Upload
vibhor-gupta
View
217
Download
0
Embed Size (px)
Citation preview
8/3/2019 16788 Session 1&2 IT Strategy
1/33
Information Technology and Systems
8/3/2019 16788 Session 1&2 IT Strategy
2/33
2
This course proposes to dwell on
Information Technology andits role and deployment
in organizations
8/3/2019 16788 Session 1&2 IT Strategy
3/33
3
Agenda
Module I:
Role and deployment of Information Technology
14 sessions by SB and UKS
Module II:
Decision modeling using Excel
6 sessions by RR
You need to bring your laptop to the class
8/3/2019 16788 Session 1&2 IT Strategy
4/33
4
Your Tutors
TTA for the course
Victor Chakraborty, [email protected]
Section A
Kuril Umeshkumar Motilal (161/46)
Sudheshna Dey (313/46)Section B
Swamy Saran Atul (327/46)
Harshvardhan Ketkar (152/46)
Section C
Sudipt Agarwal (314/46)Vikas Dosala (351/46)
Section DAmit Gupta (032/46)
Saurabh Sharma (276/46)
8/3/2019 16788 Session 1&2 IT Strategy
5/33
5
But why, in the first place, ?
Some factsAccording to a study over 265 companies in 23 countries,most IT decisions are taken by technologists
According to Forrester Research study of relationship between
IT budget and financial results over 268 American firms,highest spenders are not always the best performers
High tech consultancies estimate that more than half of ITprojects go wrong
Technology investments often exceeds half of capital spending
But why?Investment decisions are guided by gut feelings
Business units request projects without taking responsibility
System planned does not match with the current priority
8/3/2019 16788 Session 1&2 IT Strategy
6/33
6
What the management wants to know
How do organizations discover the next informationsystem to be deployed?
8/3/2019 16788 Session 1&2 IT Strategy
7/337
What forces drive competition?Economies of scale
Proprietary product differences
Switching cost
Capital requirements
Access to distribution
Differentiation of inputs
Presence of substitute inputs
Supplier concentrationImportance of volume to supplier
Relative price/performance of
substitutes
Switching costs
Buyer propensity to substitute
Buyer versus firm concentration
Information availability to buyer
Brand loyalty
Price differences
Product differences
Industry growth
Cost versus value added
Product differentiation
Brand identity
Concentration and balance
8/3/2019 16788 Session 1&2 IT Strategy
8/338
How can I remain competitive?Bargaining power of buyers
Lower cost, improve quality
Threat of new entrants
Raise the entry barrier
Threat of substitutes
Innovate, think of the substitute yourself
Bargaining power of suppliers
Increase your bargaining power as a buyer
Rivalry among competitors
Differentiate your product
Do things in a visibly different way than your competitors
8/3/2019 16788 Session 1&2 IT Strategy
9/339
Source of Competitive Advantage
The concept of Value Chain
The framework helps to identify and analyze thestreams of activities through which products and
services are created and delivered to customerCompany performs its business by splitting the jobinto technologically and economically distinctactivities linked together in a chain
Each of these value activities adds value for theconsumer
Company is profitable only when the value createdby the chain is more than the cost for performingthe value activities
8/3/2019 16788 Session 1&2 IT Strategy
10/3310
Generic Value Activities
Primary activities
Inbound logistics
Operations
Outbound logisticsMarketing and sales
Service
Support activities
Firm infrastructure
Human resource management
Technology development
Procurement
8/3/2019 16788 Session 1&2 IT Strategy
11/3311
Company Value Chain
8/3/2019 16788 Session 1&2 IT Strategy
12/3312
An ExampleRobert Talbott: the premier necktie manufacturer
Creates four neckwear lines with 300 designs per line
Customer wants drive their demands
Has traditionally been away from technology
Identified processes that add valueInfrastructure (3.1%), HRM (7.1%), R&D (4.2%), Procurement(27%), Inbound logistics (5.2%), Manufacturing (40.3%), outboundlogistics (6.6%), Sales (4.3%), Service (2.2%)
Introduced IT for design and vendor management
Identified processes that reduce valueSales process reduced value most by promising out-of-stock items,thus losing customer faith
Introduced IT to deliver inventory updates to sales team
8/3/2019 16788 Session 1&2 IT Strategy
13/33
13
What the management wants to know
How do organizations discover the next information
system to be deployed?
