Strategic Issues of Project and Systems Management Jason

Strategic Issues of Project and Systems Management Jason C. H. Chen, Ph. D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 chen@jepson. gonzaga. edu Dr. Chen, Special Topic: Project Management

Learning Objectives • Understand how to strive for business competitive advantage from the perspective of project management • Understand the concepts of “Porter’s Five Force Model” • Explain how information resources are used strategically in context of the 5 -forces model. • Understand the concepts of “Hyper-competition Model” and differences between Porter and Hypercompetition models Dr. Chen, Special Topic: Project Management

What is the “Competitive Advantage”? • A competitive advantage is a benefit derived from something a company does or has that its customers want and its competitors cannot (or choose not to) match. • If a company can sustain its competitive advantage, the company will succeed in its industry – how? • Two types of people lead a company to succeed – Those know how to innovate the enterprise – Those know how to execute their strategy onto the enterprise using IS/IT. Dr. Chen, Special Topic: Project Management

Discussion Questions • It has been said that there are no sustainable competitive advantages can be gained from IT other than the capability of the IT organization itself. Do you agree or disagree? Defend your position. • Based on our general understanding that sustainable advantage is hard to come by. Just about any advantage gained by a company seems to be copied by another at some point in the future. Dr. Chen, Special Topic: Project Management

Discussion Questions - Answer • Those who agree with this statement might argue that the key to sustaining any advantage comes from the way all business resources are organized and used, and ultimately that comes down to how the managers and the people are able to perform. • Those who disagree with this statement might argue that even the capability of the IT organization is not a sustainable advantage because people come and go, they can be bought by another organization as a move to create the capability elsewhere, and their skills and knowledge atrophy over time, when new capabilities arise. Witness IT organizations who excelled at managing mainframe applications, who are now struggling to keep up with web-based applications. Dr. Chen, Special Topic: Project Management

Sustainable Competitive Advantages • Any sustainable competitive advantages? • How can an organization sustain its competitive advantage? • Firms may create/improve their competitive advantages only if they: capacity to learn, – have ____ revenue management – employ _________ approach • With the service economy accounting for over 70 percent of GDP in OECD (Organization for Economic Co-operation and Development) countries, service firms are becoming increasingly competitive with revenue management (RM) and pricing becoming central in their focus for sustaining long term profitability (and competitive advantage). – learning to learn and learning to change (life-long learning environment) Dr. Chen, Special Topic: Project Management

Essential Value Propositions for a Successful Company • Business Model • Core Competency – Outsourcing – Offshoring • Execution – Set corporate goals and get executive sponsorship for the initiative Dr. Chen, Special Topic: Project Management

What is Business Model? • A business model is a set of planned activities (sometimes referred to as business processes) designed to result in a profit in a marketplace. • The business model is at the center of the business plan. • An e-commerce business model aims to use and leverage the unique qualities of the Internet and the www. Source: E-Commerce: business, technology, society, Laudon and Traver, A/W Dr. Chen, Special Topic: Project Management N

Why New Models? • We need some new models – for how we go about exploring IT for competitive advantage, – for IT infrastructure how we create it and manage it – for how we acquire, manage and deploy the skills that are needed to run that infrastructure – Profitability (making money) N Dr. Chen, Special Topic: Project Management

HOW CAN INFORMATION RESOURCES BE USED STRATEGICALLY FOR PROJECT MANAGEMENT ? Dr. Chen, Special Topic: Project Management

IT Capabilities • Four major categories of IT capabilities: – Technical skills - applied to designing, developing and implementing information systems. – IT management skills - critical for managing the IT function and IT projects. – Relationship skills - can either be externallyfocused or spanning across departments. – Project management skills - the role and impact (IT) projects have on an organization. Dr. Chen, Special Topic: Project Management

Striving for Competitive Advantage • Firm level: Industry & Competitive Analysis üCompetitive Forces Model üCompetitive Strategy (has been introduced) üD’Aveni’s Hypercompetition Model (7 s) • Business level üValue-Chain Analysis (to be introduced more) Dr. Chen, Special Topic: Project Management

PORTER’S FIVE COMPETITIVE FORCES MODEL NEW MARKET ENTRANTS • Switching cost • Access to distribution channels • Economies of scale THE FIRM INDUSTRY COMPETITORS • Cost-effectiveness • Market access • Differentiation of product or service • Selection of suppler • Threat of backward integration SUPPLIERS SUBSTITUTE PRODUCTS & SERVICES Threats Bargaining power • Redefine products and services • Improve price/performance • Buyer selection • Switching costs • Differentiation CUSTOMERS N Dr. Chen, Special Topic: Dr. Chen, The. Project Trends. Management of the Information Systems Technology TM -13

Porter’s Five Forces Model • According to Porter, there are five competitive forces in any industry, and the attractiveness of the industry depends on the strength of each force. • Under the perspective of market structure, Porter’s competitive forces model has been broadly adopted as the underpinning for investigating the effect of information technology on the relationships between suppliers, customers, and other potential threats. Dr. Chen, Special Topic: Project Management

PORTER’S FIVE COMPETITIVE FORCES MODEL NEW MARKET ENTRANTS • Switching cost • Access to distribution channels • Economies of scale THE FIRM INDUSTRY COMPETITORS • Cost-effectiveness • Market access • Differentiation of product or service • Selection of suppler • Threat of backward integration SUPPLIERS SUBSTITUTE PRODUCTS & SERVICES Threats Bargaining power • Redefine products and services • Improve price/performance • Buyer selection • Switching costs • Differentiation CUSTOMERS N Dr. Chen, Special Topic: Management Dr. Chen, The Project Trends of the Information Systems Technology TM -15

