This presentation was developed by Dr. Steven C This presentation was developed by Dr. Steven C. Ross for use in MIS 320 classes at Western Washington University. Some of the material contained herein is © 2007, John Wiley & Sons, Inc. and other sources, as noted. All rights reserved.

Using IT for Competitive Advantage MIS 320 Using IT for Competitive Advantage “Man in Motion” – St. Elmo’s Fire

Most Important Thought for Today … “It’s not the technology that gives a company a competitive advantage; it’s the way that people use the technology that makes the difference.” [quoted from an earlier version of Haag et al.] Why is this so?

Toronto International Airport What did they do? “Common-use airport” model Airport authority manages networks, counters, gates, security, baggage facilities Internet protocol (IP) used for communications How well did it work? 15% increase in passengers Save $3M/gate (33 gates) Cost $1B

Using Technology to Achieve a Competitive Advantage Might have to change business models and strategies Might require large investment over time Will require extensive networked infrastructure Often uses internet protocol Focus on customer service

The Digital Economy “Digitizable” products Digital transactions Digital components in physical products Examples in the text Class registration Photography Paying for gasoline Paying for transportation Paying for goods

Advantages of the New Economy Cost Quality Speed Innovation Customer service

Impact on Business Market pressures Global economy + stronger competition Changing work force Powerful customers

Impact on Business Technology pressures Innovation and obsolescence Information overload

Impact on Business Societal pressures Social responsibility Government regulations and deregulation Protection against terrorists Ethical issues

Five Forces Model Originally published in 1985 Great framework for analyzing any strategic decision Helps managers understand how IT initiatives contribute to business success

* Figure 2.2 from Rainer, et al.

Strategies to Counter the Five Forces Cost leadership Differentiation Innovation Operational effectiveness Customer-orientation

Organizational Responses* Supply chain management (SCM) Customer relationship management (CRM) * See Haag, et al. for detailed discussion and more examples

Supply Chain Management Optimizes processes: Fulfillment Logistics Production Revenue and profit Spend (purchasing)

Dell Computer What did they do? How did it work? Did it last forever? What is an alliance partner? What did they do? Change the process of computer manufacture and purchase. How did it work? Very well – frees up money normally held in inventory, provides customer with his or her exact product. Did it last forever? No – other companies also do this. What is an alliance partner? A company you do business with on a regular basis in a cooperative fashion, usually facilitated by IT systems.

Buy-Hold-Sell vs. Sell-Source-Ship * Graphic from Haag, et al.

Supply Chain Management Key issues High level executives recognize importance Work closely with customers and suppliers Integrates company IT with IT of customers and suppliers Continuous adaptation

SCM Infrastructure * Graphic from Haag, et al.

Customer Relationship Management Typical CRM system functions: Sales force automation Customer service and support Marketing campaign management and analysis

Wells Fargo Bank What did they do? How did it work? Did it last forever?

General Motors What did they do? All Fender guitar shipments routed through UPS hub in the Netherlands. While there, they are tuned. How well did it work? Very well – Fender saves 9%, UPS gets the business. Did it last forever? This partnership may last, but other shippers will emulate the process. * Graphic from Haag, et al.

Customer Relationship Management Key results More effective marketing campaigns based on customer needs and wants Efficient management of the sales process Superior after-sale service and support

Customer Relationship Management Reasons for failure Goals are too broad Strategies are too generic Implementations are too software-centric

CRM Infrastructure * Graphic from Haag, et al.

Getting a Competitive Advantage from Information Technology CEO Attitude Bridge the gap between business people and technical people View the business problem from another perspective Demand a creative design Look beyond the four walls of the company

Getting a Competitive Advantage: CEO Attitude What is his or her background? What do you do if he or she doesn’t understand technology?

Getting a Competitive Advantage: Bridging the Gap Understand the business problem that you are trying to solve. Understand the available technologies. Use a project team.

Getting a Competitive Advantage: Another Perspective View the problem from the perspective of the people the system is designed to serve.

Getting a Competitive Advantage: A Creative Design Solve the business problem in a new and highly effective way.

Getting a Competitive Advantage: Beyond the Company Involve suppliers and customers. JIT – just in time delivery CPFR – collaborative planning, forecasting, and replenishment – through the whole supply chain

The Most Difficult Question Where can we make the biggest difference with information technology?

References Haag, Cummings, and McCubbrey, Management Information Systems for the Information Age (5th Edition), McGraw-Hill Irwin, 2005. Rainer, Turban, and Potter, Introduction to Information Systems: Supporting and Transforming Business, Wiley, 2007.