This document discusses how the role of information systems has evolved over four eras from operational support to ubiquitous computing. It describes each era, including Era I from the 1950s-1970s where IS provided operational support through a single department, Era II from the late 1970s where IS began supporting management and knowledge work through personal computers, Era III from the mid-1980s where IS strategically supported business units and line-of-business, and Era IV of ubiquitous computing using networks and client/server architecture for electronic organization integration. The document also covers strategic information systems, competitive strategies, analyzing competitive forces and a company's value chain to identify how IS can provide competitive advantage.

1. Strategic Information Systems
Infsy 540
Dr. R. Ocker

2. Foundations of Information Systems
Vladimir Zwass
Chapter 3:
Competing with Information Systems
Irwin/McGraw-Hill
First Edition
© The McGraw-Hill Companies, Inc.., 1998

3. Business challenges of an
Information Society
 Global competition
– rapid product and process innovation
 Increases in amount of knowledge that
affect your business
– need organizational knowledge
management supported by IS
 faster base of business events
– time-based competition

4. How role of IS has evolved
 1. Operational support
 2. Support of management and
knowledge work
 3. Support of business transformation
and competition
 4. Ubiquitous computing

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Era I of Organizational Computing:
Operational Support
Era I of Organizational Computing:
Operational Support
Support of
Operations
Large
Company
Units
Single
DP/IS
Department
Efficiency
Primary
Objective
Justification
Primary
“Clients”
Source

6. Era 1 operational support
 1950s-1970s
 Single data processing department
 which developed all applications
 end users - no direct access to
computer technology
 large backlog

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Era II of Organizational Computing:
Support of Management & Knowledge Work
Era II of Organizational Computing:
Support of Management & Knowledge Work
Management
Support
Individual
Managers
and
Professionals
Information
Systems Units
and End
Users
Management
Effectiveness
Primary
Objective
Justification
Primary
“Clients”
Source

8. Era II support management &
knowledge work
 Began late 1970s
 Apple II PC 1977
 end-user software
 beginning of end user computing

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Era III of Organizational Computing: Support
of Business Transformation & Competition
Era III of Organizational Computing: Support
of Business Transformation & Competition
Entranced
Competitive
Position
Line of
Business
Units
Coordinated
Organizational
End User
Computing
Market Share
and
Profitability
Primary
Objective
Justification
Primary
“Clients”
Source

10. Era III Support Business
Transformation & Competition
 Mid 1980s - orgs. heavy reliance on
computers
 strategic information systems became
prominent
 systems support line-of-business units,
e.g. development and marketing of a
product
 line-of-business units control their own
systems

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Era IV of Organizational Computing:
Ubiquitous
Era IV of Organizational Computing:
Ubiquitous
Electronic
Integration
Collaborating
Teams
Owned and
Outsourced
Computing
Infrastructure
Organiza-
tional
Effectiveness
Primary
Objective
Justification
Primary
“Clients”
Source

12. Era IV Ubiquitous computing
 Cannot pursue competitive advantage
based on single system
 Competing with information systems
must be based on a broad and
continually enhanced technology
platform linked to corporate strategy
 networks & client/server architecture
 electronic integration of entire
organization

13. Strategic Information Systems
(SIS)
 A strategic system alters the way an
organization does business
 some systems - offer a company a clear
competitive advantage - higher profits
or increased market share
 most strategic systems - enable a
company to be an effective competitor

14. Strategic Information Systems
 rapid diffusion of technological change
makes it difficult to maintain a
competitive advantage
 so strategic development of IS
– dynamic capability of an org.
– not a static attribute

15. What are Strategic Systems?
 An information system designed to give
the owner organization a strategic
competitive advantage.
 A strategic system supports or shapes a
business unit's competitive strategy.
 outward looking: customers,
competitors, environments
 inward looking: employees, systems,
procedures

16. Characteristics of Strategic
Information Systems:
 significantly change business
performance
 contribute to attaining a strategic goal
 fundamentally change the way a
company does business,
 or the way it competes,
 or the way it deals with its customers or
suppliers.

17. Strategic systems
 External focus
– changes way firm competes
 innovative use of IT
 high degree of project risk

18. Strategies, Forces, and Tactics in
Competitive Markets

19. Competitive Strategies

20. Uncovering Strategic Use of
Systems
 1. Analyze competitive forces
 2. Study the value chain

21. 1. Competitive Forces Model

22. 1. Competitive Forces model
 used to describe the interaction of
external influences -- threats and
opportunities -- that affect an
organization’s strategy and ability to
compete
 competitive advantage - can be
achieved by enhancing the firm’s ability
to deal with customers, suppliers,
substitute products and services, and
new entrants to its market

23. 1. Competitive Forces model
 Objective - use this model to identify
potential areas where IT can be used to
gain a competitive advantage

24. Competitive Strategies for
competing in marketplace
 businesses can use four basic
competitive strategies to deal with these
competitive forces:
 1. Product Differentiation
 2. Cost leadership
 3. Focused differentiation
 4. Cost Focus

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Competitive Strategies
Competitive Strategies
Competitive Advantage
Competitive Advantage
Competitive
Competitive
Scope
Scope
Lower Cost Differentiation
Broad
Target
Narrow
Target
Cost
Leadership
Cost
Focus
Differentiation
Focused
Differentiation

26. 1. Differentiation
 competitive strategy for creating brand
loyalty
 Develop products & services which are
different from what the competition
offers
 . superior attributes
 . distinguishing features

