1. Creating Business Advantage with IT
As the century closed, the world became smaller. The public rapidly gained access to new and dramatically faster communication technologies.
Entrepreneurs, able to draw on unprecedented scale economies, built vast empires.
Everyday day brought forth new technological advances to which old business models seemed no longer to apply

2. IT Evolution 1950 - 1960 Mid 1960 - Early 1980 1980- Early 1990
Hardware costs and limitation of capacity and reliability. Limited IT personnel
Mainframe computer, data processing center.
Mid Early 1980
Difficulty in delivering reliable system on time and within budget, productivity of system developers, tools limitation.
Introduction of PCs
1980- Early 1990
Communication networks
Powerful desktops, Laptops, internet etc.
Late 1999-
Internet, wireless network, etc.
Hardware
constraints
Data
processing
Software
constraints
Management
Information
Systems
Hardware
constraints
User related
constraints
Strategic
Information
Systems
Organization
environment
constraints

3. Creating Business Advantage with IT
Notes:
The winners in the world of the information highway and the networked society will not just be the providers of the fibre, the computer terminals devices, and the software packages but….
Organizations (large and small) who are able to perceive new channels for reaching their customers, identify transformed products and services which can be offered, and those who have the courage and will to rapidly reposition their organizations and undertake the risks, turmoil and opprobrium which often accompanies radical change.

4. Forces that Shape Business Strategy
Three frameworks that can be used to guide analysis of the impact of IT on strategy
Value Chain
Industry and competitive analysis
Strategic Grid Analysis

5. Value Chain Framework
Tool for identifying and analyzing the stream of activities through which products and services are created and delivered to customers.
Once activities are defined, it becomes possible to analyze the economics at each step in the chain by identifying both the costs incurred and the value created.
These activities can be located inside a firm or across firm boundaries.
Accompanying the physical value chain is a related information value chain through which the involved parties coordinate and control activities
Value chain participants (Market Roles)

6. Value chain participants

7. Value Chain Framework Value Chain Analysis
Industrial Economy Business Model
Favored production
Economy of Scale
Are achieved when a market participant or a network of participants is able to leverage capabilities and infrastructure to increase its revenue and profit within a single product line
Economy of scope
… to launch new product line or businesses or enter a new market
The point within a value chain where maximum economics of scale and scope are created determines market power

8. Value Chain Framework Industrial Economy Business Model
The innovations favored production
Physical/analog production (machine, telephones, steam engines, etc)
Operational model
Assembly line, marketing, sales
Management model
Hierarchy
Social/regulation system
Specialized work, pay-for- performance incentives, etc

9. The Value Chain Support activities Primary activities
Inbound logistics Materials receiving, storing, and distribution to manufacturing premises
Operations Transforming inputs into finished products.
Outbound logistics Storing and distributing products
Marketing and Sales Promotions and sales force
Service Service to maintain or enhance product value
Corporate infrastructure Support of entire value chain, e.g. general management planning,
financing, accounting, legal services, government affairs, and QM
Human resources management Recruiting, hiring, training, and development
Technology Development Improving product and manufacturing process
Procurement Purchasing input

10. Forces that shape competition
The Networked Economy Business Model
Innovation model
Digital production and distribution technologies (broadband and wireless, networks, multimedia content creation, etc)
Operational model
Integrated supply chains and buy chains
Management model
Team, partnerships, consortia
Social/regulatory systems
Ownership incentives, virtual work, distance learning, etc)

11. Forces that shape competition
Network Economy of Scale
Are achieved when a “community” of firms shares its infrastructure, capabilities, and customer base to produce and distribute products faster, better, and cheaper than competitors can
Network Economy of Scope
… when community uses its shared infrastructure to produce and distribute new products and services, enter new market, or lunch new business more quickly, at less cost, and more successfully than competitors can

13. Industry and Competitive Analysis (ICA)
ICA framework postulates that economics and the competitive forces in the industry are the result of five basic forces:
Bargaining power of suppliers
Bargaining power of buyers
Treat of new entrants
Treat of substitute products or services
Competitive intensity and position among traditional business rivals

15. The strategic Grid Analysis
The value chain and the industry analysis help in framing the strategic decision

16. Categories of Strategic Relevance and Impact
A contingency appropriate to IT management.
Factory
Strategic
High
Goal: Improve performance of
core processes
Leadership: Business unit executives
Project Management: Process
engineering
Goal: Transform organization or
industry
Leadership: Senior executives & board
Project Management: Change
management
IT Impact on
core operations
Support
Turnaround
Goal: Improve local performance
Leadership: Local level oversight Project Management: Grassroots
experimentation
Goal: Identify and launch new
Ventures
Leadership: Venture incubation unit
Project Management: New Venture
development
Low
Low
High
IT Impact on core strategy

17. Impact of IT on Strategic Decision Making
Can IT be used to reengineer core value activities and change the basis of competition?
Can IT change the nature of relationship and the balance of power among buyers and suppliers?
Can IT build or reduce barriers to entry?
Can IT decrease or increase switching costs?
Can IT add value to existing products and services to create New Ones

18. Assessing IT-enabled business
Opportunity and Risk
Risks increased when executives
1. Have poor understanding of sources of competitive dynamics in the industry within which their firm competes
2. Fail to fully understand the long-term implications of a strategic system that have been launched or one lunched by a competitor or another industry participant
3. Lunch a system that brings litigation or regulation to the detriment of the innovator
4. Fail to account for the time, effort, and cost required to ensure user adoption, assimilation, and effective utilization.

19. Assessing IT-enabled business
Opportunities and Risks
What business are we in? Who are our customers, suppliers, and business partners? What value do we provide to these key constituencies (including employees and owners). What are the competitive dynamics and balance of power within the industry? Can IT be used to create value and change the basis of competition
Who is our biggest competitor today and who will it be in future? How easy is it for new players to enter our market. How easily can customer, suppliers and partners switch
How efficient and effective is our core operation activities and processes? How easily or difficult is it to do business with partners

20. Assessing IT-enabled business
Opportunities and Risks
Do we want to be an industry leader or follower?
Will changes in related industry (or even unrelated industries) influence our industry?
Do we have the required infrastructure to adapted to rapid changes in the industry?
Do our planning and budgeting process enable us to identify and effectively respond to strategic opportunities and threats