mis- strategic use of information systems

8/3/2019 MIS- Strategic Use of Information Systems

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Management Information Systems

Strategic Use of Information Systems

Prof. Rushen Chahal

1Prof. Rushen Chahal


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Information Systems for Competitive

Positioning Objectives

A Strategic Perspective on Information

Systems A. Why a New Perspective?

B. Change

Information Systems in Strategic Thrusts B. Creating Products & Services based on IS

C. Transforming Products/Processes with IS



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Positioning Strategies, Forces, and Tactics in Competitive

Markets

A. Competitive Systems

B. Competitive Forces

C. An example of Strategic Thrusts

D. Tactical Moves in Pursuing a Strategy

E. Strategic Cube

Z Figure 5.3 p 156



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Positioning

Value Chain Analysis of Strategic Opportunities

Customer-Oriented Strategic Systems

A. A Scenario:

B. Outbound Logistics

C. Marketing & Sales

D. Service

Strategic Systems in Operations

A. Manufacturing

B. Service Industries



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Information Systems for

Competitive Positioning Supplier-Oriented Strategic Systems: Inbound

Logistics

Organizational Requirements for SuccessfulStrategic Information Systems



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Competitive Positioning To Reengineer Business processes

A. Definition:

B. The reason for the shifts

C. Where are we Headed?

D. Using IT as a Catalyst for CHANGE

E. Principles Guiding Business Reengineering

F. Lesson about Reengineering

G. The role of the System Department



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Competitive Positioning For Interorganizational Linkage

A. Characteristics of interorganizational Systems

(IOS)

B. EDI

Strategic Systems Can change how

organizations work

A. Changing how decisions are made

B. Offering more communications options

C. Providing tools for coordination



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Objectives

Improve competitive position of organization

Transform the way the organization does

business Create a new perception of the nature of the

business

Change the firms products & services



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Objectives

Create new relationships with the

environment:

Customers

Suppliers

Competitors

Government

Partners

Employees

Community



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A Strategic Perspective on

Information SystemsFrom the realization that IS may be designed

to give a firm an enhance ability to compete &

possible furnish the firm with a competitive

advantage in the market place"

Zwass, 1992, p145



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Information Systems A. Why a New Perspective? The dynamics of information; Many organization both

produce goods & services

process information

Reduced cost of IT; The substitution power of IS: IS in

place of resources (labor, materials)

An interaction effect: Educated people, technology &

change in organization culture The change started to occur in the 1980's with the birth of

the USER- TRON



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Information Systems B. Change

A strategic system radically alters the way an

organization does business

Most companies change via a series of small steps

Strategic benefits from a system: Lower cost;

Market penetration = competitive advantage

The company may not attribute COMPETITIVEADVANTAGE to IS, but one uses these to justify

the IS



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Information Systems

in Strategic Thrusts Competitive systems

Cooperative systems

Systems that change What are Strategic Systems?

Strategy: a definition - The science or art of military

command as applied to the overall planning conduct of

large-scale combat operations. A plan of action resultingfrom the practice of this science. The art or skill of using

stratagem in politics, business, courtship or the like.



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Information Systems

in Strategic Thrusts Stratagem: A military maneuver designed to

deceive or surprise an enemy.

Strategic: Essential to the effective conduct of

war. Designed to destroy the military potential ofan enemy.

Strategic Information System: An information

system designed to give the owner organization a

strategic competitive advantage.



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Information Systems

in Strategic Thrusts Strategic systems: A systems that supports or

shapes a business unit's competitive strategy.

outward looking: customers, competitors,

environments inward looking: employees, systems, procedures

Characteristics of Strategic systems:

significantly changes business performance as

measured by one or more key indicators. (Take no

prisoners).

contributes to attaining a strategic goal.



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Information Systems

in Strategic Thrusts Strategic systems follow: a prototype form, tested on a small scale by the

customers then iteratively developed piece by piece.

User involvement is crucial both manager andcustomer.



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Information Systems

in Strategic Thrusts A. Redefining Company Business

What business are we in?

