1 Definition digital organisation
A digital org = an org that implements IS to realize its strategic objectives in order to achieve
a competitive advantage and create stakeholder value in a rapidly changing environment
1.1 Information systems (IS)
Information technologies:
- Enterprise applications (ERP, CRM, SCM)
- E-commerce and M-commerce
- Collaboration systems
- Business Intelligence and Business Analytics
- Knowledge Management Systems (KMS)
- Cybersecurity
- Emerging digital solutions (AI, Cloud, Augmented and Virtual Reality)
Digitizing orgs is an architectural exercise with 3 building blocks:
- Technology
- Organization
- Management
Implementing IS and information technology alone does not deliver a competitive advantage
1.2 Strategic objectives in order to achieve a competitive advantage
Strategies for a competitive advantage:
- Lowest cost
o FE: Ikea, Colruyt, Ryanair (by making an app where customers can do things
themselves instead of with the help of employees)
- Product leadership
o FE: Apple, Tesla (by making an app with nice features)
- Customer and supplier intimacy
o FE: TikTok, Netflix (by giving personal recommendations)
Role of IS/ technology:
- Supporting the current course/ path
o Support in achieving pre-defined strategic objectives
o Emphasis on optimization and automation: doing better at what you are
doing already
o Technology as a cost center
- Driver for fundamental/ strategic change
o Driver to reshape the path itself
o Emphasis on innovation and transformation
o Technology as source of competitive advantage
, - Source of new companies and industries
Disruptive impact of new industries and business models
- FE: Translators (vs online translators), owning a car (vs car sharing platforms),
cashiers (vs delivery at-home like HelloFresh)
- FE: Kodak: it missed the digital transformation after actually starting it -> bankrupt
1.3 Stakeholder value
Triple P
- The triple bottom line framework goes beyond traditional measures of profit
(“bottom line”) and additionally includes environmental and societal dimensions to
measure investment results in a more comprehensive manner
o Profit: maximizing profit for shareholders
o People: creating value for all stakeholders, highlighting a firm’s societal
impact and commitment to people (including customers, employees and
community members)
o Planet: positive impact on the planet
1.4 Rapidly changing environment
Orgs must continuously monitor technological innovations and their impact on:
- Own org
o What are the opportunities in supporting our current strategy or enabling
new strategies?
- Competitors
o How do our competitors adopt these innovations and what risks does this
bring to our organisation?
- Customers
o How do customer requirements and behaviour evolve?
- Society
o What does society expect from technological innovation?
- Government
o What about evolutions in legislations?
,2 Business and IT Strategy
Investment in IT is growing (FE: hardware, software, communication equipment)
Question of this chapter: ‘Why would a company invest in IT?’
2.1 Strategic business objectives of IS
5 strategic business objectives for which orgs invest heavily in IS:
- Operational excellence
o Orgs in this discipline are known for their reliable, efficient and low-cost P&S
Lowest cost through improving operational efficiency and increasing
productivity by automating routine tasks and streamlining processes
Improved efficiency -> higher profits
o IS and technologies help improve efficiency and productivity
- Product leadership
o Orgs in this discipline are known for their cutting-edge technology, superior
quality and high value-add P&S
Creating innovative and high-quality P&S that set the org apart from
its competitors, pushing the boundaries of performance, and getting
them to the market quickly
o IS and technologies enable firms to create superior/innovative P&S
- Customer and supplier intimacy
o Customer intimacy:
Orgs in this discipline are known for their personalized customer
service, customized P and strong customer relationships
Focus on creating a deep understanding of the customer's
needs and preferences, and tailoring P&S to meet those needs
Customers who are served well become repeat, loyal
customers who purchase more
IS can improve communication and collaboration with customers ->
better relationships, increased loyalty and enhanced customer service
FE: Hotel that registers everything you do so that they can personalize
your room when you return for a second time
o Supplier intimacy:
Orgs seek to work closely with their suppliers to improve quality,
reduce costs and increase innovation
More engagement with suppliers -> suppliers provide better
vital input
IS can improve communication and collaboration with suppliers ->
better relationships
- Competitive advantage
o Advantages over competitors
, o Often results from achieving previous 3 business objectives
Better performance through operational excellence
Product leadership through new P&S
Better response to suppliers and customers
o Industry leaders set the golden standard within their respective industries
- Survival
o Businesses may need to invest in IS out of necessity, it is simply the cost of
doing business
o Keeping up with competitors to survive
o Compliance to laws and regulations
o FE: Mobile banking app for banks, SOX that requires keeping all emails for 5y
Value disciplines
- Strategic approaches that orgs can choose to excel in, in order
to gain and sustain leadership positions in their industries
- Superior customer value is achieved by:
o Becoming champion in 1 of the 3 value disciplines, even at the expense of the
other 2 value disciplines
o Meeting industry standards in the other 2 two value disciplines
- All aspects of the org must be aligned to support the choice of a primary discipline
o FE: culture, processes, organizational structures, management systems,
technology
- Choosing value disciplines = choosing customers
- Danger of not choosing: ending up as underperformers, because of confusion,
conflicting priorities & wasted resources
o Exception: some org succeed to excel at more than 2 disciplines (masters of 2)
- Maintaining a leadership position is an ongoing challenge, requiring ongoing focus,
investment, continuous improvement and agility
How can an org make strategic choices?
