This Document Contains Chapters 1 to 2 Chapter 1: The Information Systems Strategy Triangle Overview This chapter presents a very simple framework, the Information Systems Strategy Triangle, which links business strategy with organizational strategy and information strategy. The chapter describes this model, and builds on several other popular strategy models and organizational models. The goal of this chapter is to make sure every student has a basic understanding of both strategy and organizations. For students familiar with business strategy and organizational behavior, this chapter is a review of key points from those two fields. Discussion Opener: One of the first slides of each chapter, following the title or agenda slide (if present), provides discussion questions that cover the opening case. It would be a good idea to set the tone for the entire course by putting students on notice that they should read the chapters before coming to class. The “notes” portion of the slide deck provide brief answers that instructors can see if they use a multi-screen approach. In PowerPoint 2016 or earlier, after enabling the external screen as an extended monitor, make sure to click the “set up slide show” icon and choose “Use presenter view.” The notes will show up on your screen while the presentation will show up on the main projector. Note: If you provide slides to the students, you should delete the brief answers on the opening slide for each chapter. Alternate Discussion Opener: Why should general managers have a broad understanding of information systems? How can that knowledge be helpful in their careers? Key Points in Chapter The Information Systems Strategy Triangle in Figure 1.1 links business strategy with organizational strategy and information strategy. The triangle is used to suggest that all three points must be in balance in any organization to have optimal efficiency and effectiveness. An imbalance can lead to organizational tension or possibly a crisis. A company is out of “alignment” when its business strategy is not supported by the IS. There are several implications from this model. First, business strategy drives organizational and information strategy. Second, organizational strategy must complement business strategy. Third, information strategy must complement business strategy. Fourth, organizational and information strategy should complement each other. Finally, if a change is made to one corner of the triangle, it is necessary to evaluate the other two corners to ensure balance is maintained. That means that if the business strategy is changed (i.e. such as becoming a "bricks and clicks" company), then the manager must also consider a redesign of both the organization (i.e. do we have people that can be successful in this new strategy) and the information systems (i.e. do we have the capability to process inquiries taken off of the Web). Strategy is defined and is tied to the mission of the organization. Examples of mission statements are provided in the text (Figure 1.2), along with a discussion of how Dell has creatively adjusted its business strategy to meet the rapidly changing computer industry. There are several ways to describe business strategy. This chapter summarizes two well-accepted models: the Porter generic strategies framework and dynamic frameworks such as the Goeltz hypercompetition model and blue ocean strategy concept. Current examples are offered to illustrate the models. The Porter generic strategies framework (Differentiation, Cost Leadership, Focus) has spawned many variants. A cost leadership focus means that the company maintains above average performance by selling products that are comparable in quality (i.e. the customer perceives relative value), but at a lower price in the marketplace. Differentiation strategy involves uniqueness of the product in the marketplace in some appreciable qualitative dimension. A focused strategy directs products to meet the specific needs of a particular segment of the market, either based on cost focus or differentiation focus. Dynamic environment strategies are useful to study. One example is the hypercompetition concept which asserts that it is more important to disrupt than to attempt to sustain an advantage. Another is the creative destruction strategy, which focuses on what competitors might do to attempt to destroy the firm, and then what moves should be taken to counteract those attacks. Finally, a blue ocean approach flies in the face of the red ocean approach (which takes emphasis away from carving a market into smaller fragments. The blue ocean strategy attempts to redefine, or even expand an industry, by creating new products or product categories. Competitive advantage is a moving target; companies must be ready to adjust quickly to changes in the marketplace. In this environment, agility becomes the competitive advantage. Chapter 2 discusses strategic use of information resources, building on these and other models. The chapter also describes the managerial levers model (Figure 1.5). That comprehensive model links organizational structure variables, control variables, and cultural variables. Decision makers can manipulate the managerial levers to effect change within the organization. Chapters 3, 4, and 5 discuss the managerial levers in greater detail and apply the organizational strategy frameworks to assessing the impact of IS. The IS strategy provides the plan for information services, and supports the business strategy through needs fulfillment. Figure 1.6 provides a basic framework showing the four components of the information system, the hardware, software, networking and data, and the key managerial concerns for each: what, who, and where. “Social Business Lens: Building a Social Business Strategy” – Variations on the Social Business Strategy include collaboration (bringing people together to share ideas, information, and expertise), engagement (increase perceived attachment through increased interaction), and innovation (development of new ideas). Example: National Instruments (ni.com) has created a ‘branded community’ to collect and disseminate new ideas. Optional Discussion Question: How can we recognize a misalignment between business strategy and IS strategy? Do you have any examples from internships or work experiences? Illustrative Answers to Chapter Discussion Questions This is a summary chapter of the key models for the information systems strategy triangle, so discussion questions were provided to get students focused on and thinking about using these models. Below are some sample answers, but expect creative answers from your students that are not represented here. We encourage you to post some of your best answers to the online community webpage and share them with other instructors. 1. Why is it important for business strategy to drive organizational strategy and IS strategy? What might happen if business strategy was not the driver? Answer: The primary point in this chapter is that in any well-run organization, the business strategy drives the rest of the operational strategy, and information systems are no different. The business strategy defines the goals and objectives based on the organizational capabilities and structure. Information systems are intended to enable and facilitate successful realization of the goals and objectives. Technology for its own sake is not usually a good investment. However, typically, managers seem to think that changing or upgrading an information system (or even a component of an information system) will only positively impact a business. This is commonly referred to as the “Technological Imperative.” Quite the opposite, in fact, is true. By making changes in organizational strategy or IT strategy first, the triangle is "out of balance" and there will be consequences in the affected areas. For example, building a virtual organization, but not changing the business strategy to something like "ensuring our people are productive and have the widest possible work place opportunities" can lead to significant disconnects between workers, their managers, and their customers. And, worse, without supplying the virtual worker with the appropriate information system (a computer at home, a laptop, etc.) will lead to a decrease in productivity by the virtual worker, and a major disruption of business operations. Therefore, allowing IS strategy to drive business strategy could easily lead to poor implementations with disappointing outcomes (i.e. wasted resources). 2. In 2015, the NFL decided to hand out Microsoft Surface tablets to all coaches for use during games, and there are reports that in the future, they will add HoloLens devices to provide augmented reality. A HoloLens device is a high-definition, head-mounted display that allows coaches to see the plays with text and animation superimposed right on the live images. If the NFL simply handed them out without making any other formal changes in organization strategy or business strategy, what might be the outcome? What unintended consequences might occur? Answer: coaches might not use them, without training and modifications to their jobs. They may be accustomed to a manual, voice and paper system and resist moving to the tablet devices. They might not appreciate the added benefits of the dynamic animation, choosing familiar business processes instead. If they do use the devices, there will eventually be strain on the rest of the organization if it doesn't adapt to this new technology. For example, messaging might become ineffective if a head coach only uses voice messaging and special team coaches use animation to simulate plays. The head coach will never see those plays and coordination will suffer. Support systems must also be redesigned. It does a coach little good to have to give up the device during a game for repairs, and a sufficient quantity of ready-to-use backups should be available. Minor problems could be disastrous, and some moderate troubleshooting skills should be provided to coaches. Employees are adept at creating their own “workarounds,” particularly when they do not support a mandatory change. 3. Consider a traditional manufacturing company that wanted to build a social business strategy. What might be a reasonable business strategy, and how would organizational and IS strategy need to change? How would this differ for a restaurant chain? A consumer-products company? A non-profit? Answer: A reasonable business strategy might be to provide what the customer wants when the customer wants it. The idea is to use the Web as a mechanism to connect to customers, to take their orders, to provide services when the customer wants them, and to link with suppliers and partners. To do that, the organization would have to be actively engaged and responsive, and would have to include elements of empowerment and authority for the employees tasked with monitoring the social network. It would not work to have a centralized decision making authority if the organization wants to be responsive because it would take too long to get appropriate information and communicate decisions back to the field. The manufacturing process might be organized around build-to-order rather than on market analysis and product histories, but then there would need to be a series of organizational processes and people that would be in place to make sure the manufacturing company is able to actually build the products when they are ordered. The IS strategy to support this business strategy would be one of rethinking the use of the Web as a tool for delivering information to customers, suppliers and employees. One direct value of social networks is the involvement of customers in the design and operation of the product. It is imperative that the company listen to the customer. In all of the instances listed, organizations could use social networking technologies to advertise, set up discussion groups, monitor discussions on social networking sites, use visualization tools to promote products and services, etc. The business strategy would need to adapt to listening to the customer, rather than “if we build it, they will come.” A restaurant chain could provide incentives for customers to join the social network (e.g. coupons, special orders, preferred seating, etc.). Service industries are often more agile than manufacturing firms, so implementing changes identified by customers could be nearly instantaneous. Consumer-products companies would be expected to respond to customer notifications rapidly. Customers who take the time to provide personal opinions are usually in the two extremes: either very happy with their experience or very unhappy. The latter group will impatiently demand action, or they will be likely to broadcast their negative views to a wide audience. Sensitivity in the company’s reply will be critical. A non-profit would be open to learning new ways to attract contributions and volunteers. The level of creativity from a social network could far exceed the capabilities of staff members. Responding to comments can create momentum and greater interest. View social networking as enhanced word-of-mouth, and don’t underestimate the impact of the media. 4. This chapter describes key components of an IS strategy. Describe the IS strategy of a consulting firm using the matrix framework. Answer: The matrix framework is a very simple structure for decomposing the confusing IS architecture of an organization. For a consulting firm, some of the components would look like this:
Element What Who Where
Hardware Tablets and servers to store information, along with necessary back up devices Consultants have their own tablets, managed by the centralized IS dept, which also "owns" the servers Tablets are mobile, traveling with consultants. Servers are fixed at corporate offices.
