Creating Values Using Information Technology

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Outline

• Does IT Matter?• Technology Evolution• BPR• IT and Value Creation• Web-Enabled Business Change

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IT Doesn’t Matter?

• Nicholas Carr’s HBR article “IT Doesn’t Matter” (May 2003)

• IT has become a commodity just like electricity or steam engines.

• Scarcity makes a business resource truly strategic as in IT’s earlier days.

• Now the opportunities for gaining IT-based advantages are dwindling.

• Management should focus on costs and risks– Spend less– Follow, don’t lead– Focus on risks, not opportunities

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How do we create values using information technologies?

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Stages of IT Development

1960 1980 1990 2000

DP Era Micro Era Internet

IT Adoption

* Adapted from Nolan (2001)

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Milestones

• 1953: IBM shipped its first computer

• 1969: UNIX was developed at AT&T Bell Lab

• 1975: Microsoft was founded

• 1981: IBM introduced PC

• 1982: Lotus was developed

• 1982: Sun Microsystems was founded

• 1969: ARPANET developed as a DOD project

• 1972: Email was invented• 1977: TCP/IP deployed• 1986: NSFNET created by

NSF• 1991: Commercial traffic

allowed at NSFNET• 1992: WWW developed• 1995: NSFNET

decommissioned

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BPR Evolution

First-wave BPR

Advanced Planning& Scheduling

Web-EnabledE-Business

Degree of ITEnablement

Second-wave BPR

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Business Processes and e-Businesses

• What is a business process?– Coordinated and logically sequenced set of work

activities and associated resources that produce something of value to customers

• Web-enabled e-business design– It involves redesigning business processes at

both the enterprise and supply chain level to take advantage of the Internet

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Business Process Reengineering (BPR )

• BPR is a performance improvement philosophy that aims to achieve quantum improvement by primarily rethinking and redesigning the way that business processes are carried out.

• Started in late 1980s

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Motivation for BPR

• IT investment has not resulted in productivity increase– It takes many years to see the results– IT was not implemented right. Not user-friendly.– It was not the fault of technology. Organizational

processes and structures need to be changed!• Central figures: Michael Hammer,Thomas Davenport• Reference:

– Michael Hammer. Reengineering work: Don’t automate, obliterate. HBR, July-August, 1990.

– Thomas Davenport and J. Short. The new industrial engineering: Information technology and business process redesign. Sloan Management Review, Summer, 1990.

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BPR: A Decade of Lessons Leaned

• The approach was too radical– Hammer’s own rhetoric:“In this journey, we’ll carry our wounded and shoot the dissenters…”

“Reengineering must be initiated … by someone who has … enough status to break legs …”

• New processes were manually reengineered through a one-time activity, e.g. implementing a packaged, off-the-shelf ERP system.

• Rather than focusing on value creation, it emphasizes cost cutting.

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Where Are We Today?

• Business environment• Inside organizations

– Multiple ERP systems don’t talk to each other

– Systems cannot share information across organization boundaries.

– EAI

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Web-Enabled e-Business Change

• Redesigning both enterprise and external processes around the Internet

• Collaborative processes for new partners and customers

• Many more opportunities and ways to change the information flows in order to create value quickly.

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The IT Investment Scorecard

Inside External

IT as Infrastructure Improve system performance.

Create a platform to deal with customers, suppliers, and partners.

IT as a Way of Doing Business

Process/Physical Flow

Process change Create new channels

Knowledge/Information Flow

Improve knowledge sharing; enhance organizational learning and collaboration.

Add information value to existing products and services.

Community

Community of practice to enhance knowledge sharing and trust.

Customer loyalty, customer interactions.

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Treacy & Wiersema Value Disciplines

Operational Excellence

Product Leadership Customer Intimacy

* M. Treacy and F. Wiersema. Customer intimacy and other value disciplines. HBR, Jan-Feb 1993.

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BPR Methodology

• Business process model– A representation that captures the aspects of the

business process that are key to the understanding of functioning and performance of the process.

• Business process model analysis– Examining the structure and performance of a

process model and assess the impact of varying its parameters.

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BPR Software

• Advantages– A Shared business language

– Helps you understand the process better

– Attached with organizational data

– Animated simulation that provide what-if scenario analysis

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Digitize and Propagate

• Shift the data entry to customers and digitize it• Make the process as paperless as possible and

as early as you can• Make information more easily accessible to

those who need it, both upstream and downstream

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Vitrify

• Provide on-demand tracking information to customers of the process

• Provide reporting capabilities that provide on-the-fly analysis

• Design standard partner interface processes for seamless exchange of information

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Sensitize

• Build in customer feedback loops to detect process dysfunctions

• Enable software smarts to trigger quick business reflexes

• Attach environmental probes to the process to monitor change

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21Connect, Collect, and Create

• Create a community of practice around the process

• Create expertise maps and “yellow pages”• Build knowledge repositories that can be reused

to enhance the performance• Develop a FAQ database• Embed knowledge-sharing spaces for

interactive dialogues around the processes

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Personalize

• Learn preferences of customers through profiling

• Insert business rules in process that are triggered based on dynamic personal profile

• Use automatic collaborate filtering techniques• Keep track of personal process execution habits

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Key Takeaways

• IT matters• It is never true that IT matters just by itself.• IT matters when we use IT and integrate IT with

business innovatively.• With tremendous innovations going on, we are only

at the start in exploring the possibilities in using IT to create values.

• What technologies do we need?– Open standard

– Modular, simple