Strategic IS for Competitive Advantage
Dr Sherif KamelDepartment of Management
School of Business, Economics and Communication
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Outline
Strategic information systems Strategic management and the role of IT Competitive intelligence Porter’s competitive model The value system Web-based strategic information systems Cases SIS implementation Managerial issues Lessons learnt
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Strategic Information Systems (SIS)
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Elements of Strategic Management
Long Range Planning Response Management Proactive Innovation
o Information Technology
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Role of Information Technology
IT creates applications that provide strategic advantages to companies
IT is a competitive weapon IT supports strategic change (re-engineering) IT networks with business partners IT provides cost reduction IT provides competitive business intelligence
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Competitive Intelligence
The Internet is central to supporting competitiveintelligence
Activities drive business performance by
Increasing market
knowledge Improving internal
relationships Raising the quality
of strategic planning
Many companies monitor the activities of competitors
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Competitive Advantage in the Web Economy
Competitive Advantage
Look for a competitive
necessity, which will help your company
keep up with the competitors
Competitive Strategy
Search for a competitive
advantage in an industry, which
leads to control of the market
Sustainable Strategic
Advantage
Maintain profitable and sustainable position against the forces that
determine industry competition
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Porter’s Competitive Model
Threat of entry of new competitors Bargaining power of suppliers Bargaining power of customers (buyers) Threat of substitute products or services Rivalry among existing firms in the industry
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Response Strategies
FOCUS
Selecting a niche market and achieving
cost leadership and/or
differentiation
DIFFERENTATION
Being unique in the industry
COST LEADERSHIP
Providing products and/or services at the lowest cost in
the industry
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Response Strategies
INNOVATIONDeveloping new products and services
GROWTH
Increasing market share, acquiring more customers or selling more products
IMPROVE INTERNAL EFFICIENCY
To improve employee and customer satisfaction
ALLIANCESWorking with business partners to create synergy and provide opportunities for growth
CRMCustomer-oriented approaches, e.g. the customer is king (queen)
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Case: Daimler Chrysler
Problemo In 1999, the company lost 2.6 Billion US dollarso Chrysler’s program with part suppliers was failing
Solutiono Suppliers began using Lotus noteso Measurement reports to static HTML web pageso eProcurement exchange online
Resultso Chrysler saves billions
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Value System
A firm’s value chain is part of a larger stream of activities, which Porter calls a Value Systemo Includes the suppliers that provide the
necessary inputs and their value chainso Applies to both products and services, for any
organization, public or privateo Is the basis for the Supply Chain Management
(SCM)
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Case: Frito Lay uses IT and the Value Chain
World’s largest snack food producer and owner of Pepsi products
SIS Systemo Integrates marketing, sales, manufacturing, logistics, financeo Provides managers with information about suppliers, customers
and competitorso Enables employees to access valuable information
Frito Lay’s use of IT allows for an optimal functioning of the value chain
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Value Chain Model
Evaluate a company’s process and competencies Investigate whether adding IT supports the value chain Enable managers to assess the information intensity and
the role of IT
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Web-based Strategic Information Systems
Many of the SIS of the 70s and 90s were based on privately owned networks, or organizational information systems (OIS)
EDI-based systems are of key importance SIS are changing the nature of competition
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Case: Mobile Oil Moves to Web-based System
Problemo Largest marketer of lubricants in the USAo In 1995, introduced EDI system
Used to place orders, submit invoices and exchange business documents
It was too expensive, too complex to use
Solutiono In 1997, moved to web-based extranet-supported B2B system
Resultso Reduced transaction cost from $45/order to $1.25o Fewer shortages, better customer serviceo Decline in distributor administration costs
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Examples of EDI/Internet-based SIS
(for individual companies) Electronic Auctions Electronic Biddings Buyer-Driven Commerce Single Company Exchange Direct Sales
(for group of companies) Industry Consortiums Horizontal Consortiums Web-based Call Centers Web-based Tracking Systems Web-based Intelligent Agents Web-based Cross Selling Accessing knowledge via
Intranets
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Who is using SIS?
Otis Elevatoro Centralized call center, self diagnosing elevators’ malfunctions and
maintenance analysis
American Airlines
o Computerized reservation system (SABRE)
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Case: Port of Singapore
Problemo Port of Singapore, the world’s largest international port, faced
increased global competition
Solutiono Implementation of Intelligent Systems
Resultso Reduction in Cycle Time
4 hours versus 16 - 20 hours in neighboring ports
o Reduction in uploading/ loading time 30 sec. versus 4-5 min./ truck in neighboring ports
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Case: Volvo Speed Cars
Problemo In comparison to global competitors, Volvo’s cars were too
expensive, with a slow delivery time
Solutiono Creation of global ISDN-based network
Resulto Reduction in delivery time from 12 - 16 weeks to 4 - 6 weeks for
customized carso Reduction in cost of doing business, along with the price of the car
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
SIS implementation
Justificationo Justifying SIS may be difficult due to the intengible nature of their
benefits
Risks and failureso The magnitude, complexity, continuous changes in technology and
business environment may result in failures
Finding appropriate SISo Identifying appropriate SIS is not a simple task
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Sustaining SIS and strategic advantage
A Major problem that companies face is how to sustain their SIS competitive advantage
3 Major approaches…o Create systems which are not visible to competitorso Provide a comprehensive, innovative and expensive system that is
difficult to duplicateo Combine SIS with structural changes including business
processes, reengineering and organizational transformation
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Managerial Issues
Implementing SIS can be riskyo Investment involved in implementing strategic information systems
(SIS) is high
Strategic information systems requires planningo Planning for an SIS is a major concern of organizations
Sustaining competitive advantage is Challengingo As companies become larger and more sophisticated, they develop
resources to duplicate the systems of their competitors quickly Ethical issues
o Gaining competitive advantage through the use of IT may involve unethical or even illegal actions
o Companies can use IT to monitor the activities of other companies and may invade the privacy of individuals working there
Copyright © 2005 Sherif KamelCopyright © 2002 Turban, McLean and Wetherbe
Lessons Learnt
Need for exchange business models and strategies Importance of web-based IT Global competition over service is key Large investment over time Importance of networked infrastructure for global systems Web-based applications for superior customer service Need to patent innovative systems