Competing with Information Technology Contd...

Section II: Using Information Technology for Strategic Advantage:

STRATEGIC USES OF IT

Companies may use information systems strategically, or may use them in defensive or controlled ways.  More and more businesses are beginning to use information systems strategically for competitive advantage.

BUILDING A CUSTOMER-FOCUSED e-BUSINESS 

For many companies, the chief business value of becoming a customer-focused e-business lies in its ability to help them:

·         Keep customers loyal

·         Anticipate customers future needs

·         Respond to customer concerns

·         Provide top quality customer service

The concept of customer-focused e-business focuses on customer value.  This strategy recognizes that quality, rather than prices, has become the primary determinant in a customer’s perception of value.  From a customer’s point of view, companies that consistently offer the best value are able to:

·         Keep track of their customers’ individual preferences

·         Keep up with market trends

·         Supply products, services and information anytime and anywhere

·         Provide customer services tailored to individual needs.

Increasingly, businesses are serving many of their customers and prospective customers via the Internet.  This large and fast-growing group of customers wants and expects companies to communicate with them and service their needs at e-commerce websites.  The Internet has become a strategic opportunity for companies large and small to offer fast, responsive, high-quality products and services tailored to individual customer preferences.

RE-ENGINEERING BUSINESS PROCESSES 

One of the most popular competitive strategies today is business process reengineering most often simply called reengineering.  Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service.  BPR combines a strategy of promoting business innovation with a strategy of making major improvements to business processes so that a company can become a much stronger and more successful competitor in the marketplace.  The potential payback of reengineering is high, but also is its level of risk and disruption to the organizational environment.

The Role of Information Technology

Information technology plays a major role in reengineering business processes.  The speed, information processing capabilities, and connectivity of computers and Internet technologies can substantially increase the efficiency of business processes, as well as communications and collaboration among the people responsible for their operation and management.

IMPROVING BUSINESS QUALITY

No single approach to organizational change is appropriate for all circumstances.  One important strategic thrust is continuous quality improvement, popularly called total quality management (TQM).  Previous to TQM, quality was defined as meeting established standards or specifications for a product or service.  Statistical quality control programs were used to measure and correct any deviations from standards.

Total Quality Management:

Quality is defined as meeting or exceeding the requirements and expectations of customers for a product or service.  This may involve many features and attributes such as:

·         Performance

·         Reliability

·         Durability

·         Responsiveness

·         Aesthetics

·         Reputation

Total quality management uses a variety of tools and methods to seek continuous improvement of quality, productivity, flexibility, timeliness, and customer responsiveness.  According to quality guru, Richard Schonberger, companies that use TQM are committed to:

·         Even better, more appealing, less-variable quality of the product or service.

·         Even quicker, less-variable response - from design and development through supplier and sales channels, offices, and plants all the way to the final user.

·         Even greater flexibility in adjusting to customers’ shifting volume and mix requirement.

·         Even lower cost through quality improvement; rework reduction, and non-value-adding waste elimination.

BECOMING AN AGILE COMPETITOR

Agility in competitive performance is the ability of a business to prosper in rapidly changing, continually fragmenting global markets for high-quality, high-performance, customer-configured products and services.  An agile company can:

·         Make a profit in markets with broad product ranges and short model lifetimes.

·         Process orders in arbitrary lot sizes.

·         Offer individualized products while maintaining high volumes of production.

Agile companies depend heavily on information technology to:

·         Enrich its customers with customized solutions to their needs.

·         Cooperate with other businesses to bring products to market as rapidly and cost-efficiently as possible.

·         Combine the flexible, multiple organizational structures it uses.

·         Leverage the competitive impact of its people and information resources.

CREATING A VIRTUAL COMPANY

          A virtual company (also called a virtual corporation or virtual organization) is an organization that uses information technology to link people, assets, and ideas.  People and corporations are forming virtual companies as the best way to implement key business strategies that promise to ensure success in today’s turbulent business climate.

Virtual Company Strategies:

Several major reasons why people are forming virtual companies include:

·         Share infrastructure and risk

·         Link complementary core competencies

·         Reduce concept-to-cash time through sharing

·         Increase facilities and market coverage

·         Gain access to new markets and share market or customer loyalty

·         Migrate from selling products to selling solutions

BUILDING THE KNOWLEDGE-CREATING COMPANY

To many companies today, lasting competitive advantage can only be theirs if they become knowledge-creating companies or learning organizations.  That means consistently creating new business knowledge, disseminating it widely throughout the company, and quickly building the new knowledge into their products and services.

Knowledge-creating companies exploit two kinds of technology:

·         Explicit Knowledge - data, documents, things written down or stored on computers.

·         Tacit Knowledge – “how-tos” of knowledge, which reside in workers.

Successful knowledge management creates techniques, technologies, and rewards for getting employees to share what they know and to make better use of accumulated workplace knowledge.

Knowledge Management Systems: 

Knowledge management has become one of the major strategic uses of information technology.  Many companies are building knowledge management systems (KMS) to manage organizational learning and business know-how.  The goal of KMS is to help knowledge workers create, organize, and make available important business knowledge, wherever and whenever it’s needed in an organization.  This includes processes, procedures, patterns, reference works, formulas, “best practices,” forecasts, and fixes.  Internet and Intranet web sites, groupware, data mining, knowledge bases, discussion forums, and videoconferencing are some of the key information technologies for gathering, storing, and distributing this knowledge.

Characteristics of KMS:

·         KMS are information systems that facilitate organizational learning and knowledge creation.

·         KMS use a variety of information technologies to collect and edit information, assess its value, disseminate it within the organization, and apply it as knowledge to the processes of a business.

·         KMS are sometimes called adaptive learning systems.  That’s because they create cycles of organizational learning called learning loops, where the creation, dissemination, and application of knowledge produces an adaptive learning process within a company.

·         KMS can provide rapid feedback to knowledge workers, encourage behaviour changes by employees, and significantly improve business performance.

·         As an organizational learning process continues and its knowledge base expands, the knowledge-creating company integrates its knowledge into its business processes, products, and services.  This makes it a highly innovative and agile provider of high quality products and customer services and a formidable competitor in the marketplace.