- The positioning view
o Outside-in: look outside the org and place the org in 1 of the 3 dimensions
- The Resource Based View (RBV)
o Inside-out: look at what the org is good at
o Can be tangible or intangible
2.2 Porter’s competitive forces model
2.2.1 The five competitive forces of Porter
Traditional competitors
- Intensity of rivalry depends on:
o Amount and equality (size & power) of competitors
, o Speed of industry growth
o Size of exit barriers
Specialized assets or management devotion to an industry
o Commitment of rivals
- Price competition is destructive to profitability
o WHY? It transfers profit from industry to customers
- Price competition occurs when:
o P&S are nearly identical
o Capacity expands in large increments to be efficient
o Perishable products
o Switching costs are low
Switching costs = the costs (time, money, psychological) that a
customer has to incur in order to switch from one P/S to another
- Competition on other dimensions than price leads to higher customer value and
(often) higher prices
New market entrants
- In a free economy with mobile labor and financial resources, new orgs are always
entering the marketplace
- When new entrants are likely, orgs must hold down prices or boost investment to
deter competitors, putting a ceiling on profitability
- Key entry barriers:
o Supply-side economies of scale: producers of large volumes enjoy lower costs
o Demand-side benefits of scale (network effect): a buyer’s WTP increases with
the number of other buyers
o Customer switching costs
o Capital requirements: invest large financial resources (facilities, R&D,
technology, inventory, advertising)
o Incumbency advantages independent of size
FE: geographic locations, brand identity, cumulative experience
o Unequal access to distribution channels: relationships and exclusive
agreements with distributors and saturated channels
o Restrictive government policy
FE: regulated industries (telecom)
o Expected retaliation
- Potential advantages of new entrants:
o Not locked into old plants and equipment
o Younger workers who are less expensive and perhaps more innovative
o Not encumbered by old worn-out brand names
o More hungry
- Weakness of new entrants:
A digital org = an org that implements IS to realize its strategic objectives in order to achieve
a competitive advantage and create stakeholder value in a rapidly changing environment
1.1 Information systems (IS)
Information technologies:
- Enterprise applications (ERP, CRM, SCM)
- E-commerce and M-commerce
- Collaboration systems
- Business Intelligence and Business Analytics
- Knowledge Management Systems (KMS)
- Cybersecurity
- Emerging digital solutions (AI, Cloud, Augmented and Virtual Reality)
Digitizing orgs is an architectural exercise with 3 building blocks:
- Technology
- Organization
- Management
Implementing IS and information technology alone does not deliver a competitive advantage
1.2 Strategic objectives in order to achieve a competitive advantage
Strategies for a competitive advantage:
- Lowest cost
o FE: Ikea, Colruyt, Ryanair (by making an app where customers can do things
themselves instead of with the help of employees)
- Product leadership
o FE: Apple, Tesla (by making an app with nice features)
- Customer and supplier intimacy
o FE: TikTok, Netflix (by giving personal recommendations)
Role of IS/ technology:
- Supporting the current course/ path
o Support in achieving pre-defined strategic objectives
o Emphasis on optimization and automation: doing better at what you are
doing already
o Technology as a cost center
- Driver for fundamental/ strategic change
o Driver to reshape the path itself
o Emphasis on innovation and transformation
o Technology as source of competitive advantage
, - Source of new companies and industries
Disruptive impact of new industries and business models
- FE: Translators (vs online translators), owning a car (vs car sharing platforms),
cashiers (vs delivery at-home like HelloFresh)
- FE: Kodak: it missed the digital transformation after actually starting it -> bankrupt
1.3 Stakeholder value
Triple P
- The triple bottom line framework goes beyond traditional measures of profit
(“bottom line”) and additionally includes environmental and societal dimensions to
measure investment results in a more comprehensive manner
o Profit: maximizing profit for shareholders
o People: creating value for all stakeholders, highlighting a firm’s societal
impact and commitment to people (including customers, employees and
community members)
o Planet: positive impact on the planet
1.4 Rapidly changing environment
Orgs must continuously monitor technological innovations and their impact on:
- Own org
o What are the opportunities in supporting our current strategy or enabling
new strategies?
- Competitors
o How do our competitors adopt these innovations and what risks does this
bring to our organisation?
- Customers
o How do customer requirements and behaviour evolve?
