INFORMATION TECHNOLOGY

1
INFORMATION TECHNOLOGY

• AS A WEAPON FOR COMPETITIVE ADVANTAGE

2
ITs Influence Within An Organization

• IT effects revenues and profits in terms of
• Helps market segmentation
• Helpful in increasing market share
• Allows fast design of new products
• Better Management Control
• Better Asset Liability Management

OR
Dont forget IT is also expensive
3
Information Technology as Competitive Advantage

• Concept Emerged in 1980.
• Slowly been accepted as valid.
• Research has shown that very few companies are
  able to generate a competitive advantage through
  information technology

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
4
Studies Involving IT as CA

• How a number of companies successfully
• deployed their IT weapon for strategic
• advantage
• Ex. Eric K. Clemons , Michael Row, McKesson
  Drug Company a case study of Economista
  strategic information system, Journal of
  Management Information Systems, v.5 n.1, p.36-50,
  July 1988
• Which are the frameworks that can help
• managers identify applications that can bring
• competitive advantage to their own business
• and the use of such frameworks within the
• organization
• Ex. Ives, Blake, Learmonth, Gordon, "The
  Information System as a Competitive Weapon,"
  Communications of the ACM, Vol. 27, No. 12,
  December 1984, pp. 1193-1201

5
Prime question of using IT as CA

• Can pioneers achieve rewards substantial enough
  to justify the costs and risks of being prime
  mover?
• Subsequent entrants come at much lower costs.
  This is why you must create switching costs.

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
6
Information Technology as CA

• Study of Thirty Major Companies
• Including GE, Xerox, FedEx, PG
• 15 firms were able to sustain a competitive
  advantage in terms of market share or
  profitability
• Only 6 were able to sustain both
• Companies are more likely to fail

Kettinger, William, Strategic Information
Systems Revisited A study in Sustainability and
Performance, MIS Quarterly, vol.18 n.1, pg
31-58, 1994
7
Examples of Firms That Successfully Used IT

• American Airlines SABRE System
• Baxter Hospital Supply Systems
• Mitek Roofing System
• UK Telecom Detailed Customer Billing
• Fed Ex Real Time Package Tracking

8
Aligning IT With Business Strategy
Contributions Commodity Differentiator
Critical Oil Refining SABRE System
Useful Payroll ICI Paints
9
The Framework
From Feeny And Ives IT as a Basis for
Sustainable C.A.
Sustainable advantage
Third Pillar How effective will response Be?
First Pillar How long until Response?
Second Pillar Who can Respond?
Project Life Cycle Analysis
Competitor Analysis
Supply Chain Analysis
10
Pioneer
Followers
First Pillar Project Life Cycle
Vision/idea

• Awakening
• Awareness
• Perceive
• significance
• Accept/assign
• responsibility

Win approval

• Built
• Technology
• Application
• Database
• Knowledge base

Discovery
Win approval
Project launch

• Build
• Technology
• Applications
• Database
• Knowledge base

• Enhance
• Vision/idea
• Win approval
• Build
• etc.

Project launch
Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
11
First PillarProject Development Life Cycle

• Can also be viewed as a sustainability analysis
• For sustainability, an expensive hard to
  duplicate system can provide uneven playing field
  for years of profitability and market growth.

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
12
First PillarProject Life Cycle

• Deals with the concept of lead time (Time from
  launch until substantive response).
• Anytime you use IT to generate CA, you can expect
  a response.

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
13
First PillarProject Life Cycle

• Four variables of lead time
• Awakening
• Larger the CA, quicker the awakening
• Win Approval
• Followers easier to win approval
• Project Build
• Does not require vision of prime mover
• Project launch

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
14
Second Pillar Competitor Analysis

• Who Can Respond?
• Generic lead-time can be made up easily. May even
  leap frog original system.
• Therefore a new application that leverages
  dissimilarities between the prime mover and
  followers makes it more difficult to mount a
  response.

