2

Organizational Strategy,
Competitive Advantage,
and Information Systems
1. Discuss ways in which information systems enable cross-
functional business processes and business processes for a single
functional area.
2. Become familiar with business process defi nition, measurement,
and analysis.
3. Compare and contrast business process improvement, business
process reengineering, and business process management to
identify the advantages and disadvantages of each one.
4. Identify effective IT responses to different kinds of business
pressures.
5. Describe the strategies that organizations typically adopt to counter
Porter’s five competitive forces.
6. Describe the characteristics of effective business–information
technology alignment.
1. Business Processes
2. Business Process Reengineering, Business
Process Improvement, and Business Process
Management
3. Business Pressures, Organizational Responses,
and Information Technology Support
4. Competitive Advantage and Strategic
Information Systems
5. Business–Information Technology Alignment
 [ Opening Case A Tool to Combat
Terrorism and Fight Crime ]

• The Problem
• A Potential IT Solution
• The Results
• What We Learned from This Case
About [small] business
2.1 Sharing Bicycles
2.1 Business Processes
• Cross-Functional Processes
• Information Systems and Business
Processes
Business Processes

• A business process is:

– an ongoing collection of related activities that create
a product or service of value to the organization, its
business partners, and/or its customers.
• Comprised of three elements:
– Inputs
– Resources
– Outputs
• Efficiency vs. Effectiveness
Cross-Functional Processes

• No single functional area is responsible

• steps executed in a coordinated,
collaborative way
• Procurement & Fulfillment Cross-
functional processes
Example: Purchasing
Airline Tickets Online
 Receive Ticket Order
Traveler Airline Web Site
Seats NO
Notify Traveler
Plan Trip Available
YES
Check Flights Reserve Seats
NO

Use NO Frequent
NO Credit Flyer Mileage
Seats Card? Sufficient?
Available?
YES
YES
YES Charge Credit Card
Subtract Mileage
Submit Ticket Order
Charge NO
Notify Traveler
OK?
Receive e-Ticket YES
Confirm Flight(s)

Issue e-Ticket
Information Systems &
Business Processes
• IS’s vital role in three areas of business
processes
– Executing the process
– Capturing and storing process data
– Monitoring process performance
Executing the Process

• IS’s help Execute the Process by:

– Informing employees when it is time to complete
a task
– Providing required data
– Providing a means to complete the task
Capturing & Storing
Process Data
• Processes generate data
– Dates, times, product numbers, quantities, prices,
addresses, names, employee actions
• IS’s capture & store process data (aka,
transaction data)
• Capturing & storing data provides
immediate, ‘real time’ feedback
Monitoring Process
Performance
• IS evaluates information to determine
how well a process is being executed
• Evaluations occur at two levels
– Process level
– Instance level
• Monitoring identifies problems for
process improvement
2.2 Business Process Improvement,
Business Process
Reengineering, and Business
Process Management
• Reengineering
• Improvement
• Management
Measures of Excellence in
Executing Business Processes
• Customer Satisfaction
• Cost Reduction
• Cycle and fulfillment time reduction
• Quality
• Differentiation
• Productivity
Business Process
Reengineering (BPR)
• Michael Hammer & James Champy, 1993,
Reengineering the Corporation
• BPR
– A radical redesign of an organization’s business
processes to increase productivity and profitability
– Examines business processes with a “clean slate”
approach
Business Process
Improvement (BPI)
• BPI
– An incremental approach to move an organization
toward business process centered operations
– Focuses on reducing variation in process outputs
by identifying the underlying cause of the
variation
• Six Sigma is a popular methodology for
BPI
Business Process
Improvement (BPI)
• Five basic phases of successful BPI
– Define
– Measure
– Analyze
– Improve
– Control
BPR versus BPI
BPI BPR
• Low risk / low cost • High risk / high cost
• Incremental change • Radical redesign
• Bottom-up approach • Top-down approach
• Takes less time • Time consuming
• Quantifiable results • Impacts can be
• All employees overwhelming
trained in BPI • High failure rate
Business Process Management
(BPM)
• A management system used to support
continuous BPI initiatives for core
business processes over time
• Important components of BPM:
– Process modeling
– Web-enabled technologies
– Business Activity Monitoring (BAM)
Business Process Management
(BPM)
• Business Process Management Suite
(BPMS)
– An integrated set of applications used for BPM
• Emerging Trend of Social BPM
– Technologies enabling employees to collaborate
across functions internally and externally using
social media tools
[about business]
2.2 Chevron
2.3 Business Pressures, Organizational
Responses, and Information
Technology Support
• Business Pressures
• Organizational Responses
Business Pressures

• Market Pressures
• Technology Pressures
• Societal/Political/Legal Pressures
Market Pressures

• Globalization
• Changing Nature of the Workforce
• Powerful Customers
Globalization

• The integration and interdependence of

economic, social, cultural, and
ecological facets of life, made possible
by rapid advances in IT.
Globalization

