MIS - Strategic Use of Information Systems

Management Information Systems
Strategic Use of Information Systems

Prof. Rushen Chahal
Prof. Rushen Chahal
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
Prof. Rushen Chahal 2

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
Prof. Rushen Chahal

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

Supplier-Oriented Strategic Systems: Inbound Logistics Organizational Requirements for Successful Strategic Information Systems
Prof. Rushen Chahal

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

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
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
Prof. Rushen Chahal
Objectives
Create new relationships with the environment:
Customers Suppliers Competitors Government Partners Employees Community
A Strategic Perspective on Information Systems

From 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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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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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 COMPETITIVE ADVANTAGE to IS, but one uses these to justify the IS

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 resulting from the practice of this science. The art or skill of using stratagem in politics, business, courtship or the like.

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 of an enemy. Strategic Information System: An information system designed to give the owner organization a strategic competitive advantage.
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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.

fundamentally changes the way a company does business, or the way it competes, or the way it deals with its customers or suppliers. A PARADIGM shift. Differences between traditional systems and strategic
Traditional project management techniques to not work well for developing strategic systems. WHY? the questions are unstructured, equivocal and uncertain.

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 and customer.
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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 Business

Company
American Express Reuters Holding Merrill Lynch Sears Dun & Bradstreet
Type
Financial Service Financial Information Stock Broker Retailer (before 1992) Financial
New Vision
Information Business Financial Execution, Financial Services (CMA, EFTS) Information Business Information
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Creating Products & Services based on IS

Company
Citicorp
Type
Financial Service
Product/Service
Software - credit unions international banking Backtel Construction Construction Management software IBM/Sears Prodigy H & R Block Tax Compuserve Procurement Bidding Matching system for Technology Information government bids with company profiles
Transforming Products / Processes with IS

Company
Federal Express UPS Baxter American Airlines United Airlines
Type
Shipping
Transformation
Information: Cosmos Shipping Information Pharmaceutical Automated Order taking system Saber System: Reservation System Apollo System
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A. Competitive Systems The watchwords for the 2000's
Innovation Speed Service Quality
To Stay in Business
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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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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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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 Strategies
Competitive Advantage Lower Cost Differentiation
Broad Target Competitive Scope Narrow Target
Cost Leadership
Differentiation
Cost Focus
Focused Differentiation
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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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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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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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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 Cube

COMPETITIVE FORCES TO CONTEND WITH
Customer Power Supplier Power Present Competitors Potential Competitors Substitute Products Strategic Alliance Merger or Acquisition Internal Growth Internal Innovation TACTICS
STRATEGIES
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

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 rotation and maintenance
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Value Chain with Typical Strategic IS Mapped onto it
EDI-Based Purchasing System Inbound Logistics
ComputerIntegrated Mftg. Operations
Automated Ordering System Outbound Logistics
Expert Systems for Salespeople Marketing and Sales
Telemaintenance Expert Systems Service
Upstream Chains of Suppliers
Downstream Chains of Customers
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Support activities: The required infrastructure
Org's infrastructure Human resources Technology Procurement
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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
DETERMINE THE NEED Establish requirements Specify Attributes
EXAMPLES
Videodisc system to select a product (fish) PC to help determine product features PC system to locate product
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PHASES
ACQUIRE THE PRODUCT Locate the supplier Order the product Authorize and pay for product Acquire the product Test and accept the product
EXAMPLES
On-Line yellow pages, Airline reservation systems EDI order entry systems Electronic funds transfer and billing systems JIT insurance ATMs MACs Drug store systems (check for other products the customer is using)
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PHASES
MANAGE THE PRODUCTS USE Maintain inventory Monitor the product Update the product Repair the product
EXAMPLES
On-Line inventory, shipment tracking systems Sales vs return to establish better stocking policies Automatic product upgrades Maintenance reminders

PHASES
DISPOSE OF THE PRODUCT Dispose or transfer Account for product
EXAMPLES
On-Line terminals for car rentals Record keeping for customers
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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 Prof. Rushen Chahal
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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 your customers
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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
Service / System Ordering Process Facilitation Payments Facilitation of Information Examples Ordering systems Creditcard processing to other firms Debit Cards (Nice, etc) ATMs for/as ATMs distribution of tickets student grades Information on usage Fed Express/ UPS
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Tracking Information
Prof. Rushen Chahal

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 Prof. Rushen Chahal etc...
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C. Market & Sales

