CHAPER 13 STRATEGIC INFORMATION SYSTEMS AND REORGANIZAITON

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CHAPER 13STRATEGICINFORMATION SYSTEMS AND
REORGANIZAITON
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Learning Objectives

• Describe strategic information systems and
  explain their advantages
• Describe Porters competitive forces model and
  how IT helps improve competitiveness
• Describe representative strategic information
  systems and the advantage they provide with the
  support of IT
• Understand the role of business processes in
  organizations and the reasons why reengineering
  is necessary
• Demonstrate the role of IT in supporting BPR and
  especially mass customization, cycle time
  reduction, self-directed teams, and empowerment
• Describe virtual corporations and their IT support

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Chapter Overview
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Case Dells Reengineering Efforts Supported
by Strategic Information Systems made IT
Worlds Champion

• The Problem

• As a result of price war with Compaq, it had a
  loss from inventory write downs

• The Solution

• IT-supported innovations
• emergence of electronic commerce

• The Results

• its stock price zoomed more than 2000 percent
• increases its market share and profitability
  simultaneously consistently
• be considered to be one of the most well managed
  and profitable corporations in the world by the
  21st century

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Case (continued)

• What have we learned from this case??

• competition on price, quality, speed, and
  customer service can be very intense,
• especially when large corporations are involved

• providing quality products at a low prices is
  necessary, but may not be sufficient
• using conventional strategies may not be
  sufficient
• fundamental change may be the only way to
  succeed, or even to survive
• using IT, a company can gain a significant
  competitive advantage

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Strategic Advantage and Information Technology

• Strategic Information Systems (SISs)
• support or shape an organizations competitive
  strategy
• outward aiming at direct competition in an
  industry
• inwardly they are focused on enhancing the
  competitive position of the firm by increasing
  employees productivity, improving teamwork, and
  enhancing communication
• strategic alliances two or more companies share
  an inter-organizational system
• strategic systems one of the organizations
  critical responses to business pressures

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Strategic Advantage and Information Technology
(continued )

• The Role of Information Technology
• IT creates applications that provide direct
  strategic advantage to organizations
• IT supports strategic changes such as
  reengineering
• IT provides for technological innovations or acts
  as an enabler of innovation
• IT provides competitive intelligence by
  collecting and analyzing information about
  innovations, markets, competitors, and
  environmental changes
• Competitive Intelligence (Industrial espionage)
• drives business performance by increasing market
  knowledge, improving internal relationships, and
  raising the quality of strategic planning

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Competitive Intelligenceon the Internet
Intelligence Search Strategy
Description
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Porters Competitive Forces Model and IT

• Porters Competitive Forces Model
• competition - at the core of a firms success or
  failure
• be used to develop strategies for companies to
  increase their competitive edge
• demonstrates how IT can enhances the
  competitiveness of corporations
• 5 major forces

Threat of entry of new competitors
Threat of substitute products or services
Bargaining power of suppliers
Bargaining power of customers (buyers)
Rivalry among existing firms in the industry
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Porters Five Forces Model
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Porters Competitive Forces Model and IT
(continued )

• Response Strategies (Per Porter and Others)
• Response strategies to competitive forces
• Cost leadership strategy - producing at lowest
  cost
• Differentiation strategy - being unique
• Focus strategy - selecting a narrow-scope segment
• Growth strategy - increasing market share
• Alliances strategy - working with business
  partners
• Innovation strategy - developing new products
• Internal efficiency strategy - improving the
  manner in which business processes are executed
• Customer-oriented strategy - concentrating on
  making customers happy

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Porters Competitive Forces Model and IT
(continued )

• How the Model is Used

The Players in each force are listed
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Impact of Competitive Forces and the Role of IT
Key Forces Affecting the Industry
Business Implications
Potential IT Responses
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Key Forces Affecting the Industry
Business Implications
Potential IT Responses
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Impact of Competitive Forces and the Role of IT
(continued )

• Sustaining a Competitive Advantage
• When SISs are combined with structural changes in
  the organization, they can provide a sustainable
  strategic advantage
• Example comprehensive strategic information
  system used by Federal Express provides a
  strategic advantage by building and maintaining a
  first-class personnel system

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Ineffective Organizations in the Information Age

• Principles and Methods that enhance the
  development of the Industrial Revolution
• Specialization of labor
• Mass production (producing large quantities,
  storing them, selling them at a later time)
• Hierarchical organizational structure following
  functional specialties with top-down lines of
  authority
• Assembly lines that bring the work to the worker
  whenever possible
• Complex support systems for planning and
  budgeting, resource allocation, coordination, and
  control

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Ineffective Organizations in the Information Age
(continued )
Business processes across functional areas and
organizational boundaries
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Ineffective Organizations in the Information Age
(continued )

