In this chapter you will: Identify several basic competitive strategies and explain how they use information technologies to confront the competitive forces faced by a business, identify several strategic uses of Internet technologies and give examples of how they help a business to gain competitive advantages, give examples of how business process reengineering frequently involves the strategic use of IT,...
Chapter Competing with Information Technology Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-1 Learning Objectives • Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business • Identify several strategic uses of Internet technologies and give examples of how they give competitive advantages to a business Copyrightâ2006,TheMcGrawưHillCompanies,Inc.Allrightsreserved 2-2 Learning Objectives ã Give examples of how business process reengineering frequently involves the strategic use of Internet technologies • Identify the business value of using Internet technologies to become an agile competitor or to form a virtual company • Explain how knowledge management systems can help a business gain strategic advantages Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-3 Why Study Strategic IT? • Technology is no longer an afterthought in forming business strategy, but the actual cause and driver • IT can change the way businesses compete Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-4 Strategic View of Information Systems • Information systems are vital competitive networks • Information systems are a means of organizational renewal • IS are a necessary investment in technologies that help a company adopt strategies and business processes that enable it to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-5 Case #1: Does IT Matter? Nicholas Carr: • It is simply the infrastructure of modern business • It’s equivalent to railroads, electricity, and internal combustion engineering • Once innovative applications of IT have become simply the cost of doing business Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-6 Case #1: Does IT Matter? How important is IT to GE? • Business imperative • Lifeblood for productivity • 20% return on technology investments and GE invests $2.5 to $3 billion a year Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-7 Case #1: Does IT Matter? Nicholas Carr: Today’s main risk is not underusing IT but overspending on it Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-8 Case #1: Does IT Matter? Michael Dell, CEO of Dell Computers • Anything in business can be either a sinkhole or a competitive advantage if you it really, really bad or you it really, really well • You’ve got a lot of people who don’t know what they’re doing and don’t it very well Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved 2-9 Case #1: Does IT Matter? Andy Grove, Chairman of Intel Corp • Commercial-transaction processing in the United States and some parts of Europe has reach maturation but that’s only one segment of IT Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 10 Knowledge-Creating Companies Definition: • Consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 52 Types of Knowledge • Explicit Knowledge – data, documents, things written down or stored on computers • Tacit Knowledge – the “how-tos” of knowledge, which reside in workers Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 53 Knowledge Management Definition: • Techniques, technologies, systems, and rewards for getting employees to share what they know and to make better use of accumulated workplace and enterprise knowledge Knowledge Management Systems – manage organizational learning and business know-how Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 54 Levels of Knowledge Management Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 55 Case #3: Shareware Grows Up How a software cooperative works • Companies pay a membership which entitles them to use any of the intellectual property of the co-op • Member companies will donate intellectual property, cooperate in adapting it for other companies, help troubleshoot problems and form subgroups to develop needed niche software for the library Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 56 Case #3: Shareware Grows Up Benefits • Decrease in the total cost of ownership of software • Co-op becomes responsible for assets and also ensure that there’s a clear title so member companies can’t be sued later • The larger the installation base, the lower the cost of ongoing maintenance Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 57 Case #3: Shareware Grows Up Challenge ã Getting members to really collaborate Copyrightâ2006,TheMcGrawưHillCompanies,Inc.Allrightsreserved - 58 Case #3: Shareware Grows Up Organizations are constantly striving to achieve competitive advantage, often through their information technologies Given this constant, why does Hansen suggest that competition among members shouldn’t be an issue because the shared assets don’t bring competitive advantage? Explain Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 59 Case #3: Shareware Grows Up What you see as the potential risks associated with the Avalanche approach? Provide some examples How could other companies apply the cooperative model used by Avalanche to achieve efficiencies in areas other than software support? Explain Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 60 Case #4: Customer-Loyalty Systems Satisfaction vs Loyalty • A satisfied customer is one who sees you as meeting expectations • A loyal customer, on the other hand, wants to business with you again and will recommend you to others Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 61 Case #4: Customer-Loyalty Systems • A good loyalty program combines customer feedback and business information with sophisticated analytics to produce actionable results • With good customer loyalty technology, IT can wire the voice of the customer back into the enterprise Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 62 Case #4: Customer-Loyalty Systems How can IT help? • Gathering customer experience data by e-mail rather than telephone dramatically reduces survey cycle times • Can build in validated, multivariate measures of loyalty into the software • Software-generated models can accurately predict customer’s purchasing behavior • IT can be used to deliver rewards to customers based on predictive analysis Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 63 Case #4: Customer-Loyalty Systems Does CDW’s customer loyalty program give them a competitive advantage? Why or why not? What is the strategic value of Harrah’s approach to determining and rewarding customer loyalty? What else could CDW and Harrah’s to truly become a customer-focused businesses? Visit their websites to help you suggest several alternatives Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 64 Summary • Information technologies can support many competitive strategies including cost leadership, differentiation, innovation, growth and alliance • IT can help • • • • • Build customer-focused businesses Reengineer business processes Businesses become agile companies Create virtual companies Build knowledge-creating companies Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 65 Chapter End of Chapter Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 66 ... Copyrightâ2006,TheMcGrawưHillCompanies,Inc.Allrightsreserved 2-4 Strategic View of Information Systems • Information systems are vital competitive networks • Information systems are a means of organizational renewal • IS are... Copyright © 2006, The McGrawHill Companies, Inc. All rights reserved - 15 Strategic Information Systems Definition: • Any kind of information system that uses information technology to help an organization gain a competitive... as examples Visit their websites to gather more information to help you answer What does Mr Strassman mean by information warfare? Can information technology give a competitive advantage to a small