Chap02_Using IT for Competitive Advantage

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Chapter 2Using Information TechnologyUsing Information Technology

for Competitive Advantagefor Competitive Advantage

Copyright 2001, Prentice-Hall, Inc.

MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell

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What is a Firm?What is a Firm?

Physical SystemPhysical System ± ± ClosedClosed--looploop

± ± Controlled by managementControlled by management ± ± Uses feedback to ensure objectives metUses feedback to ensure objectives met ± ± Open because of environmental interactionOpen because of environmental interaction

Managed through use of a conceptualManaged through use of a conceptualsystemsystem

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Importance of EnvironmentImportance of Environment

V ery reason for a firm¶s existenceV ery reason for a firm¶s existenceFirm takes resources from environment,Firm takes resources from environment,transforms them, and returns goods andtransforms them, and returns goods andservices to environmentservices to environment

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Society

FinancialCommunity

GovernmentGlobal

Community

Suppliers TheFirm

Laborunions

Stockholdersor owners

Customers

Competitors

The Firm·s Environment

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The Firm Is Connected to ItsThe Firm Is Connected to ItsEnvironment by Resource FlowsEnvironment by Resource Flows

Physical and conceptualPhysical and conceptualSome flows are major Some flows are major Some should not occur at allSome should not occur at all

All resources that enter the firm from theAll resources that enter the firm from theenvironment eventually return to theenvironment eventually return to theenvironmentenvironment

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Competitive AdvantageCompetitive Advantage

Computer field perspectiveComputer field perspective ± ± Use of information to gain leverage inUse of information to gain leverage in

marketplacemarketplace ± ± Relies on more than physical resourcesRelies on more than physical resources

Addressed with strategic objectivesAddressed with strategic objectives

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A Value Chain A Value Chain

Firm Infrastructure

Human resource management

Technology development

Procurement

Inbound

logistics

Operations Outbound

logistics

Marketingand

sales

Service

Support

Activities

Primary Activities2-7Source : Michael E. Porter



Channelvaluechains

Suppliervaluechains

Buyervaluechains

Firmvaluechain

A Value System A Value System

2-8Source : Michael E. Porter



The Information ResourcesThe Information Resources

Two views of information managementTwo views of information management

1. Manage data by implementing computer 1. Manage data by implementing computer- - based database management systems based database management systems

(DBMS)(DBMS)

2. Manage resources that produce the2. Manage resources that produce theinformationinformation

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The Information ResourcesThe Information Resources

Facilities

Software Database

Hardware

InformationSpecialists

Users

Information

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The Information ResourceThe Information Resource

ManagerManager ---- the CIO

the CIO

Chief Information Officer (CIO) is notChief Information Officer (CIO) is notsimply a title, but rolesimply a title, but role

Manager of information servicesManager of information servicesContributes managerial skillsContributes managerial skills ± ± Solves information resources problemsSolves information resources problems

± ± Solves problems in other areas of firm¶sSolves problems in other areas of firm¶soperationsoperations

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The CIO AttitudeThe CIO Attitude

The business is what countsThe business is what countsBuild partnerships/ties with the rest of theBuild partnerships/ties with the rest of thefirmfirmImprove basic business processesImprove basic business processesCommunicate in business terms, not ISCommunicate in business terms, not IS

jargon jargonProvide reliable IS servicesProvide reliable IS servicesBe positive, not defensiveBe positive, not defensive

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Strategic PlanningStrategic Planning

L ongL ong--range planningrange planning ± ± Intends to give firm most favorable position inIntends to give firm most favorable position in

its environmentits environment ± ± Specifies strategies for achieving objectivesSpecifies strategies for achieving objectives

Need for each business area to create its Need for each business area to create its

own strategic planown strategic plan

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Strategicplanning for

information resources

Strategicplanning formarketingresources


manufacturing

resources


human

resources


financial resources

The Functional Areas Should CooperateThe Functional Areas Should Cooperatein Developing Their Strategic Plansin Developing Their Strategic Plans

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Strategy Set TransformationStrategy Set TransformationOrgan iz a tio nal s t ra te g y s et

MIS s t ra te g y s et

Mission

Objectives

Strategy

Other strategicorganizationalattributes

System

objectives

Systemconstraints

Systemdesignstrategies

MIS s t ra te g ic p lann i ng pr oce ss

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Strategy Set Transformation:Strategy Set Transformation:

Basic FlawBasic FlawBusiness areas do not always have theBusiness areas do not always have theresources to ensure accomplishment of resources to ensure accomplishment of

strategic objectivesstrategic objectives

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SPIRSPIR

Strategy set transformation; support theStrategy set transformation; support thefirm¶s objectivesfirm¶s objectives

Strategic planning for information resourcesStrategic planning for information resources(SPIR)(SPIR) develops firm and IS strategic plansdevelops firm and IS strategic plansconcurrentlyconcurrently

± ± SPIR contentSPIR content»» 1. What is to be achieved1. What is to be achieved»» 2. What will be required2. What will be required

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Strategic Planning forStrategic Planning forInformation ResourcesInformation Resources

