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INFORMATION TECHNOLOGY. AS A WEAPON FOR COMPETITIVE ADVANTAGE. IT’s Influence Within An Organization. IT effects revenues and profits in terms of: Helps market segmentation Helpful in increasing market share Allows fast design of new products Better Management Control

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information technology

INFORMATION TECHNOLOGY

AS A WEAPON FOR COMPETITIVE ADVANTAGE

it s influence within an organization
IT’s Influence Within An Organization
  • IT effects revenues and profits in terms of:
    • Helps market segmentation
    • Helpful in increasing market share
    • Allows fast design of new products
  • Better Management Control
  • Better Asset & Liability Management

OR

Don’t forget IT is also expensive

information technology as competitive advantage
Information Technology as Competitive Advantage

Concept Emerged in 1980.

Slowly been accepted as valid.

Research has shown that very few companies are able to generate a competitive advantage through information technology

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

studies involving it as ca
Studies Involving IT as CA

How a number of companies successfully

deployed their IT weapon for strategic

advantage

  • Ex. Eric K. Clemons , Michael Row, “McKesson Drug Company: a case study of Economist—a strategic information system”, Journal of Management Information Systems, v.5 n.1, p.36-50, July 1988

Which are the frameworks that can help

managers identify applications that can bring

competitive advantage to their own business

and the use of such frameworks within the

organization

  • Ex. Ives, Blake, Learmonth, Gordon, "The Information System as a Competitive Weapon," Communications of the ACM, Vol. 27, No. 12, December 1984, pp. 1193-1201
prime question of using it as ca
Prime question of using IT as CA

Can pioneers achieve rewards substantial enough to justify the costs and risks of being prime mover?

Subsequent entrants come at much lower costs. This is why you must create switching costs.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

information technology as ca
Information Technology as CA
  • Study of Thirty Major Companies
    • Including GE, Xerox, FedEx, P&G
    • 15 firms were able to sustain a competitive advantage in terms of market share or profitability
    • Only 6 were able to sustain both
  • Companies are more likely to fail

Kettinger, William, “Strategic Information Systems Revisited: A study in Sustainability and Performance”, MIS Quarterly, vol.18 n.1, pg 31-58, 1994

examples of firms that successfully used it
Examples of Firms That Successfully Used IT
  • American Airlines: SABRE System
  • Baxter: Hospital Supply Systems
  • Mitek: Roofing System
  • UK Telecom: Detailed Customer Billing
  • Fed Ex: Real Time Package Tracking
the framework
The Framework

From Feeny And Ives “IT as a Basis for Sustainable C.A.”

Sustainable advantage

Third Pillar

How effective

will response

Be?

First Pillar

How long until

Response?

Second Pillar

Who can

Respond?

Project Life Cycle

Analysis

Competitor Analysis

Supply Chain Analysis

slide10

Pioneer

Followers

First Pillar

Project Life Cycle

Vision/idea

  • Awakening
  • Awareness
  • Perceive
  • significance
  • Accept/assign
  • responsibility

Win approval

  • Built
  • Technology
  • Application
  • Database
  • Knowledge base

Discovery

Win approval

Project launch

  • Build
  • Technology
  • Applications
  • Database
  • Knowledge base
  • Enhance
  • Vision/idea
  • Win approval
  • Build
  • etc.

Project launch

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

slide11

First PillarProject Development Life Cycle

Can also be viewed as a sustainability analysis

  • For sustainability, an expensive hard to duplicate system can provide uneven playing field for years of profitability and market growth.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

first pillar project life cycle
First PillarProject Life Cycle
  • Deals with the concept of lead time (Time from launch until substantive response).
  • Anytime you use IT to generate CA, you can expect a response.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

first pillar project life cycle1
First PillarProject Life Cycle
  • Four variables of lead time:
    • Awakening
      • Larger the CA, quicker the awakening
    • Win Approval
      • Followers easier to win approval
    • Project Build
      • Does not require vision of prime mover
    • Project launch

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

second pillar competitor analysis
Second Pillar: Competitor Analysis

Who Can Respond?

