Chapter 2 Information Systems for Competitive Advantage Information Systems Today Leonard Jessup and Joseph Valacich.

Chapter 2

Information Systems for Competitive Advantage

Information Systems TodayLeonard Jessup and Joseph Valacich

Chapter 2 Objectives

• Understand the IS in automation, organizational learning, and strategic support

• Understand IS for strategic organizational success• Understand the need for making an IS business case• Understand technological innovations to improve

competitive advantage

Why Use Information Systems?

• Automating: doing things faster

• Organizational learning: doing things better

• Supporting Strategy: doing things smarter

Automating: Doing Things Faster

• Technology is used to automate a manual process– Doing things faster, better, cheaper

– Greater accuracy and consistency

• Loan application example– Manual processing

– Technology-supported process

– Completely automated

Organizational Learning: Doing Things Better

• Going beyond automation– Involves learning to improve the day-to-day activities

within the process– Looking at patterns and trends

• Organizational Learning– Using acquired knowledge and insights to improve

organizational behavior• Total Quality Management (TQM)

– Monitoring an organization to improve quality of operations, products, and services

Supporting Strategy: Doing Things Smarter

Strategic Planning

1. Create a vision: setting the direction

2. Create a standard: performance targets

3. Create a strategy: reaching the goal

Types of Competitive Advantage

• Low-Cost Leadership – Best prices on goods/services– Examples: Dell, Target

• Differentiation– Best products or services– Examples: Porsche, Nordstrom, IBM

• Best-Cost Provider (middle-of-the-road)– Reasonable quality, competitive prices– Example: Wal-Mart

Information Systems for Competitive Advantage

• A clear strategy is essential• Sources of competitive advantage:

– Best-made product– Superior customer service– Lower costs– Superior manufacturing technology– Shorter lead times– Well-known brand name– High value per cost

Information Systems for Competitive Advantage

• IS and Value Chain Analysis– VC Analysis: adding value within an organization– Organizations as big input/output processes– IS can automate many value chain activities:

• Purchased supplies inbound logistics• Operations• Outbound logistics• Sales and marketing• Service

Organizational Value Chain

Information Systems for Competitive Advantage

• The Role of IS in Value Chain Analysis• IS competitive advantage in VCA:

– Internet link with suppliers, dealers• Extranets: using the Internet for B2B interactions

– Computer-aided manufacturing systems– Web site with online product ordering– Customer service response system– Computer-aided design

Information Systems for Competitive Advantage

• The Technology/Strategy Fit– An IS implementation should create a significant

organizational change consistent with the business strategy

• Business Process Reengineering (BPR)

Making the Business Case for a System

• The Productivity Paradox (how to quantify gains?)– Measurement problems

– End-user development

– Decision support systems (DSS)

– Strategic systems

– Time lags

– Redistribution

– Mismanagement

Making the Business Case for a System

• Making a Successful Business Case– Arguments Based on Faith– Arguments Based on Fear

• Industry factors• Stage of maturity• Regulation• Nature of competition or rivalry

– Arguments Based on Facts• Cost-benefit analysis for a web-based system

– Recurring/nonrecurring costs– Tangible/intangible costs– Tangible/intangible benefits

Presenting the Business Case

• Know the Audience– The IS Manager– Company Executives (VPs and higher)– Steering Committee

• Convert Benefits to Monetary Terms

Presenting the Business Case

• Devise Proxy Variables– Measure changes in terms of perceived value

• Develop a Work Profile Matrix– Time spent on each job, each type of work

• Measure What Is Important to Management

• Conoco: Making a Business Case

• Changing Mindsets About Information Systems

Competitive Advantage in Being at the Cutting Edge

• Deploying new technologies faster, better, and cheaper than competitors

• Using new technology in innovative ways

Competitive Advantage in Being at the Cutting Edge

• The Need for Constant IS Innovation

• On the lookout for new technologies that impact business

Competitive Advantage in Being at the Cutting Edge

• E-Business Innovation Cycle– Choosing enabling/emerging technologies

– Matching with economic opportunities

– Executing business innovation for growth

– Assessing client value

Competitive Advantage in Being at the Cutting Edge

• Implications of E-Business Innovation Cycle– Begin with technology when considering

successful business strategies– Marketing is secondary to IT– Emerging technology cycle is ongoing

Competitive Advantage in Being at the Cutting Edge

Terms and Concepts• E-commerce (Internet-related)• E-business (any IT that supports business)• Enabling technologies• Economic opportunities

Competitive Advantage in Being at the Cutting Edge

The Cutting Edge vs. The Bleeding Edge• Information systems are often bought from, or

built by, someone else• An organization typically cannot patent an IS• Rivals can copy emerging information systems• Therefore, one’s IS competitive advantage can be

short-lived

Competitive Advantage in Being at the Cutting Edge

Requirements for Being at the Cutting Edge• Consider Porter’s competitive forces• To deploy emerging systems well:

– Organization must adapt well to change

– Human capital available for deployment (knowledge, time, skills)

– Tolerance of risk and uncertainty