2.1 Better than Grocers, but Other Rivals? + Potential competitor is Amazon with AmazonFresh + Buying distribution center near by, higher capacity + Double kill with Amazon and AmazonFresh deliveries + Big advantage + Complaints: haven’t worked out the kinks yet + Could be straddling + straddling: attempting to occupy more than one position, while failing to match benefits of a more efficient, singular focused rival + Instacart + Uber-style groceries + Google Express + Blue Apron + Meal kit prep What Kinds of Differences? + Resource-based view of competitive advantage + Strategic thinking approach suggesting that if a firm is to maintain sustainable competitive advantage, it must control a resource or set of resources that are: + valuable + rare + imperfectly imitable + non substitutable + Must have all four + Example: the over implementation of fiber optic cable that everyone was laying down + dense wave division multiplexing (DWDM): increases transmission capacity and speed of fiber-optic cable transmission using fiber are accomplished by transmitting light inside cables. The DWDM splits different wavelengths into different colors Takeaways: - Technology is easy to copy and technology itself therefore cannot be the sole sustainable competitive advantage - Use technology to help differentiate the company by creating assets or ways of doing business that are difficult for others to copy - True sustainable advantage comes from assets and business models that are simultaneously valuable, rare, difficult to imitate, and hard to substitute 2.2 Powerful Resources + Use advantages to reorganize opportunities and threats Imitation-Resistant Value Chains + Imitation-resistant value chain: way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role + Tech always plays an enabling role + Value chain + value chain: set of interrelated activities that bring products or services to market + Michael Porter, Harvard Business + waoo Key Framework: Value Chain + Inbound logistics: getting needed materials and other inputs into the firm from suppliers + Operation: turning inputs into products or services + Outbound logistics: delivering products or services to consumers, distribution centers, retailers, or other partners + Marketing and sales: customer engagement, pricing, promotion, transaction + Support: service, maintenance, customer support + firm infrastructure: functions that support the whole firm (general management, planning, IS, and finance) + human resource management: recruiting, hiring, training, and development + technology: new product and process design + procurement: sourcing and purchasing functions + Analysis of the framework for a firm can help identify weaknesses to go back and strengthen Dell’s Struggles: Nothing Lasts Forever + Model: vertically integrated manufacturing, direct to consumer sales, cheaper prices + Had a long reign with a value chain that was seemingly resistant to imitation + lot’s of channel conflict that kept other sellers out of the market + But it didn’t last forever: + Rivals improved slowly + Cost of computing fell, savings from buying Dell wasn’t as large anymore + Took firm private + Bought up the publicly traded firms shares + Done when firms doing poorly, hoping to improve results and return to the market at some point (sometimes) Brand + + + + Brand: the symbolic embodiment of all the information connected with a brand or service Powerful sustainable advantage Consumers use to lower search costs Built with + customer experience + proxies quality + inspires trust + How does technology enable a strong brand? + viral marketing: leveraging consumers to promote a product or service + Social media does the heavy lifting for you through social sharing Scale + Scale: advantages related to size + Economies of scale: When costs can be spread across increasing units of production or in serving multiple customers + Businesses that benefit from scale economies as they grow are sometimes referred to as being scalable + growing firms can have bargaining power with suppliers or buyers + examples + Auctioneers can’t move from eBay to other sites because there were lesser buyers and lesser prices Switching Costs and Data + Switching costs: exist when consumers incur an expense to move from one product to another + Sources of switching costs + Learning costs + require investment to learn a new interface and commands + Information and data + Users have to reenter data, converse files or databases, or lose earlier contributions from incompatible systems + Financial commitment + Can include investments in new equipment, the cost to acquire new software, consulting, or expertise and the devaluation of any investment in prior technologies no longer used + Contractual commitments + Breaking contracts with breaking fess or harm reputation + Search costs + Finding and evaluating new alternative costs time + Loyalty programs + Switching can cause customers to lose out on program benefits Differentiation + Commodities are products or services that are nearly identical and can be offered by multiple vendors + Can use data and technology to differentiate firms + customer experience like Amazon using previous browsing history to suggest items Network Effects + Metcalfe’s Law or network effects: when the value of a product or service increases as its number of users expands + example: Facebook becomes more valuable with every account + Influenced by switching costs + Example: OpenTable + Largest restaurant seating/reservation service + Lowering search costs + Most