Strategic Uses of IT

Strategic Uses of IT

اسلاید 1: Strategic Uses of IT

اسلاید 2: 132Strategic Use of IT in Business Emerging Network Business ModelsIntroduction

اسلاید 3: What is Strategic Use?Having a significant, long-term impact on a firm’s growth rate, industry, and revenueUtilizing the Internet to conduct business became the strategic use of ITUsing IT to gain a sustained competitive advantage in businessMake distinction in business

اسلاید 4: Utilizing the InternetUse of the Internet has already set off a revolution in businessThe questions that remain are: Has the revolution ended, or Does an even larger revolution loom?Does IT still matter?, andWhat sorts of strategic uses are companies making?

اسلاید 5: Strategic Use of Information SystemsWorking inwardImproving a firms internal processes and structureWorking outwardImproving the firms products and relationships with customersWorking acrossImproving its processes and relationships with its business partners

اسلاید 6: History of Strategic Uses of IT (1)Mid 1980s: end user computing (working inward)End user computing dept. to help employees learn about PCs and user computing languageLate 1980s: using IT to gain competitive advantage (working outward)e.g. Merrill Lynch cash account management, AA airline ticket booking

اسلاید 7: History of Strategic Uses of IT (2)1990s: reengineering business processes (inward again)Totally redesign how the enterprise operatedIntroduction of ERPMid-1990s: Internets potential becoming evidentThe technology was mostly used internally: intranetsImprove company processesPublish e-forms

اسلاید 8: History of Strategic Uses of IT (3)Late 1990s: e-business underwayBursting of the dot com bubbleIntegration of the Internet into how companies work has proceededEarly 2000s: emphasis on working acrossleveraging traditional operations by using the Internet to work more closely with othersLinking to suppliers, customers and other partners in ones value chain or business ecosystemStrike back of Brick-and-Mortar

اسلاید 9: History of Strategic Uses of IT (4)Mid 2000s: something has changedBeing used strategically:InwardOutwardAcross Some start questioning ITs ability to give companies a competitive edge but it is absolutely necessary for competitive parity.

اسلاید 10: Whither the Internet Revolution? (1)British Railway Revolution – the mania started in 1830s and experienced a crash in 184510 fold increase in 1910, 65 years after the crashDuring boom, great excitement and small companies flourishedAfter crash, glamour gone, business became serious and full of hard workIndustry became orderly and profits began to reflect real returnsInvestment frenzy for connection technology: race for space

اسلاید 11: Whither the Internet Revolution? (2)Revolution arises only after organization structure their activities around new technologiesWe are now in a period where organizations are re-architecting themselves around Internet technologiesTearing down old structures as they goReal gains will come when Internet technology adapts to organizations and peopleWhen the technology disappears and becomes part of lifeIt will be quiet compared to frenzy of 99/00 but many think it will be a giant revolution

اسلاید 12: The Cheap RevolutionThe cost of data processing, storage and transport has dropped relentlessly$480 per MIPS in 1978  $50 per MIPS in 1985  $4 MIPS in 199510m$/GB in 1956  200,000$/GB in 1980  1 $/GB in 2003Cheap TechGoogle: runs on 100,000 cheap serversDellificationMoved from selling PCs to also selling servers, printers, storage devicesThe Cheap Revolution is occurring elsewhere:Labor – outsourcing to other countriesSoftware – Linux Vs. MicrosoftTelecommunications – Voice-over-IP

اسلاید 13: Does IT Still Matter? (1)IT Doesnt Matter – article by Nicholas Carr in Harvard Business Review May 2003What makes a resource truly strategic is not ubiquity but scarcityAs information technologys power and ubiquity have grown, its strategic importance has diminished.Being now available and affordable to all, IT has evolved from potentially strategic resources into commodity factors of production.

اسلاید 14: Does IT Still Matter? (2)Proprietary technologies VS. infrastructural technologiesProprietary technologyCan be owned by a single companyFoundation for long-term strategic advantageInfrastructural technologyHas more value when share than used in isolation, like railway, telegraph lineSuch technology can create a strategic advantage for an individual firm at the beginning of its buildout when it is expensive and risky

اسلاید 15: Does IT Still Matter? (3)IT is an infrastructure technology, like rail, electricity, telephone etc.IT, above all, is a transport mechanismIT is highly replicableIT is subject to rapid price deflationIT buildout is now much closer to its end than its beginningIT is neither proprietary or expensive

اسلاید 16: Does IT Still Matter? (4)when a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it providese.g. electricityManagement of IT should now focus more on risks and vulnerabilities than on opportunitiesGreatest risk: overspendingStudies of corporate IT spending consistently show that greater expenditures rarely translate into superior financial results. In fact, the opposite is usually true

اسلاید 17: AssignmentWrite a review on IT Doesn’t Matter.

