1. Why study Strategic Information Systems?
Technology is no longer an afterthought in forming business strategy, but the actual cause and driver.
IT can change the way businesses compete.
Information systems are a means of organizational restructuring to allow organizations to adapt
Information Systems are a necessary investment in technologies that help a company adopt strategies and business processes that enable it to reengineer or reinvent itself in order to survive and succeed in today’s dynamic business environment.

2. What’s the difference? What is a strategic IS?
Any kind of information system that uses information technology to help an organization gain a competitive advantage, reduce a competitive disadvantage, or meet other strategic enterprise objectives.
These systems provide Competitive Advantage as opposed to Competitive Necessity
What’s the difference?

3. What is the difference between competitive advantage and competitive necessity?
developing products, services, processes, or capabilities that give a company a superior business position relative to its competitors and other competitive forces
Competitive Necessity
products, services, processes, or capabilities that are necessary simply to compete and do business in an industry

4. Factors Influencing Competitive Forces
Factors shaping the structure of competition in its industry.
Number Competitors
Intense rivalry if many companies
Competitors
Rivalry
Growth Potential
Increased rivalry if growth potential and high profits
The competitive forces model includes rivalry of competitors within its industry, threat of new entrants, threat of substitutes, the bargaining power of customers, and the bargaining power of suppliers.
Capacity
Private Space Shuttles v. Airlines
Complexity
Genetic Research v. Hot Dog Stands

5. Factors Influencing Competitive Forces
Factors discouraging/encouraging new competitors
Economies of Scale
Production of large outputs at lower costs than smaller rivals
New Entrants
Proprietary Products
CPUs v. 7-11
Competitors
Rivalry
Brand Identity
Coca-Cola v. Top Soil
Distribution Channels
Easy Access?
Profit Margin
Supermarkets v. Jewelry Stores
Government Policy
Network Broadcasting v. Lemonade Stands
Retaliation
Operating Systems v. Slide-rule manufacture

6. Factors Influencing Competitive Forces
Factors influencing supplier power
Concentration
DeBeers v. Diing Sen
New Entrants
Differentiation (branding)
Rolls Royce
Volume
Is the industry vital to the supplier?
Competitors
Rivalry
Vendors
Switching Costs
Microsoft for Linux?
Can suppliers easily find new customers?

7. Factors Influencing Competitive Forces
Factors influencing buyer power
buyer concentration to firm concentration ratio
Many buyers/Few Suppliers
New Entrants
Information
Surfers v. unaware Customers.
Competitors
Rivalry
Vendors
Buyers
Importance of volume
Calpers
Necessary (electricity) v. impulse buying
Price Sensitivity

8. Factors Influencing Competitive Forces
Factors influencing Substitutes
Switching Costs
DVD v. VCR
New Entrants
Buyer inclination to substitute
iPod
Competitors
Rivalry
Vendors
Buyers
Price-Performance
Does it give a good ‘bang for the buck?”
Substitutes
Heating (necessary) v. impulse buying
Trade-off substitutes

9. What Competitive Strategies are available?
Cost Leadership
Becoming a low-cost producer of products and services
Finding ways to help suppliers and customers reduce their costs
Increase costs of competitors
Example?
Know the competitive strategies.

10. What Competitive Strategies are available?
Differentiation
Developing ways to differentiate a firm’s products and services from its competitors’
Reduce the differentiation advantages of competitors
Examples?

11. What Competitive Strategies are available?
Innovation
Development of unique products and services
Entry into unique markets or market niches
Making radical changes to the business processes for producing or distributing products and services that are so different from the way a business has been conducted that they alter the fundamental structure of an industry
Examples?

12. What Competitive Strategies are available?
Growth
Significantly expanding a company’s capacity to produce goods and services
Expanding into global markets
Diversifying into new products and services
Integrating into related products and services
Examples?
electrical and electronic equipment, plastics, aircraft engines, medical imaging equipment, and financial services

13. What Competitive Strategies are available?
Alliance
Establishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companies
Examples?
Proctor and Gamble

14. How does that work?
In the early 1990’s, Wal-Mart invited its major suppliers to jointly develop powerful supply chain partnerships
The Wal-Mart/Procter & Gamble (P&G) alliance incorporated vendor-managed inventory, category management, and other inter-company innovations.
For example, P&G monitors and replenishes all of the merchandise at Wal-Mart Stores (Wal-Mart does not place any orders, although occasionally it reviews P&G’s orders)
Based on in-store sales, P&G also modifies it product mix
The outcome has been increased sales and JIT inventory, resulting in increased sales/profits for both Wal-Mart and P&G

