Week-8

Week-8 Information Systems For Competitive Advantage

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Learning Objectives

1. Discuss how organizations can use information systems for automation, organizational learning, and strategic support 2. Describe information systems’ critical strategic importance to the success of modern organizations

Information Systems Today

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Learning Objectives

3. Formulate and present the business case for a system and understand why it is sometimes difficult to do so 4. Explain why and how companies are continually looking for new ways to use technology for competitive advantage

Information Systems Today

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Three Primary Uses of Information Systems Automation Providing support to complete a task faster, more cheaply, and perhaps with greater accuracy and/or consistency Organizational Learning (Informating) Providing support to improve day-today operations by creating, acquiring, and transferring knowledge Achieving Strategy Providing support in a way that enables the firm to gain or sustain competitive advantage over rivals

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What Value Is Provided in These Functions?

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Automation Automation Providing support to complete a task faster, more cheaply, and perhaps with greater accuracy and/or consistency Styles of Processing Manual Processing • No technology automation support Technology Supported Processing • A combination of manual and system supported steps Fully Automated Processing • All manual steps have been eliminated. Effectiveness If the underlying process is bad, automating with technology alone may mask process problems Information Systems Today

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Benefits of Automation – Loan Example

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Organizational Learning Organizational Learning Providing support to improve day-today operations by creating, acquiring, and transferring knowledge Informating (Zuboff 1988) A technology that provides information about its operation and the underlying work process it supports Effectiveness A combined automating and learning approach is more effective than an automating approach alone. If the underlying process is flawed, a learning use of technology might help you detect problems with the process

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Organizational Learning Example

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Strategy and Competitive Advantage Achieving Strategy Providing support in a way that enables the firm to gain or sustain competitive advantage over rivals Sources of Competitive Advantage • Having the best-made product on the market • Delivering superior customer service • Achieving lower cost than rivals • Having proprietary manufacturing technology • Having shorter lead-times in developing and testing new products • Having a well-known brand name and reputation • Giving customers more value for their money

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Strategy

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Traditional vs System Support Process Example Using handheld technology combined with a reengineered business process to create a competitive advantage

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Value Chain Analysis Value Chain Analysis (Porter 1985, 2001 ) Is a process of analyzing an organization’s activities to determine where value is added to products and/or services and what costs are incurred in doing so.

Information Systems Today

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Information Systems Roles in the Value Chain Systems play a significant role throughout the Value Chain to achieve competitive advantage and: • Must be appropriate for the business strategy (e.g. cost) • Are usually coupled with Business Process Reengineering that address process to enhance company operations

Information Systems Today

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The Value Chain - Primary Activities Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry Primary Activities include: • Inbound Logistics – receiving and stocking raw materials, parts, products • Operations/Manufacturing – processing orders and raw materials into finished product • Outbound Logistics – distribution of the finished product to customers • Marketing and Sales – creating demand for the product (pre-sales activities) • Customer Service – providing support for the product or customer (post-sales activities) Information Systems Today

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The Value Chain - Support Activities Support activities are business activities that enable Primary Activities These activities can be unique by industry but are generally more typical across industries Support Activities include: • Infrastructure – hardware and software that must be implemented to support applications for primary activities • Human Resources – employee management activities: hiring, interview scheduling, and benefits management • Technology Development – the design and development of applications that support the organization • Procurement – purchase of goods or services that are required as inputs to primary activities

Information Systems Today

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Making the Business Case Business Case Identifying the value provided by an information system The Productivity Paradox • It is often difficult to quantify tangible productivity gains from the use of an information systems • As system based productivity increases, other forces can simultaneously reduce gains (e.g. regulation) • Unintended consequences of technology expenditures can reduce system effectiveness (e.g. web surfing) Business Case Development Issues Several common issues create difficulty in defining business cases for information systems including: • Measurement Problems • Time Lags • Redistribution • Mismanagement

Information Systems Today

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Making the Business Case – Issues Measurement Problems • The benefits of IT are difficult to pinpoint because firms may be measuring the wrong things • Expected benefits are not always defined in advance, so they are never seen (They must be identified to measure). • The biggest increases in productivity come from system effectiveness but many metrics focus on system efficiency Time Lags • Describes the difference in time from when the IT expenditure was made and when the benefits are realized • One explanation for this lag is that it takes time for people to become proficient at using new technology • Another explanation is that large systems take a long time to fully implement and integrate - sometimes many years Information Systems Today

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Making the Business Case – Issues Redistribution • IS may be beneficial to individual firms, but not for an entire industry or the economy as a whole • Strategic information systems may help one firm increase its market share at the expense of others (redistributing) • Expectations have increased as technology has become prevalent. We forget the gains that have been realized. Mismanagement • IS has not been implemented and managed well • Some believe that people simply build bad systems, implement them poorly, and rely on technology fixes for problems that require joint technology/process solutions • Inappropriate IS investments can mask or even increase organizational slack and inefficiency Information Systems Today

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Assessing Value for IT Infrastructure Howard Rubin, Executive Vice President of Meta Group agues a holistic approach should taken in measuring IT infrastructure value. He suggests assessment along the following lines Economic

Use important business metrics to assess contribution to profitability an economic value

Architectural

Assess the capability to address current and future business needs (e.g scalability)

Operational

Assessing the performance in meeting business processing requirements

Regulatory & Compliance

Assess the extent in meeting control, security, and integrity regulatory requirements

Information Systems Today

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Technology Choices – Path to Competitive Advantage? “IT Doesn’t Matter” Car 2003 • As IT becomes more pervasive, technology becomes more standardized and ubiquitous • Competitors have access to the same technology which produces No Competitive Advantage “The Engine that Drives Success…” Lundberg 2004 • Companies with bad business models fail regardless of IT systems or other capabilities • Companies with good business models use IT to execute successful business models and succeed “Predicting the New, New Thing” Bakos/Treacy 1986 • Use IS to make your products and services unique or cause customers to invest in you to raise switching cost • Competitive Advantage can be more easily sustainable under these conditions Information Systems Today

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