1. Strategic Information Technology
Using IT for Competitive Advantage

2. Some Useful Frameworks
Porter model
Strategic grid
Venkatraman framework
Critical success factors framework (Rockart)

3. The Porter Model Threat of New Entrants Industry competitors
Bargaining Power
of Suppliers
Bargaining Power
of Buyers
Intensity of
competition
Threat of
Substitutes

4. IT and Competitive Forces
Potential Uses of
IT to Combat Force
Force
Threat of New Entrants
Switching costs
Product differentiation
Economies of scale
Buyers Bargaining Power
Buyer selection
Differentiation
Suppliers Bargaining Power
Selection
Threat of backward
integration
Substitutes
Improve price/perf.
Redefine prod & ser

5. IT Strategic Grid Factory Strategic Support Turnaround High Low High
existing operating systems
Strategic impact of
Support
Turnaround
Low
Efficiency focus
Effectiveness focus
High
Low
Strategic impact of application development portfolio

6. IT Strategic Grid (A different view)
High
Factory
Turn
around
existing operating systems
Strategic impact of
Strategic
Support
Low
High
Low
Strategic impact of application development portfolio

7. Venkatraman Framework
Business
Capability
Investment
Center
Service
Center
Value
Center
Purpose
Cost
Center
Profit
Center
Operational
Efficiency
Minimize
Risk
Maximize
Opportunity
Risk Propensity

8. IT Management Approaches for Realizing Value
Operational focus that minimizes
risk with emphasis on efficiency
Cost Center:
While still minimizing risks, aims to
create IT-enabled business capability
to support current strategies
Service Center:
Has a long-term focus and aims to
create new IT-based business
capabilities
Investment Center:
Designed to deliver IT services to
the external marketplace for revenue
Profit Center:

9. Cost Center Service Center Investment Center Profit Center Objectives
Deliver IT products
and services at the
lowest cost levels
relative to an
external referent
Deliver IT-enabled
business capabilities
to support current
business strategy
Proactively create IT-
enabled business
capabilities that
shape new business
strategies
Deliver IT products
and services in the
external markets to
realize marketplace
knowledge, credibility,
and additional profits
Objectives
Key
Capabilities
Managing scale and
scope for operational
efficiency
Understanding technolo-
gy’s role in the business
strategy
Identifying and nurturing
a portfolio of technology-
enabled new business
capabilities
Ability to compete
successfully against
best-in-class vendors
Performance
Metrics
(illustrative)
Client satisfaction;
internal service
guarantee levels
Investment payoff
reflected in business
capability creation
Realized profit levels
market experience, and
credibility
Cost/MIPS
Role of Exter-
nal Alliances
and Partners
Relationships
with best-in-class
outsourcers to
improve cost levels
Alliances for key capabil-
ities such as help desk,
customer service, and
market intelligence
Support for technology
scanning, technology
licensing, joint R&D,
beta tests, and joint
ventures
Partnering to combine
complementary skills
to serve the IT
marketplace

10. Example: Service Center: Bank of America’s development of its
customer targeting system to give its
sales and services managers better
predictive models on likely customer
response behavior than available to its
competitors

11. Example: Investment Center: CIGNA creates a forty-person IT R & D
organization with a focus on “looking at
technologies” that are ripe for development
Note: FedEx, American Express, Wal-Mart,
Johnson & Johnson, Citibank, Texaco
all have similar units

12. Example: Profit Center: Liberty National Bank and Trust creates
a subsidiary along with UPS Worldwide
Logistics to provide an overnight check-
processing capability offering lower cost
and faster service than the Fed
Swiss Bank Corporation, along with Perot
Systems has formed a unit to market IT
products and services to the global financial
community

13. Criteria for Go/No-Go Decisions
Cost Center--cost metrics, efficiency enhancements, external benchmarks
Service Center--indices specified by business managers compared to peer groups
Investment Center-a mix of strategic and quantitative indices reflecting the creation of new business functionality

14. A Question: Is it the fundamental business purpose of the IT
organization to deploy IT capabilities to rectify
current weaknesses or is it to create future
business capabilities?
Asked by Venkatraman

15. A Summary Position to Think About
“If the information revolution destroys traditional
sources of advantage while creating new sources,
companies need to do more than rectify current
weaknesses. This requires a value center profile
that goes beyond cost and service centers and
includes an investment center- -especially for
leveraging newly emerging technologies. So, both
business and IT management need to articulate the
raison d'être for IT operations.”
Venkatraman

16. Critical Success Factors
The 5 to 9 things that are critical to the success of an organization, activity, or endeavor
Or, the things that, if you fail on these, you fail overall
Watch out for mixing up: -objectives with CSFs -performance measures with CSFs

17. CSF Examples Product design (not market share)
Delivery performance (not customer satisfaction)
Location of retail facilities

18. Uses of the CSF Framework
Application of IT
Basis for Requirements Determination -e.g. JAD or Technically supported JAD sessions
What to measure