BIS I - Strategic Information Systems Flashcards
Definition SIS
Strategic Information Systems are IS on potentially all organizational levels which impact objectives, business processes, products/services or firm relationships to create competitive advantage. The link business and computer strategies.
Objectives of SIS
long-term prosperity and competitive advantage. Analysis on different levels, SIS targeting…
1) Synergies & core competencies
2) Network-based strategies
Disambiguation
strategic IS and “IS on strategic level” (senior management application systems)!
Tasks of SIS:
1) Help to open up new markets, create new products/services etc. of business relevance
2) New SIS change the work processes of a firm and potentially, the company culture, or a business area fundamentally
3) Formerly: race for efficiency
4) Today: identify market niche areas to outpace competition, better comprehension of the customer value chain, quicker learning than competitors
Synergies & core competencies IS support for classical strategies
- Classical Strategies:
- Differentiation strategy
- Focused differentiation
- cost leadership
- strategic networking
Differentiation Strategy & focused differentiation
Differentiation strategy, e.g. Car navigation systems
o Objective: quality function, service, new markets
o SIS: Avoid followers, price increase possible because of additional functions
- Focused Differentiation: e.g. customer related data for customer retention at hotels
o Objective: market niches: high specialization (often not profitable)
o SIS: data analysis of target customer base (sales data/POS, website traffic…)
Cost leadership
Cost leadership: e.g. online product configurators
o Objective: identifying, assessing and using cost advantages (for standard products) (but price competition)
o SIS: simplify standardization, decrease production cost
Strategic Networking
Strategic networking: e.g. Daimler’s direct access to suppliers’ systems
o Objective: supporting supplier/customer relationships and supply chain management (e.g. efficient consumer response/ECR, Just-in-time etc.)
o SIS: “seamless” integration of the value-added chain
IS enable knowledge exchange for creating synergies, internally and externally by…
1) Helping with mutual adaptability: coordinating and executing operative processes within different business contexts dynamically
2) Identifying opportunities, by leveraging knowledge about partnerships; learning about network partners and their activities
3) Establishing resilience by integrating information to enable market and network intelligence
4) Helping to identify complementarities to create synergies between business areas,
5) Enabling knowledge exchange between business areas and with collaborators; and inclusion of external knowledge
6) Decreasing costs/increasing returns
7) Supporting business analytics
Synergies & Core competencies - SIS in the value Chain: networks and value webs
- Value web: collection of independent firms using highly synchronized IT to coordinate value chains to produce products/services collectively
- Dynamic integration of business processes
o More consumer driven operation than in traditional value chain
o Flexible adaption to demand, changes in partner network and partnership structure, focus on core competencies/activities
o SIS relevant in both, internal and external activities
o SIS implemented between partners
Synergies & Core Competencies - Network-Based Strategies overview:
- FMCG strategy case study
- Porter’s 5 forces & impacts of IS and the internet
- From Industry to Business Ecosystems
- Network economics
Porter’s 5 forces & impacts of IS and the Internet
- The five forces have been rearranged by the internet, which enabled new business models, processes and sector transformation.
- Overall: (Strategic) Introduction of (own) standards leads to exclusion of competitors and new entrants: displacement of own products/services becomes less probable. E.g. Apple
1) The Firm & its competitors: increase of geographic reach, i.e. more competitors, less differentiation options, increased price pressure
2) New market entrants: lower entrance barriers, less coordination effort, e.g. no sales dept. required
3) Substitute products: easier development of digital substitutes, e.g. mp3 vs CD
4) Customers: global price and product transparency
5) Suppliers: lower entrance barriers, replacement of intermediaries/brokers, but: purchasing can create pressure through biddings/auctions
Ecosystem Model - From Industry to Business Ecosystem, Porter’s 5 forces adjusted to digital era:
- The digital firm era: boundaries among industries, firms, customers, and suppliers is more dynamic.
- Competition occurs among industry sets in an industry ecosystem
- In the ecosystem model, multiple industries work together to deliver value to the customer
- IT enables this network of interactions among participating firms
o E.g. mobility business ecosystem: involves automotive, air transport, bus lines, railway firms, etc.. Hybrid sectors are evolving e.g. Uber; And societal changes: Smart City, Smart Home, etc.
Network Economics:
- Traditional & network economics
o Law of diminishing returns: marginal gain in output decreases with increasing input of any given resource in production.
o Network Economics: the law of diminishing returns does not always apply. E.g. the marginal cost of adding a new participant to the network are almost zero, with much greater marginal gain. The Value of the Community grows with size.
o Examples for Network Economics: Especially for software (online community), digital goods and IT infrastructures – the value of the software grows as the installed customer base grows. Eg - Towards platform economics: the competition is now in between networks, not between single firms (e.g. Apple, Samsung, Google)
o Few platform providers serve many (niche) users
o Basis for Cloud Computing Business Models (scalability)
o Digital infrastructures might serve various applications, e.g. UPS case study
o Emergence of Business Ecosystems, Platform Firms and Platform Ecosystems
