lecture 1:Value creation Flashcards
Value creation purpose
To understand IT-based value creation in organizations and integrate concerns about the It-based value creation into the design and management of IS development and implementations projects.
The major challenges
- High level of uncertainty and complexity
- Design and co-specialization of IT and complementary investments
- Changing the business process (or organization in general)
○ Want to give the business some benefit that the business couldnt achieve before. - Collecting the value from changes - reducing lag effect
Protecting competitive advantages
Value Creation - where and why do we use it?
Value creating are done up front in the project. This is something you have to think about before the project even starts.
Information Systems
A system which assembles, stores, processes and delivers informations relevant to the organization, in such a way that the information is accessible ans useful to those who wish to use it.
Why information systems?
competitive advantages, cutting cost etc.
organizations and societies have a hard time working without information systems.
what is information systems?
example: decision-making (BI systems), marketing (social computing), shopping(e-commerce, web applications)
IS investment
investments in Is, IT managers and IT specialist.
Complementary investment
Investment in various froms of organizational change that complement the investment in IT.
Can be a key to value creation, an obstacle for value creation and/or a soruce for sustainable competitive advantages.
IS business value
The impact of investments in particular IS assets on the perfromance an capabilities of a company.
Contextual factors
factors related to the individual company, the industry or society that somehow impact the possibilities for creating value from IS and complementary investments
Lag effects
Time lags between a investment is made to value is created
sustainable competitive advantage
when the organizations competitive advantage resist erosion by competitor behavior. this requires the company to have some barrieres that makes imitation of their strategy difficult.
To keep value in terms of competitive advantage you need to build barriers to erosion (if not, the organization can experience not creating any value, because the other firms are copying the initiatives)
Response lags
The time it takes competitors to respond aggressively enough ti erode the competitive advantage.
Barrieres to erosion
impede or prevent complete dissipation of the advantage. the strength of barriers to erosion is directly related to their ability to generate response lag.
response-lag drivers
characteristics of the firm, its competitors, the technology, and the value system in which the company raise and strengthen the barrieres to erosion.
how is value created???
By combining investments in IS with complementary investments (non-IS investments)
- If good: the investments will lead to improved process performance
If REALLY good: the improved captured process performance are captured at the organizational level and the higher productivity can ex. Lead to company level savings.
BUT: new investment can lead to bad performance –> takes time to learn new processes(hint: lag effects) –> AND THEREFOR are value creation affected by contextual factor as low It skills, bad relations between IT and the business which can have a bad impact on value creation.
what can value creation through information systems do?
It can have a major impact on productivity, accounting and performance –> IF managed properly.
how to measure information system performance?
in theory many different ways to, in practice difficult to measure. don’t know if it is the IT investment or other factors that leads to higher performance.
BUT: what we do know is that alignment, relations and collaboration between IS departments and the business is crucial for the performance.
The value creation process
IS development and implementation projects is to combine IS and investments in a way that changes business processes and creates value,
- Like buying a new IS systems and then changing the way decisions are made in the organization
- You are not gaining value just because you buy a new IT system, but it gives you the ability to enable complementary organizational investments.
Which can lead to productivity, reducing cost e.g. by changing the business processes.
Co-specialization
a combination of IS and non-IS investments. Internal and maybe also external ressources are changed in a way that combines them into a new ressource that supports value creation.
AND diffrent depending on the scope of the project.
IT changes: involves all
Making IT changes involves the whole organization and not just the technology part of the firm. Therefor it is necesaary to make sure every part of the organization are following. If not it can create significant productivity losses.
Structure –> technology –> people –> task !!
Barriers to erosion: the barriers that actually can create sustainable competitive advantage
• IT resources barrier
- IT infrastructure, information repository, technical skills, IT management skills, relationship assets
• Complementary resources barrier
- The co-specialization process such as:
IT characteristics: Visiblity, Uniqueness, complexity, Implementation process: Implementation process complexity, Degree of process changes
• IT project barrier
- cost and scope
• Pretemption barrier
- Switching costs
how to make it difficult for competitors?
hard-to-accelerate-processes
how to use
Do not only focus on the software part, make use of the co-specialization process.
Use it to prepare, balance and evaluate the IT investments!!!!
