Chapter 2: Gaining Competitive Advantage Through Information Systems

Business processes

are the activities organizations perform in order to reach their business goals, including core activities that transform inputs and produce outputs, and supporting activities that enable the core activities to take place.

Operational Level

The routine, day to day business processes and interactions with customers occur. Information systems at this level are designed to automate repetitive activities, such as sales transaction processing, and to improve the efficiency of business processes at the customer interface.

Structured decisions

cost and time- are we doing this in a costly time.

productivity

Payroll processing

cash management

Transactions

Refers to anything that occurs as part of a fir's daily business of which it must keep a record

Structured Decisions

Those in which the procedures to follow for given situation can be specified in advanced.

Efficiency

Using information systems to optimize processes at the operational level can offer quick returns on the IS investment, as activities at this level are clearly delineated and well focused

Managerial Level

Functional managers (marketing managers, finance managers, manufacturing managers, human resources manager) focus on monitoring and controlling operational-level activities and providing information to higher levels of organization.

tactic level-semi structure

KPI=Key performance indicator

adidias example looking at sales and compare end of years sells from online to local stores.

Looking at ways to implement the ideas/solutions given to them by the "executive level"

Semi structured decisions

some procedures to follow for a given situation can be specified in advance, but not to the extent where a specific recommendation can be made.

Executive Level (or strategic level)

Managers focus on long-term strategic questions facing the organization, such as which products to produce, which countries to compete in, and what organizational strategy to follow.

Unstructured Decisions

few or no procedures to follow for a given situation can be specified in advance.

Organizational Learning

The ability of an organization to use past behavior and information to improve its business processes-and for change as well for automation.

Example: 529 application season, and tax season.

This computer based loan processing system, focusing on learning, is an example of information system used at the managerial level of an organization.

Organizational Strategy

A firm's plan to accomplish its mission and goals as well as to gain or sustain competitive advantage over rivals and how it relates to information systems.

Automating

Technology as a great way to help complete a task within an organization faster, more cheaply, and perhaps with greater accuracy and/or consistency.

Low-Cost leadership strategy

Offers the best prices in its industry on its goods and/or services.

Example: Walmart

Differentiation Strategy

Tries to provide better products or services than its competitors.

Example Porsche, Nordstrom, and IMB

Best-Cost Provider Strategy

Offering products or services of reasonably good quality at competitive prices, as does Dell.

Discuss the different levels of organizations and how information systems can be used for automation (faster), Organizational learning (better), and strategic advantage (smarter).

Broad Differentiation

Focused differentiation

Focused low-cost leadership

Overall low-cost leadership

Best-cost provider

Some Sources of competitive advantage

Being the first to enter a market (ie., having a first-mover advantage)

Having the best-made product on the market

Delivering superior customer service

Achieving lower costs than rivals

Having a proprietary manufacturing technology, formula, or algorithm

Having shorter lead times in developing and investing new products

Having a well-known brand name and reputation

giving customers more value for their money.

Resources

Reflects the organizations specific assts that are utilized to create cost or product differentiation from their competitors.

Examples could include: proprietary technology, brand equity, or a loyal established customer based.

Capabilites

Organizations ability to leverage their resources in the marketplace.

Distinctive Competencies

such as innovation, agility, quality, or low cost in the marketplace

Superior Value Creation

Occurs when an organization can provide products at a lower cost or with superior (differentiated) benefits to the customer. This is how organizations gain a competitive advantage.

Porters 1979 Notion of the 5 primary competitive forces:

1.) The rivalry among competing sellers in your industry.

2.) The threat of potential new entrants into your industry.

3.) The bargaining power that customers have within your industry

4.) The bargaining power that suppliers have within your industry.

5.) The potential for substitute products from other industries.

Value Chain Analysis

The process of analyzing an organization's activities to determine where value is added to products and or services and what costs are incurred for doing so.

Value Chain Analysis:

1.) Draw the value chain for your organization by fleshing out each of the activities, functions, and processes where value is or should be added and where performance can be improved.

2.) Deter the costs and the factors that drive costs or cause them to fluctuate within each of the areas in your value chain diagram.

3.) Determine which activities need to be optimized, so as to improve performance, cut costs, and ultimately gain or sustain competitive advantage.

