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COM333 – IS3

COM333 – IS3. IS & Competitive Advantage. Information systems and competitive advantage it is possible to identify examples where ISs give competitive advantage American Airlines and their Sabre (one data set per customer) Reservation System.

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COM333 – IS3

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  1. COM333 – IS3 IS & Competitive Advantage

  2. Information systems and competitive advantage • it is possible to identify examples where ISs give competitive advantage • American Airlines and their Sabre (one data set per customer) Reservation System. • Thomson’s holidays TOPS on-line view data-based booking system • IS can transform the way the business is done so that the business process can be redesigned or re-engineered

  3. Organisations may consciously and deliberately exploit MIS for competitive advantage • Use of IS may not always lead to industry domination • Organisation have the best way to select the most promising prospects to yield competitive advantage. • We can use strategic analysis techniques & methods (such as CSFs, value chain analysis, applications portfolio analysis) to identify opportunities for competitive advantage • linking business strategy and IS strategy provides the environment for competitive advantage through IS

  4. Key factors leading to a competitive IS • The application of available techniques to spot strategically significant IS • Knowledge of the effects of the information revolution on the business environment • An understanding of the process of IS strategic planning to generate concrete implementable plans for SMIS

  5. Success means competitive advantage? • ………. • successful use of information systems: • ISs relate to business goals • there is an agreed set of priorities • management of systems is appropriate to business value • there is improved business/IS communication

  6. Ward and Griffith (1996) says to gain a competitive advantage IS should be used in one or more of the following: • Linking the organisation to customers and suppliers • Creating the effective integration of the use of information in value-adding process; value-chain primary activities • Enabling the organisation to develop, produce, market and deliver new products or service based upon information • Giving senior management information to help develop and implement strategy

  7. Porter and Millar’s (1985) work suggests to follow a five step process for deliberately gaining the competitive advantage of IS. • Assess the information intensity • Determine the role of IS in the industry structure • Identify and rank the ways in which IS might create competitive advantage • Investigate how IS might spawn new businesses • Develop a plan for taking advantage of IS

  8. To gain a competitive advantage the organisation must be able to define when IS is strategic to their business. • Make the distinction between Technology Hype, Technology Capability, Useful Technology and Strategic Technology • Feeny’s Technology Onion.

  9. Feeny’s Technology Onion. IS Hype IS Capability Useful IS Strategic IS

  10. IS hype - unfounded belief that having the technology is sufficient in itself • IS capability - being able to do what the technology allows you to do • Useful IS - what may be useful technology the organisation needs • Strategic IS - if this isn’t adopted then business suffers

  11. To judge whether the organisation is looking at an instance of Strategic IS answer the three key points • Functioning of the IS activity is critical to operations on a daily basis • Application planned or under development are critical to the future competitiveness • Information content /intensity of products and functional area are high. • If the answer is Yes

  12. Harmful affects of strategic IS? • IS becomes the basis of competition. • Initial advantage may be lost and may lead to IS driven competitive disadvantage • IS may expose other related organisational problems that previously were not problems • Lowering entry barriers increased competition • Raise entry barriers – competing to unprofitable level • Application of IS may make it very difficult for the customers to move away to alternative suppliers - could be deemed unfair trading • Supplier/customer bargaining power • using IS may enable either customers or suppliers to miss out middle bit, or even go elsewhere. • Form new products and services • IS may create new products or services to the detriment of the organisation

  13. Realistically through the strategic use of IS an organisation might be able to • Achieve not competitive advantage but probably increased profit • Avoid competitive disadvantage through IS

  14. M.J Earl (1992) in his paper “Putting Information Technology in its place: a polemic for the nineties” discuss about • Putting IT in its place. • Putting business back into IT

  15. (Earl's Figure 1) investment business in IT benefit ------------------------------------------------------------------- investment business in IT benefit other business changes ------------------------------------------------------------------- business business change benefit investment in IT and other resources

  16. In nearly 1980s IT was seen as new strategic weapon, deployed for competitive advantage. • Build a reservation system, develop online links to customers or suppliers or construct a flexible manufacturing system, competitive advantage would follow. • Later the observers suggested that investment in IT alone provides very little return. • For substantial business benefits other changes are required. • A reservation system might be more successful if it were accompanied by customer service programmes or alliance with other business services to provide travel related service • Third perspective suggests the firms should identify the business needs or opportunities and then agree what is needed – including IT- to achieve it.

  17. Putting business back into IT

  18. Vision: from technology futures to rethinking business • Forget technology futures. • Rethink current business problems and environmental change. • IT is an ingredient, not the solution. • Planning: from IT strategies to business themes • Find business themes for IT rather than formulate IT strategies for the business. • Justifying: from financial appraisal to business case • If the IT investment is an integral part of the vision of the future business cost justification is simplified. • If an IT project is essential to achievement of the business plan the case is clearer. • Focus on business changes, not IT costs and benefits, when justifying IT applications.

  19. Implementing: from project management to managing the benefits • Project management as conventionally understood is too narrow. • Focus on managing the benefits: • attend to both non-IT resources and IT. • Controlling: from IT expenditure to cost of business • Obsession with total IT expenditure figures and ratios is meaningless and unhelpful. • Organising: from IT business to business IT • The potential of running IT as a business can be limited. • Decisions about IT use need to be in the business. • Benefits are limited unless it is the business's IT. • Learning: from IT literacy to organisational development • IT literacy campaigns have random influences. • Integrating IT and its management into organisational development processes is more likely to succeed.

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