It doesn t matter by nicholas g carr summary

Does IT Matter? Learning Objectives • define the productivity paradox and explain the current thinking on this topic • evaluate Carr’s argument in “Does IT Matter?” • describe the components of competitive advantage • describe information systems that can provide businesses with competitive advantage The Productivity Paradox • For over fifty years, computing technology has been a part of business • the addition of information technology to business had not improved productivity at all – the “productivity paradox.” o Mismeasurement of outputs and inputs o Lags due to learning and adjustment o Redistribution and dissipation of profits o Mismanagement of information and technology IT Doesn’t Matter • Carr asserts that as information technology has become more ubiquitous, it has also become less of a differentiator • because information technology is so readily available and the software used so easily copied, businesses cannot hope to implement these tools to provide any sort of competitive advantage • since IT is essentially a commodity, it should be managed like one: low cost, low risk • this article caused quite an uproar, especially from IT companies • Probably the best thing to come out of the article and subsequent book was that it opened up discussion on the place of IT in a business strategy, and exactly what role IT could play in competitive advantage o http://quickstream.biola.edu/distancelearning/busn220bourgeois/ITDoesn'tMatter.f4 v Competitive Advantage • What does it mean when a company has a competitive advantage? • What are the factors that play into it? • A company is said to have a competitive advantage over its rivals when it is able to sustain profits that exceed average for the industry • two primary methods for obtaining competitive advantage o cost advantage o differentiation advantage The Value Chain • Value is built through the value chain: a series of activities undertaken by the company to produce a product or service • Each step in the value chain contributes to the overall value of a product or service • The value • chain is made up of two sets of activities o primary activities o support activities The Value Chain The Value Chain • primary activities are the functions that directly impact the creation of a product or service • goal of the primary activities is to add more value than they cost o o o o o Inbound logistics Operations Outbound logistics Sales/Marketing Service The Value Chain • support activities are the functions in an organization that support, and cut across, all of the primary activities o o o o Firm infrastructure Human resource management Technology development Procurement Porter’s Five Forces • Porter developed the “five forces” model as a framework for industry analysis • can be used to help understand just how competitive an industry is and to analyze its strengths and weaknesses • consists of five elements, each of which plays a role in determining the average profitability of an industry Porter’s Five Forces Porter’s Five Forces • Threat of substitute products or services: How easily can a product or service be replaced with something else? • Bargaining power of suppliers: When a company has several suppliers to choose from, it can demand a lower price • Bargaining power of customers: A company that is the sole provider of a unique product has the ability to control pricing • Barriers to entry: The easier it is to enter an industry, the tougher it will be to make a profit in that industry • Rivalry among existing competitors: The more competitors there are in an industry, the bigger a factor price becomes Using Information Systems for Competitive Advantage • A strategic information system is an information system that is designed specifically to implement an organizational strategy meant to provide a competitive advantage • a strategic information system is one that attempts to do one or more of the following o o o o deliver a product or a service at a lower cost deliver a product or service that is differentiated help an organization focus on a specific market segment enable innovation Using Information Systems for Competitive Advantage • Examples o Business Process Management Systems • integration of information systems with business processes that leads to competitive advantage • true competitive advantage can be found with information systems that support business processes o Electronic Data Interchange • integrating the supply chain electronically • primarily done through a process called electronic data interchange, or EDI o computer-to-computer exchange of business documents in a standard electronic format between business partners o Collaborative Systems • allow any software that allows multiple users to interact on a document or topic could be considered collaborative • users to brainstorm ideas together without the necessity of physical, face-to-face meetings Using Information Systems for Competitive Advantage o Decision Support Systems • A decision support system (DSS) is an information system built to help an organization make a specific decision or set of decisions • can exist at different levels of decision-making with the organization,