System Insulation requirement for homes Properietary Clinical data to Physicians Brokerage Services: Match Customers needs with suppliers Select & Configure Marketing Analysis Company Owens Coring Fiberglass Genentech: Notebook PCs Airline Guide (Display flights) CAD / CAM - FMS Citicorp: From credit card data
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D. Service
After Sales continuation of customer relationship Reduce Cognitive dissonance
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D. Services
System Maintenance Contract: send reminders Mazda Follow-up Double warranty on purchases Tele-maintenance system: Update on systems configurations Diagnostics Update of software
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Company Sears
American Express Stratus Computer Corp. Westinghouse Prodigy

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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

System CIM FMS CAD / CAM MRP II Benefit Control of entire process Units of 1 Configuration control for each customer Reduced inventory costs Reduced cycle time
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Strategies for CIM and BRP

Fjermestad & Chakrabarti, 1993
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B. Service Industries
Anything that facilitates the information flow
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Strategic Systems in Operations: Service Industries

System System 1-800-DENTIST phone number base ordering Direct meter reading Benefit Benefit Find a dentist call back when queue is full Reduced costs and time
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Supplier-Oriented Strategic Systems: Inbound Logistics

Z-1992 Figure 5.6 p160
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Using IS to increase its POWER with Suppliers Want:
Price Delivery Time (JIT) Quality Quantity Service Certification

Want:
Control Good relationship Linkage
GM Example:
JIT/ No-inventory Certified / Quality CAD/CAM for custom engineering EDI for all transactions

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"
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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
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Requirements for success Active support of Senior management Integrated Planning Direct reporting responsibilities of strategic Team Feedback & Control
budget reward
correction
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Organizational Requirements for Successful Strategic Information Systems
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Feedback & Control
Organizational Requirements for Successful Strategic Information Systems

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
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The 1980' focus is on the Competitive advantage The 1990's focus on internal outmode business practices
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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

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 dropped

C. Where are we Headed?
Sprague Fig 3.5 p83
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D. Using IT as a Catalyst for CHANGE
1. Informate rather than automate:
use the information gathered about automated processes to improve the process or change the work performed
2. Use different structures

centralized decentralized both
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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 work that produces the information
decentralization. At Ford the receiving department receive, process and authorizes payment

4. Treat geographically dispersed resources as if they were centralized
central purchasing department to negotiate contracts, local department to draw on the database
5. Link parallel activities rather than integrate them

work in parallel rather than sequenced
6. Let doers be self managing

the lowest level makes the decision
7. Capture information once at its source

Yes!

F. Lesson about Reengineering
Synchronize:
aligning strategy people technology business processes
to cut cost, reduce non-valued-added- work, and streamline client organizations
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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
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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 adaptability

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 Prof. Rushen Chahal 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

B. EDI (con t)
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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A. Changing how decisions are made B. Offering more communications options C. Providing tools for coordination
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A. Changing how decisions are made
To match the increasing turbulence and complexity organizational decision making will be:
more frequent performed faster more complex
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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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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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B. Offering more communications options
E-mail, CMC, GDSS, CSCW These systems can ease and enhance communication between individuals and groups.
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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

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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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
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MIS - Strategic Use of Information Systems

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MIS - Strategic Use of Information Systems

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Management Information Systems

Strategic Use of Information Systems

Prof. Rushen Chahal

Information Systems for Competitive Positioning

Information Systems in Strategic Thrusts

Information Systems for Competitive Positioning

Prof. Rushen Chahal

Information Systems for Competitive Positioning

Strategic Systems in Operations

Information Systems for Competitive Positioning

Prof. Rushen Chahal

Information Systems for Competitive Positioning

Information Systems for Competitive Positioning

Strategic Systems Can change how organizations work

Prof. Rushen Chahal

A Strategic Perspective on Information Systems

Prof. Rushen Chahal

A Strategic Perspective on Information Systems

Prof. Rushen Chahal

A Strategic Perspective on Information Systems

Information Systems in Strategic Thrusts

Information Systems in Strategic Thrusts

Prof. Rushen Chahal

Information Systems in Strategic Thrusts

Information Systems in Strategic Thrusts

Information Systems in Strategic Thrusts

Prof. Rushen Chahal

Information Systems in Strategic Thrusts

B. Creating Products & Services based on IS C. Transforming Products/Processes with IS

Prof. Rushen Chahal

Redefining Company Business

Prof. Rushen Chahal

Creating Products & Services based on IS

Transforming Products / Processes with IS

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Broad Target Competitive Scope Narrow Target

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Prof. Rushen Chahal

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

Strategies, Forces, and Tactics in Competitive Markets

Prof. Rushen Chahal

The Strategic Cube

Value Chain Analysis of Strategic Opportunities

Value Chain Analysis of Strategic Opportunities

Prof. Rushen Chahal

Value Chain with Typical Strategic IS Mapped onto it

EDI-Based Purchasing System Inbound Logistics