An Empirical Study of the Relationships between IT Infrastructure Flexibility, Mass Customization, and Business Performance Sock Hwa Chung Department of Computer Information Systems College of Business Eastern Michigan University

2 Overview Why this research? Seven Research Questions Research Design Data Collection Findings Contributions & Future Research Questions/Answers

3 Why this study? Organizations −Attempt to do mass customization for business performance −Invest a huge amount in IT infrastructure −Question about IT value due to inadequate evaluation practices Few studies on the relationship between IT infrastructure and business performance

4 Terminologies for Study §Mass customization Mass production for target customers with great efficiency §IT infrastructure flexibility Compatibility, Connectivity, Modularity, IT Personnel Skills §Business performance − Market share − Revenue increase − Time to delivery

5 Literature Review §An IT infrastructure is the enabling foundation of shred IT capabilities upon the entire business depends (Mckay & Brockway, 1989) §One firm’s infrastructure may makes strategic innovations in business processes feasible (Duncan, 1995) §A good IT infrastructure is quantified its flexibility to enable to change (Davenport & Linder, 1994) §The IT flexibility is viewed as a critical component of IT infrastructure, because many firms are faced with an ever-increasing rate of change in their competitive environments (Byrd & Turner, 2000)

6 Literature Review §Mass customization l is for a customer-centered orientation in production and delivery processes requiring the company to collaborate with individual customers to design each one’s desire product or service’ which is then constructed from a base of pre-engineering modules that can be assembled in a myriad of ways (Pine, Peppers & Rogers, 1995) l Allows businesses to offer products and services to a wide variety of customers and to meet product demands through service or product variety and innovation – all without an in incsease in costs (Bynton, Victor & Pine, 1993; Zipkin, 2003)

7 Seven Research Questions H1 IT infrastructure integration has a positive effect on mass customization H2 IT infrastructure integration has a positive effect on business performance H3 IT infrastructure modularity has a positive effect on mass customization H4 IT infrastructure modularity has a positive effect on business performance H5 A flexible IT personnel resource has a positive effect on the mass customization H6 A flexible IT personnel resource has a positive effect on business performance H7 Mass customization has a positive effect on business performance

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9 Research Design An empirical study in the U.S Steps included: I nstrument development Data collection Statistical data analysis Discussion about findings

10 Data Collection Target sample senior CEOs/CIOs at FORTUNE 2000 companies 105 questionnaires were returned (21% response rate) 66% - CEOs & CIOs 31% - middle level IT managers 65% of the companies had 1000 employees or more 73% of the companies had revenues over one billion dollars 52% of the companies were organized by function, 12% by product, and 36% with a matrix structure.

11 Analysis Methods §Cronbach’s alpha §Confirmative factor analysis §Structural equation model §Partial Least Square (PLS) l Path Analysis l R- square

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13 Hypothesis 1 IT infrastructure integration has a positive effect on mass customization

14 Findings (H1) - IT infrastructure integration has a positive effect on mass customization A positive effect Integration factor Facilitates sharing and reusing of software applications and data across technology platforms Provides IT users with ease of use, consistency, and uniformity with other IT components Increases the variety of choice by allowing mix & match capabilities Can reduce production cost for mass customization

15 Hypothesis 2 IT infrastructure integration has a positive effect on business performance

16 Findings (H2) - IT infrastructure integration has a positive effect on business performance A positive effect Integration factor May benefit from open systems components

17 Hypothesis 4 IT infrastructure modularity has a positive effect on business performance

18 Findings (H4) - IT infrastructure modularity has a positive effect on business performance A positive effect Modularity factor Facilitates to interoperability, productivity and cycle time Enables the speed isolation and correction of problems among a variety of IT components

19 Hypothesis 5 A flexible IT personnel resource has a positive effect on the mass customization

20 Findings (H5) - A flexible IT personnel resource has a positive effect on the mass customization No effect IT personnel skills may Influence integration or modularity Indirectly affect mass customization Future research should examine this possibility

21 Hypothesis 6 A flexible IT personnel resource has a positive effect on business performance

22 Findings (H6) - A flexible IT personnel resource has a positive effect on business performance A positive effect IT personnel skills The value extends far beyond simply supporting the technical IT infrastructure May help establish a competitive advantage for a firm Can be a considerable strategic resource Companies may long and hard think about outsourcing

23 Hypothesis 7 Mass customization has a positive effect on business performance

24 Findings (H7) - Mass customization has a positive effect on business performance A positive effect In addition The size of a firm has a negative effect on mass customization A competitive environment appears to encourage companies to implement mass customization in order to compete

25 Contributions Propose a framework to examine IT infrastructure flexibility, mass customization and business performance The framework includes: D etermining key factors Use of control variables such as size and competitive environment IT infrastructure flexibility facilitates the firm’s effort to increase the organization’s business performance

26 Future Research 1.Comparisons of IT infrastructure flexibility factors between manufacturing and service sectors, and among industries 2.Addition of more intermediate variables between IT infrastructure flexibility and business performance such as Operations, value chain and competitive advantage 3.Relationships between IT infrastructure flexibility and enterprise system implementations

27 Questions and Answers