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MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE

MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE. LEARNING GOALS. Describe the various approaches to devising corporate strategy. Explain how information systems can help organizations achieve a strategic advantage.

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MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE

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  1. MANAGING INFORMATIONSYSTEMS FOR STRATEGIC ADVANTAGE

  2. LEARNING GOALS • Describe the various approaches to devising corporate strategy. • Explain how information systems can help organizations achieve a strategic advantage. • Describe the methods organizations use to choose a strategic information systems project. • Describe how information systems can bring about corporate change. • Explain the concept of knowledge management and describe the technologies that comprise knowledge management systems.

  3. Value Chain • Value chain – activities within an organization that bring products and services to market • Primary activities – take raw materials and transform it into something of greater value • Inbound logistics • Marketing and sales • Operations • Service • Outbound logistics • Supporting activities – those functions that the company requires to do business but do not directly add value to a product or service • HR • Procurement • IT • Firm infrastructure

  4. Value Chain Analysis • Process of analyzing the activities within an organization’s value chain • Companies gain strategic value by focusing on a particular portion of the value chain • IT can help reduce the costs of these processes, thus increasing profit margins

  5. Porter’s Competitive Forces Model • Unlike the value chain, the Competitive Forces Model deals with external factors • Five components • Level of competition in industry • Threat of new entrants into industry • Bargaining power of customers • Bargaining power of suppliers • Threat of substitute products • Uses for CFM • Determine position within industry • Analyze industries and market segments they might wish to enter (exit)

  6. Competitive Advantage (CA) • Those qualities that allow a company to earn above-average profits within an industry • Low cost • Unique product • Three generic strategies to achieve competitive advantage • Cost leadership strategy • Differentiation strategy • Focus strategy

  7. Information Systems forStrategic Advantage • How can information systems improve the value chain? • By reducing the cost of primary and support activities • How can information systems change the way an organization reacts to its competitive forces? • By changing the bargain power of suppliers • By building closer ties with customers • By increasing or decreasing barriers to entry in a market • By serving as the basis for new products and/or services

  8. Sustainable Competitive Advantage • Four approaches lead to sustainable competitive advantage • Create barriers to entry through patents, monopoly, or technical expertise • Be the first to develop systems with high switching costs • Develop the technologies that change the underlying nature of the industry • Cultivate and hire people with excellent information systems management skills

  9. Productivity Paradox • “We see computers everywhere, but in the productivity statistics.” Robert Solow, Nobel Prize-winning economist • It is difficult to attribute cost savings directly to a specific information system • It is difficult to prove that a specific system led to certain financial outcomes • Other measures are needed • Balanced scorecard • Total cost of ownership (TCO)

  10. The Balanced Scorecard • Strategic planning method that translates business strategy into a comprehensive set of performance measures • Investigates strategies in four areas • Financial – e.g. improving cash flow and reducing expenses • Internal business processes – e.g. decreased cycle time and improved quality • Learning and growth – e.g. develop successful new products • Customer – e.g. improve customer satisfaction and decrease product defects

  11. Value of Information Systems • Cost must NOT outweigh benefits • Return on investment (ROI) ROI = (Benefits – Costs) *100 / Costs • Costs include – Benefits include • Hardware • Tangible benefits • Software • Intangible benefits • Labor • Total cost of ownership (TCO) • Method to quantify long-term direct and indirect costs

  12. TCO Analysis for PDA Purchase

  13. The IS Portfolio • Treat investments in IS assets like a portfolio of investment assets to find redundancies and achieve balance • Five steps • Put information about all the organization’s IS projects into a database • Prioritize the IS projects • Divide the IS projects into three types of investments • Infrastructure • Upgrades • Strategic initiatives • Automate the entire process • Have the organization’s top finance executive perform a Modern Portfolio Theory analysis

  14. Sample IS Portfolio

  15. Business Process Improvement and Reengineering • BPI – processes are good but can be better • BPR – elimination or change of business processes • “The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed.” Hammer and Champy, 1993 • Automation (e.g information systems) is a key factor in both BPI and BPR

  16. Major Themes of Successful BPR • Several jobs are combined into one. • Workers are empowered to make decisions. • Work is performed where it makes the most sense. • Checks and controls are reduced or eliminated. • Reconciliation is minimized.

  17. Steps in BPR • Have a clear strategy that is aligned with the organization’s goals • Clearly defined scope that identifies exactly which processes need to be reengineered and which supporting processes need to be revised • Define measures and benchmarks for success • Develop an understanding of the current, as-is processes • Develop a plan for transition from the as-is processes to the to-be processes • Implement the changed processes • Measure the outcomes of the changes

  18. Knowledge Management (KM) • Knowledge assets – the knowledge that exists within the minds of each employee and the knowledge that exists in a tangible form such as databases, documents, and reports • Companies must know how to manage this knowledge • Knowledge management (KM) – the process by which organizations extract value from their knowledge assets

  19. KM Systems • Information technologies that enable the exchange of knowledge among employees and the storage of knowledge in repositories • Types of KM systems • Expert directories • Knowledge repositories • Knowledge sharing technologies • Knowledge representation technologies • Knowledge discovery tools

  20. Knowledge Portals • A single access point to the knowledge of an organization • Provides Web-based access to all of the KM technologies within an organization

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