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Chapter 2

Chapter 2. IT Impact on Business Models. 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

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Chapter 2

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  1. Chapter 2 IT Impact on Business Models

  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. IT Impact Map • IT Impact on Strategy: what role does IT play in determining product, market, business network, and boundary positioning? • IT Impact on Capabilities: what role does IT play in building the capabilities to execute strategy? • (capabilities: processes, infrastructure, people and partners, organization and culture, leadership and governance)

  4. McFarlan’s Strategic Grid

  5. IT Impact Map: IBM Path to Business Transformation

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

  7. Impact of IT on Business Model Capabilities • Can IT: • Change the basis of competition? • Change the nature of relationships and the balance of power among buyers & suppliers? • Build barriers to entry? • Increase switching costs? • Add value to existing products/services or create new products/services?

  8. Can IT Change the Basis of Competition? • Automation of activities (inside firm, across its boundaries) • Inform and transform • American Hospital Supply Corporation • Charles Schwab

  9. Evolving the Charles Schwab Business Model: 1975-2002

  10. Can IT Change the Nature of Relationships and Change the Balance of Power in Buyer-Seller Relationships? • Streamlining channels, decreasing costs, improving order accuracy, streamlining supply chain between suppliers and buyers • Global Healthcare Exchange • Infrastructure and supporting processes (supply chain, production, physical facilities, data and network operations, call centers and help desks) • Customer-facing processes (demand generation, order fulfillment, CRM) • Business and product innovation processes (new product development and business development)

  11. Can IT Build Barriers to Entry? • Technology-based advantages give way to 2nd order barriers to entry: • Firm exploit the value of information generated by IT • Firm are able to leverage proprietary capabilities and assets to continuously innovate and evolve business strategy • Leveraging a loyal and engaged community of suppliers, customers, partners • “IT doesn’t matter”

  12. Can IT Raise Switching Costs? • Ideally, IT system easy to start using but difficult to stop using • Proprietary systems vs. public Internet • Intuit – increase switching costs through use of Internet

  13. Can IT Add Value to Existing Products/ Services or Create new Ones? • Increase in information content of products/services • Information-enabled products/services • Information is reusable • Information is easily customized • Information-based products/services posses inherent ‘time value’ • Boeing

  14. Economics of things vs. economics of information

  15. Sources of IT Risk (More in chapter 8 ) • Impact of IT on Strategic Risk • Can emerging technologies disrupt current business model by enabling new business models with superior economics? • Can IT lower entry barriers, change industry power dynamics, or increase competitive intensity? • Can IT trigger regulatory action? • Impact of IT on Project Risk • Is project larger than typical project? • Level of uncertainty? Set or evolving requirements? • Experience with technology? • Resources available? • Sponsorship/buy-in from key stakeholders?

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