  • Generic lead-time can be made up easily. May even leap frog original system.
  • Therefore a new application that leverages dissimilarities between the prime mover and followers makes it more difficult to mount a response.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

three major areas of second pillar
Three Major Areas of Second Pillar
  • Competitive Scope

Geographical scope

The geographical area that a firm chooses to compete in or locate particular types of work.

Segment Scope

The breadth of products sold and the buyers served

Vertical scope

The extend to which the firm has elected to pursue backwards or forward integration strategies

Industry scope

The range of related industries in which the firm competes with a coordinated strategy.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

three major areas of second pillar1
Three Major Areas Of Second Pillar

2. Organizational Base

  • Structure
  • Culture
  • Physical Assets

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

three major areas of second pillar2
3. Information Resources

Technological infrastructure

Application inventory

Databases

Knowledge bases

Three Major areas of Second Pillar

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

third pillar supply chain analysis will a response be effective
Third Pillar: Supply Chain AnalysisWill A Response Be Effective?

1.)Find exploitable link- Find point in chain where resources are finite and a limited number of participants control the link.

2.)Capture Pole Position- Create unique relationships

  • Seek out applications which create unique relationships with that group
  • In return for benefits, user will put mover in position of preferred partner
  • Movers continued position is secured against any equivalent offering only superior will justify switching costs.

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

third pillar supply chain analysis
Third Pillar: Supply Chain Analysis

3. Keep the gate Closed- Users perceive a significant tangible/intangible cost of switching systems. This is the base for maintaining an advantage

  • Applications- people have to learn interface
  • Database- switching can cause loss of all data gathered and learning of new system
  • Community- A community may form that leads IT to be a part of infrastructure, switching loses this advantage

Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic Resource, Willcocks, Leslie, Feeny, David (eds). McGraw-Hill Education-Europe, 1997, pp. 43-61

case studies
Case Studies

1. Celera Genomics Group

Presented by: Matt Brickel

2. Dell Computer Corporation

Presented by: Kevin Shipley

slide21

Celera Genomics Group

Achievement of Sustainable Competitive Advantage

Through the Use of IT?

why choose celera genomics as a case study
Why Choose Celera Genomics AS A Case Study?
  • In 1998 the principles of the Applera Corporation decided to sequence the Human Genome.
  • At that time the Scientific Community thought it would take 3,000 scientists 15 to 20 years.
  • Celera Genomics did it in 2 years using IT.

www.pbs.org/wgbh/nova/genome/deco_venter.html

Viewed September 11, 2002

company background
Company Background
  • Established in May 1998 by the PE Corporation and J. Craig Venter, Ph.D
  • Formed to generate and commercialize genomic information.
  • Celera Genomics Group is an operating company of the Applera Corporation, F.K.A. the PE Corp.

Dr. Craig Venter Ph.D

www.celera.com/company/home.cfm?ppage=overview&cpage=background

Viewed October 12, 1992

size of celera in terms of sales and profits
Size of CeleraIn Terms of Sales and Profits
  • Celera Genomics Group:
  • Net Revenue 2001: $ 89,385,000
  • Loss Before Taxes 2001: $232,662,000
  • Net Loss: $186,229,000
  • Source: Applera Corporation Annual Report 2001

http://media.corporate-ir.net/media_files/NYS/CRA/reports/2001report.pdf

Viewed September23, 2002

major products sold by celera
Major Products Sold by Celera
  • Celera Discovery System (CDS)

CDS is a subscription based web enabled system that allows users access to Celera databases and applications

  • Moving Into Therapeutics

Celera plans to begin developing and marketing novel therapeutic drugs identified through its genomic research.

www.findarticles.com/cf_bzwr/m0EIN/2000_April_6/61343200/print.jhtml

Viewed October 12, 2002

major characteristics of celera customers
Major Characteristics of Celera Customers
  • 250 International Academic and Commercial Customers Now Use Celera’s Celera Discovery System
  • Some Notable Customers:
    • Pfizer
    • Yamanouchi Pharmaceuticals
    • National Cancer Institute
    • Harvard University
    • University of California System

www.celera.com/genomics/home.cfm?ppage=overview&cpage=customers

Viewed September23, 2002

who does the cio report to
Who Does the CIO Report To?