27. 2. Cost leadership
 to prevent new competitors from
entering their markets, businesses
produce goods/services at lower price
than competition
 based on efficient operations
 based on effective operations
 economies of scale

28. 3. Focused differentiation
 develop new market niche for
specialized products or services
 so that business can compete in target
market better than its competitors

29. 4. Cost Focus
 Company serves narrow market
segment with product/service
 which it offers at a significantly lower
cost than competitors

30. Competitive Forces
 Use competitive strategy to combat 5
competitive forces in marketplace
 1. threat of new competitors
 2. bargaining power of suppliers
 3. bargaining power of customers
 4. substitute products
 5. rivalry within the industry

31. Competitive Forces
 Use IT to enact or counteract these
forces with respect to
– customers
– existing & potential competitors
– suppliers

32. Threat of new competitors
 Erect barriers to entry:
 use IT to slow down new firms entering
market
– SABRE
– ASAP

33. Intensify rivalry among
competitors
 Change basis of competition
– novel IS can perhaps change the basis of
competition - help offer product/service
with new features
– e.g. delivery service allows customer to
track progress of package
– you are now differentiated from competition
– no longer compete just on price basis

34. Pressures from potential
substitute products
 Deliver products with better value
 identify and track a market niche with IS
that you can serve better than others
 try to prevent substitution

35. Bargaining power of customers
 Introduce switching costs
– cost of switching to competitor
– deters customers from switching
– e.g. due to training and contracts, travel
agents unlikely to switch to different airline
reservation system

36. Bargaining power of suppliers
 Develop Alternatives
 use IS to maintain information on
available alternative sources of supply

37. Tactical Moves in Pursuing a
Strategy
 Firm can use any of several tactics to
change its products or processes
through use of SIS
– Internal innovation - generate new
knowledge
– internal growth - economies of scale
– Mergers & acquisitions
– Strategic alliances - partnerships with other
companies

38. IOS & Strategic Alliances
 strategic alliances:
– information partnership - cooperative
alliance formed between two firms
 Advantages
– share information systems
– reciprocity of competencies
– economy of time and money

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The Strategic Cube
The Strategic Cube
Customer
Power
Supplier
Power
Present
Competitors
Potential
Competitors
Substitute
Products
COMPETITIVE
COMPETITIVE
FORCES TO
FORCES TO
CONTEND WITH
CONTEND WITH
STRATEGIES
STRATEGIES
TACTICS
TACTICS
Strategic
Alliance
Merger or
Acquisition
Internal Growth
Internal
Innovation
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40. 3. Value Chain

41. Value Chain
 Tool to use to discover where a
company can apply IS to gain a
competitive advantage

42. Value Chain Analysis of Strategic
Opportunities
 value chain model
 highlights the primary or support
activities
 that add a margin of value to a firm’s
products or services
 where information systems can best be
applied
 to achieve a competitive advantage

43. Value Chain Analysis of Strategic
Opportunities
 Value chain consists of the major
activities that have been added to the
product during its creation,development
or sale.

44. Activities in the value chain
 Activities in the creation of product or service
– inbound logistics - obtain raw materials
– Operations - transformation of inputs to
finished goods
– Outbound logistics - storing products and
delivering them
– Marketing/sales - establishing a customer
need
– Service activities - after-sale service and
maintenance
 each of these activities adds value to final

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Value Chain with Typical Strategic IS
Mapped onto it
Value Chain with Typical Strategic IS
Mapped onto it
EDI-Based
Purchasing
System
Computer-
Integrated
Mftg.
Automated
Ordering
System
Expert
Systems for
Salespeople
Telemaintenance
Expert
Systems
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
and Sales
Service
Downstream Chains
of Customers
Upstream Chains
of Suppliers

46. Value Chain
 besides determining discrete steps in
chain - also need to analyze linkages
between steps in value chain
 Use value-chain analysis to identify
strategic information systems
 to use IS strategically, must identify
potentially info.-related aspects of each
activity in value chain and linkages
between them.

47. Virtual Value Chain
 Mirrors with information the physical
value chain
 possible to integrate the systems
mapped onto the physical value chain
(fig. 3.14) to produce the virtual V.C.
 can also link V.C. to that of suppliers
and customers to form an integrated
supply chain

48. point of analysis
 identify stages and links where highest-
impact potential is available and
creatively use IS to bring about that
potential.

49. Organizational Requirements for
Successful SIS
 Active support of Senior management -
not just MIS management
 Integrated Planning - for strategic use of
IS into overall company strategic
planning process
 Readiness: successful use of MIS
already, org. experience with tech.
innovation

50. Sustainability of a competitive
advantage
 depends on:
 1. lead time will allow the achievement
of competitive advantage
 2. Copy cats may fail because of
Uniqueness
 3. If copied: Your organization will still
have preempted the marketplace

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Key Terms in Chapter 3
Key Terms in Chapter 3
Information Society
Business Globalization
Product Innovation
Process Innovation
Knowledge Management
Strategic Information System
Competitive Forces Model
Differentiation
Cost Leadership
Focused Differentiation
Cost Focus
Value Chain
Information Society
Business Globalization
Product Innovation
Process Innovation
Knowledge Management
Strategic Information System
Competitive Forces Model
Differentiation
Cost Leadership
Focused Differentiation
Cost Focus
Value Chain