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Information Systems for Strategic Advantage

Information Systems for Strategic Advantage. BiMBA, Fall 1999 Professor Chen School of Business Gonzaga University Spokane, WA 99258 chen@gonzaga.edu. Innovation as a Response to Change in Market and Technology. Technological Opportunities. Advances in Technology. EFFICINCY.

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Information Systems for Strategic Advantage

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  1. Information Systems for Strategic Advantage BiMBA, Fall 1999 Professor Chen School of Business Gonzaga University Spokane, WA 99258 chen@gonzaga.edu

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

  3. Figure 3-6 Reengineered Accounts Payable Process (from Hammer[1]) Before Copy of Purchase Order Purchasing Purchase Order  Payment Accounts Payable Vendor Invoice Goods Receiving Document Receiving

  4. Figure 3-6 Reengineered Accounts Payable Process (from Hammer[1]) After Purchasing  Purchase Order Payment  Accounts Payable Database Vendor Goods Receiving

  5. 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 Software advances in application packages (e.g. , DBMS, spreadsheet PC as DSS tool to access information stored in the center computer files to support management decision-making process.

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

  7. Information Engineering PLANNING ANALYSIS DESIGN CONSTRUCTION

  8. 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.

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

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

  11. Figure: Relationship and linkage of proposed system projects with strategic factors and the business plan Objective Proposal Business Plan Strategic Factors SystemProject • 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. Supports Supports

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

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

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

  15. Enablers Inhibitors • 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 • Technological • Uncertainty • Cost of integration Organizational • Lack of strategic vision for integration • Organizational inertia • Centralization -decentralization conflict Internal Integration: Enablers and Inhibitors IT-induced reconfiguration: Level Two

  16. Enablers 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 • Electronic filing initiative by IRS • IT-based value-added services • Perceived benefits of an integrated platform • IT-based strategic advantages IT-industry business reconfiguration in level 2: Enables and Inhibitors in the tax return preparation business IT-induced reconfiguration:tax return preparation business

  17. Inhibitors • Technological • Uncertainty • Cost of redesign • Organizational • Lack of strategic vision for redesign • Organizational inertia • Costs of transforming the organization Business process redesign: Enablers and Inhibitors 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 IT-induced reconfiguration: Level Three

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

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

  20. Strategic options for business network redesign Tightly coupled C D Business Network redesign Collaborative advantage Business Governance B A Electric infrastructure Competitive advantage Loosely coupled Common role Unique role Information Technology Governance

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

  22. Business Scope Redefinition: Enlarging the business domain using IT Traditional business scope Products Products Additional business using IT Markets Markets Traditional operating technology Technology Technology Information technology Traditional operating technology Before After

  23. Most likely quadrant-to-quadrant movement HIGH Preemptive Penetration Chaotic Proliferation Interrelatedness L O w Barroom Brawl Clash of the Titans LOW HIGH Exploitability

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

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

  26. 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

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

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

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