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THREE LENSES OF IT STRATEGY - Coggle Diagram
THREE LENSES OF IT STRATEGY
Lens #1: The Five-Forces Model
your telescope—zooms out to the level of your industry, helping you understand how IT is altering the rules of competition for every firm in your industry, includ-ing your archrivals
the fierceness of competition in your industry
the bargaining power of your customers and suppliers
the threat of new entrants
the threat that a substitute offering can meet your customers’ needs
IT's impact
increase transparency
The Internet has increased the transparency of suppli-ers’ costs for firms and of market prices for customers
firms can more readily compare prices offered by rival suppliers just as you can compare prices charged by rival firms for a car or airfares
erases geography
Consumer access to a broader array of sellers increases the fierceness of competition in an industry
IT also increases suppliers’ bargaining power because they have more downstream firms to sell to, and potentially even directly to end customers
blurs industry boundaries
The trifecta is causing a growing variety of previously independent industries to converge
Offerings from an unrelated indus-try can meet a need for your industry’s core customers, increasing the threat of substitutes
legacy-free business model
IT can lower conventional entry bar-riers such as the capital needed to enter an industry
enabling business models without the legacy burdens of incumbent firms
IT-enabled business models that shed an industry’s legacy assets increase the threat of new entrants and of substitutes
How IT affect the five forces
It analyzes an industry, not an individual firm
Bargaining power is about who has negotiating clout to force prices down
The model captures the bargaining power of suppliers from which firms buy inputs and customers to which they sell
An increase in either suppliers’ or customers’ bargain-ing power erodes the margins of all firms in an industry
Substitutes rarely come from your own industry
an offering that meets the same customer need as your industry but in a different way
the mere threat of a substitute caps prices that firms in an industry can dare to charge, especially when buyers incur low costs to switch to it
All it takes is the threat of new entrants
lower an industry’s profitability
The threat alone caps the prices you can charge and raises costs
Traditional strategy texts emphasize brute-force entry barriers such as initial capital outlay
Lens #2: Value Chains
Strategy = How’ll you deliver more value than your archrivals to explicitly
Value creation = Making outputs worth more than inputs
Value chain = lens for understanding this ~ prevailing business model
value chain describes only the firm, but a value stream encompasses its partner firms
Each step has physical + informational components
IT can transform a value chain in one of two places
the content of individual steps
linkages
Transforming one step in a value chain
lowering costs
increasing value-added in
Lens #3: The Competitive Litmus Test
IT Assets That Are Valuable but Not Rare
IT infrastructure of any sort is not rare even when it is valuable, so it rarely generates a competitive advantage
It has operational—but not strategic—value
competitive necessity because it provides the foundation for other IT assets that might generate a competitive advantage
IT Assets That Are Valuable and Rare
purchased apps can often be imitated
destroys their rarity
Solution: Creating new apps faster than they’re imitated
But often financially exhausting and unsustainable
Four Approaches to Data-Driven Analytics
Predictive modelling
Pattern discovery using correlation
Model discovery in big-data streams using machine learning
Sentiment analysis