اسلاید 18: 132Strategic Use of IT in Business Emerging Network Business ModelsIntroduction

اسلاید 19: Working Inward: Business-to-EmployeeStrategically using IT inside the enterprise still focuses on using Internet to improve business processesBuilding intranetsIntranets are private company networks that use Internet technologies and protocols, and possibly the Internet itself

اسلاید 20: VPN Intranet

اسلاید 21: Benefits of Using IntranetsWider access to company informationIntranets open-system architecture significantly decrease the cost of providing companywide information and connectivityOpen-system architecture VS. proprietary networksThe link to the Internet allows companies to expand intranets worldwide easily and cheaplyBrowser interface for web applications greatly decreased training costs

اسلاید 22: Fostering a Sense of BelongingIntranets are evolving into very important enterprise structuresIn some enterprises, the intranet is seen as the enterpriseInternal forms, rules and processesCan also be seen as cold and impersonalCreating a sense of belongingGiving a means of communicating and creating communitiesCare of employees

اسلاید 23: Working Outward: Business-to-CustomerIn most industries companies need sophisticated computer systems to competee.g. reservation systems used in airlinesautomated order entry and distribution in wholesale industryATMs., trading and settlement in financeAHSAs industry leaders increase the sophistication of their systems to improveCompetitors must do the same or find themselves at a disadvantage

اسلاید 24: Jumping to a New Experience Curve (1)Strategically using IT to work outward is highly competitive and innovativeTechnology updates occur frequently, forming a set of connected experience curvesEach curve represents a new technology or combination thereof in a product or service as well as in its manufacture and/or supportMoving to a new curve requires substantial investment in a new technology

اسلاید 25: Jumping to a New Experience Curve (2)The principle of the experience curve is that management should not have too much emotional attachment to the current experience curve and fail to see the next oneKeep up or lose outHistorically lessonsMainframe manufacturers ignored minicomputer firmsThe minicomputer firms ignored PC manufacturers (Microsoft)Microsoft ignored the Internet

اسلاید 26: Case Example: the Shipping Industry

اسلاید 27: The Emergence of Electronic TendersInitially IT has been embedded in products and services for its computational capabilitiese.g. in cars and elevators to make them operate more efficientlyInternet and embedded systems now allow products/services to be tendede.g. packages / luggage trackingVehicle diagnostics monitored by car dealerPotential uses are endless and we are just at the beginningOptions are endless but the goal is still to get closer to the customer

اسلاید 28: Getting Closer to Customers (1)B2C e-business is the most widely reported form of e-business.Nearly every type of product can now be purchased online: books, CDs, flowers etc.Many success stories – Dell, Cheap Tickets, ETrade ….Success is not easily achieved:Amazon.com had its business viability questioned for a long timeLevi Strauss, despite encouraging figures, quit selling jeans over the Internet Use of Internet has now become much more sophisticated.

اسلاید 29: Getting Closer to Customers (2)CRMs are used to learn more about customersWhether you visit their website, call them (home, office, mobile) or buy something – the firm is often keeping track and combining that information to create a profile of youFollowed on from ERPERP focused on internal dataCRM focuses on customer dataBoon or bane: Great useful information Vs. Invasion of privacy

اسلاید 30: Getting Closer to Customers (3)Successful selling over the Internet entails much more than just setting up a Web site and taking ordersIt involves organizing the entire value chain around the InternetThe E-Business model: redefining customer valueOn-demandPersonalization of serviceAccess to a wide range of competitive prices and sellers for products

اسلاید 31: Getting Closer to Customers (4)The Internet is not only used to sell to customers online. It is also used to provide services to companiesSometimes it is can be difficult to know which is more valuable – the product or the serviceThe current focus is on staying in closer contact with customersUnderstanding them betterEventually, becoming customer driven by delivering personalized products and service

اسلاید 32: Working Across: Business-to-BusinessStreamlining processes that cross company boundaries is the next big management challengeFrom streamlining internal processes to changing processes to mesh with otherWorking across business takes many forms including:Working with co-suppliersWorking with customers in a close mutually dependent relationshipBuilding a virtual enterprise, in fact, one that might evolve into an e-marketplace

اسلاید 33: Coordinating with Co-SuppliersCosuppliers: firms that have the same customers but not compete with each otherKey in coordinating with cosuppliersMechanisms to share information quickly and easilyRecommended steps for cooperationStreamlining internal processCollaborating on new joint processesEliminate duplicate activities, focus on customer needs...

