session 4 it architecture and competitive advantage
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IT & Strategy
2 things
IT-strategy alignment
modularization & IT architecture
how do I align my technology to my firm’s
strategy?
TODAY:conventional views
1.0
what does a firm do?
firm needsproduct
mat
eria
lsmarket
money
what is a product?
customer’s needs
a product is a solution package
mobilize commodities to deliver the product
2.0
Accounting Finance Sales Human
Resources Production
MIS is the “glue” that ties
businesses together…
…and uses the technology that makes business work.
what dose IS do?
IT reduces communication & coordination cost
IT architecture
shows how hardware, software, database and
network will be coordinated
to achieve strategic goal of the firm
a master plan that provides a technology vision for the company
© copyright 2007, youngjin yoo
more than IT architecture
“A digital nervous system requires a combination of hardware and software; it's distinguished from a mere
network of computers by the accuracy, immediacy, and richness of the information it brings to knowledge
workers and the insight and collaboration made possible by the information.”
Bill Gates, Business @ The Speed of Thoughts
© copyright 2007, youngjin yoo
“He is right - I would be very nervous if my systems were based on their (Microsoft’s) platforms
and products!”
Scott McNealy on Gates
also includes
organizational control
funding model
standardization
3.0
strategy question
how do you build sustainable competitive advantage?
3.1
Michael Porter
it’s all about positioningfive forces
three generic strategies
Bargaining power
of buyers
Bargaining power
of suppliers
Threat of
new entrants
Threat of substitute
products or services
Rivalry among
existing competitors
three generic strategies
cost leadership
differentiation
focus
3.2
it is about unique resources
CK Prahalad
capabilities
core competencies
3.3
it is about ability to innovate
Kathleen Eisenhardt
dynamic capability
hyper competition
4.0
how can you exploit IT to build sustainable
competitive advantage?
it depends!
4.1
positioning
Wal-Mart and EDI
4.2
create unique resources
4.2.1
unique IT
American Airline
City Bank
IBM-Mayo Clinic
HyperActive Bob
Mrs. Fields Cookie
4.2.2
technology is a commodity utility
others
they will copy it
if not the same system
similar enough is enough
IT value will evaporate
first mover makes all the mistakes
second mover will learn
price will go down
consumer will benefit
ATM
Airline reservation systems
ERP
4.2.3
© copyright 2007, youngjin yoo
Managerial Capabilities
(Uniqueness)
Technology(Efficiency)
Sustainable competitive Advantage
IT + culture
IT + ownership structure
IT + access to capital
IT + operation excellence
IT + brand
IT + HR
© copyright 2007, youngjin yoo
Some statistics
4.3
first mover
Amazon vs
Barns & Noble
Me First vs.
Me Too
Amazon
Introducing new feature
Barns & Noble
integration with inimitable resources (physical stores)
IT-enabled innovation
SustainableCompetitive Advantage
Time &History
it’s like a garden
time matters!
5.0
Modularization & IT architecture
5.1
mass production
physical machines
maximizing the throughputs
economy of scale
upstream & downstream integration
economy of scope
diversification
vertical integration
m-form organization
internalization of value activities
© copyright 2005, youngjin yoo
traditional view
A firm’s value chainTransaction Systems
(ERP, MRP, TPS)
Enterprise DB
Back-end Systems Executives & Managers
Customers
Suppliers
control
everyone thinks “I am unique!”
centralized
decentralized
hybrid
5.2
modularization of products
system view of a product
subsystems and components
design hierarchyand
design rules
componentsinterfaces
stereo system
amplifier speakers radio tunerCD players
so, what’s the big deal?
containingcomplexity
innovation through mix & match
agility
what does IT have to do with this?
reduction of communication and
coordination cost
making externalization of activities cheaper
facilitating modularization
disintegration of vertically integrated
firms
© copyright 2007, youngjin yoo
network-centric view (service oriented architecture) for
modular organizations
F in anc ia ls
ERPM
anufacturing
Sales an d D
istr ibut io n
Hum
an R
esou r ce
ERP infrastructure services
RDBMS
Call
Center
CRM
CRM infrastructure services
RDBMS
Salesforce
suppor t
S er vic e
Ca ta lo g
Commerce Server
Application Server
RDBMS
ShoppingC
art
Payment
E AI
Midd lew
ar e
service oriented architecture
modularinteroperable
reusableflexible
scalable
standardscommon infrastructure
SOA
6.0
IT infrastructure is a strategic asset
more than a tool
not utility
no overhead
“let’s just have ERP” wouldn’t work
it is a strategic decision
must be a part of strategic decision-making process
aligning business goals to IT
how do I really know if IT is a strategic
resource in my firm?
where is your CIO in your organization?
how is IT being funded?
is IS a part of corporate G&A?
where is IS plan in your strategic planning?
who makes the decision?
so, why should I care?
accelerating technology innovations
challenging long-held assumptions
new ways of organizing relationship inside
new ways of organizing relationship outside
agility and innovations
it is as strategic as it gets when it comes to information systems