15. How do Information Systems help in This?

16. Additional Competitive Advantage Tactics
Locking in customers or suppliers:
McKesson Drugs, as well as others, have developed their own proprietary automated dispensing and reporting systems along with consulting services to deepen their relationships with clients.
Airlines and hotels have benefited from frequent flier and frequent guest (Loyalty) programs
Key Competitive Strategies:
Locking in customers.
Building switching costs which make customers or suppliers dependent on them for the continued use of innovative, mutually beneficial inter-organizational information systems.
Raising barriers to entry.
These programs are possible because companies keep more information about their customers' historical purchasing patterns. Retailers collect detailed information on individual customers' buying patterns. These methods require tracking individual customer purchases over time, establishing accounts for each

17. Additional Competitive Advantage Tactics
Locking in customers or suppliers:
Building switching costs:
A firm’s customers or suppliers are reluctant to pay the costs in time, money, effort, and inconvenience that it would take to switch to a company’s competitors.
The benefits (of Frequent Flier/Frequent guest programs) become part of the total switching costs: Either the customer loses them (a customer switching cost) or the new carrier matches them (a supplier switching cost).

18. Additional Competitive Advantage Tactics
Locking in customers or suppliers:
Building switching costs:
Raising barriers to entry:
Without the technology in use by the industry (e.g., ATMs) new entrants would be at a severe disadvantage

19. Additional Competitive Advantage Tactics
Locking in customers or suppliers:
Building switching costs:
Raising barriers to entry:
Leveraging investment :
Using investments in information technology that have developed new products and services that can not be duplicated without a strong IT capability.
Leveraging investment in information technology aids in building strategic information resources
For example, the use of intranets and extranets which enables them to leverage previous investments in web browsers, PCs, servers and client-server networks.

20. JetBlue Airlines Another example of SIS
At a time when airlines (especially low-cost airlines) have failed JetBlue (founded 1999) has prospered.
2009 Revenues: $3.286 billion
Leveraging investment in information technology aids in building strategic information resources
JD Powers 2010 rankings of low-cost carriers:
1. JetBlue Airways
2. Southwest Airlines
3. WestJet
4. AirTran Airways
5. Frontier Airlines

21. Some Reasons Another example of SIS
Combination reservation system and accounting system
Supports customer services and sales tracking
Electronic tickets
No paper handling or expense
Encourages online ticket purchases
Avoids travel agents
Leveraging investment in information technology aids in building strategic information resources
Significant cost savings
Automated Maintenance Systems
Logs all airplane parts and time cycles
Reduced tracking costs

22. Some Reasons Another example of SIS Flight planning software
Maximize seats occupied on a flight
Reduced planning costs
In-house software for tracking operational data
Updated on a flight by flight basis
Systems are accessible by all employees
Leveraging investment in information technology aids in building strategic information resources
Employees are given wireless devices so they can Report and respond to irregular events
All training records are stored electronically
Do not use the hub and spoke routing

23. Some Reasons Another example of SIS Paperless Cockpits
Pilots provided with laptops
Live TV through contract with DirecTV
Excellent on-schedule arrivals/departures
Fewest mishandled baggage
Rapid check-in times
Leveraging investment in information technology aids in building strategic information resources
Partnership
In 2009, signed a 6 year strategic agreement with Verizon Business to manage its IT data center and network needs, as well as provide security and IT consulting services.

24. Business that: Such as? Customer Focused Businesses
provide top-quality customer service
respond to customer interests and concerns
anticipate customers’ future needs
Such as?
Consider Hilton Hotels Reservations World-Wide (HRW)
2,400 hotels in 65 Countries
31M calls, 9M reservations annually
Average time to complete reservation: less than 2 minutes

25. How? OR Customer Orders Placed Directly
Distribution Partner Orders (e.g., Expedia, Priceline) OR
Build Web Community (Customers, Providers, Partners)
Customer Database
Transaction Database
Create/Revise as necessary
View customer Information
Check/Revise Reservation
Personalize Service
Customers and Distribution Partners
Employees
(Intranet/Extranet)
(Internet/Extranet)
(Internet/Extranet)

26. Value Chains
Viewing a firm as a series, chain, or net-work of basic activities that add value to its products and services, and thus add a margin of value both to the firm and its customers.
Primary processes add to revenues (Line)
Support Processes are intended to assist primary processes (Staff)

27. Value Chains and Strategic IS
Examples of applying information technologies to business processes using the value chain network: 
Collaborative workflow intranet based system to increase the communications and collaboration needed to dramatically improve administrative coordination and support services.   
Computer aided engineering and design extranets to enable a company and its business partners to jointly design products and processes.
Career development intranet that can help the human resources management function provide employees with professional development training programs.

