MI 720 Session

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MI 720 Session 12

• Topics
• Case ITC eChoupal Initiative
• Mini-Lecture The Business Value of IT

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Old Supply Chain
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Wrap up - Aftermath

• Total IBD volumes grew 400 from 2000-2003
  (reaching 12 market share)
• 20 from better yields
• 80 from taking market share from competitors
• By 2003
• 3,000 computers deployed, but not one lost,
  stolen or vandalized.
• 350 IBD employees150 of which dedicated to
  setting up eChoupals (up from 100)
• 1.8 million farmers in 80,000 villages touched by
  eChoupal
• Set up 6 eChoupals per day
• Out of a set of 50 villages, visit 8-9 in best
  locations, choose one for eChoupal

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Business Value of IT Framework
What key factors affect the level of business
value produced by a given level of IT investment?
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Complements Complementarities

• Complementarities
• Are present when two things are worth more
  together than both individually
• Value (A and B) gt Value (A) Value (B)
• Systems of complements
• A group of elements that have complementarities
• Each element may or may not be valuable by itself

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BV Framework A. Level of IT Investment
5 Zara IT for Fast Fashion 6 Moore Medical
CRM Project
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
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BV Framework D. IT Enabled Business Value
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
2 Rich-Con MRP Implementation 4 Harrahs
Competing on Analytic Capabilities 5 Zara IT
for Fast Fashion 12 ITC eChoupal Initiative
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BV Framework B1. IT Business Strategy
2 NetFlix IT Enabled Business Models 4
Harrahs Competing on Analytic Capabilities 5
Zara IT for Fast Fashion 12 ITC eChoupal
Initiative
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
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BV Framework B2. Tech Competitive Context
1 Friedman Ten World Flatteners 2
Distinctive Characteristics of IT 7 Google
Internet Search 8 Web 2.0
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
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BV Framework B3. Org. Practices Assets
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
4 Harrahs Competing on Analytic Capabilities
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B3. Org. Practices Assets (cont.)

• IT has higher payoffs when embedded in a cluster
  of related innovations that comprise the digital
  organization
• Automation of routine tasks
• Highly skilled labor
• Decentralized decision making
• Improved info flow vertically laterally
• Strong performance-based incentives
• Increased emphasis on training and recruitment

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B3. Org. Practices Assets (cont.)

• For every dollar of IT hardware capitalthere
  are up to 9 of IT-related intangible assets
  Brynjolfsson 2003
• Only 20 of the firms studied by Brynjolfsson
  are digital organizations Whats
  wrong with the other 80?

IT capital (10) Technology complements
(15) Intangibles (75) Organizational assets,
including human capital, business processes,
culture
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BV Framework B4. IT Capabilities
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
4 Harrahs Competing on Analytic
Capabilities 5 Zara IT for Fast Fashion 12
ITC eChoupal Initiative
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BV Framework IT Capabilities
IT Assets
IT Processes

• Developing articulating IT strategy
• Defining the IT architecture
• Valuing justifying IT investments
• Developing custom systems
• IT project management
• Implementing technology managing change
• Operating IT systems efficiently and reliably

Adapted from Ross et al. 1996
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BV Framework C. How IT is Deployed
2 Rich-Con MRP Implementation 9 DrKW Wiki
Adoption and Implementation 10 Mt Auburn
CPOE 11 Dominion-Swann Industries 12 ITC
eChoupal Initiative
A. Level of IT Investment
C. How IT is Deployed and Used
D. IT-Enabled Business Value
B2. Technological Competitive Context
B1. IT Business Strategy
B3. Organizational Practices Assets (Digital
Organization)
B4. IT Capabilities
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Conclusions

• Business value (D) does not automatically flow
  from IT investments (A)
• Investment has to be joined with favorable
  positions on four related organizational elements
  (B1-B4)
• The resulting IT systems have to actually be
  assimilated, and joined with initiative-specific
  organizational changes (C)
• Certain general organizational practices and
  assets (B3) complement most kinds of IT
  investment
• But each IT initiative has unique complements
  also
• IT Capabilities (B4) can be judged by results,
  but they are driven by valuable IT assets and
  valuable IT processes
• Non-IT managers play a crucial role in building
  and sustaining IT capabilities