Chapter 2
Using Information Technology
Using Information Technology
for Competitive Advantage
for Competitive Advantage
What is a Firm?
What is a Firm?
Physical SystemPhysical System
– Closed-loopClosed-loop
– Controlled by managementControlled by management
– Uses feedback to ensure objectives metUses feedback to ensure objectives met
– Open because of environmental interactionOpen because of environmental interaction
Managed through use of a conceptual Managed through use of a conceptual system
system
Importance of
Importance of
Environment
Environment
Very reason for a firm’s existenceVery reason for a firm’s existence
Firm takes resources from environment, Firm takes resources from environment, transforms them, and returns goods and
transforms them, and returns goods and
services to environment
Society
Financial
Community
Government
Global
Community
Suppliers
The
Firm
Labor unions
Stockholders or owners
Customers
Competitors
The Firm’s
Environment
The Firm Is Connected to
The Firm Is Connected to
Its Environment by
Its Environment by
Resource Flows
Resource Flows
Physical and conceptual Physical and conceptual
Some flows are majorSome flows are major
Some should not occur at allSome should not occur at all
All resources that enter the firm from the All resources that enter the firm from the environment eventually return to the
environment eventually return to the
environment
Competitive Advantage
Competitive Advantage
Computer field perspectiveComputer field perspective
– Use of information to gain leverage in Use of information to gain leverage in marketplace
marketplace
– Relies on more than physical resourcesRelies on more than physical resources
Addressed with strategic objectivesAddressed with strategic objectives
A Value Chain
A Value Chain
Firm Infrastructure
Channel value chains Supplier
value chains
Buyer value chains Firm
value chain
A Value System
A Value System
2-8
The Information Resources
The Information Resources
Two views of information management
Two views of information management
1. Manage data by implementing
1. Manage data by implementing
computer-based database management systems
based database management systems
(DBMS)
(DBMS)
2. Manage resources that produce the
2. Manage resources that produce the
information
The Information Resources
The Information Resources
Facilities
Software Hardware Database
Information Specialists
Users
Information
The Information Resource
The Information Resource
Manager -- the CIO
Manager -- the CIO
Chief Information Officer (CIO) is not Chief Information Officer (CIO) is not simply a title, but role
simply a title, but role
Manager of information servicesManager of information services
Contributes managerial skills Contributes managerial skills
– Solves information resources problemsSolves information resources problems – Solves problems in other areas of firm’s Solves problems in other areas of firm’s
The CIO Attitude
The CIO Attitude
The business is what countsThe business is what counts
Build partnerships/ties with the rest of the Build partnerships/ties with the rest of the
firm firm
Improve basic business processesImprove basic business processes
Communicate in business terms, not IS jargonCommunicate in business terms, not IS jargon
Provide reliable IS servicesProvide reliable IS services
Be positive, not defensiveBe positive, not defensive
Strategic Planning
Strategic Planning
Long-range planningLong-range planning
– Intends to give firm most favorable position in Intends to give firm most favorable position in its environment
its environment
– Specifies strategies for achieving objectivesSpecifies strategies for achieving objectives
Need for each business area to create its Need for each business area to create its own strategic plan
Strategic planning for information resources Strategic planning for marketing resources Strategic planning for manufacturing resources Strategic planning for human resources Strategic planning for financial resources
The Functional Areas Should
The Functional Areas Should
Cooperate
Cooperate
in Developing Their Strategic
in Developing Their Strategic
Plans
Plans
Strategy Set
Strategy Set
Transformation
Transformation
Organizational
Strategy Set
Strategy Set
Transformation: Basic Flaw
Transformation: Basic Flaw
Business areas do not always have the Business areas do not always have the resources to ensure accomplishment of
resources to ensure accomplishment of
strategic objectives
strategic objectives
SPIR
SPIR
Strategy set transformation; support the Strategy set transformation; support the
firm’s objectives
firm’s objectives
Strategic planning for information resources Strategic planning for information resources
(SPIR)
(SPIR) develops firm and IS strategic plans develops firm and IS strategic plans
concurrently
concurrently
– SPIR contentSPIR content
Strategic Planning for
Strategic Planning for
Information Resources
Information Resources
Business strategy
Information resources and
IS
strategy
Influence on Business
Strategy Influence on
Information Resources
Strategic Plan Framework
Strategic Plan Framework