Tony White

Chairman, President and CEO of Applera Corporation

Tama Oliver

CIO of Applera Corporation

John Reynders, Ph.D

Vice President, Information Systems, Celera Corp.

Jamie Lacey, Celera Genomics Corporate Communications, interviewed via e-mail by Matt Brickel, September 24, 2002.

celera executive management
Celera Executive Management

Kathy Ordoñez

President, Celera Genomics

Mark Adams, Ph.D.

Vice President, Genome Programs

Werten Bellamy, Jr., J.D.

Group Counsel

David Block, M.D.

Executive Vice President, Celera and Chief Operating Officer, Celera Therapeutics

Robert Booth, Ph.D.

Senior Vice President, Research & Development

Samuel Broder, M.D.  

Chief Medical Officer

Ugo DeBlasi, CPA

Vice President, Finance

Jason Mollé

Senior Vice President, General Manager, Online Business

Gene Myers, Ph.D.

Vice President, Informatics Research

Scott Patterson, Ph.D.

Vice President, Proteomics

John Reynders, Ph.D.

Vice President, Information Systems

Bridgette Robinson, A.B.D.

Vice President, Human Resources

Michael Venuti, Ph.D.

Senior Vice President, Research and General Manager

http://media.corporate-ir.net/media_files/NYS/CRA/reports/2001report.pdf

Viewed September23, 2002

how many it personnel
How Many IT Personnel?

The most recent count shows that 50 people are employed in an IT capacity at Celera.

Jamie Lacey, Celera Genomics Corporate Communications, interviewed via e-mail by Matt Brickel, September 24, 2002.

what is celera s annual it budget
What is Celera’s Annual IT Budget?
  • Celera does not disclose information pertaining to IT budget.
  • In 2001 Celera Spent $164,693,000 on research and development.

http://media.corporate-ir.net/media_files/NYS/CRA/reports/2001report.pdf

Viewed September23, 2002

description of the critical differentiator
Description of the Critical Differentiator

Celera’s process uses robots that conduct polymerase chain reaction PCR processes to magnify and read DNA chains.

http://allserv.rug.ac.be/~avierstr/principles/pcrani.html

  • 300 robots @ $300,000 each = $90,000,000
  • Each rung on the DNA chain contains 2 out of 4 possible letters; A, G, C or T
  • Human Genome is 3 billion letters

www.pbs.org/wgbh/nova/genome/deco_venter.html

Viewed September 11, 2002

description of the critical differentiator1
Description of the Critical Differentiator
  • Celera’s computer’s hard drive has 100 terabytes of data
  • 1 terabyte = 1,000 gigabytes
  • 1 gigabyte = 1,000 megabytes
  • Perspective, my new Dell computer has a 40 gigabyte hard drive

X 2,500 = Celera Hard Drive Capacity

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

description of the critical differentiator2
Description of the Critical Differentiator
  • Celera uses a network of computers to process the data from the hard drive
  • Each computer has 4 alpha chips in it
  • 20,000 CPU hours to decode the Human Genome
  • One CPU hour = Use of 1 Alpha Chip for 1 Hour
  • Celera decoded Human Genome in one shift!

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

celera discovery system overview
Celera Discovery System Overview

“The Celera Discovery System is an integrated, easy to use, web-based discovery platform that combines the most comprehensive set of genomic and biological data along with powerful visualization and analysis tools. It allows researchers to search, analyze, interpret and manage their genomic information in one place thus saving valuable time, reducing costs and accelerating their research.”

www.celera.com/genomics/academic/home.cfm?ppage=cds&cpage=default

Viewed October 12, 2002

history of the system
History of the system:
  • In 1998 the principals of Applera Corporation decided to sequence the human genome.
  • The thinking at the time, by people outside of Applera Corp., was that it would take 3,000 scientists 15 to 20 years to sequence the human genome.
  • The people at Applera thought that it could be done by 2002 using information technology.
  • They formed Celera Genomics group to begin the process.
  • They had an idea that they could use Robots to automatically conduct PCR processes but they had to build them first.
  • Applied Biosystems, Celera’s sister company, built the robots from scratch.

