Information Systems for Strategic Advantage BiMBA, Fall 1999 Professor Chen School of Business Gonzaga University Spokane, WA

Innovation as a Response to Change in Market and Technology Innovation as a Response to Change in Market and Technology INNOVATION Socio-political Changes Technological Opportunities Advances in Technology New Products and Services Market Needs EFFICINCY EFFECTIVENESS INNOVATION Time Market

Figure: Reengineered Accounts Payable Process (from Hammer[1]) Before Purchasing Vendor Receiving Accounts Payable Goods Payment Invoice Receiving Document Copy of Purchase Order Purchase Order 

Figure: Reengineered Accounts Payable Process (from Hammer[1]) After Purchasing Vendor Receiving Accounts Payable Goods Purchase Order Payment Database  

The Information Age vs. the Computer Age The Computer Age Time-sharing Computer 1960’s Interactive Computing Mini/Micro provide user with computer power (as of Mainframe) but with little cost Advances in telecommunications(link terminals/PC  mainframe) End of the computer age Beginning of the information age PC as DSS tool to access information stored in the center computer files to support management decision- making process. Software advances in application packages (e.g., DBMS, spreadsheet

CONSTRUCTION DESIGN ANALYSIS PLANNING Information Engineering

What is Information Engineering The application of an interlocking set of formal techniques for the planning, analysis, design and construction of IS, applied ton an enterprise-wide basis or across a major sector of an enterprise. An enterprise-wide set of automated disciplines for getting the right information to the right people with the right form at the right time.

ENVISION DESIGN BUILD OPERATE SDLC ANALYAIS DESIGN IMPLEMENTATION MAINTENANCE MANAGMENT IS DEVELOPMENT REENGINEERING INFLUENCE CAPABILITY LEADERSHIP CONTROL MANAGERS IS PROFESSIONALS BUSINESS ENVIRONMENT IS CHANGING RAPIDLY RADICALLY AND PERPLEXINGLY

SDLC ANALYAIS DESIGN IMPLEMENTATION MAINTENANCE ENVISION DESIGN BUILD OPERATE MANAGMENTIS DEVELOPMENT REENGINEERING INFLUENCE CAPABILITY LEADERSHIP CONTROL MANAGERS IS PROFESSIONALS BUSINESS ENVIRONMENT IS CHANGING RAPIDLY RADICALLY AND PERPLEXINGLY

Supports Business PlanStrategic Factors System Project  Decrease direct labor and overhead by 20%  Increase our customer order-filing rate to 95%  Produce timely tracking and sales information for inventory managers  Increase labor productivity  Improve service differentiation  Provide managers with better information  A standard cost accounting system that provides online labor rate and efficiency variances  An inventory management system that provides reorder points, EOQ’s, quantity on hand, and sales by item and salesperson. Figure: Relationship and linkage of proposed system projects with strategic factors and the business plan ObjectiveProposal

The Emergence of a Strategic Role for IT in Organizations IT as a strategic resource Technology Push  Cost- performance trends  Connectivity capabilities Competitive Pull  Innovative IT- enabled applications to obtain differential benefits in the marketplace to stay competitive

Five levels of IT-induced reconfiguration One. Localized exploitation Two. Internal integration Three. Business process redesign Four. Business network redesign Five. Business scope redefinition HighLow Revolutionary levels Evolutionary levels Design of business transformation High Range of potential benefits

Localized exploitation: Enablers and Inhibitors IT-induced reconfiguration: Level One Enablers Technological  Favorable cost- performance trends  Vendor push-system solution Organizational  Localized impact  Ease of assessing efficiency benefits  Minimal disturbance to operations Inhibitors Technological  Obsolescence  Further reduction in cost-performance Organizational  Lack of strategic vision  Unwillingness to recognize the strategic role of IT and IS

Internal Integration: Enablers and Inhibitors IT-induced reconfiguration: Level Two Enablers Technological  Increase connectivity capabilities  Favorable cost-per- formance trends  Vendor push-system solutions Organizational  Strategic vision for integration through an IT platform  Centrality of IT to the strategic context Inhibitors Technological  Uncertainty  Cost of integration Organizational  Lack of strategic vision for integration  Organizational inertia  Centralization - decentralization conflict

IT-industry business reconfiguration in level 2: Enablers and Inhibitors in the tax return preparation business IT-induced reconfiguration:tax return preparation business Enablers  Electronic filing initiative by IRS  IT-based value- added services  Perceived benefits of an integrated platform  IT-based strategic advantages Inhibitors  Inability to view IT in strategic terms  Low economies of scale for integration  Inexperience with IT and IT-based applications  Mismatch with market needs

