Week-8

Information Systems For Competitive

Advantage

1
 Learning Objectives

1. Discuss how organizations can

use information systems for
automation, organizational
learning, and strategic support

2. Describe information systems’

critical strategic importance to
the success of modern
organizations

Information Systems Today 2-2 (©2006 Prentice Hall)

 Learning Objectives

3. Formulate and present the

business case for a system and
understand why it is sometimes
difficult to do so

4. Explain why and how

companies are continually
looking for new ways to use
technology for competitive
advantage

Information Systems Today 2-3 (©2006 Prentice Hall)

 Three Primary Uses of Information Systems

Automation
Providing support to complete a task faster, more cheaply,
and perhaps with greater accuracy and/or consistency

Organizational Learning (Informating)

Providing support to improve day-today operations by
creating, acquiring, and transferring knowledge

Achieving Strategy
Providing support in a way that enables the firm to
gain or sustain competitive advantage over rivals

Information Systems Today 2-4 (©2006 Prentice Hall)

 What Value Is Provided in These Functions?

Information Systems Today 2-5 (©2006 Prentice Hall)

 Automation

Automation
Providing support to complete a task faster, more cheaply,
and perhaps with greater accuracy and/or consistency

Styles of Processing
Manual Processing
• No technology automation support
Technology Supported Processing
• A combination of manual and system supported steps
Fully Automated Processing
• All manual steps have been eliminated.

Effectiveness
If the underlying process is bad, automating with
technology alone may mask process problems

Information Systems Today 2-6 (©2006 Prentice Hall)

 Benefits of Automation – Loan Example

Information Systems Today 2-7 (©2006 Prentice Hall)

 Organizational Learning

Organizational Learning
Providing support to improve day-today operations by
creating, acquiring, and transferring knowledge

Informating (Zuboff 1988)

A technology that provides information about its operation
and the underlying work process it supports

Effectiveness
A combined automating and learning approach is more
effective than an automating approach alone. If the
underlying process is flawed, a learning use of technology
might help you detect problems with the process

Information Systems Today 2-8 (©2006 Prentice Hall)

 Organizational Learning Example

Information Systems Today 2-9 (©2006 Prentice Hall)

 Strategy and Competitive Advantage
Achieving Strategy
Providing support in a way that enables the firm to gain or
sustain competitive advantage over rivals

Sources of Competitive Advantage

• Having the best-made product on the market
• Delivering superior customer service
• Achieving lower cost than rivals
• Having proprietary manufacturing technology
• Having shorter lead-times in developing and testing new
products
• Having a well-known brand name and reputation
• Giving customers more value for their money

Information Systems Today 2-10 (©2006 Prentice Hall)

 Strategy

Information Systems Today 2-11 (©2006 Prentice Hall)

 Traditional vs System Support Process

Example
Using handheld technology combined with a reengineered
business process to create a competitive advantage

Information Systems Today 2-12 (©2006 Prentice Hall)

 Value Chain Analysis
Value Chain Analysis (Porter 1985, 2001 )
Is a process of analyzing an organization’s activities to
determine where value is added to products and/or
services and what costs are incurred in doing so.

Information Systems Today 2-13 (©2006 Prentice Hall)

 Information Systems Roles in the Value Chain

Systems play a significant role throughout the Value Chain to

achieve competitive advantage and:
• Must be appropriate for the business strategy (e.g. cost)
• Are usually coupled with Business Process Reengineering that
address process to enhance company operations

Information Systems Today 2-14 (©2006 Prentice Hall)

 The Value Chain - Primary Activities
Functional areas within an organization that process
inputs and produce outputs. These activities may vary
widely based on the unique requirements of a
company’s industry

Primary Activities include:

• Inbound Logistics – receiving and stocking raw
materials, parts, products
• Operations/Manufacturing – processing orders and
raw materials into finished product
• Outbound Logistics – distribution of the finished
product to customers
• Marketing and Sales – creating demand for the product
(pre-sales activities)
• Customer Service – providing support for the product
or customer (post-sales activities)

Information Systems Today 2-15 (©2006 Prentice Hall)

 The Value Chain - Support Activities

Support activities are business activities that enable

Primary Activities These activities can be unique by
industry but are generally more typical across industries

Support Activities include:

• Infrastructure – hardware and software that must be
implemented to support applications for primary activities
• Human Resources – employee management activities:
hiring, interview scheduling, and benefits management
• Technology Development – the design and development
of applications that support the organization
• Procurement – purchase of goods or services that are
required as inputs to primary activities

Information Systems Today 2-16 (©2006 Prentice Hall)

 Making the Business Case
Business Case
Identifying the value provided by an information system
The Productivity Paradox
• It is often difficult to quantify tangible productivity gains
from the use of an information systems
• As system based productivity increases, other forces
can simultaneously reduce gains (e.g. regulation)
• Unintended consequences of technology expenditures
can reduce system effectiveness (e.g. web surfing)
Business Case Development Issues
Several common issues create difficulty in defining business
cases for information systems including:
• Measurement Problems
• Time Lags
• Redistribution
• Mismanagement
Information Systems Today 2-17 (©2006 Prentice Hall)
 Making the Business Case – Issues
Measurement Problems
• The benefits of IT are difficult to pinpoint because firms
may be measuring the wrong things
• Expected benefits are not always defined in advance, so
they are never seen (They must be identified to measure).
• The biggest increases in productivity come from system
effectiveness but many metrics focus on system efficiency

Time Lags
• Describes the difference in time from when the IT
expenditure was made and when the benefits are realized
• One explanation for this lag is that it takes time for people
to become proficient at using new technology
• Another explanation is that large systems take a long time
to fully implement and integrate - sometimes many years
Information Systems Today 2-18 (©2006 Prentice Hall)
 Making the Business Case – Issues

Redistribution
• IS may be beneficial to individual firms, but not for an
entire industry or the economy as a whole
• Strategic information systems may help one firm increase
its market share at the expense of others (redistributing)
• Expectations have increased as technology has become
prevalent. We forget the gains that have been realized.

Mismanagement
• IS has not been implemented and managed well
• Some believe that people simply build bad systems,
implement them poorly, and rely on technology fixes for
problems that require joint technology/process solutions
• Inappropriate IS investments can mask or even increase
organizational slack and inefficiency
Information Systems Today 2-19 (©2006 Prentice Hall)
 Assessing Value for IT Infrastructure

Howard Rubin, Executive Vice President of Meta Group agues

a holistic approach should taken in measuring IT infrastructure
value. He suggests assessment along the following lines

Economic Use important business metrics to assess

contribution to profitability an economic value

Architectural Assess the capability to address current and

future business needs (e.g scalability)

Operational Assessing the performance in meeting

business processing requirements

Regulatory & Assess the extent in meeting control, security,

Compliance and integrity regulatory requirements

Information Systems Today 2-20 (©2006 Prentice Hall)

Technology Choices – Path to Competitive Advantage?
“IT Doesn’t Matter” Car 2003
• As IT becomes more pervasive, technology
becomes more standardized and ubiquitous
• Competitors have access to the same technology
which produces No Competitive Advantage

“The Engine that Drives Success…” Lundberg 2004

• Companies with bad business models fail regardless
of IT systems or other capabilities
• Companies with good business models use IT to
execute successful business models and succeed

“Predicting the New, New Thing” Bakos/Treacy 1986

• Use IS to make your products and services unique or
cause customers to invest in you to raise switching cost
• Competitive Advantage can be more easily sustainable
under these conditions
Information Systems Today 2-21 (©2006 Prentice Hall)