Software Office suite, collaboration tools Consultants have the software on their tablets, but software is managed centrally by the IS group All software resides on the mobile devices but is backed up on servers. Some corporate applications might only be on the servers.
Networking Internet, hard wired connections from office, dial up and/or high bandwidth lines from remote (home and client) locations (e.g. secure VPN) ISP service is obtained from AT&T or AOL or other provider who has international access numbers for dialing in. Company has own IS group provide the necessary servers to be connected to the Internet Global access is needed. Nodes are not managed by the consulting company, but by the ISP they contract with.
Data Engagement data such as details of the work done for clients, client data with info about who the client is, previous engagements done for them, etc., and personnel data so consultants can be identified and assigned to projects (billable work hours) All data is "owned" by the company, but is made available to any consultant on an as-needed basis Data reside on the servers, but are "replicated" to the tablets as needed. Information is not considered part of the company until it is on the servers, therefore information only residing on the tablets would not be recognized until uploaded to the servers.
5. What does this tip from Fast Company mean: “The job of the CIO is to provide organizational and strategic flexibility”? Answer: The job of the CIO does not just narrowly involve information systems (IS) or solely focus on developing IS strategy. Rather the CIO must work with top level executives and functional supervisors to ensure that the IS strategy is aligned with the business and organizational strategy. A particular challenge for the CIO is to ensure that the IS architecture and infrastructure can support the business and organizational strategy. In making long-term decisions about IS architecture, the CIO must attempt to promote flexibility in the future with scalable architecture that meets the organization’s present and future needs. Being responsive to the needs of the business will create a mutual benefit for all stakeholders. Further Discussion Questions 1. How can managers determine an imbalance between the three strategies in the Information Systems Strategy Triangle? How might corrections be made before the imbalance leads to a catastrophic failure? Answer: Managers can determine an imbalance between the three strategies in the Information Systems Strategy Triangle by closely monitoring the alignment and coherence among the business strategy, organizational infrastructure strategy, and information technology strategy. Signs of imbalance may include discrepancies in resource allocation, conflicts between IT initiatives and organizational goals, or inefficiencies in information system utilization. Corrections can be made proactively by conducting regular assessments of strategy integration, fostering open communication between departments, and adjusting resource allocation to address areas of weakness. Additionally, managers can implement agile methodologies to adapt quickly to changing business needs, establish cross-functional teams to promote collaboration, and invest in training programs to enhance employees' IT skills and organizational alignment. By addressing imbalances promptly and effectively, managers can mitigate the risk of catastrophic failure and ensure that the organization's IT strategies continue to support its overall objectives. 2. a. Imagine that you purchase an expensive home appliance. The first time you use the device, sparks literally fly, and the device shuts down automatically. You read on the box that the company engages in social networking using a dedicated site. Would you use the social networking site to share your concerns? Why/why not? What do you expect to happen in this instance? b. Now imagine that you are the corporate representative assigned to respond to the customer feedback provided in part a. What is the appropriate way to engage this irate customer? (“Ignore it; hope it goes away”?) Answer: a. As a customer experiencing a significant issue with an expensive home appliance, the decision to use the company's social networking site to share concerns would depend on various factors. Firstly, if the company actively engages with customers on social media and has a track record of responding to inquiries and issues promptly, it might be worthwhile to share concerns on the platform. However, if there's a lack of responsiveness or a history of unresolved complaints, I might hesitate to use the social networking site. Additionally, the severity of the issue, such as sparks and automatic shutdown, may warrant immediate direct contact with the company's customer service channels rather than posting on social media. Ultimately, I would weigh the potential benefits of public visibility against the risk of ineffective resolution or negative repercussions. b. As the corporate representative tasked with responding to the irate customer feedback, it is crucial to address the issue promptly and empathetically. Ignoring the customer's concerns or hoping they will go away is not an appropriate approach and may escalate the situation further. Instead, the first step would be to acknowledge the customer's frustration and apologize for the inconvenience caused by the malfunctioning appliance. Offering a sincere apology demonstrates empathy and a commitment to resolving the issue. Next, I would gather relevant details about the customer's experience and escalate the matter to the appropriate department for investigation and resolution. Providing transparent communication about the steps being taken to address the issue reassures the customer and restores confidence in the company's commitment to customer satisfaction. Finally, offering a resolution, such as a repair, replacement, or refund, based on the company's policies, helps to resolve the customer's concerns and rebuild trust in the brand. 3. Many companies have created corporate Facebook pages/groups. From your experience, are those pages well-utilized? What characteristics might lead some pages to be used widely and what characteristics would lead them to be abandoned? How might a company motivate customers to interact with it using social networking technologies? How would the organizational and IS strategies need to change to increase the effectiveness of this social business strategy? Answer: In my experience, the utilization of corporate Facebook pages/groups varies widely among companies. Pages that are well-utilized often exhibit characteristics such as regular updates with relevant and engaging content, active interaction with followers, prompt responses to inquiries and feedback, and a genuine effort to build a community around the brand. Conversely, pages that are abandoned typically lack consistent updates, fail to respond to customer inquiries or comments, or simply do not provide value to followers. To motivate customers to interact with the company using social networking technologies, companies can employ strategies such as hosting contests or giveaways, soliciting feedback on products or services, sharing exclusive offers or discounts, and fostering genuine connections with followers through personalized interactions. Organizational and IS strategies would need to adapt to prioritize social business strategies by allocating resources for social media management, training staff on effective engagement techniques, integrating social media data into decision-making processes, and aligning IT infrastructure to support seamless integration between social platforms and other business systems. Cases Case Study 1-1: Lego 1. How did the information systems and the organization design changes implemented by Knudstorp align with the changes in business strategy? Answer: Knudstorp determined that the way to save the company was to focus on productivity and profits. The organizational strategy included incentives for employees, encouraging them to develop profitable new product ideas. From the modeler approach, the IS strategy followed the same pattern. The infrastructure was streamlined and the systems supported a more responsive product ordering/operations/shipping business process. The entire company adapted to the new goals and objectives, focusing on key performance indicators of creating products that were well-received by customers. 2. Which of the generic strategies does Lego appear to be using on this case? Provide support for your choice. Answer: Lego appears to be following a differentiated focused strategy. These are toys designed for creative play. They are high quality, and not the cheapest products on the market. However, they are designed to appeal to a variety of customers – themes to capture movie followers (e.g. Star Wars), video games, and creative artists. Each product line can be targeted toward a particular group. 3. Are changes implemented by Knudstorp an indication of hypercompetition? Defend your position. Answer: This would be a hypercompetition strategy since the market continues to change rapidly, and Lego must keep pace with the market. Also, the company is attempting to dynamically adapt to the rapid pace of change. Entering into new markets with innovative product offerings is one way to stay ahead of the competition. 4. What advice would you give Knudstorp to keep Lego competitive, growing, and relevant? Answer: Student responses will vary. Answers should be creative and reflect deep, critical thinking. In general, Lego should remain financially viable through cost cutting practices, automation using IT, and innovative product designs based on sound marketing studies and focus groups. Remove products from inventory if they are not selling well, or if they are not resulting in financial profits. Higher margin products should be added to the portfolio to help secure the company’s future. To keep Lego competitive, growing, and relevant, Knudstorp should focus on several key strategies. Firstly, he should continue to invest in innovation and product development to keep Lego sets engaging and appealing to children of all ages. Additionally, expanding Lego's presence in emerging markets and exploring new distribution channels can help drive growth. Knudstorp should also prioritize sustainability initiatives to align with growing consumer demand for eco-friendly products and practices. Leveraging digital technologies to enhance the Lego experience, such as through interactive apps or online communities, can further engage customers and keep the brand relevant in a rapidly evolving digital landscape. Furthermore, fostering partnerships with popular entertainment franchises or brands can create new opportunities for themed Lego sets and collaborations. Knudstorp should also focus on maintaining a strong brand identity and reputation for quality and creativity to differentiate Lego from competitors. Lastly, ensuring a customer-centric approach by listening to feedback, adapting to changing consumer preferences, and continuously improving products and services will be essential for sustaining Lego's competitive edge and long-term success. Case Study 1-2: Google 1. How is Google’s mission statement related to its business strategy? Answer: Google’s primary goal is to organize the world’s information and make it universally accessible and useful (mission statement). Google continues to take risks and expand into new markets to further its reach into the information world. It takes advantage of new avenues to expand its market share by making information freely available on its Intranet, and by willing to take risks by investing in speculative and strange projects if they see a large potential payoff. 