2

Organizational Strategy,
Competitive Advantage,
and Information Systems

1. Discuss ways in which information systems enable cross-functional

business processes and business processes for a single functional area.

2. Become familiar with business process defi nition, measurement, and
analysis.
3. Compare and contrast business process improvement, business process
reengineering, and business process management to identify the
advantages and disadvantages of each one.
4. Identify effective IT responses to different kinds of business pressures.
5. Describe the strategies that organizations typically adopt to counter
Porters five competitive forces.
6. Describe the characteristics of effective businessinformation
technology alignment.

1. Business Processes
2. Business Process Reengineering, Business Process
Improvement, and Business Process Management
3. Business Pressures, Organizational Responses,
and Information Technology Support
4. Competitive Advantage and Strategic Information
Systems
5. BusinessInformation Technology Alignment

[ Opening Case A Tool to Combat

Terrorism and Fight Crime ]

The Problem
A Potential IT Solution
The Results
What We Learned from This Case

About [small] business

2.1 Sharing
Bicycles

2.1Business Processes
Cross-Functional Processes
Information Systems and
Business Processes

Business Processes
A business process is:
an ongoing collection of related activities that create a
product or service of value to the organization, its
business partners, and/or its customers.

Comprised of three elements:

Inputs
Resources
Outputs

Efficiency vs. Effectiveness

Cross-Functional
Processes
No single functional area is
responsible
steps executed in a coordinated,
collaborative way
Procurement & Fulfillment Crossfunctional processes

Example: Purchasing
Airline Tickets Online

Traveler
Plan Trip

NO

Receive Ticket
Order
Seats
Availabl
e
YES

Check Flights

Reserve Seats

Seats
Availabl
e?

Use
Credit
Card?
YES
Charge Credit
Card

YES
Submit Ticket
Order
Receive e-Ticket

Charge
OK?
YES
Confirm Flight(s)
Issue e-Ticket

Airline Web Site

NO

Notify Traveler

NO
NO

Frequent
Flyer
Mileage
Sufficient?
YES
Subtract Mileage

NO

Notify Traveler

Information Systems &

Business Processes
ISs vital role in three areas of
business processes
Executing the process
Capturing and storing process data
Monitoring process performance

Executing the Process

ISs help Execute the Process by:
Informing employees when it is time to complete
a task
Providing required data
Providing a means to complete the task

Capturing & Storing

Process Data
Processes generate data
Dates, times, product numbers, quantities, prices,
addresses, names, employee actions

ISs capture & store process data

(aka, transaction data)
Capturing & storing data provides
immediate, real time feedback

Monitoring Process
Performance
IS evaluates information to determine
how well a process is being executed
Evaluations occur at two levels
Process level
Instance level

Monitoring identifies problems for

process improvement

2.2Business Process Improvement,

Business Process Reengineering,

and Business Process
Management

Reengineering
Improvement
Management

Measures of Excellence in
Executing Business Processes

Customer Satisfaction
Cost Reduction
Cycle and fulfillment time reduction
Quality
Differentiation
Productivity

Business Process
Reengineering (BPR)
Michael Hammer & James Champy,
1993, Reengineering the Corporation
BPR
A radical redesign of an organizations business
processes to increase productivity and profitability
Examines business processes with a clean slate
approach

Business Process
Improvement (BPI)
BPI
An incremental approach to move an organization
toward business process centered operations
Focuses on reducing variation in process outputs
by identifying the underlying cause of the
variation

Six Sigma is a popular methodology

for BPI

Business Process
Improvement (BPI)
Five basic phases of successful BPI
Define
Measure
Analyze
Improve
Control

BPR versus BPI

BPI

BPR

Low risk / low cost

Incremental change
Bottom-up approach
Takes less time
Quantifiable results
All employees
trained in BPI

High risk / high cost

Radical redesign
Top-down approach
Time consuming
Impacts can be
overwhelming
High failure rate

Business Process
Management (BPM)
A management system used to
support continuous BPI initiatives for
core business processes over time
Important components of BPM:
Process modeling
Web-enabled technologies
Business Activity Monitoring (BAM)

Business Process
Management (BPM)
Business Process Management Suite
(BPMS)
An integrated set of applications used for BPM

Emerging Trend of Social BPM

Technologies enabling employees to collaborate
across functions internally and externally using
social media tools

[about business]
2.2 Chevron

Pressures, Organizational
2.3Business
Responses, and Information
Technology Support
Business Pressures
Organizational Responses

Business Pressures
Market Pressures
Technology Pressures
Societal/Political/Legal Pressures

Market Pressures
Globalization
Changing Nature of the Workforce
Powerful Customers

Globalization
The integration and interdependence
of economic, social, cultural, and
ecological facets of life, made
possible by rapid advances in IT.

