downstream integration

economy of scope

diversification

vertical integration

m-form organization

internalization of value activities


traditional view

A firm’s value chainTransaction Systems

(ERP, MRP, TPS)

Enterprise DB

Back-end Systems Executives & Managers

Customers

Suppliers

control

everyone thinks “I am unique!”

centralized

decentralized

hybrid

modularization of products

system view of a product

subsystems and components

design hierarchyand

design rules

componentsinterfaces

stereo system

amplifier speakers radio tunerCD players

so, what’s the big deal?

containingcomplexity

innovation through mix & match

agility

what does IT have to do with this?

reduction of communication and

coordination cost

making externalization of activities cheaper

facilitating modularization

disintegration of vertically integrated

firms


network-centric view (service oriented architecture) for

modular organizations

F in anc ia ls

ERPM

anufacturing

Sales an d D

istr ibut io n

Hum

an R

esou r ce

ERP infrastructure services

RDBMS

Call

Center

CRM

CRM infrastructure services

RDBMS

Salesforce

suppor t

S er vic e

Ca ta lo g

Commerce Server

Application Server

RDBMS

ShoppingC

art

Payment

E AI

Midd lew

ar e

service oriented architecture

modularinteroperable

reusableflexible

scalable

standardscommon infrastructure

IT infrastructure is a strategic asset

more than a tool

not utility

no overhead

“let’s just have ERP” wouldn’t work

it is a strategic decision

must be a part of strategic decision-making process

aligning business goals to IT

how do I really know if IT is a strategic

resource in my firm?

where is your CIO in your organization?

how is IT being funded?

is IS a part of corporate G&A?

where is IS plan in your strategic planning?

who makes the decision?

so, why should I care?

accelerating technology innovations

challenging long-held assumptions

new ways of organizing relationship inside

new ways of organizing relationship outside

agility and innovations

it is as strategic as it gets when it comes to information systems

Session 4 it architecture and competitive advantage

Education

Transcript of Session 4 it architecture and competitive advantage