2. How does Google’s information systems strategy support its business strategy? Answer: Through openness and innovation. It permits users to download their own software, maintains official and unofficial blogs, and buys and makes software to suit the needs of the business. IT encourages innovation by allowing employees to spend 20% of their time on a project of their own choosing. This “flexible” IT structure supports the innovation and creativity that its business strategy espouses. 3. How does Google’s organizational strategy support its business strategy? Answer: Google has a culture of innovation and creativity. However, it still provides a level of structure when making decisions. Specifically, Google’s mission statement relates to its business strategy by making data on all ongoing projects and systems available to all of its employees through its corporate Intranet. Any employee can see what is transpiring in other areas and can lend a hand through Google’s “free day” policy and other open work-environment strategies. 4. Which of Porter’s three generic strategies does Google appear to be using based on this case? Provide a rationale for your response. Answer: Differentiation, though one may argue that cost leadership is also utilized with its very reasonable ad costs. However, through the use of its innovative processes and unique business model, Google has differentiated itself from its competitors by keeping a clean and simple interface (which most of the other search engines have emulated), and by continuing to invest in its employees to provide innovation on a large scale. 5. Analyze Google’s strategy and the type of market disruption it has created using a dynamic environment perspective. Answer: In some form or another Google has utilized a blue ocean strategy, which changes an entire industry. Google has added new products that provide value to its customers (AdSense, etc.). It is continually seeking out new knowledge through its innovative management styles and by its willingness to invest in risky projects that have a high-return potential. Google constantly innovates by setting limitations on how long it will take to make changes to its products and services. Through this innovative approach, it is able to stay on the cutting edge of technology and lead this market of the IT world. Through its new products and services (AdSense, GoogleApps, etc.) and its low cost marketing, it changes competition by finding new and better ways to serve its customers. Supplemental Cases Google Inc. by Edelman, B., and Eisenmann, T.R., Harvard Business School. 9-910-036, 21 pages, 2011 (setting: US) This case study provides a glimpse of Google’s history and is a good compliment to the mini-case provided in the chapter. The authors discuss the strategic focus and competition with Yahoo! and Microsoft. Students will be required to recommend a course of action for the company going forward. Airbnb (A) by Edelman, B., and Luca, M., Harvard Business School. 9-912-019, 7 pages, 2012 (setting: US) Airbnb is an online apartment rental site. This case study explores the online reputation service developed to address trust issues in the apartment rental business. Students will investigate the tradeoff between complexity/simplicity and amount of information necessary. Introducing Expert Systems at The Corporation by Liebowitz J., Idea Publishing Group. IT5555, 8 pages (setting: US) This case study highlights the concept the “management” of the technology is usually the limiting factor causing the demise of a project rather than the “technology” itself. This real case study involves creating an awareness of a new technology within the company and trying to start a much-needed project using this technology. Risks and Rewards at Frontier Communications: Improving Customer Service Using Client/Server Technology by Mathieson, K. and T. Toland , Idea Publishing Group. IT5561, 11 pages (setting: US) The case shows how a firm can improve a critical business function with new technology. In addition, the case shows that a firm can use new technology to build mission-critical information systems and examines the risks and benefits of restructuring. Business Reeingineering at a Large Government Agency by McGarry, N.and T. Beckman, Idea Publishing Group. IT5562, 25 pages (setting: US) This case describes the difficulties and successes encountered in a reengineering effort. A team of consultants undertook reengineering the delivery of compensation and benefits at a large quasi-governmental agency. Benefits included six programs which accounted for time-intensive processes such as “cafeteria plan,” options enrollment period where information is dispersed to assist employees in plan selection, and retirement accounts. End-User computing at BRECI: The Ordeals of a One-Person IS Department by Moffitt, K. Idea Publishing Group. IT5563, 11 pages (setting: US) The intention of the case study is to show an unsuccessful attempt at the introduction and use of information technology in a small business, leading to the finding that the application and understanding of technology is lacking in many small businesses that could benefit greatly from its use. Implementing a Wide-Area Network at a Naval Air Station: A Stakeholder Analysis Hocevar, S.P., B.A. Frew, and V.C. Bayer. Idea Publishing Group. IT5568, 13 pages (setting: US) This case study illustrates the use of a non-traditional approach to determine the requirements for the Naval Air Systems Team Wide-Area Network (NAVWAN). It is considered to be non-traditional because the case data enable the use of Stakeholder Analysis and SWOT (strengths, weaknesses, opportunities, threats) assessments to determine the requirements instead of asking functional proponents about function and data requirements. Reengineering the Selling Process in a Showroom by Crnkovic, J., N. Janicijevic, and G. Petkovic, Idea Publishing Group. IT5630, 14 pages (setting: Yugoslavia) The case study describes a process of successful re-engineering of a small Yugoslavian showroom wholesale company (“Wissol”) during the period of economy in transition. An established organizational solution was not supported by adequate IS support. It opens possibilities for designing an IS prototype and for planning future steps in IT and IRM. Enterprise Wide Strategic Information Systems Planning for Shanghai Bell Corporation by Long, Y., F. Fui-hoon Nah, and Zhanbei Shu. Idea Publishing Group. IT5581, 16 pages (setting: China) This case examines Shanghai Bell Corporation, Limited, a leading telecommunications enterprise located in Shanghai, China, and its initiative to develop its new generation Information Technology/Information Systems (IT/IS) plan. The issues covered include alignment of IT strategy with evolving business needs, application of a methodology to develop the enterprise-wide strategic IT/IS plan, and the evaluation of strategic planning project success. Sun Microsystems, Inc: Web Services Strategy by Eisenmann, T. R., Suarez, F. F. Harvard Business School Publishing. 2005 (20 pages) Microsoft and IBM have excluded Sun Microsystems from the board of the Web Services Interoperability Organization (WS-I), an industry consortium that will shape the evolution of Web services standards. Sun managers must decide whether to join WS-I as a contributing member--a less influential role that lacks the veto and agenda-setting powers of a board position. Sun has recruited leading IT vendors--including several WS-I board members--to create technologies that compete with proposed standards jointly developed by Microsoft and IBM. Volkswagen of America: Managing IT Priorities by Austin, R. D., Ritchie, W. & Garrett, G. Harvard Business School Publishing. 2005 (19 pages) Describes the efforts of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to arrive at a process for setting IT funding priorities so that they align with business priorities and the company's overall strategy. Kemps LLC: Introducing Time-Driven ABC by Robert S Kaplan. Harvard Business School Publishing; 08/03/2005 (10 pages) Managers use the information to enhance process efficiencies, negotiate new terms with customers, and attempt to win new business. The company now faces some crucial decisions about how to forge new relationships with key customers. Supplemental Readings/Articles Coltman, Tim R., et al. "Strategic IT alignment: twenty-five years on." Journal of Information Technology (2015). Martinez-Simarro, D., Devece, C., & Llopis-Albert, C. (2015). How information systems strategy moderates the relationship between business strategy and performance. Journal of Business Research, 68(7), 1592-1594. Kim, W. C., & Mauborgne, R. (2015). Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press. Sakas, Damianos, Dimitris Vlachos, and Dimitris Nasiopoulos. "Modelling strategic management for the development of competitive advantage, based on technology." Journal of Systems and Information Technology 16.3 (2014): 187-209. Gerow, Jennifer E., et al. "Looking Toward the Future of IT-Business Strategic Alignment through the Past: A Meta-Analysis." Mis Quarterly 38.4 (2014): 1059-1085. Lee, Dongwon, and Sunil Mithas. "IT Investments, Alignment and Firm Performance: Evidence from an Emerging Economy." (2014). Chae, H. C., Koh, C. E., & Prybutok, V. R. (2014). Information technology capability and firm performance: contradictory findings and their possible causes. MIS Quarterly, 38(1), 305-326. Learning to Compete: IT's Next Transformation from EMC http://www.emc.com/microsites/cio/articles/learning-to-compete/pwf.htm This white paper covers the changing relationship between IT and business. Rapid implementation, efficiency, and reliability are the clear expectations. There is competition for IT solutions not present in years past. Alignment with the business users’ needs is critical to attracting internal clients. These changes lead to operational changes as well. Andrew McAfee and Erik Brynjolfsson, “Investing in the IT that makes a competitive difference,” Harvard Business Review, July 2008. This article provides practical advice for managers to create a sustainable competitive advantage through a strategic use of technology. The three key points are: deploy an enterprise technology that is integrated, innovate by improving work processes, and propagate those successes throughout the company. It is important to continue these endeavors to stay ahead of the competition. Brad Wyckoff and David Thompson, “Unlocking the Value of IT” Harvard Business Review. May 25, 2010. www.hbr.org Organizations must become information-centric (predictive) rather than system-centric (historical). In order to facilitate competitive advantage, data must be pushed out to the decision makers throughout the organization. This article exposes the gap that exists between what companies say about the value of this critical asset and what they are actually doing with their data. Shayndi Raice, “Is Facebook Ready for the Big Time?” Wall Street Journal January 14-15, 2012, B1. The article features an interview with Mark Zuckerberg, Chief Executive of Facebook, and Sheryl Sandberg, former Google Inc. executive. They discuss the initial public offering for the social networking company and the original purpose behind the product. Warren McFarland & Richard Nolan, “Information Technology and the Board of Directors” Harvard Business Review. 