The information society

Business in the information society

The rise of strategic IT

• high levels of spending
• misalignment between spending and corporate goals
• feeling of loss of control
• growing competitive pressures on companies
• difficulties with cost justification
• vendor and consultants push

Merril Lynch

• Cash Management Account (CMS)
• combined banking and investment
• provides:
  • cheque and guarantee card
  • charge card
  • broker service
• collaboration between Merril Lynch (brokers) and Banc One (bankers)
• forced competitors to copy them

American Hospital Supplies

• doctors
• hospitals
• medical laboratories

Over 5,000 customers use the system to:

• forecast and plan
• manage stock

McKesson

• distributor of pharmaceuticals in the USA
• provided customers with a personal computer and bar code reader
• orders transmitted by modem using a “toll free” 800 telephone call
• helped clients run their own businesses (required increased understanding of their business)

DEC Easynet

• Digital Equipment Corporation
• a corporation-wide global network for electronic mail
• bulletin boards and electronic interest groups for both business and pleasure
• business or technical 'queries' can be mailed worldwide in minutes with a response in hours
• collective global expertise

American Airlines

• started in 1950s in collaboration with IBM for inventory management of a perishable commodity (i.e. airline seats)
• used widely a Customer Reservation Systems (CRSs)
• on-line access for travel agents
• load management
• more profit from SABRE than flying passengers

Thomson Holidays

• vicious competition and regular bankruptcies
• few(er) operators
• in 1982 Thomson introduced Thomson Online Program (TOP) to replace telephone enquires to 1,500 lines in 42 centres
• helped travel agents to “close” sales
• videotex-based system with link to Bankers’ Automated Clearing System (BACS)

Otis Elevator Co.

• little profit in installation, it is mainly in maintenance and service
• freephone service to national centre, which
• records fault(s)
• identifies nearest available engineer
• records fault correction report
• aim to eliminate completely customer call-outs

• customer
• model
• system components
• engineer

7-Eleven

• franchised operation
• growing by 350 new stores per year in Japan
• cut stock by 50% using Electronic Point of Sales terminals
• increased turnover
• increased profit margin (25% to 28%)
• some areas of shelf cleared three times in a day with different products
• accepted payments for:
  • gas
  • electricity
  • life assurance

Benetton

• one of Europe's largest clothing businesses
• Computer Aided Design (CAD)
• simple distinctive designs held in small quantities in shops
• Electronic Point of Sales (EPoS) terminals in shops gather data for analysis
• order details sent from franchisees by telecommunications
• order details passed to production contractors
• computers in shops to analyse data

W H Smith

• newspapers
• magazines
• confectionery
• stationery

• Electronic Point of Sales (EPoS)
• Computer Aided Design of shop, also used as fixed asset management systems
• Direct Product Profitability (DPP)

Niesenbaums

• car scrap yards in USA
• re-sell components from broken-up cars
• created a national network to link yards across continental USA
• customers request components and, if not available locally, details can be sent to network
• response in 24-36 hours

National Bingo Game

• declining in early 1980s
• heavily regulated industry
• recognised need for national game to increase prize money
• computer service supplied by a division of ICL
• national prize of £50,000 plus regional prizes of £5,000

However

• competitive advantage is not sustainable
• copied through:
  • consultants
  • case studies
  • job-hopping
• bypassed
• overtaken by new technology

Independent vision

• design of IT infrastructure is independent of the business strategy
• information systems management is at a relatively low level in the organisation
• IT planning is operational
• IT is seen as an administrative expense

Reactive vision

• the business strategy defines the design of the IT infrastructure
• IS function has higher reporting status
• IT planning is derived from business plans
• IT is seen as a business expense

Interdependent vision

• a dynamic co-alignment of business strategy and IT infrastructure
• IS function has a critical role within the firm
• strategic IT planning responds to business opportunities
• IT is seen as a business investment

Conclusion

• IT can contribute to competitive performance
• IT is not a sustainable weapon in the medium or long term
• companies are reliant on smart and innovative people

Readings

Scott Morton, Michael S (1991) "The Corporation of the 1990s Oxford University Press.

Beaumont, J R and Sutherland, E (1992) "Information Resources Management" Butterworth-Heinemann, Oxford.