Economic Value

The contribution an investment makes toward improving the infrastructure's ability to enhance the profitability of the business. To calculate such enhancements, you need to choose important business metrics in order to gauge the economic value of a given investment.

Architectural Value

An investment's ability to extend the infrastructure's capabilities to meet business needs today and in the future. To measure architectural value, "before and after" assessments of infrastructure characteristics such as inter-probability, portability, scalability, recover-ability,and compatibility can be taken

Operational Value

Assessing an investment's impact on enabling the infrastructure to better meet business processing requirements. To asses this, you could measure the impact of not investing in a particular project.

Business Model

A summary of a business's strategic direction that outlines how the objectives will be achieved; a business model specifies the value propostion.

Business Model Reflects the Following:

1.) What does a company do?

2.) How does a company uniquely do it?

3.) In what way (or ways) does the company get paid for doing it?

4.) What are the key resources and activities needed?

5.) What are the costs involved?

Freeconomics

The leveraging of digital technologies to productive free goods and services to customers as a business strategy for gaining a competitive advantage can be utilized by organizations from virtually any industry in the highly competitive digital world.

Key factors of globalization

fall of Berlin wall

the windows operating system: end of the cold war opening of global markets. Opened up sales of goods and services worldwide

The Windows Operating System: Developed in 1990. Standardized operating systems for most companies at the time.

Falling of telecommunications cost:

Help promote/produce wireless internet.

Only about 1.3 of the world population has internet access. 2.7 billion

the other 5 billion are digitally divided.

Successful Innovation Is Difficult

Innovation Is Often Fleeting

o Innovation Is Often Risky

o Innovation Choices Are Often Difficult

• Plus, innovation is not patentable; it can be copied

Co don't have unlimited tech

time is limited

info over tech is not perfect

Other Efforts in Freeconomics

o Freemium - free basic service with price for premium service

• Flickr Skype Tablet games

o Advertising - free services for customers paid by advertisers

• Yahoo Google

o Cross-subsidies - Reduced price in order to sell something

else

• Free cell phone for 2-year subscription

o Gift economy

• Wikipedia

Organizations: The Context of

Information Systems

Information Systems can help organizations

Be more productive and profitable

Gain competitive advantage

Reach more customers

Improve service to their customers

How information systems has made organizational levels flatter

Organizational strategy:

Cadna

Coalition against domain name abuse

legislation used to stop doaminers purchase

Disruptive innovations

Digital photography

online retailing

mp3 players and music downloading

smartphones

tablets

Netscape

blossomed the internet

Part of winners and losers in ssucessful inovation.

Eventually beat out by microsoft internet explorer.

Diffusion of Innovations

Innovators: adding features to already established tech markets.

Need for constant IS innovation

Sporting kc using google fiber for their stadium

transformation technology

Hard to predict what will come next, technology field very fast pace.

peco cell

some countries use this to allow people to use their cell phones on their airplanes

not legal in the U.S.

Why India is a good source of outsourcing labor

1.) Speak english

2.) Highly intelligent

3.) Low cost labor

4.) Very high population

Accenture

multinational management consulting, technology services and outsourcing companies

Information systems for supporting strategy: doing things smarter

Applying Freeconomics

Advertising

What it means: free services are provided to customers and paid for by a third party

examples: yahoo's banner ads, google pay per click, amazon's pay per transaction affiliate ads

Applying Freeconommics

Freemium

What it means: basic services are offered for free, but a premium is charged for special features.

Examples: flickr; skype, dropbox.com giving away an ap for free but having to buy paid upgrades to get full usuage and benefit of the app.

Applying Freeconomics

Cross subsidies

What it means: sale price of one item is reduced in order to sell something else of value.

example: comcast DVR

Applying Freeconomics

Gift economy

open source software development; wiki freeycycle free secondhand goods to anyone willing to haul them away

Doing things faster

Automating

BPA= Business Process Automation

is doing things faster always better?

SEC-put limits on transactions to what you could buy.

Dillons example

Doing things smarter

walmart "lower cost provider:" which implies IS to minimize expenses.

Dillons example: matching companty strategy with is strategy. Coupons.

Also builds loyalty. plus card, once customers regular use their plus card for gas. It's more benefical for them to shop at that store because they get fuel points vs not shopping there.