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
15
Three Major Areas of Second Pillar

• Competitive Scope
• Geographical scope
• The geographical area that a firm chooses to
  compete in or locate particular types of work.
• Segment Scope
• The breadth of products sold and the buyers
  served
• Vertical scope
• The extend to which the firm has elected to
  pursue backwards or forward integration
  strategies
• Industry scope
• The range of related industries in which the
  firm competes with a coordinated strategy.
• 
  

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
16
Three Major Areas Of Second Pillar

• 2. Organizational Base
• Structure
• Culture
• Physical Assets

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
17
Three Major areas of Second Pillar

• 3. Information Resources
• Technological infrastructure
• Application inventory
• Databases
• Knowledge bases

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
18
Third Pillar Supply Chain AnalysisWill A
Response Be Effective?

• 1.)    Find exploitable link- Find point in chain
  where resources are finite and a limited number
  of participants control the link.
• 2.)    Capture Pole Position- Create unique
  relationships
• Seek out applications which create unique
  relationships with that group
• In return for benefits, user will put mover in
  position of preferred partner
• Movers continued position is secured against any
  equivalent offering only superior will justify
  switching costs.

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
19
Third Pillar Supply Chain Analysis

• 3. Keep the gate Closed- Users perceive a
  significant tangible/intangible cost of switching
  systems. This is the base for maintaining an
  advantage
• Applications- people have to learn interface
• Database- switching can cause loss of all data
  gathered and learning of new system
• Community- A community may form that leads IT to
  be a part of infrastructure, switching loses this
  advantage

Feeny, David Ives, Blake, IT as a basis for
sustainable competitive advantage in Managing IT
as a Strategic Resource, Willcocks, Leslie,
Feeny, David (eds). McGraw-Hill Education-Europe,
1997, pp. 43-61
20
Case Studies

• 1. Celera Genomics Group
• Presented by Matt Brickel
• 2. Dell Computer Corporation
• Presented by Kevin Shipley

21
Celera Genomics Group Achievement of Sustainable
Competitive Advantage Through the Use of IT?
22
Why Choose Celera Genomics AS A Case Study?

• In 1998 the principles of the Applera Corporation
  decided to sequence the Human Genome.
• At that time the Scientific Community thought it
  would take 3,000 scientists 15 to 20 years.
• Celera Genomics did it in 2 years using IT.

www.pbs.org/wgbh/nova/genome/deco_venter.html View
ed September 11, 2002
23
Company Background

• Established in May 1998 by the PE Corporation and
  J. Craig Venter, Ph.D
• Formed to generate and commercialize genomic
  information.
• Celera Genomics Group is an operating company of
  the Applera Corporation, F.K.A. the PE Corp.

Dr. Craig Venter Ph.D
www.celera.com/company/home.cfm?ppageoverviewcpa
gebackground Viewed October 12, 1992
24
Size of Celera In Terms of Sales and Profits
Celera Genomics Group Net Revenue 2001
89,385,000 Loss Before Taxes 2001
232,662,000 Net Loss 186,229,000 Source
Applera Corporation Annual Report 2001
http//media.corporate-ir.net/media_files/NYS/CRA/
reports/2001report.pdf Viewed September23, 2002
25
Major Products Sold by Celera

• Celera Discovery System (CDS)
• CDS is a subscription based web enabled system
  that allows users access to Celera databases and
  applications
• Moving Into Therapeutics
• Celera plans to begin developing and marketing
  novel therapeutic drugs identified through its
  genomic research.

www.findarticles.com/cf_bzwr/m0EIN/2000_April_6/61
343200/print.jhtml Viewed October 12, 2002
26
Major Characteristics of Celera Customers

