Week 4 Monday, February 13

1. Week 4Monday, February 13 Business Networks Leveraging IT

2. Processes Outputs Inputs What does it take to get groceries into a home?

3. Business Network Manufacturers Distributors Peapod Delivery Consumer How does IT provide a competitive advantage?

4. From Last Week…Networks for Competitive Advantage • Low number of suppliers means they have higher bargaining power • New entrants due to market potential with a quick ROI • High cost of IT capital (barrier to entry) • Rivalry high in industry

6. How should a business invest in IT? Long-term vs. ‘Low-Hanging Fruit’

7. IT Value Framework Strategic differentiation and proprietary advantage that can be measured in terms of increased market share, improved brand value, increased market capitalization Value-sustaining IT applications Value-creating IT applications Profitable growth through further cost reductions and revenue generation Lower costs, improve asset efficiency, and create strategic options for future growth Value-enabling infrastructure Initiatives How will the business achieve this?

8. IT Application Framework Strategic Application of IT IT to differentiate the organization from others Reengineering Business Processes Basic IT to remain competitive in industry IT Infrastructure Basic IT to do business

9. Leveraging the IT Infrastructure • Two key infrastructure components: • IT operations (data center, network, call centers, etc.) • Supporting enterprise processes (procurement, enterprise resource planning, finance, human resources) • Flexibility and efficiency in the IT infrastructure to drive down costs, and increase IT asset productivity and future options values Business process IT

10. Global IT Infrastructure • Shared common infrastructure • IBM’s Business On Demand • Exploits immediate cost savings and asset productivity • An on demand enterprise leverages standards-based, componentized technology to support integrated and flexible business processes • Opens a range of business opportunities • Supports collaboration among business partners

11. Leveraging IT and Reengineering Processes • Cost reductions • Revenue generation: Introduction of new services through product development • Proprietary advantage

12. IT Infrastructure and Processes Reengineering: Reengineering to Leverage IT Organization and coordination Structure Vision and direction Information Technology Planning and control Strategy Management Processes Technology Individuals and Roles Human resources Dynamic Equilibrium: Any change to a component requires an adjustment to the others

13. In a Nutshell… Business IT Alignment Vision Strategy Strategy Business networks (Competitive Advantage) Process Reengineering (Control, enhancing, leveraging) Capabilities Capabilities IT infrastructure Alignment Value

14. Aloha Airlines • One of two major inter-island airlines in Hawaii • Smaller of the two • In December 2004, filed for Chapter 11 reorganization

15. e-Commerce

16. Receives direct non-stop flights from US mainland

17. Threat: Hawaiian Airlines

19. Online Reservations

20. Customer Loyalty Programs

21. Leveraging IT Business IT Alignment Vision Strategy Strategy Business networks (Competitive Advantage) Process Reengineering (Control, enhancing, leveraging) Capabilities Capabilities IT infrastructure Alignment Value

22. Porter’s Five Forces ModelForces that Shape Strategy  How will the business react to threats (and opportunities)? Potential Entrants Threat of new entrants Industry Competitors Bargaining power of suppliers Bargaining power of buyers Customers and Buyers Suppliers    Rivalry among existing firms Threat of substitute products or services  Substitutes