02 corporate information strategy 26 slides
DESCRIPTION
Corporate information strategyTRANSCRIPT
CORPORATE INFORMATION STRATEGY
& MANAGEMENT Prof. Sajjad Ahmad Qadri
02-Creating Business Advantage
with IT
Prof. Sajjad Ahmad,School of Business & Management, MULCambridge Graduate University
IT and Competitive Advantage
Sustainability of Competitive Advantage
Case StudiesGE
Conclusion
IT as a Competitive Weapon
Definition:Information Technology
Information Technology (IT) is the amalgamation of hardware, software, data, people and procedures that enables or inhibits business objectives depending on management’s involvement in IT.
Source: Why General Managers Need to Understand Information Technology, lecture notes, Lacity, 2002
How the information revolution affects competition
Changes industry structure thereby altering the rules of competition
Creates competitive advantage by giving new ways to outperform rivals
Spawns whole new businessesSource: How information gives you competitive advantage, Porter and Millar, 1985
How IT creates a competitive advantage
Differentiate a product or service
Improve business processes (lower costs)
Change a business structure
Create new business
Source: IS 480 lecture notes, Lacity, 2002
Competitive advantage comes from critical
differentiators
Source: IS 480 lecture notes, Lacity, 2002
CriticalCommodities
Critical Differentiators
Useful Commodities
Eliminate/Migrate
Critical
Useful
Commodity Differentiator
IT as a Competitive Weapon -Sustainability
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
• Very few companies sustain their competitive edge over the long term
• Sustainability occurs when it is difficult or impossible for the competition to respond
IT as a Competitive Weapon -Sustainability
IT Resources-Easily Duplicated
• Capital for investment• Proprietary technology• Technical Skills
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon -Sustainability
IT Resources-NOT Easily Duplicated
• Managerial IT Skills• Understanding business needs• Collaborating with colleagues• Managing market & technical risk of
innovation
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon -Sustainability
Sustainable Advantage
Lead Time Competitive Asymmetry
Pre-emption Potential
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
Supply System Analysis
Competitor Analysis
Project Life-cycle Analysis
1. How long before a competitor responds?2. Which competitors can/will respond?3. Will the response be effective?
IT as a Competitive Weapon -Sustainability
3 Pillars Supporting Sustainable Advantage
1. Lead Time• Information leaks• Followers take short cuts• Followers implement better solutions
2. Competitor Analysis(Difficulty of competitor to respond or copy application)
3. Supply system analysis• Market capture• Switching costs
1980’s: Killer Application• AA/UA-Reservation Systems• American Hospital Supply-Online ordering system• Frito-Lay-Handheld devices for sales
Early 1990’s: Re-engineering
• Redesigning business processes around technology
Mid 1990’s: Information Management• Knowledge Management• ERP• CRM
Success with IT: Strategies
http://www.cio.com/archive/050101/davenport_content.html
Late 1990’s: e-Commerce
Today• e-Commerce is not enough• IT investment in the business core (touches customer)• Business commitment• Commitment to change (continually re-invent and never rest)• Using multiple technologies and management approaches (not just one)
• Company must excel in front office(e-commerce, CRM) , back office (ERP), and data warehousing, mining, and KM
• Information focus (to make smart decisions)
Success with IT: Strategies
http://www.cio.com/archive/050101/davenport_content.html
IT’S ALL ABOUT “E”
CASE STUDY: GENERAL ELECTRIC
• Formed in 1892
• Only company part of the Dow Jones's Industrial Index since the Index’s debut
• 67,588 patents, 2 Nobel Prizes and numerous other honors
• Operates in more than 100 countries and employs 313,000 people worldwide
• GE is considered to be one of the largest and most diversified industrial corporations in the world
