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Information Systems TechnologyRoss Malaga

"Part III Building and Managing Information Systems"

III

10

Copyright 2005 Prentice Hall, Inc. 10-1

MANAGINGINFORMATION

SYSTEMS FOR

STRATEGIC ADVANTAGE


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LEARNING GOALS Describe the various approaches to devising corporate

strategy.

Explain how information systems can help organizationsachieve a strategic advantage.

Describe the methods organizations use to choose a strategicinformation systems project.

Describe how information systems can bring about corporatechange.

Explain the concept of knowledge management and describethe technologies that comprise knowledge managementsystems.


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Competition at The Bead Bar The Bead Bar faces increased competition and

needs to find ways to use information systems to

generate competitive advantage. Meredith How to know if the Bead Bar information

systems truly improve the business and how can they be

used to help create a competitive advantage?

Suzanne How to share knowledge and collaborateabout designs ?

Leda How to lock in franchisees?


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Competition at The Bead Bar(continued)

Mitch How to use IS to keep advantage in the cruise

industry? Julia How to value the current information systems?

Miriam How can the marketing team share

knowledge and collaborate?

Rachel How to demonstrate increased efficiency andreduced costs achieved through information system?

Jim How to use systems to assist in transitioning new

employees into the Bead Bar environment?


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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 addvalue to a product or service

HR Procurement

IT Firm infrastructure


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Value Chain Analysis Process of analyzing the activities within an

organizations 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


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Porters 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)


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Competitive Advantage (CA) Those qualities that allow a company to earn

above-averageprofits within an industry

Low cost

Unique product

Three generic strategies to achieve competitive

advantage

Cost leadership strategy

Differentiation strategy

Focus strategy


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Information Systems for

Strategic 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


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Sustainable Competitive Advantage Four approaches lead to sustainable competitive

advantage

Create barriers to entry through patents, monopoly, ortechnical expertise

Be the first to develop systems with high switchingcosts

Develop the technologies that change the underlying

nature of the industry Cultivate and hire people with excellent information

systems management skills


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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 aspecific information system

It is difficult to prove that a specific system led tocertain financial outcomes

Other measures are needed

Balanced scorecard

Total cost of ownership (TCO)


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The Balanced Scorecard Strategic planning method that translates business

strategy into a comprehensive set of performancemeasures

Investigates strategies in four areas Financial e.g. improving cash flow and reducing

expenses

Internal business processes e.g. decreased cycle timeand improved quality

Learning and growth e.g. develop successful newproducts

Customer e.g. improve customer satisfaction anddecrease product defects


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Value of Information Systems Cost must NOToutweigh 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 indirectcosts


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TCO Analysis for PDA Purchase


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The IS Portfolio Treat investments in IS assets like a portfolio ofinvestment assets to find redundancies and achievebalance

Five steps Put information about all the organizations IS projectsinto 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 organizations top finance executive perform

a Modern Portfolio Theory analysis


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Sample IS Portfolio


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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 incritical contemporary measures of performance such as cost,

quality, service, and speed. Hammer and Champy, 1993

Automation (e.g information systems) is a keyfactor in both BPI and BPR


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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.


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Steps in BPR Have a clear strategy that is aligned with the

organizations goals

Clearly defined scope that identifies exactly whichprocesses 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-isprocesses

Develop a plan for transition from the as-isprocesses to the to-beprocesses

Implement the changed processes

Measure the outcomes of the changes


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Knowledge Management (KM) Knowledge assets the knowledge that exists

within the minds of each employee and the

knowledge that exists in a tangible form suchas 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


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Copyright 2005 Prentice Hall, Inc.10-25

KM Systems Information technologies that enable the exchange

of knowledge among employees and the storage ofknowledge in repositories

Types of KM systems

Expert directories

Knowledge repositories

Knowledge sharing technologies

Knowledge representation technologies

Knowledge discovery tools


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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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Bead Bar Consultant How Issues on Managing Information Systems for

Strategic Advantage Affect the Bead Bar Meredith Understanding the strategic role of information

systems has changed the way I think about technology Suzanne Wants to build KM system to share bead designs Leda Using KM systems to streamline the value chain makes

the Bead Bar more attractive to franchisees Mitch Use IS to create differentiation for cruise line customers

Miriam KM system for collaboration on marketing campaign Rachel Use IT for incremental improvements in business

processes

Jim Develop KM system to improve retention of valuedemployees


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Learning Goals SummaryIn this chapter you have learned:

The various approaches to devising corporate strategy

How information systems can help organizationsachieve a strategic advantage The methods organizations use to choose a strategic

information systems project How information systems can bring about corporate

change The concept of knowledge management and the

technologies that comprise knowledge managementsystems

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