Table 1
American Airlines SABRE Reservation System
IT Assets
Integrated database of
current flights, routes
and pricing offered by
multiple airlines
Nature of the Competitive Action
Provided travel agents with access to online reservation
systems to book passenger flights with higher efficiency, speed,
and flexibility (e.g., multi-destination travel). The system
gained great penetration because travel agents understood its
value in helping the agents to make bookings. In this booking
process, American used the system to display its own flights
before showing the flights operated by other airlines. This
preferential ordering boosted Amercian’s bookings.
As the system became the industry standard for travel agent
Desktop-based software bookings, other airlines paid American for the ability to list their
flights and a higher fee for priority listing. These fees boosted
that allowed travel
American’s non-operational revenue.
agents to dial-in to the
system to search for
American gained valuable intelligence about competitors’ prices
available flights and
and routes and was able to utilize this information in setting its
prices and make direct
own routes and prices.
bookings
Rival airlines sought regulatory intervention because they
perceived SABRE to give American an unfair competitive
advantage. Eventually, American divested SABRE by creating a
new entity independent of its airline operation.
Table 2
Merrill Lynch Cash Management Account
IT Assets
Nature of the Competitive Action
Offered business customers a service for
Integrated database of integrated financial management, whereby
all of a business
customers could maintain the desired level of
customer’s accounts
money in liquid accounts (e.g., checking and
(e.g., savings, checking, savings), while sweeping daily excess cash into
brokerage)
higher yield brokerage accounts.
Automated decisionmaking system for
tracking investment
opportunities and
executing financial
investments
The automated system kept track of market
conditions and executed transactions to deliver
‘optimal’ returns to the customers, combining
access to financial markets with financial
expertise to deliver customers the best
available returns on their cash across the
different types of accounts.
Figure 1
Rethinking Business Strategy and IT Strategy
Business
Strategy
Seed
Business
Strategies
Target IT
Priorities
IT Strategy
Enabler
Role
Support
Role
Figure 2
Identifying Ideas for Using IT to Enhance Competitiveness
Business Strategy
Business Model
Value Discipline
Ideas for IT-enabled
Competitive Actions
IT Strategy
Strategic Role of IT
Competitive
Actions
Figure 3
Business Model Components
• Who is the customer?
• What does the customer value?
• How does our product/service
meet the customer’s needs?
Customer
Value
Proposition
Critical
Processes
What are the business
activities critical to our being
able to both provide customers
with the products and services
they value and do so in a
profitable manner?
• How is revenue generated?
• What is the cost structure?
• How exactly is profit
created?
Profit Model
Critical
Resources
What are the business
and technology resources
necessary in order to
carry out critical
processes in an effective
and efficient manner?
Figure 4
Components of Apple’s Business Model
• Technically savvy segment of the
mass market
• Seamless online access to
content across multiple media
Customer
Value
Proposition
Critical
Processes
• Internal product design
• Product architecture
• Tight control of sales and
marketing
• Outsourced manufacturing
• High prices due to in-demand
hardware products (new,
stylish, high quality)
• Moderate manufacturing and
marketing costs
• High margins
Profit Model
Critical
Resources
• Brand
• Product designers and
architects
• Electronic content delivery
platforms
• Relationships with content
providers
Figure 5
Components of Walmart’s Business Model
• Cost-sensitive segment of the mass
market (‘Everyday Low Prices’)
• Availability of a broad range of
products, enabling one-stop
shopping
• Low prices, low costs
• High volume, high product
turnover
Customer
Value
Proposition Profit Model
Critical
Processes
• Store site selection
• Tailor local inventory to local
market
• Shelf-space optimization
• Supplier relationships
• Logistical processes
Critical
Resources
• Retail and distribution facilities
• Information technology
• Employee talent in logistics,
