Information technology as a strategy
In the globalized world, business must rely on information technology (IT) to innovate and find new ways to grow. Today, company owners are beginning to realize that management alone can no longer assure the profitable and growth of a company. To remain competitive, company will need a “new weapon” by bringing information technology into the vision and strategy of company to achieve business goals.
Information Technology (IT) can be used to optimize operation efficiency, reduce costs, minimize risks, and accelerate business growth. It is a fact that today IT has evolved from its support role to become a strategic role. Company owners want more automation that are highly visible for them to make decision quicker but there are resistances among managers who do not want to be “visible” because what they do can be seen by company owners. With IT their ineffectiveness or bureaucracy can be revealed so they try to manipulate the ways IT works to avoid being visible. This attitude will cost company a significant amount of time, waste efforts and money.
To avoid this issue, company owners need to have better understanding of what IT can do. That is why recently the role of the Chief Information Officer (CIO) is elevated into executive position to help other executives to make decisions. The CIO has to decide which innovation technologies are appropriated for business by knowing the existing levels of company's effectiveness and efficiency. The CIO must determine which information technology can be used to examine the business opportunities, reduce risks, and improve strategy for growth. The CIO must know what technology can be used to maximize the use of company resources and reduce waste. The CIO must consolidate infrastructures and networks to facilitate internal communication and delivers customer data to executives for decision making. The CIO must encourage collaboration among business units within a company by collect data, analyze and report to company owners.
Of course, the CIO cannot achieve all of that alone. He needs supports from his information system managers. During this transition toward a strategic role, the tasks of the information systems management also change. Information systems are no longer viewed as support for operational decisions, but rather in the achievement of company's objectives, and the competitive in the marketplace. It requires new thinking, new logic, and new way of managing information system. In the past, many information system managers were technical people who are trained in computer science but today, technical skills are NOT enough. To be effective, many must also have business skills, especially in the execution of the business strategy. Computer Science or Software Engineering do not teach these skills but this is a specialize area of IT managers who are trained in the Information System Management (ISM).
Let us look into the case of an airline that uses information systems to increase the number of passengers and increase profits. Before the use of information system, airline sell tickets to passengers and number of ticket sale is collected daily, analyzed, and sent from one level of manager to another higher level for review. It may take several days to reach the owner to make decision whether to increase or decrease ticket prices. The delay in time during the changing market can cost the company some opportunities. By having information system collect data, analyze and report quickly, certain decision can be made in a matter of minutes. By having up to the minute report, company owners can make decision quickly and achieve business goals.
Today airline information systems is designed to collect ticket sale data and compare it against a business rule so it can change ticket prices depending on the numbers of ticket sold. For example, several weeks before the flight, ticket price is kept low to attract people to buy tickets and to fill the seat on the airplane. Depending on the numbers of ticket sold, the price will be automatically adjusted up or down based on business formula sets by the owner. If more tickets are sold, the price will go up and if less ticket sold, the price will remain low. About one week before the flight, if it only has 40% of ticket sold but historically it usually had 75%. In that case the information systems are programmed to lower the ticket price to attract more people to buy tickets on that flight. By lower the prices, it competes with other airlines for passengers. If a flight has 80% which is higher than normal, it will increase the price since for whatever reason more people want to travel on that day. By allowing the information systems automatically manipulate the prices up and down; airlines can increase its profits. The same concept can be applied to hotel, transportation, buses as well as other service sector. An oil company can change the price at its retail station directly as oil prices change to ensure maximum profit.
A retail store may have thousands of items to sell. The owner does not know which item is selling quickly and which item is not selling until they do an inventory. Traditionally, inventory happens every week or month where each item is counted by workers, data is collected, analyzed and report to the owner. The process may take several days or weeks. With the use of information technology, every item sold is collected immediately at the point of sale so there is no need for inventory. Every day or every hour, the owner knows exactly how many items are sold and how many are still remaining in the store. The information systems will keep track of all items based on a formula, programmed into the computer systems. When an item fells below a minimum number, the information system immediately send an order to the manufacturing for sending in more items. When an item is not sold well, the information system will alert the owner for a price reduction and automatically send the new price to newspapers to advertise the sale to attack more customers. By quickly adjust prices, order more best seller items and reduce price on poor selling items, the retail store can increase its profits significantly.
The efficiency and effectively use of information systems as strategic tool to help improve company business goals are common in business today. It is the “new weapon” of successful company to expand the market and eliminate competitors. To do that, it needs new thinking, new concept, and new types of manager who know how to design and implement information technology to solve business problems. It needs graduates in information system management (ISM) program.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
