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Chapter 1: Organizational Strategy, Competitive Advantage, and Information Systems Business Processes  Competitive advantage – any asset that provides and organization with an edge against its competitors  Business process – an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customers o Inputs – materials, services and information that flow through and are transformed as a result of process activities o Resources – people and equipment that perform process activities o Outputs – the product or service created by the process  Information Systems play a vital role in three areas: o Executing the process  Efficiently and effectively  IS is embedded in the process o Capturing and storing process data o Monitoring process performance  IS evaluates information about a process  This information can be created at the instance level (a specific task or activity) or at the process level (the process as a whole) Business Process Reengineering, Improvement and Management  BPI phases: o Define – document existing process activities, resources, inputs and outputs, customer requirements for the process output, and description of problem that needs to be addressed

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o Measure – identify relevant process metrics, ex. Time and cost to generate one output, and collect data to understand how the metrics evolve over time o Analysis – examines the as is process map and collected data to identify problems with the process and their root causes, if possible benchmark the process, can use process simulation software o Improve – identify possible solutions for addressing the root causes, map the ‘to be’ process alternatives, select and implement most appropriate solution  Eliminate process activities that do not add value to the output o Control – establish process metrics and monitor the improved process after solution has been implemented to ensure process performance remains stable BPI does not deliver the huge performance gains promised by BPR, but are less risky and costly BPI focuses on delivering quantifiable results BPI performed from the bottom up, BPR requires top-down change mandates BPI takes less time and consumes fewer organizational resources If incremental improvements through BPI are no longer possible, or if significant changes occur in the firm’s business environment, firm should consider BPR Over time employees can become overstretched or lose interest if company undertakes too many BPI projects without an effective system to manage and focus improvement efforts Organizations can adopt Business process Management (BPM) to sustain BPI efforts over time, this management system includes methods and tools to support the design, analysis, implementation, management and continuous optimization of core business processes throughout the organization

 BPM integrates disparate BPI initiatives to ensure consistent strategy execution  BPM components – process modelling, Web-enabled technologies, and business activity monitoring Business Pressures, Organizational Responses, and Information Technology Support Business Pressures  Business Environment: the combination of social, legal, economic, physical, and political factors in which business conduct their organizations  Significant changes in any of these factors are likely to create business pressures on organizations  Market Pressures: are generated by the global economy, intense competition, the changing nature of the workforce and powerful customers  Globalization: the integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology  Workforce is becoming more diversified – women, single parents, minorities, disabilities, work from home  Customers become more knowledgeable about the products and services they acquire – compare prices, read reviews, order online  Technology Pressures – technological innovation and information overload  Innovation = obsolescence  BYOD – bring your own device – schools and workplace  Lose control to manage these devices  Increased worker productivity and satisfaction  Security concerns  Information overload – solved by search engines and data mining  Societal/Political/Legal Pressures

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 Social responsibility – environment, education, company and individual philanthropy  Organizational or individual social responsibility – spend time and/or money to address social problems  Green IT – facilities design and management, carbon management, international and US environmental laws  Digital divide – wide gap between those who have access to information and communications technology and those who do not  Compliance with government regulations – health, safety, environmental protection, equal opportunity  Government deregulation intensifies competition  Ethical issues – general standards of right and wrong  Information ethics relates to standards of right and wrong in information processing practices  Monitoring email, invading privacy Organizational Responses  Strategic Systems – provide organizations with advantages that enable them to increase their market share/profits to better negotiate with suppliers, and to prevent competitors from entering their markets  Customer Focus – can make the difference between attracting and retaining customers vs losing them to competitors o Ex. Amazon  Make to Order and Mass Customization – make to order is a strategy of producing customized products and services o How to manufacture efficiently at a low cost? o Change manufacturing processes from mass production to mass customization o Consumer segmentation – companies provide standard specifications for different consumer groups or segments, ex. Clothing sizes

