Exploiting IS for Strategic Advantage

MSSI 2023S
Gartner’s Top Strategic Technology Trends for
2023
Optimize
• Optimizing IT systems for greater reliability,
improving data-driven decision making and
maintaining value integrity of AI systems in
production.
Scale
• Accelerating vertical offerings, increasing the
pace of product delivery and enabling
connectivity everywhere.
Pioneer
• Enabling business model change, reinventing
engagement with employees and customers, and
accelerating strategies to tap new virtual
markets.

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Structure Demand-side Supply-side

Corporate & Aligning Organizing

business IS/IT with Managing the Strategic
strategy and business the app. Managmnt
IS/IT strategy portfolio of IS/IT
implications

A strategic Business Determine

perspective innovation the IS
of IS/IT with IS/IT strategy

Establish Search for Justifying & The Strat.

IS/IT strategy competitive managing Managmnt
process opportunit. IS/IT of IT service
to shape investment &
strategy infrstructure

Establishing IS/IT Portfolio & Organizing,

strategic strategy: investment sourcing, and
management tools & management infrastructure
framework techniques management
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Session Objectives
• To understand the strategic perspective of IS/IT
investment: Exploring New Value Propositions
• To understand various techniques commonly
used to analyze opportunities provided by IS/IT
to gain strategic advantage:
– Competitive Forces Analysis
– Value Chain Analysis
– Resource Life-Cycle Analysis
– Strategic Options Generator

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Agenda
• Achieving and Sustaining Advantages across the Value Disciplines
• Exploring New Value Propositions: Informating Products and Services
• Analysis of Competitive Forces to Identify IS/IT Opportunities and Threats
• Value Chain Analysis
• Customer Life-Cycle Management and the Value Chain
• From Value Chain to Value Network
• The Internal Value Chain
• The Uses of Value Chain Analysis

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IS/IT Strategy Formulation & Planning Process:
The Framework

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Developing the IS/IT Investment Portfolio from a Strategic
Perspective

• The focus is on
evaluating strategic
potential of
innovative ideas.
• The techniques are
likely to also
suggest other high
potential
possibilities.
• The techniques also
help assess the
readiness of key
operational
applicatons as the
basis for future
development.

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Achieving and Sustaining Advantages across the
Value Disciplines
• Strategic investments should relate readily to the
dimension in which the organization seeks to excel in
the next one to three years (i.e. product leadership,
customer intimacy or operational excellence), with the
objectives of gaining advantage in the marketplace.
• Key operational investments improvements are
essential in any dimension if the systems are causing
performance levels to fall below those essential to
success (i.e. are causing disadvantage).
• High-potential projects would normally be
‘prototypes’ related to specific strategic developments
or evaluations of ideas in any of dimensions (i.e. early,
tentative steps in finding out how IS/IT might provide
future opportunities).

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Exploring New Value Propositions:
Informating Products and Services

• Informating existing products

e.g., ‘smart’, ‘connected’ products (driveless cars)
• Informating existing services
e.g., car insurance – pay-how-you-drive
• Informating to improve product availability/reliability in
use
e.g., cloud service (as opposed to servers & data
centers)
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Informating Products
• Riddell is an American company specializing in sports equipment for Americal football.
• Recently, Riddell has informated the helmet to redefine the customer value proposition.
• Riddell placed sensors (in the helmet) that measure the acceleration of a player’s head during a
tackle.
– These sensors determine the magnitude, direction, location on the head, duration, and time
of impact.
– Data shows that some players can receive up to 2.000 head blows each season.
• Upon impact, the sensor immediately assesses the collison and as the player is still trying to get up,
the impact data are transmitted to a computer console at the side of the pitch. If the hit exceeds a
certain threshold, pagers held by coaching light up and the player’s condition must be assessed.
• All data collected is stored in the cloud, which can be examined later to zero in on dangerous plays.
• So, instead of selling just a helmet, Riddell now sells a service that is about both protection and
prevention.
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Informating Services
• The Co-operative Motor Insurance (CMI) has developed a ‘pay-how-you-drive’ solution for
17- to 25-year-olds.
• CMI calculates premiums based on actual driving behaviors and rewards safe driving.
• CMI monitors a driver’s behavior by using data transmitted from a Smartbox, which is
fitted into the policyholder’s car, via satellite technology. The behaviors then used to
calculate premiums are: braking and acceleration; cornering; speed and time of driving
(e.g., day time, night time, etc.)
• If responsible driving behaviors are demonstrated, policyholders will receive a Safer
Driving Discount. Otherwise, if a policyholder consistently drives badly (e.g., repeatedly
breaking speed limits or taking corners too sharply), their insurance could increase or even
be canceled.
• The system also allows customers to see how their driving has been rated against the for
driving behaviors.
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Analysis of Competitive Forces to Identify IS/IT Opportunities and
Threats
How can IS/IT Threat of new How will new entrants based on
build barriers of entry? IS/IT enter the industry?
entrants

How can IS/IT build in switching

costs/change customer relationships?

