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2
Competing with Information Technology
CHAPTER OVERVIEW Chapter 2: Competing with Information Technology introduces fundamental concepts of competitie adantage through information technology and illustrates ma!or strategic applications of information systems.
LEARI! O"#ECTIVE$ After reading and studying this chapter, you should be able to: %& "dentify seeral basic competitie strategies and e#plain ho$ they use information technologies technologies to confront the competitie forces faced by a business. 2& "dentify seeral strategic uses of "nternet technologies and gie e#amples of ho$ they can help a business gain competitie competitie adantages. adantages. '& %ie e#amples of ho$ business process reengineering fre&uently inoles the strategic use of "nternet technologies. (& "dentify the business alue of using "nternet technologies to become an agile competitor or form a irtual company. )&
'#plain ho$ kno$ledge management systems can help a business gain strategic adantages.
$*++AR, ( $trategic *-e- of Information Technology& Technology& "nformation technologies can support many competitie strategies. )hey can help a business cut costs* differentiate and innoate in its products and serices* promote gro$th* deelop alliances* alliances* lock in customers customers and suppliers* suppliers* create s$itching s$itching costs* raise barriers barriers to entry* and leerage its inestment in ") resources. resources. )hus* information technology can help a business gain a competitie adantage in its relationships $ith customers* suppliers* competitors* ne$ entrants* and producers of substitute substitute products. +efer +efer to Figures Figures 2.3 and 2., for summaries summaries of the uses of information technology for strategic adantage.
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( ".il/ing a C.-tomer01oc.-e/ ".-ine--& key strategic use of "nternet technologies is to build a company that deelops its business alue by making customer alue its strategic focus. ustomer-focused companies use "nternet* intranet* and e#tranet e-commerce eb sites and serices to keep track of their customers1 preferences to supply products* serices* and information anytime* any$here and to proide serices tailored to the indiidual needs of the customers. ( Reengineering ".-ine-- Proce--e-& "nformation technology is a key ingredient in reengineering business operations because it enables radical changes to business processes that dramatically improe their efficiency and effectieness. "nternet technologies can play a ma!or role in supporting innoatie changes in the design of $orkflo$s* !ob re&uirements* and organiational structures in a company. ( "ecoming an Agile Company& business can use information technology to help it become an agile company. )hen it can prosper in rapidly changing markets $ith broad product ranges and short model lifetimes in $hich it must process orders in arbitrary lot sies it can also offer its customers customied products $hile it maintains high olumes of production. n agile company depends heaily on "nternet technologies to help it respond to its customers $ith customied solutions* and to cooperate $ith its customers* suppliers* and other businesses to bring products to market as rapidly and cost effectiely as possible. ( Creating a Virt.al Company& Forming irtual companies has become an important competitie strategy in today1s dynamic global markets. "nternet and other information technologies play a key role in proiding computing and telecommunications resources to support the communications* coordination* and information flo$s needed. 4anagers of a irtual company depend on ") to help them manage a net$ork of people* kno$ledge* financial* and physical resources proided by many business partners to take adantage of rapidly changing market opportunities. ( ".il/ing a nowle/ge0Creating Company& 5asting competitie adantage today can only come from the innoatie use and management of organiational kno$ledge by kno$ledge-creating companies and learning organiations. "nternet technologies are $idely used in kno$ledge management systems to support the creation and dissemination of business kno$ledge and its integration into ne$ products* serices* and business processes.
E, TER+$ A3 COCEPT$ %& Agile Company 4567: n organiation $ith the ability to profitably operate in a competitie enironment of continual and unpredictable changes by producing high-&uality* high-performance* customer-configured products and serices. 2& ".-ine-- Proce-- Reengineering 4)57: )he fundamental rethinking and radical redesign of business processes to achiee dramatic improements in cost* &uality* speed* and serice. '& Competiti8e 1orce- 4((7: business must confront rialry of competitors $ithin its industry 2 threat of ne$ entrants 3 threat of substitutes 7 the bargaining po$er of customers , the bargaining po$er of suppliers.