83(3): 2005. Most boards remain largely in the dark when it comes to IT spending and strategy, despite the fact that corporate information assets can account for more than 50% of capital spending. This article spells out the conditions under which boards need to change their level of involvement in IT decisions, explaining how members can recognize their firms' IT risks. Tarun Khanna, Krishna G Palepu & Sinha, Jayant “Strategies That Fit Emerging Markets” Harvard Business Review. 83(2): 2005. If Western companies don't come up with good strategies for engaging with emerging markets, they are unlikely to remain competitive. The best way to do this, the authors have found, is by using the five contexts framework. The five contexts are a country's political and social systems, its degree of openness, its product markets, its labor markets, and its capital markets. Robert S. Kaplan and David P. Norton, “Having troubles with your strategy? Then map it.” Harvard Business Review. 78(5): 167-176. 2000 Sep/Oct. A workforce needs clear and detailed information to execute a business strategy successfully. Until now, there have not been many tools that can communicate both an organization’s strategy and the processes and systems needed to implement that strategy. But Kaplan and Norton, the creators of the balanced scorecard, have adapted that seminal tool to create strategy maps. Books Galliers, Robert D., and Dorothy E. Leidner. Strategic information management: challenges and strategies in managing information systems. Routledge, 2014. R.D. Austin, R.L. Nolan, and S. O'Donnell, The Adventures of an IT Leader. MA: Harvard Business School Press, 2009. N.G. Carr, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage MA: Harvard Business School Press, 2002. R. D'Aveni, Hypercompetition: Managing the Dynamics of Strategic Maneuvering. New York: Free Press, 1994. P. Evans and T. Wurster, Blown to Bits. Boston, MA: Harvard Business School Press, 2000. B. Girard, The Google Way. San Francisco, CA: No Starch Press, Inc., 2009. F. Hogue, V. Sambamurthy, R. Zmud, T. Trainer, and C.Wilson, Winning the 3-Legged Race. Upper Saddle River, NJ: Prentice Hall, 2005. M. Porter, Competitive Advantage. New York: Free Press, 1985. M. Porter, Competitive Strategies. New York: Free Press, 1998. Websites www.bp.com BP is a global petrochemical company. The website includes a tab featuring the innovative uses of technology, from seismic imaging to biofuels. Links also update the cleanup from the Gulf of Mexico oil spill that occurred in April 2010. Ritz-Carlton Gold Standards: http://corporate.ritzcarlton.com/en/About/GoldStandards.htm The website describes the values and philosophy for the premier hotel chain. www.cisco.com The Cisco website is an excellent source of additional information on the importance of linking business, organizational and IT strategy. Look at the annual report letter from the CEO, and at the numerous cultural and organizational references Cisco describes as part of their various programs and opportunities. www.cio.com CIO and CIO.com are published by CXO Media Inc. to meet the needs of CIOs (Chief Information Officers) and other information executives. CIO is read by more than 140,000 CIOs and senior executives who oversee annual IT budgets in excess of $175 million. CIO.com serves over 12 million pages annually. www.google.com Founded in 1998, the statement from the website is, “Google’s mission is to organize the world’s information and make it universally accessible and useful.” Visitors can learn a detailed history of the company, from the original search engine to the IPO in 2004 and, more recently, the launch of Google+. This website is a valuable companion to the case study. News August 17, 2015: Microsoft is offering a free upgrade to customers who want to move to Windows 10, and a recent Computerworld article (at http://www.computerworld.com/article/2971728/it-industry/free-windows-10-upgrade-will-have-no-financial-impact-on-microsoft.html) states that it will not be a financial problem for Microsoft. Have students read the brief article and answer these questions: (1) How many of you use Windows? Apple's OSX? Linux? Why did you choose your platform? [A big discussion will ensue; cut it off after 5 minutes] (2) Which of the three sources of competitive advantage is Microsoft trying to address with the free update? Why? (3) What other reasons are offered in the article to explain Microsoft's action? Do you believe those explanations? Dec 29, 2014: A new Microsoft seems to be looming in the future. A cynical but interesting discussion of the upcoming changes Microsoft is hinting about is available on Computerworld at http://www.computerworld.com/article/2863914/microsoft-will-surprise-in-2015.html. Ask students to read it and ask them the following: (1) Where did Microsoft earn most of the revenue growth in the most recent quarter? (2) What are advantages and disadvantages for Microsoft of their decision to offer iPad and Android users Microsoft Office? [Discussion will probably reflect that although it would cut into Microsoft's revenues by diminished Windows 7 or 10 sales along with diminished PC sales, the monthly business pricing ($12.50 to $15 a month) and personal pricing ($6.99 per month) are such that it should make up for those lost revenues over the longer term. It might also be limited in features to some extent and then stimulate PC sales. These basic issues could stimulate a nice detailed discussion of probable market sizes and revenues] (3) Given Nadella's statement "I love Linux," what do you think Microsoft will do with Linux? Chapter 2: Strategic Use of Information Resources Chapter Overview A long-standing management topic for information systems courses is the use of information and information systems for strategic advantage. The triangle model of chapter 1 sets up this discussion by making the link between IT and business strategy. This chapter explores some of these concepts, building on the classic Porter models. Discussion Opener: On the PowerPoint slides, there are questions from the Zara case. Alternate Discussion Opener: Why are we concerned with the alignment of business, organizational, and information strategies? How can that knowledge be helpful to you in your career? Key Points in Chapter Innovative use of a firm’s information resources can provide companies with substantial advantages over competitors. The introduction to this chapter explores Zara, a global retail and apparel manufacturer based in Spain that has successfully implemented this idea by having a continuous flow of new products that are typically limited in supply. Zara has created a system that draws its clientele into its stores, on average, 17 times per year as compared to 4 times per year for most stores. This is made possible by aligning its IS model with its business model. The conclusion is that a company can achieve substantial advantage over its competitors through innovative use of its information resources. The evolution of information resources for business advantages is explored. Building on the eras model of Harvard Business School professors Applegate, McFarlan and McKenney, this model succinctly summarizes how IT has been used to create efficiency, effectiveness, strategic gain, and value. This model is useful to show how leading edge companies have engaged IT for more than just automation of activities and removal of paper from the business. The model also incorporates the economics of information vs. the economics of things that was discussed in Chapter1. The text explains some of the key components of each era. Students might be engaged in discussion as to what a business's objectives are and how IT can help achieve those objectives, based on the targets and models discussed in Figure 2.1. Students should explain how the current Era is different from the previous one, and the implications for these changes. The term information resources is defined as the data, technology, people, and processes available to perform business processes and tasks. Information resources can be either assets or capabilities. IT asset is anything, tangible or intangible, that can be used by a firm in its processes for creating, producing and/or offering its products (IT infrastructure is an asset). IT capability is something that is learned or developed over time in order for the firm to create, produce, or offer its products. Figure 2.2 shows these resources with a definition and an example. Students would do well to understand the difference between an asset and a capability. Crafting advantages using information resources is the job of the manager. Information resources include the technical systems, as well as the people and processes associated with the systems. To evaluate the business advantages of using a particular information resource, five questions are asked: • What makes the information resource valuable? • Network effects occur when benefits increase as the network grows. • Who appropriates the value created by the information resource? • Is the information resource equally distributed across firms now and in the future? • Is the information resource highly mobile? • How quickly does the information resource become obsolete? Information resources can be used strategically. They can influence competitive forces (see Porter’s model in Figure 2.3). For example, the potential threat of new entrants is influenced by using information resources to build barriers to entry. The bargaining power of buyers is influenced by using information resources to build switching costs. The bargaining power of suppliers can be influenced by using information resources to integrate