e-business Is Business Just Simpler, Faster, and Better
General Electric:Company Overview
• Short-cycle businesses contributed approximately 20% of GE's net earnings in 2001
• Consumer Products (Lighting & Appliances) • Plastics • Industrial Systems• NBC• Specialty Materials
•Long-cycle businesses contributed approximately 40% of GE's net earnings in 2001
• Medical Systems
• Power Systems
• Transportation Systems
• Aircraft Engines
• Financial services contributed approximately 40% of GE's net earnings in 2001
• Before 1999 - IT at GE was non existent
GE – Digitization Strategy
•1999 - Jack Welch orders each business to “Destroy your business/ Grow your business”
• Use information technology to “create a leaner, faster, more customer focused company, accelerate high margin, capital efficient growth.”, Jeff Immelt, CEO
• 2001- GE Top e-business innovator (eweek)www.ge.com
IT Spending
2000 - $2.5 billion2001 - $3.0 billion2002 - $3.5 billion
GE – Digitization Strategy
"You won't see one ounce of slowdown in tech spending.” Jack Welch 1/2001
Gary Reiner, CIO
http://www.eweek.com/article2/0,3959,94717,00.asp
GE – Digitization Strategy
• Negotiate
– e-Auctions
–Deflation
• Transact –
Productivity – eTransactions – Control
Buy
• Eliminate Intermediaries–Speed– Unit Cost
Reduction –Streamline processes
Make
• Make the Customer More Productive– Comparative
Performance Data– Customized Service (Availability/Order Service)
• Transaction Productivity
Sell
Productivity (“Workflow”)
More Share/HigherMargin
GE Internal Presentation
Buy smarter
Process more efficiently
Sell more
GE ValueCustomer ValueBuy smarter
Process more efficiently
Sell more
e-Business Value
Digitization provides ways to improve our customer interface and work on our own internal productivity at the same time. It is just beginning. Our investments in information technology will grow about 15% this year. It is really going to help us transform the cost base of GE. Its going to help us buy better. Its going to help us interface with customers better. But primarily its going to help us in terms of the inner workings of GE make us more efficient, leaner, and closer to the customer."
-- Jeff Immelt, Chairman and CEOCustomer City Swings, April 2001
e@GE
CEO
BDLeader
MarketingLeader
CIO
• External or Internal• Internet Generation• Creative,
Entrepreneurial• Start Up Experience• Marketing/IT
Background
• High Level Leader• Knows the Business• Track Record of Delivering• Well Respected - Great Team
Player/Influencer• Understands Commercial &
Operations• Has or Can Play on Business
Leader Staff
e-BusinessLeader
• External Hire• e-Commerce Industry
Experience• Business Savvy• Technical Expertise
DYB.com/GYB.com LeaderFocus: Destroy Your
Business/ Grow Your Business
CWC.com LeaderFocus: Enhance & Build
Your Customer Web Center
Marketing SalesOperation
s
Cross Functional Team
Marketing Sales Operations
Cross Functional Team
TechnicalFunctionality
Back EndInfrastructure
Chief Architect.Com Technical Team
Buy Sidee-Commerce
Leader
Other e-Business Functional
Leaders
E-BUSINESS ORGANIZATIONAL APPROACH
GE Internal Presentation
e-Business Steering Committee•CEO•e-Business Leader•CIO•Marketing Leader•BD Leader
Web BusinessStaying Power
• Simplicity• Applying traditional business thinking to a new channel• Use web to improve business and create valuable services• Awareness of customer needs• e-Business is a constantly moving target• Need for sound relationships
http://www.cio.com/archive/120101/power_content.htmlDavidson, Stephen, “B2B Exchaanges:Lessons from the Trading Pit,” Journal of Internet Law,
4/2002, v5 i10 p1(10)
IT as a Competitive Weapon -Summary
IT can be used as a competitive weapon through cost reduction and differentiation
Very few companies sustain competitive advantage using IT
IT projects need to be evaluated for “sustainability’ in addition to traditional risk
e-Business is a constantly moving target
Future of IT
Competitive Advantage?
Competitive Necessity?
or