2. Chapter 3 Effects of IT on Strategy and Competition Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99223 chen@gonzaga.edu

3. DATA WORKERS KIND OF SYSTEM GROUPS SERVED STRATEGIC LEVEL SENIOR (ESS,EIS,DSS) MANAGERS MANAGEMENT LEVEL MIDDLE (DSS, MIS)MANAGERS OPERATIONAL OPERATIONAL LEVEL (TPS,OAS) MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & (KWS) SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN RESOURCESMARKETING Types of the Information Systems

4. Figure 1: Creating Value & Agent of Change Value Drivers Management Decision Speed Value to learn, adapt, innovate () Technology Innovation Competitive Advantage Revenue generation Cost reduction Cost avoidance

5. Figure 1.2 Levels of Knowledge Intuitive/Tacit Codify Verify Science Formalized Knowledge Develop Physically Embodied Products and Processes

6. Figure. Evolution of Management of Technology 1950197019801990s & Beyond R&D Management New venture divisions Linking to business Broader vision of technology Outsourcing Tools to assess value Internal markets Allocation of Funds to projects Scientists & engineers Leadership Innovation Management Different organizational arrangements Management of Innovation Technology Strategy Value-Based Management Era of Plentiful Resources Era of Accountability Chief Technology Officer/ Chief Information Officer R&D Manager

7. Figure. Management of Technology WHY HOWWHAT Management of Technology Strategy Organization & Management Purpose: value-driven Technology Choices principle guided by Deployment in Products/Services focus Development of Technological Capability focus

8. Roles of the Information Infrastructure Frito-Lay:4 Information Processing Capacity Demand Organization Information Infrastructur e To achieve the potential, employees should develop two important competencies: 1. The ability to use the technology 2. The ability to use the information Meet the increased I.P.demand of the new structure Flexible, easy-to-use Enable learning Education training and support in the development of information competencies AND I.P. capacity invest more infor., resources Expanding I.P. capacity and buffering complexity, uncertainty and speed of change. Vertical I.P. capacity Human I.P.C. Coordination, communication Internal I.P.C. (Intra-org.) 1. Serve as a buffer for complexity, uncertainty and speed of change Crisis Created when structural, authority and incentive changes increased interdependencies

9. Roles of the Information Infrastructure 2. Enable the complex, interlocking authority structures and incentive systems that were adopted Frito-5 Authority Incentive System Information Infrastructur e Enable development of interlocking Centralized Decision-making Information Cost Decision Cost Access needed information on business dynamics Time and expertise for analysis of information to ensure that they made the right decision Failed to consider important trade-offs costs Frito-Lay designed an authority structure based on “considerations” other than the availability of the requisite information TOP executives Information In traditional/hierarchical organizations, the costs of coordinating and aligning local operations has typically been minimized by

10. Roles of the Information Infrastructure 3. Enable streamlining, integration, and time-synchronization of operating and management processes Frito-6 OperatingProcess MGMT Streamline, integrate and “time-synchronize” both operating and management IT capacity Support Process Redesign Effort Achieve high- levels of integration and efficiency of routine operations Redesign the management processes to enable fast-cycled process control achieved Automate Informate/Innovate Operating processes became dysfunctional as traditional lateral information processing systems broke down. Vertical I.P.S also broke down