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o Configured mass customization – companies offer features that allow each shopper to customize their product with a range of components  Ex. Smartphone o Mass customization – company produces a large quantity of items but it customizes them to match the needs and preferences of individual customers o Attempt to perform make to order on a large scale  Ex. Body-metrics – provides a body scanner to provide made to measure clothes  NikeID  E-Business and E-Commerce  Electronic commerce – process of buying, selling, transferring or exchanging products, services or information via computer networks  E-Business – in addition to buying and selling goods and services, refers to servicing customers, collaborating with business partners, performing electronic transactions within an organization Competitive Advantage and Strategic Information Systems  Competitive strategy – statement that identities a business’s approach to compete, its goals, and the plans and policies that will be required to carry out those goals  A strategy can apply to a desired outcome  Competitive strategy focuses on achieving a desired outcome when competitors want to prevent you from reaching your goal  Must plan your own moves and anticipate and counter competitors’ moves  Through competitive strategy organization seeks a competitive advantage  Strategic information systems o Any information system that helps an organization achieve a competitive advantage or reduce a competitive disadvantage

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Porter’s Competitive Forces Model  Overall impact of the Web is to increase competition which diminishes profitability  Threat of Entry of New Competitors o Threat is high when entry is easy and low when there are barriers to entry o Entry barrier – product or service feature that customers have learned to expect from organizations in a certain industry o Web increase the threat that new competitors will enter market by reducing traditional barriers to entry o Seen in industries that perform an intermediation role or where primary product or service is digital  Bargaining Power of Suppliers o Supplier power is high when buyers have few choices and low when buyers have many choices o Organizations would rather have more potential suppliers to be in a position to negotiate price, quality, delivery terms o Internet enables buyers to find alternate suppliers and compare prices easily, reducing supplier bargaining power  Bargaining Power of Customers (Buyers) o Buyer power is high when buyers have choices from whom to buy and low when buyers have few choices o Loyalty programs reduce buyer power, less likely to buy from competitors  Threat of Substitute Products or Services o If there are many alternatives, threat is high, if few alternatives, threat is low o New technologies create substitute products rapidly o Information based industries experience the greatest threat from substitutes o Any industry in which digitized information can replace material goods (ex. Music, books, software) must view the Internet as a

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threat that can convey this information efficiently at a low cost and high quality o Even with many substitutes, companies can create competitive advantage by increasing switching costs o Switching costs – costs, in money and time, imposed by a decision to buy elsewhere o Ex. Contracts with cellphones include a penalty for switching to another provider before contract expires, this is a monetary switching cost  Rivalry Among Existing Firms in the Industry o Threat is high when there is intense competition among many firms in the industry, low when the competition is among fewer firms and not as intense o Proprietary information systems – systems that belong exclusively to a single organization and provided strategic advantage to firms in competitive industries o Today it is more difficult to keep it secret, will match competitor’s online system’s features to remain competitive o Results in fewer differences among competitors, leading to more intense competition Porter’s Value Chain Model  Use Porter’s competitive forces model to design general strategies  Use value chain model to identify specific activities where they can use competitive strategies for greatest impact  Value chain – a sequence of activities through which the organization’s inputs are transformed into more valuable outputs  Value chain model – identifies points where an organization can use information technology to achieve competitive advantage  The activities conducted in any organization can be divided into primary activities and support activities

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 Primary activities – relate to the production and distribution of the firm’s products and services and create value for which customers are willing to pay  Support activities - do not add value directly to the firm’s products or services, but contribute to the firm’s competitive advantage by supporting the primary activities  A firm’s value chain is part of a larger stream of activities called a value system o Includes the suppliers that provide inputs to the firm along with their value chains, and the distributors and their value chains Strategies for Competitive Advantage Develop strategies to counter the five competitive forces Five Strategies: Cost Leader – I can sell at lower prices Differentiation – I am better because I am different Innovation – I’m doing something new and you can’t catch up Operational Effectiveness – I can do the same thing more efficiently than you can  Customer Oriented – I treat my customers better than you do      

Business-Information Technology Alignment  The tight integration of the IT function with the organization’s strategy, mission and goals  IT function directly supports the business objectives of the organizations  Six characteristics of excellent alignment: o Organizations view IT as an engine of innovation that continually transforms the business o Organizations view their internal and external customers and their customer-service function as supremely important

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o Organizations rotate business and IT professionals across departments and job functions o Organizations provide overarching goals that are clear to each IT and business employee o Organizations ensure that IT employees understand how the company makes or loses money o Organizations create a vibrant and inclusive company culture  Only 16% of organizations have this alignment, why? o Business managers and IT managers have different objectives o Business and It departments are ignorant of the other group’s expertise o Lack of communication  Form a collaborative environment

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