What would the information system interact with?
8/3/2019 16788 Session 1&2 IT Strategy
14/33
14
The IT Interaction Model
8/3/2019 16788 Session 1&2 IT Strategy
15/33
15
The External Environment
External environment is defined by factors like:
Competitive structure of the industry
Relative power of buyers and sellers
Basis of competitionGrowing, shrinking or stable industry
Regulation
Technological deployment
The external environment and the firms position in it
influence decisions like:Which Information Systems to be implemented
The design features of those systems
The impact on the firm and the industry
8/3/2019 16788 Session 1&2 IT Strategy
16/33
16
Firm Strategy
Business strategies may have IT implicationslike:
Differentiation
Low-cost productionFocus on quality and service
Going global
Right sizing
Customer/Supplier intimacyJust-in-time inventory/manufacturing
8/3/2019 16788 Session 1&2 IT Strategy
17/33
17
Organizational Structure & Culture
Firms structure and culture can influence IS designand IS success
Firms structure and culture can be influenced by
introduction of Information systemsSome decision factors may be:
Centralized versus decentralizedFunctional, divisional, matrix or networked organizationReporting hierarchy
Risk averting or risk takingValues individuality or teamwork
8/3/2019 16788 Session 1&2 IT Strategy
18/33
18
Business Processes
Business processes are the set of activities, oftencutting across major functional boundaries withinorganizations, by which organizations accomplish their
missionInformation Systems have been traditionally used toautomate business processes
Automation becomes more effective when planned in
the context of larger organizational reengineeringefforts
Information System is influenced by businessprocesses and business processes, in its turn, getinfluenced by Information Systems
8/3/2019 16788 Session 1&2 IT Strategy
19/33
19
IT Infrastructure
IT infrastructure represents the organizationalresources that give the firm the capacity to generatenew IT applications. It includes:
The physical components or the hardwareSoftware development tools and methodsThe Data and document repositoriesTelecommunications networksTraining materials and facilitiesUsers skills with IT
Compatibility, connectivity, reach and range
Management of IT environment
8/3/2019 16788 Session 1&2 IT Strategy
20/33
20
What the management wants to know
How do organizations discover the next information
system to be deployed?
What would the information system interact with?
How do organizations decide the IS portfolio?
8/3/2019 16788 Session 1&2 IT Strategy
21/33
21
Where IT can have an impact?
Impact on core operationsDoing things more efficiently
Inventory management system, Production schedulingsystem, Demand forecasting system, Sales forcemanagement system,
IT development priorities are targeted toward incremental,operational improvements that may improve companys costprofile but do little to change its position or power in theindustry
Impact on core strategiesDoing things differently
Going global, decentralizing, right sizing, being morecustomer oriented, diversifying,
If this works, it would change ; impacts companys
position or power
8/3/2019 16788 Session 1&2 IT Strategy
22/33
22
Impact of IT: McFarlans Strategic Grid
Factory
Goal: Improve performance of
core process
Leadership: Business unit
executives
Project Management: Process
reengineering
Goal: Improve local
performance
Leadership: Local level
oversight
Project Management:
Grassroots experimentation
Support
ITimpactoncoreoperations Strategic
Goal: Transform organization
or industry
Leadership: Senior executives
and Board
Project Management: Change
Management
Goal: Identify and launch new
ventures
Leadership: Venture
incubation unit
Project Management: New
venture development
Turnaround
IT impact on core strategy
Low High
High
8/3/2019 16788 Session 1&2 IT Strategy
23/33
23
An example: Cisco
Engaged in the business of manufacturing items thatprovide infrastructure for the Internet
Ciscos portfolio management approach is called E-Business Value Matrix
Every IT project must belong to one of the four categoriesto assess its value to the company.
