Table 1 American Airlines SABRE Reservation System
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Table 1 American Airlines SABRE Reservation System IT Assets Nature of the Competitive Action Integrated database of current flights, routes and pricing offered by multiple airlines Desktop-based software that allowed travel agents to dial-in to the system to search for available flights and prices and make direct bookings Provided travel agents with access to online reservation systems to book passenger flights with higher efficiency, speed, and flexibility (e.g., multi-destination travel). The system gained great penetration because travel agents understood its value in helping the agents to make bookings. In this booking process, American used the system to display its own flights before showing the flights operated by other airlines. This preferential ordering boosted Amercian’s bookings. As the system became the industry standard for travel agent bookings, other airlines paid American for the ability to list their flights and a higher fee for priority listing. These fees boosted American’s non- operational revenue. American gained valuable intelligence about competitors’ prices and routes and was able to utilize this information in setting its own routes and prices. Rival airlines sought regulatory intervention because they perceived SABRE to give American an unfair competitive advantage. Eventually, American divested
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Table 1 American Airlines SABRE Reservation System. Table 2 Merrill Lynch Cash Management Account. Figure 1 Rethinking Business Strategy and IT Strategy. Business Strategy. Seed Business Strategies. Target IT Priorities. IT Strategy. Enabler Role. Support Role. - PowerPoint PPT Presentation
Transcript of Table 1 American Airlines SABRE Reservation System
Table 1American Airlines SABRE Reservation System
IT Assets Nature of the Competitive Action
Integrated database of current flights, routes and pricing offered by multiple airlines
Desktop-based software that allowed travel agents to dial-in to the system to search for available flights and prices and make direct bookings
Provided travel agents with access to online reservation systems to book passenger flights with higher efficiency, speed, and flexibility (e.g., multi-destination travel). The system gained great penetration because travel agents understood its value in helping the agents to make bookings. In this booking process, American used the system to display its own flights before showing the flights operated by other airlines. This preferential ordering boosted Amercian’s bookings.
As the system became the industry standard for travel agent bookings, other airlines paid American for the ability to list their flights and a higher fee for priority listing. These fees boosted American’s non-operational revenue.
American gained valuable intelligence about competitors’ prices and routes and was able to utilize this information in setting its own routes and prices.
Rival airlines sought regulatory intervention because they perceived SABRE to give American an unfair competitive advantage. Eventually, American divested SABRE by creating a new entity independent of its airline operation.
Table 2Merrill Lynch Cash Management Account
IT Assets Nature of the Competitive Action
Integrated database of all of a business customer’s accounts (e.g., savings, checking, brokerage)
Automated decision-making system for tracking investment opportunities and executing financial investments
Offered business customers a service for integrated financial management, whereby customers could maintain the desired level of money in liquid accounts (e.g., checking and savings), while sweeping daily excess cash into higher yield brokerage accounts.
The automated system kept track of market conditions and executed transactions to deliver ‘optimal’ returns to the customers, combining access to financial markets with financial expertise to deliver customers the best available returns on their cash across the different types of accounts.
Figure 1Rethinking Business Strategy and IT Strategy
Business Strategy
IT Strategy
Target IT Priorities
Seed Business
Strategies
Support Role
Enabler Role
Competitive Actions
Business Strategy
Business Model
Value Discipline
IT Strategy
Strategic Role of IT
Figure 2Identifying Ideas for Using IT to Enhance
Competitiveness
Ideas for IT-enabledCompetitive Actions
Figure 3Business Model Components
Customer Value
Proposition
Profit ModelCritical
Processes
Critical Resource
s
•Who is the customer?•What does the customer value?•How does our product/service meet the customer’s needs?
•How is revenue generated?•What is the cost structure?•How exactly is profit created?
What are the business activities critical to our being able to both provide customers with the products and services they value and do so in a profitable manner?
What are the businessand technology resources necessary in order to carry out critical processes in an effective and efficient manner?