• The Need for Integration
• Integration should cross not only departmental
  boundaries, but also organizational ones,
  reaching suppliers and customers
• Account numbers in an information systems
  developed along departmental lines may not be
  logically related and so cannot be used for
  cross-referencing a customers accounts
• Managers want to send letters to specific
  customers

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Business Process Reengineering - The Solution

• Traditional solutions may not be effective

BPR copy the definition BPR overcomes the
problems cited earlier
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BPR (continued )

• Principles of BPR
• several jobs are combined into one
• employees make decision
• steps in the business process are performed in a
  natural order, and several jobs get done
  simultaneously
• processes may have multiple versions
• work is performed where it makes the most sense
• controls and checks are minimized
• reconciliation is minimized
• a hybrid centralized/decentralized operation is
  used
• a single point of contact is provided to customers

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BPR (continued )

• BPR, continuous improvement programs, and IT
  support

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BPR (continued )

• The Enabling Role of Information Technology
• The IT tools for BPR
• Simulation and visual simulation tools - to
  support the modeling activities of BPR
• Flow diagrams - made by specialized BPR tools
  that are usually integrated with other tools
• Work analysis - accomplished with tools that
  conduct forecasting, risk analysis, and
  optimization
• Workflow software - places system controls in the
  hands of end-user departments

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Changes in Work Rules Brought by IT
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Changes in Work Rules Brought by IT
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Major Reengineering Activities

• Redesign of processes
• From mass production to mass customization
• mass production
• produces a large quantity of an identical,
  standard product
• mass customization
• produces large volumes, yet customizes the
  products to the specifications of individual
  customers
• increases with the spread of electronic commerce,
  which transforms the supply chain from a
  traditional push model to a pull model

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Major Reengineering Activities (continued )

• Cycle time reduction
• IT makes a major contribution in shortening cycle
  times by allowing companies to combine or
  eliminate steps, and to expedite various
  activities in the business process
• Cycle time reduction can result in gain a
  substantial market share

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Restructuring Entire Organizations
Reengineered bank with integrated system
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Restructuring Entire Organizations (continued )

• Networked organization
• resemble computer networks and are supported by
  computerized systems
• away from the hierarchical organization toward
  the networked organization due to the evolution
  from an industrial-based economy to an
  information-based economy

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Hierarchical vs. Networked Organization
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The Roles of Managers and Subordinates
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Restructuring Entire Organizations (continued )

• Empowerment - the vesting of decision-making or
  approval authority in employees in instances
  where such authority traditionally was a
  managerial prerogative
• Empowerments relationship to information
  technology
• the provision of right information, at the right
  time allows employees to make decisions
• enhances the creativity and productivity of
  employees, as well as the quality of their work
• training can be enhanced by IT
• enables non-managers to make decisions

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Ethical and Societal Issues

• Unethical tactics

• pressuring competitors employees to reveal
  information
• using software that is the intellectual property
  of other companies without permission
• using IT to monitor the activities of their
  employees and customers, and in so doing they may
  invade the privacy of individuals

• Societal Issues

• Reengineering efforts involve dramatic changes in
  peoples jobs and working relationships
• Jobs are eliminated

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Virtual Corporations

• Characteristics of Virtual Corporations (VC)
• Excellence. Each partner brings its core
  competence (area of excellence) so an all-star
  winning team is created. No single company can
  match what the virtual corporation can achieve.
• Full utilization of resources. Some resources of
  the business partners are sometimes underutilized
  when not in a VC.
• Opportunism. The partnership is opportunistic. A
  VC is organized to seize market opportunities.
• Lack of borders. It redefines traditional
  boundaries.
• Trust. Business partners in a VC must be far more
  reliant on each other and more trusting than ever
  before.
• Adaptability to change. The VC can adapt quickly
  to environmental changes because its structure is
  relatively simple.
• Technology. IT makes the VC effective and
  efficient.

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Virtual Corporations (continued )

• How IT Supports Virtual Corporations
• IT allows communication and collaboration among
  the dispersed business partners
• Standard transactions are supported by electronic
  data interchange and EFT
• Modern database technologies and networking
  permit business partners to access each others
  databases
• Lotus Notes and other groupware tools permit
  diversified interorganizational collaboration

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Whats in IT for Me?

• For Accounting
• The accountant must understand these technologies
  and the role of IT to collect the data for
  justification of the investment
• For Finance
• Finance people must understand the nature of
  these technologies and the manner in which they
  enable organizations to seize opportunities and
  solve problems

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Whats in IT for Me? (continued )

• For Marketing
• SIS and/or BPR are likely to change distribution
  channels, order fulfillment, customer service,
  and many tasks that are under the control of
  marketing and sales
• For Production/Operations Management
• BPRs are most likely to completely change
  existing business processes including production
  lines, materials handling, design, and inventory
  systems

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Whats in IT for Me? (continued )

• For Human Resource Management
• What makes SIS and BPR different is the magnitude
  of the organizational changes that could disrupt
  the operation of the organization if not handled
  properly by management and HRM