backwards or to reduce costs of linking with other suppliers. Substitute products are more difficult to create if information resources are used to add value to a business’s product and service offerings. And, industry competition can be influenced by information resources when these resources are used to differentiate products or services and to build new markets such as net markets. In Figure 2.4 the 5-forces model evaluates how Zara was able to gain competitive advantage through the strategic use of IT resources and services. Information resources can be used to alter the value chain of a business, creating strategic advantages through lower costs and/or increased value. Porter's value chain suggests primary and support activities a business can use to create value. Information resources lower activity costs, which may create an advantage for the firm. Information resources add value only if a firm has accurate information regarding customers. By extending Porter's model to include supply chains of business partners, information resources are useful to create advantages through innovative linking of a business's supply chain and distribution channel chain. Students often fail to apply the value chain to business partners. Figure 2.5 shows Porter’s Value Chain model of the firm, and Figure 2.6 applies the value chain model to show the extended value system and the interconnected relationships between organizations, including suppliers and buyers. SCM and CRM are introduced, showing how they are applied to the value chain. Figure 2.7 describes the value added to Zara’s primary and support activities by its innovative IS. The main focus is on the value added to Zara’s processes, but it also shows how its suppliers and customers realize this value. Sustaining competitive advantage is discussed next, and Figure 2.8 describes the elements of the Piccoli and Ives framework. Next there is discussion on the Resource-Based View (RBV). It is a useful approach to identify two subsets of information resources: those that enable a firm to attain competitive advantage and those that enable a firm to sustain the advantage over the long term. Information resources can support the strategic purposes that drive the use of the business's resources or strategic thrusts. While not discussed in this chapter, a lecture on this topic might include a discussion of Wiseman's theory of strategic thrusts. There are four types of thrusts: differentiation, cost, growth, and alliance. To find specific strategic opportunities, this model suggests asking three questions: • What is the mode of the thrust? • What is the direction of the thrust? • What is the strategic target of the thrust? Figure 2.9 indicates the extent to which the attributes of each information resource may add value to Zara. In the table you will notice that the resources are categorized by asset and capability and then by value creation and sustainability. The new edition includes Relationship Skills – Externally Focused and Relationship Skills – Spanning under the IT Capability dimension. A discussion on this table may be useful to have students provide their own experiences and frame of reference on each of these resources. Social Business Lens: Social Capital – Social capital is created through relationships. Three types of value potentially created are: structural (pattern of relationships), relational (nature of the relationship), and cognitive (thoughts of people in the network). Next in the chapter is a discussion of strategic alliances. Supply chain management (SCM) is used as an example. Facebook’s IPO and the partnership with Zynga is used to illustrate this concept. A discussion of Brandenburger and Nalebuff’s co-opetition theory demonstrates that some virtual corporations are formed with competitors. Basically, companies both cooperate and compete in the same industry. The last section in this chapter includes a discussion of risks of information systems. This discussion, which describes information systems that failed, is necessary to balance the discussion of competitive advantages afforded by information systems. Instructors are encouraged to have a discussion about the risks and to challenge students to come up with additional risks. Geographic Box: Mobile-Only Internet Users Dominate Emerging Countries – This vignette outlines the common practice of emerging countries to bypass traditional computing, opting for completely mobile connectivity. Malaysia is called a “test case.” The chapter concludes with the concept of co-creating IT and business strategy. The focus of the chapter has been on how IT strategy is aligned with business strategy. It discusses how information is increasingly a core component of the product or service offered by the firm, that IT strategy is business strategy – they cannot be created without each other. FedEx is considered as an example; since its main product is information, the company cannot function without IT even though it is primarily a package delivering company. Business models cannot be built without consideration of information systems. Illustrative Answers to Discussion Questions 1. How can information itself provide a competitive advantage to an organization? Give two or three examples. For each example, describe its associated risks. Answer: There are many appropriate responses to this question. This chapter explores some of them, such as building barriers to entry, creating switching costs, reducing operating costs, opening up new markets, and creating time-based advantages. Encourage students to give specific examples from companies they know about. For each example, explore the risks (i.e., awaking a sleeping giant, demonstrating bad timing, implementing IS poorly, failing to deliver what users want, or running afoul of the law). Discuss their answers in the context of Zara and FedEx. 2. Use the five competitive forces model as described in this chapter to describe how information technology might be used to provide a winning position for each of these businesses: a. A global advertising agency b. A local restaurant c. A mobile applications provider d. An insurance company e. A web-based audio book service Answer: The five forces are substitutes, supplier, buyer, new entrants, and inter-industry. The question asks the student to pick a force and describe how each of these 5 types of business might use information resources to reduce the threat of that force. An example of analyzing the substitute force is given below: • Global advertising agency – A substitute for a global ad agency could be the use of local ad agencies in various locations. Another possibility would be using in-house personnel to fashion ad campaigns. IT resources might provide better coordination among different global locations, or even automatic translation to other languages. • Local restaurant – Substitute services might be using a chain restaurant, or cooking at home. Information resources might be useful to create switching costs using a frequent customer card, or to provide customers with information about the ingredients in their foods with connections to their health monitoring device (such as a FitBitTM). Note that these ideas might also be useful to reduce the threat of other forces, too. • A mobile applications provider - A substitute service might be employing a desktop/laptop application provider, or bringing applications development in house. The firm can reduce the threat of substitution by increasing the reliability and emphasizing the superior features of the mobile apps. • Insurance company – A substitute service that might threaten an insurance company is a trend with large firms to “self-insure.” More specifically, using health insurance as an example is quite interesting. A health insurance company substitute might be to make use of an HSA (Health Savings Account), which is another form of self-insurance, but tax authorities in the USA require putting money into a special savings account so that healthcare expenditures are covered. A partial substitute would be to concentrate resources on healthy living or eating practices, which would presumably reduce healthcare expenses later. Insurance firms might use their information resources to offer a larger variety of options to customers. The IT would be required to track all the chosen options right on the spot when service is required. Other services of value to the customer such as quick and easy plan application and approval, extra incentives for longevity in accounts, links with medical practitioners, and closer links with preferred providers. • Web-based audio book service – A substitute service might be a brick and mortar audio book store where customers could actually listen to selected portions of any book prior to buying. Another might be placing a kiosk in a bookstore or department store where the customer has instant access to the books after listening to the sample (if desired). The web-based audio book service might use IS to offer a broader array of books with more helpful information on the background of the book or its author, and feedback from customers on each audio book along with expert recommendations. Also, the web-based retailer could create value by setting up discussion forums for customers where they could interact with others interested in their particular selections. 3. Using the value chain model, describe how information technology might be used to provide a winning position for each of these businesses: a. A global advertising agency b. A local restaurant c. A mobile applications provider d. An insurance company e. A web-based audio book service Answer: The advertising agency has primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) and secondary activities (organization, human resources, technology, and purchasing). The question asks the student to describe how each of these 5 businesses might use information resources to add value to the activities to their company (and possibly to partners in their supply chain). An example of analyzing a particular value chain stage is: • Global advertising agency – (operations) An agency could use automatic translation to get a head start on providing a web site for each country in which a particular client operates. The system could improve on those already available by tailoring certain phrases that would occur globally. For instance, the word “Sale” might be treated in a special way to provide the best term in each target language; the word might more closely match the typical way to introduce a special deal. • Local restaurant– (marketing) An information system could take various factors into account (such as season, holiday, or even weather) to determine specials to run each day or even new selections to feature. • A mobile applications provider – (human resources) An information system can be used to keep track of employee skills and development of those skills. This adds value for customers, because many applications require particular database or development training. • Insurance company – (outbound logistics) An information system may support all communications with customers for Electronic Funds Transfers for all transactions from premiums to claim payments. • Web-based audio book service – (outbound logistics) A system could be set up where the book service delivers books in any desired format, from mp3 to physical CD, depending on the wishes of the customer. This flexibility could build loyalty among customers because these idiosyncratic preferences are sometimes quite strong. 