Figure 4Components of Apple’s Business Model
Customer Value
Proposition
Profit Model
Critical Processe
s
Critical Resource
s
•Technically savvy segment of the mass market•Seamless online access to content across multiple media
•High prices due to in-demand hardware products (new, stylish, high quality)•Moderate manufacturing and marketing costs•High margins
•Internal product design•Product architecture•Tight control of sales and marketing•Outsourced manufacturing
•Brand•Product designers and architects•Electronic content delivery platforms•Relationships with content providers
Figure 5Components of Walmart’s Business Model
Customer Value
Proposition
Profit ModelCritical
Processes
Critical Resource
s
•Cost-sensitive segment of the mass market (‘Everyday Low Prices’)•Availability of a broad range of products, enabling one-stop shopping
•Low prices, low costs•High volume, high product turnover
•Store site selection•Tailor local inventory to local market•Shelf-space optimization•Supplier relationships•Logistical processes
•Retail and distribution facilities•Information technology•Employee talent in logistics, supplier management, merchandizing, purchasing and IT
Table 3Overview of the Value Disciplines
ValueDisciplin
eStrategic Focus
Key Business Capabilities
Examples
Operational
Excellence
• Product and service reliability• Competitive pricing• Customer convenience
• Order processing and fulfillment• Customer service• Supply chain• Inventory management• Merchandising• Financial management
DellFedEx
Walmart
Customer Intimacy
• Customer loyalty• Customer lifetime value
• Micro-segmentation• Customer relationship mgt• Advertising and marketing• Campaign management
Ritz CarltonHarrah’sNeiman MarcusAmazon
Product Leadershi
p
• Product and service innovation• Creativity• Leveraging internal and external knowledge
• Product and service development• Rapid commercialization of promising products and services• Quality assurance• Customer support
3MIntel
Johnson & Johnson
Table 4Strategic Roles of IT
Automation Empowerment
• Cost reduction• Transaction cycle time improvement• Responsiveness improvement• Productivity improvement
• Data distribution and access• Information distribution and access• Knowledge distribution and access• Business intelligence tools availability
Control Collaboration
• Real-time event monitoring• Real-time event visibility• Business rule automation
• Complex business process execution • Problem and opportunity handling• Business process innovation• Product and service innovation• Business model innovation
Table 5Value Disciplines and the Strategic Roles of IT
Value Disciplines
IT-enabled Business Innovation
Operational Excellenceat Walmart
• Digitized merchandising, logistics and inventory business processes (automation, control)• Cross-docking process innovation (collaboration)
Customer Intimacy
at Amazon
• 24x7, convenient shopping channel (automation, control) • Personalization through collaborative filtering (collaboration, empowerment)• Customer-generated product reviews (empowerment)
Product Leadership
at 3M
• Highly effective new product development processes (collaboration, empowerment)
Figure 6IT as a Strategic Enabler
Product/Service
CompetitiveMarket
Positioning
Business Processes
Employee Skills & Roles
Organization (or Work
Unit) Structure
ITFunctionalit
y
Adapted from M.S. Scott Morton (Ed.), The Corporation of the 1990s: Information Technology
and Organizational Transformation. New York: Oxford University Press, 1991.
Innovative IT
Functionality
Table 6Examples of IT-enabled Business Model Innovation
Organization Business Model Innovation
Enabling IT
Google Targeted Internet Advertising Search Engine
Harrah’sCustomer Life Cycle
ManagementCustomer Data Analytics
Walmart ‘Everyday Low Prices’Supply Chain CoordinationRetail Store Merchandising
ApplePersonal Digital Content
Devices (iPod, iPhone, iPad)
iTunes StoreThird-Party Applications
Stylish, Easy-to-Use Devices
eBay
Customer-to-Customer Exchanges
Business-to-Business Exchanges
Auction EnginesAuction Platform
FedEx Overnight Shipping Package Tracking
American Airlines
Customer Life Cycle Management
Frequent Flyer Program
Dell Direct ModelCustomer Product
ConfigurationSupply Chain Coordination
Amazon Effortless Online Shopping ‘1-Click’ Ordering
Table 7Limiting Competitor Responses to IT-Enabled Competitive
Actions
Barriers to Erosion
Questions for Analysis
IT Resources
• Are barriers based on unique or rare IT assets?• Do rivals possess matching IT assets? If not, how difficult will it be for rivals to build or acquire them?
Complementary Resources
• Are non-IT assets or capabilities required?• Do rivals possess these non-IT assets or capabilities? If not, how difficult will it be for rivals to build or acquire them?
Project Management Capabilities
• How complex are the projects involved with implementing the IT-enabled competitive action?• Do rivals possess sufficient project management capabilities? If not, how difficult will it be for rivals to build or acquire them?
Preemption Barriers
• Will rival’s customers and/or trading partners face high switching costs?• Is a value network required in order to implement the strategic action? If not, how difficult will it be for rivals to put together such a value network?Adapted from G. Piccoli and B. Ives, “IT-Dependent Strategic Initiatives and Sustained
Competitive Advantage: a Review and Synthesis of the Literature,”MIS Quarterly, December 2005,
pp. 747-776.
