Transcript Management Information Systems

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When you finish this week, you will:
◦ Understand business strategy and strategic moves.
◦ Recognize how information systems can give
business a competitive advantage.
◦ Understand basic initiatives for gaining a
competitive advantage.
◦ Know what makes an information system a
strategic information system.
◦ Understand the fundamental requirements for
developing strategic information systems.
◦ Recognize circumstances and initiatives that
make one SIS succeed and another fail.
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Strategy
◦ A plan designed to help an organization
outperform its competitors.
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Strategic Information Systems
◦ Information systems that help seize
opportunities.
◦ Can be developed from scratch, or they can
evolve from existing ISs.
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Profits increase significantly through
increased market share.
The essence of strategy is innovation, so
competitive advantage often occurs when
an organization tries a strategy that no one
has tried before.
Dell was the first PC manufacturer to use
the Web to take customer orders.
Figure 2.1
Eight basic ways
to gain advantage
Figure 2.2 Many strategic moves can work together to achieve a competitive
advantage
 Initiative
#1: Reduce Costs
◦ Lower Costs
◦ Lower Price
◦ Bigger Market Share
 Initiative
Entrants
#2: Raise Barriers to
◦ Patenting
◦ High expense of entering industry
 State Street, Inc. (Pension fund
management business)
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Initiative #3: Establish High
Switching Costs
◦ Explicit Switching Costs
 Fixed and nonrecurring
◦ Implicit Switching Costs
 Indirect costs in time and money of
adjusting to a new product
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Initiative #4: Create New Products
and Services
◦ Dynamic
 The advantage lasts only until other
organizations in the industry start
offering an identical or similar product or
service for a comparable or lower price.
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Initiative #5: Differentiate Products and
Services
◦ Product differentiation
◦ Brand recognition
◦ Examples of brand name success
 Levi’s jeans
 Chanel perfumes
 Calvin Klein clothing
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Initiative #6: Enhance Products and Services
◦ Examples
 Auto manufacturers enticing customers with a
longer warranty
 Real estate agents providing useful financing
information to potential buyers
 Charles Schwab moving stock trading services online before Merrill Lynch
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Initiative #7: Establish Alliances
◦ Combined service may attract customers
 Lower cost
 Convenience
◦ Examples
 Travel industry
 HP and FedEx
Figure 2.3 Strategic alliances combine services to create synergies
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Initiative #8: Lock in Suppliers or Buyers
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Bargaining Power
Purchase volume
Strengthen perception as a leader
Create a standard
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Strategic Information Systems (SIS)
◦ Any IS that can help an organization achieve a
long-term competitive advantage
◦ SIS embodies two types of ideas
 Potentially-winning business move
 How to harness IT to implement that move
◦ Two conditions for SIS
 IS must be serving an organizational goal
 IS unit must be working with the managers of the other
functional units
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Creating an SIS
◦ Top management must be involved from initial
consideration through development and
implementation.
◦ SIS must be a part of the overall organizational
strategic plan.
Figure 2.4 Steps for considering a new SIS
Figure 2.5 Steps to take in an SIS idea-generating
meeting
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Re-engineering and Organizational
Change
◦ To implement an SIS and achieve a competitive
advantage, organization must rethink the entire
way in which it operates.
◦ Goal of re-engineering is to achieve efficiency
leaps of 100 percent or even higher.
 Competitive
Advantage as
Moving Target
◦ SISs developed as strategic advantages quickly
become standard business.
 Banking industry (ATMs and banking by phone)
◦ Companies must continuously contemplate new
ways of utilizing information technology to their
advantage.
 SABRE, American Airlines’ reservation system
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Sources of Strategic Information Systems
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Existing System
New Service
New Technology
Excess Information
Vertical Information
◦ From Automation to SIS
 An organization can gain a competitive advantage
through automation of a manual process.
 American Hospital Supply automated manual
orders and improved services, resulting in a 17
percent compound annual growth rate in sales.
◦ SIS from a New Service
 A company may gain competitive advantage by
providing a new service using IT.
 Merrill Lynch was the first to use IT to provide a cashon-demand service for their investors and captured a
lion’s share of the market.
◦ SIS from New Technology
 A company that figures out how to use a new
technology can gain a competitive advantage.
 American Express used new scanning technology to
process credit charges and saved millions of dollars
in reduced labor costs.
◦ SISs from Excess Information
 An organization can gain an advantage by putting
excess information toward a new product or
service.
 Sears Roebuck and Company uses its customer
record database to provide target information to its
subsidiaries in insurance and real estate.
◦ SISs from Vertical Information
 Organizations use ISs to augment their
businesses vertically by offering related
services.
 Realtors offer financing and relocation
information in addition to information
about houses for sale.
◦ Good SIS ideas must be carefully executed if a
company is to seize opportunities.
 McKesson Drugs, Inc., automated its operations and
gained a competitive advantage.
 Enhanced existing services
 Provided new services
 Cut costs
 Created high switching costs for clients
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How one IS Failed
◦ Citicorp tried to use an SIS to implement a 15minute mortgage approval plan called
MortgagePower Plus, but the program failed.
 Failed strategically due to unwise business
shortcuts.
 Failed operationally due to poor technical
implementation.
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Success and Failure on the Web
◦ Just being first on the Web is not
enough to be successful; business ideas
must be sound.
 An organization must carefully define
what buyers want.
 Establishing a recognizable brand name is
important but does not guarantee
success; satisfying needs is more
important.
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Business owners must develop new features
to keep the system on the leading edge.
Adopting a new technology involves great
risk.
◦ No experience from which to learn
◦ No guarantee technology will work or customers
and employees will welcome it
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The bleeding edge: failure in an
organization’s effort to be on the
technological leading edge.
Some organizations let competitors
assume the risk associated with being on
the leading edge.
◦ Risk losing initial rewards.
◦ Can quickly adopt and even improve pioneer
organization’s successful technology.