Applegate, L.M., Austin, R.D, and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Instructor’s Manual Chapter 2 IT Impact on Business Models Key Learning Objectives for Chapter 2: Understand that IT can impact the business model through its effects on strategy and/or organizational capabilities Learn how to analyze the potential of IT to create strategic opportunities Understand how to evaluate IT as a potential source of strategic risk

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models In the past IT is considered a tool to automate back-office activities-for example, payroll and accounts receivable Even Now a huge proportion of IT investments fail to deliver their intended return each year; in the United States alone, this number is estimated at 40 percent. On average, companies spend nearly 5 percent of revenues on IT (11/2004)

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models In Taiwan 從 IT 預算佔營收比從去年的 1.78 ％，到今年增加到了 2.05 ％，也反映了同樣的趨勢，臺灣企業願意將全年營 收的 2 ％用於 IT 建置 ( 來源：

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models In Taiwan

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models In Taiwan

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Today’s Chief Information Officers (CIOs) must enable the organization to meet its strategic goals and to envision goals that were never before possible. Only recently has IT become an important tool for defining new strategic opportunities and building the capabilities needed to execute them.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Analyzing IT Impact Given that a company’s business model links decisions executives make to business performance, IT Impact map also serves as a useful tool for analyzing the impact of IT on business performance IT impact on strategy Defines the role that IT plays in determining product, market, business network, and boundary positioning. It seeks to explain the mechanisms through which IT drives differentiation, sustainable advantage, and the development of proprietary assets IT impact on capabilities Defines the role that IT plays in building capabilities needed to execute strategy. It is important to note that these capabilities may be located inside an organization or may be dispersed over a network of business partners

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Analyzing IT Impact IT Impact Map can be used to analyze the impact of a single project or it can be used to analyze a series of projects through which a company evolves its strategy over time Local Improvements: (strategy low & capability low) Use IT to improve local operating performance Business Process Design/Reengineering (strategy low & capability high) Use IT to improve end-to-end operating processes Emerging Opportunities (strategy high & capability low) Pursue business opportunities that enable launch of new products or business or entry into new markets （個資系統） Business Transformation (strategy high & capability high) Transform your organization and industry, differentiate strategy, and develop proprietary assets （ Siri, Google Glass, Yelp? ）

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models IT Impact Map: IBM Path to Business Transformation

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models IT Impact Map Medtronic is a medical device company that invented the first wearable and first implantable cardiac pacemakers ( 心律調節器） Remote monitoring  collect information from installed cardiac pacemakers Expand to other devices such as diabetes （糖尿病）, spinal （脊髓）, and neurological （神經系統） devices

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models IT Impact Map: Medtronic (MDT) Path to Business Transformation

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models The Search for Opportunity Jeff Timmons, a pioneering expert on new venture creation, described the search for opportunity as the "heart of the entrepreneurial process.” An opportunity has the qualities of being attractive, durable, and timely and it must be anchored in a product or service that creates or adds value for the buyer or the end user Cloud? Big Data? Internet of Things? Wearable devices such as glasses, watches, etc.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models The Search for Opportunity How do I know an opportunity is NOT a disaster Is this a unique value proposition? Do we have a real shot at being first in the market? Is this a compelling enough business that people are going to be drawn to it, [initially employees and] managers and ultimate customers? Are there barriers to entry that we can erect so that when other people see our good ideas they don’t pile in? Can we build it with a reasonable amount of capital in a reasonable period of time?

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models The Search for Opportunity Opportunity identification requires a more analytically driven evaluation of the viability of the business model. Can IT change the basis of competition? Can IT change the nature of relationships and the balance of power in buyer-seller relationships? Can IT build barriers to entry? Can IT raise switching costs? Can IT add value to existing products or services or create new ones?