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

history of the system1
History of the system:
  • The building of these robots was the impetus for the genome race.
  • Once the robots were built to perform and read the information derived from the PCR processes, Celera had to find computers to store the data and then process it (sequence the Genome).
  • Once the system was assembled Celera started out by sequencing the genome of simple organisms that had already been sequenced so that they could verify that it worked.
  • They then sequenced the mouse genome, and then they sequenced the human genome in 2000.
  • Shortly thereafter the Celera Discovery System was launched and in 2001 the current advanced version was launched.

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

was the system designed for competitive advantage or was it a surprise
Was the System Designed for Competitive Advantage Or Was It a Surprise?

The people at Celera had the idea that they could sequence the human genome faster than was thought possible at the time.

Nobody new for certain that it was going to work.

Dr. Craig Venter was quoted as saying: “I am not afraid to take risks. I mean I said at the beginning that either this would be one of the most spectacular success stories in history or the biggest flame-out in history. There was clearly a risk element to this. In fact, when I look at all the things that could have failed and could have gone wrong, its stunning perhaps that it did work as well as it did.”

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

was the system designed for competitive advantage or was it a surprise1
Was the System Designed for Competitive Advantage Or Was It a Surprise?

Essentially Celera is not worried about others replicating what they have done because there is really no need to do so. Celera willingly shares the information that they have for a subscription fee.

In the case of Pharmaceutical companies the fee is negotiated and is in the millions of dollars.

For academic researchers there is a pricing schedule:

www.pbs.org/wgbh/nova/genome/deco_venter.html Viewed September 11, 2002

was the system designed for competitive advantage or was it a surprise2
Was the System Designed for Competitive Advantage Or Was It a Surprise?

CDS pricing schedule:

www.celera.com/genomics/academic/home.cfm?ppage=pricelist&cpage=default, Viewed Oct. 12, 2002

how do customers interact with the system
How Do Customers Interact With the System?

The Celera Discovery System (CDS) is a web based tool that is accessed through www.celera.com. They can use the information available there to conduct their own research which can be saved on the customers computers behind their own firewall.

does celera s use of it give them a sustainable competitive advantage
Does Celera’s Use of IT Give Them a Sustainable Competitive Advantage?
  • Pillar 1: Project Life Cycle analysis: How long until a response?
  • Awakening
  • Approval
  • Building the System
  • Project Launch
  • The time it would take the government to respond would likely be substantial and its effectiveness uncertain. Celera’s competitive advantage is supported by the first pillar.
does celera s use of it give them a sustainable competitive advantage1
Does Celera’s Use of IT Give Them a Sustainable Competitive Advantage?
  • Pillar 2: Competitor Analysis: Who can respond?
  • Competitive Scope
  • Organizational Base
  • Information Resources
  • As stated previously the most likely competitive response would come from the US Government. The government does not have the competitive scope that Celera has. They do not have the necessary organizational base. They do not have the necessary information resources assembled. Celera’s competitive advantage is supported by the second pillar.
does celera s use of it give them a sustainable competitive advantage2
Does Celera’s Use of IT Give Them a Sustainable Competitive Advantage?
  • Pillar 3: Supply Chain Analysis: Will Copying Help?
  • Supply Chain Analysis: Will Copying Help?
  • Find Exploitable Link
  • Capture Pole Position
  • Keep the Gate Closed
  • Even if the government copies what Celera has done it is unlikely that Celera’s customer base will switch.
overall conclusion
Overall Conclusion

Celera’s systems provide a sustainable competitive advantage that is supported by the three pillar model.

company background1
Company Background
  • Founded in 1984 by Michael Dell
  • Started selling computers out of his dorm room
  • Started by building computers with components made by other companies to meet customers needs.
  • This became the basis for Dell’s direct-model
  • Today, Dell is valued at over 26 billion dollars
size of dell in terms of sales and profits
Size of DellIn terms of Sales and Profits

Dell Computer Company:

Net Revenue

February 2002 $31,168

2001 $31,888

2000 $25,265

Net Income

February 2002 $1,246

2001 $1,777

2000 $1,666

Dell Annual Report February 2002

major products sold by dell
Major Products Sold by Dell

Enterprise Systems servers and storage

Network switches and workstations

Notebook and Desktop computers

Peripheral Products

Various services and technical support

major characteristics of dell s customers
Major Characteristics of Dell’s Customers

The companies customer’s range from large corporations, government agencies, healthcare institutions, small businesses, and individual consumers

No customer represents more than 10% of business

Range from relational to transactional

  • More than $3 million a day in internet sales
  • Most sales to business or government(>70%)
    • Shell, Exxon, MCI, Ford, Toyota, Boeing
  • Greater than 30% of sales from foreign customers

www.mhhe.com/business/management/thompson/11e/case/dell5.html

dell s chief information officer
Dell’s Chief Information Officer
  • Randy Mott, former CIO of Wal-Mart
    • Reports To Michael Dell
    • Oversees more than 20 strategic and over 100 other major projects at any given time
    • Consults with executive team and oversees eight direct subordinates
    • Constantly meets with customers to understand customer and sales force needs
    • Challenge is to make sure department uses the right systems to support Dell’s model.

Worthen, Ben.: “Travelin’ Man.” CIO Magazine. Mar1, 2002

dell s it department
Dell’s IT Department
  • More than 2,500 IT personnel
  • Uses Cross-Functional Teams
    • Global Matrix Team
      • 250 members
      • Ensure that Dell website functions correctly
      • Find enterprise solutions to help
      • Improve Productivity

Worthen, Ben.: “Travelin’ Man.” CIO Magazine. Mar1, 2002

what is dell s it budget
What is Dell’s IT Budget?

Not Available

Research Development and Engineering Costs

February 2002 $452

February 2001 $482

February 2000 $374

Dell Annual Report February 1, 2002

description of the critical differentiator3
Description of the Critical Differentiator

Dell’s Direct Model

Purchase

by Users

Manufacture

of

Components

by suppliers

Customized

Assembly

Service

And

Support

critical differentiator advantages of dell s direct model
Critical DifferentiatorAdvantages of Dell’s Direct Model
  • Eliminated time and costs of distributing through independent retailers.
  • Eliminated need for various computer models
  • No longer need to discount slow selling PC’s before new models are introduced
  • Eliminated Mark-Ups.

www.mhhe.com/business/management/thompson/11e/case/dell5.html, October 16 2002

critical differentiator supply chain management
Critical DifferentiatorSupply Chain Management
  • Dell manages the relationships from the original supplier to the end customer.
  • ‘Supply chain management shortens the cycle between the component, the manufacturer and the end customer. We are allowing them to almost touch each other.’–Michael Chong, Tech. Mgr.
  • Dell looks for opportunities to cut costs throughout the process.
    • Shaving .1% off materials costs has a bigger impact than a Ten percent raise in manufacturing productivity

---. “How Dell Keeps from stumbling”. Business Week. May 14, 2001, page 38b

ITAC online Dell case study, see reference

critical differentiator it s role in the supply chain
Critical DifferentiatorIT’s Role in the Supply Chain
  • Dell uses information technology to continually refine the supply-chain to remain the low cost producer.
  • Key Components:
    • i2 suite software
    • Valuechain.dell.com
    • Dell.com
    • XelusPlan
critical differentiator i2 suite software
Critical Differentiatori2 Suite Software

Implemented in 1999

  • Planning
    • i2 TradeMatrix Supply Chain Planner
    • i2 TradeMatrix Buy Solution
  • Execution
    • i2 TradeMatrix Factory Planner
    • Rhythm Collaboration Planner
critical differentiator i2 suite software1
Critical Differentiatori2 Suite Software

“On the planning side, we decided to use the i2 TradeMatrix Supply Chain Planner and i2 TradeMatrix Buy Solution software to communicate our materials requirements to suppliers. On the execution side, we\'re deploying the i2 TradeMatrix Factory Plannerand Rhythm Collaboration Planner to schedule our factories and communicate materials requirements to the supplier hubs,"

