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02-Creating

Business
Advantage with

IT
CORPORATE INFORMATION
STRATEGY
& MANAGEMENT

Prof. Sajjad Ahmad Qadri

Prof. Sajjad Ahmad,


School of Business & Management, MUL
Cambridge Graduate University

IT as a Competitive Weapon

IT and Competitive Advantage


Sustainability of Competitive
Advantage
Case Studies
GE
Conclusion

Definition:

Information Technology
Information Technology (IT) is the
amalgamation of hardware,
software, data, people and
procedures that enables or inhibits
business objectives depending on
managements involvement in IT.
Source: Why General Managers Need to Understand Information
Technology, lecture notes, Lacity, 2002

How the information


revolution affects competition
Changes industry structure
thereby altering the rules of
competition
Creates competitive advantage by
giving new ways to outperform rivals
Spawns whole new businesses
Source: How information gives you competitive advantage,
Porter and Millar, 1985

How IT creates a competitive


advantage
Differentiate a product or service
Improve business processes (lower
costs)
Change a business structure
Create new business
Source: IS 480 lecture notes, Lacity, 2002

Competitive advantage
comes
from critical
differentiators

Critical

Critical
Commodities

Critical
Differentiators

Useful

Useful
Commodities

Eliminate/Migrate

Commodity
Differentiator

Source: IS 480 lecture notes, Lacity, 2002

IT as a Competitive Weapon Sustainability

Very few companies sustain


their competitive edge over
the long term
Sustainability occurs when it
is difficult or impossible for
the competition to respond
IT as a Basis for Sustainable Competitive Advantage, Feeny & Ives

IT as a Competitive Weapon Sustainability

IT Resources-Easily Duplicated
Capital for investment

Proprietary technology
Technical Skills

IT as a Basis for Sustainable Competitive Advantage, Feeny & Ives

IT as a Competitive Weapon Sustainability

IT Resources-NOT Easily
Duplicated

Managerial IT Skills
Understanding business needs
Collaborating with colleagues
Managing market & technical risk of
innovation
IT as a Basis for Sustainable Competitive Advantage, Feeny & Ives

IT as a Competitive Weapon Sustainability


Sustainable Advantage

Competitor
Analysis

Project Lifecycle
Analysis

1.
2.
3.
Lead Time

Supply
System
Analysis

How long before a competitor responds?


Which competitors can/will respond?
Will the response be effective?
Competitiv
e
Asymmetry

Preemption
Potential

IT as a Basis for Sustainable Competitive Advantage, Feeny & Ives

IT as a Competitive Weapon Sustainability


3 Pillars Supporting Sustainable Advantage
1. Lead Time
Information leaks
Followers take short cuts
Followers implement better solutions
2. Competitor Analysis
(Difficulty of competitor to respond or copy application)
3. Supply system analysis
Market capture
Switching costs

Success with IT:


Strategies
1980s: Killer Application
AA/UA-Reservation Systems
American Hospital Supply-Online ordering system
Frito-Lay-Handheld devices for sales
Early 1990s: Re-engineering
Redesigning business processes around technology
Mid 1990s: Information Management
Knowledge Management
ERP
CRM
http://www.cio.com/archive/050101/davenport_content.html

Success with IT:


Strategies
Late 1990s: e-Commerce
Today
e-Commerce is not enough
IT investment in the business core (touches customer)
Business commitment
Commitment to change (continually re-invent and never rest)
Using multiple technologies and management approaches (not just
one)
Company must excel in front office(e-commerce, CRM) , back
office (ERP), and data warehousing, mining, and KM
Information focus (to make smart decisions)
http://www.cio.com/archive/050101/davenport_content.html

ITS ALL ABOUT E

CASE STUDY:
ELECTRIC

GENERAL

Formed in 1892
Only company part of the Dow Jones's
Industrial Index since the Indexs debut
67,588 patents, 2 Nobel Prizes and
numerous other honors
Operates in more than 100 countries and
employs 313,000 people worldwide
GE is considered to be one of the largest
and most diversified industrial corporations
in the world
e-business Is Business Just Simpler, Faster, and Better

