Chapter 2 Competing with Information Technology Mc GrawHillIrwin

Chapter 2 Competing with Information Technology Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives Mc. Graw-Hill/Irwin v Identify several basic competitive strategies and explain how they use information technologies to confront the competitive forces faced by business. v Identify several strategic uses of Internet technologies and give examples of how they can help a business gain competitive advantages. Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives Mc. Graw-Hill/Irwin v Give examples of how business process reengineering frequently involves the use of Internet technologies. v Identify the business value of using Internet technologies to become an agile competitor or form a virtual company. v Explain how knowledge management systems can help a business gain strategic advantages. Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Section 1 Fundamentals of Strategic Advantage Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Strategic IT Mc. Graw-Hill/Irwin v Technology is now the actual cause and driver of business strategies v Technology is no longer an afterthought in forming business strategies Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts v Mc. Graw-Hill/Irwin Strategic Information Architecture – the collection of strategic information systems that shape/support the competitive position/strategies of a firm Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts v Competitive Forces (Porter) v Rivalry of Competitors v Threat of New Entrants v Threat of Substitutes v Bargaining Power of Customers v Bargaining Power of Suppliers v Competitive Strategies v Cost Leadership Strategy v Differentiation Strategy v Innovation Strategy v Growth Strategy v Alliance Strategy Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Strategic Uses of Information Technology v Other Strategic Initiatives v Locking by Building Relationships v v v Mc. Graw-Hill/Irwin Lock In Customers Lock In Suppliers Lock Out Competitors v Switching Costs – make customers/supplier dependent on mutually beneficial inter-enterprise information systems v Raise Barriers to Entry – discourage or delay other firms from entering a market v Leverage Investment in IT – develop new products and services that are not possible without strong IT capabilities Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Competitive Strategy Concepts Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Boeing: Saving Big by Cutting Imaging Costs Mc. Graw-Hill/Irwin v How much was Boeing spending on annual imaging services costs? v What did they do to solve this problem? v How much did they save annually by making these changes? Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Competitive Advantage and Competitive Necessity v What is Competitive Advantage? v Mc. Graw-Hill/Irwin What is the problem with competitive advantage? v What is Competitive Necessity? v What is the relationship between Competitive Advantage and Competitive Necessity? Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Competitive Advantage and Competitive Necessity Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Building A Customer-Focused Business – Strategic Focus on Customer Value v. Recognizing that Quality, not Price, has become the primary factor in a customer’s perception of value v. Internet technologies can make customers the focal point of ebusiness applications Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Building A Customer-Focused Business – Strategic Focus on Customer Value Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Universal Orlando: IT Decisions Driven by Customer Data Mc. Graw-Hill/Irwin v What does Mc. Kenna see as the way to fulfill her contribution to decision making? v According to Mc. Kenna, it’s more critical than ever for CIOs to do what? v Why Is Universal interested in drill down? Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. The Value Chain and Strategic IS Value Chain – the series/chain/network of activities that add value to products/services v Primary Processes – directly related to manufacture of products or delivery of services v Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. The Value Chain and Strategic IS Mc. Graw-Hill/Irwin v Support Processes – business activities that support daily operations of the firm and indirectly contribute to products/services v Value Chain Examples v The Value Chain Concept can help identify where and how to apply strategic capabilities of IT Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Section 2 Using Information Technology for Strategic Advantage Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Strategic Uses of IT Support everyday operations (nonstrategic) v Use IT as a major competitive differentiator (strategic) v Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Reengineering Business Processes v Business Process Reengineering (BPR) High Potential Payback, but High Risk of Failure v Organizational Redesign v v Process Teams v Case Managers v Mc. Graw-Hill/Irwin The Role of Information Technology – IT plays a major role in BPR Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Reengineering Business Processes Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

To Build or to Buy – Is That Really the Question? Mc. Graw-Hill/Irwin v What is the traditional answer? v Why might reality be more complicated? v Why does VISA custom build in-house? v Why does VISA busy of-the-shelf? Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Becoming An Agile Company v Mc. Graw-Hill/Irwin Business today is changing from mass market products/services that were standardized, long-lived, informationpoor, exchanged in one-time transactions to global competition with niche markets that are individualized, short-lived, information-rich, exchanged on an ongoing basis with customers Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Becoming An Agile Company v 4 Basic Strategies: v v v Types of Agility v v v Mc. Graw-Hill/Irwin Customer Perception of Goods and Services Partnering with Customers, Suppliers, and Even Competitors Organize to Thrive on Change and Uncertainty Leverage Impact of Personnel and Their Knowledge Customer Partnering Operational Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Becoming An Agile Company Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Creating A Virtual Company v Virtual Company – Uses the Internet, intranets and extranets to create virtual workgroups and support alliances with business partners v Virtual Company Strategies v v v Mc. Graw-Hill/Irwin Share infrastructure and risk with alliance partners Link complimentary core competencies Reduce concept-to-cash time through sharing Increase facilities and market coverage Gain access to new markets and share market or customer loyalty Migrate from selling products to selling solutions Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Creating A Virtual Company Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Creating A Virtual Company Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Sysco: Transforming a Company with the Help of IT Mc. Graw-Hill/Irwin v What is Sysco’s new project? v What do they hope to accomplish with this? v What is the most important key to a project of this scope? v Why SAP? Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. Building a Knowledge-Creating Company Mc. Graw-Hill/Irwin v One sure Source of Competitive Advantage is Knowledge v The Business of a “Knowledge. Creating” company is Continuous Innovation Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. Building a Knowledge-Creating Company Mc. Graw-Hill/Irwin v Explicit Knowledge – written down or stored on computers v Tacit Knowledge – “how-to” knowledge residing in the workers; very important but little incentive to share this information so it is never written down Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. Building a Knowledge-Creating Company v Mc. Graw-Hill/Irwin Knowledge Management – 3 levels: v Enterprise Knowledge v Information Creation, Sharing, and Management v Document Management Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VI. Knowledge Management Systems Mc. Graw-Hill/Irwin v Making personal knowledge available is the central activity of a knowledgecreating company v This takes place continuously at all levels of the organization v Knowledge management has become a major strategic use of information technology Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VI. Knowledge Management Systems v Goal of Knowledge Management – to create, organize, and disseminate important business knowledge whenever and wherever it is needed in the organization v Knowledge Management systems: v v Mc. Graw-Hill/Irwin Facilitate organizational learning and knowledge creation Provide rapid feedback top knowledge workers Encourage employee behavioral change Significantly improve business performance Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Goodwin Proctor Makes a Strong Case for Knowledge Management What were G. P. ’s attorneys spending their time doing? v What is the Matter Page System? v In what way does Matter Pages help an attorney? v What other technologies are being incorporated into the system? v How will these technologies assist users? v Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.