Group Work/ Discussion Questions • Using the five competitive forces model and value chain model as described in this chapter to describe how (and what) IT might be used to provide a winning position for: • A global airline – Use UA as an example (Group work together) • A bank Dr. Chen, Special Topic: Project Management 16

The Five Forces Model and IS • The Five Forces Model provides a way to think about how information resources can create competitive advantage. • Using Porter’s Model, General Managers can: – Identify key sources of competition they face. – Recognize uses of information resources to enhance their competitive position against competitive threats – Consider likely changes in competitive threats over time Dr. Chen, Special Topic: Project Management N 17

Part II • Hypercompetition and the New 7 -S’s framework (D’Aveni) Dr. Chen, Special Topic: Project Management

Hypercompetition and the New 7 -S’s framework (D’Aveni) Every advantage is eroded. • ____________ • Sustaining an advantage uses too much time and resources that can be a deadly distraction. disruption not • The goal should be______, sustainability of advantage. ________ • Initiatives are achieved with a series of small steps. • Hypercompetiton occurs when technologies or offerings are so new that standards and rules are influx, resulting in competitive advantages that cannot be sustained. It is characterized by intense and rapid competitive moves, in which competitors must move quickly to build new advantages and erode the advantages of their rivals. Dr. Chen, Special Topic: Project Management

D’Aveni’s Disruption and 7 -S’s Vision for Disruption Old 7 Ss: structure, strategy, system, style, skills, staff, and superordinate goals. Identifying and creating opportunities for temporary advantage through understanding • Stakeholder satisfaction • Strategic Soothsaying directed at identifying new ways to serve existing customers better or new customers that are not currently served by others Market Disruption Capability for Disruption Sustaining momentum by developing flexible capacities for • Speed • Surprise That can be applied across actions to Build temporary advantage By Richard D’Aveni, professor of business strategy at Dartmouth College Dr. Chen, Special Topic: Project Management Tactics for Disruption Seizing the initiative to gain advantage by • Shifting the rules • Signaling • Simultaneous and sequential strategic thrusts With actions that shape, mold, or influence the direction or nature of the competitor’s response N

Example: • At General Electric, Jack Welch, implemented a DYB (“Destroy Your Business”) approach by placing employees in the shoes of competitors to highlight weaknesses and find fresh ways of meeting customer needs. • Similarly GE’s Medical Systems Division used DYB to respond to the challenges posed by the Internet. N Dr. Chen, Special Topic: Project Management

Summary of Key Strategy Frameworks • Generic Strategies: Competitive Advantage (CA) through low cost, differentiation or focus • Hypercompetition: CA is temporary, created through speed and aggression in the market Dr. Chen, Special Topic: Project Management

Porter’s Model vs. Hypercompetition Model Industries Competitive Advantage (Characteristics) Competitive Advantage (How to) Porter’s Model Relatively stable Establish a strong, long-term position and defend it. Attain a fit with the environment as in traditional markets Hypercompetition Model Dynamic 1) Ever-increasing competition 2) Changing power between players Short-lived, take advantage of any small window of opportunity that arises (thru speed and aggression) 1) change rules of competition 2) create disruptions (during which temporary advantages can be exploited) Dr. Chen, Special Topic: Project Management

Disruptive versus Sustaining Technology • Sustaining technologies – produces an improved product customers are eager to buy, such as a faster car or larger hard drive – Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets – Sustaining technologies virtually never lead in markets opened by new and disruptive technologies • Disruptive technologies – a new way of doing things that initially does not meet the needs of existing customers – Disruptive technologies redefine the competitive playing fields of their respective markets – Disruptive technologies tend to open new markets and destroy old ones – Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies Dr. Chen, Special Topic: Project Management

Disruptive versus Sustaining Technology • Q? • Please name two (or more) of Disruptive and Sustaining Technologies on the market now? Dr. Chen, Special Topic: Project Management

“Be fearful when others are greedy, and be greedy when others are fearful. ” -- Warren E. Buffett, CEO, Berkshire Hathawy, Inc. Dr. Chen, Special Topic: Project Management

Keen’s Six-Stage Competitive Advantage Model Stimulus for action First major move Customer acceptance Competitor catch-up moves First-mover expansion moves Commoditization Dr. Chen, Special Topic: Project Management N

When to Perform Activities • First Movers Advantages Disadvantages • Build brand recognition • Newer technology • Control scarce resources • Higher development costs • Establish networks • Reverse engineering by competitors • Early Economies-of-Scale Dr. Chen, Special Topic: Project Management

Three … for PM and Enterprise • Three important characteristics for PM and for an enterprise: – 企业家 in English Entrepreneur v Creativity, v Innovation v Entrepreneur Dr. Chen, Special Topic: Project Management

Three … for PM and Enterprise 企业家 Entrepreneur Efficiency/ Uniques Techniques Dr. Chen, Special Topic: Project Management

Summary • Using IS for strategic advantage of project and systems management requires more than just knowing the technology. • Remember that not just the local competition is a factor in success but the 5 competitive forces model reminds us of other issues. • Value chain analysis show us how IS add value to the primary activity of a business. Dr. Chen, Special Topic: Project Management