4. Use the resource-based view as described in this chapter to describe how information technology might be used to provide and sustain a winning position for each of these businesses: a. A global advertising agency b. A local restaurant c. A mobile applications provider d. An insurance company e. A web-based audio book service Answer: The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources. Two subsets of information resources have been identified: those that enable firms to attain competitive advantage (rare and valuable resources that are not commonplace), and those that enable firms to sustain competitive advantage (resources must be difficult to transfer or relatively immobile). The question asks the student to describe how each of these 5 businesses might use information resources to add value to the activities of their company. • Global advertising agency – The agency could utilize its global relationships to market strategically to customers through a CRM system that would be difficult to imitate because of the firm’s global reach. IT talent could be utilized from all parts of the world to create ads that are innovative and strategic in nature. • Local restaurant – In conjunction with a frequent dining card, a customer preference system could be set up which markets to customers that have not utilized the restaurant recently. Perhaps offer coupons to these customers, etc. • A mobile applications provider – An IS system could be used to track interactions with customers (along with their usage of the applications), thereby developing sustainable relationships and generating more customer loyalty. Competitive advantage can be attained by innovative IT embedded in the features of the phones. IT can sustain that competitive advantage through superior customer service, facilitated by a CRM system. • Insurance company – Provide a new service through their websites that takes advantage of a service that is unique to that company and difficult to emulate. • Web-based audio book service – Take advantage of its online presence to offer other services like book recommendations, limited samples, and other services that would enhance its services. 5. Some claim that no sustainable competitive advantages are gained from IT other than the capability of the IT organization itself. Do you agree or disagree? Defend your position. Answer: This is, of course, a very open-ended question. As the chapter discusses, sustainable advantage is hard to come by. The sustainability framework provides some food for discussion. Because almost any advantage gained by a company can eventually be copied by another at some point in the future, it is an important issue for discussion. Students who agree with this statement might argue that the key to sustaining any advantage comes from the way all business resources are organized and used, and ultimately that comes down to how the managers and the people are able to perform. Students who disagree with this statement might argue that even the capability of the IT organization is not a sustainable advantage because people come and go, they can be bought by another organization as a move to create the capability elsewhere, and their skills and knowledge atrophy over time, when new capabilities arise. Witness IT organizations who excelled at managing mainframe applications, who are now struggling to keep up with web-based applications. I disagree with the claim that no sustainable competitive advantages are gained from IT other than the capability of the IT organization itself. IT can indeed provide numerous sustainable competitive advantages to organizations. For instance, IT enables process automation, improving efficiency and reducing costs, which can be a significant source of competitive advantage. Additionally, IT facilitates data analytics and insights, empowering organizations to make informed decisions and adapt quickly to market changes, thus gaining a competitive edge. Furthermore, IT enables innovation by fostering collaboration, enhancing communication, and enabling the development of new products and services ahead of competitors. Moreover, IT can enhance customer experience through personalized interactions, seamless transactions, and tailored services, fostering customer loyalty and differentiation in the market. Lastly, IT can strengthen organizational agility and resilience, enabling businesses to respond rapidly to disruptions and stay ahead of competitors in dynamic environments. 6. a. Cisco Systems has a network of component suppliers, distributors, and contract manufacturers that are linked through Cisco’s extranet. When a customer orders a Cisco product at Cisco’s Web site, the order triggers contracts to manufacturers of printed circuit board assemblies when appropriate and alerts distributors and component suppliers. Cisco’s contract manufacturers are aware of the order because they can log on to Cisco’s extranet and link up with Cisco’s own manufacturing execution systems. What are the advantages of Cisco’s strategic alliances? b) What are the risks to Cisco? To the suppliers? Answer: a. Cisco is linked via its extranet to contract manufacturers who print circuit board assemblies. The circuit boards can be provided when the order is made, or shortly thereafter. This reduces the circuit board inventory that Cisco needs to maintain. Similarly, since it is linked to component suppliers, it can be anticipated that Cisco’s inventories for component supplies can be maintained for several days (or less) of manufacturing needs, instead of for weeks or months. The distributors linked via the extranet can be alerted that a customer order is being processed. This can help them schedule the delivery and complete the paper work so that the customer order can be completed more speedily. By making the processing more efficient, inventory and processing costs may be reduced. Ultimately this may result in reduced prices and speedier delivery to the customer. b. Cisco Supply Chain Management can improve the way a company finds raw components it needs to make a product or service, manufactures that product or service, and delivers it to customers. But sharing that information might increase the risk of a security breach, which would open up sensitive data to attack. Both Cisco and suppliers are vulnerable. Further, Cisco’s long-term needs would be immediately known to suppliers, and they could be tempted to increase prices on some products that are to be in higher demand. Suppliers might also count too heavily on that information, and if it is not accurate, they might be caught short on particular items. Further Discussion Questions 1. Social networking, used strategically, can be viewed as an information resource. Select a firm to analyze. Explain how SN can be used as an IT Asset and how the skills acquired by corporate staff can be viewed as an IT Capability. Answer: Social networking can be viewed as an information resource and IT asset for a firm like Apple. Apple strategically utilizes social networking platforms such as Twitter, Facebook, and Instagram to disseminate product updates, engage with customers, and gather feedback. These platforms serve as valuable channels for collecting real-time market insights and understanding consumer preferences. The skills acquired by Apple's corporate staff, such as social media management, data analysis, and customer relationship management, can be viewed as IT capabilities. These capabilities enable Apple to effectively leverage social networking as a strategic tool, driving brand awareness, fostering customer loyalty, and staying ahead of competitors in the rapidly evolving digital landscape. Overall, social networking serves as a crucial IT asset for Apple, enhancing its ability to connect with consumers and capitalize on emerging opportunities in the market. 2. Apple’s iPad is saturating the market, commanding huge market share. Use Porter’s five competitive forces model to analyze how Apple has attained a competitive advantage in the tablet market. Answer: Apple has achieved a competitive advantage in the tablet market by leveraging Porter's five competitive forces model. Firstly, the threat of new entrants is mitigated by Apple's strong brand reputation, extensive distribution networks, and significant economies of scale, making it challenging for new players to enter the market. Secondly, the bargaining power of buyers is reduced due to Apple's differentiated product offerings, high-quality user experience, and strong customer loyalty, enabling Apple to command premium prices. Thirdly, the bargaining power of suppliers is moderated by Apple's vertical integration and strategic supplier relationships, ensuring a consistent supply of high-quality components at competitive prices. Fourthly, the threat of substitute products is minimized by Apple's ecosystem lock-in, where customers are heavily invested in Apple's ecosystem of devices, services, and software, making it less likely for them to switch to alternative tablet brands. Lastly, competitive rivalry is subdued by Apple's continuous innovation, product differentiation, and aggressive marketing strategies, allowing Apple to maintain its dominant position and fend off competition effectively. Overall, Apple's strategic approach to addressing Porter's five forces has contributed to its sustained competitive advantage in the tablet market. Cases Case Study 2-1: Groupon Students might not be familiar with Groupon. They should visit the website (http://www.groupon.com/ ) and visit the entry on Wikipedia. From the case in the textbook and this additional information, they should be able to answer the questions posed. 1. How does information technology help Groupon compete? Answer: IT creates the network and communicates daily deals to participating potential consumers. The deals are e-mailed to the public. The system also tracks acceptance of the offers, determining when constraints are satisfied. 