© 2003 Prentice Hall, Inc.2-1 Chapter 2 Information Systems for Competitive Advantage Information Systems Today Leonard Jessup and Joseph Valacich

© 2003 Prentice Hall, Inc.2-2

© 2003 Prentice Hall, Inc.2-3 Chapter 2 Objectives Understand the IS in automation, organizational learning, and strategic support Understand the IS in automation, organizational learning, and strategic support Understand IS for strategic organizational success Understand IS for strategic organizational success Understand the need for making an IS business case Understand the need for making an IS business case Understand technological innovations to improve competitive advantage Understand technological innovations to improve competitive advantage

© 2003 Prentice Hall, Inc.2-4 Why Use Information Systems? Automating: doing things faster Automating: doing things faster Organizational learning: doing things better Organizational learning: doing things better Supporting Strategy: doing things smarter Supporting Strategy: doing things smarter

© 2003 Prentice Hall, Inc.2-5 Automating: Doing Things Faster Technology is used to automate a manual process Technology is used to automate a manual process  Doing things faster, better, cheaper  Greater accuracy and consistency Loan application example Loan application example  Manual processing  Technology-supported process  Completely automated

© 2003 Prentice Hall, Inc.2-6 Organizational Learning: Doing Things Better Going beyond automation Going beyond automation  Involves learning to improve the day-to-day activities within the process  Looking at patterns and trends Organizational Learning Organizational Learning  Using acquired knowledge and insights to improve organizational behavior Total Quality Management (TQM) Total Quality Management (TQM)  Monitoring an organization to improve quality of operations, products, and services

© 2003 Prentice Hall, Inc.2-7 Supporting Strategy: Doing Things Smarter Strategic Planning 1. Create a vision: setting the direction 2. Create a standard: performance targets 3. Create a strategy: reaching the goal

© 2003 Prentice Hall, Inc.2-8 Types of Competitive Advantage Low-Cost Leadership Low-Cost Leadership  Best prices on goods/services  Examples: Dell, Target Differentiation Differentiation  Best products or services  Examples: Porsche, Nordstrom, IBM Best-Cost Provider (middle-of-the-road) Best-Cost Provider (middle-of-the-road)  Reasonable quality, competitive prices  Example: Wal-Mart

© 2003 Prentice Hall, Inc.2-9

© 2003 Prentice Hall, Inc.2-10 Information Systems for Competitive Advantage A clear strategy is essential A clear strategy is essential Sources of competitive advantage: Sources of competitive advantage:  Best-made product  Superior customer service  Lower costs  Superior manufacturing technology  Shorter lead times  Well-known brand name  High value per cost

© 2003 Prentice Hall, Inc.2-11 Information Systems for Competitive Advantage IS and Value Chain Analysis IS and Value Chain Analysis  VC Analysis: adding value within an organization  Organizations as big input/output processes  IS can automate many value chain activities:  Purchased supplies inbound logistics  Operations  Outbound logistics  Sales and marketing  Service

© 2003 Prentice Hall, Inc.2-12 Organizational Value Chain

© 2003 Prentice Hall, Inc.2-13 Information Systems for Competitive Advantage The Role of IS in Value Chain Analysis The Role of IS in Value Chain Analysis IS competitive advantage in VCA: IS competitive advantage in VCA:  Internet link with suppliers, dealers  Extranets: using the Internet for B2B interactions  Computer-aided manufacturing systems  Web site with online product ordering  Customer service response system  Computer-aided design

© 2003 Prentice Hall, Inc.2-14 Information Systems for Competitive Advantage The Technology/Strategy Fit The Technology/Strategy Fit  An IS implementation should create a significant organizational change consistent with the business strategy  Business Process Reengineering (BPR)

© 2003 Prentice Hall, Inc.2-15 Making the Business Case for a System The Productivity Paradox (how to quantify gains?) The Productivity Paradox (how to quantify gains?)  Measurement problems  End-user development  Decision support systems (DSS)  Strategic systems  Time lags  Redistribution  Mismanagement

© 2003 Prentice Hall, Inc.2-16 Making the Business Case for a System Making a Successful Business Case Making a Successful Business Case  Arguments Based on Faith  Arguments Based on Fear  Industry factors  Stage of maturity  Regulation  Nature of competition or rivalry  Arguments Based on Facts  Cost-benefit analysis for a web-based system Recurring/nonrecurring costsRecurring/nonrecurring costs Tangible/intangible costsTangible/intangible costs Tangible/intangible benefitsTangible/intangible benefits

© 2003 Prentice Hall, Inc.2-17 Presenting the Business Case Know the Audience Know the Audience  The IS Manager  Company Executives (VPs and higher)  Steering Committee Convert Benefits to Monetary Terms Convert Benefits to Monetary Terms

© 2003 Prentice Hall, Inc.2-18 Presenting the Business Case Devise Proxy Variables Devise Proxy Variables  Measure changes in terms of perceived value Develop a Work Profile Matrix Develop a Work Profile Matrix  Time spent on each job, each type of work Measure What Is Important to Management Measure What Is Important to Management Conoco: Making a Business Case Conoco: Making a Business Case Changing Mindsets About Information Systems Changing Mindsets About Information Systems

© 2003 Prentice Hall, Inc.2-19 Competitive Advantage in Being at the Cutting Edge Deploying new technologies faster, better, and cheaper than competitors Deploying new technologies faster, better, and cheaper than competitors Using new technology in innovative ways Using new technology in innovative ways

© 2003 Prentice Hall, Inc.2-20 Competitive Advantage in Being at the Cutting Edge The Need for Constant IS Innovation The Need for Constant IS Innovation On the lookout for new technologies that impact business On the lookout for new technologies that impact business

© 2003 Prentice Hall, Inc.2-21 Competitive Advantage in Being at the Cutting Edge E-Business Innovation Cycle E-Business Innovation Cycle  Choosing enabling/emerging technologies  Matching with economic opportunties  Executing business innovation for growth  Assessing client value

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© 2003 Prentice Hall, Inc.2-23 Competitive Advantage in Being at the Cutting Edge Implications of E-Business Innovation Cycle Implications of E-Business Innovation Cycle  Begin with technology when considering successful business strategies  Marketing is secondary to IT  Emerging technology cycle is ongoing

© 2003 Prentice Hall, Inc.2-24 Competitive Advantage in Being at the Cutting Edge Terms and Concepts E-commerce (Internet-related) E-commerce (Internet-related) E-business (any IT that supports business) E-business (any IT that supports business) Enabling technologies Enabling technologies Economic opportunities Economic opportunities

© 2003 Prentice Hall, Inc.2-25 Competitive Advantage in Being at the Cutting Edge The Cutting Edge vs. The Bleeding Edge Information systems are often bought from, or built by, someone else Information systems are often bought from, or built by, someone else An organization typically cannot patent an IS An organization typically cannot patent an IS Rivals can copy emerging information systems Rivals can copy emerging information systems Therefore, one’s IS competitive advantage can be short-lived Therefore, one’s IS competitive advantage can be short-lived

© 2003 Prentice Hall, Inc.2-26 Competitive Advantage in Being at the Cutting Edge Requirements for Being at the Cutting Edge Consider Porter’s competitive forces Consider Porter’s competitive forces To deploy emerging systems well: To deploy emerging systems well:  Organization must adapt well to change  Human capital available for deployment (knowledge, time, skills)  Tolerance of risk and uncertainty