- Eric Michlowitz, Dell’s director of Supply Chain

http://www.dell.com/us/en/gen/casestudies/casestudy_dell_i2.htm, October 16, 2002

critical differentiator i2 suite software advantages
Critical Differentiatori2 Suite Software Advantages
  • Enhances efficiency of the pull system
    • Only .05% of costs to obsolete inventory
  • Precise delivery of components
    • Can specify what door and what time components arrive
  • Orders arrive exactly when needed
    • Factory has five to six hours worth of inventory
  • Allows for order prioritization
    • Three times the number of units per square foot

---. “How Dell Keeps from stumbling”. Business Week. May 14, 2001, page 38b

critical differentiator i2 suite software advantages1
Critical Differentiatori2 Suite Software Advantages
  • “It was important for us to have a global view of Dell\'s entire supply chain. We wanted to be able to see - on a real-time basis - what materials are available at the supplier hubs, what suppliers have committed to worldwide and what demands they haven\'t been able to support." Michlowitz

http://www.dell.com/us/en/gen/casestudies/casestudy_dell_i2.htm October 16, 2002

critical differentiator valuechain dell com
Critical Differentiator ValueChain.Dell.Com
  • Secure extranet that allows suppliers to collaborate in managing the supply chain
    • Provides suppliers with the ability to drop off invoices, check engineering change orders, cost reports, and overall performance.
    • Allows suppliers to more accurately forecast future demand.

ITAC online Dell case study, see reference

critical differentiator valuechain dell com1
Critical Differentiator ValueChain.Dell.Com
  • Enhances Supplier relations
    • Number of Suppliers has dropped from 1,000 to 100
    • 90 percent of Material Supplies purchased online
    • Suppliers are more likely to collaborate
      • Color of monitor example
critical differentiator dell com
Critical DifferentiatorDell.com
  • Converted to XML in 1999
    • Uses eXcelon
  • Redesign uses customerization
    • Takes into account local factors
    • Remembers product purchased
    • Reaches 80 countries with 22 different languages
    • Maintains 20,000 pages in service section alone

http://www.wdvl.com/Authoring/Languages/XML/Conferences/XML99/dell.html October 16, 2002

critical differentiator xelusplan
Critical DifferentiatorXelusPlan
  • Service logistics program
    • “XelusPlan allows us to forecast, plan, and track forecast accuracy against actual demand. It provides us with a single, centralized database and standard planning procedures.”

–Don Smith, business analyst

  • Focuses on service organization
    • More than 6,000 orders a day

http://www.xelus.com/CaseStudies/cs_dell.asp, October 16, 2002

critical differentiator xelusplan advantages
Critical Differentiator XelusPlan Advantages
  • Quickly process orders
  • Use scenario analysis
  • Appropriately adjust inventory levels to maintain proper service levels
  • In continuously changing environment allows Dell to forecast demand for both new and old components

http://www.xelus.com/CaseStudies/cs_dell.asp October 16, 2002

reasons it generates a competitive advantage
Reasons IT generates a Competitive Advantage
  • Cuts materials costs
    • Materials cost account for greater than $21 billion
    • More than 70% of revenue spent on materials
  • Reduces inventory levels and cycle time
    • Very little obsolete products
  • Reduces transaction costs
    • Most transactions occur online

Shah, Jennifer. “Dell writes the book on efficiency.” EBN. Dec 17,2001. pg32

reasons it generates a competitive advantage1
Reasons IT generates a Competitive Advantage
  • “Putting Technology behind the Supply Chain process has also provided a gateway for greater efficiencies, facilitated Communications with suppliers, and improved operations between internal groups”
    • Jennifer Shah, EBN

Shah, Jennifer. “Dell writes the book on efficiency.” EBN. Dec 17,2001. pg32

does dell s use of it give them a sustainable competitive advantage
Does Dell’s use of IT Give Them a Sustainable Competitive Advantage?

Pillar 1: Project Life Cycle: How Long Until Response?