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(& Competiti8e $trategie- 4(97: business can deelop: cost leadership 2 product differentiation 3 innoation 7 gro$th , alliance or other strategies to confront its competitie forces. )& $witching Co-t- 4)67: )he cost in time* money* effort* and inconenience that it $ould take a customer or supplier to s$itch its business to a firm1s competitors. 5& C.-tomer 8al.e 4)27: )he perception of alue or benefit* on the part of a customer* associated $ith a gien transaction or business relationship. 8rganiations can proide this by recogniing that &uality rather than price has become the primary determinant. 8rganiations must focus on anticipating future needs* responding to customer concerns* and proide top-&uality serice. 9& Interenterpri-e information -y-tem- 4527: onsists of multiple e#tranets linking suppliers* customers* subcontractors* and competitors together in support of a irtual company. & nowle/ge0Creating Company 45'7: lso kno$n as learning organiations are companies that consistently create ne$ business kno$ledge* disseminate it $idely throughout the company* and &uickly build the ne$ kno$ledge into their products and serices. ;& nowle/ge +anagement $y-tem 45(7: n information system that helps manage organiational learning and business kno$-ho$. )hese systems help kno$ledge $orkers create* organie* and make aailable important business kno$ledge* $hereer and $heneer it1s needed in an organiation. %6& Le8eraging In8e-tment in IT 4)67: eeloping ne$ products and serices made possible by inestments in information technology. %%& Loc< in C.-tomer- an/ $.pplier- 4)67: ;uilding aluable relationships $ith customers and suppliers* $hich deter them from abandoning a firm for its competitors or intimidating it into accepting less profitable relationships. %2& Rai-e "arrier- to Entry 4)67: reating technological* financial* or legal re&uirements $hich deter firms from entering an industry. %'& $trategic Information $y-tem 4((7: "nformation systems that supports or shapes the competitie position and strategies of an organiation. %(& Val.e Chain 4)(7: ie$ of an organiation as a series of actiities $ith each actiity adding alue to its products and serices. %)& Virt.al Company 4527: lso called a irtual corporation or irtual organiation* is an organiation that uses information technology to link people* assets* and ideas.
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A$WER$ TO REVIEW =*I>
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A$WER$ TO 3I$C*$$IO =*E$TIO$ %&
$.ppo-e yo. are a manager ?eing a-
Bnless the indiidual is familiar $ith the tools inoled in deeloping information technology applications* they $ill hae a high leel of apprehension. +eserations $ould include the fear of being out of oneCs depth and feelings of helplessness* insecurity* and dependence on others. " might also $onder $hether or not an appropriate application might be obtained off the shelf. 8ff the shelf soft$are* though not easily customiable* generally costs less than custom soft$are deelopment. 5astly* " might also be concerned about ho$ the soft$are may affect my o$n organiation. hange isnCt easy* and if it isnCt supported at the ery top management leels* it may fail due to lack of organiational $ill. 2&
How co.l/ a ?.-ine-- .-e information technology to increa-e -witching co-t- an/ loc< in itc.-tomer- an/ -.pplier-@ *-e ?.-ine-- eample- to -.pport yo.r an-wer-&
business might undertake pro!ects to integrate some of its information systems $ith its customersC systems in order to proide them $ith more timely* accurate* and useful information. "t might een directly proide applications for its customerCs use at lo$ or no cost to the customer. ustomers later considering changing suppliers $ould lose these benefits. "ndeed* the ery process of deeloping these tools $ill help managers increase their familiarity $ith their customers and allo$ them to tune their information resources to their needs. )his relationship $ill further sere to lock in customers. For e#ample* Fed '# proides its customers $ith package tracking information. nd medical supply companies proide hospitals $ith inentory management and re-ordering systems.
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How co.l/ a ?.-ine-- le8erage it- in8e-tment in information technology to ?.il/ -trategic IT capa?ilitie- that -er8e a- a ?arrier to entry ?y new entrant- into it- mar
)his is but one of many possible e#amples. )he cost of building and maintaining a strategic ") platform can be ery high. ;usinesses may look to leerage some of these costs by building ") platforms that can be used by their customers and suppliers. "nitially* both the company and the customer benefit from the ne$ system. Do$eer* as time goes by the customers become dependent on using the platform. "n the long run* the company1s inestment in ") results in locking in their customers and suppliers and creating s$itching costs. )he high costs associated $ith deeloping these systems sere as barriers to entry from competitors. (&
Refer to the Real Worl/ Ca-e on IT Lea/er- an/ Rein8enting IT in the chapter& How wo.l/ the-e i/ea- a?o.t the -trategic po-itioning of IT apply to a -mall company@ 3o yo. thin< a -mall ?.-ine-- wo.l/ ha8e a har/er or an ea-ier time aligning it- ?.-ine-- an/ IT organiBation-@ *-e an eample to ill.-trate yo.r an-wer& Small company application: strategic positioning re&uires ") professionals $ell ersed in their organiationCs business practices. "n small companies Eless than ,00 employees* this familiarity comes easily. ll managers $ould kno$ each other and communicate freely. "n addition* these organiations hae flatter management structures and fe$er barriers to communication. Difficulty: small organiations also hae less e#pertise to dra$ upon for planning and implementing strategic pro!ects* and they hae greater time and money constraints. )hey canCt afford big mistakes or significant delays. s a result* these strategic initiaties pose significant risk to small organiations. Example: encourage students to e#plore ho$ $ell their o$n schoolCs ") department is aligned $ith its strategic ob!ecties. ot counting the student body* most colleges and some uniersities $ould &ualify as a small company.