28. Using IT for Strategic Advantage
Organizational Redesign
The use of self-directed cross-functional or multidisci-plinary process teams
Business Process Reengineering
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service.

29. Using IT for Strategic Advantage

30. Agile Companies Agility is the ability to prosper:
In rapidly changing, continually fragmenting global markets
By selling high-quality, high-performance, customer-configured products and services
By using Internet technologies to integrate and manage business processes.
An agile company profits in spite of:
Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.
Broad product ranges
Short model lifetimes
Arbitrary lot sizes

31. Agile Companies
Support mass customization: Providing individualized products while maintaining high volumes of production.
Presents products as solutions to customers’ problems
Cooperates with customers, suppliers and competitors
Brings products to market as quickly and cost-effectively as possible
Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.
Organizes to thrive on change and uncertainty
Leverages the impact of its people and the knowledge they possess

32. Agile vs. ‘Staid’ companies
Performance
Agile
Staid
Measurement
New Products
8.8
3.2
Percent of 2004 sales from new products introduced in previous three years. Average = 5.6%
Modified Products 35 13
Average percent of 2004 sales from modified products introduced in previous three years. Average = 22.5%
Growth +7
-10
Average annual percentage growth (relative to industry average). Average growth = 6.8% per annum
Profit Growth
+37
-13
Average annual percent change in ROE (relative to industry average). Average = 0.5%
Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.
From: "Business Agility & IT Portfolios," MIT Sloan School of Management, Center for Information Systems Research, Summer Session 3, June 2006, data from 649 firms, National Science Foundation grant number IIS Agile = Average of firms above sample mean on percent of sales from new products (i.e., 5.6%). Staid = Average of firms below sample mean. Copyright © Massachusetts Institute of Technology, This work was created by MIT’s Sloan Center for Systems Research (CISR)

33. IT and Agile Companies
Forming a virtual company can be one of the most important strategic uses of information technology.
A virtual company is an organization that uses information technology to link people, organizations, assets, and ideas.
A virtual company uses the Internet, intranets, and extranets to form virtual workgroups and support alliances with business partners.

34. Creating a virtual company
An organization that uses information technology to link people, organizations, assets, and ideas.
Creation of Interenterprise Information Systems:
Information systems implemented on an extranet among a company and its suppliers, customers, subcontractors, and competitors with whom it has formed alliances.
Forming a virtual company can be one of the most important strategic uses of information technology.
A virtual company is an organization that uses information technology to link people, organizations, assets, and ideas.
A virtual company uses the Internet, intranets, and extranets to form virtual workgroups and support alliances with business partners.

35. Virtual company strategies
Share infrastructure and risk with alliance partners.
Link complementary core competencies
Reduce concept-to-cash time through sharing.
Increase facilities and market coverage.
Gain access to new markets and share market or customer loyalty.
Migrate from selling products to selling solutions
Example?

36. Virtual company strategies
Cisco Systems
The world’s largest supplier of telecom-munications product; manufacturer of none
Online orders arrive simultaneously at Cisco (San Jose) and Jabil Circuit (St. Petersburg, FL).
Jabil builds the product from 3 on-site warehouses: 1 owned by Jabil, 1-owned by Cisco, 1 owned by Hamilton Standard
Product is tested, checked against the order (at Cisco) and shipped (by Jabil)
Jabil and Hamilton Standard send bills to Cisco
Cisco sends bill to customer

37. Knowledge Creation Companies
“learning organizations” or “organizational learning”
Creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.
What does “knowledge” mean?
Includes processes, procedures, patents, reference works, formulas, best practices, forecasts, and fixes
Knowledge-creating companies or learning organizations consistently create new business knowledge, disseminate knowledge widely throughout the company and quickly build new knowledge into products and services.
Explicit knowledge is data, documents, things written down or stored on computers
Explicit knowledge: data, documents, things written down or stored on computers
Tacit knowledge: the “how-tos” of knowledge, which reside in workers

38. Knowledge Management Systems (KMS)
Manages organizational learning and know-how
Helps knowledge workers create, organize, and make available important knowledge
Makes this knowledge available wherever and whenever it is needed
Knowledge-creating companies or learning organizations consistently create new business knowledge, disseminate knowledge widely throughout the company and quickly build new knowledge into products and services.
Explicit knowledge is data, documents, things written down or stored on computers

39. Knowledge Management

40. Summary
Information technologies can support many competitive strategies including cost leader-ship, differentiation, innovation, growth and alliance
IT can help
Build customer-focused businesses
Reengineer business processes
Businesses become agile companies
Create virtual companies
Build knowledge-creating companies

41. ??? Any Questions ???
You Moron!!
I know Evrythin!!!