Chapter 3 Effects of IT on Strategy and Competition

1. Chapter 3Effects of IT on Strategy and Competition Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99223 chen@gonzaga.edu

2. SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING RESOURCES Types of the Information Systems KIND OF SYSTEM GROUPS SERVED STRATEGIC LEVEL SENIOR (ESS,EIS,DSS) MANAGERS MANAGEMENT LEVEL MIDDLE (DSS, MIS) MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & (KWS) DATA WORKERS OPERATIONAL OPERATIONAL LEVEL (TPS,OAS) MANAGERS

3. Revenue generation Technology Management Decision Cost reduction Competitive Advantage to learn, adapt, innovate Innovation Cost avoidance ( ) Figure 1: Creating Value & Agent of Change Value Drivers Value Speed

4. Codify Verify Science Formalized Knowledge Develop Physically Embodied Products and Processes Figure 1.2 Levels of Knowledge Intuitive/Tacit

5. Management of Innovation Technology Strategy Value-Based Management Era of Plentiful Resources Era of Accountability New venture divisions Linking to business Broader vision of technology Outsourcing Different organizational arrangements Allocation of Funds to projects Innovation Management Tools to assess value Scientists & engineers Internal markets Leadership Chief Technology Officer/ Chief Information Officer R&D Manager Figure. Evolution of Management of Technology 1950 1970 1980 1990s & Beyond R&D Management

6. WHY guided by guided by HOW WHAT guided by principle principle Technology Choices Deployment in Products/Services Development of Technological Capability focus focus Management of Technology Figure. Management of Technology Purpose: value-driven Organization & Management Technology Strategy

7. Roles of the Information Infrastructure 1. Serve as a buffer for complexity, uncertainty and speed of change Crisis Created when structural, authority and incentive changes increased interdependencies Information Processing <..balance..> I.P. capacity invest more infor., resources Demand Capacity Vertical I.P. capacity To achieve the potential, employees should develop two important competencies: 1. The ability to use the technology 2. The ability to use the information Organization Coordination, communication Meet the increased I.P.demand of the new structure Human I.P.C. Information Infrastructure Internal I.P.C. AND (Intra-org.) Education training and support in the development of information competencies Flexible, easy-to-use Enable learning Expanding I.P. capacity and buffering complexity, uncertainty and speed of change. Frito-Lay:4

8. 2. Enable the complex, interlocking authority structures and incentive systems that were adopted Roles of the Information Infrastructure Incentive System Authority Enable development of interlocking Information Infrastructure In traditional/hierarchical organizations, the costs of coordinating and aligning local operations has typically been minimized by Frito-Lay designed an authority structure based on “considerations” other than the availability of the requisite information Information Centralized Decision-making TOP executives Decision Cost Information Cost Failed to consider important trade-offs costs Time and expertise for analysis of information to ensure that they made the right decision Access needed information on business dynamics Frito-5

9. 3. Enable streamlining, integration, and time-synchronization of operating and management processes Roles of the Information Infrastructure Operating processes became dysfunctional as traditional lateral information processing systems broke down. Streamline, integrate and “time-synchronize” both operating and management MGMT Operating Process Process Vertical I.P.S also broke down Process Redesign Effort Support IT capacity Automate Informate/Innovate Achieve high-levels of integration and efficiency of routine operations Redesign the management processes to enable fast-cycled process control achieved Frito-6