Chapter 3: Strategy and Information Management (IT-enabled Strategies)

Question 1

Relation between corporate strategy and information systems

Answer 1

corporate strategy -align-> information systems

information systems -enable-> corporate strategy

Question 2

On-going Discussion

Answer 2

• IT as an enabler for corporate strategies & success <–> Nicholas Carr 2003: IT does not matter!
• Both Points of Views may be partly right:
  • Hal Varian (2004): „It is not information technology itself that matters, but how you use it.“
  • Costs for IT are lower, ability to manage IT is widespread, IT is ubiquitous. In some areas, IT has indeed become a commodity.
  • But: As various technologies in history show, even if some components get standardized, they multiply the opportunities to create new innovations and establish sustainable or temporary competitive advantages.

Question 3

Key questions to determine the impact of IT on Strategic Decision Making

Answer 3

• Previously, we talked about Michael Porter’s Competitive Forces and Value Chain Analysis
• These help in framing decision making along two dimensions depicted in McFarlan’s strategic grid

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Question 4

Key questions to determine the impact of IT on Strategic Decision Making

Answer 4

Guides decision making when evaluating the impact of IT on core strategy and core operations

• Can IT be used to reengineer core value activities and change the basis of competition?
• Can IT change the nature of relationships and the balance of power between buyers and suppliers?
• Can IT build or reduce barriers to entry?
• Can IT increase or decrease switching costs?
• Can IT add value to existing products and services or create new ones?

Question 5

Strategic Information Systems (SIS)

Answer 5

Strategic information systems are IS that assure a competitive advantage for a company or avoid a drop of the company‘s competitiveness.

Example

• Airline reservation system SABRE

Question 6

System Categories for SIS

Answer 6

1. Inter-Organisational Systems
2. Value-Added Services
3. IT for new products and services

4. Electronic Markets

Question 7

Successful SIS: Key Questions

Answer 7

• Do we need the SIS to compensate for a competitive disadvantage?
• Does the SIS add value for our customers?
• Is the SIS defendable?
• Does the SIS make use of the unique qualities of our company?
• Are there exit barriers?
• Does the SIS produce unrealistic expectations?
• Is the project the SIS is part of cost-effective?

Question 8

Technological Advancement Spurs Change

Answer 8

• Steam engine
• Mass production
• Internet technology
• Internet of things

Question 9

Business Process Model for Serial Products

Answer 9

Question 10

IT-enabled Business Process Change

Answer 10

• Business processes (in private and public organizations) present a collection of activities that takes one or more kinds of input and creates an output.
• Business Process Change (BPC) presents a management concept that involves any type of process change (radical and continuous) for increasing efficiency and effectiveness in organizations.
• While both approaches, radical (e.g., BPR, BPT) and continuous (e.g., TQM, CPI, six sigma), share the common goal of improving processes, they are also frequently used complementary

Question 11

Process Change Concepts/Methods

Answer 11

• BPC Business Process Change
• BPI Business Process Innovation
• BPM Business Process Management
• BPR Business Process Reengineering
• BPT Business Process Transformation
• CPI Continues Process Improvement
• TQM Total Quality Management

Question 12

Definition of BPM

Answer 12

Business Process Management is a holistic view of business processes and aims at a structured, analytical, cross-functional and continuous improvement of business processes (see also Lee/Dale 1998, p. 216).

Question 13

Core Elements of Business Process Management

Answer 13

Question 14

Business Process Reengineering

Answer 14

• Objective: achieve sustainable productivity improvements by changing processes substantially.
• This is typically achieved by applying ICT, often in a new and unprecedented way.

Question 15

ICT in the context of Business Process Reengineering

Answer 15

IM as Facilitator –> Process Design
IM as enabler –> Process Design

IM as implementor –>Implementation
IM as operator –> Implementation

Question 16

Phases of a BPR project

Answer 16

Phase Tasks and objectives

Pre-phase

• Creation of general conditions for the BPR project
  
  • Establishing a project organisation
  • Defining the scope of analysis
  • Defining the objectives of the restructuring/ reengineering

As is- analysis phase

• Detailed Description of current situation
  
  • Creation of process transparency
  • Discovering major process weaknesses and improvement poten- tials

Design phase

• Development of a holistic to-be concept / ideal concept
  
  • Desciption of new business processes with corresponding structures
  • Development of an action plan

Implementation phase

• Step-by-step implementation of the to-be concept
  
  • Implementationofpilotprojects
  • Area-wide introduction of new structures
  • Continuous progress controll and establishment of new structures

Question 17

E-Commerce Business Models

Answer 17

• The Storefront Model
• The Auction Model
• The Portal Model (Vertical vs. horizontal)
• The Name-Your-Price Model
• The Comparison Pricing Model
• The Demand Sensitive Pricing model
• The B2B Exchange Model

Question 18

Partial Models of an Integrated Business Model

Answer 18

• Competition model Market model Demand model
• Procurement model
• Product & service production model
• Product & service offering model
• Distribution model
• Financing model, capial model, revenue model

Question 19

IT-Enabled Business Models and Platforms

Answer 19

Many IT-enabled business models are platforms

• Examples: iPhone, Microsoft Windows, Uber, Airbnb
• Platform brings together two sides by the help of IT: –
  
  • iPhone user<–>app developer
  • Passenger<–>Uber driver

Software platform:

A software-based product or service that serves as a foundation on which outside parties can build complementary products or services (Tiwana, Platform Ecosystem, 2014)

Question 20

Platform Governance in an App Store

Answer 20

3 dimension of platform governance

• Control–ensure integration
  
  • The platform owner needs to control and guide the development process of third-party.
• Pricing–create incentives
  
  • The platform owner needs to create incentives e.g. by sharing revenues with developers
• Decision rights – provide autonomy
  
  • The platform owner can transfer decision rights to the app developer to trigger innovation
• Exercise class on October 30:
  
  • Experiment on developing for a software platform
  • Participation improves final grade by 0.3

Question 21

Open vs. closed innovation

Answer 21

Question 22

Types of Innovation

Answer 22

Sustaining innovations:
New technologies or business models which suit an existing market better (improvement) evolutionary / revolutionary

Disruptive innovations:

–> New technologies or business models that (at first) lead to worse products measured against common criteria; often cheaper / less complex;

Question 23

Disruptive Innovation – Christensen’s Criteria

Answer 23

• Historically most valued attributes
• Other quality criteria
• Cost and margin
• Simplicity / convenience
• Interest of main customers
• First customers
• First vendors
• Value chain
• It is not possible to forecast market disruption ex-ante
• Criteria are a good first indicator
• Market disruption
• It is not possible to forecast market disruption ex-ante

Criteria are a good first indicator

Question 24

Summary

Answer 24