Using Information Technology for Competitive Advantage Chapter 2 Interview In order for IT to create competitive advantage, it must be properly aligned with a company’s overall business strategy. Companies that get the most out of their IT investments generally follow five basic steps: Analyzing market opportunities Defining and assessing strategy Allocating resources Managing investment decisions and IT projects Measuring and communicating results Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Interview Elizabeth Lauer Ivey Senior Information Technology Strategist HVS International Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Interview (cont.) Defines Competitive Advantage as: A property’s (or chain’s) ability to attain and maintain a strong bottom line. Examples: Efficient Reservation System Lower operating overhead Guest recognition system Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

1. Introduction to Competitive Advantage Use technology to: lower your cost structure increase revenues and market share create unique value propositions for guests create unprecedented returns for investors or shareholders Creating competitive advantage requires creative, “out-of-the-box” thinking After competitive advantage has been created, it must be sustained or destroyed and either reinvented or replaced with something before anyone has time to copy it and catch up to your lead. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

2. Technology Takes Center Stage Convergence: The coming together of numerous technologies to make great things happen. Digital Convergence Miniaturization Portability Declining Costs Push Technology More Powerful Applications Speed, agility, connectivity, and the ability to amass and subsequently employ knowledge, are key competitive ingredients. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Tradition Six prevailing philosophies Essential to survival Requires an act of faith (or gut feeling) that an investment will prove beneficial Intuitive appeal and seemingly obvious outcomes Required or mandated Response to competitors Undergo intense scrutiny and analysis All tend to be reactive and not based on the organization’s strategy Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Enlightenment Impossible to achieve high-touch without high-tech Proactive rather than reactive Strategic rather than support-oriented IT and strategy must be intertwined and evolve in definition together Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

3. Concept of Co-Alignment To be successful, a firm must be well aligned, both internally and externally, with the forces driving change in its business environment. Firm Performance and Competitive Advantage Strategic Choices and Competitive Methods Resource Allocation Decisions Environmental Events Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Michael Porter Generic Strategies Five Forces Model Low-Cost Producer Product Differentiation Market Niche Focus Five Forces Model Barriers to Entry Competition Buyer Power Supplier Power Substitute Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

4. Achieving Competitive Advantage What makes your firm a better choice over other options in the marketplace? What is the deciding factor, the thing that really makes the difference? Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Assessing Competitive Advantage Outcome Approach (Macro Level) Trait Approach (Micro Level) CAPITA Efficiency Functionality Threat Pre-emptiveness Synergy Resource-Based View Not only how a firm competes but also the assets it has to compete (X-Factor) Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Examples of Competitive Advantage Economies of Scale Functionality Accuracy of Information Proprietary Technology Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

5. Sustainability The ability of a firm’s workforce to creatively exploit the capabilities of information technology to create new products and services that sell well; it will not be derived from the technologies themselves. It will come in one of these forms: Innovations that result from a firm’s ability to effectively leverage its unique resources Competitive asymmetry or differences between firms as a result of their unique resources The ability to preempt competitive responses Once the competitive advantage is lost, the industry’s sophistication becomes greater Leading firms continually seek ways to destroy their competitive advantages (creative destruction) and create new ones before the competition does this for them. Multi-pronged approaches (sequential thrusts) make it more difficult for competitors to react with counter-responses. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

6. Summary No longer fruitful to resist IT or take a “wait and see approach” People are key Further info www.business20.com www.businessweek.com www.ceoexpress.com Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458