restaurants and most customers Distribution Channels + Distribution channels: the path through which products or services get to customers + Example: Apple Stores + Employees are trained in presenting advantages and unique products that work in the ecosystem + Best retailer for sales per square foot + Example: iTunes Store and Apple Music + Easy to switch, part of the ecosystem + Tech can open up opportunities to leverage products provided by others to create new distribution channels to reach customers + Application programming interfaces (APIs): programming hooks or guidelines published by firms that tell other programs how to get a service to perform a task such as send or receive data + Example: Amazon provides APIs to let developers write their own applications and websites that can send the firm orders + Example: Uber has APIs that can be used on apps and websites like United, OpenTable, and TripAdvisor + Unique challenges: Google products on Apple products + Apple taking Google Maps off and creating Apple Maps + Have to be wary: Google fined for favoring own products in searches over those provided by rivals Patents + Grants intellectual property protection for innovations that are useful, novel, and nonobvious + Typically periods of 20 years + Protection from copycats that try to identically mimic their products and methods + Considered unfairly stacked against startups + Non-practicing entities (NPEs): commonly known as patent trolls, firms make money by acquiring and asserting patents, rather than bringing products and services to market + Sue or extort settlements from others + Example: BlackBerry and NTP Takeaways + Tech can help reinforce assets for sustainable advantage by enabling imitation resistant value chain by: + Strengthening the brand + Collecting useful data and establishing switching costs + Creating firm’s scale advantage + enabling differentiation + Leveraging unique distribution channels + Value chain can be used to map a firm’s efficiency and to benchmark it against rivals + Reveal opportunities to leverage technology + When value chain is resistant to imitation, can have sustainable advantage + Firms can consider adopting packaged software or outsourcing value chain tasks that are not critical to a firm’s competitive advantage + Should not outsource or use packaged software for sources of sustainable advantage + Patents are not surefire path to exploiting an innovation + Can be copied + Nothing lasts forever, must be prepared for shifts to compensate for new assets and new challenges because once strong assets can become obsolete 2.3 Barriers to Entry, Technology, and Timing + Market entry vs building a sustainable, profitable business is not the same + Dark horse candidates that trampled their competitors: + Amazon and Barnes and Noble, Blockbuster and Netflix + Timing and technology can both be enablers of competitive advantage But Google was late? + Pay attention to your competitors + Move fast and establish competitive advantage + Defensible strategic assets Takeaways + Need to be able to create and leverage assets needed to challenge incumbents + “Beware of those who say, “IT doesn’t matter” or refer to the “myth” of the first mover. This thinking is overly simplistic. It’s not a time or technology lead that provides sustainable competitive advantage; it’s what a firm does with its time and technology lead. If a firm can use time and technology lead to create valuable assets that others cannot match, it may be able to sustain its advantage. But if the work done in this time and technology lead can be easily matched, then no advantage can be achieved, and a firm may be threatened by new entrants” 2.4 Key Framework: Five Forces of Industry Competitive Advantage + Strategic frameworks can be used to generate new ideas for responding to industry competition + Porter’s five forces + known as Industry and Competitive Analysis + Framework considering the interplay between: + intensity of competition between existing competitors + threat of new entrants + threat of substitute goods or services + bargaining power of buyers + bargaining power of suppliers + exposes underlying drivers of profitability and its evolution in the future + Criticisms + Mostly from historical evidence + Can it be applied to future evolving? + Huge international companies with a domestic presence can wipe out smaller businesses + + + + + + + Equal emphasis on all five forces + Difficult to apply to highly diversified companies Example: music retailers and CDS + Switching costs from CDS to mp3 players Price transparency: the degree to which complete information is available Information asymmetry: decision where one party has more or better information than its counterparty Internet can strengthen bargaining power of supplier + Example: eBay rare items to larger audience Switching costs can also lower bargaining power of buyer + Example: Wells Fargo and online bill pay make customers not want to switch even when rivals offer more compelling rate or services Other forces that can create industry shock: + Government intervention/deregulation + Political shock + Social and demographic changes Takeaways + Industry competition and attractiveness can be described by Porter’s 5 forces + Intensity of rivalry among competitors + Potential for new entrants to challenge incumbents + Threat posed by substitute products/services + Power of buyers + Power of suppliers + Internet can increase buyer power for commodities by increasing price transparency + More differentiated and valuable