• 250 International Academic and Commercial
  Customers Now Use Celeras Celera Discovery
  System
• Some Notable Customers
• Pfizer
• Yamanouchi Pharmaceuticals
• National Cancer Institute
• Harvard University
• University of California System

www.celera.com/genomics/home.cfm?ppageoverviewcp
agecustomers Viewed September23, 2002
27
Who Does the CIO Report To?
Tony White Chairman, President and CEO of Applera
Corporation
Tama Oliver CIO of Applera Corporation
John Reynders, Ph.D Vice President, Information
Systems, Celera Corp.
Jamie Lacey, Celera Genomics Corporate
Communications, interviewed via e-mail by Matt
Brickel, September 24, 2002.
28
Celera Executive Management
Kathy Ordoñez President, Celera Genomics Mark
Adams, Ph.D. Vice President, Genome
Programs Werten Bellamy, Jr., J.D. Group Counsel
David Block, M.D. Executive Vice President,
Celera and Chief Operating Officer, Celera
Therapeutics Robert Booth, Ph.D. Senior Vice
President, Research Development Samuel Broder,
M.D.   Chief Medical Officer
Ugo DeBlasi, CPA Vice President, Finance Jason
Mollé Senior Vice President, General Manager,
Online Business Gene Myers, Ph.D. Vice President,
Informatics Research Scott Patterson, Ph.D. Vice
President, Proteomics John Reynders, Ph.D. Vice
President, Information Systems Bridgette
Robinson, A.B.D. Vice President, Human
Resources Michael Venuti, Ph.D. Senior Vice
President, Research and General Manager
http//media.corporate-ir.net/media_files/NYS/CRA/
reports/2001report.pdf Viewed September23, 2002
29
How Many IT Personnel?
The most recent count shows that 50 people are
employed in an IT capacity at Celera.
Jamie Lacey, Celera Genomics Corporate
Communications, interviewed via e-mail by Matt
Brickel, September 24, 2002.
30
What is Celeras Annual IT Budget?

• Celera does not disclose information pertaining
  to IT budget.
• In 2001 Celera Spent 164,693,000 on research and
  development.

http//media.corporate-ir.net/media_files/NYS/CRA/
reports/2001report.pdf Viewed September23, 2002
31
Description of the Critical Differentiator
Celeras process uses robots that conduct
polymerase chain reaction PCR processes to
magnify and read DNA chains. http//allserv.rug.
ac.be/avierstr/principles/pcrani.html

• 300 robots _at_ 300,000 each 90,000,000
• Each rung on the DNA chain contains 2 out of 4
  possible letters A, G, C or T
• Human Genome is 3 billion letters

www.pbs.org/wgbh/nova/genome/deco_venter.html View
ed September 11, 2002
32
Description of the Critical Differentiator

• Celeras computers hard drive has 100 terabytes
  of data
• 1 terabyte 1,000 gigabytes
• 1 gigabyte 1,000 megabytes
• Perspective, my new Dell computer has a 40
  gigabyte hard drive

X 2,500 Celera Hard Drive Capacity
www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
33
Description of the Critical Differentiator

• Celera uses a network of computers to process the
  data from the hard drive
• Each computer has 4 alpha chips in it
• 20,000 CPU hours to decode the Human Genome
• One CPU hour Use of 1 Alpha Chip for 1 Hour
• Celera decoded Human Genome in one shift!

www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
34
Celera Discovery System Overview
The Celera Discovery System is an integrated,
easy to use, web-based discovery platform that
combines the most comprehensive set of genomic
and biological data along with powerful
visualization and analysis tools. It allows
researchers to search, analyze, interpret and
manage their genomic information in one place
thus saving valuable time, reducing costs and
accelerating their research.
www.celera.com/genomics/academic/home.cfm?ppagecd
scpagedefault Viewed October 12, 2002
35
History of the system

• In 1998 the principals of Applera Corporation
  decided to sequence the human genome.
• The thinking at the time, by people outside of
  Applera Corp., was that it would take 3,000
  scientists 15 to 20 years to sequence the human
  genome.
• The people at Applera thought that it could be
  done by 2002 using information technology.
• They formed Celera Genomics group to begin the
  process.
• They had an idea that they could use Robots to
  automatically conduct PCR processes but they had
  to build them first.
• Applied Biosystems, Celeras sister company,
  built the robots from scratch.

www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
36
History of the system

• The building of these robots was the impetus for
  the genome race.
• Once the robots were built to perform and read
  the information derived from the PCR processes,
  Celera had to find computers to store the data
  and then process it (sequence the Genome).
• Once the system was assembled Celera started out
  by sequencing the genome of simple organisms that
  had already been sequenced so that they could
  verify that it worked.
• They then sequenced the mouse genome, and then
  they sequenced the human genome in 2000.
• Shortly thereafter the Celera Discovery System
  was launched and in 2001 the current advanced
  version was launched.

www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
37
Was the System Designed for Competitive Advantage
Or Was It a Surprise?
The people at Celera had the idea that they could
sequence the human genome faster than was thought
possible at the time. Nobody new for certain
that it was going to work. Dr. Craig Venter was
quoted as saying I am not afraid to take risks.
I mean I said at the beginning that either this
would be one of the most spectacular success
stories in history or the biggest flame-out in
history. There was clearly a risk element to
this. In fact, when I look at all the things
that could have failed and could have gone wrong,
its stunning perhaps that it did work as well as
it did.
www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
38
Was the System Designed for Competitive Advantage
Or Was It a Surprise?
Essentially Celera is not worried about others
replicating what they have done because there is
really no need to do so. Celera willingly shares
the information that they have for a subscription
fee. In the case of Pharmaceutical companies the
fee is negotiated and is in the millions of
dollars. For academic researchers there is a
pricing schedule
www.pbs.org/wgbh/nova/genome/deco_venter.html
Viewed September 11, 2002
39
Was the System Designed for Competitive Advantage
Or Was It a Surprise?
CDS pricing schedule
Number of User(s) (1 year term) Additional Cumulative Annual User Fee Per User
Per User 30,000 each
Number of User(s) (3 year term) Additional Cumulative Annual User Fee Per User
1-5 Users 17,000 each
6 - 10 Users 15,000 each
11 - 25 Users 12,000 each
26 - 55 Users 11,000 each
56 - 75 Users 10,000 each
76 - 100 Users 8,500 each
101 - 250 Users 7,000 each
Basic subscription (Human Reference SNP Database not included)All fees should be calculated based on a 3-year term (Human Reference SNP Database not included). Basic subscription (Human Reference SNP Database not included)All fees should be calculated based on a 3-year term (Human Reference SNP Database not included).
www.celera.com/genomics/academic/home.cfm?ppagepr
icelistcpagedefault, Viewed Oct. 12, 2002
40
How Do Customers Interact With the System?
The Celera Discovery System (CDS) is a web based
tool that is accessed through www.celera.com.
They can use the information available there to
conduct their own research which can be saved on
the customers computers behind their own
firewall.
41
Does Celeras Use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 1 Project Life Cycle analysis How long
  until a response?
• Awakening
• Approval
• Building the System
• Project Launch
• The time it would take the government to respond
  would likely be substantial and its effectiveness
  uncertain. Celeras competitive advantage is
  supported by the first pillar.

42
Does Celeras Use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 2 Competitor Analysis Who can respond?
• Competitive Scope
• Organizational Base
• Information Resources
• As stated previously the most likely competitive
  response would come from the US Government. The
  government does not have the competitive scope
  that Celera has. They do not have the necessary
  organizational base. They do not have the
  necessary information resources assembled.
  Celeras competitive advantage is supported by
  the second pillar.

43
Does Celeras Use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 3 Supply Chain Analysis Will Copying
  Help?
• Supply Chain Analysis Will Copying Help?
• Find Exploitable Link
• Capture Pole Position
• Keep the Gate Closed
• Even if the government copies what Celera has
  done it is unlikely that Celeras customer base
  will switch.