Actually a "new vision" is created as an answer

Build on existing strengths

Examples:

B. Creating Products & Services based on IS

C. Transforming Products/Processes with IS



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Redefining Company

BusinessCompany Type New VisionAmericanExpress

FinancialService

InformationBusiness

ReutersHolding FinancialInformation FinancialExecution,

Merrill Lynch StockBroker

Financial Services(CMA, EFTS)

Sears Retailer

(before 1992)

Information

BusinessDun &Bradstreet

Financial Infor mation



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Creating Products &

Services based on ISCompany Type Product/ServiceCiticorp Financial

ServiceSoftware - creditunions international

bankingBacktel Construction Construction

Management software

IBM/Sears Prodigy

H & R Block Tax Compuserve

ProcurementTechnology

BiddingInformation

Matching system forgovernment bids withcompany profiles



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Transforming Products / Processes

with ISCompany Type TransformationFederalExpress

Shipping Infor mation:Cosmos

UPS Shipping Infor mationBaxter Phar maceutical Automated Order

taking system

AmericanAirlines

Saber System:ReservationSystem

UnitedAirlines

Apollo System



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Strategies, Forces, and Tactics in

Competitive Markets A. Competitive Systems

The watchwords for the 2000's

Innovation Speed

Service

Quality

To Stay in Business



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Competitive Markets a. To Gain Market Share (Federal Express)

Continuously improve quality

Improve the value of service

Get closer to the customers

Make an international business profitable

Produce strong cash flow



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Competitive Markets b. Uncovering Strategic Use of Systems

Analyze competitive forces

Study strategic thrusts

Study the value chain

Take the customer's view



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Competitive Markets c. Strategies: Z-1998 Figure 3.11 p96

Differentiation

Develop products & services which are different

from what the competition offers

superior attributes

distinguishing features



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Competitive StrategiesCompetitive Strategies

Competitive AdvantageCompetitive Advantage

CompetitiveCompetitive

ScopeScope

Lower Cost Differentiation

Broad

Target

NarrowTarget

Cost

Leadership

Cost

Focus

Differentiation

Focused

Differentiation

Prof. Rushen Chahal


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Competitive Markets Cost leadership based on efficient operations

based on effective operations

economies of scale become a low cost producer

market segmentation (niche)

Focused differentiation

Market niche

Cost focus

narrow market & low cost



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Competitive Markets

B. Competitive Forces

Threat of new entrants

Intensifying realty

Pressures from substitute products

Bargaining power of customers

Bargaining power of suppliers

Z-1998 Figure 3.12 p97



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Competitive Markets C.Process for uncovering strategic systems

opportunities

1. informal meetings to sell the idea

2. a tutorial on the theory of strategic information

3. Discussion of case examples

4. BRAINSTORMING

5. Executive brainstorming



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Competitive Markets

D. Tactical Moves in Pursuing a Strategy

Internal innovation

Internal growth (reengineering)

economies of scale (large volume)

economies of scope (Small volume)

Mergers

Strategic alliances



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The Strategic CubeThe Strategic Cube

CustomerPower

SupplierPower

PresentCompetitors

PotentialCompetitors

SubstituteProducts

COMPETITIVECOMPETITIVE

FORCES TOFORCES TO

CONTEND WITHCONTEND WITH

STRATEGIESSTRATEGIES

TACTICSTACTICS

StrategicAlliance

Merger orAcquisition

Internal Growth

InternalInnovation

Prof. Rushen Chahal


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Value Chain Analysis

of Strategic Opportunities

Definition: Value chain- consists of the major

activities that have been added to the product

during its creation, development or sale.

Primary activities : the creation of product or

service

inbound logistics - order entry data collection,

obtain raw materials, subassemblies

Operations - order processing, MRP;

transformation of inputs to finished goods



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Primary activities : the creation of product or

service

Outbound logistics - distribution & sales data;

storing products,

Marketing sales - promotions, discounting;

establishing a customer need

Service activities - calls, returns, product rotationand maintenance



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Value Chain with Typical Strategic ISValue Chain with Typical Strategic IS

Mapped onto itMapped onto it

EDI-Based

Purchasing

System

Computer-

Integrated

Mftg.

Automated

Ordering

System

Expert

Systems for

Salespeople

Telemaintenance

Expert

Systems

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

and SalesService

Downstream Chains

of Customers

Upstream Chains

of Suppliers

Prof. Rushen Chahal


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Z-1992 fig 5.5 & 5.6



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Customer-Oriented Strategic

Systems

"How can we use IT to help our customers

more easily acquire our products and get

more value out of it?"

The Customer Resource Life Cycle



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The Customer Resource

Life Cycle - 1

PHASES EXAMPLESDETERMINE THE NEEDEstablish requirements

Specify Attributes

Videodisc system to selecta product (fish)

PC to help determineproduct features

PC system

to locateproduct



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Life Cycle - 2

PHASES EXAMPLESACQUIRE THE PRODUCTLocate the supplier

Order the productAuthorize and pay for

productAcquire the product

Test and accept the product

On-Line yellow pages,Airline reservation systems

EDI order entry systemsElectronic funds transfer

and billing systemsJIT insuranceA

TMs MA

CsDrug store systems (checkfor other products thecustomer is using)



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Life Cycle - 3

PHASES EXAMPLESMANAGE THE

PRODUCTS USE

Maintain inventoryMonitor the productUpdate the productRepair the product

On-Line inventory,shipment tracking systems

Sales vs return to establishbetter stocking policies

Auto

matic productupgrades

Maintenance reminders



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Life Cycle - 4

PHASES EXAMPLESDISPOSE OF THEPRODUCT

Dispose or transferAccount for product

On-Line terminals for carrentals

Record keeping forcustomers



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Systems

Whence Success?

