Lecture 9. Strategic Information
Systems and the Resource-based view of the firm.
1. What
is a strategic information system?
All IS should be strategic!
i.e. Linked to the business strategy
essential to the business
adding value
dealing with essential support work.
SISs go one better: they contribute to or drive the unit
of competitive advantage i.e. the core competency.
2. SIS are IS that impact the way the
company competes and positively affect the company’s position in new or existing
markets
SIS can:
Provide links with customers and suppliers;
Improve information integration within the
value chain;
Enable the provision of new products or
services;
Provide information to give a strategic
advantage in decision-making
SIS often emerge
from ad-hoc business situations:
Identification of problem requiring element
of IS support
Customer requirements ‘push’
3. Classic examples of SIS
SABRE internal ad-hoc inventory management http://www.saffo.com/disinteremediation.html
ASAP
localised response to customer need
Economost order entry system
Minitel access to large databases. http://specials.ft.com/ln/specials/sp7f42.htm
SMARTS
SABRE is a classic transaction oriented SIS.
More current SISs
are likely to be knowledge oriented.
American Airline's SMARTS Sales Management and Report Tracking
in one such knowledge oriented SIS.
Once AA was permitted by the Department of
Transport in the
Here information is managed to gain
competitive advantage.
Using reservation data and historical data,
agency specific information on revenue, booking and performance could be
monitored.
This enables incentive scheme for individual
agents to be developed, rather than general incentive schemes.
Why is this important?
Used
to persuade travel agents to change behaviour
Knowledge
and expertise can be used in sale interactions.
Enhances
AA's image as leader in the use of IT
Sales
staff become analysers rather than just relationship
builders.
Individual
agency problems can be identified.
Expertise
exploited to monitor and influence downstream channel member's behaviour.
Transaction-based
and knowledge-based approaches to SISs
Comparing Sabre and SMART, we can see two
approaches to Strategic Information System
A transaction-based SIS may be strategic
because of the way its locks suppliers or customers in through the support of
transactions. It becomes difficult for the customer to change suppliers because
if the cost of setting up a new EDI link. SABRE put the transaction front end
in the travel agents and creates a preference for American Airline
transactions. Similarly American Hospital Supplies’s
ASAP is a transaction-based SIS.
Knowledge-based SIS provide strategic
advantage through the information collected which enables tailored business
decisions to be made. SMART is a knowledge-based SIS, drawing on sources of
information about travel agent’s business to enable customised sales decisions
to be made. Similarly, a bank might use information about customer’s travels on
the web to influence marketing and other decisions. Here competitive advantage
is derived from the way information about the customer, the supplier and the
supply chain is used.
While transaction-based competitive advantage
may be derived from SISs which increase the efficiency of transactions, and
reduces the cost associated with transactions, knowledge-based SIS require
significant human understanding and intervention to derive the strategic
advantage.
What can we do to encourage SIS?
Can we design SISs?
4. Important
questions
What are the characteristics of an SIS
that make it strategic?
Unique
First of its kind
Hard to imitate
Raises entry barriers.
Creates new dependencies
(i.e. provides solutions to the five forces)
5. How do we find SIS?
SIS are difficult to
plan for.
They arise out of ad-hoc solutions to
immediate problems.
Found by luck, serendipity, ‘bricolage’.
Finding SIS requires:
Understanding the technology and looking for
opportunities
Listening to those on the coalface
Promoting organisational learning
Allowing end user computing
and prototyping (even hacking!)
Using local knowledge
Giving people the freedom to try out new
ideas
Avoiding the IS department!
Using small, interdisciplinary groups
Job rotation
New approaches to
investment appraisal.
6.
Problem: Advantage of SIS is difficult to sustain.
How can IS remain strategic? IT purchased so
easily on the open market may not produce sustainable competitive advantage
Firms may gain competitive advantage by
following the IT leader rather than being the IT leader.
However, the development of SIS may give a
company first mover advantage which, even if it only lasts for 6 months is
enough to gain more market share which can then be built on by other means.
