1. IT Impact on Business Models
Chapter 2

2. Key Learning Objectives
Understand that IT can impact the business model through its effects on strategy and/or organizational capabilities
Learn how to analyze the potential of IT to create strategic opportunities
Understand how to evaluate IT as a potential source of strategic risk

3. Automate back-office activities 辦公室自動化
Before
Now
Automate back-office activities
辦公室自動化
Define new strategic opportunities
And build the capabilities needed to execute them
Really?
(2004, US) average 5% revenue on IT
computer equipment, communications equipment, software(2/3 packaged software), IT services/outsourcing, IT staff costs

4. IT Impact Map IT impact on strategy IT impact on capabilities
The role IT plays in determining four key dimensions of strategic positioning
Product, market, business network, and boundary positioning
Where IT drives differentiation, sustainable advantage
IT impact on capabilities
The role IT plays in building the capabilities
Processes, infrastructure, people and partners, organization and culture, leadership and governance
Business network capability (outside the wall of an organisation)

5. IT Impact Map: IBM Path to Business Transformation

6. IT Impact Map: Medtronic (MDT) Path to Business Transformation

7. Business process design/reengineering
IT impact category
Description
Local improvement
(automate functional support processes (e.g. payroll, budgeting); IT support for business intelligence for a local decision)
Goal: improve local operating performance
Business sponsors: local managers, teams and individual
Business value: reduce costs and improve local operating performance
Risk and uncertainty: low-moderate; loss of focus on strategic goals
Project investment and management: local budgeting and management (may be ad hoc)
Business process design/reengineering
(business process reengineering; launch of shared services offering; ERP or sales force automation implementation)
Goal: use IT to improve end-to-end operating processes
Business sponsors: business unit and shared services leaders (may include suppliers, customers, or partners)
Business value: reduce costs, decrease cycle time, improve total cost of IT ownership
Risk and uncertainty: moderate-high; organizational changed, often require integration of new capabilities with existing capabilities
Project investment and management: corporate budgeting; steering committee with formal milestone review; change control processes and system

8. Emerging Opportunities
IT impact category
Description
Emerging Opportunities
(remote monitoring service offering; information-based product offerings)
Goal: pursue business opportunities that enable launch of new products or business or entry into new markets
Business sponsors: executive committee or business unit leadership
Business value: grow revenues and launch new business; enter high growth industries and markets
Risk and uncertainty: High; new business models often require new capabilities and may involve new technologies
Project investment and management: staged commitments and investments based on milestones; fund “experiments” and business plans; new venture risk management
Business Transformation
(Global service business supports core product business; interactive online business sells or supports physical service offerings or products)
Goal: transform your organization and industry, differentiate strategy, and develop proprietary assets
Business sponsors: board, executive committee; strong project leadership
Business value: Enable sustained capital efficient profitable growth, improve market share
Risk and uncertainty: High; new business model require new capabilities and new technologies; organizational changed, integration of new business models with existing business s
Project investment and management: integrated with corporate strategy; board oversight with formal milestone review by executive committee; change control processes and system

9. The Search for Opportunity
Is this a unique value proposition?
Are there barriers to entry?
Can we build it with a reasonable amount of capital in a reasonable period of time?
The role of IT
Change the basis of competition
Change the nature of relationships and the balance of power in buyer-seller relationships
Build barriers to entry
Raise switching costs
Add value to existing products or services or create new ones

10. Can IT change the basis of competition?
1950s and 1960s: To automate routine, information intensive back-office transactions
increase efficiency and productivity
To inform and transform across business boundaries
Information is by-product of automation
Real-time information could be used to drive new benefits
Enhanced strategic positioning and differentiation of existing products and services
Creation of IT-enabled products and services
Generate new revenue streams
American Airlines (1960s)
Giving large travel agencies computer terminals allowed them to check airline schedules posted within AA’s internal reservation systems
Self-serve, reduce cycle time
為什麼要花錢送電腦?
Other examples?

11. Can IT change the nature of relationships and the balance of power in buyer-seller relationships?
Health care supply
Convenience online  lock-in effect  marketplace
Late 1990s: Power shift from suppliers to channel players and buyers
2000s: health care suppliers regain position by eliminate inefficiencies in every step in the supply chain
Other examples?

12. Can IT build barriers to entry?
Before Internet
Build operate proprietary networks, transaction system and databases…are significant barriers
Now? (e.g. Amazon)
Be innovative
First-mover advantage
Build proprietary capabilities
Business intelligence infrastructure
Create a large, loyal community
Understand customers and feed information to suppliers
Brand, customers, technology, distribution capability, deep e-commerce expertise
Other examples?

13. Can IT raise switching costs?
IT system should ideally be easy to start using but difficult to stop using
Before Internet
Switching costs HIGH
Now
Other methods to “hook” the user…
How?
Other examples?

14. Can IT add value to existing products or services or create new ones?
Interesting properties of information-enabled products and services
Information is reusable
Information is easily customized
“time value”
Boeing “e-Enabled Advantage”
Acquired airline industry software companies
Partner with airlines
Other examples?

15. The management of risk Strategic risk Project risk
Can emerging technologies disrupt our current business model by enabling new business models with decidedly superior economics?
Can IT lower entry barriers, change industry power dynamics, or increase competitive intensity?
Can IT trigger regulatory actions?
Project risk
Is the project larger than our typical projects?
How much uncertainty is there in the projects? Do we know the requirements for key deliverables at the start of the project or are these requirements still evolving?
Do we have experience with the technology? If new technologies are involved, are they new to the world or just new to us?
Do we have the resources needed to implement the projects?
Do we have the sponsorship and buy-in from key stakeholders?
Is the organization (including the extended enterprise and industry) ready to implement and use what we deliver?