- Society
o What does society expect from technological innovation?
- Government
o What about evolutions in legislations?
,2 Business and IT Strategy
Investment in IT is growing (FE: hardware, software, communication equipment)
Question of this chapter: ‘Why would a company invest in IT?’
2.1 Strategic business objectives of IS
5 strategic business objectives for which orgs invest heavily in IS:
- Operational excellence
o Orgs in this discipline are known for their reliable, efficient and low-cost P&S
Lowest cost through improving operational efficiency and increasing
productivity by automating routine tasks and streamlining processes
Improved efficiency -> higher profits
o IS and technologies help improve efficiency and productivity
- Product leadership
o Orgs in this discipline are known for their cutting-edge technology, superior
quality and high value-add P&S
Creating innovative and high-quality P&S that set the org apart from
its competitors, pushing the boundaries of performance, and getting
them to the market quickly
o IS and technologies enable firms to create superior/innovative P&S
- Customer and supplier intimacy
o Customer intimacy:
Orgs in this discipline are known for their personalized customer
service, customized P and strong customer relationships
Focus on creating a deep understanding of the customer's
needs and preferences, and tailoring P&S to meet those needs
Customers who are served well become repeat, loyal
customers who purchase more
IS can improve communication and collaboration with customers ->
better relationships, increased loyalty and enhanced customer service
FE: Hotel that registers everything you do so that they can personalize
your room when you return for a second time
o Supplier intimacy:
Orgs seek to work closely with their suppliers to improve quality,
reduce costs and increase innovation
More engagement with suppliers -> suppliers provide better
vital input
IS can improve communication and collaboration with suppliers ->
better relationships
- Competitive advantage
o Advantages over competitors
, o Often results from achieving previous 3 business objectives
Better performance through operational excellence
Product leadership through new P&S
Better response to suppliers and customers
o Industry leaders set the golden standard within their respective industries
- Survival
o Businesses may need to invest in IS out of necessity, it is simply the cost of
doing business
o Keeping up with competitors to survive
o Compliance to laws and regulations
o FE: Mobile banking app for banks, SOX that requires keeping all emails for 5y
Value disciplines
- Strategic approaches that orgs can choose to excel in, in order
to gain and sustain leadership positions in their industries
- Superior customer value is achieved by:
o Becoming champion in 1 of the 3 value disciplines, even at the expense of the
other 2 value disciplines
o Meeting industry standards in the other 2 two value disciplines
- All aspects of the org must be aligned to support the choice of a primary discipline
o FE: culture, processes, organizational structures, management systems,
technology
- Choosing value disciplines = choosing customers
- Danger of not choosing: ending up as underperformers, because of confusion,
conflicting priorities & wasted resources
o Exception: some org succeed to excel at more than 2 disciplines (masters of 2)
- Maintaining a leadership position is an ongoing challenge, requiring ongoing focus,
investment, continuous improvement and agility
How can an org make strategic choices?
- The positioning view
o Outside-in: look outside the org and place the org in 1 of the 3 dimensions
- The Resource Based View (RBV)
o Inside-out: look at what the org is good at
o Can be tangible or intangible
2.2 Porter’s competitive forces model
2.2.1 The five competitive forces of Porter
Traditional competitors
- Intensity of rivalry depends on:
o Amount and equality (size & power) of competitors
, o Speed of industry growth
o Size of exit barriers
Specialized assets or management devotion to an industry
o Commitment of rivals
- Price competition is destructive to profitability
o WHY? It transfers profit from industry to customers
- Price competition occurs when:
o P&S are nearly identical
o Capacity expands in large increments to be efficient
o Perishable products
o Switching costs are low
Switching costs = the costs (time, money, psychological) that a
customer has to incur in order to switch from one P/S to another
- Competition on other dimensions than price leads to higher customer value and
(often) higher prices
New market entrants
- In a free economy with mobile labor and financial resources, new orgs are always
entering the marketplace
- When new entrants are likely, orgs must hold down prices or boost investment to
deter competitors, putting a ceiling on profitability
- Key entry barriers:
o Supply-side economies of scale: producers of large volumes enjoy lower costs
o Demand-side benefits of scale (network effect): a buyer’s WTP increases with
the number of other buyers
o Customer switching costs
o Capital requirements: invest large financial resources (facilities, R&D,
technology, inventory, advertising)
o Incumbency advantages independent of size
FE: geographic locations, brand identity, cumulative experience
o Unequal access to distribution channels: relationships and exclusive
agreements with distributors and saturated channels
o Restrictive government policy
FE: regulated industries (telecom)
o Expected retaliation
- Potential advantages of new entrants:
o Not locked into old plants and equipment
o Younger workers who are less expensive and perhaps more innovative
o Not encumbered by old worn-out brand names
o More hungry
- Weakness of new entrants:
