Organizational Strategy, Competitive Advantage, and Information Systems (Video Notes)

ORGANIZATIONAL STRATEGY, COMPETITIVE ADVANTAGE, AND INFORMATION SYSTEMS

LEARNING OBJECTIVES (overview from slides)

• Discuss how information systems (IS) enable business processes for a single functional area and cross-functional processes.
• Differentiate among Business Process Reengineering (BPR), Business Process Improvement (BPI), and Business Process Management (BPM).
• Identify effective IT responses to different kinds of business pressures.
• Describe the strategies organizations typically adopt to counter Porter’s five competitive forces.

BUSINESS PROCESSES

• A business process is an ongoing collection of related activities that create a product or service of value to the organization, its partners, and/or its customers.
• Three elements of a process:
  • Inputs
  • Resources
  • Outputs
• Key concepts:
  • Efficiency vs. effectiveness

CROSS-FUNCTIONAL PROCESSES

• No single department or functional area is responsible for end-to-end processes.
• Steps are executed in a coordinated, collaborative way across functions.
• Examples include procurement and fulfillment cross-functional processes.

INFORMATION SYSTEMS AND BUSINESS PROCESSES

• IS plays a vital role in three areas of business processes:
  • Executing the process
  • Informing employees when it is time to complete a task
  • Providing required data and a means to complete the task
• IS also captures and stores process data (e.g., dates, times, product numbers, quantities, prices, addresses, names, employee actions).
• Transaction data is captured and stored to provide immediate, real-time feedback.
• IS monitors process performance, evaluating information to determine how well a process is being executed at two levels:
  • Process level
  • Instance level
• Monitoring identifies problems for process improvement.

ROBOTIC PROCESS AUTOMATION (RPA)

• RPA enables enterprises to automate business processes and tasks historically performed by employees.
• Companies develop software “robots” or bots that automate steps in a business process.

EXCELLENCE IN BUSINESS PROCESSES

• Excellence in executing business processes underpins competitive performance.
• Measures of success (examples):
  • Customer satisfaction: aligning processes to fulfill customer needs
  • Cost reduction: optimizing operations and supplier processes
  • Cycle and fulfillment time reduction: manufacturing and logistics optimization
  • Quality: design, development, and production optimization
  • Differentiation: marketing and innovation optimization
  • Productivity: optimizing each individual’s work processes
• Question: How does an organization achieve business process excellence?

BPN: EXCELLENCE IN PRACTICE – BPR, BPI, BPM

• Three approaches to improving processes:
  • Business Process Reengineering (BPR)
  • Business Process Improvement (BPI)
  • Business Process Management (BPM)

BUSINESS PROCESS REENGINEERING (BPR)

• Definition: radical redesign of an organization’s business processes to increase productivity and profitability.
• Characteristics:
  • Difficult
  • Radical
  • Lengthy
  • Comprehensive
• Implications: requires resources (financial, HR, etc.), affects organizational culture, and can create stress.

BUSINESS PROCESS IMPROVEMENT (BPI)

• Definition: incremental approach toward business process–centered operations.
• Focus: reducing variation in process outputs by identifying the underlying causes.
• Six Sigma is a popular methodology for BPI.

BPI: DMAIC FRAMEWORK

• Five basic phases of successful BPI (DMAIC):
  1. Define: document the existing “as is” process activities, resources, inputs/outputs, and customer requirements; describe the problem.
  2. Measure: identify relevant process metrics.
  3. Analyze: examine the “as is” process diagram and data to identify problems and root causes.
  4. Improve: identify possible solutions, map the resulting “to be” process, select and implement the best solution.
  5. Control: establish process metrics and monitor the improved process to ensure stability.

BPI VERSUS BPR (COMPARISON SUMMARY)

• BPI (incremental, low risk, bottom-up, shorter time, quantifiable results; involves all employees in many cases).
• BPR (radical redesign, high risk, top-down, time consuming, potential for overwhelming impacts, higher failure rate).

BUSINESS PROCESS MANAGEMENT (BPM) AND KEY COMPONENTS

• BPM is a management system that supports continuous BPI initiatives for core business processes over time.
• Important components:
  • Process modeling
  • Business Activity Monitoring (BAM)

BUSINESS PRESSURES AND ENVIRONMENT

• Business pressures arise from changes in the business environment and include:
  • Social, legal, economic, technological, political factors
• Business environment pressures can include ethical issues, regulatory compliance, and social responsibility.
• Organizational responses to these pressures and the competitive landscape include strategic systems and continuous improvement efforts.

BUSINESS PRESSURES – DETAILED CONTEXT

• Societal/political/legal pressures:
  • Ethical issues and compliance with government regulations (e.g., PIPEDA)
  • Social responsibility and Green IT (carbon management, environmental laws, digital divide)
  • Protection against criminal activities (fraud, identity theft)
• Terrorist attacks and homeland security, global economy, and regulatory changes.
• Economic and technological shifts drive the need for real-time operations, data management, and IT investments.

ORGANIZATIONAL RESPONSES TO PRESSURES

• Strategic systems: provide advantages to increase market share and profits, negotiate with suppliers, deter entry by competitors.
• Customer focus.
• Make-to-order and mass customization:
  • Make-to-order: produce customized products/services to individual specifications.
  • Mass customization: large-scale make-to-order capability.
• E-business and e-commerce.

PORTER’S COMPETITIVE FORCES MODEL

• Five forces:
  1) Threat of entry of new competitors
  2) Bargaining power of suppliers
  3) Bargaining power of customers/buyers
  4) Threat of substitute products or services
  5) Rivalry among existing firms within the industry

PORTER’S VALUE CHAIN MODEL

• Value chain: sequence of activities transforming inputs into valuable outputs.
• Primary activities relate to production and distribution of products/services.
• Support activities assist primary activities and contribute to competitive advantage.

PORTER’S VALUE CHAIN – PRIMARY AND SUPPORT ACTIVITIES (EXAMPLES)

• Primary activities (5):
  • Inbound logistics: quality control; receiving; raw materials control; supply schedules
  • Operations: manufacturing; packaging; production control; quality control; maintenance
  • Outbound logistics: finishing goods; order handling; dispatch; delivery; invoicing
  • Marketing and sales: customer management; order taking; promotion; sales analysis; market research
  • Services: customer service; warranty; maintenance; education and training; upgrades
• Support activities (4):
  • Firm infrastructure (administration and management); legal, accounting, finance management
  • Human resources management
  • Product and technology development (R&D)
  • Procurement
• The firm adds value through the interaction of these activities and through information-enabled processes (e.g., electronic scheduling, intranets, supplier portals, CRM).

COMPETITIVE ADVANTAGE

• Definition: outperforming competitors on a critical measure such as cost, quality, or time-to-market.
• Strategies to achieve competitive advantage:
  • Cost leadership
  • Differentiation
  • Innovation
  • Operational effectiveness
  • Customer orientation

STRATEGIES FOR COMPETITIVE ADVANTAGE (QUICK SUMMARY)

• Cost Leadership: ability to sell at a lower price than competitors.
• Differentiation: offer something unique that customers perceive as valuable.
• Innovation: introduce new products or approaches that competitors cannot match quickly.
• Operational Effectiveness: perform the same tasks more efficiently than rivals.
• Customer Orientation: superior customer treatment and service.

BUSINESS INFORMATION TECHNOLOGY (IT) ALIGNMENT

• Tight integration of IT with strategy, mission, and goals.
• Six characteristics of excellent IT alignment:
  1. IT as an engine of innovation that can create new revenue streams.
  2. Customer focus and service as central to both internal and external operations.
  3. Rotating IT and business professionals across departments.
  4. Clear overarching goals shared by IT and business employees.
  5. Understanding of how the company makes or loses money by IT staff.
  6. A vibrant and inclusive company culture.

ADDITIONAL NOTES

• You may encounter references to a quiz and class logistics (e.g., next week's quiz, time limits). Prepare by reviewing the topics covered in this deck and prior readings.

KEY TERMS TO REMEMBER

• Business Process Reengineering (BPR)
• Business Process Improvement (BPI)
• Business Process Management (BPM)
• DMAIC: Define, Measure, Analyze, Improve, Control
• Six Sigma
• Inbound/Outbound Logistics, Operations, Marketing and Sales, Services (Porter’s Primary Activities)
• Firm Infrastructure, HR Management, Product & Technology Development, Procurement (Porter’s Support Activities)
• Porter’s Five Forces and Value Chain concepts
• Green IT, PIPEDA, digital divide
• RPA (Robotic Process Automation)

SUMMARY REMINDER

• IS supports the full lifecycle of processes: execution, data capture, monitoring, and feedback.
• Process improvement can be radical (BPR) or incremental (BPI); BPM provides ongoing management for continuous improvement.
• External pressures (globalization, workforce changes, demanding customers, technology shifts) drive organizational responses and IT investments.
• Competitive advantage arises from choosing and executing strategies across cost, differentiation, innovation, operational effectiveness, and customer focus, guided by strong IT alignment with business strategy.