Strategic Impact of Information Technology

Enabling technology

Information technology allows operations, strategies and competitive advantages not possible before.

Operational dependency occurs when time, volume or other physical conditions makes IT unique to perform a task. It is related to the organization's EFFICIENCY.

Strategic impact occurs when a policy, strategy or product uniquely requires IT for its implementation. It is related to the organization's EFFECTIVENESS.

Strategic impact

Competitive forcesPotential new

entrants

Strategic

business unit

Substitute

products, services

Bargaining

power suppliers

Bargaining

power buyers

intraindustry

competition

Mass Productionfrom

Mass Customization

to

Strategic Advantage

CostLeadershipDifferentia-tion

Innovation

Growth

Alliance

OtherStrategies

Rivalry ofCompetitors

Threat ofNew

Entrants

Threat ofSubstitutes

BargainingPower of

Customers

BargainingPower ofSuppliers

Competitive Forces

Com

peti

tive

Str

ateg

ies

Value Chain & Strategic ITValue Chain & Strategic IT

Support Processes • Administrative Coordination

and Support Services• Human Resources Management• Technology Development• Procurement of Resources

Value Chain & Strategic ITValue Chain & Strategic IT

Primary Business Processes• Inbound Logistics

• Operations

• Outbound Logistics

• Marketing and Sales

• Customer Service

Value Chain & Strategic ITValue Chain & Strategic IT

CO

MP

ET

ITIV

EAD

VA

NT

AG

E

SU

PP

OR

TP

RO

CE

SS

ES

PR

IMA

RY

BU

SIN

ES

SP

RO

CE

SS

ES

Administrative Coordination & Support Services

Human Resources Management

Technology Development

Procurement of Resources

Collaborative Workflow IntranetCollaborative Workflow Intranet

Employee Benefits IntranetEmployee Benefits Intranet

Product Development Extranet with PartnersProduct Development Extranet with Partners

E-Commerce Web Portals for SuppliersE-Commerce Web Portals for Suppliers

InboundLogistics

AutomatedAutomatedJust-in-TimeJust-in-TimeWarehousingWarehousing

OperationsOutboundLogistics

Marketing& Sales

CustomerService

Computer-Computer-AidedAided

FlexibleFlexibleManufactu-Manufactu-

ringring

OnlineOnlinePoint-of-SalePoint-of-Sale

And OrderAnd OrderProcessingProcessing

TargetTargetMarketingMarketing

CustomerCustomerRelation-Relation-shipshipManage-Manage-mentment

The Value Chain of a FirmThe Value Chain of a Firm

Building Customer ValueBuilding Customer Value

Build a WebCommunity of

Customers, etc.

CustomersCheck Own

History

Web Personal-ization Builds

Loyalty Employee

View ofCustomer isComplete

CustomerDatabase

TransactionDatabase

CustomerOrders ThroughPartners

CustomerDatabase by

Preferences &Profitability

CustomerPlace Orders

Directly

CustomersLinked With Distribution

IntranetsIntranets InternetInternet

IntranetsIntranetsExtranetsExtranets

IntranetsIntranetsExtranetsExtranets

InternetInternet

Reengineering Business ProcessesReengineering Business Processes

Level of Change

ProcessChange

Primary Enabler

Time Required

Path toExecution

Risk

BusinessImprovement

BusinessReengineering

Incremental Radical

Improved NewVersion of Process

Brand NewProcess

HighModerate

Information TechnologyStatistical Control

Clean SlateExisting Processes

Broad, Cross-Functional

Narrow, WithinFunctionsTypical Scope

LongShort

Cultural Cultural Structural

Participation Bottom-up Top-down

Horizon Past and Present Future

Frequency ofChange

One-time orContinuous

Periodic One-timeChange

Starting Point

The The VirtualVirtual Company CompanyInterenterprise ISInterenterprise IS

Boundary of a Firm

CustomerResponseand Order-FulfillmentTeams

ManufacturingTeams

EngineeringTeams

Cross-FunctionalTeams

Alliance -Complementary

Services

Alliance -Major

Customer

Alliance -Major

Supplier

Alliance -Small

Suppliers

Alliance -Subcontractors

Intranets

Ext

ran

ets

Virtual Company StrategiesVirtual Company Strategies

• Share Infrastructure and Risk with Alliance Partners

• Link Complementary Core Competencies• Reduce Concept-to-Cash Time Through

Sharing• Increase Facilities and Market Coverage• Gain Access to New Markets and Share

Market or Customer Loyalty• Migrate from Selling Products to Selling

Solutions