)&
What -trategic role can information technology play in ?.-ine-- proce-- reengineering@
"nformation plays a critical role in ;G+ initiaties. First* information about e#isting operational metrics seres as a baseline for future comparison. ?econd* as ne$ processes take shape* information in the form of feedback allo$s managers to ealuate and control these ne$ processes. 5astly* the organiation may find $ays to repackage this information for its customersC use. For e#ample* Fed'# has taken information from its package tracking system and repackaged it so that customers kno$ $hat delieries to e#pect on any gien day. 5&
How can Internet technologie- help a ?.-ine-- form -trategic alliance- with it- c.-tomer- -.pplier- an/ other-@
"nformation technology can help a business form strategic alliances $ith its customers* suppliers* and others as they are able to communicate* collaborate* and share information in $ays that $ere neer before possible. ;y irtue of $orking together online* managers can monitor and automatically capture process metrics* identify bottlenecks* and recommend process improements $ithin and bet$een organiations. For e#ample* corporate property managers might employ a system connecting them themseles $ith real estate agents Esuppliers* attorneys Esuppliers* and business managers Ecustomers to help manage property ac&uisitions. )hese comple# transactions re&uire mutually dependent $ork from each party* and a collaboratie system allo$s managers from each party to document their $ork* assign tasks* reie$ status summaries* and monitor $orkflo$ all $ith significantly fe$er meetings and phone calls.
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How co.l/ a ?.-ine-- .-e the Internet technologie- to form a 8irt.al company or ?ecome an agile competitor@ Virtual company: '#ample: a person or company could use the "nternet to ac&uire customers and then farm out the $ork to suppliers. simple e#ample of this can be found managing contractors. company solicits customers for contract $ork Ecustomers and then solicits reliable contractors $ho can do this $ork Esuppliers. "n e#change for a share in the contractorCs earnings* the irtual company handles the billing and customer relations. "t manages its reputation by monitoring the &uality of the contractorCs $ork. Digh performing contractors retain a larger percentage of their earnings* and lo$ performing contractors are not inited to $ork on future contracts. ?ome soft$are endors no$ lease Eor proide for free $eb enabled business soft$are to manage accounting* customer relations management* and office automation tasks E$ord processing* spreadsheets* calendaring* and e-mail. s a result* a truly irtual company need only a computer connected to the "nternet and a $eb bro$ser. >isit rentacoder.com for an auction site ersion of this enterprise. Agile competitor: )hrough the "nternet* organiations can break time* geographic* cost* and structural barriers. ompanies can use the "nternet to publish real-time information about their products* seek information about competitors* and access ne$ markets. ;y conducting transactions entirely online* an organiation can monitor eery phase of the process and ealuate the effectieness of any process changes.
& Refer to the Real Worl/ Ca-e on Wacho8ia Corporation an/ Other- in the chapter& How m.ch of the competiti8e a/8antage- /e-cri?e/ in the ca-e come from the technology an/ how m.ch from the .n/erlying proce--e- /e8elope/ ?y the organiBation- /e-cri?e/ there@ I- one -o.rce of competiti8e a/8antage more important than the other@ 3efen/ yo.r an-wer& Technology advantage:
"n this case* net$ork technology and high speed processing gie brokers an adantage in attracting traders to their serices. )hese traders re&uire fast processing speeds to support their innoatie approach to trading. Process advantage: hile the process remains relatiely the same for the brokerage firms Ebuy/sell* their customers hae deeloped innoatie algorithms $hich gie them a competitie adantage. )hese ne$ tools are entirely dependant upon the transaction speeds enabled by net$ork technology. )he algorithms gie the traders an adantage* and the technology gies the brokers an adantage. elative importance: "n most cases* innoatie processes $ould not succeed $ithout a supporting information system. +arely $ill technology alone proide a competitie adantage. "n this case* the process remains relatiely the same H buy/sell stock. "tCs the technology $hich allo$s this to happen at a faster rate thereby meeting customer demand. ;&
Information technology canDt really gi8e a company a -trategic a/8antage ?eca.-e mo-t competiti8e a/8antage- /onDt la-t more than a few year- an/ -oon ?ecome -trategic nece--itiethat .-t rai-e the -ta
"nformation technology for early innoators can gie a company a temporary competitie adantage. lthough technology is changing at a rapid pace* the first company to gain acceptance stands to capture a substantial market share before its competitors can catch up. ppleCs iGod seres as a good e#ample. ;y the time that other organiations catch up* the originator has potentially realied a large market share and captured substantial customer loyalty.
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%6& +I$ a.thor an/ con-.ltant Peter een -ay-: FWe ha8e learne/ that it i- not technology that create- a competiti8e e/ge ?.t the management proce-- that eploit- technology&G What /oe- he mean@ 3o yo. agree or /i-agree@ Why@ !hat does it mean" =een recognies that buying and installing a ne$ application simply because a competitor has it does little to guarantee its successful e#ploitation. Agreed : "t takes leadership to foster the organiational changes enabled by ne$ technologies. 'mployees often resist changes to roles and responsibilities they hae taken years to ac&uire and master* and management must incorporate change as an ongoing organiation process in such a $ay that employees anticipate rather than resist change. "ndeed* employees should learn to see change as part of their !ob H a part in $hich they too hae a role.
A$WER$ TO APPLICATIO EERCI$E$ %& En/ *-er Comp.ting: $
Wor/ proce--ing: approimately how many wor/- per min.te can yo. type@ 3o yo. .-e -tyleto manage /oc.ment formatting@ Ha8e yo. e8er -et .p yo.r own mail merge template an/ /ata -o.rce@ Ha8e yo. create yo.r own macro- to han/le repetiti8e ta-<-@ Ha8e yo. e8er a//e/ ?ranching or looping logic in yo.r macro program-@
4ost students feel they are competent at $ord processing if they can type* sae* and print their papers. ompetent kno$ledge $orkers use styles* mail merge* and macros to create shortcuts to repetitie tasks. Do$eer* macro branching and looping routines comprise basic programming concepts that fall !ust outside the range of basic end-user computing. ?7
$prea/-heet-: /o yo.
?tudents should be able to calculate the ans$er to the e&uation proided $ithout programming it into a spreadsheet. )he correct order of operations for this e&uation is po$er* multiplication* addition* and the ans$er is 0. ;asic users must understand order of operations* fi#ed and relatie cell references* ho$ to apply functions* and ho$ to create graphs. "ntermediate users can use piot tables to rapidly cross-tabulate data* use the "F function to create conditional ans$ers* and create basic macros. 4acro branching and looping comprise basic programming concepts that fall !ust outside the range of basic end-user computing.
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Pre-entation-: ha8e yo. e8er .-e/ pre-entation -oftware to create pre-entation o.tline-@ Ha8e yo. a//e/ yo.r own m.lti0me/ia content to a pre-entation@ 3o yo.
?tudents should be able to prepare presentation outlines that include graphics from spreadsheet applications. danced users $ill be able to include audio and ideo elements into their presentations as $ell as set slide timing to automate stand-alone or kiosk presentations. /7
3ata?a-e: ha8e yo. e8er importe/ /ata into a /ata?a-e from a tet file@ Ha8e yo. e8er written M.erie- to -ort or filter /ata -tore/ in a /ata?a-e ta?le@ Ha8e yo. ?.ilt report- to format yo.r /ata for o.tp.t@ Ha8e yo. ?.ilt form- to ai/ in man.al /ata entry@ Ha8e yo. ?.ilt f.nction- or program- to manip.late /ata -tore/ in /ata?a-e ta?le-@
4ost students $ill hae ery little database e#perience. Iet* managers can take great adantage of a database systemCs built-in report generating features. )o do this* users need basic table design and data import skills. "ntermediate desktop database users $ill hae basic form design skills. ode $riting Efunction programming and application deelopment comprise basic programming concepts that fall outside the range of end-user computing. 2& +ar
Pro/.ct: which ?.-ine-- maor- are pre-ently in greate-t /eman/ ?y employer-@ *-e entry0le8el -alarie- a- the primary in/icator for /eman/& ns$ers to this &uestion $ill depend on the year* region* and ma!or researched.
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Pro/.ct: what college- or .ni8er-itie- in yo.r region po-e the greate-t competiti8e threat to -t./ent- with yo.r maor@ ns$ers to this &uestion $ill depend on the year* region* and ma!or researched.
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Price: what i- the a8erage -alary for entry le8el employee- in yo.r maor an/ geographic region@ I- -alary yo.r top concern@ Why or why not@ ns$ers to this &uestion $ill depend on the year* region* and ma!or researched. Glace-bound students should logically rate geography as more important. onsider suggesting that students $eigh the opportunities their first !ob creates aboe the initial salary.
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Place: what area- of the co.ntry are c.rrently eperiencing the greate-t employment growth@ ns$ers to this &uestion $ill depend on the year* region* and ma!or researched.
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Promotion: what i- yo.r mars. ?tudents may also use this ability to publish portfolios of their $ork. ?uch portfolios might include sample programs* original research or analysis* or graphic documentation of their pro!ects or significant professional actiities. )he "nternet has opened the doors to irtually all applicants. s a result* on-line applications and !ob search sites do little to help an applicant get noticed. Gersonal contacts still rate highly in effectie !ob search strategies. )o that end* consider encouraging students to deelop and maintain personal address books for professional business contacts.
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Competing Again-t 1ree: Wi
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How wo.l/ yo. recommen/ Encyclope/ia "ritannica a/apt to thi- new threat@ 8ne obious approach $ould merge the 8' methodology $ith ikipediaCs to produce a hybrid. )his approach is not $ithout precedent. )he Oxford English Dictionary $as originally created in the 9 th century through oluntary submissions processed by professional editors. Wikipedia accepts any submission and instantly publishes them* no matter ho$ inaccurate or ridiculous* in hopes that others $ill find and correct errors or andalism. )he Encyclopedia Britannica could merge both the 8' and the ikipedia approaches and create the means for readers to update old articles or contribute ne$ ones $hile sub!ected to professional editorial reie$. )he 8' should hurry. umerous competitors* including a spinoff of ikipedia itself hae already begun.
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nowle/ge +anagement: nowing What ,o. now Product !ebsites '#change and omino are the leading* proprietary e-mail and group$are endors. ork?ite is one of the most sophisticated and $idely adopted 3-tier* $eb-based applications aailable.