Opportunity costs: Switching costs of customer are low

(from other supplier to you)

YOU provide hardware/software, training, custom

implementation

You ensure the exit cost is high

Staying power based on time & money exit costs

Offer responsive service

provide maintenance

provide upgrades 48Prof. Rushen Chahal


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Systems

ISO

YOU know the customers business

STRATEGIC BENEFITS

1. Barriers to entry for new competitors are high

ordering systems take time to develop

costs are high (but are coming down)

2. Prevent substitution of other products

3. Market Segment leader: You have a DB of all yourcustomers



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Systems

4. You have reorganized your company based customer

service and technology

provided value to your customers

Systems based JUST on technology DO NOT always create

Competitive ADVANTAGE

(I.E. ATM's by Citicorp)



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B. Outbound Logistics

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Service / System Examples

Ordering Process Ordering systems

FacilitationPayments

Creditcard processingto other firmsDebit Cards (Nice, etc)

Facilitation ofInformation

ATMs for/as ATMsdistribution of tickets

student gradesInformation on usage

TrackingInformation

Fed Express/ UPS

Prof. Rushen Chahal


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Systems

C. Marketing & Sales

The Key is to use IS added to the creativity of the

people

Systems used in Marketing & Sales

Ordering

Customer DB's information by & about contact

Telemarketing Quality

Tracking

Scheduling

etc... 52Prof. Rushen Chahal


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C. Market & Sales

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System Company

Insulation requirementfor homes

Owens CoringFiberglass

Properietary Clinicaldata to Physicians

Genentech:Notebook PCs

Brokerage Services:

Match Customers

needs with suppliers

Airline Guide

(Display flights)Select & Configure CAD / CAM - FMS

Marketing Analysis Citicorp: Fromcredit card data

Prof. Rushen Chahal


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Systems

D. Service

After Sales continuation of customer relationship

Reduce Cognitive dissonance



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D. Services

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System Company

Maintenance Contract:send reminders

Sears

Mazda Follow-up

Double warranty onpurchases

AmericanExpress

Tele-maintenance

system

: Update onsystems configurations

Stratus

Com

puter Corp.

Diagnostics Westinghouse

Update of software Prodigy

Prof. Rushen Chahal


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Strategic Systems

in Operations

A. Manufacturing

CIM

MRP II



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5.6 Strategic Systems

in Operations Z Figure 5.7 p166



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Strategic Systems in

Operations: Manufacturing

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System Benefit

CIM Control of entire process

FMS Units of 1

CAD / CAM Configuration control foreach customer

MRP II Reduced inventory costsReduced cycle time

Prof. Rushen Chahal


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Strategies for CIM and BRP

Fjermestad & Chakrabarti, 1993



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Strategic Systems

in Operations B. Service Industries Anything that facilitates the information flow


S i S i


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Strategic Systems in

Operations: Service Industries

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System Benefit

System Benefit

1-800-DENTIST Find a dentist

phone numberbase ordering

call back when queueis full

Direct meterreading

Reduced costs andtime

Prof. Rushen Chahal

S li O i d S i


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Supplier-Oriented Strategic

Systems: Inbound Logistics

Z-1992 Figure 5.6 p160


S li O i d S i


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Using IS to increase its POWER with Suppliers

Want:

Price

Delivery Time (JIT)

Quality

Quantity

Service

Certification


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Want:

Control

Good relationship

Linkage

GM Example:

JIT/ No-inventory

Certified / Quality

CAD/CAM for custom engineering

EDI for all transactions72

Prof. Rushen Chahal

S li O i t d St t i


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ShopRite Example:

a. UPC codes for collecting unit prices

b. PicePlus Club: Customer data

c. a & b customer data base

Information on:

Who buys what

Who buys when

d. point of sales coupons for the "other product"


S li O i t d St t i


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Systems: Inbound Logistics e. from a & b:

Crew scheduling

Shelf stocking

f. portable scanners for inventory checking g. All linked with main local warehouse

h. all line via EDI to suppliers

i. get store demand fees for stocking new products


Organizationa Requirements or


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g q

Successful Strategic Information

Systems Requirements for success Active support of Senior management

Integrated Planning

Direct reporting responsibilities of strategic

Team

Feedback & Control

budget

reward

correction75

Prof. Rushen Chahal

Organizationa Requirements or


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g q

Successful Strategic Information

Systems Feedback & Control Readiness: Culture, Resistance

sustainability

1. lead time will allow the achievement of CA

2. Copy cats may fail because of Uniqueness

3. If copied: Your organization will still have Preempted

the marketplace


T R i


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To Reengineer

Business processes

The 1980' focus is on the Competitive

advantage

The 1990's focus on internal outmode

business practices


T R i


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To Reengineer

Business processes

A. Definition: Fundamentally redesigning

how the enterprise works-

procedures

control mechanisms

reporting relationships

decision makers

compensation criteria

The is to replace the paper-base world with IT


To Reengineer


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To Reengineer

Business processes

B. The reason for the shifts

1. From competition

Quality

Cycle time

customer service

niche markets

2. Failures in implementing IT

3. Organizations are being forced to cut expenses

4. The cost/performance of computer

hardware/software has dropped79

Prof. Rushen Chahal

To Reengineer


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To Reengineer

Business processes

C. Where are we Headed?

Sprague Fig 3.5 p83



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To Reengineer


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To Reengineer

Business processes

E. Principles Guiding Business Reengineering

1. Organize around Outcomes, Not tasks

Right!

2. People who use the output should perform the

process

order your own supplies

3. Include information processing in the real workthat produces the information

decentralization. At Ford the receiving department

receive, process and authorizes payment

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Prof. Rushen Chahal


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To Reengineer


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To Reengineer

Business processes

F. Lesson about Reengineering

Synchronize:

aligning strategy

people

technology

business processes

to cut cost, reduce non-valued-added- work, and

streamline client organizations


To Reengineer


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To Reengineer

Business processes 1. Business integration is a Process, not a project

2. People need time to change

3. Recognize the potential up front, get people

involved early

4. Make job change throughout the organization

5. Manage the pace of change


To Reengineer


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To Reengineer

Business processes

G. The role of the System Department

1. Be an influencer

2. Participate on multifunctional teams

3. Build more Flexible Applications faster

4. Introduce processing supporting technologies.

Image processing

EDI, Groupware, video conferencing, E-mail 5. Manage the technical architecture

flexibility

adaptability86Prof. Rushen Chahal


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For Interorganizational Linkage

A. Characteristics of interorganizational

Systems (IOS)

1. IOS require partners

2. Standards

3. Education

4. Coordination via third parties (consultants)

5. The work must be synchronized 6. Work processes are to be reevaluated

7. Technical aspects are the easy ones

8. Effort cannot be secretive



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Cooperative Systems

Definition: Coordination- the act of working together

The definition of cooperative is nested within

coordination. Sprague Fig 3.7 p96 (also 3.4)

B. EDI

The computer to computer exchange of standard business

transactions

payment/remittance

request for quotations



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B. EDI (cont)

purchase order

logistics

Applications that have the greatest Benefits:

they involve a large number of transactions

these transactions require careful and accurate

reporting

they make it easier for the customer to purchase goods

& services




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organizations work



C. Providing tools for coordination




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organizations work


To match the increasing turbulence and

complexity organizational decision making will be:

more frequent

performed faster

more complex




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organizations work Thus three technologies will be needed:

advanced computer and communications technologies

computer message system

computer conferencing video conferencing

decision group technologies (GDSS) as environmental

complexity increases there will be a need for more

information exchanging either via meetings of CMC.




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organizations work Thus systems (CMC) with different structures to

aid different problems (i.e. EBS, DI, Agenda

setting, etc)

Technology support for managing decision processes project mgt for DM

more rapid techniques

expert systems

AI Structuring techniques




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organizations work


E-mail, CMC, GDSS, CSCW

These systems can ease and enhance

communication between individuals and groups.




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organizations work 1. Among Individuals

time and distance can be collapsed

small messages will no longer be a potential bother to

other people communication has increase

thus people are better informed

problems are resolved much faster; people get the

point more quickly when messages are typed memo wars decrease

CMC encourages action; messages are informal yet to

the point




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organizations work 2. Among groups

time and distance are collapsed

people can easily signal interests to other people

messages can easily be sent to other people E-mail reduces the costs of finding people with mutual

interests

Can build strong ties (within group) weak ties between

groups




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organizations work 2. Among groups

E-mail encourages intergroup communication because

it reduces time and effort

filtering mechanism become important to screen in/out

important/junk mail

innovation/ effectiveness can be improved

A second order effect

A first order effect is efficiency

mis- strategic use of information systems

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