offerings → shifts bargaining power to sellers + Differentiated sellers that can advertise their products to wider customer base can demand higher prices + Strategists must constantly refer to models that describe events impacting their industry, particularly as technologies are just emerging. Slides Today’s Business World + Intense competition leaves little wiggle room such that businesses cannot slow down at all + Operating ‘lean and mean’ + Mere competitive advantage is no longer enough, must be sustainable and sustained to thrive IT Strategy Why does a business need an IT strategy? + Every business has access to some sort of technology, info, data + Having IT strategy makes defense against other firms + Required to deploy IT/information in a manner that creates sustainable advantage and sustained advantage What’s the difference between efficiency and effectiveness? + Pre-reqs for competitive advantage + Managers are concerned with both + Efficiency + Effectiveness + Must implement technology that is both + Makes businesses succeed + Helps businesses become and stay market leaders + Efficiency + getting optimal output and functioning best possible manner with least waste and time and resources + How well? + How well are resources used? + Competent performance? + IT Metrics + Focus on tech and performance of system + Throughput + Transaction speed + System availability + Accuracy of information + Web traffic + Response time + Effectiveness + process is achieving the intended results + How useful is this process in producing the specific desired result? + Does the process have to be revised? + IT Metrics + Focus on impact of IT systems on organization's goals, strategies, objectives, business processes, and other activities + Flexibility + Usability + Customer satisfaction + Financial + Trade off between efficiency and effectiveness + Example: IT security may decrease transaction speed but necessary for the customer to feel safe (satisfaction) Theories + Jay Barney’s Resource Based View Theory (RBV) or Valuable-RareImperfectlyImitable-Nonsubstitutable (VRIN) Theory + What is a resource + Both tangible and intangible + Could be physical, financial, HR, technology + Valuable + Rare + Imperfectly Imitable + Non-substitutable + Assumptions: + Resource heterogeneity + Resource immobility + Criticisms + Non prescriptive + Not sufficient for SCA/ignores external environment + Limited applicability + Limits ‘entrepreneurial alertness’ ability to notice and exploit hitherto unnoticed opportunities + RBV and IT + Understand how different IS/IT related competencies lead to value for the businesses Chapter 3 Zara: Fast Fashion from Savvy Systems 3.1 Takeaways + Zara used technology to dominate the fashion industry measured by sales, profitability, and growth + Excess inventory in the retail apparel industry is a major inhibitor + Need to be exact: Long manufacturing times means you have to predict what customers will want in advance + Contract manufacturing can offer firms advantages + Lower costs + Increased profits + Cons + Engaged in sweatshop labor + Poor working conditions + Environmental Abuse 3.2 Don’t Guess, Gather Data Takeaways + Zara store management and staff used mobile devices and POS systems to gather and analyze customer preference data to plan future designs based on feedback + DATA + Combination of vertical integration and technology-orchestrated supplier coordination, just-in-time manufacturing, logistics allows it to go from design to shelf in days instead of months + RFID tags help Zara keep track of inventory + Improves warehouse-to-store distribution + Easier to locate items that customers want to purchase + Advantages accruing to Inditex include fashion exclusivity, fewer markdowns and sales, lower marketing expenses, and more frequent customer visits + Zara’s IT expenditures are low by fashion industry standards + Targeting investment points in the value chain where it had the greatest impact + vs Prada + IT is just hardware and software, information systems also include data, people and procedures. Critical to think about systems and not just technologies + Planning for and deploying tech enabled solutions 3.3 Moving Forward Takeaways + Zara’s value chain is hard to copy, but it’s not invulnerable + Zara’s management has to be aware of limitations to the business model and continuously watch threats on the horizon Zara Versus Others + Gap + Same product line in every store + Sells most items + redo mistakes, introduce failed items + Zara + uses products specific to local clientele + uses limited run items to encourage immediate purchase at full price + Uses preferences to sell almost all items + E-commerce efforts + Omnichannel strategy + blending online and offline sales that benefit customer + returns in store, in store pickup Benefits of E-Commerce + National and international markets are accessible + Lower costs of processing, distributing, retrieving, information + Provides access to a vast number of products and services 24/7 + Deliver information, services, and products to people in cities, rural areas, and developing countries Limitations + Lack of security standards + Telecommunications bandwidth is often insufficient and web access can be expensive + Perception that e-commerce is insecure + Unresolved legal issues + Lack a critical mass of buyers and sellers E-Business vs E-Commerce + Business + Broader: servicing customers, collaborating with partners, performing includes ecommerce transactions + Commerce + Buying, selling, transferring, exchanging