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The Transformative Impact of IT on Business Models and Strategic Opportunities

This chapter explores how Information Technology (IT) influences business models by shaping strategy and organizational capabilities. It identifies key learning objectives, including analyzing IT's potential for creating strategic opportunities, evaluating IT as a risk source, and understanding its role in competitive dynamics. Through examples like McFarlan’s Strategic Grid, Medtronic's transformation, and Charles Schwab’s evolution, it delves into how IT can change competition, relationships, and business innovation. It highlights the importance of IT in building capabilities, creating barriers to entry, and raising switching costs while also addressing associated strategic risks.

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The Transformative Impact of IT on Business Models and Strategic Opportunities

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Presentation Transcript

  1. Chapter 2 IT Impact on Business Models

  2. Key Learning Objectives • Understand that IT can impact the business model through its effects on strategy and/or organizational capabilities • Learn how to analyze the potential of IT to create strategic opportunities • Understand how to evaluate IT as a potential source of strategic risk

  3. IT Impact Map • IT Impact on Strategy: what role does IT play in determining product, market, business network, and boundary positioning? • IT Impact on Capabilities: what role does IT play in building the capabilities to execute strategy? • (capabilities: processes, infrastructure, people and partners, organization and culture, leadership and governance)

  4. McFarlan’s Strategic Grid

  5. IT Impact Map: IBM Path to Business Transformation

  6. IT Impact Map: Medtronic (MDT) Path to Business Transformation

  7. Impact of IT on Business Model Capabilities • Can IT: • Change the basis of competition? • Change the nature of relationships and the balance of power among buyers & suppliers? • Build barriers to entry? • Increase switching costs? • Add value to existing products/services or create new products/services?

  8. Can IT Change the Basis of Competition? • Automation of activities (inside firm, across its boundaries) • Inform and transform • American Hospital Supply Corporation • Charles Schwab

  9. Evolving the Charles Schwab Business Model: 1975-2002

  10. Can IT Change the Nature of Relationships and Change the Balance of Power in Buyer-Seller Relationships? • Streamlining channels, decreasing costs, improving order accuracy, streamlining supply chain between suppliers and buyers • Global Healthcare Exchange • Infrastructure and supporting processes (supply chain, production, physical facilities, data and network operations, call centers and help desks) • Customer-facing processes (demand generation, order fulfillment, CRM) • Business and product innovation processes (new product development and business development)

  11. Can IT Build Barriers to Entry? • Technology-based advantages give way to 2nd order barriers to entry: • Firm exploit the value of information generated by IT • Firm are able to leverage proprietary capabilities and assets to continuously innovate and evolve business strategy • Leveraging a loyal and engaged community of suppliers, customers, partners • “IT doesn’t matter”

  12. Can IT Raise Switching Costs? • Ideally, IT system easy to start using but difficult to stop using • Proprietary systems vs. public Internet • Intuit – increase switching costs through use of Internet

  13. Can IT Add Value to Existing Products/ Services or Create new Ones? • Increase in information content of products/services • Information-enabled products/services • Information is reusable • Information is easily customized • Information-based products/services posses inherent ‘time value’ • Boeing

  14. Economics of things vs. economics of information

  15. Sources of IT Risk (More in chapter 8 ) • Impact of IT on Strategic Risk • Can emerging technologies disrupt current business model by enabling new business models with superior economics? • Can IT lower entry barriers, change industry power dynamics, or increase competitive intensity? • Can IT trigger regulatory action? • Impact of IT on Project Risk • Is project larger than typical project? • Level of uncertainty? Set or evolving requirements? • Experience with technology? • Resources available? • Sponsorship/buy-in from key stakeholders?

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