44
Overall Conclusion
Celeras systems provide a sustainable
competitive advantage that is supported by the
three pillar model.
45
Dell Computer CorporationEnabling business
processes through information technology?
46
Company Background

• Founded in 1984 by Michael Dell
• Started selling computers out of his dorm room
• Started by building computers with components
  made by other companies to meet customers needs.
• This became the basis for Dells direct-model
• Today, Dell is valued at over 26 billion dollars

47
Size of DellIn terms of Sales and Profits

• Dell Computer Company
• Net Revenue
• February 2002 31,168
• 2001 31,888
• 2000 25,265
• Net Income
• February 2002 1,246
• 2001 1,777
• 2000 1,666

Dell Annual Report February 2002
48
Major Products Sold by Dell

• Enterprise Systems servers and storage
• Network switches and workstations
• Notebook and Desktop computers
• Peripheral Products
• Various services and technical support

49
Major Characteristics of Dells Customers

• The companies customers range from large
  corporations, government agencies, healthcare
  institutions, small businesses, and individual
  consumers
• No customer represents more than 10 of business
• Range from relational to transactional
• More than 3 million a day in internet sales
• Most sales to business or government(gt70)
• Shell, Exxon, MCI, Ford, Toyota, Boeing
• Greater than 30 of sales from foreign customers

www.mhhe.com/business/management/thompson/11e/case
/dell5.html
50
Dells Chief Information Officer

• Randy Mott, former CIO of Wal-Mart
• Reports To Michael Dell
• Oversees more than 20 strategic and over 100
  other major projects at any given time
• Consults with executive team and oversees eight
  direct subordinates
• Constantly meets with customers to understand
  customer and sales force needs
• Challenge is to make sure department uses the
  right systems to support Dells model.

Worthen, Ben. Travelin Man. CIO Magazine.
Mar1, 2002
51
Dells IT Department

• More than 2,500 IT personnel
• Uses Cross-Functional Teams
• Global Matrix Team
• 250 members
• Ensure that Dell website functions correctly
• Find enterprise solutions to help
• Improve Productivity

Worthen, Ben. Travelin Man. CIO Magazine.
Mar1, 2002
52
What is Dells IT Budget?

• Not Available
• Research Development and Engineering Costs
• February 2002 452
• February 2001 482
• February 2000 374
• Dell Annual Report February 1, 2002

53
Description of the Critical Differentiator

• Dells Direct Model

Purchase by Users
Manufacture of Components by suppliers
Customized Assembly
Service And Support
54
Critical DifferentiatorAdvantages of Dells
Direct Model

• Eliminated time and costs of distributing through
  independent retailers.
• Eliminated need for various computer models
• No longer need to discount slow selling PCs
  before new models are introduced
• Eliminated Mark-Ups.

www.mhhe.com/business/management/thompson/11e/case
/dell5.html, October 16 2002
55
Critical DifferentiatorSupply Chain Management

• Dell manages the relationships from the original
  supplier to the end customer.
• Supply chain management shortens the cycle
  between the component, the manufacturer and the
  end customer. We are allowing them to almost
  touch each other. Michael Chong, Tech. Mgr.
• Dell looks for opportunities to cut costs
  throughout the process.
• Shaving .1 off materials costs has a bigger
  impact than a Ten percent raise in manufacturing
  productivity

---. How Dell Keeps from stumbling. Business
Week. May 14, 2001, page 38b ITAC online Dell
case study, see reference
56
Critical DifferentiatorITs Role in the Supply
Chain

• Dell uses information technology to continually
  refine the supply-chain to remain the low cost
  producer.
• Key Components
• i2 suite software
• Valuechain.dell.com
• Dell.com
• XelusPlan

57
Critical Differentiatori2 Suite Software

• Implemented in 1999
• Planning
• i2 TradeMatrix Supply Chain Planner
• i2 TradeMatrix Buy Solution
• Execution
• i2 TradeMatrix Factory Planner
• Rhythm Collaboration Planner

