The information system as a competitive weapon

Abstract

Long considered backoffice support tools, information systems have become strategic competitive weapons. In the airline, travel services financial services, and distribution industries, for example, information systems have become strategic competitive weapons. Information systems have been used to produce new productsorto substantiallymodifyold one. Frequently, these systems increase the customer's "switching costs," and thereby increase dependence on the supplier This phenomenon has been discussed by several researchers, and disparate descriptive models proposed. A new model the Customer Resource Life Cycle Model, provides a powerful descriptive capability and potential as a mechanism for generating strategic applications. The model assumes competitive advantages can be obtained by supporting a customer's resource life cycle via information systems technologies. Numerous applications illustrate the descriptive power of the modeL The considerable attention recently paid to using information systems as competitive weapons can be attributed to several factors, includingthe unrelenting decline of the cost of information technologies; structural changes inthe economywroughtbythe recenteconomic decline and subsequent recovery; and perhaps most importantly, by the deregulation of many industries-particularly airlines and finaricial services. Companies, once shackled by regulatoly agencies, have moved quickly to replace limited, but well understood product lines with a varied, ever changing menu of new products and services Information systems have played a critical role in managing this diversity. Information systems are beginning to distinguish successful firms from their competitors And they are doing it where it counts-in the market place. Information systems are emerging from the back office and making their way to the corporate boardroom. Recentstudies(reviewedinthepaper) describe how informationsystems canbeexploitedt:o an organization's competitive advantage and present descriptive models for classifying successful strategic applications or evaluating the potential of proposed applications. We presentanewmodelfordescribingstrategicinformationsystems,amodel withaprescriptive character. We expect that the model will foster and encourage the discovery of new opportunities for the successful application of information system technologies. We have populatedthemodelwithseveraldozenexamples ofsuchinformationsystemapplicationsto enhance the prescriptive capabilities.\nThe Product/Resource Life Cycle\nIt is well known that an organization's products or services go through a fairly well-defined life cycle. Within IBM's Business Systems Planning process, for instance, four stages are proposed for the life cycle of both products/services and supporting resources:\nThe Customer's Resource Life Cycle\nThe products an organization provides its customers are, from the customers perspective, supporting resources. To acquire them the customer goes through a resource life cycle, a life cycle frequently requiring a considerable investment of time and effort to manage. If the suppliercan assistthe customerin managingthis life cycle, thenthe supplier, throughhigher quality customer service, may differentiate itself from its competitors. Simultaneously, the supplier has introduced customer switching costs. The customer's resource life cycle (CRLC) can frequently be supported through the application of supplier-provided IST. Frequently, transactions with customers are sufficiently homogeneous to economicallyjustify the supplier developing support systems which the customer can't afford. The four-stage IBM model is a helpful starting point, but provides a ratherrough cut at the CRLC. A more detailed breakdown significantly improves the model's utility. Burnstine has proposed an eleven-stage resource life cycle model and we have extended it by two more stages(seeExhibit).Anyofthesethirteen-stagesmaybeamenabletosupportfromsupplierdeveloped strategic information systems. The CRLC model provides a tool forseeking outnew competitive applications. The 13 stages focus the search, while the dozens of examples included in the paper provide analogies that serve as a catalyst to creative thought Competitive information systems have already shown themselves to be of strategic importance in severalindustries and their influence is being felt in manyothers Theimportance of these systems has been well documented in the literature, and several authors have provided criteria usefulinevaluating the utilityof both existingandpotentialapplications. The CRLC model goes a step further by providing a tool to assist in identifying such systems Because it focuses on customer service, the model is of primary use for building in customer switching costs and differentiating a product or service. 16