2. Do you agree or disagree with the statement that “Groupon has no sustainable competitive advantage”? Please explain your point of view. Answer: Student responses might support or oppose the statement. The important point is for them to justify their positions with logical arguments. The case seems to agree with the statement, since there are a number of competitors entering the market, and Groupon’s service is not truly unique. However, Groupon could continue to innovate in order to establish itself as the premier service for this type of market. Branding its product will be critical, so that consumers only think of Groupon for this activity. The Piccoli and Ives framework will provide useful discussion material. I agree with the statement that "Groupon has no sustainable competitive advantage." Groupon operates in a highly competitive industry with low barriers to entry, leading to intense rivalry among competitors offering similar deals and discounts. Additionally, Groupon's business model relies heavily on acquiring new customers through aggressive marketing campaigns, resulting in high customer acquisition costs and limited brand loyalty. Furthermore, Groupon faces challenges in retaining merchants due to the high commission fees and the potential for negative reviews from dissatisfied customers. The rise of alternative deal platforms and coupon websites further undermines Groupon's ability to differentiate itself and maintain market dominance. Groupon's lack of significant technological innovation or proprietary technology also contributes to its vulnerability to competition. Moreover, Groupon's business model is susceptible to economic downturns, as consumers may reduce discretionary spending on non-essential goods and services. Lastly, Groupon's reliance on external factors such as consumer behavior and merchant partnerships makes it difficult to establish a sustainable competitive advantage in the long term. 3. How does Groupon add value to the companies whose offers are sold on the site? Answer: The value created for companies is both direct and indirect. As stated in the case, a large number of companies realize a loss from the volume of coupons redeemed. However, they increase their visibility by appearing on Groupon’s site and the coupons get the target customers to visit the company. Getting new customers through the door creates the opportunity for up-selling and cross-selling. 4. What impact, if any, will Groupon Now have on Groupon’s competitive position? Explain. Answer: Groupon Now will create an immediate competitive advantage by making use of the geographical location-based systems and the pervasiveness of mobile devices. However, it would not be sustainable since Groupon’s competitors will likely duplicate that feature quickly. More features must be developed to remain ahead of the competition. 5. What would you advise Groupon leaders to consider as their next application? Answer: Student responses should be creative and reflect serious possibilities. One obvious extension would be to capitalize on the social networking phenomenon. Another possibility is to create an application designed specifically for entrepreneurs. Third, there might be an application that could limit the number of coupons based on quantity or time. This would encourage more members to respond with urgency and mitigate the negative financial losses of companies offering coupons. As Groupon considers its next application, I would advise its leaders to focus on enhancing user engagement and personalization. Developing a mobile app with advanced machine learning algorithms can provide personalized deal recommendations based on user preferences, browsing history, and location, improving the overall user experience. Additionally, integrating social networking features into the app, such as user reviews, recommendations, and sharing options, can foster community engagement and drive word-of-mouth marketing. Implementing gamification elements, such as loyalty programs, badges, and challenges, can incentivize users to interact with the app more frequently and increase customer retention. Moreover, investing in augmented reality (AR) technology can offer innovative ways for users to visualize products and experiences before making a purchase, enhancing the appeal of Groupon deals. Prioritizing seamless integration with merchants' systems and payment gateways can streamline the redemption process and improve merchant satisfaction. Furthermore, incorporating real-time analytics and insights into the app can provide valuable data for optimizing marketing strategies and improving deal targeting. Leveraging location-based services and push notifications can deliver timely and relevant deal alerts to users based on their proximity to available offers. Ensuring robust security measures and compliance with data privacy regulations is essential to maintain user trust and protect sensitive information. Lastly, continually soliciting user feedback and iterating based on user preferences and trends can drive continuous improvement and innovation in Groupon's app offerings. 6. Analyze the business model of Groupon using Porter’s five forces model. Answer: Existing competition: Considering Groupon’s industry as the paid couponing industry, there is not very much competition. But considering their industry as couponing in general, there is quite a bit of competition. Newspapers, emails, websites, and several other publications provide coupons. The unique factor here is having higher customer commitment because they must purchase a voucher for future use. New entrants: Others who duplicate their business model have appeared, and switching costs would be unlikely to build on the end-customer’s (the diner’s) side. However, providing special deals to restaurants with increased use could provide switching costs. Buyer power: Groupon provides entertaining, colorful ads to the end customers (the diners), and has preemption impacts (as the first such service). Therefore, customer loyalty might increase switching cost. Supplier power: Considering restaurants as suppliers, this is a difficulty in Groupon’s model. Without restaurants, Groupon would not be able to operate. Groupon therefore has a high threat in supplier power. However, if customer loyalty is high, Groupon would be able to reduce supplier power somewhat, so restaurants might find Groupon campaigns to be more successful than those of other similar firms. Substitute products: This depends on how the industry is defined. If it is defined narrowly (paid couponing), there are many substitutes. If it is defined broadly (couponing in general), then substitutes might include restaurant “specials” that might be offered without a coupon at all. Also, a substitute might be to choose a less expensive restaurant (such as a fast food outlet). Students will likely have different assessments of the individual elements. They should be able to explain their decisions, describing the forces experienced by Groupon. Case Study 2-2: Zipcar This is an interesting, short case about how a new type of rental car company is able to operate in a completely new business model, as compared to other rental car companies, and embrace Web 2.0 technologies to gain further competitive advantage. 1. Apply the resource-based view to Zipcar’s business model to show how information resources may be used to gain and sustain competitive advantage. Answer: Zipcar has created a model that would be difficult for other companies to imitate with its technology infrastructure and low overhead. Zipcar has a valuable set of agreements in place with various agencies, businesses, and city governments that enabled them to achieve desirable positions for parking spaces. They have population and transaction information that allows them to reallocate their supply. Their model would be difficult for traditional car rental companies to model due to their existing infrastructure and model. Customers could utilize other rental companies, but they would lose the convenience offered by the Zipcar model of hourly rental agreements and convenient locations. 2. Discuss the synergy between the business strategy of Zipcar and information technology. Answer: There is tremendous synergy between Zipcars business and IT strategy. Zipcar is heavily dependent upon an automated process and supports social networking of its clients so that they can freely provide feedback on the company and its products and services. IT completely supports what Zipcar is trying to accomplish. 3. What network effects are part of Zipcar’s strategy? How do they add value? Answer: Through their use of social networking, they provide value to the customer by providing an open exchange of ideas and feedback to Zipcar. Zipcar's strategy incorporates several network effects that add significant value to its business model. Firstly, Zipcar benefits from direct network effects, where the value of its car-sharing service increases as the number of users (both renters and car owners) grows. More users mean a larger pool of available vehicles, shorter wait times, and increased convenience for customers. Secondly, Zipcar leverages indirect network effects through its platform, where the value of the service grows as the number of locations and coverage areas expands. This encourages more users to join and increases the attractiveness of Zipcar's service compared to traditional car rental options. Additionally, Zipcar benefits from data network effects, where the collection of user data and feedback enables the company to improve its service offerings, optimize vehicle placement, and tailor promotions to specific user segments, enhancing the overall customer experience. These network effects create a self-reinforcing cycle where more users attract more users, leading to increased utilization rates, profitability, and market dominance for Zipcar in the car-sharing industry. 4. As the CEO of Zipcar, what is your most threatening competition? What would you do to sustain a competitive advantage? Answer: The most threatening competition has not yet been identified. Existing rental agencies have not been successful in adopting Zipcar’s model (a web-based one with distributed locations). However, this situation is likely to change over time in unpredictable ways. To sustain their advantage, they should continue to innovate through the use of IT and by listening to customer feedback on the social network sites. Look for strategic partnerships with suppliers or other potential providers of services that Zipcar could leverage to improve its service or add extra value. Supplemental Cases Groupon by Chatterjee, S., O’Keefe, S., and Streiff, A., Richard Ivey School of Business. W12674, 15 pages, 2012 (industry: retail trade) This case study provides a foundation for the “collective buying industry,” a new business model. As discussed in the case, the future is uncertain, relying on the innovative decisions of the market leaders. This case is a good compliment to the mini-case provided in the chapter. Students will be asked to recommend a course of action for the company to maintain the incredible growth trajectory. Apple Inc. in 2010 by Yoffie, D.B. and Kim, R., Harvard Business School. 