Download Housekeeping

Value Creation
with Information Systems
What theoretical and analytical
models help managers identify
opportunities to create added
value with IT
© Gabriele Piccoli
Course Roadmap
• Part I: Foundations
• Part II: Competing in the Internet Age
• Part III: The Strategic use of Information Systems
– Chapter 6: Strategic Information Systems Planning
– Chapter 7: Value Creation and Strategic Information
Systems
– Chapter 8: Value Creation with Information Systems
– Chapter 9: Appropriating IT-Enabled Value over Time
• Part IV: Getting IT Done
© Gabriele Piccoli
Learning Objectives
1.
Identify and use traditional models of value creation with
information systems and information technology, including:
•
Industry analysis
•
Value chain analysis
•
Customer service life cycle framework
2.
3.
Incorporate the data resource in your search for opportunities for
value creation using emerging frameworks, including:
•
Virtual value chain
•
Customer data strategies framework
Learn to devise and select initiatives that create value using
business data.
© Gabriele Piccoli
Traditional Frameworks
Frameworks that have been
proposed over time in the
literature
© Gabriele Piccoli
Industry Analysis
• Based on the fact that different industries
offer different profit potential
• Differences measured using the 5 Forces
framework
© Gabriele Piccoli
Threat of New Entrants
• How easily can competitors enter the
market?
• Are the barriers significant enough?
• Example:
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The Threat of Substitutes
• How easily can the product or service be
replicated in a way that meets the same
customer needs?
• Example:
VS.
© Gabriele Piccoli
Bargaining Power of Buyers
• How easily can customers influence the
price of the product or service?
• Example:
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Bargaining Power of Suppliers
• How easily can individuals and firms sell
their products and services at high prices?
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Rivalry Among Existing
Competitors
• How fierce is the battling for position and
how aggressive is competition in the
industry?
• Hyper competition – fierce rivalry among
existing firms and a very rapid rate of
innovation leading to fast obsolescence of
any competitive advantage
© Gabriele Piccoli
How Does this Apply to IS?
• Investing in IS may:
– Can the use of IT raise or increase barriers to
entry in the industry?
– Can the use of IT decrease suppliers’
bargaining power?
– Can the use of IT decrease buyers’ bargaining
power?
– Can the use of IT change the basis of industry
competition?
© Gabriele Piccoli
Value Chain
• As managers – you will analyze
opportunities to use strategic IS to create
added value.
• The value chain model identifies:
– Primary activities
– Support activities
Support
Activities
Firm
Infrastructure
HR
Management
Technology
development
Procurement
Inbound
logistics
Primary
Activities
© Gabriele Piccoli
Operations
Outbound
logistics
Marketing
and sales
Service
Margin
Primary Activities
• Those directly related to value creation
• They are:
– Inbound logistics
– Operations
– Outbound logistics
– Marketing and Sales
– Service
© Gabriele Piccoli
Support Activities
• Those not directly related to the
transformation process
• They are necessary to enable it.
• They are:
– Firm infrastructure
– HR management
– Technology development
– Procurement
© Gabriele Piccoli
Value Chain and Information
Systems
• Managers need to identify, understand,
and analyze the activities of the firm
• The objective is to enhance or transform
them using Information Systems
• Careful! Map a representative value chain
Marketing
& Sales
Procurement
© Gabriele Piccoli
Guest Stay
Production
After Stay
Service
Value Network
• Firms interact with one another in the value network
• Individual value chains are therefore linked to those of
suppliers (upstream) and customers (downstream)
• These linkages offer opportunities for value creation with
Information Systems
Linkages
Suppliers
© Gabriele Piccoli
Firm
Customers
The Customer Service Life Cycle
• Objective:
– To map the relationship between a firm and its
customers
– To identify the stages where customers:
• Are unsatisfied or
• Receive substandard service
– Provide ideas as to how:
• To improve customer service through the use of
the advanced IT
• or the deployment of IT-dependent strategic
initiatives.
© Gabriele Piccoli
CSLC: Four Phases
• The CLSC identifies four major phases
mapping the relationship between the firm
and its customers
• Stepping through the relationship in the
customer’s shoes
• Helps managers
address these needs
from the customers’
point of view
© Gabriele Piccoli
CSLC: Thirteen Stages
• Each of the four phases is further
subdivided into stages
• These represent typical needs the
customer has when:
– Purchasing
– Using and
– Retiring a product or service.
© Gabriele Piccoli
Phase 1: Requirements
• Establish requirements:
– Customer identifies a need for a firm’s
product/service
• Specify:
– Customer details the characteristics of
product or service of interest
© Gabriele Piccoli
Phase 2: Acquisition
• Select a source:
– The customer identifies where to acquire the product or service
from
– Internet is a new source that reduces vendor’s distribution costs
• Ordering:
– The customer requests the product or service
• Authorize and pay for:
– The customer issues payment
• Acquire:
– The customer begins using the product or service
• Evaluate and accept:
– The customer ensures tha the product or service meets
specifications and the stated objectives of use
© Gabriele Piccoli
Stage 3: Ownership
• Integrate:
– The customer adds the product or service to the existing
inventory of resources
• Monitor use and behavior:
– The customer ensures that the product or service remains in
working order
• Upgrade:
– The customer modifies or improves the product or service as
needed
• Maintain:
– The customer services the product or service as needed
– The firm can use such opportunities to avoid dissatisfaction and
provide outstanding service
© Gabriele Piccoli
Stage 4: Retirement
• Transfer or dispose:
– The customer will needs to transfer, resell,
return, or dispose of the product or service
• Account for:
– The customer needs to evaluate the
experience provided by the product or service
– The customer needs to measure the costs
associate with ownership of the product or
service
© Gabriele Piccoli
Emerging Frameworks
Frameworks that have recently
emerged, in response to recent
trends
© Gabriele Piccoli
Virtual Value Chain
• Designed to map the set of sequential
activities that enable a firm to transform:
– Raw data in input into
– Higher value information in output
• Adopts the same logic as the phisical value
chain
• VVC recognizes info as the entity being
transformed (the value of which is being
enhanced) through the chain of activities
© Gabriele Piccoli
Virtual Value Chain
Gather
© Gabriele Piccoli
Organize
Select
Synthesize
Distribute
Five Activities
• Gather:
– Collecting and accumulating information
• Organize:
– Storing the gathered data in a way that makes later retrieval and
analysis simple and effective.
• Select:
– Identifying and extracting the needed data from the data
repository
• Synthesize:
– Packaging information so that it can be readily used by the
intended consumer for the specific purpose to which it is directed
• Distribute:
– Transmiting the appropriately packaged information to its intended
user or customer.
© Gabriele Piccoli
Three Classes of Strategic
Initiatives
• Visibility:
– The ability to “see through” organizational
processes previously treated as black box
• Example:
© Gabriele Piccoli
Three Classes of Strategic
Initiatives
• Mirroring Capabilities:
– The ability of transrming physical activities into
information-based ones
• Thus potentially Increasing:
– Efficiency
– Effectiveness
– Performance
• Example:
© Gabriele Piccoli
Three Classes of Strategic
Initiatives
• New Digital Value:
– Creating relationship with the customer
• Thus:
– Increasing Customer willingness to pay
– Creating new value in the form of new
information enabled products or services.
© Gabriele Piccoli
New Frontier: Value Matrix
Inbound
Logistics
Gather
Organize
Select
Synthesize
Distribute
© Gabriele Piccoli
Operations
Outbound
Logistics
Marketing
and Sales
Service
New Frontier: Value Matrix
Marketing
& Sales
Guest Stay
Procurement
Capture
Store
Select
Synthesize
Distribute
© Gabriele Piccoli
Production
After Stay
Service
Creating Value with Data
Purpose of data: Do something of value for
customers
Value
 increase their customer willingness to pay
© Gabriele Piccoli
Theoretical Repurchase Frequency
How often the customer repurchases the
goods/services
It is a function of the industry the firm
is in and the characteristics of the
value proposition it offers
© Gabriele Piccoli
Degree Of Customizability
How much the product or service can be
tailored to the specific needs and
requirements of individual customers
© Gabriele Piccoli
Customer Data Strategies
High
Rewards Strategy
Theoretical
Repurchase Rate
- Loyalty Rewards
- Reporting
Personalization
- Operations
- Differentiation
Acquisition Strategy
Low Payoff
- Analytics
- New Prospects
Low
Low
© Gabriele Piccoli
Degree of
Customizability
High
Personalization Strategy
• Repeated interactions
• Returning customers.
© Gabriele Piccoli
Rewards Strategy
• Product and service
purchased frequently.
• Products are fairly
standardized
Difficult to tailor them to
specific customer
requests
© Gabriele Piccoli
Acquisition Strategy
• Low theoretical
repurchase
frequency
• High degree of
customization
© Gabriele Piccoli
No Potential
• Low theoretical
repurchase
frequency
• Relatively low
degree of
customizability
© Gabriele Piccoli
The Third Dimension
Unobtrusive
Data Capture
The extent to
which – during
the normal
business cycle –
data is collected
and stored in a
readily usable
format.
© Gabriele Piccoli
Data-Driven Strategic Initiatives
• Identify relevant Transaction Processing
Systems (TPS)
– Narrow the scope of the analysis and focus on the
systems that hold relevant data
• Inventory currently available data
– Identify the underlying data tracked in the natural
course of business
– Talk to power users
• Conceptualize initiatives
– Generate and brainstorm ideas
– Don’t evaluate feasibility or financial viability yet
© Gabriele Piccoli
Prioritize Initiatives
• Evaluate actual feasibility – make
pragmatic decisions about these initiatives
• Upside potential
– Time sensitivity
- Impact immediacy
- Aggregation requirements
- Trending requirements
• Data availability
– Accuracy
– Comprehensiveness
© Gabriele Piccoli
Prioritize Initiatives
© Gabriele Piccoli
Prioritize Initiatives
Imperatives:
- Projects with significant upside potential that rely on readily
available information
Quick wins:
- Projects without much upside potential
- Can be readily implemented based on immediately available
information
- Help gain momentum and build credibility
Tradeoffs:
- Projects that rely on information not readily available that
tends to be costly
Losing causes:
- Projects with little upside potential that rely on information
that is not readily available
© Gabriele Piccoli
What we Learned
1.
Identify and use traditional models of value creation with
information systems and information technology, including:
•
Industry analysis
•
Value chain analysis
•
Customer service life cycle framework
2.
3.
Incorporate the data resource in your search for opportunities for
value creation using emerging frameworks, including:
•
Virtual value chain
•
Customer data strategies framework
Learn to devise and select initiatives that create value using
business data.
© Gabriele Piccoli