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Introduction Challenges of Managing in a Network Economy
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
1
10
100
1,000
10,000
100.000
1,000,000
1980 1990 1996
PCs and workstations
Mainframe
Adapted from: McKenney, J., Waves of Change: Business Evolution through Information Technology , Boston: Harvard Business School Press, 1995.
Price Performance Trends of Mainframes and PCs $/MIPs
*Ratio of MIPs per Dollars (Mainframes:PCs)
8:1*
286:1*
900:1*
Evolution of Computing Performance
I ntroduction Figure I-1
Themes presented in this book
• Market structure and industry dynamics• Evolving business models• IT impact• Prioritizing IT investment• Assimilation and organizational learning• Buy versus make• Partnership among key constituencies as IT
evolves• Protecting IT assets and managing risks• Pervasive computing
Theme 1: Market Structure and Industry Dynamics
• New choices for designing and building industries, markets, and organizations.
• IT expands processing capacity enabling convergence of voice, video, and data.
• Real-time transactions, interactivity and connectivity.
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002. Chapter 1 Figure 1-3
The Value Chain Defines Industry Structure and Relationships
Theme 2: Evolving Business Models
• The business models that dominated the Industrial Economy are evolving to take advantage of the capabilities of the new technologies and business practices of the Network economy, giving rise to new sources of power and differentiation.
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002.
Components of a Business Model
Chapter 2 Figure 2-1
Theme 3: IT Impact
• Important dimensions are:– The impact of IT on core operations and– The impact of IT on core strategy.
S o u r c e: A p p l e g a te , L y n d a M . , R o b e r t D . A u s t i n , a n d F . W a r r e n M c F a r l a n . , C o r p o r a te I n fo r m a t i o n S t r a teg y a n d M a n a g e m e n t . B u r r R i d g e , I L : M c G r a w - H i l l / I r w i n , 2 0 0 2 . I n t r o d u c t i o n F i g u r e I - 4
T h e I m p a c t o f I T
F a c t o r y S t r a t e g i c
S u p p o r t T u r n a r o u n d
G o a l : I m p r o v e p e r f o r m a n c e o f c o r e p r o c e s s e s
L e a d e r s h i p : B u s i n e s s u n i t e x e c u t i v e s
P r o j e c t M a n a g e m e n t : P r o c e s s r e e n g i n e e r i n g
G o a l : I m p r o v e l o c a l p e r f o r m a n c e
L e a d e r s h i p : L o c a l l e v e l o v e r s i g h t
P r o j e c t M a n a g e m e n t : G r a s s r o o t s e x p e r i m e n t a t i o n
G o a l : T r a n s f o r m o r g a n i z a t i o n o r i n d u s t r y
L e a d e r s h i p : S e n i o r e x e c u t i v e s & b o a r d
P r o j e c t M a n a g e m e n t : C h a n g e m a n a g e m e n t
G o a l : I d e n t i f y a n d l a u n c h n e w v e n t u r e s
L e a d e r s h i p : V e n t u r e i n c u b a t i o n u n i t
P r o j e c t M a n a g e m e n t : N e w v e n t u r e d e v e l o p m e n t
I T I m p a c t o n C o r e S t r a t e g y
IT Im
pac
t o
n C
ore
Op
erat
ion
s
L o w
H i g h
H i g h
Theme 4: Prioritizing IT Investments
• Shift in IT investment priorities and decisions from a cost-avoidance, project centered approach to an asset-based, strategic option approach.
The IT Business Value Scorecard
Table 4-2: The IT Business Value ScorecardCategories of Benefits
Goals and Measures
Internal External
Type I: Benefits from Investments in a Networked IT Infrastructure
Functionality and Flexibility
Improve infrastructure performance; increase the functionality and range of strategic options that can be pursuedSample Measures: Decrease the cost and/or improve the performance of internal IT operations; enable new IT applications to be created at lower cost, in less time, and with less risk; expand the range of internal IT initiatives
Create an efficient, flexible online/offline platform for doing business with customers, suppliers, and partnersSample Measures: Decrease the cost and/or improve the performance of doing business online; decrease the time, cost and risk of launching new online business initiatives; expand the reach of existing IT enabled businesses and the range of business opportunities that can be pursued.