Business Process Redesign: Enablers and Inhibitors IT-induced reconfiguration: Level Three Enablers Technological  Favorable cost- performance trends  Organizational  Awareness of the power of IT  Willingness to make quantum changes to fully exploit IT power  Marketplace  Competitive pressures Inhibitors Technological  Uncertainty  Cost of redesign  Organizational  Lack of strategic vision for redesign  Organizational inertia  Costs of transforming the organization

Business Network Redesign: Enablers and Inhibitors IT-induced reconfiguration: Level Four Enablers  Ability to specify and/or create standards for integration  Identification of value-added services  Recognition of mutual benefits Inhibitors  Lack of standards  Lack of vision and understanding  Lack of commitment to integration  Possible erosion of market positions

Strategic options for business network redesign Collaborative advantage Business Network redesign Electronic infrastructure Competitive advantage Information Technology Governance Tightly coupled Loosely coupled Common role Unique role Business Governance

Strategic options for business network redesign Collaborative advantage Business Network redesign Electronic infrastructure Competitive advantage Information Technology Governance Tightly coupled Loosely coupled Common role Unique role Business Governance A B CD

Business Scope Redefinition: Shifting the business domain using IT Technology BeforeAfter Technology Markets Traditional business scope Increased role for information technology in operations Traditional operating technology Products

Business Scope Redefinition: Enlarging the business domain using IT Technology BeforeAfter Technology Markets Traditional business scope Traditional operating technology Products Additional business using IT Information technology

Five levels of transformation: A Summary LevelThemePotential ImpactsMajor objectives Management Implications Localized exploitation Internal integration Business Process redesign Business network redesign Business scope redefinition One Two Three Four Five Potentially high savings in narrow areas of business Integration offers both efficiency and effectiveness Powerful in creating differential capabilities Opportunities for creatively exploiting capabilities Altering the business scope both proactively and reactively Reduced costs and/ or improved service Elevate IT as a strategic resource Reengineer the business with IT lever Create a virtual organization and occupy a central position in the network Identify new business as well as potential treats Identify firm-specific areas for exploitation Articulate the logic for integration Strategy -- IT alignment Articulate the logic of network redesign for the focal firm Identification of new scope of business

Most likely quadrant-to-quadrant movement Interrelatedness LOwLOw LOWHIGH Chaotic Proliferation Preemptive Penetration Barroom BrawlClash of the Titans HIGHHIGH Exploitability

Figure 2-1 MIT 90s framework -- Chapter 2 emphasis EXTERNAL SOCIOECONOMIC ENVIRONMENT EXTERNAL TECHNOLOGY ENVIRONMANT STRUCTURE STRATEGIC INDIVIDUALS & ROLES TECHNOLOGY MANAGEMENT PROCESSES Organization Boundary

Figure 2-2. Advances in IT provide opportunities for dramatically increased connectivity, enabling new forms of interorganizational relationships and enhanced group productivity 1990s business forces  Globalization  Worldwide competition  Productivity requirements  Volatile environment Increased connectivity Interorganizational business relationships Intraorganizational coordination for increased efficiency and effectivity Adaptable organizational structure 1990s Information Technology (IT) opportunities  Continued dramatic cost/performance and capacity advances  New IT architectures encompassing: --extensive communications networks --accessible distributed databases --enhaced human interface workstations

Figure 5-24 The strategic alignment model Business scope Distinctive competencies Business government Administrative infrastruction ProcessSkills Business scope Distinctive competencies Business government Administrative infrastruction ProcessSkills Functional Integration Business domain IT domain Strategic integration External Internal

Figure 5-25 Comparison of alternative patterns of alignments Four Dominant Patterns of Alignments Characteristics Competitive potential Technology potential Business value Service level Product-market arena Reengineer business processes Competitive strategy frameworks Business measures relative to competitors Domain anchor Manager focus Analytical frameworks Measures Adapting the IT platform IT arena Technology scan and forecasting, scenarios Measures of IT capability and flexibility Transforming work and organization Organizational domain Business process analysis Organizational efficiency IS products and services Redesigning IS portfolio Portfolio analysis of applications Service levels

THE GENERIC VALUE CHAIN Firm Infrastructure (general management, accounting, finance, strategic planning Human Resource Management (recruiting, training, development) Technology Development (R&D, product and process improvement) Procurement (purchasing of raw materials, machines, supplies) Inbound Logistics (raw materials handling and warehous ing) Operations (machining, assembling, testing) Outbound Logistics (warehousin g and distribution of finished product) Marketing and Sales (advertising, promotion, pricing, channel relations) Service (installation, repair, parts) Profit Margin Primary Activities Support Activities