Information Systems for Strategic Advantage:

Information systems can be used by businesses to achieve a strategic advantage by improving production methods and by developing new products and services. Following are some of the strategic advantages that a company can gain through the use of information systems:

• Enhance the efficiency and effectiveness of business operations.
• Create entry barriers to other competitive firms.
• Encourage the suppliers to do business with it and attract customers to buy its products and/or services.
• Strengthen the organization's relationships with the suppliers.
• Enhance the existing products and/or services, customize the products and/or services, and develop innovative products and/or services on a regular basis.
• Maintain an information database about the customers. Target the customers based on their previous purchases, and sell this information to other retailers.
• Global expansion.

Some of the other advantages that an organization can gain from using information systems are discussed here in detail:

Improvements in Business Processes

Information systems can be used to develop products, services, and other competencies that will enable companies to achieve a strategic advantage. The use of information systems helps in streamlining the operational and managerial processes. By improving the business processes, the organization can cut costs, improve quality and customer service, and develop innovative products. The manufacturing process can be automated; computers are used in design, production, and engineering, in addition to the management of resources. Organizations can use intranets, extranets, the Internet, and other networks to interact within and outside the organization. For example, information systems can be used for connecting manufacturers with dealers and suppliers. Improved business processes will enable manufacturers to improve production, distribution, and sales.

Re-engineering Business Processes

Business Process Re-engineering (BPR) refers to radically changing the design of business processes to improve the performance and efficiency of the organization. Such redesigning will enable improvements in terms of costs, quality of goods and services, speed of delivery, and the service being provided. BPR is different from business improvement. While BPR deals with complete redesigning of the business processes, business improvement is used for making improvements in the existing processes. Business improvement is usually carried out for any process while only the strategic business processes are reengineered. Also, the risk of failure and level of disruption is very high in case of BPR while it is low in case of business improvement.

Information systems play an important role in the implementation of BPR in business organizations. It can help in making improvements to the procurement function in an organization. It also ensures greater collaboration and communication among the people in the organization. There are three levels in BPR.

• In the first level, the activities that are time-consuming and/or performed inefficiently are identified.
• In the second level, the internal business activities are connected with those of the external entities like the suppliers, the customers, and other business partners. The main objective behind this is to do away with redundancy and redeploy the inventory. This would in turn aid in improving interaction among the various business entities.
• In the third level, the principles of reengineering are applied by looking for answers to questions like: What will be the effect of eliminating a particular step? Can this eliminated step be used in combination with another process? Can an IT tool enhance efficiency? In order to adapt to the transformation, the existing processes are completely discarded and a new process design is developed. This stage marks the end of the reengineering process. The business processes of the organization are completely transformed and it is now important to review and monitor the progress of the new system from time to time.

Toward Creation of a Virtual Company

Virtual companies are created by linking people, assets, and ideas using IT. The success of virtual organizations depends on adaptability and the ability to exploit opportunities. The organizations should aim at world-class standards while adapting to new technologies. These organizations have a network structure. Internally, the organization is organized into a cluster of processes, and the various cross-functional teams are linked to each other using the intranets. The organization is linked to external entities like customers, competitors, and subcontractors through extranets. Thus, the network structure helps in creating a flexible virtual organization that adapts quickly to changing business opportunities.

Knowledge Management Systems

Knowledge management systems essentially deal with learning within the organization and business know-how. The aim of a knowledge management system is to create, organize, and provide access to important information. These systems should be simple and easy to use and provide quick access to information. Knowledge in this context refers to forecasts, processes, procedures, reference work, and best practices. The key technologies used for knowledge management include groupware, data mining, and video conferencing.

Knowledge management systems promote learning within the organization and facilitate the creation of knowledge bases. For this reason, these systems are alternatively called ‘adaptive learning systems.' Using various technologies, knowledge management systems collect, edit, evaluate, and disseminate information within the organization. The benefits of a knowledge management system are as following:

• It provides feedback to knowledge workers.
• It helps employees adapt to change.
• It improves business performance.
• It helps integrate knowledge in products, processes, and services, thus fostering an agile company.

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