Globalization
The World is Flat, by Thomas
Friedman
Technology is leveling global competition making
the world Flat

Friedmans Three Eras of

Globalization
Globalization 1.0
Globalization 2.0
Globalization 3.0

Globalization 1.0 (1st Era)

1492 - 1800
Focus:
Countries

Drivers:
Muscle
Horse power
Wind power
Steam power

Globalization 2.0 (2nd Era)

1800 - 2000
Focus:
Companies

Main Driver:
Multinational Companies

First Half of 2.0

Driver: Falling transport costs

Second Half of 2.0

Driver: Falling telecom costs

Globalization 3.0 (3rd Era)

2000 - Present
Focus:
Groups & Individuals

Drivers:
Convergence of 10 forces or Flatteners

The Ten Flatteners

1. 11/9/1989: Berlin
Wall Falls
2. 8/9/1995: Netscape
Goes Public
3. Development of
Workflow
Software
4. Uploading

5. Outsourcing
6. Offshoring
7. Supply Chaining
8. Insourcing
9. Informing
10.The Steriods

Changing Nature of the

Workforce
Workforce is Becoming More
Diversified
Women
Single Parents
Minorities
Persons with Disabilities

IT is Enabling Telecommuting
Employees

Powerful Customers
Increasing consumer sophistication
& expectations
Consumer more knowledgeable
about
Products and services
Price comparisons
Electronic auctions

Customer Relationship Management

Technology Pressures
Technological Innovation &
Obsolescence
Rapid development of both New and Substitute
Products & Services

Information Overload
Vast stores of data, information, & knowledge
Difficulties in managing data for decision making

Societal / Political / Legal

Pressures
Social Responsibility
Compliance with Government
Regulations
Protection against Terrorist Attacks
Ethical Issues

Social Responsibility
Green IT
Facilities design and management
Carbon management
International and U.S. state environmental laws
Energy management

Digital Divide
One Laptop per Child (OLPC) http://one.laptop.org

Social Responsibility &

Philanthropy in Business

www.patientslikeme.com
www.giftflow.org
www.ourgoods.org
www.sparked.com
www.thredup.com
www.collaborativeconsumption.com
www.kiva.org
www.donorschooce.org

Compliance with
Government Regulations

Sarbanes-Oxley Act
USA PATRIOT act
Gramm-Leach-Bliley Act
Health Insurance Portability &
Accountability Act (HIPAA)

Protection against Terrorist

Attacks
Employees in military reserves called
to active duty
Information Technology used to identify
and protect against terrorists and
cyberattacks
Department of Homeland Securitys
(DHS) US-VISIT program
Network of biometric-screening systems

Ethical Issues
General standards of right and
wrong
Information-processing activities
Monitoring employee email
Monitoring employee Internet activity at work
Privacy of customer data

[about business]
2.3 Bring Your
Own Device
Can Cause
Problems

[about business]
2.4 The Surui Tribe
of the Amazon

Organizational Responses
Strategic Systems
Customer Focus
Make-to-Order and Mass
Customization
Bodymetrics (www.bodymetrics.com)

E-Business & E-Commerce

[about business]
2.5 Massechusetts
Mutual
Transforms Its
Information
Systems

2.4Competitive Advantage and

Strategic Information Systems

Porters Competitive Forces

Model
Porters Value Chain Model
Strategies for Competitive
Advantage

2.4Competitive Advantage and

Strategic Information Systems

Competitive Strategy
A statement identifying a businesss
approach to compete, its goals, and the
plans and policies required to attain those
goals.

2.4Competitive Advantage and

Strategic Information Systems

Strategic Information Systems

(SIS)
An information system that helps an
organization achieve and maintain a
competitive advantages

Porters Competitive Forces

Model

Porters Competitive Forces

Model
1. Threat of Entry of New Competitors
2. Bargaining Power of Suppliers
3. Bargaining Power of
Customers/Buyers
4. Threat of Substitute Products or
Services
5. Rivalry Among Existing Firms within
the Industry

Porters Value Chain

Model

Porters Value Chain Model

Value Chain
A sequence of activities through which the organizations
inputs are transformed into valuable outputs.

Primary Activities
Relate to Production & Distribution of Products & Services

Support Activities
Support Primary Activities Contributing to Competitive
Advantage

Primary Activities
Five Primary Activities for
Manufacturing
1.
2.
3.
4.
5.

Inbound Logistics (inputs)

Operations (manufacturing & testing)
Outbound Logistics (storage & distribution)
Marketing & Sales
After Sales Services

Support Activities
Four Support Activities
1. Firms Infrastructure (accounting, finance,
management)
2. Human Resources Management
3. Product & Technology Development (R&D)
4. Procurement

Strategies for Competitive

Advantage

Cost Leadership
Differentiation
Innovation
Operational Effectiveness
Customer-Orientation

2.5Business Information
Technology Alignment

The tight integration of the IT

function with the
organizations strategy,
mission, and goals.

Six Characteristics of Excellent

Business-IT Alignment
1. IT viewed as an engine of innovation
continually transforming the business and
often creating new revenue streams.
2. Organizations view their internal &
external customers and their customer
service function as supremely important.
3. Organizations rotate business and IT
professionals across departments and job
functions.

Six Characteristics of Excellent

Business-IT Alignment
4. Organizations provide overarching
goals that are completely clear to
each IT and business
5. Organizations ensure that IT
employees understand how the
company makes (or loses) money.
6. Organizations create a vibrant and
inclusive company culture.

Major Reasons Business-IT

Alignment Does Not Occur
Business managers and IT managers
have different objectives.
The business and IT departments are
ignorant of the other groups
expertise.
A lack of communication.

[ Closing Case IBMs Watson ]

The Problem
An Interesting IT Solution
The Results: Initial Uses of Watson
What We Learned from This Case