EVALUATING STRATEGIES FOR IS AND ECOMMERCE APPLICATIONS

Value Creation 5 Dimensions of e-commerce Time Efficiency Accelerate user tasks Improve scale to seem large Alter role of intermediaries Effectiveness Eliminate information float Present a single gateway access Engage in marketing to look small User controls details of information accesses Provide online decision support Strategic Establish 24/7 hr customer service Achieve global presence Create user dependency for repeat business Users interact as online community Bundle information

Distance Relationship

Interaction

Use extensive user feedback

Product

Use software agents to

Mostly business decision Various business questions are asked Whether ICT play any role in resolving those questions

Action plan is vital for change Action for change can incorporate the following
strategy: planned course of action and resources allocated to meet change goal Project Organization: designation of authority, responsibility and relationship that will see the plan through Roles and responsibilties

 System: the procedures and processes that will be used throughout the organisation Training Style Common Mission Technology

Computer enabled communication has changed business tremendously Offer many advantages
Lowering cost in terms of sales and services Mass customisation Customer driven design of products etc

Organisation mostly aim to reduce the cost of doing business Organisation can make savings by reducing transaction cost Among theories propounded earlier are that transaction cost is incurred in dealing with other organisations seeking their own profit Bring its operation inside the firm reduces cost

Some e-commerce initiatives could be strong revenue generators but may not create new markets Others may create new market but profit margin may be minimal Some my create competitive advantages in the short term but lose it in the long term Resource required to create e-business must be examined with regard to their probable return on investments

However in e-business the traditional measurement is limited DCF and NPV and IRR do not take into account the customer side of the benefits Assessing ROI in e-business should include
Increased revenue Reduced costs Customer value variables Stakeholder value variables Competitive capability variable

One approach called information economics classifies values and risk as follows
VALUE FINIACIAL
STRATEGIC STAKEHOLDER

RISKS COMPETITIVE STRATEGY

ORGANISATIONAL STRATEGY UNCERTIANTY

Seven Variable relating to customer value and competitiveness

Service Expanded and improved Price more rational and dynamic Quality improved and more attractive Fulfilment time -reduced Agility Increased flexibility Reach Global Time to market- reduced time and increased products

E-business should therefore measure these 7 variables against the following value drivers
Revenue growth Operating margin Working capital Capital expenditure Taxation Cost of capital Competitive advantage period

Technological push has driven e-business The digitisation of business activities has created opportunity for major change if the business implications are well understood and properly managed Flow of information is effective New ways of ordering transforming supply chain

Physical goods may be advertised and ordered online yet delivered traditionally Virtual good are delivered online Products that can be digitised are offered a new distribution channel
Services industry making the most of e-business

Draw Backs
Threat of new entrance Requires new product capabilities and new service from those already in business Reduced need for intermediaries mean less employment? Or different types of employment will emerge Different types of intermediation is emerging eg amazon.com

Business Systems Planning

Follows three basic steps
Agreement on business vision, mission statement and objectives that flow from this vision Formulate strategy for putting in place IT/IS infrastructure needed to support the business aims and objectives IT/ architecture is defined in terms of blueprint, data models, network design etc

This top down approach is discarded due to

Lack of enduring business plan Emerging technologies and IT capabilities Time lag between IT Plan and implementation Hence BSC approach is preferred
Multi view approach Both internal and external to the business

Five principles

Mobilise change through effective leadership

Communicate vision Establish governance process Create strategic management systems Develop strategy maps Introduced balanced scorecards Define corporate role Identify business unit synergies

Translate strategy to operational terms

Align the organisation to strategy

 Make strategy everybody's job

Create strategic awareness Use personal score cards Introduce incentive based compensation

Make strategy continual process

Link budget to strategy Create systems for strategic review Encourage strategic learning

BSC is a tool to evaluate a companys efficient implantation of IT within business context It does it by combining 4 perspective on a project
Financial perspective Internal business perspective Customer perspective Innovative and learning

How do customers view the company

BSC enable management measure the companys performance and become customer driven Internal Business Perspective
Customer needs and perception are not always under the control of a firm There is the need to translate customer oriented measures into indicator on which the firm has control Provide means by which strategic objectives can be achieved

Organization must strive to improve performance and promote continues improvement Overall targets needs Eliminating non value added activities

How do shareholders view company Increase profitability Improvement of level of productivity if not accompanied by increase in production and sale result in excess capacity

Clarify and gain consensus about vision and strategy Build strategic management teams Communicate the strategy through the organization Align departmental goals to the strategy Set strategic targets Perform periodic and systematic strategic review Obtain feedback to learn and improve strategy

Refer to Table 5.6 In practice building BSC mould require the understanding and support of business and IT Management Need to integrate IT/IS and business strategies for success Good BSC contain a good mix of measurable outcomes and performance drivers

Using internet to deliver lower cost services to customers must be matched by easy to use and ergonomic interfaces Information rich Premium Global 24/7 level of service

Determine both internal and external forces to the organization that influence the ecommerce strategy Create a metrics program based on the use of value criteria in the form of Internet effectiveness scorecard Determine the effectiveness of the value criteria at the ownership level and transaction levels

External forces
Internal Forces
Customers competitors

Content and process owners Organization seeking maximize effectiveness and profitability of e-business must recognize the level of virtuality
How virtual it is How virtual is should be How to manage the opportunities and problems that arise

Plant suggest 3 steps Define a set of metrics to measure progress to goals as represented by the value criteria Have clear projected expectations for each metrics concerned Create automated data delivery systems for internal and external comparism

7 criteria
Financial impacts Competitive leadership Brand Services Market Technology Internet sites metrics

E-value maps at stakeholder level and process level

Values chain analysis at individual value points are critical. SVA can be applied. (Strategic Value

Analysis)

Four stages in developing evaluation process

Create set of criteria for evaluating return on Investments (ROI) Create metrics program to measure and monitor these values Develop systems for data capture and to allow for best of class comparisons Perform ROI Analysis and act on the results

THANKS

YOUR PRESENTER HAS BEEN

Francis Onuman Internal Auditor KNUST Qualifications:
Exec.MBA (Business Info. Technology )KNUST

Cert. in IT Audit GIMPA Member ICA Ghana Member IIA Ghana

E-mail oflash2001@yahoo.com Tel. 020 818 6134