The IT Business Value Scorecard – Contd.
Categories of Benefits
Goals and Measures
Internal External
Type II: Benefits from Doing Business on a Networked IT Infrastructure
Commerce Improve internal operating efficiency and quality
Sample Measures: Internal process performance and work flow improvements; cost savings or cost avoidance; increased quality; decreased cycle time
Streamline and integrate channels to market, create new channels, and integrate multiple online/offline channels
Sample Measures: Supply chain or distribution channel performance improvements; cost savings or cost avoidance for the organization and its customers, suppliers, or partners; decrease time to market or just-in-time order replenishment; enable new channels to market and/or extend the reach and range of existing channels
The IT Business Value Scorecard – Contd.
Categories of Benefits
Goals and Measures
Internal External
Type II: Benefits from Doing Business on a Networked IT Infrastructure
Content / Knowledge
Improve the performance of knowledge workers and enhance organizational learning
Sample Measures: Enable individuals to achieve and exceed personal performance goals; increase the speed and effectiveness of decision making; increase the ability of the organization to respond quickly and effectively to threats and opportunities
Improve the performance of knowledge workers in customer, supplier, and partner organizations; add “information value” to existing products and services; create new information-based products and services
Sample Measures: Provide information to customers, suppliers, and partners that enables better decision-making; charge a price premium for products and services based on information value-added; launch new information-based products and services; increase revenue per users and add new revenue streams
The IT Business Value Scorecard – Contd.
Categories of
Benefits
Goals and Measures
Internal External
Type II: Benefits from Doing Business on a Networked IT Infrastructure
Community Attract and retain top talent; increase satisfaction, engagement, and loyalty; create a culture of involvement, motivation, trust, and shared purposeSample Measures: Length of time to fill key positions; attrition rate, trends in hiring and retaining top talent (over time, by industry, by region)
Attract and retain high quality customers, suppliers, partners, and investors; increase external stakeholders satisfaction, engagement, and loyaltySample Measures: Customer, supplier, partner satisfaction and lifetime value; average revenues per customer and trend over time; level of personalization available and % that use it; churn rate
Theme 5: Assimilation and Organizational Learning
• The time required for successful organizational learning and assimilation of rapidly changing technologies limits the practical speed of change.
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.
Success
Phase 1Opportunity Identification and Investment
Phase 2Organizational Learningand Adaptation
Phase 3Rationalization and Continuous Evolution
Widespread TechnologyTransfer
Lack of attention andcommitment
StagnationBlock A
StagnationBlock B
Narrowly focused andnot marketed
Too efficiencydominated
StagnationBlock C
Success
Success
Introduction Figure I-5
Identifying and Assimilating IT
Theme 6: Buy versus Make
• External industry, internal organizational, and technological changes are increasing the pressure on organizations to “buy” rather than “make” IT applications and services.
Theme 7: Partnerships among Key Constituencies as IT Evolves
• High levels of engagement and cooperation among four key constituencies:– Business Executives– IT Executives– Users– Technology Providers / Partners
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/I rwin, 2002. Introduction Figure I-6
Three Eras of IT Evolution
AdministrativeFramework
Target for IT Use
Justification/Benefits
Era IMainframe
Regulated monopoly
Back office automation
Organizational productivity
Era IIMicrocomputer
Freemarket
Individual decision-
making and productivity
Individual effectiveness
Era IIIInternetworking
Shared partnership
Electronic integration and
learning
Business advantage
Theme 8: Protecting IT Assets and Managing Risks
• The ability to ensure high levels of security, privacy, reliability, and availability is a core capability that determines an organization’s ultimate success and survival.
Theme 9: Pervasive Computing: Opportunities and Risks
• Shift in IT that has dramatically changed the way people access and use technology, the way organizations exploit it, and the way it is developed and managed.