robert j. robbins [email protected] (206) 300 3443 medit 115 competitive advantage mini lecture...

Robert J. [email protected]

(206) 300 3443

http://medit115.wikispaces.comMEDIT 115

CompetitiveAdvantage

Mini Lecture Series

2Mini Lecture Series: Competitive Advantage

Copyright © 2010 by R. J. RobbinsMEDIT 115

The Goal: Competitive Advantage

Must align IT with business goals !





Easier said than done…





A google search on

align it business goals





A google search on


produced 1.5 MILLION hits, most of them selling something and the rest talking about how hard it is to achieve alignment.





A google search on



Why is it hard?





A google search on



Why is it hard?

IT is so plastic that it can be aligned with ANY business goal, from achieving savings through cost-cutting efficiency to achieving competitive advantage through major investments.





A google search on



Why is it hard?

IT is so plastic that it can be aligned with ANY business goal, from achieving savings through cost-cutting efficiency to achieving competitive advantage through major investments.

Michael Porter’s analysis of competitive advantage offers a framework within which to consider the alignment of IT with business goals.



The Value Chain

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Michael Porter. 1985. Competitive Advantage.

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Michael Porter’s works on competitive advantage contain a compelling analysis of the various components of operational activities in a competitive enterprise.



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PrimaryActivities

According to Porter, the value-adding primary activities define the enterprise. Primary activities must be managed to deliver maximum strategic competitive effectiveness.

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PrimaryActivities

SupportActivities

According to Porter, the value-adding primary activities define the enterprise. Primary activities must be managed to deliver maximum strategic competitive effectiveness.

Conversely, support activities are necessary but not sufficient for the success of the enterprise. Support activities must be managed for maximum operational efficiency.

The Value Chain



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$o

Cash outflow $o occurs during the value-adding and support processes. Cash inflow $i occurs when the value-added products are sold to customers.

The Value Chain



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$i

Cash outflow $o occurs during the value-adding and support processes. Cash inflow $i occurs when the value-added products are sold to customers.

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Simplistically speaking, the difference between cash inflow and outflow ($i - $o) provides the margin of profit.

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$i $o-

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Increased expenses (strategic investment) can lead to increased profits, if the expenses generate more value than they cost.

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$i $o-

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ROI: Because $o usually occurs before $i, we can judge the appropriateness of cost-incurring activities to the extent that we can measure the effect of a particular $o upon overall $i.

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$i $o-

The Value Chain



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As highly plastic tools, computers can play useful roles in both the accomplishment and the management of tasks. Thus, computers have potential roles in all phases of the value chain.

The Value Chain



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As highly plastic tools, computers can play useful roles in both the accomplishment and the management of tasks. Thus, computers have potential roles in all phases of the value chain.

Many of the most successful companies of the last fifteen years have achieved that success through the skilled deployment of IT to great competitive advantage.

The Value Chain



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Computers can also play useful roles in many support activities. Here, IT delivers infrastructure strength and may contribute to competitive advantage through cost containment.

The Value Chain



In the value-adding chain, IT is a strategic asset and must be managed accordingly. Investment is made to maximize strategic competitive effectiveness.


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The Value Chain




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The Value Chain

Here, aggressive spending may be necessary to achieve the business goal of improving the value-adding chain.



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In support activities, IT is a cost-center component and must be managed accordingly. Costs must be contained and the entire operation tuned to achieve maximum operational efficiency.

The Value Chain



Here, aggressive cost cutting may be necessary to achieve the business goal of increasing operational efficiency.

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The Value Chain



The Value Chain



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The Value Chain



?



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Simultaneously implementing aggressive spending and aggressive cost-cutting is not easy.

No wonder it can be hard to align IT with business goals.

AdditionalChallenges



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The rapid rate of technological change adds another complexity.

New Becomes Routine



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Value-adding activities can become support activities overnight.

New Becomes Routine



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Although deploying IT to competitive advantage is a challenge in any organization, the difficulties are especially acute in a highly regulated environment, with third-party payers.

Issues in Healthcare



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Despite increased recognition of its importance, investment in HIT to support strategic advantage has been limited.




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Instead, much of the historical focus in HIT has been on cost containment in operational support.

Despite increased recognition of its importance, investment in HIT to support strategic advantage has been limited.




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The environmental structure of US health care delivery has a strong influence on this pattern.




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Regulatory compliance drives up costs here…, while capped fees hold down revenues here.





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Regulatory compliance drives up costs here, while capped fees hold down revenues here.



AddedComplexity



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In most academic healthcare organizations, there are multiple value-adding chains, one for each independently managed unit.

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Multiple Value Chains



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Academic healthcare provides a model for other organizations...




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Aligning IT operations with multiple, independently managed units (each with its own dynamic goals, budgets, staff, and timelines) is not easy.

Indeed, efforts to achieve specific alignment with all of these activities must fail.




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The trick is UNDERSTANDING the process, business drivers, and values of healthcare.

With understanding, and acceptance, real alignment may be possible…




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…provided that business leadership (not IT leadership) can identify the business goals with which IT should be aligned.




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PROBLEM:

Most business leaders find it much easier to understand IT as a cost center than to appreciate it as giving strategic advantage.


http://medit115.wikispaces.comMEDIT 115

Mini Lecture Series

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robert j. robbins [email protected] (206) 300 3443 medit 115 competitive advantage mini lecture...

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