'#change: omino: ork?ite: a&
http://$$$.microsoft.com/e#change/ http://$$$-306.ibm.com/soft$are/lotus/ http://$$$.inter$oen.com/components/pagene#t.!spJtopicKG+8B)::8+=?")'
What -tep- might a manager ta
4anagers might consider any or all of the follo$ing: • •
•
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)rain employees about ho$ to use kno$ledge management tools. Groide practical demonstrations of ho$ these tools immediately benefit the employee and also the organiation. +ecognie and re$ard early technology adopters. 'nsure that managers lead the $ay in usage.
$ho.l/ manager- -et minim.m M.ota- for -y-tem .-age for each employee@ Why or why not@
o. "f managers keep score in this $ay* then employees can easily figure out ho$ to inflate their scores. For e#ample* an employee can spend a fe$ minutes each morning opening and closing arious items in a kno$ledge management system $hile not actually benefiting from the actiity.
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A-i/e from employee M.ota- how el-e might an organiBation ?enefit from .-age -tati-tic-@
4anagers should primarily reflect on the processes affecting the numbers. )hey should ask themseles seeral &uestions: • • • • • • •
Dae my employees receied sufficient trainingJ Dae " ade&uately demonstrated the toolCs usefulnessJ hat more can " do to promote the toolJ ould deelopers or content managers improe the tools in some fashionJ "s the tool sufficiently accessibleJ "s the tool truly usefulJ Do$ can " measure the impact on productiity adoption of these tools $ill presumably bring aboutJ
A$WER$ TO REAL WORL3 CA$E$ RWC %: IT Lea/er-: Rein8enting IT a- a $trategic ".-ine-- Partner Ca-e $t./y =.e-tion%& What are the ?.-ine-- an/ political challenge- that are li
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;usiness schools should not ie$ students as one-time customers and long-term donors but rather as long-term customers $hose actie academic participation also makes a significant contribution to the institution. )hat is* $orkers need ongoing education* and ery fe$ uniersities offer significant continuing education programs. '#perienced students benefit the institution by adding depth and e#perience to classroom discussions. Bniersity administration should not think !ust in terms of degrees but in incremental certifications.
#e& emphasis: ") $orkers should hae strong pro!ect management and business skills. hile technologies may change* the principles by $hich an organiation effectiely learns and adapts $ill remain fairly constant. '& To what etent /o yo. agree with the i/ea that technology i- em?e//e/ in .-t a?o.t e8erything a company /oe-@ Pro8i/e eample- other than tho-e incl./e/ in the ca-e of recent pro/.ct intro/.ction- that co.l/ not ha8e ?een po--i?le witho.t hea8y reliance on IT& Agree: as a minimum* technology is effectiely embedded in the production or distribution of a product. onsider road-side egetable stands. Farmers use satellite imagery* %G? systems* and computers to determine ho$ to ma#imie crop yields. )he roadside egetable stand may operate $ith only a cardboard sign* cashbo#* and card table* but thereCs rocket science in those greens. ecent product examples: • iGod • iGhone • ;lu-+ay • %oogle 'arth ?treet >ie$ Real Worl/ Acti8itie%& $earch the Internet to fin/ information a?o.t other firm- that ha8e tran-forme/ their IT organiBation- an/ the role that the CIO play- in the go8ernance -tr.ct.re of the organiBation& What ?enefit- ha8e they ?een a?le to /eri8e from the-e change-@ Prepare a report an/ pre-ent yo.r fin/ing- to yo.r cla--& Example: )he ". "8 l )arasiuk has organied an oerhaul of the "Cs information technology. )he oerhaul included: • • • • • •
ligning ") $ith oerall strategy gile pro!ect management "ncorporating eb 2.0 technologies "mproed goernance "mproed information sharing "mproed collaboration
hallenges included: )he need for absolute security 8ercoming organiational culture 5ack of user sophistication Eat least , years behind corporate counterparts • • •
http://$$$.cio.com/article/776/"nsideLtheL"LsL'#tremeL)echnologyL4akeoerLGartL
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=eys to success: )op management support E%en. Dayden irect inolement from each directorate "8Cs authority to make decisions $hen no consensus e#ists lose contact bet$een intelligence analysts and deelopers resilient ") staff H accustomed to change • • • • •
)he results hae included: +educing information silos Eenabling greater sharing ost saings by irtualiing oer *000 serers. "ncreased success rate in deliering applications • • •
