IT Strategy: Competitiveness, Investment, and Digital Business Models
IT’s Contribution to Business Competitiveness
What are the concrete forms (i.e., the practical actions and results) by which IT can make an effective contribution to business competitiveness? Identify at least four actions, and for each, provide a practical example.
- Differentiation: Allowing products and services to be perceived as superior to the competition. Example: Porsche Cars.
- Cost Leadership: Enabling the delivery of products and services at prices and conditions perceived as more advantageous. Example: Generic supermarket brands.
- Niche Market Focus: Enabling the organization to serve specific market segments. Example: Dell Computers (early customization model).
- New Market Creation: Making previously unviable markets accessible, often through e-business systems. Example: Online book retailers or computer component e-commerce.
- Shifting Power Dynamics: Altering the balance of power between the organization and its customers, suppliers, competitors, substitutes, and potential new entrants.
Justifying IT Investment for Decision Making
Consider a company earning $200 million a year that is planning an IT investment. The main expected result is a significant improvement in its decision-making process, especially for managers and leaders. The IT executive is having difficulty obtaining board authorization to start the project, budgeted at $10 million (5% of annual revenues). The executive needs to prepare a justification that clearly shows the cost/benefit and ROI (Return on Investment) of the proposal. If you were the IT executive, how would you act? Provide examples.
Key Business Models in the Digital Age
What are the main business models in the digital age? Identify at least three of them, and for each, explain the model, how it works, and provide practical examples.
- Agora/Marketplace Model: A model where buyers and sellers meet freely, similar to a fair or an outdoor market. Examples: eBay, Mercado Libre.
- Aggregation Model: A company that collects and mediates contacts between producers/sellers and buyers. Examples: WebMotors, Amazon.
- Value Chain Integration Model: A company brings together several producers, integrates them, and provides the final product or service to consumers. Examples: Nike, Cisco.
- Community/Prosumer Model (Alliances): Roles of producers and consumers often blur, with participants operating at both ends. Examples: Online forums on specific topics (e.g., culinary, enology), user-generated content platforms.
- Distribution Network Model: Provides the essential infrastructure that enables other business models, such as physical delivery or payment processing. Examples: Logistics companies (e.g., FedEx, UPS), payment gateways.
Key Learnings: IT and Business Strategy Alignment
Comment on what you learned in this course regarding the most important aspects of alignment between information technology and business strategy.
I learned that without sound decision-making and a clear business strategy, technology alignment will not meet expectations. Everything is interconnected.
Five Key Decisions in IT Governance
Considering the challenges of governance in IT, what are the five key decisions to be taken? Explain each one.
- IT Principles: Defining how information technology should be adopted and used across the business for all involved, clarifying its role within the business model, and outlining desirable behaviors related to the IT function.
- IT Architecture: Determining how the company’s business processes are related, what information is involved in these processes, how to integrate them efficiently, and which technology choices will guide IT initiatives.
- IT Infrastructure: Identifying the most critical and important infrastructure services for the business, defining their service levels, planning technological upgrades and support, and deciding on outsourcing specific services.
- Business Application Needs: Establishing processes for evaluating new technologies, identifying market opportunities for new commercial applications, and assigning sponsors to projects that ensure value creation for the company.
- IT Investment Decisions and Prioritization: Involves decisions about when and where to invest in IT and how to strategically allocate IT investments.