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT change the basis of competition? IT was first used to automate routine. As it automates, IT can also be used to both inform and to transform Late 1960s, American Airline (AA) giving large travel agencies computer terminals that allow them to check airline schedule posted within AA’s internal reservation systems Both hardware and training are free to travel agencies. About the same time, American Hospital Supply Corporation (AHSC) created a system that enabled hospital purchasing clerks to order supplies across telephone lines using punch cards and primitive card-reading computers AHSC gave hospitals the card readers … and taught hospital supply clerks how to use them. AHSC even helped hospital personnel redesign their internal purchasing processes to fit with the new online process. Charles Schwab pioneered online trading -- a new market segment that had dominated for over 20 years. All firms were able to differentiate existing services and to offer new information-based services to customers ex. iTune  iPod  iPhone/iPad

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT change the nature of relationships and the balance of power in buyer-seller relationships? AHSC rose to power within the hospital supply industry by dramatically decreasing cost, improving order accuracy, and streamlining the supply chain between suppliers (e.g., Johnson & Johnson, Baxter, and Abbott) and hospital buyers Hospital buyers encouraged this channel consolidation In 1985, Baxter bought AHSC; but a few years later, due to pressure from other participants, Baxter was force to spin out; in 2000, five of the largest health care suppliers launched Global Healthcare Exchange (GHX); in 2003, GHX became a neutral shared services platform; in 2006, GHX is the only player left. 太強勢之後所造成的疑慮： Google, Apple 等

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT build barriers to entry? Entry barriers Offering attractive products and services at a price and level of quality that competitors cannot match Possess assets and specialized expertise that would be costly, time consuming, and difficult to duplicate AHSC and AA built up an e-marketplace Over time, however, these technology-based advantages decreased United Airlines also launched a similar reservation system.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT build barriers to entry? Second-order barriers: Exploit the value of information generated by the technology and leverage proprietary capabilities and assets to continuously innovate and evolve business strategy Learn, respond, and innovate more quickly and more effectively than others. Build proprietary capabilities that are not easily replicable Create a large, loyal community that remains committed and engaged despite the availability of seemingly comparable alternatives Amazon case! （值得一讀） 超有效率的訂貨系統 ( 四億美金 )  Robots  無人運送機

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT raise switching costs? An IT system should ideally be easy to start using but difficult to stop using. In the past, when proprietary technologies were the norm, switching costs were high. Ex. AA, AHSC, Wal-Mart, etc. On the Internet, switching costs are often substantially reduced. ex. Amazon  Barnes & Noble’s; PCHome  Yahoo How Intuit (a company provides low-cost financial services software such as Quicken, TurboTax) did it? In 1983, Intuit provided a much simpler and easier way to complete time- consuming and repetitive tasks. A decade later, Intuit launched online service By 2001, personal and small business services included pay bills, bank online, calculate and pay taxes, manage a portfolio of investment. Small business owners could also manage payroll, inventory, and customer accounts, and could purchase supplies.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT add value to existing products or services or create new ones? Today, computer chips control everything from a car's internal air temperature to the braking system, and they also provide valuable information to service mechanics and auto manufacturers to guide after-sales service and future product design. Consumers can now tap into on-board computers, like General Motors' OnStar service, to get driving directions, make dinner reservations, contact police and rescue personnel, and even open the car door to retrieve keys inadvertently left inside. 保全公司切入居家照護

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT add value to existing products or services or create new ones? Information-enabled products and services possess some very interesting properties. information is reusable information can be "sold" without transferring ownership and "used" without being consumed information is easily customized The same information can be presented in different forms and in varying levels of detail. It can be combined with information from other sources to communicate different messages and to create new products and services information-based products and services possess an inherent "time value.”

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Can IT add value to existing products or services or create new ones? Books, magazines, music, videos, and games in a purely digital form. “The Piano Guys” releases videos and asks for buying! Smart phones such as iPhones and Android phones. extra services such as messages, calendar, cloud drives, etc. Online banking and stock trading.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Sources of IT Risk Strategic risk Project risk

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Strategic Risk Can emerging technologies disrupt our current business model by enabling new business models with decidedly superior economics? Can IT lower entry barriers, change industry power dynamics, or increase competitive intensity? Can IT trigger regulatory action?

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8 th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009 Chapter 2: IT Impact on Business Models Project Risk Is the project larger than our typical projects? How much uncertainty is there in the project? Do we know the requirements for key deliverables at the start of the project or are these requirements are still evolving? （個資推動） Do we have experience with the technologies? If new technologies involved, are they new to the world or just new to us? (SDN?) Do we have resources (time, money, talent, information) needed to implement the project? Do we have the support from key stakeholders? Is the organization (including the extended enterprise and industry) ready to implement and use what we deliver?