  • Awakening
  • Approval
  • Building the System
  • Project Launch
    • Dell’s system is largely internal and complex. This makes it hard for the competition to build and introduce a similar product.
does dell s use of it give them a sustainable competitive advantage1
Does Dell’s use of IT Give Them a Sustainable Competitive Advantage?

Pillar 2: Competitor Analysis: Who can respond?

  • Competitive Scope
  • Organizational Base
  • Information Resources
    • Competitors were too vertical and had too many products.
    • Structure, cultures, and physical assets were geared toward other system
    • Competitors had investments in current inventory methods and technological infrastructures

www.mhhe.com/business/management/thompson/11e/case/dell7.html October 16, 2002

does dell s use of it give them a sustainable competitive advantage2
Does Dell’s use of IT Give Them a Sustainable Competitive Advantage?

Pillar 3; Supply Chain Analysis: Will Copying Help?

  • Find Exploitable Link
  • Capture Pole Position
  • Keep the Gates Closed
    • Found points in supply chain where participants control the link, created unique applications that encourage strong relationships with suppliers and customers, found ways to ensure that suppliers and customers will continue to be loyal to Dell.
dell conclusion
Dell Conclusion
  • Dell uses IT to:
    • Enable its business model
    • Create a sustainable competitive advantage over its competitors.
conclusion
Conclusion
  • IT is important to an organization because it effects profits, revenues, and a company’s business systems
  • IT can be used to create a sustainable competitive advantage
  • Companies can succeed by following certain rules regarding the use of IT
  • More companies fail than succeed
effective use of it
Effective Use of IT
  • Celera’s System Meets the Criteria Set Forth by the Three Pillars Model
      • Project Life Cycle Analysis
      • Competitor Analysis
      • Supply System Analysis
effective use of it1
Effective Use of IT
  • Celera Genomics Group
    • Celera Genomics Group Used IT To:
      • Develop a ground breaking system enabling users to perform accelerated genome research
          • Research institutions do not have to invest the vast amounts of capital required to perform this type of research
          • The genome of any organism can be mapped
          • Will aid in the discovery of new medicines and therapies
      • Create a new business niche
          • Automated genome mapping and research at previously impossible speed
effective use of it2
Effective Use of IT
  • Dell’s System Meets the Criteria Set Forth by the Three Pillars Model
      • Project Life Cycle Analysis
      • Competitor Analysis
      • Supply System Analysis
effective use of it3
Effective Use of IT
  • Dell Computer
    • Dell used IT to:
      • enable its business model
      • enhance business processes
      • Manage its supply chain
        • Better supplier relations
        • Real-time management
        • Forecast and respond to demand
        • Reduce Inventories
        • Improve customer relations
lessons for the cio
Lessons for the CIO

Factors in the Success of IT

  • Complexity of system
  • Switching costs
  • Dissimilarities between prime mover and competition
  • Use of exploitable link
  • Customers understand system
lessons for the cio1
Lessons for the CIO
  • Make a complex system that is hard to replicate
  • Companies had CIO’s that were valued by their organization
  • Companies viewed IT as an important part of creating a competitive advantage
lessons for the cio2
Lessons for the CIO
  • Used weaknesses of their competitors to leverage dissimilarities
  • Captured the Pole Position
  • Found ways to deter customers from switching to a competitor
  • Used the right system
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Additional References

  • http://www.itac.ca/client/ITAC/ITAC_UW_MainEngine.nsf/cd0bbbe7b8237e1e85256482005b6998/6baed26bb718c58f85256a23004d7688!OpenDocument 10/17/02
  • Blau, John, “E.U mulls How To Boost Its R&D” Research Technology Management, Vol. 45, Sept./Oct. 2002, pp. 5-6.
  • Thackray, John, “Bioinformatics Grows Legs” Electronic Business; Highlands Ranch, Vol. 27, July 2001, pp. 76-82
  • Mearian, Lucas and Weiss, Todd R., “HP User Defects; EMC, IBM Score” Computerworld; Framingham, Vol. 36, Sept. 30, 2002, pp. 1,16
  • Anonymous, “Tech Quarterly: Microchips In the Blood” The Economist, Vol. 364, Sept. 21, 2002, pp. 7
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