9-710-467, 25 pages, 2011 (setting: California) Apple launched the iPad to the market in April 2010, on the heels of the incredibly successful iPhone and iPod products. This case study explores the competitive challenges Apple faced worldwide, particularly with struggling sales of the Macintosh personal computer. Students will investigate the growth potential for this new product, suggesting ways to build market share into the future. Carnival Cruise Lines by Applegate, L.M. & Robert J Kwortnik, Gabriele Piccoli, Harvard Business School Publishing; 07/07/2005; (33 pages) Highlights the potential value of customer data and the choices and challenges the firm faces when attempting to capture this value. Carnival collects a significant amount of individual-level behavioral and demographic customer data. Senior management must now decide how to leverage such a wealth of data. Information Systems at FirstCaribbean: Choosing a Standard Operating Environment by Beaubien L & S. Mahon, Ivey School of Business; 3/22/2005; (12 pages) The Canadian Imperial Bank of Commerce and Barclays Bank PLC were in advanced negotiations regarding the potential merger of their respective retail, corporate, and offshore banking operations in the Caribbean. Currently there are four systems in operation in the region. All are carry-overs from the pre-merger operation of the bank. Each of the systems has different pros and cons consisting of degree of fit with the organization strategy, likely impact on organizational culture, and functionality. Kemps LLC: Introducing Time-Driven ABC by Robert S Kaplan. Harvard Business School Publishing; 08/03/2005; (10 pages) Managers use the information to enhance process efficiencies, negotiate new terms with customers, and attempt to win new business. The company now faces some crucial decisions about how to forge new relationships with key customers. Change Management of People & Technology in an ERP Implementation by Edwards, H. E., Humphries, L. P. Idea Group Publishing; 2005 Eighteen months after adopting an enterprise resource planning (ERP) system, the chief executive officer wanted an investigation into the performance of the system. The results of the investigation reported here reveal problems with the acquisition and implementation process. Lands’ End case: Ives, B., & Piccoli, G. (2003). Custom made apparel and individualized service at Lands' End. Communications of the Association for Information Systems, 11(1), 3. This case is somewhat old but I still use it as the first case because (1) it is free and I can put it on the course website, and (2) it is a classic one that fits well with the sustainability framework. Developing Inter-Organizational Trust in Business-to-Business E-Commerce Participation – Case Studies in the Automotive Industry, P. Ratnasingam, Idea Publishing Group Case, 11 pages, IT 5610 (setting: Australia) The case study describes the process involved in an EDI implementation in the Australian automotive industry. Buyer-supplier interactions during EDI implementation and its impact on technical, political, behavioral, and trading partner trust aspects are discussed in this case study between Ford Australia (manufacturer) and Patents, Brakes and Replacements Limited (their first tier supplier). Analyzing the Evolution of End User Information Technology Performance: A Longitudinal Study of a County Budget Office, J. Sacco and D. Hackler, Idea Publishing Group Case, 14 pages, IT 5611 (scope: U.S.) This case study examines end-user information technology evolution from microcomputers to World Wide Web applications in a large county budget office over a fifteen-year period. The study evaluates end-user information technology performance and comments on organizational, technical, and social issues that accompany information technology implementation. Risk in Partnerships Involving Information Systems Development: Lessons From a British National Health Service Hospital Trust, G. Harindranath, J.A.A. Sillince, and R. Holloway, Idea Publishing Group Case, 22 pages, IT 5619 (setting: UK) This case study presents a UK-based project that promised new healthcare service delivery by redesigning healthcare procedures and developing sophisticated new information systems through a unique partnership between public and private sectors. The case study concentrates on one of the more important determinants of success or failure of such partnerships involved in information systems development, i.e., ‘risk.’ Success and Failure in building Electronic Infrastructure in the Air Cargo Industry: A Comparison of the Netherlands and Hong Kong SAR, E. Christiaanse and J. Damsgaard, Idea Publishing Group Case, 13 pages, IT 5645 (setting: worldwide) This case describes the genesis and evolution of two IOSs in the air cargo community and provides information that lets students analyze what led one to be a success and one to be a failure. The two cases are from the Netherlands and Hong Kong SAR. Success in Business-to-Business E-Commerce: Cisco New Zealand’s Experience, P. Ratnasingam, Idea Publishing Group Case, 19 pages, IT 5649 (setting: New Zealand) The case study about Cisco New Zealand permits students to learn about the factors that influence the successful trading partner relationships in business-to-business e-commerce participation among other pertinent issues. The Role of Virtual Organizations in Post-Graduate Education in Egypt – The Case of the Regional IT Institute, S. Kamel, Idea Publishing Group Case, 13 pages, IT 5653 (setting: Egypt) This case reports on the experience of Egypt’s Regional IT Institute in the field of education and training. The Regional IT Institute was established in 1992 targeting the formulation of partnerships and strategic alliances to jointly deliver degree (academic) and non-degree (executive) programs for the local community capitalizing on the enabled processes and techniques of virtual organizations. Supplemental Readings/Articles G. Piccoli and B. Ives, “IT-Dependent Strategic Initiatives and Sustained Competitive Advantage: A Review of the Synthesis of the Literature,” MIS Quarterly, 29(4), pp. 747-776, 2005. The authors present a thorough review of the literature, focusing on the IT-dependent strategic advantage literature. This interdisciplinary literature presents a clear picture of the value of these initiatives on corporate success. Gary, Loren “Network vs. Network: The New Arena of Competition,” Supply Chain Strategy, Harvard Business Publishing, 2005. As companies increasingly build value through often far-reaching relationships with other firms--through alliances, outsourcing, deep supplier relationships, and other partnerships--more and more leaders are facing a new reality: to succeed, they and their partners must address the market as one competitive unit. Martin J. Garvey, “IT helps utilities stay competitive” Information Week. (803): 375-383. 2000 Sep 11. For years, the specter of deregulation hung over the utility industry, threatening to bring major changes to what traditionally had been a slow-moving market. Now that the specter has become reality, utilities are using IT to reduce the trauma of deregulation, compete more effectively and efficiently, improve customer service, and boost profits. Books Ward, J. & Griffiths P. M. Strategic Planning for Information Systems (Wiley Information Systems Series) NY: John Wiley & Sons, 1996. This book takes a clear, practical, and comprehensive look at the impact of information systems (IS) on business performance and its contribution to the strategic development of organizations. It provides the tools, techniques, and management framework for identifying and implementing the opportunities offered and shows how IS/IT helps organizations achieve a competitive advantage. Boar, B.H. Strategic Thinking for Information Technology NY: John Wiley and Sons, 1996. This book shows managers how to apply strategic thinking about information technology to their business process to create and maintain aggressive, competitive, and productive computer systems. A special chapter reviews forty strategic ideas and shows IT managers how to directly apply them to their system Evans, P. & Wurster, T. Blown to Bits. MA: Harvard Business School Press, 2000. This book examines how the new economy is "deconstructing" industries such as newspapers, auto retailing, and banking while creating new opportunities for others. They write that the "glue that holds today's value chains and supply chains together" is melting, and that even "the most stable of industries, the most focused of business models and the strongest of brands can be blown to bits by new information technology” (this is also a good book for the e-business chapter).
Carr N.G. Does IT Matter? Information Technology and the Corrosion of Competitive Advantage MA: Harvard Business School Press, 2002. This could spark some debate in the class, but it is dated. Websites www.cio.com CIO and CIO.com are published by CXO Media Inc. to meet the needs of CIOs (Chief Information Officers) and other information executives. CIO is read by more than 140,000 CIOs and senior executives who oversee annual IT budgets in excess of $175 million. CIO.com serves over 12 million pages annually. www.groupon.com/ The Groupon web site provides details on the company and the service provided. In particular, students should visit the “How It Works” tab. This is a good reference site when discussing the case study. www.zipcar.com The ZIPCAR web site shows how they function, rates, etc. This can be a good tool when discussing the case study. www.uber.com The Uber web site shows how they function, rates, etc. This can be a good tool when discussing interesting business strategies enabled by IT. http://www.zara.com/ The website is aesthetically pleasing, presenting many samples of their products. Their mission statement page is devoted to the company’s eco-friendly environmental focus. This can be used to supplement the textbook discussion of strategic use of IT at Zara. News: August 17, 2015: Uber, Lyft, and Gett are fiercely competing in New York City, according to an article in CNN at http://money.cnn.com/2015/08/17/technology/gett-nyc-campaign-uber/index.html Ask students to read that article and answer the following: (1) Before anyone imagined ride-sharing systems, if you had to answer intuitively (without doing research) about Porter's forces on the taxicab industry, what would you estimate was the force of (a) Buyer power, (b) substitutes, and (c) new entrants? (2) Without smartphones, what would it be like to try and implement an Uber-like business? (3) How would you evaluate for forces of (a) buyer power, (b) substitutes, and (c) new entrants now that Uber and others are on the scene? (4) Does the practice of surge pricing address any of those three forces? Which? How does it address any of those forces? Solution Manual for Managing and Using Information Systems: A Strategic Approach Keri E. Pearlson, Carol S. Saunders, Dennis F. Galletta 9781119244288, 9781118281734
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