General Electric:
Company Overview
Short-cycle businesses contributed approximately 20% of GE's net

earnings in 2001
Consumer Products (Lighting & Appliances)
Plastics
Industrial Systems
NBC
Specialty Materials

Long-cycle businesses contributed approximately 40% of GE's net


earnings in 2001
Medical Systems
Power Systems
Transportation Systems
Aircraft Engines
Financial services contributed approximately 40% of GE's net earnings in 2001

GE Digitization Strategy
Before 1999 - IT at GE was non existent
1999 - Jack Welch orders each business to
Destroy your business/ Grow your business
Use information technology to create a leaner,
faster, more customer focused company,
accelerate high margin, capital efficient
growth., Jeff Immelt, CEO
2001- GE Top e-business innovator (eweek)
www.ge.com

GE Digitization Strategy
IT Spending
2000 - $2.5 billion
2001 - $3.0 billion
2002 - $3.5 billion

Gary Reiner, CIO

"You won't see one ounce of slowdown in tech spending.


Jack Welch 1/2001
http://www.eweek.com/article2/0,3959,94717,00.asp

GE Digitization Strategy

Buy

Make

Productivity (Workflow)

Sell

More Share/
Higher
Margin

Negotiate
Eliminate
Make the Customer More

eIntermediari
Productive
Auctions

es

Comparative
Deflation

Speed
Performance Data

Unit Cost

Customized Service
Transact

(Availability/Order
Productivity
Reduction
Service)

Transaction Productivity
eTransactions
Streamline
GE Internal Presentation
Control
processes

e-Business Value

Customer Value

GE Value

Buy smarter
Process more efficiently
Sell more

Buy smarter
Process more efficiently
Sell more

e@GE
Digitization provides ways to improve our customer interface
and work on our own internal productivity at the same time.
It is just beginning. Our investments in information
technology will grow about 15% this year. It is really going to
help us transform the cost base of GE. Its going to help us
buy better. Its going to help us interface with customers
better. But primarily its going to help us in terms of the inner
workings of GE make us more efficient, leaner, and closer to
the customer."
-- Jeff Immelt, Chairman and CEO
Customer City Swings, April 2001

E-BUSINESS ORGANIZATIONAL
APPROACH
CEO

Marketing
Leader

Buy Side
e-Commerce
Leader

e-Business
Leader

BD
Leader

Other
e-Business
Functional
Leaders

DYB.com/GYB.com Leader
Focus: Destroy Your
Business/ Grow Your
Business

e-Business Steering Committee


CEO
Cross Functional Team
e-Business Leader
Operation
Marketing
s
Sales
CIO
Marketing Leader
BD Leader

High Level Leader


Knows the Business
Track Record of Delivering
Well Respected - Great Team
Player/Influencer
Understands Commercial &
Operations
Has or Can Play on Business
Leader Staff

External Hire

External or Internal
Internet Generation
Creative,
Entrepreneurial
Start Up Experience
Marketing/IT
Background

CWC.com Leader
e-Commerce Industry
Focus: Enhance & Build
Experience
Your Customer Web Center Business Savvy
Technical Expertise

Chief Architect
.Com Technical Team
Technical
Functionality

CIO

Back End
Infrastructure

GE Internal Presentation

Cross Functional Team


Marketing

Sales

Operations

Web Business
Staying Power

Simplicity
Applying traditional business thinking to a
new channel
Use web to improve business and create
valuable services
Awareness of customer needs
e-Business is a constantly moving target
Need for sound relationships

http://www.cio.com/archive/120101/power_content.html
Davidson, Stephen, B2B Exchaanges:Lessons from the Trading Pit, Journal of Internet Law,
4/2002, v5 i10 p1(10)

IT as a Competitive Weapon Summary


IT can be used as a competitive weapon
through cost reduction and differentiation
Very few companies sustain competitive
advantage using IT
IT projects need to be evaluated for
sustainability in addition to traditional risk

e-Business is a constantly
moving target

Future of IT
Competitive Advantage?

or
Competitive Necessity?