2& Con-i/er the 8irt.al reality technologie- employe/ ?y Procter !am?le an/ /e-cri?e/ in thica-e& "rea< into -mall gro.p- an/ ?rain-torm application- of the-e type- of technologie- for companie- in in/.-trie- other than tho-e re8iewe/ in the ca-e& Potential applications: • rchitecture: human traffic flo$ analysis • iil engineering: infrastructure analysis • Dealth care: emergency room design analysis • "): infrastructure design and analysis RWC 2: Wacho8ia an/ Other-: Tra/ing $ec.ritie- at the $pee/ of Light Ca-e $t./y =.e-tion%& What competiti8e a/8antage- can the companie- /e-cri?e/ in the ca-e /eri8e from the .-e of fa-ter technology an/ co0location of -er8er- with the echange-@ Which wo.l/ yo. -ay are -.-taina?le an/ which one- temporary or ea-ily imita?le@ #.-tify yo.r an-wer& (ompetitive advantage: faster technology and co-location enable faster transactions. Fast transaction speeds enable algorithm based trading. lgorithm based trading allo$s traders to take adantage of minute* fleeting price anomalies. Sustainable advantages: since high speed transactions re&uire co-location* this adantage might be sustainable assuming limited capacity to co-locate. Temporary Advantages: the algorithms themseles might be imitable or their effects might be mitigated by competitorCs countermeasures. 2& Tony "i-hop of Wacho8ia -tate/ that F (ompetitive advantage comes from your math, your &or'flo& and your processes through your systems) G Referring to what yo. ha8e learne/ in thichapter /e8elop oppo-ing 8iewpoint- a- to the role of IT if any in the /e8elopment of competiti8e a/8antage& *-e eample- from the ca-e to -.pport yo.r po-ition-&
)rue* technology enables faster and more efficient $orkflo$s* and organiations may derie competitie adantage from these. "n some cases* technology alone applied to an e#isting business process can also proide competitie adantages. For e#ample* simply co-locating serers helped speed up transactions.
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'& What companie- in in/.-trie- other than -ec.ritie- tra/ing co.l/ ?enefit from technologie- that foc.- on re/.cing tran-action proce--ing time-@ Pro8i/e -e8eral eample-& Examples: • irline reserations systems • heck clearing • redit card transaction processing • )elecommunications s$itching and routing • eather modeling and forecasting • 4assie 4ultiplayer 8nline +ole-Glaying %ame proiders E448+G% Real Worl/ Acti8itie%& +o-t of the /i-c.--ion in the ca-e wa- /one from the per-pecti8e of the tra/ing firm- an/ the 8al.e that the-e technologie- a// to them an/ their c.-tomer& Howe8er the ca-e al-o mention- actionta
Benefits: this capability further enables algorithm based trading by increasing speed and data olume. #ASDA+: Technologies: >irtual data center .3
Benefits: +educe seen data centers do$n to t$o resulting in significant cost saings. 2& The technologie- /e-cri?e/ in the ca-e repre-ent an eample of how /ifferent ?arrier- to the flow of goo/- an/ information are ?eing o8ercome ?y the .-e of IT& "rea< into -mall gro.p- an/ -elect an in/.-try other than the one /e-cri?e/ in the ca-e an/ ?rain-torm what ?arrier- to commerce yo. -ee there an/ how IT may help to /o away with them& Example: >oter education and a$areness ;arriers: itCs difficult for citiens to actiely participate in goernment $ithout dedicating significant amounts of time researching important issues. Goliticians may not $ant citiens check up on them in a ery detailed manner.
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http://ne$sroom.progress.com/phoeni#.htmlJcK@699MpKirolne$srticleLGrintM"K6709MhighlightK 3 http://$$$.$allstreetandtech.com/goldbook2006/sho$rticle.!htmlJarticle"K90,00A@0
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?olution: create a goernment portal Ecity* county* state* and federal $hich sho$s legislation and committee $ork in process. )he portal should help isitors &uickly locate issues important to them* sho$ $ho is inoled* sho$ $hat portions of $hich proposed legislation $ere authored by $hich legislators* proide access to meeting minutes* public statements* and other documentation in support of or opposition to each proision in each bill* proide a enue for citiens to e#press their o$n opinions* and allo$ citiens to assess the performance of their elected representaties. itiens hae the right to this information* and ") could proide access to this information far more easily than at present.RWC ': !E 3ell Intel !+ an/ Other-: The Competiti8e A/8antage of Information Technology Ca-e $t./y =.e-tion) Do you agree &ith the argument made by #icholas (arr to support his position that %T no longer gives companies a competitive advantage" !hy or &hy not"
ompetitie adantage comes from haing something useful that competitors do not. "n time* competitors find a $ay to duplicate these capabilities and the adantage is lost until the ne#t innoation. arr argues that companies must use information technology to remain competitie* but that information technology innoation is no longer possible. "f true* this $ould eliminate the possibility of using ") as a competitie adantage. " do not beliee this is true. ?cience and technology !ournals abound $ith ne$ ")-related discoeries and companies lined up to e#ploit them. )hese actiities* ho$eer* are likely the e#ception rather than the rule.
