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CHAPTER# 04CORPORATE INFORMATION STRUCTURE AND COMPETITIVE STRATEGYMaking the Case for Networked Business
PresentersKamran Iqbal SiddiquiSyed Hamid JamalYahya Vana (Out of town)
Major Topics of the Chapter
Changing Economies
Linking strategies to Execution to Results
Developing the Business case for IT
Presented by: Kamran IqbalChanging EconomicsLinking Strategy to Execution and Results
Presented by: Hamid JamalDeveloping the Business Case for IT
CHANGING ECONOMICS
Comparing Industrial and Networked EconomiesThe Successful Organizations of the past
century differentiated themselves from others by creating economies of scale and scope
Economies of Scale The ability to produce better, faster and cheaper
by building specialized plants, creating specialized jobs.
Economies of Scope The ability to leverage an existing infrastructure
to produce and distribute new products
Industrial Economies of Scale
INDUSTRIAL ECONOMIES OF SCOPE
CHANGING ECONOMICS The Next Evolution – Network Economies of
Scale and Network Economies of Scope Network Economies of Scale
Community of firms use a common infrastructure to better produce and distribute products and services
Network Economies of Scope Community of firms use a common infrastructure to
launch new products and services
CHANGING ECONOMICS
Example Covisint In 2002, Covisint united its eight equity
partners (Ford, Daimler – Chrysler, GM, Nissan etc) and 19 Tier 1 suppliers (Delphi, Siemens, Arvin Meritor etc) and thousands of smaller Tier 2 and 3 suppliers.
Thus creating a network of networks and community members could routinely develop and execute proprietary strategies and capabilities.
NETWORK ECONOMIES
CHANGING ECONOMICS
Dave Perry and Ventro B2B e-commerce is all about getting in between
the existing buyers and sellers and creating an internet solution which helps them in doing business more effectively.
You need to have a critical mass of both buyers and sellers.
DAVE PERRY’S VIEW ON CREATING VALUE
LINKING STRATEGY TO RESULTS
Analyzing Performance Drivers Analysis of Business Concept, business
capabilities and value created. These three categories links directly to revenues
costs and assets which in turn drive your market valuation.
LINKING STRATEGY TO RESULTS
Business Concept Opportunities a firm will pursue and its strategy
to achieve a dominant position The business concept is used to frame the
assumptions used to forecast revenues.
LINKING STRATEGY TO RESULTS Capabilities
Once the business concept is defined then capabilities must be built to execute this strategy
Analysis of an organizations capabilities frames the assumptions used to forecast costs.
Operating and Innovating Capabilities Managing and Learning Capabilities Leading and Engaging Capabilities
LINKING STRATEGY TO RESULTS
Value Value analysis begins with assessment of
benefits delivered to customers, suppliers, partners and employees.
These benefits together with organization’s concept and capabilities create the assets that drive the financial and market performance.
STRATEGY TO RESULTS
DEVELOPING THE BUSINESS CASE FOR IT
We can use the framework (linking strategy to execution to results) to analyze and priorities IT investments.
Type 1 benefits arise from improvements in IT infrastructure.
An organization is poised to pursue the Type 2 benefits that accrue when an organization exploits new IT-enabled business opportunities that take advantage of the infrastructure i.e. “Benefits from doing business on a Networked Infrastructure”
REASONS TO INVESTMENT “IN” INFRASTRUCTURE (TYPE I)
By early 1900s, IT infrastructure became incompatible and inefficient due to technology therefore further investment in IT infrastructure was the consensus of all executives resulting in “Network Era of Technology”
Transition to Network Era of Technology began not with the INTERNET but with the early “CLIENT-SERVER” technologies but the cost of maintaining Client-Server was over $ 10,000 per year per workstation (Gartner Group survey: 1997)
BENEFITS FROM INVESTING IN IT INFRASTRUCTURE
It improved Computers, Database, Web hosting services, Networks, IT Professionals etc.
It decreased the cost and time to Launch new business
It decreased the risk
Increased number of Strategic Options That can be pursued
IT BUSINESS VALUE SCORECARD
For Type I benefits: Benefits from Investment in IT Infrastructure
Era’s of IT evolution
Source: A pplegate, L ynda M ., Robert D . A usti n, and F . W arren M cF arl an, Corporate I nfor mation Strategy and M anagement. B urr R idge, I L : M cG raw-H il l /I rw i n, 2002.
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C hapter 4 F igure 4-5
B enefi ts of I nvestments i n I nf rastructure
OTHER BENEFITS OF TYPE I
Security Options gives the owner the right (as distinct from the obligation) to buy a security at a fixed, predetermined price (Exercise price) on or before some fixed date (maturity date) Features to determine value:
1. Nature of future benefits (Risky projects , higher return)
2. Length of time one has to exercise the option (longer time frame: greater P.V of the option)
OTHER BENEFITS OF TYPE I (CONTD..)
Value-added IT-enables business opportunities at a lower cost, more quickly and with less inherent risk throughout Features to determine value:
1. Potential benefits from value-creating business opportunities that could be pursued (value depends on: number, type, and range of business opportunities)
2. Pursue riskier projects with higher potential return
3. Length of time for capturing value (keeping in mind that IT options can be exercised over and over throughout the useful life of the technology)
BENEFITS FROM DOING BUSINESS ON A NETWORKED INFRASTRUCTURE (TYPE II) Three major benefits
1. Commerce (Internal and External)
2. Content (Internal and External)
3. Community (Internal and External)
IT BUSINESS VALUE SCORECARD
For Type II benefits: Benefits from Investment on IT Infrastructure
Thank you..
