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Introduction
Modern information technology (IT) is
understood to be the result of a convergence between modern digital
computing and communication technologies. The importance of IT is as the
core of an ‘Information System’ which consists of a series of interactions
between people, data, hardware and software, organizations and their
social environment.
Information and its associated
technologies are now so vital to business success that information is
frequently regarded as an independent factor of production on a par with
capital, land and labour. In the twenty-first century every business
manager must understand the role which information technology plays, not
only in their organization but also in the wider society, within which
their organization must compete.
A full understanding of information
technology is impossible without considering its interaction with the
social world in which it has developed. Computer professionals who are
unaware of the social, political, and economic political dimension of
their work are doomed to be the pawns of ‘decision-makers’ who are.
In the real world a frequent cause of the
failure of IT projects is a neglect of the human (including managerial and
organizational) factors at work. No business or computing professional
can, therefore, ignore the ‘softer’ elements in Information Systems, which
paradoxically, often prove the hardest to get right!
The Computing Environment
Linking together definitions of
‘information’ and ‘technology’ from the Shorter Oxford English
Dictionary, ‘information technology’ means ‘the systematic study of
the industrial arts relating to the communication of instructive
knowledge’. This definition includes studying printing, or, for that
matter, smoke signals. However the general usage today, is more like the
definition employed by Flowers (1988, 284) ‘the application of computers
and telecommunications to the collection, processing, storage, and
dissemination of voice, graphics, text, and numerical information’.
One notable development in recent years
has been the convergence of communications and computer technology, with
both becoming intensive users of data embodied in binary digital form and
processed by microprocessors on silicon chips. Therefore ‘IT’ is normally
used in the broad modern sense to encompass both computing and
telecommunications technologies. In some books, IT is used more narrowly
to refer principally to computing and ‘ICTs’ to refer to information and
communication technologies more generally.
If we consider the industrial and
commercial implications of the employment of the new information
technologies then we must take on board that the computer is a general
purpose machine which mechanizes human brain-powered operations just
as the Industrial Revolution mechanized human and animal muscle-powered
operations. The impact of such a broadly applicable technology is
inevitably widespread and far-reaching. Computers have become a
pervasive technology applied in all sectors of life, including
industry, commerce, government, education and leisure activities.
For businesses, information technology is
only a means to an end - which is the use of knowledge to make and
implement commercial decisions. Efficient organizations require
established systems to enable them to make the best possible decisions in
the situations they are likely to meet. Thus an organizational information
system should collect data, analyse, and present this as useful
information that can be retrieved as the basis of expert knowledge at the
point of decision. Once decisions are made they must be passed on to those
who implement them, carried out, and the success or failure of the
operation monitored. Increasingly decisions can be automatically
implemented using the technology, thus enabling organizational objectives
to be achieved with maximum efficiency.
Uses of computers in business:
Storage and easy retrieval of
information: databases; Analysing information: spreadsheets, accounts
packages; Internal communications (within business): networks; External
communications (with other businesses and customers): e-mail, booking
systems, etc.; Presentation of information: word processing and desktop
publishing; Computer-aided design (CAD); Computer-aided manufacture (CAM):
robots, process control; and, New and better products: video recorders,
washing machines, etc.
An Intensive Information User: HSBC Bank
HSBC (formerly the Hong Kong and Shanghai
Banking Corporation) can fairly claim to be one of the largest banking and
financial services organizations in the world. It is the successor to a
merger between a Hong Kong-based bank and one of the largest UK banks -
the Midland. HSBC had total assets of US$674 billion and shareholders’
equity of US$46 billion by the end of 2000. With a headquarters in London,
HSBC operates through long-established businesses in five regions: North
America, Latin America, Europe, Hong Kong, and the rest of Asia-Pacific,
including the Middle East and Africa. A world network of about 6,500
offices in 79 countries and territories clearly requires a sophisticated
communications system. The group provides a wide range of financial
services to personal and commercial clients.
HSBC sees the Internet as one of several
exciting new media, to be incorporated as an integral part of its working.
The bank has concluded that e-commerce will change the fabric of the
financial services sector and sees it as a way of finding new customers
all over the world and improving its services to existing customers. It
intends to use e-commerce to reorganize the business so as to provide
higher-quality customer services more efficiently.
HSBC will be able to link its customers to
the full range of international services and manage their processing
wherever it chooses, which the bank sees as a considerable competitive
advantage.
HSBC has adopted a ‘clicks and mortar’
strategy. This requires that customer Internet offerings must meet three
criteria: customer needs and preferences come first; they must fit HSBC’s
existing distribution channels; and they must be multinational in scope.
Recently the group has been reorganizing
its work for the e-age and putting in place some major components of such
a strategy. In 2000, over US$2 billion was spent on technology, including
a significant proportion on dot.com initiatives. HSBC aspires to be one of
the first to provide customers with facilities through the Internet on a
multigeographical, multi-product, basis.
IBM is developing an Interactive Financial
Services (IFS) system for the bank which links in with the full range of
customers’ own technology: the Internet, interactive TV, mobile phones and
other wireless modes of data transmission. IFS is designed to give HSBC’s
customers the freedom to access their finances where and when they wish.
HSBC launched the UK’s first nationally available TV banking service
digital satellite provided by Sky in 1999. This has already attracted over
126,000 customers.