products, services, information vis networks, inlcuding the internet + Automation of B2B and B2C commerce B2C Commerce + Customers must come back to the business and this will only happen if there is an “emotional response” B2B Commerce + Supplier relationships + Business needs the services of another (outsourcing example: catering company employs an accounting firm) + Business resells products (example: retailer) Ethical Issues in E-Commerce + Threats to privacy + Potential job loss Legal Issues + Cybersquatting + Registering, trafficing in, or using internet domain with bad faith intent to profit form the goodwill of a trademark belonging to someone else + May offer to sell the domain to the person or company who owns the trademark contained within the name at a price + Popular cases + Kevin SPacey + Nissan Motors vs Nissan Computers E-Commerce not used as much + C2C + eBay + C2B + Not common + B2G + Not common + Mobile commerce + Catching up now Pros and Cons of Vertical Integration + Pros + No reliance on suppliers + Potential access to monopolizing suppliers + Can lower costs + Eliminate middle men + + Cons + + + Economies of scale Expensive Reduces flexibility Loss of focus Chapter 5Moore’s Law 5.1 Introduction + Moore’s Law: chip performance per dollar doubles every 18 months + Origins + Intel co-founder Gordon Moore made a prediction in ‘65 + discussed regular advances + more of a golden rule + Five parts + prediction that transistors in an integrated circuit will double every two years + which will drastically increase computing power of a single chip + which will increase speed and capability + but cost will become lower + and growth of microprocessors will be exponential + Microprocessor: part of computer that executes the instructions of a computer program + Random-access memory (RAM): fast, chip-based volatile storage in a computing device + Volatile memory: storage that is wiped clean if power is cut off from the device + Transistor: electronics engineering - semiconductor device used to amplify electronic signals + Integrated circuit: electronics engineering - a large number of electronic circuits on a relatively small piece of silicon semiconductor material (chip) + Printed Circuit Board (PCB) also known as motherboard: important component of a computer + holds communication between electronics components and CPU and memory Technologies that Managers Should Know About + Supercomputers + Grid Computing + Cluster Computing Technology in Healthcare + Moore’s Law shows potential for low-cost computing to improve healthcare quality while lowering costs + GlowCap + Proteus + Digestable tech to sense if medicine has been activated + Look for vitals + Medtronic PillCam + Relay images of insides E-Waste + 9.4 metric tons of e-waste + May be toxic, contains harmful materials + Bits of valuable metals + Requires tedious recycling + Exported for recycling Takeaways + Moore’s law applies to semiconductor industry + Non Chip-based tech is also advancing rapidly + Disk drive storage doubles every year, while equipment to speed transmissions doubles every 9 months + advances exponentially + Inventory value changes quickly, depreciation accounting, employee training, and other managerial functions + WHY is it important for managers to know about this? + What is impossible from a cost or performance perspective today may be possible in the NEAR future + Fast cheap computing also needs price elasticity where whole new markets can be created + Need to be able to capitalize on these new markets and fast + Managers need to study trends to recognize opportunities and manage disruptions + Moore’s law has driven 6 waves of disruption in terms of marketing transforming computing + Sixth wave involves Internet of Things 5.2 Death of Moore’s Law Takeaways + As chips get smaller and more powerful, they get hotter and present new power management challenges + At some point, Moore’s law will stop because we will no longer be able to shrink the spaces between components on a chip + Multicore chips use two or more low-power calculating “cores” to work together in unison, but to take optimal advantage of multicore chips, software must be rewritten to “divide” a task among multiple cores + 3-D transistors are also helping to extend Moore’s Law by allowing chips to get smaller + New materials are also extending Moore’s law + Entirely new methods for calculating, quantum computing Takeaways + Most modern supercomputers use massive sets of microprocessors working in parallel + The microprocessors used in most modern supercomputers are often the same commodity chips that can be found in conventional PCS and servers + Moore’s Law means that businesses as diverse as financial services firms, industrial manufacturers, consumer goods firms, and film studios can afford access to supercomputers + Grid computing software uses existing computer hardware to work together and mimic a massively parallel supercomputer. Using existing hardware for a grid can save a firm millions of dollars it might otherwise cost to buy a conventional supercomputer. + Cluster computing refers to collections of server computers that are linked together via software and networking hardware so they function as a single resource + Massively parallel computing also enables vast server farms that power online businesses like Google and FAcebook + create new computing models like software as a service (SaaS) and cloud computing Chapter 13 Understanding Software Slides Terminology + Firmware: software stored on and