Chapter 2

Information Systems for

Competitive Advantage

Information Systems Today

Leonard Jessup and Joseph Valacich

2003 Prentice Hall, Inc. 2-1

 2003 Prentice 2-2
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

2003 Prentice 2-3

Why Use Information Systems?
Automating: doing things faster
Organizational learning: doing things better
Supporting Strategy: doing things smarter

2003 Prentice 2-4

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

2003 Prentice 2-5

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

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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

2003 Prentice 2-7

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

2003 Prentice 2-8

 2003 Prentice 2-9
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

2003 Prentice 2-10

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

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Organizational Value Chain

2003 Prentice 2-12

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

2003 Prentice 2-13

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)

2003 Prentice 2-14

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

2003 Prentice 2-15

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
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Presenting the Business Case
Know the Audience
The IS Manager
Company Executives (VPs and higher)

Steering Committee

Convert Benefits to Monetary Terms

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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

2003 Prentice 2-18

Competitive Advantage
in Being at the Cutting Edge
Deploying new technologies faster, better,
and cheaper than competitors
Using new technology in innovative ways

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Competitive Advantage
in Being at the Cutting Edge
The Need for Constant IS Innovation
On the lookout for new technologies that
impact business

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Competitive Advantage
in Being at the Cutting Edge
E-Business Innovation Cycle
Choosing enabling/emerging technologies
Matching with economic opportunties

Executing business innovation for growth

Assessing client value

2003 Prentice 2-21

 2003 Prentice 2-22
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

2003 Prentice 2-23

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

2003 Prentice 2-24

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, ones IS competitive advantage can be
short-lived

2003 Prentice 2-25

Competitive Advantage
in Being at the Cutting Edge
Requirements for Being at the Cutting Edge
Consider Porters 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

2003 Prentice 2-26