Chapter 2

Information Systems for

Competitive Advantage

Information Systems Today

Leonard Jessup and Joseph Valacich
 Chapter 2 Objectives
• Understand the IS in automation, organizational
learning, and strategic support
• Understand IS for strategic organizational success
• Understand the need for making an IS business case
• Understand technological innovations to improve
competitive advantage
 Why Use Information
Systems?

• Automating: doing things faster

• Organizational learning: doing things better
• Supporting Strategy: doing things smarter
 Automating:
Doing Things Faster
• Technology is used to automate a manual
process
– Doing things faster, better, cheaper
– Greater accuracy and consistency
• Loan application example
– Manual processing
– Technology-supported process
– Completely automated
 Organizational Learning:
Doing Things Better
• Going beyond automation
– Involves learning to improve the day-to-day activities
within the process
– Looking at patterns and trends
• Organizational Learning
– Using acquired knowledge and insights to improve
organizational behavior
• Total Quality Management (TQM)
– Monitoring an organization to improve quality of
operations, products, and services
 Supporting Strategy:
Doing Things Smarter
Strategic Planning
1. Create a vision: setting the direction
2. Create a standard: performance targets
3. Create a strategy: reaching the goal
Types of Competitive Advantage
• Low-Cost Leadership
– Best prices on goods/services
– Examples: Dell, Target
• Differentiation
– Best products or services
– Examples: Porsche, Nordstrom, IBM
• Best-Cost Provider (middle-of-the-road)
– Reasonable quality, competitive prices
– Example: Wal-Mart
 Information Systems for
Competitive Advantage
• A clear strategy is essential
• Sources of competitive advantage:
– Best-made product
– Superior customer service
– Lower costs
– Superior manufacturing technology
– Shorter lead times
– Well-known brand name
– High value per cost
 Information Systems for
Competitive Advantage
• IS and Value Chain Analysis
– VC Analysis: adding value within an organization
– Organizations as big input/output processes
– IS can automate many value chain activities:
• Purchased supplies inbound logistics
• Operations
• Outbound logistics
• Sales and marketing
• Service
Organizational Value Chain
 Information Systems for
Competitive Advantage
• The Role of IS in Value Chain Analysis
• IS competitive advantage in VCA:
– Internet link with suppliers, dealers
• Extranets: using the Internet for B2B interactions
– Computer-aided manufacturing systems
– Web site with online product ordering
– Customer service response system
– Computer-aided design
 Information Systems for
Competitive Advantage
• The Technology/Strategy Fit
– An IS implementation should create a significant
organizational change consistent with the
business strategy
• Business Process Reengineering (BPR)
 Making the Business Case for a
System
• The Productivity Paradox (how to quantify gains?)
– Measurement problems
– End-user development
– Decision support systems (DSS)
– Strategic systems
– Time lags
– Redistribution
– Mismanagement
 Making the Business Case for a
System
• Making a Successful Business Case
– Arguments Based on Faith
– Arguments Based on Fear
• Industry factors
• Stage of maturity
• Regulation
• Nature of competition or rivalry
– Arguments Based on Facts
• Cost-benefit analysis for a web-based system
– Recurring/nonrecurring costs
– Tangible/intangible costs
– Tangible/intangible benefits
 Presenting the Business Case
• Know the Audience
– The IS Manager
– Company Executives (VPs and higher)
– Steering Committee
• Convert Benefits to Monetary Terms
 Presenting the Business Case
• Devise Proxy Variables
– Measure changes in terms of perceived value
• Develop a Work Profile Matrix
– Time spent on each job, each type of work
• Measure What Is Important to Management
• Conoco: Making a Business Case
• Changing Mindsets About Information
Systems
 Competitive Advantage
in Being at the Cutting Edge
• Deploying new technologies faster, better,
and cheaper than competitors
• Using new technology in innovative ways
 Competitive Advantage
in Being at the Cutting Edge
• The Need for Constant IS Innovation
• On the lookout for new technologies that
impact business
 Competitive Advantage
in Being at the Cutting Edge
• E-Business Innovation Cycle
– Choosing enabling/emerging technologies
– Matching with economic opportunities
– Executing business innovation for growth
– Assessing client value
 Competitive Advantage
in Being at the Cutting Edge
• Implications of E-Business Innovation Cycle
– Begin with technology when considering
successful business strategies
– Marketing is secondary to IT
– Emerging technology cycle is ongoing
 Competitive Advantage
in Being at the Cutting Edge
Terms and Concepts
• E-commerce (Internet-related)
• E-business (any IT that supports business)
• Enabling technologies
• Economic opportunities
 Competitive Advantage
in Being at the Cutting Edge
The Cutting Edge vs. The Bleeding Edge
• Information systems are often bought from, or
built by, someone else
• An organization typically cannot patent an IS
• Rivals can copy emerging information systems
• Therefore, one’s IS competitive advantage can be
short-lived
 Competitive Advantage
in Being at the Cutting Edge

Requirements for Being at the Cutting Edge

• Consider Porter’s competitive forces
• To deploy emerging systems well:
– Organization must adapt well to change
– Human capital available for deployment (knowledge,
time, skills)
– Tolerance of risk and uncertainty