Strategic Management and Competitive Advantage Essay

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LECTURE 3:
PRODUCTIVITY, INNOVATION
AND STRATEGY
Zorana Svedic

BUS 237 Business Technology Management

Agenda
2



Questions?



Productivity
Business Processes and Value Chains
Organizational Strategy and Industry Structure
IT and Innovation
IS and Competitive Advantage






BUS 237

The Productivity Paradox
3



The increase in investment in information technology combined with small changes in worker productivity is referred to as the Productivity Paradox

Q: Do computers really make us more productive?
For example, think about your assignments...


Would your assignments still be done on time if you only used typewriters?



Would it take a longer time or a shorter time with a computer? 

Would the quality of the writing be higher or lower?
BUS 237

Productivity and Innovation
4







Productivity, or, labour productivity, is the ratio of the
Canadian gross domestic product (GDP) over the total paid hours worked by Canadians
It measures the value that Canadian workers generate per hour ~ $35
The Conference Board of Canada has suggested:






labour productivity is the primary indicator of our per capita income increasing labour productivity is the best measure of Canada’s future growth

Increasing productivity in our current global economy is all about working smarter through innovation and adapting to changing economic conditions
BUS 237

Employment Trends
5





Jobs are becoming more polarized


More high-skill jobs (requiring problem solving), and



More low-skill jobs (such as restaurant workers, janitors, and home aides) are increasing



Middle-class pay jobs are being replaced by technology
(such bookkeeping, clerical, manufacturing)

Type of work has changed, not employment rate…
BUS 237

Productivity and Business Value
9



Is there really a paradox?




Companies have heavily invested in information technology.
They must be getting productivity from these investments.
Why else would they invest?
If growth in productivity hasn’t kept up with growth in IT investment, does it mean that there is room to further exploit technology? So what is productivity?
 One way to think about productivity is to relate it to business value


How can IT/IS create business value?
BUS 237

How can IT create Business Value (1)
10



Three ways to create value:
1. Productivity – IT allows a company to make either more output from the same inputs, and/or to make better output and/or to make the output faster than before the technology


e.g. Accounting firm buys tax software application so the firm can prepare tax returns more quickly

BUS 237

How can IT create Business Value (2)
11

2. Structure of competition – IT can alter the way corporations compete


e.g. Accounting firm buys tax software application. Rival firms have to compete. How might they respond?






purchasing the same (or better) software acquire other firms to get larger lowering the price of tax return service increase other services provided to client

BUS 237

How can IT create Business Value (3)
12

3. Benefits to customers – consumers may see cheaper and better goods and services as a result of IT and increased competition


e.g. Accounting firm buys tax software application.
Customers benefit in the following ways:





tax returns are done more quickly price for returns may come down due to competition and less resources need to complete the return customer may have more choices in where to bring taxes
BUS 237

Can IS improve Productivity?
13

How can productivity improve?


Increasing efficiency means that business processes can be accomplished either more quickly or with fewer resources and facilities (or both)
 “doing things right”



Increasing effectiveness means that the company offers new and/or improved goods or services that the customer values  “doing the right things”
BUS 237

Business Processes and Value Chains
14



When considering the effectiveness and efficiency of an organization, we
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