Creating Business Advantage with IT

1. Creating Business Advantage with IT

2. Vision and business models Demonstration of the telephone in the late 1800s While it is a wonderful invention, businessmen will never use it. Rutherford B. Hayes 19th President of the USA

3. Technological innovations • Internet and broadband networks • WWW and high performance servers • Flexible, standardized, powerful platform for creating and storing information in all its forms • URL Uniform Resource locator and Browser • Common approach for identifying and locating information anywhere on the internet • Multimedia digital devices • Portable internet access devices that provide internet access to voice, television and information • Laptops, palm pilots, cell phones, … • Wireless networks and protocols • JAVA, XML and other OO languages and database technologies

4. Economies • Economy of scale • When a participant or network of participants is able to leverage capabilities and infrastructure to increase its revenues and profitability within a single product line or market. • Economy of scope • When a participant or network of participants is able to leverage capabilities and infrastructure to launch new product lines or enter new markets.

5. Porter’s Value Chain(well suited for analyzing product/manufacturing firms)

6. Value Chain Applied to AirlinesIdentifies uses of IT for each element of the value chain

7. Market Roles Corporate Information Strategy and Management Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , . Burr Ridge, IL: Chapter 1 Figure 1 - 4 McGraw - Hill/Irwin, 2002.

8. Industrial vs. Network Economy

9. Forces Influencing Industry and Competitive Advantage Corporate Information Strategy and Management Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarland , . Burr Ridge, IL: Chapter 1 Figure 1 - 5 McGraw - Hill/Irwin, 2002.

10. Impact of IT: questions 1 of 5. • Can IT be used to reengineer core value acti-vities and change the basis of competition? • Uses IT not just to automate but also to transform and to inform • Benefits of conducting business online • AHSC American Hospital Supply Corporation • American Airlines • Internet to reengineer value chain and the basis of competition

11. Impact of IT: questions 2 of 5. • Can IT change the nature of relationships and the balance of power among buyers and suppliers? • AHSC • Customers recognized the value of a multivendor marketplace but were unwilling to put up with the problems of using multiple different supplier systems • AHSC became channel manager • Electronic market places: Oracle, CommerceOne, Ariba, …

12. Impact of IT: questions 3 of 5. • Can IT build or reduce barriers to entry? • Consultancy companies: knowledge technology • Technology based advantage: AHSC, AA, … • The internet can decrease the impact: low cost, ease of penetration • Knowledge and community barriers are more sustainable • Proprietary infrastructure and channels to market are at a particular disadvantage relative to new entrants when they attempt to create second-order barriers to entry (Amazon.com as new entrant with transaction, information and community infrastructures)

13. Impact of IT: questions 4 of 5. • Can IT increase or decrease switching costs? • Switching to another system might become difficult and costly in proprietary systems • With the internet switching costs are substantially reduced difficult to achieve customer loyalty • Intuit increased the switching cost • Provided easy to use inexpensive financial service software • Won users via ease-of-use • Hooked via simple ways of storing the information that should be reentered if the customer switches to a different product

14. Impact of IT: questions 5 of 5. • Can IT add value to existing products and services or create new ones? • Grocery stores are also in the business of selling information (client profiles) • Information content of existing products (cars) • Digital distribution of books, music, and video will dramatically alter existing publishing and entertainment industries. • Manure and fertilizer company provides information.

15. Summary • Exploiting the opportunities afforded by IT, while avoiding the pitfalls requires vision, sound execution, and the ability to respond quickly • Risks increase when executives • Have poor understanding of sources of competitive dynamics • Fail to understand the long-term implications of a strategic system (their own or a competitor) • Launch a system that brings on litigation or regulation to the detriment of the innovator • Fail to account for the time, effort, and cost required to ensure user adoption, assimilation and effective utilization

16. Summary (cont) • Investments should be examined on sustainable advantage • Movement of IT-personnel results in rapid proliferation of strategic ideas • Questions • What business are we in? Who are our customers, suppliers, partners? • Who are our biggest competitors, today and in the future? • How effective are our core operating activities and processes? • Are there big changes looming at the horizon and what can we do? • Will changes in related industries influence our industry? • Did we identified the strategic risks today and in the future? • Have we appropriately prioritized our business investments?