02 corporate information strategy 26 slides

CORPORATE INFORMATION STRATEGY

& MANAGEMENT Prof. Sajjad Ahmad Qadri

02-Creating Business Advantage

with IT

Prof. Sajjad Ahmad,School of Business & Management, MULCambridge Graduate University

IT and Competitive Advantage

Sustainability of Competitive Advantage

Case StudiesGE

Conclusion

IT as a Competitive Weapon

Definition:Information Technology

Information Technology (IT) is the amalgamation of hardware, software, data, people and procedures that enables or inhibits business objectives depending on management’s involvement in IT.

Source: Why General Managers Need to Understand Information Technology, lecture notes, Lacity, 2002

How the information revolution affects competition

Changes industry structure thereby altering the rules of competition

Creates competitive advantage by giving new ways to outperform rivals

Spawns whole new businessesSource: How information gives you competitive advantage, Porter and Millar, 1985

How IT creates a competitive advantage

Differentiate a product or service

Improve business processes (lower costs)

Change a business structure

Create new business

Source: IS 480 lecture notes, Lacity, 2002

Competitive advantage comes from critical

differentiators

Source: IS 480 lecture notes, Lacity, 2002

CriticalCommodities

Critical Differentiators

Useful Commodities

Eliminate/Migrate

Critical

Useful

Commodity Differentiator

IT as a Competitive Weapon -Sustainability

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

• Very few companies sustain their competitive edge over the long term

• Sustainability occurs when it is difficult or impossible for the competition to respond


IT Resources-Easily Duplicated

• Capital for investment• Proprietary technology• Technical Skills



IT Resources-NOT Easily Duplicated

• Managerial IT Skills• Understanding business needs• Collaborating with colleagues• Managing market & technical risk of

innovation



Sustainable Advantage

Lead Time Competitive Asymmetry

Pre-emption Potential


Supply System Analysis

Competitor Analysis

Project Life-cycle Analysis

1. How long before a competitor responds?2. Which competitors can/will respond?3. Will the response be effective?


3 Pillars Supporting Sustainable Advantage

1. Lead Time• Information leaks• Followers take short cuts• Followers implement better solutions

2. Competitor Analysis(Difficulty of competitor to respond or copy application)

3. Supply system analysis• Market capture• Switching costs

1980’s: Killer Application• AA/UA-Reservation Systems• American Hospital Supply-Online ordering system• Frito-Lay-Handheld devices for sales

Early 1990’s: Re-engineering

• Redesigning business processes around technology

Mid 1990’s: Information Management• Knowledge Management• ERP• CRM

Success with IT: Strategies

http://www.cio.com/archive/050101/davenport_content.html

Late 1990’s: e-Commerce

Today• e-Commerce is not enough• IT investment in the business core (touches customer)• Business commitment• Commitment to change (continually re-invent and never rest)• Using multiple technologies and management approaches (not just one)

• Company must excel in front office(e-commerce, CRM) , back office (ERP), and data warehousing, mining, and KM

• Information focus (to make smart decisions)

Success with IT: Strategies

http://www.cio.com/archive/050101/davenport_content.html

IT’S ALL ABOUT “E”

CASE STUDY: GENERAL ELECTRIC

• Formed in 1892

• Only company part of the Dow Jones's Industrial Index since the Index’s debut

• 67,588 patents, 2 Nobel Prizes and numerous other honors

• Operates in more than 100 countries and employs 313,000 people worldwide

• GE is considered to be one of the largest and most diversified industrial corporations in the world

e-business Is Business Just Simpler, Faster, and Better

General Electric:Company Overview

• Short-cycle businesses contributed approximately 20% of GE's net earnings in 2001

• Consumer Products (Lighting & Appliances) • Plastics • Industrial Systems• NBC• Specialty Materials

•Long-cycle businesses contributed approximately 40% of GE's net earnings in 2001

• Medical Systems

• Power Systems

• Transportation Systems

• Aircraft Engines

• Financial services contributed approximately 40% of GE's net earnings in 2001

• Before 1999 - IT at GE was non existent

GE – Digitization Strategy

•1999 - Jack Welch orders each business to “Destroy your business/ Grow your business”

• Use information technology to “create a leaner, faster, more customer focused company, accelerate high margin, capital efficient growth.”, Jeff Immelt, CEO

• 2001- GE Top e-business innovator (eweek)www.ge.com

IT Spending

2000 - $2.5 billion2001 - $3.0 billion2002 - $3.5 billion


"You won't see one ounce of slowdown in tech spending.” Jack Welch 1/2001

Gary Reiner, CIO

http://www.eweek.com/article2/0,3959,94717,00.asp


• Negotiate

– e-Auctions

–Deflation

• Transact –

Productivity – eTransactions – Control

Buy

• Eliminate Intermediaries–Speed– Unit Cost

Reduction –Streamline processes

Make

• Make the Customer More Productive– Comparative

Performance Data– Customized Service (Availability/Order Service)

• Transaction Productivity

Sell

Productivity (“Workflow”)

More Share/HigherMargin

GE Internal Presentation

Buy smarter

Process more efficiently

Sell more

GE ValueCustomer ValueBuy smarter

Process more efficiently

Sell more

e-Business Value

Digitization provides ways to improve our customer interface and work on our own internal productivity at the same time. It is just beginning. Our investments in information technology will grow about 15% this year. It is really going to help us transform the cost base of GE. Its going to help us buy better. Its going to help us interface with customers better. But primarily its going to help us in terms of the inner workings of GE make us more efficient, leaner, and closer to the customer."

-- Jeff Immelt, Chairman and CEOCustomer City Swings, April 2001

e@GE

CEO

BDLeader

MarketingLeader

CIO

• External or Internal• Internet Generation• Creative,

Entrepreneurial• Start Up Experience• Marketing/IT

Background

• High Level Leader• Knows the Business• Track Record of Delivering• Well Respected - Great Team

Player/Influencer• Understands Commercial &

Operations• Has or Can Play on Business

Leader Staff

e-BusinessLeader

• External Hire• e-Commerce Industry

Experience• Business Savvy• Technical Expertise

DYB.com/GYB.com LeaderFocus: Destroy Your

Business/ Grow Your Business

CWC.com LeaderFocus: Enhance & Build

Your Customer Web Center

Marketing SalesOperation

s

Cross Functional Team

Marketing Sales Operations

Cross Functional Team

TechnicalFunctionality

Back EndInfrastructure

Chief Architect.Com Technical Team

Buy Sidee-Commerce

Leader

Other e-Business Functional

Leaders

E-BUSINESS ORGANIZATIONAL APPROACH

GE Internal Presentation

e-Business Steering Committee•CEO•e-Business Leader•CIO•Marketing Leader•BD Leader

Web BusinessStaying Power

• Simplicity• Applying traditional business thinking to a new channel• Use web to improve business and create valuable services• Awareness of customer needs• e-Business is a constantly moving target• Need for sound relationships

http://www.cio.com/archive/120101/power_content.htmlDavidson, Stephen, “B2B Exchaanges:Lessons from the Trading Pit,” Journal of Internet Law,

4/2002, v5 i10 p1(10)

IT as a Competitive Weapon -Summary

IT can be used as a competitive weapon through cost reduction and differentiation

Very few companies sustain competitive advantage using IT

IT projects need to be evaluated for “sustainability’ in addition to traditional risk

e-Business is a constantly moving target

Future of IT

Competitive Advantage?

Competitive Necessity?

or

02 corporate information strategy 26 slides

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