7.
How does an SIS remain strategic?
Use of patentable technology
Links with organisational culture
Links with core competencies (i.e. using IT
to build on existing strengths or develop new strengths).
Links to internal
organisational structure and politics.
8. We have seen that Strategic
Information Systems are systems that give competitive advantage.
But this competitive advantage is not
sustainable on the basis of IT alone - competitors will imitiate
IT innovations and eliminate any sustained performance advantage.
Above normal returns on IT eventually vanish.
Some recent studies suggest
:
Little connection between
IT and competitive performance.
21 out of 30 firms with successful IT still
had declined competitively within 5 years.
Little impact of IT on
entry barriers. - questions value of five forces analysis.
Strategic Necessity Hypothesis:
IT provides value by increasing internal and
external efficiency.
But IT will not provide sustainable
advantages.
IT, by itself, provides economic value but
not strategic advantage.
IT will produce advantage only to the extent
that it complements or enhances or supports other firm specific resources.
IT is necessary, but not sufficient, for
sustainable competitive advantage.
An appropriate environment is needed which
will promote SISs:
Human Resources
Open organisation
Open Communications
Organisational Consensus
CEO commitment
Organisational flexibililty
IT-strategy integration
Skills and Knowledge
Business Resources
Supplier relationships
Training
Process Redesign
Team structures
Knowledge management
Benchmarking
Competitive advantage arises from complex,
causally ambiguous, intangible resources.
Technology is not enough.
But IT management skills may contribute to
sustained competitive advantage:
Understanding and appreciating business
needs;
Working with functional managers;
Anticipating future needs.
In seeking to integrate IT with human and
business resources in order to create a sustainable performance advantage,
taking a resource-based view of the firm can help.
9.
Developing SIS with the aid of a Resource-based View of the Firm (RBVF)
Goal : to develop, protect and deploy resources and
capabilities that provide the firm with a sustainable competitive advantage.
Resource-Based View of the Firm
Companies are collections of resources and
capabilities required for product or market competition.
Resources
Physical capital - IT infrastructure.
Human
capital - IT staff
Organisational capital - IT management structures and organisation.
Capability
Ability
to combine resources to promote superior performance
A special type of embedded, non-transferable, firm specific
resource.
Improves productivity of other resources.
The firm seeks to acquire hard to imitate
resources and capabilities.
Capabilities are applied to resources
(including IT).
These resources are initially
undifferentiated.
organisational context
organisational routines
We learn from the organisational routines and
by adaptation produce new routines which differentiate the resources and lead
to core capabilities.
Three learning loops lead to core
capabilities.
What are core capabilities?
Skills, approaches, strategies, ways of doing
things which are unique to the firm and are:
valuable,
rare,
imperfectly imitatable,
and have no strategically equivalent substitute.
10. Learning Loops
Routinisation
Search for better work practices
Mastering standard resources
Seeking new resources to enable new work
practice
Capability Learning
Generalise work practices
Develop capabilities based on ways of doing
things
Strategic Learning
Evolving core capabilities
Developing capabilities with strategic potential
Relating capabilities to firm’s mission.
11.
RBVF and SIS
AHS Corporation
New work practice
Generalisation
Recognition of
strategic value
Mrs Field’s Cookies
Work practice
changes
Generalisation
Spread
Spanish Bank
New system
Creation of
competitive culture
New organisational
context
12. Involvement of IT in Learning
Aim: To transfer IT from role of commodity
(resource) to that of strategic asset.
Routinisation
Allow room to experiment with new practices
Use new information resources
Share work practices
Capabilities
Develop ‘electronic brainstorming’
Develop knowledge sharing systems
Strategic Capabilities
Develop applications that provide information
about the external environment.
Use IT to develop culture
13. IT should make the firms capabilities rare
(e.g. a unique
information infrastructure)
- Valuable
- Generating income
- Difficult to imitate
- Complex
- Involving joint ventures
- Not substitutable
Last Updated by Neil McBride 19/11/03