اسلاید 34: Case Example: General Mills and Land O’LakesSeven largest US food companies supply about 40% of supermarket shelf space for dry goodsUse own trucks etc. Only supply 15% of refrigeratedOne truck for several supermarketsLess efficient, delays etc. = unhappy clientsLand OLake combined their deliveries on General Mills trucksNow, they are looking into integrating their order taking and billing processes

اسلاید 35: Establishing Close and Tight Relationships (1)Working across companies is the most difficult area of strategic use of IT and InternetHaving relationships with various players in ones business ecosystemBanks, advertising agencies, suppliers, distributors, retailers, even competitorsSuch relationships often have accompanying linking information systems

اسلاید 36: Establishing Close and Tight Relationships (2)3 level of systems integration between companiesLoose: provide ad hoc access to internal informationBusiness processes remain distinctClose: two parties exchange information in a formal mannerProcesses are distinct, but some tasks are handled jointlyTight: two parties share at least one business processHigh volumes of possibly confidential data are exchanged

اسلاید 37: Establishing Close and Tight Relationships (3)* Basic Conformance** Intermediate conformance with significant detail*** Advanced conformance with significant detail and ongoing maintenance

اسلاید 38: Becoming a Customer-Centric Value ChainA companys value chain consists of:Upstream supply chainDownstream demand chainTraditional make-to-stock: build products / create services and then push them to customersSupply-Push worldThe rising of the reverse – a demand-pull worldA customers order triggers the creation of a customized product or service the customer has defined

اسلاید 39: Case Example: DellThe foremost example of the demand-pull business modelCustomers configure their PCs on Dells WebsiteOnce an order is initiated, Dells suppliers can see the ordering information and production schedule on Dells extranetThis information can be grabbed automaticallyDells extranet is becoming a private market placeCustomers orders are distributed to suppliers ( or even suppliers of suppliers)Value chain transparency, better forecastA demand-pull financial value chain

اسلاید 40: Pros and Cons of Demand-PullProsBetter satisfy the customer’s diversified needsValue-chain transparency10,000 memory chips Vs. 30,000 ‘ordered’ due to shortageConsInfrastructuresCrashes can be more devastatingBecoming customer centric is not easy, especially for supply-push companiesThe lure of CRM

اسلاید 41: Getting Back-End Systems in ShapeWorking across often needs integrate existing back-end systemsAccounting, finance, sales, marketing, planning...Particular challenging Variety of platformsIncompatibleApproachesPurchase new systemsDatabase Management Systems (DBMS)ERP SystemsExtranetGoal: extend the companys back-end systems to reengineer business processes external to the company

اسلاید 42: 132Strategic Use of IT in Business Emerging Network Business ModelsIntroduction

اسلاید 43: Classifying Network Business ModelsProducersFocused distributorsPortalsInfrastructure ProducersInfrastructure DistributorsInfrastructure PortalsCreate and package products, services, and solutionsEnable buyers and sellers to connect, communicate, and transact businessCreate and package technology-based products, services, and solutionsEnable technology buyers and sellers to transact businessEnable consumers and businesses to access online services and informationBusinesses Built on the InternetBusinesses Providing the Infrastructure

اسلاید 44: Focused DistributorsProvide products and services related to a specific industry or market niche.Differentiate focused distributor business modelsControl of inventorySelling onlinePrice negotiation and biddingDistribution of physical products and services

اسلاید 45: eRetailerse.g. Amazon.comAssume control of inventorySet a nonnegotiable price to the consumersSell physical products onlineThe primary revenue model is based on product/service sales

اسلاید 46: eMarketse.g. Global Healthcare Exchange, which links buyers and sellers allowing them to compare and purchase products onlineThe revenue model includes a commission and transaction fee on each saleeMarkets must electronically link to supplier database and order fulfilment systemA second revenue streamTakes no control of physical inventoryThe physical distribution and logistics costs are lower than that of eRetailerSystem integration service may bring more risk and cost

اسلاید 47: eAggregatorse.g. InsWeb, which provides information on products or services for sale by others in the channelProvide electronic catalogs and comparisons of features and pricingThey then pass the customer through to the supplier to complete the saleRevenue model: referral fee and advertising

اسلاید 48: Informediariese.g. Internet SecuritiesA special class of eAggragators that unites sellers and buyers of informationRevenue modelB2B Informediaries will charge a company a corporate subscription feeB2C informediaries often provide information free to customers and make money based on advertising revenuesInformediaries often seek to quickly evolve from simply brokering information

اسلاید 49: Exchangese.g. eBay, NASDAQ, FreeMarketsMay or may not take control of inventoryMay or may not complete the final transaction onlineKey differentiating featurePrice is not set; negotiated at the time of saleRevenue model varies

اسلاید 50: PortalsE.g. AOL, Yahoo!, GoogleNetwork model with longest historyEarly Internet portals: help consumers to access content on WWWConnect to the InternetBrowse the webDirectory and search servicesNow portals are recognized as channels through with users access information and services.

اسلاید 51: ProducersProducers use the Internet to design, produce and distribute products and servicesManufacturersE.g. Ford, P&GService providersE.g. American Express, Citigroup, AAEducatorsE.g. Harvard Business School, McGraw-Hill, Knowledge UniversityAdvisorsE.g. Accenture, Booz AllenInformation and news servicesE.g. WSJ