58
Critical Differentiatori2 Suite Software

• On the planning side, we decided to use the i2
  TradeMatrix Supply Chain Planner  and i2
  TradeMatrix Buy Solution  software to communicate
  our materials requirements to suppliers. On the
  execution side, we're deploying the i2
  TradeMatrix Factory Planner and Rhythm
  Collaboration Planner to schedule our factories
  and communicate materials requirements to the
  supplier hubs,"
• - Eric Michlowitz, Dells director of Supply
  Chain

http//www.dell.com/us/en/gen/casestudies/casestud
y_dell_i2.htm, October 16, 2002
59
Critical Differentiatori2 Suite Software
Advantages

• Enhances efficiency of the pull system
• Only .05 of costs to obsolete inventory
• Precise delivery of components
• Can specify what door and what time components
  arrive
• Orders arrive exactly when needed
• Factory has five to six hours worth of inventory
• Allows for order prioritization
• Three times the number of units per square foot

---. How Dell Keeps from stumbling. Business
Week. May 14, 2001, page 38b
60
Critical Differentiatori2 Suite Software
Advantages

• It was important for us to have a global view of
  Dell's entire supply chain. We wanted to be able
  to see - on a real-time basis - what materials
  are available at the supplier hubs, what
  suppliers have committed to worldwide and what
  demands they haven't been able to support."
  Michlowitz

http//www.dell.com/us/en/gen/casestudies/casestud
y_dell_i2.htm October 16, 2002
61
Critical Differentiator ValueChain.Dell.Com

• Secure extranet that allows suppliers to
  collaborate in managing the supply chain
• Provides suppliers with the ability to drop off
  invoices, check engineering change orders, cost
  reports, and overall performance.
• Allows suppliers to more accurately forecast
  future demand.

ITAC online Dell case study, see reference
62
Critical Differentiator ValueChain.Dell.Com

• Enhances Supplier relations
• Number of Suppliers has dropped from 1,000 to 100
• 90 percent of Material Supplies purchased online
• Suppliers are more likely to collaborate
• Color of monitor example

63
Critical Differentiator Dell.com

• Converted to XML in 1999
• Uses eXcelon
• Redesign uses customerization
• Takes into account local factors
• Remembers product purchased
• Reaches 80 countries with 22 different languages
• Maintains 20,000 pages in service section alone

http//www.wdvl.com/Authoring/Languages/XML/Confer
ences/XML99/dell.html October 16, 2002
64
Critical Differentiator XelusPlan

• Service logistics program
• XelusPlan allows us to forecast, plan, and track
  forecast accuracy against actual demand. It
  provides us with a single, centralized database
  and standard planning procedures.
• Don Smith, business analyst
• Focuses on service organization
• More than 6,000 orders a day

http//www.xelus.com/CaseStudies/cs_dell.asp,
October 16, 2002
65
Critical Differentiator XelusPlan Advantages

• Quickly process orders
• Use scenario analysis
• Appropriately adjust inventory levels to maintain
  proper service levels
• In continuously changing environment allows Dell
  to forecast demand for both new and old components

http//www.xelus.com/CaseStudies/cs_dell.asp
October 16, 2002
66
Reasons IT generates a Competitive Advantage

• Cuts materials costs
• Materials cost account for greater than 21
  billion
• More than 70 of revenue spent on materials
• Reduces inventory levels and cycle time
• Very little obsolete products
• Reduces transaction costs
• Most transactions occur online

Shah, Jennifer. Dell writes the book on
efficiency. EBN. Dec 17,2001. pg32
67
Reasons IT generates a Competitive Advantage

• Putting Technology behind the Supply Chain
  process has also provided a gateway for greater
  efficiencies, facilitated Communications with
  suppliers, and improved operations between
  internal groups
• Jennifer Shah, EBN

Shah, Jennifer. Dell writes the book on
efficiency. EBN. Dec 17,2001. pg32
68
Does Dells use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 1 Project Life Cycle How Long Until
  Response?
• Awakening
• Approval
• Building the System
• Project Launch
• Dells system is largely internal and complex.
  This makes it hard for the competition to build
  and introduce a similar product.