B usinessstrategy

Informationresourcesand

ISstrategy

Influence onB usinessStrategy

Influence onInformationResources

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Strategic Plan Framework forStrategic Plan Framework forInformation Resources

Information Resources

Strategic Planfor Information

Resources

AISObjectives

MISObjectives

DSSObjectives

V irtualOffice

Objectives

Knowledge- based systems

Objectives

RequiredInformationResources





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The Strategic Implications ofThe Strategic Implications of

EndEnd--User Computing (EUC)User Computing (EUC)L evels of end users in terms of capabilitiesL evels of end users in terms of capabilities ± ± menumenu--level end userslevel end users

± ± commandcommand--level end userslevel end users ± ± endend--user programmersuser programmers ± ± functional support personnelfunctional support personnel

EUC application considerationsEUC application considerations ± ± shifts workload so that endshifts workload so that end- -users andusers and

information specialists¶ talents are better usedinformation specialists¶ talents are better used ± ± reduces communications gapreduces communications gap 2-20



EUC RisksEUC Risks

Poorly aimed systemsPoorly aimed systemsPoorly designed/ documented systemsPoorly designed/ documented systemsInefficient use of information resourcesInefficient use of information resourcesL oss of data integrityL oss of data integrityL oss of securityL oss of securityL oss of controlL oss of control

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Information ResourcesInformation ResourcesManagement ( IRM) ConceptManagement ( IRM) Concept

Realization that firm¶s informationRealization that firm¶s informationresources go far beyond the informationresources go far beyond the information

itself itself Activity pursued by managers at all levelsActivity pursued by managers at all levelsIdentifying, acquiring, and managingIdentifying, acquiring, and managing

information resources needed to satisfyinformation resources needed to satisfyinformation needsinformation needs

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IRMIRM -- Required ElementsRequired Elements

A recognition that competitive advantageA recognition that competitive advantagecan be achieved by means of superior can be achieved by means of superior

information resourcesinformation resourcesA recognition that information services is aA recognition that information services is amajor functional areamajor functional area

A recognition that the CIO is a topA recognition that the CIO is a top- -levellevelexecutiveexecutive

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IRMIRM--Required Ingredients (cont.)Required Ingredients (cont.)

A consideration of the firm¶s informationA consideration of the firm¶s informationresources when engaging in strategicresources when engaging in strategic

planning planningA formal strategic plan for informationA formal strategic plan for informationresourcesresources

A strategy for stimulating and managingA strategy for stimulating and managingendend--user computinguser computing

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The firm¶s executivesC IO Other executives

C entral computingresources

Disbursed computingresources

FUN CT IONAL AREASFUN CT IONAL AREAS

Users engaged inend-user computing Other users

ENVIRONMEN TAL INFLUEN C ESENVIRONMEN TAL INFLUEN C ES

Internal influences Firm¶s strategic plan

INFORMA T ION RESOUR C ESINFORMA T ION RESOUR C ES

DATA AND INFORMA T IONDATA AND INFORMA T ION

The IRM ModelThe IRM Model

Informationservices

Humanresources

Manufacturing MarketingFinance

The environment of the firm

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IRM Model: Firm EnvironmentIRM Model: Firm Environment

Provides setting for achieving competitiveProvides setting for achieving competitiveadvantageadvantage

Executives are aware of need to manageExecutives are aware of need to manageresource flows to meet needs of resource flows to meet needs of environmental elementsenvironmental elements

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IRM Model: Firm·s ExecutivesIRM Model: Firm·s Executives

Includes CIOIncludes CIOGuides firm toward objectivesGuides firm toward objectivesKey activity is strategic planningKey activity is strategic planning

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IRM Model: Business AreasIRM Model: Business Areas

Information services is a major businessInformation services is a major businessareaarea

Each area develops own strategic plansEach area develops own strategic plansOne business area strategic plan is for One business area strategic plan is for information resourcesinformation resources

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IRM Model:InformationIRM Model:InformationResourcesResources

Strategic plan for information resourcesStrategic plan for information resourcesdetails acquisition and managementdetails acquisition and management

Information resourcesInformation resources ± ± CentralizedCentralized ± ± Dispersed throughout firmDispersed throughout firm

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IRM Model: UsersIRM Model: Users

Details data and information flows betweenDetails data and information flows betweenresources and usersresources and users

Some users engage in endSome users engage in end- -user computinguser computing

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SummarySummaryEnvironment of a firm consists of eightEnvironment of a firm consists of eightelementselementsFirms attempt to achieve competitiveFirms attempt to achieve competitive

advantageadvantage ± ± MarginMargin -- value of products and services over value of products and services over

costcost ± ± V alue chainV alue chain

Information resourcesInformation resources ± ± Hardware, software, facilities, database,Hardware, software, facilities, database,

information specialists, information, and usersinformation specialists, information, and users2-31



Summary [cont.]Summary [cont.]

Executives perform strategic planningExecutives perform strategic planning ± ± SPIR SPIR

All firm¶s managers need to engage in IRMAll firm¶s managers need to engage in IRM ± ± Recent revelationRecent revelation ± ± Integrating conceptIntegrating concept

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Chap02_Using IT for Competitive Advantage