1. Chapter 2 Information Systems For Competitive Advantage

2. Learning Objectives
1. Discuss how organizations can use information systems for automation, organizational learning, and strategic support
2. Describe information systems’ critical strategic importance to the success of modern organizations

3. Learning Objectives
3. Formulate and present the business case for a system and understand why it is sometimes difficult to do so
4. Explain why and how companies are continually looking for new ways to use technology for competitive advantage

4. Three Primary Uses of Information Systems
Automation
Providing support to complete a task faster, more cheaply, and perhaps with greater accuracy and/or consistency
Organizational Learning (Informating)
Providing support to improve day-today operations by creating, acquiring, and transferring knowledge
Achieving Strategy
Providing support in a way that enables the firm to gain or sustain competitive advantage over rivals

5. What Value Is Provided in These Functions?

6. Automation Automation
Providing support to complete a task faster, more cheaply, and perhaps with greater accuracy and/or consistency
Styles of Processing
Manual Processing
No technology automation support
Technology Supported Processing
A combination of manual and system supported steps
Fully Automated Processing
All manual steps have been eliminated.
Effectiveness
If the underlying process is bad, automating with technology alone may mask process problems

7. Benefits of Automation – Loan Example

8. Organizational Learning
Providing support to improve day-today operations by creating, acquiring, and transferring knowledge
Informating (Zuboff 1988)
A technology that provides information about its operation and the underlying work process it supports
Effectiveness
A combined automating and learning approach is more effective than an automating approach alone. If the underlying process is flawed, a learning use of technology might help you detect problems with the process

9. Organizational Learning Example

10. Strategy and Competitive Advantage
Achieving Strategy
Providing support in a way that enables the firm to gain or sustain competitive advantage over rivals
Sources of Competitive Advantage
Having the best-made product on the market
Delivering superior customer service
Achieving lower cost than rivals
Having proprietary manufacturing technology
Having shorter lead-times in developing and testing new products
Having a well-known brand name and reputation
Giving customers more value for their money

11. Strategy

12. Traditional vs System Support Process
Example
Using handheld technology combined with a reengineered business process to create a competitive advantage

13. Value Chain Analysis Value Chain Analysis (Porter 1985, 2001 )
Is a process of analyzing an organization’s activities to determine where value is added to products and/or services and what costs are incurred in doing so.

14. Information Systems Roles in the Value Chain
Systems play a significant role throughout the Value Chain to achieve competitive advantage and:
Must be appropriate for the business strategy (e.g. cost)
Are usually coupled with Business Process Reengineering that address process to enhance company operations

15. Making the Business Case
Identifying the value provided by an information system
The Productivity Paradox
It is often difficult to quantify tangible productivity gains from the use of an information systems
As system based productivity increases, other forces can simultaneously reduce gains (e.g. regulation)
Unintended consequences of technology expenditures can reduce system effectiveness (e.g. web surfing)
Business Case Development Issues
Several common issues create difficulty in defining business
cases for information systems including:
Measurement Problems
Time Lags
Redistribution
Mismanagement

16. Making the Business Case – Issues
Measurement Problems
The benefits of IT are difficult to pinpoint because firms may be measuring the wrong things
Expected benefits are not always defined in advance, so they are never seen (They must be identified to measure).
The biggest increases in productivity come from system effectiveness but many metrics focus on system efficiency
Time Lags
Describes the difference in time from when the IT expenditure was made and when the benefits are realized
One explanation for this lag is that it takes time for people to become proficient at using new technology
Another explanation is that large systems take a long time to fully implement and integrate - sometimes many years

17. Making the Business Case – Issues
Redistribution
IS may be beneficial to individual firms, but not for an entire industry or the economy as a whole
Strategic information systems may help one firm increase its market share at the expense of others (redistributing)
Expectations have increased as technology has become prevalent. We forget the gains that have been realized.
Mismanagement
IS has not been implemented and managed well
Some believe that people simply build bad systems, implement them poorly, and rely on technology fixes for problems that require joint technology/process solutions
Inappropriate IS investments can mask or even increase organizational slack and inefficiency

18. Making the Business Case - Arguments
Individuals in organizations generally use one, or in most cases, a combination of the following arguments types to justify investments in information systems
Based on
Faith
Fear
Fact
Arguments based on beliefs about organizational strategy, competitive advantage, industry forces, customer perceptions, market share, and so on
Arguments based on the notion that if the system is not implemented, the firm will lose out to the competition or, worse, go out of business
Arguments based on data, quantitative analysis and/or indisputable factors

19. Making the Business Case - Argument Examples

20. Making the Business Case - Fear Based Considerations
There are several different factors to take into account when a business case is developed using arguments Based on Fear
Industry
Factors
Stage of Maturity
Regulation
Nature of Competition
What is effective in one industry may not be in another. Consider the industry!
The maturity of the industry can have a significant impact on necessity for investment
In regulated industries, companies can use IS to control process and ensure compliance
What competitors are doing can drive the necessity for IS investment

