Business Models and IT Capabilities

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Business Models and IT Capabilities
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Industrial and Network Economies

• Economies of scale and economies of scope
• Industrial economy key technological
  innovations- production technologies scale and
  scope were built and closely guarded the
  dominant organizational model hierarchical

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Industrial and Network Economies

• Network holes
• Network economy enhancement of distribution
  capabilities
• Successful network economy leverage a
  nonproprietary and shared infrastructure to unite
  buyers and sellers
• Economies of scale is achieved when a community
  of firms uses a common infrastructure to produce
  and distribute

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Industrial and Network Economies

• Economies of scope is achieved when a community
  of firms uses a common infrastructure to launch
  new products/services
• Example Covisint, Nexprise (Ventro)

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Business Model Components in Networked Economy

• Concepts, capabilities, and value
• Performance drivers -gt financial results -gt
  market results (figure 4.4)
• Capabilities must be built execute strategy
• Analysis of capabilities frames the assumptions
  used to forecast costs

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Capabilities

• Operating and innovating capabilities
• Managing and learning capabilities
• Leading and engaging capabilities
• Note IT infrastructure needed to support all
  categories of capabilities

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Value

• Assess all subjective and objective benefits
  delivered to customers, suppliers, partners and
  employees
• Benefits concept capabilities drive the
  market performance of a company (Table 4.1)

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Three Eras of IT Evolution

• Era I Mainframe (1950s 1970s)
• Era II Microcomputer (1980s early 1990s)
• By early 1990s, most companies IT infrastructure
  had become a hodgepodge
• Era III Network (1990s to present the coming of
  client server technology)
• Table 4.3

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The role of IT in Business Performance

• Type I benefits arise from investing in the IT
  infrastructure- computers, databases, data
  centers, web hosting services, networks and IT
  professionals
• Examples enhancement of internal and external
  functionality and flexibility- decrease the cost,
  improve the performance of internal operations

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Benefits from IT

• Type II benefits arise from doing business on
  the networked IT infrastructure
• Examples decreased cycle time, increase in the
  speed of decision making
• Launch a new IT services business, improve
  knowledge worker performance, launch
  e-procurement, launch customer focused e-commerce
  etc.