Transparency Strategy
and the I-role of the CIO
Nelson F. Granados, Ph.D.
Pepperdine University
nelson.granados@pepperdine.edu
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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THE PROBLEM
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Challenge
¾ The T of IT:
“The Internet, per se, will rarely be a competitive
advantage.”
Porter, HBR, 2001
University of Minnesota, MISRC Seminar, November 2009
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What is the multi-channel strategy?
Search
CONSUMER
PRE-PURCHASE
PROCESS
Computers
Books
Airline tickets
Software
Stocks
Food
Insurance
Jewels
Clothes
Tax advice
Experience
Physical
Information
PRODUCT ATTRIBUTES
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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What is the multi-channel strategy?
Search
CONSUMER
PRE-PURCHASE
PROCESS
Computers
Books
Airline tickets
Software
Stocks
Food
Insurance
Jewels
Clothes
Tax advice
Experience
Physical
Information
PRODUCT ATTRIBUTES
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Progressive
University of Minnesota, MISRC Seminar, November 2009
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What is the multi-channel strategy?
Search
CONSUMER
PRE-PURCHASE
PROCESS
Computers
Books
Airline tickets
Software
Stocks
Food
Insurance
Jewels
Clothes
Tax advice
Experience
Physical
Information
PRODUCT ATTRIBUTES
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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The Internet Enables Competition
in the Transparency Dimension
Transparent
High
Orbitz
Offline
Expedia
Travelocity
Product
Transparency
Opaque
Hotwire
Priceline.com
Low
Price Transparency
High
Source: Granados, N.F., Gupta, A., and Kauffman, R.F. “Designing Internet-Based Selling Mechanisms:
Multi-Channel Transparency Strategy,” WITS, Las Vegas, NV, 2005.
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Leisure vs. Business
Relative Price Elasticities – Leisure vs. Business
Offline
Transparent OTA
Opaque OTA
1.27
1.50
Leisure
2.22
0.35
0.89
Business
0.0
0.5
1.0
1.5
2.0
Source: Granados, N.F., Gupta, A., and Kauffman, R.F. “Offline and Online Price Elasticities:
Evidence from the Air Travel Industry,” working paper, 2009.
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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The Challenges
¾ The T of IT:
“The Internet, per se, will rarely be a competitive
advantage.”
Porter, HBR, 2001
¾ The I of IT:
“The great paradox of the Internet is that its very
benefits—making information widely available;
reducing the difficulty of purchasing, marketing,
and distribution..– also makes it more difficult for
companies to capture those benefits as profits.”
Porter, HBR, 2001
• The positive effect of product information
• Price information can lead to price erosion
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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THE LESSONS
University of Minnesota, MISRC Seminar, November 2009
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IT Strategy: Information and
Technology Strategy
The I of IT: INFORMATION STRATEGY
¾ Transparency: Differentiate from competitors
by strategically disclosing or concealing
information.
• Blue Nile, Hotwire, Orbitz
The T of IT: TECHNOLOGY STRATEGY
¾ Develop, use (smartly), or patent digital and
search technologies, in line with the i-strategy.
• Orbitz developed, Blue Nile and Hotwire used
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Link between Strategy and IT
Business Strategy
Channel Strategy
Information Strategy
Transparency Strategy
Technology Strategy
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Transparency as a strategic choice
¾ Transparency strategy: What
information do I disclose and to whom?
Case #1:
Transparent
S1
S2
Case #2:
Distorted
S1
S2
Case #3:
Biased
S1
S2
Case #4:
Opaque
S1
S2
Product
Price
Source: Granados, N.F, Ph.D. Dissertation, University of Minnesota, 2006.
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Orbitz Strategy: Industry Impacts
Airlines, Hotels, Rental Cars
OFFLINE
ONLINE
Global Distribution
Systems (GDSs):
Pricing and Search
Engines:
Amadeus, Sabre, Galileo,
Worldspan
Supplier
Reservation
Offices
Offline
Travel
Agencies
ITA Software
Online Travel
Agencies
(orbitz.com)
Supplier
Portals
(delta.com)
Meta-Search Agents
(kayak.com)
Consumer
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Air Travel:
Transparency Design Game
High
Orbitz
Expedia
Airline
Portals
Priceline.com
Hotwire
Travelocity
Product
Transparency
Low
Low
High
Price Transparency
Source: Granados, N.F., Gupta, A., and Kauffman, R.F. “The Impact of IT on Market Information and
Transparency: A Unified Theoretical Framework,” Journal of the Association for IS, March 2006.
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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Air Travel:
Transparency Design Game
Kayak.com
High
Orbitz
Expedia
Airline
Portals
Product
Transparency
Priceline.com
Hotwire
Travelocity
Low
Low
Price Transparency
High
Source: Granados, N.F., Kauffman, R.F, and King. B. “How has Electronic Travel Distribution been
Transformed? A Test of the Theory of Newly-Vulnerable Markets,” Journal of MIS, 2008, 25(2), 73-95
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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SUMMARY
¾ Develop a transparency strategy and
an IT strategy that supports the
business strategy.
¾ Understand the long-term trends in
the industry to strategize accordingly
• Transparency developments
• Technological developments
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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APPENDIX
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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priceline.com
University of Minnesota, MISRC Seminar, November 2009
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Orbitz
BACK
University of Minnesota, MISRC Seminar, November 2009
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BACK
Source: Granados, N.F., Gupta, A., and Kauffman, R.F. “Transparency Strategy in Internet-Based
Selling,” in Advances in the Economics of Information Systems (Ed. K. Tomak, UT Texas, Austin), Idea
Group, Publishing, PA, 2005.
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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BACK
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Copyright © Nelson Granados
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OliveSoftware
University of Minnesota, MISRC Seminar, November 2009
Copyright © Nelson Granados
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