Robert J. Robbins (206) MEDIT 115 Competitive Advantage Mini Lecture Series

2 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals !

3 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! Easier said than done…

4 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! A google search on align it business goals

5 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! A google search on align it business goals produced 1.5 MILLION hits, most of them selling something and the rest talking about how hard it is to achieve alignment.

6 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! A google search on align it business goals produced 1.5 MILLION hits, most of them selling something and the rest talking about how hard it is to achieve alignment. Why is it hard?

7 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! A google search on align it business goals produced 1.5 MILLION hits, most of them selling something and the rest talking about how hard it is to achieve alignment. Why is it hard? IT is so plastic that it can be aligned with ANY business goal, from achieving savings through cost-cutting efficiency to achieving competitive advantage through major investments.

8 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Goal: Competitive Advantage Must align IT with business goals ! A google search on align it business goals produced 1.5 MILLION hits, most of them selling something and the rest talking about how hard it is to achieve alignment. Why is it hard? IT is so plastic that it can be aligned with ANY business goal, from achieving savings through cost-cutting efficiency to achieving competitive advantage through major investments. Michael Porter’s analysis of competitive advantage offers a framework within which to consider the alignment of IT with business goals.

9 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Value Chain Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Michael Porter Competitive Advantage. Margin Michael Porter’s works on competitive advantage contain a compelling analysis of the various components of operational activities in a competitive enterprise.

10 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Primary Activities According to Porter, the value-adding primary activities define the enterprise. Primary activities must be managed to deliver maximum strategic competitive effectiveness. The Value Chain

11 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Primary Activities Support Activities According to Porter, the value-adding primary activities define the enterprise. Primary activities must be managed to deliver maximum strategic competitive effectiveness. Conversely, support activities are necessary but not sufficient for the success of the enterprise. Support activities must be managed for maximum operational efficiency. The Value Chain

12 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service $o$o Cash outflow $ o occurs during the value-adding and support processes. Cash inflow $ i occurs when the value-added products are sold to customers. The Value Chain

13 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service $i$i Cash outflow $ o occurs during the value-adding and support processes. Cash inflow $ i occurs when the value-added products are sold to customers. The Value Chain

14 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Simplistically speaking, the difference between cash inflow and outflow ($ i - $ o ) provides the margin of profit. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service $i$i $o$o - Margin The Value Chain

15 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Increased expenses (strategic investment) can lead to increased profits, if the expenses generate more value than they cost. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin $i$i $o$o - The Value Chain

16 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 ROI: Because $ o usually occurs before $ i, we can judge the appropriateness of cost-incurring activities to the extent that we can measure the effect of a particular $ o upon overall $ i. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Margin $i$i $o$o - The Value Chain

17 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service As highly plastic tools, computers can play useful roles in both the accomplishment and the management of tasks. Thus, computers have potential roles in all phases of the value chain. The Value Chain

18 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service As highly plastic tools, computers can play useful roles in both the accomplishment and the management of tasks. Thus, computers have potential roles in all phases of the value chain. Many of the most successful companies of the last fifteen years have achieved that success through the skilled deployment of IT to great competitive advantage. The Value Chain

19 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Computers can also play useful roles in many support activities. Here, IT delivers infrastructure strength and may contribute to competitive advantage through cost containment. The Value Chain

20 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 In the value-adding chain, IT is a strategic asset and must be managed accordingly. Investment is made to maximize strategic competitive effectiveness. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The Value Chain

21 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The Value Chain Here, aggressive spending may be necessary to achieve the business goal of improving the value-adding chain.

22 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement In support activities, IT is a cost-center component and must be managed accordingly. Costs must be contained and the entire operation tuned to achieve maximum operational efficiency. The Value Chain

23 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Here, aggressive cost cutting may be necessary to achieve the business goal of increasing operational efficiency. Firm Infrastructure Human Resource Management Technology Development Procurement The Value Chain

24 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 The Value Chain Here, aggressive cost cutting may be necessary to achieve the business goal of increasing operational efficiency. Here, aggressive spending may be necessary to achieve the business goal of improving the value-adding chain. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service

25 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The Value Chain Here, aggressive cost cutting may be necessary to achieve the business goal of increasing operational efficiency. Here, aggressive spending may be necessary to achieve the business goal of improving the value-adding chain. ?

26 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The Value Chain Here, aggressive cost cutting may be necessary to achieve the business goal of increasing operational efficiency. Here, aggressive spending may be necessary to achieve the business goal of improving the value-adding chain. Simultaneously implementing aggressive spending and aggressive cost-cutting is not easy. No wonder it can be hard to align IT with business goals.

Additional Challenges

28 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The rapid rate of technological change adds another complexity. New Becomes Routine

29 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The rapid rate of technological change adds another complexity. Value-adding activities can become support activities overnight. New Becomes Routine

30 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The rapid rate of technological change adds another complexity. Value-adding activities can become support activities overnight. New Becomes Routine

31 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Although deploying IT to competitive advantage is a challenge in any organization, the difficulties are especially acute in a highly regulated environment, with third-party payers. Issues in Healthcare

32 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Despite increased recognition of its importance, investment in HIT to support strategic advantage has been limited. Issues in Healthcare

33 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Instead, much of the historical focus in HIT has been on cost containment in operational support. Despite increased recognition of its importance, investment in HIT to support strategic advantage has been limited. Issues in Healthcare

34 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service The environmental structure of US health care delivery has a strong influence on this pattern. Issues in Healthcare

35 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Regulatory compliance drives up costs here…, while capped fees hold down revenues here. The environmental structure of US health care delivery has a strong influence on this pattern. Issues in Healthcare

36 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Regulatory compliance drives up costs here, while capped fees hold down revenues here. The environmental structure of US health care delivery has a strong influence on this pattern. Issues in Healthcare

Added Complexity

38 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Multiple Value Chains

39 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Academic healthcare provides a model for other organizations... Multiple Value Chains

40 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Institute Infrastructure Human Resource Management Core Technology Facilities Procurement Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Academic healthcare provides a model for other organizations... Aligning IT operations with multiple, independently managed units (each with its own dynamic goals, budgets, staff, and timelines) is not easy. Indeed, efforts to achieve specific alignment with all of these activities must fail. Multiple Value Chains

41 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Institute Infrastructure Human Resource Management Core Technology Facilities Procurement Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Academic healthcare provides a model for other organizations... The trick is UNDERSTANDING the process, business drivers, and values of healthcare. With understanding, and acceptance, real alignment may be possible… Multiple Value Chains

42 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Institute Infrastructure Human Resource Management Core Technology Facilities Procurement Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Academic healthcare provides a model for other organizations... The trick is UNDERSTANDING the process, business drivers, and values of healthcare. With understanding, and acceptance, real alignment may be possible… …provided that business leadership (not IT leadership) can identify the business goals with which IT should be aligned. Multiple Value Chains

43 Mini Lecture Series: Competitive Advantage Copyright © 2010 by R. J. Robbins MEDIT 115 Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication Institute Infrastructure Human Resource Management Core Technology Facilities Procurement Grant Writing Inbound Logistics Research Operations Outbound Logistics Publication In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit. Academic healthcare provides a model for other organizations... The trick is UNDERSTANDING the process, business drivers, and values of healthcare. With understanding, and acceptance, real alignment may be possible… PROBLEM: Most business leaders find it much easier to understand IT as a cost center than to appreciate it as giving strategic advantage. Multiple Value Chains

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