supplier management,
merchandizing, purchasing and IT
Table 3
Overview of the Value Disciplines
Value
Discipline
Key Business Capabilities
Examples
• Product and service
reliability
• Competitive pricing
• Customer convenience
• Order processing and fulfillment
• Customer service
• Supply chain
• Inventory management
• Merchandising
• Financial management
Dell
FedEx
Walmart
Customer
Intimacy
• Customer loyalty
• Customer lifetime value
• Micro-segmentation
• Customer relationship mgt
• Advertising and marketing
• Campaign management
Product
Leadership
• Product and service
innovation
• Creativity
• Leveraging internal
and external knowledge
• Product and service
development
• Rapid commercialization of
promising products and services
• Quality assurance
• Customer support
Operational
Excellence
Strategic Focus
Ritz Carlton
Harrah’s
Neiman Marcus
Amazon
3M
Intel
Johnson &
Johnson
Table 4
Strategic Roles of IT
Automation
• Cost reduction
• Transaction cycle time
improvement
• Responsiveness improvement
• Productivity improvement
Control
• Real-time event monitoring
• Real-time event visibility
• Business rule automation
Empowerment
• Data distribution and access
• Information distribution and access
• Knowledge distribution and access
• Business intelligence tools availability
Collaboration
• Complex business process execution
• Problem and opportunity handling
• Business process innovation
• Product and service innovation
• Business model innovation
Table 5
Value Disciplines and the Strategic Roles of IT
Value Disciplines
Operational
Excellence
at Walmart
Customer
Intimacy
at Amazon
Product
Leadership
at 3M
IT-enabled Business Innovation
• Digitized merchandising, logistics and inventory
business processes (automation, control)
• Cross-docking process innovation (collaboration)
• 24x7, convenient shopping channel (automation,
control)
• Personalization through collaborative filtering
(collaboration, empowerment)
• Customer-generated product reviews
(empowerment)
• Highly effective new product development
processes (collaboration, empowerment)
Figure 6
IT as a Strategic Enabler
Organization
(or Work Unit)
Structure
Innovative IT
Functionality
Product/Service
Competitive
Market
Positioning
Business
Processes
IT
Functionality
Employee
Skills & Roles
Adapted from M.S. Scott Morton (Ed.), The Corporation of the 1990s: Information Technology
and Organizational Transformation. New York: Oxford University Press, 1991.
Table 6
Examples of IT-enabled Business Model Innovation
Organization
Business Model Innovation
Enabling IT
Google
Targeted Internet Advertising
Search Engine
Harrah’s
Customer Life Cycle Management
Customer Data Analytics
Walmart
‘Everyday Low Prices’
Supply Chain Coordination
Retail Store Merchandising
Apple
Personal Digital Content Devices
(iPod, iPhone, iPad)
iTunes Store
Third-Party Applications
Stylish, Easy-to-Use Devices
eBay
Customer-to-Customer Exchanges
Business-to-Business Exchanges
Auction Engines
Auction Platform
FedEx
Overnight Shipping
Package Tracking
American Airlines
Customer Life Cycle Management
Frequent Flyer Program
Dell
Direct Model
Customer Product Configuration
Supply Chain Coordination
Amazon
Effortless Online Shopping
‘1-Click’ Ordering
Table 7
Limiting Competitor Responses to IT-Enabled Competitive Actions
Barriers to
Erosion
Questions for Analysis
IT Resources
• Are barriers based on unique or rare IT assets?
• Do rivals possess matching IT assets? If not, how difficult will it
be for rivals to build or acquire them?
Complementary
Resources
• Are non-IT assets or capabilities required?
• Do rivals possess these non-IT assets or capabilities? If not, how
difficult will it be for rivals to build or acquire them?
Project Management
Capabilities
• How complex are the projects involved with implementing the
IT-enabled competitive action?
• Do rivals possess sufficient project management capabilities? If
not, how difficult will it be for rivals to build or acquire them?
Preemption Barriers
• Will rival’s customers and/or trading partners face high
switching costs?
• Is a value network required in order to implement the strategic
action? If not, how difficult will it be for rivals to put together
such a value network?
Adapted from G. Piccoli and B. Ives, “IT-Dependent Strategic Initiatives and Sustained Competitive
Advantage: a Review and Synthesis of the Literature,”MIS Quarterly, December 2005, pp. 747-776.