Chapter%201:%20Creating%20Business%20Advantage%20with%20IT

1
Chapter 1 Creating Business Advantage with IT
2
Major Models

• Macroeconomic Model Evolution (pg. 27)
• Value Chain (pg. 30)
• Market Roles (pg. 31)
• Industrial vs. Network Economy (pg. 32)
• Porters Five Competitive Forces (pg. 33)
• Strategic Grid (pg. 34)

3
Porters Model
Along Industry Boundaries
Threat of Substitutes
Along the Extended Value Chain
Traditional Rivalry Among Competitors
Bargaining Power Of Suppliers
Bargaining Power Of Buyers
Threat of New Entrants
4
A Closer Look at the Value / Supply Chain
Along the Extended Value Chain
Focal Firm
Suppliers
Buyers
IT can help integrate and strengthen the supply
chain. What does this imply for suppliers and
buyers?
5
Integration

Focal Firm
Suppliers
Buyers
Integration means the boundaries between the
focal firm and its suppliers and buyers becomes
more permeable and transparent. What does
THIS imply?
6
Strengthening

Focal Firm
Suppliers
Buyers
Strengthening means that suppliers and buyers
freedom to act outside the supplying, buying
relationship becomes restricted hence unique
identity becomes lowered. What does THIS imply
for the suppliers and buyers?
7
OffLoading

Focal Firm
Suppliers
Buyers
Offloading means that processes that used to be
costs or risks for the focal firm become costs or
risks for suppliers and/or buyers. Coupled with
other effects, what does that mean?
8
Potential Downside?
Effects of IT
9
Value Chain
DATA INFORMATION KNOWLEDGE
Informa-tion Activities Core Opera-ting
Activities Infra-structure Activities
Inbound Operations Outbound Sales After
SalesLogistics
Logistics Service
Facilities Technology People Equipment

What is the relationship among these three
levels? How does it come about? How is it
maintained?
10
Market Roles
The Market
Suppliers
Customers
11
Components of a Business Model
CONCEPT Opportunity Strategy
CAPABILITIES Resources needed
VALUE Benefits to stakeholders
12
Strategic Impact of IT

• Support No strategic impact now or planned
• Turnaround No strategic impact now, but in the
  future
• Factory Current strategic impact, but nothing
  new planned
• Strategic Now and in the future

13
Strategic Grid
FACTORY Reengineer
STRATEGIC Change Management
Low Operations Impact High
SUPPORT Improvement
TURNAROUND New Venture Development
Low Strategy Impact High
14
Strategic Grid -Evolution
FACTORY
STRATEGIC
Low Operations Impact High
SUPPORT
TURNAROUND
Low Strategy Impact High
15
Critical Questions

• What is Strategic?
• What are core operations?
• What are strategic activities?
• Can an entire organization be so characterized?

16
Making the Case for IT

• Type I Benefit from IT infrastructure investment
  (to IT itself)
• Type II Benefit From doing business using IT
  infrastructure
• Commerce Production and Marketing
• Content/Knowledge Intelligence
• Community Human Process

17
Analyzing the Impact of IT on Strategic Decision
Making

• Can IT Be Used to Reengineer Core Value
  Activities and Change the Basis of Competition?
  (economies of scale, scope, style)
• Can IT Change the Nature of Relationships and the
  Balance of Power among Buyers and Suppliers?

18
Analyzing the Impact of IT on Strategic Decision
Making, Contd

• Can IT Build or Reduce Barriers to Entry?
• Can IT Increase or Lower Switching Costs?
• Can IT Add Value to Existing Products and
  services?
• Can IT Create NEW Products and Services?

19
THEMES

• Market Structure and Industry Dynamics
• Evolving Business Models
• IT Impact
• Prioritizing IT Investments
• Assimilation and Organizational Learning
• Buy vs. Make
• Partnership among Key Constituencies as IT
  Evolves
• Protecting IT Assets and Managing Risks
• Pervasive Computing Opportunities Risks