New Fundamentals: low risk, increases productivity, in overheadareas, little user involvement, 3-6 months
Operational Excellence: medium risk, involves reengineering, highlyvisible, provides faster access to information, 12 month
Rational Experimentation: experiments with new technologies andideas, low criticality, incremental funding
Breakthrough Strategy: high risk, huge impact on company andindustry, managed like startups, venture capital like funding
8/3/2019 16788 Session 1&2 IT Strategy
24/33
24
E-Business Value Matrix
New Fundamentals Low Low
OperationalExcellence
High Low
RationalExperimentation
Low High
BreakthroughStrategy
High High
Criticality toBusiness
Newness ofIdea
8/3/2019 16788 Session 1&2 IT Strategy
25/33
25
Enters internet
(+) Eliminates intermediatechannels(-) Buyer has moreinformation about competitors& products(-) Switching cost is low
(-) Reduces barriers such asneed for sales force, physicalassets, access to channels(-) Initiatives are easilyimitated by the new entrants
(+) Network effect (value ofproduct increases as thenumber of users increases)thwarts substitutes(-) Opens up entirely newways to meet customer need
(+) More options are availableto choose supplier from(-) Suppliers, too, have moreoptions for customers
(-) Reduces difference amongcompetitors as offerings aredifficult to keep proprietary(-) Widens the geographicmarket increasing the numberof competitors(+) Widens the geographicmarket increasing the numberof buyers On the whole,
Porter says,
internet reducesyour profitability
8/3/2019 16788 Session 1&2 IT Strategy
26/33
26
But what makes the impact so
revolutionary?Value chain or value system also includes all theinformation that flows within a company, between acompany and its suppliers, its distributors and its existingor potential customers.
Earlier information used to move along with the product.
Now information can be unbundled from its physicalcarrier and made to travel by itself.
Information and the mechanism for delivering it shapeindustry structure and underlie competitive advantage.
Information is now a commodity and a business by itself.
8/3/2019 16788 Session 1&2 IT Strategy
27/33
27
Now your profitability depends on,
Leveraging IT towards
Commerce: to improve internal and external operations
Content: to provide richness of information
Community: to increase commitment and loyalty ofstakeholders
Judicious balance between
Reach: defined by the number of suppliers, distributors andcustomers you can access; and
Richness of content: defined byBandwidth, amount of information that can be moved
Customization, tailored for individual recipients
Interactivity, allowing dialogue
8/3/2019 16788 Session 1&2 IT Strategy
28/33
28
Strategic Positioning in the Internet: Factors
Internal Drivers
Degree of collaboration
Information & System requirements
Cost containment
External Drivers
Competition
Customer connectivity
Technology
8/3/2019 16788 Session 1&2 IT Strategy
29/33
29
Strategic Positioning in the Internet:
OptionsCost/Efficiency
Internet acts as a low-cost substitute for othercommunication channels. EDI links
Performance ImprovementWeb tools used to integrate resources, support virtual teamsand distributed decision making. Intranets, Groupware
Market Penetration
Public websites allowing for on-line customer interaction,support, and value-added services. Fedex
Product Transformation
Unique internet-based products.Amazon, electronic banking
8/3/2019 16788 Session 1&2 IT Strategy
30/33
30
Cronins Internet Strategic Grid
Market
Penetration
Product
Transformation
Cost/Efficiency PerformanceImprovement
ExternalDrivers
Internal Drivers
Low
Low
High
High
8/3/2019 16788 Session 1&2 IT Strategy
31/33
31
Competing in the age of information
Assess information intensity
High information intensity in the value chain
High information intensity in the product
Determine role of information in the industry structure
How each of the five competitive forces may be affected
Identify and rank the ways in which information technologymight create competitive advantage
Cost, quality, differentiation, service, reach, customization
Investigate how information technology might spawn newbusinesses
Information that can be sold, idle information processing capacity
Develop a plan for taking advantage of information technology
Balance among investment, expected advantage and risk
Your coordinates in the strategic grid
8/3/2019 16788 Session 1&2 IT Strategy
32/33
32
Implications
Value chain may get deconstructedITC e-Choupal
Fragments of value chain can give rise to separate businessesAll the BPOs
Businesses can benefit from network economies of scaleWalmart
New businesses will be spawned to help navigate throughinformation
Navigators, search engines, portals
Bargaining power will shift to customer as no one will havemonopoly over information
BanksCustomer loyalty will be difficult to retain as switching costsreduce
Amazon.com
Assets of legacy business may become a liabilityEncyclopedia Britannica
8/3/2019 16788 Session 1&2 IT Strategy
33/33
In summary
Information Technology is affecting competition inthree vital ways:
It creates competitive advantage by giving companies new
ways to outperform their rivals
It changes industry structure and, in so doing, alters therules of competition
It spawns whole new businesses, often from within acompanys existing operations