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MANAGING INFORMATION SYSTEMS FOR STRATEGIC ADVANTAGE. LEARNING GOALS. Describe the various approaches to devising corporate strategy. Explain how information systems can help organizations achieve a strategic advantage.

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learning goals
  • Describe the various approaches to devising corporate strategy.
  • Explain how information systems can help organizations achieve a strategic advantage.
  • Describe the methods organizations use to choose a strategic information systems project.
  • Describe how information systems can bring about corporate change.
  • Explain the concept of knowledge management and describe the technologies that comprise knowledge management systems.
value chain
Value Chain
  • Value chain – activities within an organization that bring products and services to market
    • Primary activities – take raw materials and transform it into something of greater value
      • Inbound logistics • Marketing and sales
      • Operations • Service
      • Outbound logistics
    • Supporting activities – those functions that the company requires to do business but do not directly add value to a product or service
      • HR • Procurement
      • IT • Firm infrastructure
value chain analysis
Value Chain Analysis
  • Process of analyzing the activities within an organization’s value chain
  • Companies gain strategic value by focusing on a particular portion of the value chain
  • IT can help reduce the costs of these processes, thus increasing profit margins
porter s competitive forces model
Porter’s Competitive Forces Model
  • Unlike the value chain, the Competitive Forces Model deals with external factors
  • Five components
    • Level of competition in industry
    • Threat of new entrants into industry
    • Bargaining power of customers
    • Bargaining power of suppliers
    • Threat of substitute products
  • Uses for CFM
    • Determine position within industry
    • Analyze industries and market segments they might wish to enter (exit)
competitive advantage ca
Competitive Advantage (CA)
  • Those qualities that allow a company to earn above-average profits within an industry
    • Low cost
    • Unique product
  • Three generic strategies to achieve competitive advantage
    • Cost leadership strategy
    • Differentiation strategy
    • Focus strategy
information systems for strategic advantage
Information Systems forStrategic Advantage
  • How can information systems improve the value chain?
    • By reducing the cost of primary and support activities
  • How can information systems change the way an organization reacts to its competitive forces?
    • By changing the bargain power of suppliers
    • By building closer ties with customers
    • By increasing or decreasing barriers to entry in a market
    • By serving as the basis for new products and/or services
sustainable competitive advantage
Sustainable Competitive Advantage
  • Four approaches lead to sustainable competitive advantage
    • Create barriers to entry through patents, monopoly, or technical expertise
    • Be the first to develop systems with high switching costs
    • Develop the technologies that change the underlying nature of the industry
    • Cultivate and hire people with excellent information systems management skills
productivity paradox
Productivity Paradox
  • “We see computers everywhere, but in the productivity statistics.” Robert Solow, Nobel Prize-winning economist
  • It is difficult to attribute cost savings directly to a specific information system
  • It is difficult to prove that a specific system led to certain financial outcomes
  • Other measures are needed
    • Balanced scorecard
    • Total cost of ownership (TCO)
the balanced scorecard
The Balanced Scorecard
  • Strategic planning method that translates business strategy into a comprehensive set of performance measures
  • Investigates strategies in four areas
    • Financial – e.g. improving cash flow and reducing expenses
    • Internal business processes – e.g. decreased cycle time and improved quality
    • Learning and growth – e.g. develop successful new products
    • Customer – e.g. improve customer satisfaction and decrease product defects
value of information systems
Value of Information Systems
  • Cost must NOT outweigh benefits
  • Return on investment (ROI)

ROI = (Benefits – Costs) *100 / Costs

    • Costs include – Benefits include
      • Hardware • Tangible benefits
      • Software • Intangible benefits
      • Labor
  • Total cost of ownership (TCO)
    • Method to quantify long-term direct and indirect costs
the is portfolio
The IS Portfolio
  • Treat investments in IS assets like a portfolio of investment assets to find redundancies and achieve balance
  • Five steps
    • Put information about all the organization’s IS projects into a database
    • Prioritize the IS projects
    • Divide the IS projects into three types of investments
      • Infrastructure
      • Upgrades
      • Strategic initiatives
    • Automate the entire process
    • Have the organization’s top finance executive perform a Modern Portfolio Theory analysis
business process improvement and reengineering
Business Process Improvement and Reengineering
  • BPI – processes are good but can be better
  • BPR – elimination or change of business processes
    • “The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed.” Hammer and Champy, 1993
  • Automation (e.g information systems) is a key factor in both BPI and BPR
major themes of successful bpr
Major Themes of Successful BPR
  • Several jobs are combined into one.
  • Workers are empowered to make decisions.
  • Work is performed where it makes the most sense.
  • Checks and controls are reduced or eliminated.
  • Reconciliation is minimized.
steps in bpr
Steps in BPR
  • Have a clear strategy that is aligned with the organization’s goals
  • Clearly defined scope that identifies exactly which processes need to be reengineered and which supporting processes need to be revised
  • Define measures and benchmarks for success
  • Develop an understanding of the current, as-is processes
  • Develop a plan for transition from the as-is processes to the to-be processes
  • Implement the changed processes
  • Measure the outcomes of the changes
knowledge management km
Knowledge Management (KM)
  • Knowledge assets – the knowledge that exists within the minds of each employee and the knowledge that exists in a tangible form such as databases, documents, and reports
  • Companies must know how to manage this knowledge
  • Knowledge management (KM) – the process by which organizations extract value from their knowledge assets
km systems
KM Systems
  • Information technologies that enable the exchange of knowledge among employees and the storage of knowledge in repositories
  • Types of KM systems
    • Expert directories
    • Knowledge repositories
    • Knowledge sharing technologies
    • Knowledge representation technologies
    • Knowledge discovery tools
knowledge portals
Knowledge Portals
  • A single access point to the knowledge of an organization
  • Provides Web-based access to all of the KM technologies within an organization