-) Do you agree &ith the argument made by the business leaders in this case in support of the competitive advantage that %T can provide to a business" !hy or &hy not"
"mmelt argues that ") is imperatie. Do$eer* this does not contradict arrCs point of ie$. )he other utilities listed by arr are also imperatie* but they are still commodities. ell argues that his company* al-4art* and %' still reap large adantages from their ") inestments. %roe argues through his bicycle metaphor that competitie adantages still remain. Fitgerald states that much more can be done $ith the information component of "). ?trassman points out leading companies such as Nero# and Fed'# are in a state of information $arfare. ?ygenda says ") could be a differentiator. " agree $ith these arguments* but " think they miss the point: technology innoation leads to competitie adantages* and innoations in ") continue to this day.
"nput: ho$ can $e capture more data faster* reliably* securely* and at a lo$er costJ reas still open to considerable innoation: image processing embedded sensors/processors and +F". Grocessing: parallel processing continues to find ne$ applications distributed processing remains in its infancy and &uantum computing Estill in the labs $ill change the $ay $e crack problems unassailable by present-day linear logic. ?torage: ;lue-ray D Eoptical storage and 'G+84 Eto replace hard dries and maybe +4.
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8utput: earphones and monitors of arious sorts hae been around scores of years. ;oth are due ma!or oerhauls. 5ook for heads up displays EDB* integrated audio/ideo systems E$here $e e#perience the $orld through our information system rather than directly* and tactile feedback deices Eibrating cell phones/pagers are a primitie e#ample. Examples: ell is using its $ebsite to directly integrate $ith its customersC procurement systems. 7
%' is releasing pod-casts from its %lobal +esearch enter to keep customers up to date on %'Cs innoations., Bsers can do$nload audio* ideo* or +?? feeds to suit their needs. "ntel is in the business of technology infrastructure innoation. urrent research areas include lo$-po$er deices* small mobile deices* and multi-processor chips. )hese innoations $ill help "ntel maintain its competitie adantages. 8ne $ay "ntel helps maintain this pace of deelopment is through uniersity net$orked research labs.6 4icrosoft is also a leader in deeloping innoatie ") solutions. )o support its customers* 4icrosoft hosts an e#tensie* searchable* kno$ledge base. rticles $ithin this kno$ledge base include user rating and feedback mechanisms that allo$ 4icrosoft to monitor and improe each articleCs &uality.A orney Gark uses +F"-based =id )rack@ to help parents and children find each other any$here $ithin the park.
Real Worl/ Acti8itie) #icholas (arr0s article created a storm of debate that is still raging) /sing the %nternet, see if you can find (arr0s original article) Also, try to find some more opinions for and against (arr0s arguments beyond those provided in the case)
)he original article $ith commentary by the author can be found on the authorCs $ebsite.9 >isitors may read the abstract and e#cerpts* but they $ill hae to pay to access the original in its entirety. -) The core of (arr0s arguments has some significant implications for businesses) $rea' into small groups &ith your classmates and discuss your opinion of (arr0s arguments) !hat are some of the implications of the argument that come to mind" 1o& might they serve to change the &ay &e use computers to support corporate strategy" %mplications: in areas $here ") has been commoditied* donCt re-inent the $heel. ;uy off-the-shelf E8)?* and spend +M dollars on ne$ technologies. Strategy support: treat most of ") as a commodity. Do$eer* if outsourced* this $ould mean including one or more 3rd parties into the strategic planning process. hile this might bring in fresh perspecties to the table* it may also add an unhelpful layer of bureaucracy to the planning process. RWC (: !E Energy an/ !E Healthcare: *-ing Information Technology to Create $trategic C.-tomer Relation-hip-
7
http://$$$.dell.com/content/topics/topic.asp#/global/premier/login/signinJcKusMlKenMsKgen http://$$$.ge.com/ne$s/ne$sfeeds/inde#.html 6 http://$$$.intel.com/research/e#ploratory/application/appliedLresearch.htm A http://support.microsoft.com/ @ http://$$$.dorneypark.com/public/insideLpark/generalLinformation/children.cfm 9 http://$$$.nicholasgcarr.com/articles/matter.html ,
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Ca-e $t./y =.e-tion) !hat are the business benefits of using information technology to build strategic customer relationships for 2E Energy and 2E 1ealthcare" !hat are the business benefits for their customers" !E Energy Business benefits • >alue based billing
Benefits to the customers +educed risks or une#pected failures Fe$er fines %reater predictability • • •
!E Healthcare Business benefits >ertical integration reating economies of scale +educing redundancy by consolidating data resources • • •
Benefits to the customers 5o$er costs Germits focus on core competencies %reater predictability 5ess risk • • • •
-) !hat strategic uses of information technology discussed in this chapter and summari3ed in 4igures -). and -)5 do you see implemented in this case" Explain the reasons for your choices) 6o&er customer costs 4edical staff does not customarily conduct product comparisons* schedule e&uipment maintenance* or conduct technical training. %' Dealthcare takes oer these responsibilities for their customers $ith efficiencies and cost reductions gained through their e#pertise and economies of scale. %' 'nergy is able to lo$er its customerCs costs by reducing e#pensie e&uipment do$n-time. 4ocus on mar'et niche %' Dealthcare serices has focused on its smaller customers and proide them $ith serices that might other$ise be aailable $ithin larger hospitals. )his focus has allo$ed them to make significant gains $ithin this specific market. (reate ne& services ssuming financing* installing* testing* maintenance* and training actiities responsibilities proides a ne$ serice that %' DealthcareCs customers preiously had to manage themseles. (hange business processes %' 'nergy has effectiely reengineered the maintenance processes for itself and its customers by taking a more actie role in monitoring e&uipment and scheduling preentatie maintenance. %ncrease s&itching costs %' Dealthcare has increased s$itching costs for its customers because they $ould hae to resume management functions assumed by %'.