Rivalry
Bargaining Bargaining
amongst
power of power of
existing
suppliers buyers
competitors
How can IS/IT How can/will IS/IT How will IS/IT
change the balance of change the basis of increase
power and relationship competition? the power of buyers?
with suppliers?
Threat of
substitute
How can/will IS/IT
products/se
generate new 12
rvices product or services?
Value Chain Analysis
• Michael Porter:
– ‘Every firm is a collection of activities that are performed to design, produce, market, deliver and
support its products or services. All these activities can be represented using a value chain. Value
chains can only be understood in the context of the business unit.’
• … the value chain of the business unit is only one part of a larger set of value-adding activities in an
industry—the industry value chain or value system …
– For an organization to identify the overall implications of e-commerce for its business in terms of
opportunities and threats, the information flowing through the industry—the external value chain —
needs to be analysed before the information processes can be optimized inside the business—by
considering the internal value chain.
• The overall performance of the industry, in terms of its ability to maximize its value-added and minimize
its costs, is primarily dependent on how well demand and supply information are matched at all stages of
the industry.
– … can be used in any industry, since every industry uses funds, incurs cost and uses resources to
deliver services of some sort to consumers …
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The External Value Chain –
INDUSTRY VALUE CHAIN/VALUE SYSTEM

Questions:
1. How does the chain add value to the (next) customer in the chain?
2. How does the chain add value to those providing the input? 14
Information Flows between Firms
SUPPLIERS Regulatory Bodies
Invoices

Invoices

CUSTOMERS
Payments

Sales Service

Payments
Opera- Out-
Inbound Sales Service
tions bound

Opera-
Purchase orders Sales orders Inbound
tions
Distributors
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Technical queries
Value Chain Economics
• A retailer:
– adds value to the customer mainly through the range of goods offered and local access to
them
– adds value to the supplier by providing consumer availability, sharing stock costs and
administration of low-value transactions, etc.
When assessing changes to the chain, it implies that new value can be added, or existing value-
adding and costs will be redistributed, or costs of adding the same value can be reduced, enabling
price reduction or increased profit.
• In Internet shopping:
– The consumer’s (invisible) costs are reduced, but costs are switched to home delivery.
– Unless this is offset by another cost reduction (e.g. lower stock holdings), the increased
cost of supply will require an equivalent increase in price (payment for delivery)—or the
profit in the chain will be reduced.
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Information Systems and the Value Chain

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Significant Benefits From the Improved Links
• Clearly, intermediation increases the number of firms among whom the profit is
shared, and the attraction of disintermediation is that the opposite occurs.
• If, in the version of the value chain that includes our firm, the overall net profit
can be increased (how?), we can take a share of that increased profit and hence
outperform our direct competitors, who are not part of that version of the chain.
i. create more demand;
ii. satisfy more of the available demand (gain market share);
iii. reduce the cost of satisfying the demand
• If we initiate the changes but also share the benefit with our customers and
suppliers (i.e. they too become more profitable), they will prefer to trade in our
more efficient version of the industry.
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Examples – Reduction of Intercompany Costs Due to
Better Information Exchange
• Administration
Electronic transmission of orders and invoices, etc. directly between customers and suppliers
• Inventory
Sharing information on stocks and demand to avoid both companies carrying unnecessary stock
• Transport/storage
Optimizing delivery to ensure transport or storage space is utilized effectively to meet agreed
service levels
• Financing
Electronic payments to improve cash flow and reduce the need for working capital and reduce
Accounts Receivable and Payable costs
• Services
Linking third-party service suppliers to service requests to reduce delays in delivering and costs of
administration
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How e-Commerce Affect Information Flow
1. Normal business transactions (invoices, orders, payments, etc.) could be
addressed by a company with most of its customers and suppliers who
have computers, simply by connection via the Internet.
2. E-commerce offers an additional channel for promotional flow, but also
provides customers with the ability to search the whole chain for
information directly or via intermediaries, on whom firms become
increasingly dependent to provide an electronic shop window/shelf space
for their products and services.
3. E-commerce offers huge potential to gather information and intelligence
about consumer and customer preferences and attitudes online, rather
than through traditional market research.
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Dell Computer’s Virtual Integration
• Model VC at conventional PC’s industry
Distribution
Suppliers Manufacturer Customers
Channels

• Dell’s Direct Model:

Suppliers Manufacturer Customers

• Dell’s Virtual Integration:

Suppliers Manufacturer Customers

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Tax Payment: values & issues
Data Xsaction Account. Recon.
• Values:
DJP-DJPB
Filling SSP Pay at the Bank Submit to KPP
Reconciliation

Need
• Issues: Error- Error-prone &
extra-
Complex
prone long time process
time

DJP-DJPB
Filling SSP Pay at the Bank Submit to KPP
Reconciliation

• Solutions:
Self- Electronic
e-Payment
service ally

DJP-DJPB
Filling SSP Pay at the Bank
Reconciliation

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Tax Payment: current
Data Xsaction Account. Recon.
• Old days:
DJP-DJPB
Filling SSP Pay at the Bank Submit to KPP
Reconciliation

Automatically
Better process
• notify KPP
MPN-G1:
DJP-DJPB
Filling SSP Pay at the Bank
Reconciliation

Ease of Paying Even-better

• MPN-G2: taxes process

DJP-DJPB
Create Billing Pay Anywhere
Reconciliation

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HALFWAY …

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Customer Life-Cycle Management and the Value Chain
• ‘Customer/Supplier resource life-cycle analysis’ is a powerful tool to analyse relationships with
customers/suppliers.
– By examining its customer relationships via the model, companies can determine not only
when opportunities (and threats) exist for improved or new information exchanges but
also which specific applications should be developed.
• The 5 key stages of products/services life cycle are:
1. Problem recognition
2. Information search
3. Evaluation of alternatives
4. Choice/Purchase
5. Post-purchase behaviour
• Each of these stages involves a number of processes of information exchange to enable the
stage to be managed effectively, thereby ensuring maximum benefit
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Strategic Options Generator
• A similar technique for generating IS ideas during VC analysis …
• It considers the impact of IS/IT in relation to Suppliers, Customers, and Competitors by developing
alternative Strategic Thrusts
Strategic Thrusts Suppliers Customers Competitors

Differentiation—ensuring that superior

quality is delivered and perceived, leading to
obtaining a premium price

Cost—being cheaper or enabling suppliers

or customers to reduce their costs

Innovation—introduce a new product,

service, process or way of doing business
Growth—enable volume or expansion in
geography or increased flexibility
Alliance—forging agreements, joint
ventures or joint investments 30
Strategic Options Generator –
Identification of Options
Suppliers – Can we use IS to: Customers – Can we use IS to:
• Improving our bargaining power over • Reduce their costs or increase their
revenues?
them? • Increase their switching costs to
• Reduce our buying costs? alternative suppliers?
• Reduce their selling costs? • Increase their knowledge of our products
• Be a better customer and obtain a or services?
better service? • Improve our services to them or reduce
• Identify alternative potential supplier? the costs of existing services?
• Improve the quality of products or • Discover more about their needs?
services purchased? • Identify new potential customers?

Competitor – Can we use IS to:

o Raise the entry costs of potential competitors?
o Differentiate or create new products or services?
o Reduce our costs or increase their costs?
o Control the channels of distribution?
o Identify or establish new market niches?
o Form joint ventures to enter new market?
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The Internal Value Chain Analysis
• The purpose of Internal Value Chain analysis is to divorce what the company does from
how it does it
– i.e. look at the activities it performs to contribute to the value-adding processes of
the industry, rather than its organization structure
• The Value Chain approach first distinguishes between two types of business activity.
– Primary activities —those that enable it to fulfil its role in the industry value chain
and hence satisfy its customers, who see the direct effects of how well those
activities are carried out. Not only must each activity be performed well, they must
also link together effectively if the overall business performance is to be optimized.
– Support activities —those which are necessary to control and develop the
business over time and thereby add value indirectly—the value being realized
through the success of the primary activities.
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The Internal Value Chain Analysis:
Example – Manufacturing Company

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Alternative Value ‘Configuration’ Models:
Value Shop [~service biz.]

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Alternative Value ‘Configuration’ Models:
Value Network [~exchange/mediation biz.]

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Benchmarks: Potential Impact of IS/IT
[https://www.everestgrp.com/2020-09-https-www-everestgrp-com-2020-09-impact-of-data-and-analytics-across-the-banking-value-chain-market-insights-html-.html]

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 Process Classification Framework® (PCF)
Cross Industry Process Classification
Framework® (PCF) is a taxonomy of
cross-functional business processes
intended to allow the objective
comparison of organizational
performance within and among
organizations. The PCF organizes
operating and management processes
into 13 enterprise-level categories,
including process groups and more than
1,000 processes and associated activities.
The PCF, its associated measures, and
definitions are available for download at
no charge at www.apqc.org/pcf.

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PCF Examples: City Government & Banking

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End of Presentation
TUGAS: BAHAN DISKUSI MINGGU DEPAN

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