21. How the Nature of Competition Affects IS Investment

22. Recurring/Non-Recurring and Tangible/Intangible
Business cases typically include both Recurring/Non-recurring and Tangible/Intangible costs and benefits
Recurring vs Non-Recurring
Recurring - Ongoing costs or benefits identified in a business case (IT staff to support system)
Non-Recurring - One-time costs or benefits identified in a business case (software purchase)
Tangible vs Intangible
Tangible - Cost and benefits that are easily identified (e.g. headcount or labor cost)
Intangible - Cost and benefits that are not easily identified (i.e. increased customer service)

23. Business Case – Cost/Benefit Analysis
Costs
All recurring and nonrecurring costs related to the acquisition, development, and deployment of the systems project
Benefits
All recurring and nonrecurring increases in revenue, reduction in costs, and or increases in organizational efficiency
Net Costs/Benefits
Benefits minus Cost

24. Presenting the Business Case – Success Factors
The key to successfully presenting the business case depends on thorough presentation and paying attention to the following factors
Know your Audience
A number of people may be involved in the decision making process. The key is to present information that is relevant and important to them
IS Manager - He/She has overall responsibility for development, deployment, and maintenance of systems. Concern about IS organization impact are likely
Company Executives - They represent various stakeholders in the organization. The may also have their own agenda at stake when making decisions about expenses
Steering Committee – A collection of various company stake holders whose goal is to balance the needs and concerns in making a recommendation to the CEO

25. Presenting the Business Case – Success Factors
Convert Benefits to Monetary Terms
Try to translate all benefits into monetary terms (e.g. savings of 1 hr/day = $ salary/total hours x one hour = benefit). Monetary terms have impact and are understood by all
Devise Proxy Variables
Convert difficult to quantity benefits in proxy variables to demonstrate relative improvement such as 1 to 5 scale (e.g. customer face time moves from 1 to 5 with new system)
Measure What is Important to Management
Measure managerial hot buttons including cycle time, downtime, customer feedback, employee moral. Spend the time to explain and show how these are achieved

26. Assessing Value for IT Infrastructure
Howard Rubin, Executive Vice President of Meta Group agues a holistic approach should taken in measuring IT infrastructure value. He suggests assessment along the following lines
Economic
Architectural
Operational
Regulatory & Compliance
Use important business metrics to assess contribution to profitability an economic value
Assess the capability to address current and future business needs (e.g scalability)
Assessing the performance in meeting business processing requirements
Assess the extent in meeting control, security, and integrity regulatory requirements

27. Cutting Edge Competitive Advantage
Being at the Cutting Edge
Deploying new state-of-the-art technologies can provide competitive advantage over rivals using older mainstream technologies (e.g. a new database that speeds processing)
Requirements for Being at the Cutting Edge
A firm must eliminate bureaucracy for tech adoption (fast track), have sufficient human capital (right numbers and skills), and have a risk tolerance (failures happen)
Cutting Edge versus Bleeding Edge
Choosing the right emerging system technologies is very difficult. It is a balance of the opportunity for significant competitive advantage against a risk of total failure

28. The Need for Constant IS Innovation
“ The most important discoveries of the next 50 years are likely to be the ones of which we can not even now conceive”
Sir John Maddox, Physicist (Scientific American 1999)

29. E-Business Innovation Cycle
Choosing
Devote dedicated resources to scan the environment for new emerging
and enabling technologies that appear to be relevant to the organization

30. E-Business Innovation Cycle
Matching
Match the promising new technologies with current economic opportunities

31. E-Business Innovation Cycle
Executing
Select from among the current economic opportunities using new technologies to grab customers and market share

32. E-Business Innovation Cycle
Assessing
Assess the value of a technology use to customers, and to internal clients as well (e.g. sales reps, marketing, CIO, etc.)

33. E-Business Innovation Cycle – Implications
The E-Business Innovation Cycle presents a new way of thinking about technology. Many currently held ideas are challenged by this process
Implication
One
Two
Three
Technology is so important to strategy and to success that you have to begin with technology
Technology is more important than Marketing
The step of “Choosing” for firms using the E-Business Innovation Cycle has to be ongoing and in search of the “next big thing”

34. Technology Choices – Path to Competitive Advantage?
“IT Doesn’t Matter” Car 2003
As IT becomes more pervasive, technology becomes more standardized and ubiquitous
Competitors have access to the same technology which produces No Competitive Advantage
“The Engine that Drives Success…” Lundberg 2004
Companies with bad business models fail regardless of IT systems or other capabilities
Companies with good business models use IT to execute successful business models and succeed
“Predicting the New, New Thing” Bakos/Treacy 1986
Use IS to make your products and services unique or cause customers to invest in you to raise switching cost
Competitive Advantage can be more easily sustainable under these conditions