Learning Objectives Upon successful completion of this chapter you will be able to Define the productivity paradox and explain the current thinking on this topic Evaluate Carrs argument in Does IT Matter ID: 742392
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Slide1
Chapter 8
Does IT Matter?Slide2
Learning Objectives
Upon successful completion of this chapter, you will be able to:
Define the productivity paradox and explain the current thinking on this topic.
Evaluate
Carr’s
argument in “Does IT Matter?”
Describe the components of competitive advantage.
Describe information systems that can provide businesses with competitive advantage.Slide3
The Productivity Paradox
Erik
Brynjolfsson
(1991)
CACM
, “The Productivity
Pardox
”
Studies on investment in IT and productivity showed that gains in productivity were not realized.
Why?
Mismeasurement of outputs and inputs
Lags due to learning and adjustment
Redistribution and dissipation of profits
Mismanagement of information and technologySlide4
IT Doesn’t Matter
Nicholas
Carr
(2003), “IT Doesn’t Matter”,
Harvard Business Review
.
As IT becomes more ubiquitous, it also becomes less of a differentiator.
Technology is so readily available and software is so easily copied, that new tools
will not give companies
sustained competitive advantage.Slide5
IT Doesn’t Matter (contd.)
Carr
suggests:
Technology is a commodity and should be managed like one.
Low cost: Wait until it is cost effective to adopt.
Low risk: Adopt slowly so other companies can take the risks associated with new technologies.
IT should operate as a utility in a
company. Good service with
minimal downtime.Slide6
Competitive Strategy
Thinking comes from Michael Porter of Harvard
Late 70’s developed 3 models
to help us think about strategy.
5 Force Model
Value Chain
Generic StrategiesSlide7
Competitive Advantage
Creating
and sustaining superior performance.
When a company can sustain profits that exceed the average for the industry
.
Example: Google’s Slide8
Porter’s Generic Strategies
Cost: Compete by offering the lowest prices.
Differentiation:
Product or service that offers unique value
.
Focus: Narrow or Large, focus on an entire industry or a small market segment.Slide9
Generic Strategies
Samsung Galaxy
Walmart
Big 5
REISlide10
The Value ChainSlide11
Value Chain (contd.)
Inbound Logistics: raw materials brought into the company
Operations: any part of the business that converts raw materials into products and services
Outbound Logistics: Getting the products
and services to the customers.Slide12
Value Chain (contd.)
Sales/Marketing: Entire buyers to purchase products and services.
Service: Support of products and services that customers have purchased.
Firm Infrastructure: All
the organizational
functions that support the business.
Technology connected/supported.
Human Resources Management: Recruiting
hiring, and retaining employees.Slide13
Value Chain (contd.)
Technology Development: Advances and innovations adopted to add value to the company.
Procurement: Acquiring raw materials for production/operations.Slide14
The Value Chain
Model & CRM
Graphic from Docstock.com
Enterprise Resources Planning
Supply Chain Management
Customer Relationship ManagementSlide15
Porter’s 5 Force Model
Industry
Rivalry
Threat of
New Entrants
Threat of
Substitute Products
Bargaining Power of Suppliers
Bargaining Power of
Buyers
Government
RegulationSlide16
5 Forces
Bargaining Power of Buyers (customers): Ability of the customers to put the firm under pressure to reduce prices.
Bargaining Power of Suppliers: Power of suppliers to control prices.
Intra-Industry Rivalry:
Competitiveness of a given industry. Threat of New Entrants: Profitable industries attract new competitors. (Amazon producing TV shows)
Threat of substitute products and services:
Other entities that consumers can use,
instead of your product. (bike instead of car)Slide17
Entry Barriers
Creating a barrier to entry to would be competitors.
Southern California Edison
Utility, captive market
To open an electric company would require a massive infrastructure
Bar
Liquor license is a cost that might prohibit entrants
Online mega-store like Amazon
New entrants cannot compete with branding, infrastructure and supply chainSlide18
Switching Costs
Switchi
n
g Cost – The cost of a customer to switch to another product or service.
Used to reduce the threat of new entrants and substitute products.
Increasing Switching Costs
Deals for Staying with You (loyalty programs)
Memberships
ContractsSlide19
Strategies and ForcesSlide20
Using Information Systems for Competitive Advantage
Business Process Management Systems
Control of processes gives competitive advantage because ___.
Electronic
Data
Interchange
Automation of the value chain gets products to market quicker.
Allows for integration of partners in the value chain.
Allows for flexible value chain because of automation
.Slide21
Competitive Advantage (contd.)
Collaborative
Systems – Easier ways for people to collaborate in work and processes.
Google Drive
MS SharePoint
Cisco WebEx
Atlassian
Confluence
IBM Lotus NotesSlide22
Competitive Advantage (contd.)
Decision Support Systems
Assist with decision making at all levels, particularly semi-structured.
Data Analytics
Internally: Having centralized data can give opportunities to see what the data is telling you.
Externally: Data sources can inform
strategic decisions about new technologies
and your industry.Slide23
Summary
Defined
the productivity
paradox.
Evaluated
Carr’s
argument in “Does IT Matter?”
Reviewed
the components of competitive advantage.
Reviewed how information
systems that can provide businesses with competitive advantage.