69
Does Dells use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 2 Competitor Analysis Who can respond?
• Competitive Scope
• Organizational Base
• Information Resources
• Competitors were too vertical and had too many
  products.
• Structure, cultures, and physical assets were
  geared toward other system
• Competitors had investments in current inventory
  methods and technological infrastructures

www.mhhe.com/business/management/thompson/11e/case
/dell7.html October 16, 2002
70
Does Dells use of IT Give Them a Sustainable
Competitive Advantage?

• Pillar 3 Supply Chain Analysis Will Copying
  Help?
• Find Exploitable Link
• Capture Pole Position
• Keep the Gates Closed
• Found points in supply chain where participants
  control the link, created unique applications
  that encourage strong relationships with
  suppliers and customers, found ways to ensure
  that suppliers and customers will continue to be
  loyal to Dell.

71
Dell Conclusion

• Dell uses IT to
• Enable its business model
• Create a sustainable competitive advantage over
  its competitors.

72
Conclusion

• IT is important to an organization because it
  effects profits, revenues, and a companys
  business systems
• IT can be used to create a sustainable
  competitive advantage
• Companies can succeed by following certain rules
  regarding the use of IT
• More companies fail than succeed

73
Effective Use of IT

• Celeras System Meets the Criteria Set Forth by
  the Three Pillars Model
• Project Life Cycle Analysis
• Competitor Analysis
• Supply System Analysis

74
Effective Use of IT

• Celera Genomics Group
• Celera Genomics Group Used IT To
• Develop a ground breaking system enabling users
  to perform accelerated genome research
• Research institutions do not have to invest the
  vast amounts of capital required to perform this
  type of research
• The genome of any organism can be mapped
• Will aid in the discovery of new medicines and
  therapies
• Create a new business niche
• Automated genome mapping and research at
  previously impossible speed

75
Effective Use of IT

• Dells System Meets the Criteria Set Forth by the
  Three Pillars Model
• Project Life Cycle Analysis
• Competitor Analysis
• Supply System Analysis

76
Effective Use of IT

• Dell Computer
• Dell used IT to
• enable its business model
• enhance business processes
• Manage its supply chain
• Better supplier relations
• Real-time management
• Forecast and respond to demand
• Reduce Inventories
• Improve customer relations

77
Lessons for the CIO

• Factors in the Success of IT
• Complexity of system
• Switching costs
• Dissimilarities between prime mover and
  competition
• Use of exploitable link
• Customers understand system

78
Lessons for the CIO

• Make a complex system that is hard to replicate
• Companies had CIOs that were valued by their
  organization
• Companies viewed IT as an important part of
  creating a competitive advantage

79
Lessons for the CIO

• Used weaknesses of their competitors to leverage
  dissimilarities
• Captured the Pole Position
• Found ways to deter customers from switching to a
  competitor
• Used the right system

80
Information Technology as Competitive Advantage

• Questions

81
http//www.itac.ca/client/ITAC/ITAC_UW_MainEngine.
nsf/cd0bbbe7b8237e1e85256482005b6998/6baed26bb718c
58f85256a23004d7688!OpenDocument 10/17/02
82
Additional References

• http//www.itac.ca/client/ITAC/ITAC_UW_MainEngine.
  nsf/cd0bbbe7b8237e1e85256482005b6998/6baed26bb718c
  58f85256a23004d7688!OpenDocument 10/17/02
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  Research Technology Management, Vol. 45,
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• Thackray, John, Bioinformatics Grows Legs
  Electronic Business Highlands Ranch, Vol. 27,
  July 2001, pp. 76-82
• Mearian, Lucas and Weiss, Todd R., HP User
  Defects EMC, IBM Score Computerworld
  Framingham, Vol. 36, Sept. 30, 2002, pp. 1,16
• Anonymous, Tech Quarterly Microchips In the
  Blood The Economist, Vol. 364, Sept. 21, 2002,
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