• The World is Flat, by Thomas Friedman

– Technology is leveling global competition making
the world “Flat”
• Friedman’s Three Eras of Globalization
– Globalization 1.0
– Globalization 2.0
– Globalization 3.0
Globalization 1.0 (1st Era)
1492 - 1800
• Focus:
– Countries
• Drivers:
– Muscle
– Horse power
– Wind power
– Steam power
Globalization 2.0 (2nd Era)
1800 - 2000
• Focus:
– Companies
• Main Driver:
– Multinational Companies
• First Half of 2.0
– Driver: Falling transport costs
• Second Half of 2.0
– Driver: Falling telecom costs
Globalization 3.0 (3rd Era)
2000 - Present
• Focus:
– Groups & Individuals
• Drivers:
– Convergence of 10 forces or “Flatteners”
The Ten “Flatteners”
1. 11/9/1989: Berlin 5. Outsourcing
Wall Falls 6. Offshoring
2. 8/9/1995: Netscape 7. Supply Chaining
Goes Public
8. Insourcing
3. Development of
9. Informing
Workflow
Software 10.The Steriods
4. Uploading
Changing Nature of the
Workforce
• Workforce is Becoming More Diversified
– Women
– Single Parents
– Minorities
– Persons with Disabilities
• IT is Enabling Telecommuting
Employees
Powerful Customers

• Increasing consumer sophistication &

expectations
• Consumer more knowledgeable about
– Products and services
– Price comparisons
– Electronic auctions
• Customer Relationship Management
Technology Pressures

• Technological Innovation &

Obsolescence
– Rapid development of both New and Substitute
Products & Services
• Information Overload
– Vast stores of data, information, & knowledge
– Difficulties in managing data for decision making
Societal / Political / Legal
Pressures
• Social Responsibility
• Compliance with Government
Regulations
• Protection against Terrorist Attacks
• Ethical Issues
Social Responsibility

• Green IT
– Facilities design and management
– Carbon management
– International and U.S. state environmental laws
– Energy management
• Digital Divide
– One Laptop per Child (OLPC)
http://one.laptop.org
Social Responsibility &
Philanthropy in Business
• www.patientslikeme.com
• www.giftflow.org
• www.ourgoods.org
• www.sparked.com
• www.thredup.com
• www.collaborativeconsumption.com
• www.kiva.org
• www.donorschooce.org
Compliance with
Government Regulations
• Sarbanes-Oxley Act
• USA PATRIOT act
• Gramm-Leach-Bliley Act
• Health Insurance Portability &
Accountability Act (HIPAA)
Protection against Terrorist
Attacks
• Employees in military reserves called to
active duty
• Information Technology used to identify
and protect against terrorists and
cyberattacks
• Department of Homeland Security’s
(DHS) US-VISIT program
– Network of biometric-screening systems
Ethical Issues

• General standards of right and wrong

– Information-processing activities
– Monitoring employee email
– Monitoring employee Internet activity at work
– Privacy of customer data
[about business]
2.3 “Bring Your Own
Device” Can
Cause Problems
[about business]
2.4 The Surui Tribe
of the Amazon
Organizational Responses

• Strategic Systems
• Customer Focus
• Make-to-Order and Mass Customization
– Bodymetrics (www.bodymetrics.com)
• E-Business & E-Commerce
[about business]
2.5 Massechusetts
Mutual
Transforms Its
Information
Systems
2.4 Competitive Advantage and
Strategic Information
Systems
• Porter’s Competitive Forces
Model
• Porter’s Value Chain Model
• Strategies for Competitive
Advantage
2.4 Competitive Advantage and
Strategic Information
Systems
• Competitive Strategy
– A statement identifying a business’s
approach to compete, it’s goals, and the
plans and policies required to attain those
goals.
2.4 Competitive Advantage and
Strategic Information
Systems
• Strategic Information Systems
(SIS)
– An information system that helps an
organization achieve and maintain a
competitive advantages
Porter’s Competitive Forces
Model
Porter’s Competitive Forces
Model
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
Porter’s Value Chain Model
• Value Chain
– A sequence of activities through which the
organization’s inputs are transformed into valuable
outputs.
• Primary Activities
– Relate to Production & Distribution of Products &
Services
• Support Activities
– Support Primary Activities Contributing to
Competitive Advantage
Primary Activities

• Five Primary Activities for

Manufacturing
1. Inbound Logistics (inputs)
2. Operations (manufacturing & testing)
3. Outbound Logistics (storage & distribution)
4. Marketing & Sales
5. After Sales Services
Support Activities

• Four Support Activities

1. Firm’s Infrastructure (accounting, finance,
management)
2. Human Resources Management
3. Product & Technology Development (R&D)
4. Procurement
Strategies for Competitive
Advantage
• Cost Leadership
• Differentiation
• Innovation
• Operational Effectiveness
• Customer-Orientation
2.5 Business – Information
Technology Alignment
• The tight integration of the IT
function with the organization’s
strategy, mission, and goals.
Six Characteristics of Excellent
Business-IT Alignment
1. IT viewed as an engine of innovation
continually transforming the business and
often creating new revenue streams.
2. Organizations view their internal &
external customers and their customer
service function as supremely important.
3. Organizations rotate business and IT
professionals across departments and job
functions.
Six Characteristics of Excellent
Business-IT Alignment
4. Organizations provide overarching
goals that are completely clear to each
IT and business
5. Organizations ensure that IT employees
understand how the company makes
(or loses) money.
6. Organizations create a vibrant and
inclusive company culture.
Major Reasons Business-IT
Alignment Does Not Occur
• Business managers and IT managers
have different objectives.
• The business and IT departments are
ignorant of the other group’s expertise.
• A lack of communication.
 [ Closing Case IBM’s Watson ]

• The Problem
• An Interesting IT Solution
• The Results: Initial Uses of Watson
• What We Learned from This Case