1. MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE
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LEARNING GOALS
Describe the various approaches to devising corporate strategy.
Explain how information systems can help organizations achieve a strategic advantage.
Describe the methods organizations use to choose a strategic information systems project.
Describe how information systems can bring about corporate change.
Explain the concept of knowledge management and describe the technologies that comprise knowledge management systems.
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3. Competition at The Bead Bar
The Bead Bar faces increased competition and needs to find ways to use information systems to generate competitive advantage.
Meredith – How to know if the Bead Bar information systems truly improve the business and how can they be used to help create a competitive advantage?
Suzanne – How to share knowledge and collaborate about designs ?
Leda – How to lock in franchisees?
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4. Competition at The Bead Bar (continued)
Mitch – How to use IS to keep advantage in the cruise industry?
Julia – How to value the current information systems?
Miriam – How can the marketing team share knowledge and collaborate?
Rachel – How to demonstrate increased efficiency and reduced costs achieved through information system?
Jim – How to use systems to assist in transitioning new employees into the Bead Bar environment?
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Value Chain
Value chain – activities within an organization that bring products and services to market
Primary activities – take raw materials and transform it into something of greater value
Inbound logistics • Marketing and sales
Operations • Service
Outbound logistics
Supporting activities – those functions that the company requires to do business but do not directly add value to a product or service
HR • Procurement
IT • Firm infrastructure
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Value Chain Analysis
Process of analyzing the activities within an organization’s value chain
Companies gain strategic value by focusing on a particular portion of the value chain
IT can help reduce the costs of these processes, thus increasing profit margins
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8. Porter’s Competitive Forces Model
Unlike the value chain, the Competitive Forces Model deals with external factors
Five components
Level of competition in industry
Threat of new entrants into industry
Bargaining power of customers
Bargaining power of suppliers
Threat of substitute products
Uses for CFM
Determine position within industry
Analyze industries and market segments they might wish to enter (exit)
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10. Competitive Advantage (CA)
Those qualities that allow a company to earn above-average profits within an industry
Low cost
Unique product
Three generic strategies to achieve competitive advantage
Cost leadership strategy
Differentiation strategy
Focus strategy
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12. Information Systems for Strategic Advantage
How can information systems improve the value chain?
By reducing the cost of primary and support activities
How can information systems change the way an organization reacts to its competitive forces?
By changing the bargain power of suppliers
By building closer ties with customers
By increasing or decreasing barriers to entry in a market
By serving as the basis for new products and/or services
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13. Sustainable Competitive Advantage
Four approaches lead to sustainable competitive advantage
Create barriers to entry through patents, monopoly, or technical expertise
Be the first to develop systems with high switching costs
Develop the technologies that change the underlying nature of the industry
Cultivate and hire people with excellent information systems management skills
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Productivity Paradox
“We see computers everywhere, but in the productivity statistics.” Robert Solow, Nobel Prize-winning economist
It is difficult to attribute cost savings directly to a specific information system
It is difficult to prove that a specific system led to certain financial outcomes
Other measures are needed
Balanced scorecard
Total cost of ownership (TCO)
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15. The Balanced Scorecard
Strategic planning method that translates business strategy into a comprehensive set of performance measures
Investigates strategies in four areas
Financial – e.g. improving cash flow and reducing expenses
Internal business processes – e.g. decreased cycle time and improved quality
Learning and growth – e.g. develop successful new products
Customer – e.g. improve customer satisfaction and decrease product defects
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17. Value of Information Systems
Cost must NOT outweigh benefits
Return on investment (ROI)
ROI = (Benefits – Costs) *100 / Costs
Costs include – Benefits include
Hardware • Tangible benefits
Software • Intangible benefits
Labor
Total cost of ownership (TCO)
Method to quantify long-term direct and indirect costs
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18. TCO Analysis for PDA Purchase
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The IS Portfolio
Treat investments in IS assets like a portfolio of investment assets to find redundancies and achieve balance
Five steps
Put information about all the organization’s IS projects into a database
Prioritize the IS projects
Divide the IS projects into three types of investments
Infrastructure
Upgrades
Strategic initiatives
Automate the entire process
Have the organization’s top finance executive perform a Modern Portfolio Theory analysis
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Sample IS Portfolio
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21. Business Process Improvement and Reengineering
BPI – processes are good but can be better
BPR – elimination or change of business processes
“The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed.” Hammer and Champy, 1993
Automation (e.g information systems) is a key factor in both BPI and BPR
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22. Major Themes of Successful BPR
Several jobs are combined into one.
Workers are empowered to make decisions.
Work is performed where it makes the most sense.
Checks and controls are reduced or eliminated.
Reconciliation is minimized.
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Steps in BPR
Have a clear strategy that is aligned with the organization’s goals
Clearly defined scope that identifies exactly which processes need to be reengineered and which supporting processes need to be revised
Define measures and benchmarks for success
Develop an understanding of the current, as-is processes
Develop a plan for transition from the as-is processes to the to-be processes
Implement the changed processes
Measure the outcomes of the changes
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24. Knowledge Management (KM)
Knowledge assets – the knowledge that exists within the minds of each employee and the knowledge that exists in a tangible form such as databases, documents, and reports
Companies must know how to manage this knowledge
Knowledge management (KM) – the process by which organizations extract value from their knowledge assets
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KM Systems
Information technologies that enable the exchange of knowledge among employees and the storage of knowledge in repositories
Types of KM systems
Expert directories
Knowledge repositories
Knowledge sharing technologies
Knowledge representation technologies
Knowledge discovery tools
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Knowledge Portals
A single access point to the knowledge of an organization
Provides Web-based access to all of the KM technologies within an organization
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Bead Bar Consultant
How Issues on Managing Information Systems for Strategic Advantage Affect the Bead Bar
Meredith – Understanding the strategic role of information systems has changed the way I think about technology
Suzanne – Wants to build KM system to share bead designs
Leda – Using KM systems to streamline the value chain makes the Bead Bar more attractive to franchisees
Mitch – Use IS to create differentiation for cruise line customers
Miriam – KM system for collaboration on marketing campaign
Rachel – Use IT for incremental improvements in business processes
Jim – Develop KM system to improve retention of valued employees
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28. Learning Goals Summary
In this chapter you have learned:
The various approaches to devising corporate strategy
How information systems can help organizations achieve a strategic advantage
The methods organizations use to choose a strategic information systems project
How information systems can bring about corporate change
The concept of knowledge management and the technologies that comprise knowledge management systems
Copyright © 2005 Prentice Hall, Inc.