Chapter 2 Information Systems for Competitive Advantage Information

Chapter 2 Information Systems for Competitive Advantage Information Systems Today Leonard Jessup and Joseph Valacich

Chapter 2 Objectives • Understand the IS in automation, organizational learning, and strategic support • Understand IS for strategic organizational success • Understand the need for making an IS business case • Understand technological innovations to improve competitive advantage

Why Use Information Systems? • Automating: doing things faster • Organizational learning: doing things better • Supporting Strategy: doing things smarter

Automating: Doing Things Faster • Technology is used to automate a manual process – Doing things faster, better, cheaper – Greater accuracy and consistency • Loan application example – Manual processing – Technology-supported process – Completely automated

Organizational Learning: Doing Things Better • Going beyond automation – Involves learning to improve the day-to-day activities within the process – Looking at patterns and trends • Organizational Learning – Using acquired knowledge and insights to improve organizational behavior • Total Quality Management (TQM) – Monitoring an organization to improve quality of operations, products, and services

Supporting Strategy: Doing Things Smarter Strategic Planning 1. Create a vision: setting the direction 2. Create a standard: performance targets 3. Create a strategy: reaching the goal

Types of Competitive Advantage • Low-Cost Leadership – Best prices on goods/services – Examples: Dell, Target • Differentiation – Best products or services – Examples: Porsche, Nordstrom, IBM • Best-Cost Provider (middle-of-the-road) – Reasonable quality, competitive prices – Example: Wal-Mart

Information Systems for Competitive Advantage • A clear strategy is essential • Sources of competitive advantage: – – – – Best-made product Superior customer service Lower costs Superior manufacturing technology Shorter lead times Well-known brand name High value per cost

Information Systems for Competitive Advantage • IS and Value Chain Analysis – VC Analysis: adding value within an organization – Organizations as big input/output processes – IS can automate many value chain activities: • • • Purchased supplies inbound logistics Operations Outbound logistics Sales and marketing Service

Organizational Value Chain

Information Systems for Competitive Advantage • The Role of IS in Value Chain Analysis • IS competitive advantage in VCA: – Internet link with suppliers, dealers • Extranets: using the Internet for B 2 B interactions – – Computer-aided manufacturing systems Web site with online product ordering Customer service response system Computer-aided design

Information Systems for Competitive Advantage • The Technology/Strategy Fit – An IS implementation should create a significant organizational change consistent with the business strategy • Business Process Reengineering (BPR)

Making the Business Case for a System • The Productivity Paradox (how to quantify gains? ) – – – – Measurement problems End-user development Decision support systems (DSS) Strategic systems Time lags Redistribution Mismanagement

Making the Business Case for a System • Making a Successful Business Case – Arguments Based on Faith – Arguments Based on Fear • • Industry factors Stage of maturity Regulation Nature of competition or rivalry – Arguments Based on Facts • Cost-benefit analysis for a web-based system – Recurring/nonrecurring costs – Tangible/intangible benefits

Presenting the Business Case • Know the Audience – The IS Manager – Company Executives (VPs and higher) – Steering Committee • Convert Benefits to Monetary Terms

Presenting the Business Case • Devise Proxy Variables – Measure changes in terms of perceived value • Develop a Work Profile Matrix – Time spent on each job, each type of work • Measure What Is Important to Management • Conoco: Making a Business Case • Changing Mindsets About Information Systems

Competitive Advantage in Being at the Cutting Edge • Deploying new technologies faster, better, and cheaper than competitors • Using new technology in innovative ways

Competitive Advantage in Being at the Cutting Edge • The Need for Constant IS Innovation • On the lookout for new technologies that impact business

Competitive Advantage in Being at the Cutting Edge • E-Business Innovation Cycle – – Choosing enabling/emerging technologies Matching with economic opportunities Executing business innovation for growth Assessing client value

Competitive Advantage in Being at the Cutting Edge • Implications of E-Business Innovation Cycle – Begin with technology when considering successful business strategies – Marketing is secondary to IT – Emerging technology cycle is ongoing

Competitive Advantage in Being at the Cutting Edge Terms and Concepts • • E-commerce (Internet-related) E-business (any IT that supports business) Enabling technologies Economic opportunities

Competitive Advantage in Being at the Cutting Edge The Cutting Edge vs. The Bleeding Edge • Information systems are often bought from, or built by, someone else • An organization typically cannot patent an IS • Rivals can copy emerging information systems • Therefore, one’s IS competitive advantage can be short-lived

Competitive Advantage in Being at the Cutting Edge Requirements for Being at the Cutting Edge • Consider Porter’s competitive forces • To deploy emerging systems well: – Organization must adapt well to change – Human capital available for deployment (knowledge, time, skills) – Tolerance of risk and uncertainty