linked with certain hardware + Software controlling a medical device such as a defibrillator + Desktop software: Applications installed on a personal computer; single user + Customer Relationship Management Software: Systems used to support customer-related sales and marketing activities + Computing hardware: physical components of IT, including computer and storage devices, mouse, etc. + Software: program; precise instructions that tells hardware what to do Business Intelligence + BI Software and Tools + Tools that enable: + collection of data from in/external systems + preparation and analysis including querying + data visualizations + creation of dashboards + reporting KPIs + reporting metrics + other operations that enable decision making by top management + BI answers questions + when + who + how + how many + what happened? Platform + Usually operating system and computer hardware which form a base on which various software can be run + MS windows on a laptop could be considered a platform + Computer hardware and software on which additional programs, processes, or technologies are developed + Modern application programs can be run on multiple platofrms + Modern web browsers allow third party software known as plugins to be run as part of a browser in which case browsers could be referred to as platforms + Software can also be platform-agnostic + software is designed to run on any combination of operating systems and processor architecture Enterprise software + Enterprise resource planning (ERP) + Software package that integrates the many functions of a business + Sales and inventory + Manufacturing and purchasing + Human Resources + Order Tracking and Decision Support + Why is this important? + Can save millions of dollars and turbocharge organizations + Streamline processes + Make data more usable + Ease linking of systems with software across the firm + Efficient and integrated ES may also make more attractive for acquisition + Disadvantages + Expensive + Success depends on skills of workforce Client Server Architecture + Client Server Model/Architecture: + Server is a device/computer program that provides functionality for other programs/devices called clients. Such a model of computing is called the ClientServer Model/Architecture + Servers provide services such as sharing data or resources between several clients + Servers could be of specific types: database server, printer, sever, mail server + A single server can serve several clients + A single client can be associated with several servers + Facilitates and authentication and authorization + verifying credentials and determining what data user has access to Service-Oriented Architecture (SOA) + Independent software programs with their own interfaces that communicate with one another’s interfaces in a networked environment to provide specific services + Makes sense: + At an enterprise level setting where data has to be shared between several applications + or similar feature/output is sought by various departmental software applications + Why SOA? + IT infrastructure is heterogeneous across many operating systems, software applications and hardware + Too expensive to start from scratch + Leverage existing infrastructure and applications to address changing needs of business and newer software/application needs of a business + Examples: + Creative mashups like HousingMaps + Two services like Google Maps and Craigslist to display real estate listing + Massachusetts Mutual Life Insurance is staying ahead of curve because it has 40 services + distribution, management, premium collections, customer information management, new business, and under writing Software + Layer cake + User + applications + Operating + Hardware + Programming Languages + 70’s and 80’s + FORTRAN, BASIC, COBOL, PASCAL + Called imperative languages + Explicit reference to state of execution environment + Reserved words such as “if”, “while”, “do” + Considered to be more disciplined but less efficient than OOP + 90’s + Object Oriented Languages (OOP) + Java, C++, ObjectPascal, Python, Ruby, Perl + Programming comprised of Objects + Advantages + Reused in other programs + Disadvantages + Less disciplined but more efficient Database Management System Chapter 14 Software in Flux: Open Source, Cloud, Virtualized, AppDriven Shifts Marginal Cost + Marginal cost: cost of producing one additional unit of a product + effectively zero to produce an additional copy of software + May not be zero for hardware + Absolute cost of producing software or hardware is not usually zero + Why is the concept of marginal cost important to IS/IT managers? + Think about the absolute cost and marginal cost of producing hardware and software + Simple math problems involve marginal cost Open Source Software (OSS) + Available free of cost in ht epublic domain + Free to download and to use + May come with licensing agreement + Gives access to source code + Why? + Vendors make money through ads and free advice to upgrade + Cost + Free alternatives to costly commercial code + Reliability + the more people who look at a program’s code, the greater the likelihood that na error will be caught and corrected + Security + Most OSS has good security features but debatable aspect could be a concern + Salability + Ability to either handle increasing workloads or to be easily expanded to manage workload increases + Agility and time to market + Vendors able to skip whole segments of the software development process, allowing new products to reach the market faster Free Rider Problem