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$uild barriers to entry ompetitors $ill hae great difficulty duplicating the results from %' 'nergyCs inestment in its po$er turbine serice and support areas.
.) 1o& could other companies benefit from the use of %T to build strategic customer relationships" Provide or propose several examples of such uses) Explain ho& each benefits the business and their customers) (onsumer relations benefits "n general* suppliers can integrate themseles deeply into their customerCs processes. ot only $ill this integration enable better customer support and increase s$itching costs* but it $ill also proide the supplier $ith greater insights into its customerCs operations. )hey can then use these insights to improe e#isting products or serices as $ell as deelop ne$ ones. Proposal Gerhaps book sellers such as maon or ;arnes and oble could integrate their order system directly $ith a uniersityCs faculty and distribute pre-assembled packages to students for pickup at campus book stores* student unions* or ia a the mail.
ustomer benefits )his proposal might result in lo$er costs* shorter check-out lines* and less hassle. ?tudents may also receie their course materials $eeks or months in adance* thereby giing them more time to prepare for a course. ?tudents could sell back or e#change their books at the end of the semester ia presupplied return bo#es. )his $ould reduce end of semester &ueues at the book store. )hrough the use of indiidual student accounts* this might een help control te#tbook theft if it limited students to selling back or e#changing books they had purchased through the system. !upplier benefits ;y integrating directly $ith the faculty* the bookseller $ould kno$ e#actly $hat the student needs and $hen. )his $ill help reduce ordering mistakes and returns. "t $ould also encourage students to buy* sell* or e#change all their books through this serice. 4a!or book suppliers $ould benefit from economies of scale* too. ;ook sellers can proide their serice less e#pensiely through a fe$ large* efficient sorting and processing facilities* a task currently undertaken by eery college and uniersity campus across the country. portion of this cost saings $ould go to students to lure them a$ay from competitors* and the rest $ould go into shareholder pockets.
Real Worl/ Acti8itie) /se the %nternet to discover if 2E Energy and 2E 1ealthcare are expanding or strengthening their uses of %T to build strategic customer relationships) !hat benefits are they gaining for themselves and claiming for their customers"
%' 'nergy Gress enter: http://$$$.gepo$er.com/about/press/en/inde#.htm %' Dealthcare e$s M 'ents: http://$$$.gehealthcare.com/ne$s.html
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-) /se the %nternet to discover other companies &hose products are net&or'ed, monitored, diagnosed, and managed at customers0 sites li'e the 2E companies in this case) Alternatively, choose other companies you can research on the %nternet and propose several &ays they could implement and benefit from similar uses of information technology)
8tis 'leator uses sophisticated pattern recognition soft$are embedded in its products to self-diagnose problems and re&uest serice directly from 8tis.0
.) !hat business control and security concerns might a business customer have &ith the extent of their dependency on 2E for the use and maintenance of assets that are vital to the operation of the business" $rea' into small groups to discuss the rationale for these concerns, and &hat measures both the business and 2E could ta'e to reduce any security threats and improve a customer0s secure control of the business assets it obtains from 2E) Potential customer concerns First* customers may fear loss of control. "f the endor fails to fully appreciate the risks inoled in a particular operation* they may fail to take the appropriate measures. )his fear might be mitigated through e#tensie communications and through practical e#perience.
?econd* customers may $ish to maintain the fle#ibility to s$itch endors so they can use this fle#ibility to leerage better prices. 8f course* if only one endor has this particular competitie adantage* then s$itching oer probably isnCt a practical option. a) 1o& might this mista'e result in data loss" 4istakes in failed security might enable a customerCs competitors to intercept data transmissions. )his $ould allo$ the competitors learn more about and e#ploit an organiationCs ulnerabilities. b) !hat procedures could you follo& to minimi3e this ris'" >endors can manage security threats by assessing its customersC security needs beforehand and ensuring that these needs are meet from data ac&uisition* processing* storage* transmission* and finally $arehousing. ?ecure communications lines* fire$alls* effectie policies* and encryption $ould all aid in this effort. >endors should fully disclose to their customers e#actly $hat data their systems $ill capture* store* and transmit as $ell as ho$ it $ill be used. >endors might also gie their customers the option to redirect transmission to internal systems or cut them off entirely. 5astly* the endor should be able to patch or upgrade their systemCs soft$are remotely in order to guard against the possibility of the future discoery of a security hole.
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http://$$$.kikm.org/=G+O20hiteO20GaperO20oO202007O20.pdf
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