MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE

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MANAGING INFORMATIONSYSTEMS FOR STRATEGIC
ADVANTAGE
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LEARNING GOALS

• Describe the various approaches to devising
  corporate strategy.
• Explain how information systems can help
  organizations achieve a strategic advantage.
• Describe the methods organizations use to choose
  a strategic information systems project.
• Describe how information systems can bring about
  corporate change.
• Explain the concept of knowledge management and
  describe the technologies that comprise knowledge
  management systems.

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Value Chain

• Value chain activities within an organization
  that bring products and services to market
• Primary activities take raw materials and
  transform it into something of greater value
• Inbound logistics Marketing and sales
• Operations Service
• Outbound logistics
• Supporting activities those functions that the
  company requires to do business but do not
  directly add value to a product or service
• HR Procurement
• IT Firm infrastructure

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Value Chain Analysis

• Process of analyzing the activities within an
  organizations value chain
• Companies gain strategic value by focusing on a
  particular portion of the value chain
• IT can help reduce the costs of these processes,
  thus increasing profit margins

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Porters Competitive Forces Model

• Unlike the value chain, the Competitive Forces
  Model deals with external factors
• Five components
• Level of competition in industry
• Threat of new entrants into industry
• Bargaining power of customers
• Bargaining power of suppliers
• Threat of substitute products
• Uses for CFM
• Determine position within industry
• Analyze industries and market segments they might
  wish to enter (exit)

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Competitive Advantage (CA)

• Those qualities that allow a company to earn
  above-average profits within an industry
• Low cost
• Unique product
• Three generic strategies to achieve competitive
  advantage
• Cost leadership strategy
• Differentiation strategy
• Focus strategy

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Information Systems forStrategic Advantage

• How can information systems improve the value
  chain?
• By reducing the cost of primary and support
  activities
• How can information systems change the way an
  organization reacts to its competitive forces?
• By changing the bargain power of suppliers
• By building closer ties with customers
• By increasing or decreasing barriers to entry in
  a market
• By serving as the basis for new products and/or
  services

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Sustainable Competitive Advantage

• Four approaches lead to sustainable competitive
  advantage
• Create barriers to entry through patents,
  monopoly, or technical expertise
• Be the first to develop systems with high
  switching costs
• Develop the technologies that change the
  underlying nature of the industry
• Cultivate and hire people with excellent
  information systems management skills

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Productivity Paradox

• We see computers everywhere, but in the
  productivity statistics.
  
  Robert Solow, Nobel Prize-winning economist
• It is difficult to attribute cost savings
  directly to a specific information system
• It is difficult to prove that a specific system
  led to certain financial outcomes
• Other measures are needed
• Balanced scorecard
• Total cost of ownership (TCO)

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The Balanced Scorecard

• Strategic planning method that translates
  business strategy into a comprehensive set of
  performance measures
• Investigates strategies in four areas
• Financial e.g. improving cash flow and reducing
  expenses
• Internal business processes e.g. decreased
  cycle time and improved quality
• Learning and growth e.g. develop successful new
  products
• Customer e.g. improve customer satisfaction and
  decrease product defects

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Value of Information Systems

• Cost must NOT outweigh benefits
• Return on investment (ROI)
• ROI (Benefits Costs) 100 / Costs
• Costs include Benefits include
• Hardware Tangible benefits
• Software Intangible benefits
• Labor
• Total cost of ownership (TCO)
• Method to quantify long-term direct and indirect
  costs

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TCO Analysis for PDA Purchase
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The IS Portfolio

• Treat investments in IS assets like a portfolio
  of investment assets to find redundancies and
  achieve balance
• Five steps
• Put information about all the organizations IS
  projects into a database
• Prioritize the IS projects
• Divide the IS projects into three types of
  investments
• Infrastructure
• Upgrades
• Strategic initiatives
• Automate the entire process
• Have the organizations top finance executive
  perform a Modern Portfolio Theory analysis

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Sample IS Portfolio
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Business Process Improvement and Reengineering

• BPI processes are good but can be better
• BPR elimination or change of business processes
• The fundamental rethinking and radical redesign
  of business processes to achieve dramatic
  improvements in critical contemporary measures of
  performance such as cost, quality, service, and
  speed. Hammer and Champy,
  1993
• Automation (e.g information systems) is a key
  factor in both BPI and BPR

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Major Themes of Successful BPR

• Several jobs are combined into one.
• Workers are empowered to make decisions.
• Work is performed where it makes the most sense.
• Checks and controls are reduced or eliminated.
• Reconciliation is minimized.

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Steps in BPR

• Have a clear strategy that is aligned with the
  organizations goals
• Clearly defined scope that identifies exactly
  which processes need to be reengineered and which
  supporting processes need to be revised
• Define measures and benchmarks for success
• Develop an understanding of the current, as-is
  processes
• Develop a plan for transition from the as-is
  processes to the to-be processes
• Implement the changed processes
• Measure the outcomes of the changes

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Knowledge Management (KM)

• Knowledge assets the knowledge that exists
  within the minds of each employee and the
  knowledge that exists in a tangible form such as
  databases, documents, and reports
• Companies must know how to manage this knowledge
• Knowledge management (KM) the process by which
  organizations extract value from their knowledge
  assets

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KM Systems

• Information technologies that enable the exchange
  of knowledge among employees and the storage of
  knowledge in repositories
• Types of KM systems
• Expert directories
• Knowledge repositories
• Knowledge sharing technologies
• Knowledge representation technologies
• Knowledge discovery tools

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Knowledge Portals

• A single access point to the knowledge of an
  organization
• Provides Web-based access to all of the KM
  technologies within an organization