Week 4 Monday, February 13

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Week 4Monday, February 13

• Business Networks
• Leveraging IT

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Processes
Outputs
Inputs
What does it take to get groceries into a home?
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Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
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From Last WeekNetworks 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

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How should a business invest in IT?

• Long-term vs. Low-Hanging Fruit

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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?
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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
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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
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Global IT Infrastructure

• Shared common infrastructure
• IBMs 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

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Leveraging IT and Reengineering Processes

• Cost reductions
• Revenue generation Introduction of new services
  through product development
• Proprietary advantage

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IT Infrastructure and Processes Reengineering
Reengineering to Leverage IT
Organization and coordination
Structure
Information Technology
Vision and direction
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
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In a Nutshell
Business
IT
Alignment
Vision
Strategy
Strategy
Business networks (Competitive Advantage)
Process Reengineering (Control, enhancing,
leveraging)
Capabilities
Capabilities
IT infrastructure
Alignment
Value
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Aloha Airlines

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

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e-Commerce
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Receives direct non-stop flights from US mainland
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Threat Hawaiian Airlines
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Online Reservations
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Customer Loyalty Programs
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Leveraging IT
Business
IT
Alignment
Vision
Strategy
Strategy
Business networks (Competitive Advantage)
Process Reengineering (Control, enhancing,
leveraging)
Capabilities
Capabilities
IT infrastructure
Alignment
Value
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Porters 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 buyers
Bargaining power of suppliers
Customers and Buyers
Suppliers
?
?
?
Rivalry among existing firms
Threat of substitute products or services
?
Substitutes