During 2000, HSBC has developed ‘hsbc.com’
as a brand name and a portal for its consumer services. By the end of
2000, Internet banking was available to HSBC customers in eleven of its
businesses, including the United Kingdom, Brazil, Canada, the Hong Kong
SAR, Singapore and the United States. Operations based in the Channel
Islands serve Internet customers in 150 countries and territories. In
2000, in Brazil and France, HSBC began banking by mobile phone using WAP
technology.
HSBC is a major supplier of collection,
payment, account services and liquidity management throughout the world,
so corporate customers and financial institutions can manage their cash
efficiently on a worldwide basis. A key part of HSBC’s strong market
position in cash management is the flexibility of electronic delivery
using Internet-enabled, file transfer or personal computers, as best suits
the client concerned.
As long ago as 1989, HSBC’s UK arm
launched First Direct, the country’s first complete 24/365 banking service
by telephone. Despite the growth in competition, First Direct has
continued to attract more customers. An Internet version of the service ‘firstdirect.com’,
already has 270,000 clients.
Source:
HSBC plc Annual Report 2000
Achieving Competitive Advantage
Tansey (2002) suggests four
alternative strategies for achieving competitive advantage: doing it
better, marketing it better, doing it differently and making yourself
indispensable.
Doing it better. First,
the customer may be brought to think that your firm is doing the same
thing better in some way than others - either the product or service is
better than others, or it is as good as others and produced more cheaply,
or perhaps it is delivered more conveniently to the consumer.
The obvious way to do this is to deliver a
better, cheaper or more convenient product. A higher specification product
(e.g. a more durable one) can be produced to higher quality standards
(e.g. fewer defective goods sold), with better production methods or
cheaper sources of supply than competitors can find. The same product or
service can be delivered to the door of consumers on demand rather than
forcing them to wait for or collect the product. Thus more sales and/or
greater profits can be achieved.
Marketing it better.
On a cynical note it must be pointed out that an alternative is to
convince your customers that they are getting some or all of these
advantages without necessarily delivering them. A large sales or marketing
effort may, to a degree, be a substitute for superiority in the actual
product. In the long term, though, it is probable that consumers in most
markets cannot be fooled indefinitely. But, in any case, it must be said
that many excellent products have failed to sell because the consumers did
not know about them. In many cases effective brand management of a good
product or service can effectively create a demand for, say, Coca-Cola
which is different from the demand for soft drinks. Producers can create a
sort of monopoly by establishing a difference between their version of the
product and other versions.
Doing it differently.
An alternative strategy to achieve
competitive advantage is to innovate, as we touched upon under the heading
of intellectual property. If your product really is different in kind to
the competition then a substantial competitive advantage may well result.
Your new product will certainly be protected from competition by a
time-lag before your competitors can invest in the necessary plant or
skilled personnel to produce the new product. You will probably generate a
marketing advantage through being first in the field - including free
publicity in the media and perhaps identification of the product with your
brand name. Additional protection may be available under patent law,
design right and copyright.
Making yourself indispensable.
A more subtle strategy is to
attempt to engineer a situation in which your service or product is taken
for granted. The customer does not stop to make comparisons but
automatically re-orders your product or service. An example might be book
or record clubs automatically delivering the current choice of the month.
At one stage IBM were happy to accept the myth that ‘no one ever got fired
for buying IBM’. Corporate clients’ employees were trained in IBM
technology, their managers were offered upgrades on existing equipment on
‘favourable’ terms, and the effort required to move out of an assumption
that the next generation of equipment would also come from ‘the Big Blue’
was considerable.
Information Strategy
Corporate strategies to use IT
for competitive advantage.
Corporate frontiers - cutting
out the middleman; Market strategy - moving to a global strategy;
Product and service strategy - developing new ‘information-rich’
products; and, Production and servicing strategy - adopting new
IT-dependent strategies.
Ten theses relating to the
Internet economy. The digitalization of value as a strategic
challenge A global marketplace for digital bits is replacing more and
more national industrial sectors; Critical mass as a key factor in the
network economy Instead of rarity leading to value, a position of
global market dominance (surplus) is the key factor; Cannibalize
yourself before someone else does it to you!; Giving products away as a
recipe for success; Competition and cooperation through value networks
Firms must increasingly stick to their core competencies and form
strategic alliances with others in order to meet customer needs;
Simultaneous price cuts and increased differentiation Extreme
specialization combined with very low cost becomes the winning strategy;
Product differentiation through versioning The same product can be
sold to multiple markets in many different forms; Individualization of
mass markets Powerful databases, interactive links with customers and
capacity to individualize goods and services enable mass marketing of
personalized products; Traditional regulatory models become obsolete;
and, Main challenges to future regulation Globalization and the
convergence of communications and media markets disrupt current means of
regulation.
Source: Zerdick et al.
(2000, 17-21)
The Future of IT and Organizations
A number of authors (particularly Peter
Drucker in the Harvard Business Review, January 1988) have argued
that IT has and will have a revolutionary impact on the role of managers
in organizations, and consequently on the numbers of layers of structure
in the organization.
Since other research suggests that the
most financially successful companies have four fewer layers of
organization than the least successful, the implications for restructuring
seem obvious! With electronic communication systems salesmen or production
line workers can be directly provided with more information than ever
before, whilst top-level staff can obtain immediate summaries of their
performance and be alerted to units performing below par through executive
information system’s ‘exception reporting’ facilities. What need of middle
management?
Another argument is that integrated
information systems will enable previously separate functions like
accounting and clerical processing to all be brought together under one
integrated management, thus enabling (for instance) a particular class of
customer only to be dealt with by one office rather than several. Hence a
much more flexible and competitive service can be given to individual
customers. |
