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3 Capability-based Strategies to Market Leadership
•Operational Excellence
–The term “operational excellence” describes a specific strategic approach to the production and delivery of products and services. The objective of a company following this strategy is to lead its industry in price and convenience. Companies pursuing operational excellence are indefatigable in
seeking ways to minimize overhead costs, to eliminate intermediate production steps, to reduce transaction and other “friction” costs, and to
optimize business processes across functional and organizational boundaries. They focus on delivering their products or servicesto customers at
competitive prices and with minimal inconvenience.E.g.: Dell Computer, Federal Express
•Customer Intimacy
–…, those pursuing a strategy of customer intimacy continually tailor and shape products and services to fit an increasingly finedefinition of the
customer. This can be expensive, but customer-intim ate com panies are willing to spend now to build custom er loyalty for the longterm. They
typically look at the customer’s lifetime value to the company, not the value of any single transaction. E.g.: IBM, HomeDepot
•Product Leadership
–Companies that pursue the product leadership strategy strive to produce a continuous stream of state-of-the-art products and services. Reaching
that goal requires them to challenge themselves in three ways. First, they must be creative. M ore than anything else, being creative m eans
recognizing and embracing ideas that usually originate outside the company. Second, such innovative companies must commercializetheir ideas
quickly. To do so, all their business and m anagem ent processes have tobe engineered for speed. Third and most important, product leaders must
relentlessly pursue new solutionsto the problems that their own latest product or service has just solved. If anyone is going to render their
technology obsolete, they prefer to do it themselves. E.g.: Apple, Johnson & Johnson
*https://hbr.org/1993/01/custom er-in tim a c y-and-other-value-disciplines 24
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IS/IT Role in Achieving Competitive Advantage
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Align IS/IT to improve relationships with customers, proactively anticipating and addressing
customers’ unique needs
Align IS/IT to cut costsfrom its processes,improving profit
margins, and allowing the company to reduce
prices
Align IS/IT to accelerate the development cycle for a competitive
advantage
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IS/IT Role in Achieving Competitive Advantage–
examples
•Operational ExcellenceGE, which effectively reinvented the supply chain for white goods with new information systems. Instead of encouraging dealers to hold stock of GE’s products by offering discounts for bulk purchase, GE refuses dealers purchases for stock, but provides demonstration models, against which customers can order for next day direct delivery through GE’s ‘Direct Connect’ system. GE holds all the stock and dealers can order any model online, on behalf of the customer. This enables GE to encourage customers to buy the latest models rather than the often oldermodels stocked in large quantities by dealers. The system has helped smaller dealers to compete more effectively with large discountwarehouses, enabling them to meet more of the customers’ needs, and has reduced stock holdings in the supply chain by about 12%. Also, sinceGE has toarrange delivery, it gathers useful consumer data.
•Customer IntimacyHome Depot, Kraft, &Frito Lay’s information systems enable a retail outlet to tailor the ‘product offer’to the locality through ‘micro-merchandising’ programs affecting product range, promotion, pricing and store layout. Within such a strategy, information systems will focus on collecting and analysingcustomer information, covering not merely purchases but also other relevant attributes and feedback on products and services. This enables careful segmentation of the marketplace and targeting of the desired segments.
•Product LeadershipApple? Amazon? Google?
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5. How to Change –the Need for Dynamic Capabilities
•Executing business strategies almost always includes implementing a range of
internal and external changes àstrategic change management
•Organizations that possess dynamic capabilities as well as a range of strategic assets are most likely to be successful in both sustaining existing and creating
new business advantages
–Organization’s dynamic capabilities create valuable and inimitable strategic
assets and resources
–Example of dynamic capability: the ability to change investment and project priorities, then reallocate resources in response to, or even in anticipation
of, changes in the business environment
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Evolution of The IS/IT Strategy Process:
From Technology Deployment to Strategic Focus
1.Ad-hoc IT deployment; IT organization plans the interfaces between apps developed separately; key operational & support apps are being built and the dependence is steadily increasing
2.Top-down review of apps in light ofbusiness dependence and priorities are agreed; methodological approaches are used; resulted in an extended, prioritized of key operational apps for both operational and management information requirements3.Detailed IS/IT planning to determine better way of implementing priority apps and infra (including re-implementation/integration); greater attention to the critical key operational apps, less resource to support apps (outsourcing), and introduce app-packages4.Business-led strategizing to provide business leverage/competitive advantage; ‘shadow IT’ emerges in response of the perceived inability of the in-house IT organization to deliver; innovation grows, but risky as inexperience business users are dealing with vendors
5.IntegratedIS/IT and business strategizing; nurturing innovative ideas along with opportunities made available from results of stage-3; organization-led strategizing where senior executives, line management and IT specialists are in-sync!
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CH3
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1.Top management lacked awareness of the impact IS/IT is having generally and did not understand how IS/IT offered strategic advantages. They tended to see ‘computers’ in purely an operational context—still essentially a DP era view.
2.They perceived a credibility gap between the ‘hype’ of the IT industry as to what IT can actually doand how easy it is to do it, given the difficulties their organization had had in delivering the claimed benefits.3.Top managers did not view information as a business resource to be managed for long-term benefit. They only appreciated its criticality when they could not get what they needed.4.Despite the difficulty in expressing all IS benefits in economic terms, top management still demand to see a financial justification for investments.
5.Finally, and an increasingly apparent problem today, is that top managers have become action orientated with a short-term focus that militates against putting much effort into long-term planning, especially of IS/IT, given the other issues above.
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Problems & Barriers:
Difficulties of Obtaining Top-Management’s Commitment
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