for Information Resources
for Information Resources
The Strategic Implications
The Strategic Implications
of End-User Computing
of End-User Computing
(EUC)
(EUC)
Levels of end users in terms of capabilitiesLevels of end users in terms of capabilities
– menu-level end usersmenu-level end users
– command-level end userscommand-level end users – end-user programmersend-user programmers
– functional support personnelfunctional support personnel
EUC application considerationsEUC application considerations
– shifts workload so that end-users and information shifts workload so that end-users and information
specialists’ talents are better used
specialists’ talents are better used – reduces communications gapreduces communications gap
EUC Risks
EUC Risks
Poorly aimed systemsPoorly aimed systems
Poorly designed/ documented systemsPoorly designed/ documented systems
Inefficient use of information resourcesInefficient use of information resources
Loss of data integrityLoss of data integrity
Loss of securityLoss of security
Information Resources
Information Resources
Management (IRM)
Management (IRM)
Concept
Concept
Realization that firm’s information Realization that firm’s information
resources go far beyond the information
resources go far beyond the information
itself
itself
Activity pursued by managers at all levelsActivity pursued by managers at all levels
Identifying, acquiring, and managing Identifying, acquiring, and managing information resources needed to satisfy
information resources needed to satisfy
information needs
information needs
IRM - Required Elements
IRM - Required Elements
A recognition that competitive advantage A recognition that competitive advantage can be achieved by means of superior
can be achieved by means of superior
information resources
information resources
A recognition that information services is a A recognition that information services is a major functional area
major functional area
A recognition that the CIO is a top-level A recognition that the CIO is a top-level executive
IRM-Required Ingredients
IRM-Required Ingredients
(cont.)
(cont.)
A consideration of the firm’s information A consideration of the firm’s information resources when engaging in strategic
resources when engaging in strategic
planning
planning
A formal strategic plan for information A formal strategic plan for information resources
resources
A strategy for stimulating and managing A strategy for stimulating and managing end-user computing
end-user computing
The firm’s executives
CIO Other executivesOther executives
Central computing resources Disbursed computing resources FUNCTIONAL AREAS FUNCTIONAL AREAS ENVIRONMENTAL INFLUENCES ENVIRONMENTAL INFLUENCES
Internal influences Firm’s strategic plan
INFORMATION RESOURCES
INFORMATION RESOURCES
DATA AND INFORMATION
DATA AND INFORMATION
The IRM
The IRM
Model
Model
Information
services Finance resourcesHuman Manufacturing Marketing
IRM Model: Firm
IRM Model: Firm
Environment
Environment
Provides setting for achieving competitive Provides setting for achieving competitive advantage
advantage
Executives are aware of need to manage Executives are aware of need to manage resource flows to meet needs of
resource flows to meet needs of
environmental elements
environmental elements
IRM Model: Firm’s
IRM Model: Firm’s
Executives
Executives
Includes CIOIncludes CIO
Guides firm toward objectivesGuides firm toward objectives
IRM Model: Business Areas
IRM Model: Business Areas
Information services is a major business Information services is a major business area
area
Each area develops own strategic plansEach area develops own strategic plans
One business area strategic plan is for One business area strategic plan is for information resources
information resources
IRM Model: Information
IRM Model: Information
Resources
Resources
Strategic plan for information resources Strategic plan for information resources details acquisition and management
details acquisition and management
Information resourcesInformation resources
– CentralizedCentralized
IRM Model: Users
IRM Model: Users
Details data and information flows between Details data and information flows between resources and users
resources and users
Some users engage in end-user computing Some users engage in end-user computing
Summary
Summary
Environment of a firm consists of eight elementsEnvironment of a firm consists of eight elements Firms attempt to achieve competitive advantageFirms attempt to achieve competitive advantage
– Margin - value of products and services over costMargin - value of products and services over cost – Value chainValue chain
Information resourcesInformation resources
– Hardware, software, facilities, database, information Hardware, software, facilities, database, information
specialists, information, and users
Summary [cont.]
Summary [cont.]
Executives perform strategic planningExecutives perform strategic planning
– SPIRSPIR
All firm’s managers need to engage in IRMAll firm’s managers need to engage in IRM
– Recent revelationRecent revelation – Integrating conceptIntegrating concept
