e-Everything Age Competing with Information Technology Chapter 2 James A. O’Brien Introduction to Information Systems Eleventh Edition 2 Chapter Objectives • Identify competitive strategies of information technologies. • Give examples of how business process reengineering frequently involves the strategic use of e-business technologies. • Identify the business value of using ebusiness technologies Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. 3 The Age of Networked Intelligence Not just networking of technology but it is about the networking of humans through technology Digital Economy Individuals and enterprises create wealth by applying knowledge, networked human intelligence, and effort to manufacturing, agriculture, and services Knowledge Economy Based on the application of human know how Life long learner “SMART” products Economy added value will be created by brain not brawn Mass Customized rather than massproduced (Boutique Bakers/Garden scents) Mass Customization One of the most successful models of eCommerce is mass customization. the production of large quantities of customized items. It supplements or even replaces one of the most innovative concepts of the Industrial Revolution, mass production. Mass customization can be facilitated by the Web in four different approaches; Collaborative customizers Adaptive customizers Cosmetic customizers Transparent customizers 7 Example of customization 8 Home Depot Online Design Tools 9 Organization Structure Need for new structures….. Information Technology Information technologies are flexible tools, constrained primarily by managers’ will to use them, expectations about their roles, and applications choices. Cash p.267 11 Organization Structure Division of Labor Who does what? Division of Decision Rights Who should make which decision? Coordination Mechanisms Organizational Boundaries Informal Structures 12 James A. O’Brien Introduction to Information Systems Eleventh Edition 13 Strategic Uses of Information Technology Strategy IT Role Outcome Irwin/McGraw-Hill Raise Barriers to Entry Increase amount of investment or complexity of IT needed to compete Increase Market Share Build a Strategic IT Platform Locking in Customers and Suppliers Leverage investment in IS resources from operational uses to strategic uses Use IT to improve quality Use IT to link business to customers and suppliers Create New Business Opportunities Enhance Organizational Collaboration Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Information Systems Cost leadership Differentiation Supports strategic changes – like reengineering Growth Innovation Provide business intelligence by collecting and analyzing information Improve internal efficiency Customer-oriented approaches 14 James A. O’Brien Introduction to Information Systems Eleventh Edition 15 The Internet Value Chain Internet Capability Marketing and Product Research Benefits to Company Data for market research, establishes consumer responses Opportunity for Advantage Irwin/McGraw-Hill Increase Market Share Sales and Distribution Support and Customer Feedback •Low cost distribution •Reaches new customers •Multiplies contact points •Access to customer comments online •Immediate response to customer problems Lower Cost Margins Maintain Valuable Customers and Relationships Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. James A. O’Brien Eleventh Edition Introduction to Information Systems 16 Customer-Focused e-Business Let customers place orders directly Let customers check order history and delivery status Build a community of customers, employees, and partners Let customers place orders thru distribution partners Customer Database Transaction Database Give all employees a complete view of customers Irwin/McGraw-Hill Link Employees and distribution partners Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Customer Service on the Web Providing Search and Comparison Capabilities. Allowing Customers to Order Customized Products and Services Online. Providing Free Products and Services. Providing Technical and Letting Customers Track Accounts or Order Status Other Information and Service. 17 Tools for Customer Service Personalized Web Pages E-mail and Automated Response FAQs Tracking Tools Chat Rooms Help Desks and Call Centers Troubleshooting Tools 18 James A. O’Brien Introduction to Information Systems Eleventh Edition 19 Strategic Positioning of Internet Technologies High Global Market Penetration Product and Services Transformation Strategy E-Commerce Website Value-added IT Services E-Business; Extensive Intranets and Extranets Solution Cost and Efficiency Improvements Performance Improvements in Business Effectiveness E-Mail, Chat Systems Low Intranets and Extranets E-Business Processes Connectivity Internal Drivers Irwin/McGraw-Hill High Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Reengineering…. BPR, Process Innovation, ERP, Mass Customization, Networked Organization, Empowerment, Teams, Virtual Corporations, TQM, JIT, POM, BPM, CRM Reengineering the Corporation Written - 1993 Michael Hammer One of 1996 most influential people in the U.S. Time Magazine July 17,1996 James Champy 21 What is Reengineering? “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures or performance, such as cost, quality, service, and speed” p. 32 22 24 Impacts Company Customers Employees Increase Teams Benefit from product by an better product Less Workers order of - More Work Needs are magnitude Empowered met Examine Layoffs Tendency to process return Vision Loyalty Increase Profits 25 To reengineer a company is to take a journey from the familiar into the unknown. The journey has to begin somewhere and with someone. Where and with whom? P. 101 26 Business Process Reengineering Initially, attention was given to a complete restructuring of organizations. Later, the concept was changed due to failures of BPR projects and the emergence of Web-based applications. Today, BPR can focus on anything from the complete restructuring of an organization to the redesigning of individual processes. Major objective of BPR = Information Integration. 27 Bell Atlantic’s Experience The difference is that in a compliance mode I do what I must do because my boss tells me I must do it. In a commitment mode, I understand what the corporation is trying to achieve and how we’re going to achieve it, and I will do whatever it takes to make that happen, including changing the way I do my job if that is what is required p. 196/197 28 BPR No longer a need to destroy everything - start from scratch Instead - Flexible approach that can be executed by proven methodologies and principles. Hammer and Stanton & Champy  29 Process Innovation Encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions – order-of-magnitude improvements Davenport (1993) 30 James A. O’Brien Introduction to Information Systems Eleventh Edition 31 Business Reengineering and Quality Management Business Quality Improvement Definition Target Potential Payback Risk What Changes? Primary Enablers Irwin/McGraw-Hill Business Reengineering Incrementally Improving Existing Processes Radically Redesigning Business Systems Any Process Strategic Business Processes 10%-50% Improvements 10-Fold Improvements Low High Same Jobs - More Efficient Big Job Cuts; New Jobs; Major Job Redesign IT and Work Simplification IT and Organizational Redesign Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. James A. O’Brien Introduction to Information Systems Eleventh Edition 32 Chapter Summary • Information systems can play several strategic roles in business. • Using the Internet, intranets, extranets, and other Internet-based technologies as a strategic competitive advantage for ebusiness and e-commerce • Build the an e-business model by making customer value its strategic focus. Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. James A. O’Brien Introduction to Information Systems Eleventh Edition 33 Chapter Summary (cont) • IT is a key driver in changing and streamlining business processes. • IT can be strategically used to improve the quality of business performance. • A business can use IT to help it become an agile company, that can respond quickly to changes in its environment. Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved.