Enhancing Competitive Intelligence Capabilities using Decision Support System - Essay Example

The Finance Director has recently d that an information audit is a waste of money in these stringent times. Prepare a response to this that critically analyses the contribution of an information audit to an information systems strategy. In many organizations, information audits are not supported by management, such as the Finance Director in the situation described, because of the perception of information as a soft intangible the profit impact of which cannot be ascertained. Managers are therefore reluctant to undertake a procedure that entails expenses that cannot be recovered by tangible returns. Undertaking an information audit may cost the company some money, but this is money well spent. The information audit is “a systematic examination of information use, resources, and flows, with a verification by reference to both people and existing documents, in order to establish the extent to which they are contributing to an organization’s objectives” (Jones & Burwell, 2004). Information audits are useful tools employed by organizations to identify, cost, develop, and rationalize their information resources and services. Also, as the foregoing definition suggests, an important function of information audits is that it yields results that clarify the benefits contributed by the firm’s information services to the overall effort of the organization in the attainment of its goals (Dubois, 1995). While information audits are of primary importance in organizations that deal in information, such as libraries, and archival and database centres, they nevertheless tend to benefit all types of organizations in managing the firm more effectively (Suduc, et al., 2010). There are several benefits to information audits; these include ensuring validity (that information is accurate and complete), diagnostics (identification of strong and weak points), feedback (to see if inputs produce the desired outputs), information (for staff to maximize the benefits of information), and training (for staff members) (Botha & Boon, 2003). Aside from these, one of the most important of which is the enhancement of information systems security. The great amount of information accessible through the current digital communication networks also creates vulnerabilities for the integrity of company information systems, both to attacks from inside and outside the company (Suduc, et al., 2010). In another study, Rosca, et al. (2010) forward the proposition of and information systems audit as cornerstone of corporate IT governance in the context of institutions of higher learning. Information Technology Governance (IT Governance) addresses the concerns of regulators, management and clientele about the proper use of information, most especially personal data. It focuses on IT systems and their performance and risk management. Application of IT audits in the Rosca study served the purpose of identifying, evaluating and managing university risks, in the course of establishing the organization’s governance structure. The principles around which IT audit and governance are structured, however, are not limited to the academe but find much relevance in any type of organization that has its own internal IT system. The goals of information audit, particularly in the service of IT governance, are several and varied, but primarily are aimed at (1) assuring the investment in IT generates value, and (2) mitigating the associated risks with IT implementation. More specific objectives that may be identified are: Objectives for IT audit Major objectives To implement prevailing best practices in IT To assess existing controls or introduce common policy and processes, among which are: IT Help desk amalgamation with common support processes PC/Desktop installation and deployment techniques Information security Software licensing Virtualization of desktops, servers and data hosting To configure key parameters for information security To reduce the frequency and/or impact of major incidents Important objectives To align IS components and subsystems with the internal security policy To integrating the IS with the risk management program To protect the firm’s investments in its information systems (IS) Other objectives To enable the firm to gain and protect its competitive advantage To respond to requests for information by management To enable the firm to meet challenges posed by third parties (government, suppliers, customers, etc.) To aid the firm in minimizing costs Adapted from: Rosca, et al. (2010) An example of an organization situated within the UK that conducts information audit is the Hilton Hotel. Part of an international chain of hotels, the Hilton prides itself on its customer relationship management (CRM) program and its strategy of customer centricity. Hilton’s CRM is envisioned to be much like the grocery store relational marketing. The corner store was “a place where customers were known and warmly greeted by name” (m-Travel.com, 2007). Store customers knew their customers’ like and dislikes, allowing the hotel staff to make useful recommendations to clientele, and even cater to special requests. The challenge of this CRM vision to the Hilton’s information system is to develop a single integrated worldwide information structure that informs every element of the business and enables the firm to create a singular cross-corporate view of the customer. Thus, if the customer has already visited the local Hilton hotel, chances are that anywhere in the world he or she goes, if such person checks into any Hilton hotel worldwide the staff in that distant hotel would know his or her particular preferences, and thus make the visitor feel comfortable immediately. This is the vision, even if the customer is visiting that particular branch of Hilton Hotel for the first time. Doubtless, therefore, a great mass of personal information of guests, including the particular details of their personalities and their private lives, their preferences and requests, and so forth. There is therefore a great need for information audit at the Hilton, because negligence, misuse, or outright fraud could cause the release of these confidential information into the hands of unauthorized third parties, and compromise the future patronage at the hotel. Periodic information audits ensure the integrity and security of vital information 2. Discuss, with examples, how a critical success factors analysis might contribute to an information systems strategy. The Critical Success Factor Analysis is a strategic planning tool the purpose of which is “to identify the factors most critical to the success of any given mission” (Justice & Jamieson, 2006, p. 360). More formally, CFS are defined as “The limited number of areas in which results, if they are satisfactory, will enable successful competitive performance” (Rockart & Hoffman, 1992, cited by Harris, 2005, p. 31). They are “those components of strategy where the organization must excel to outperform competition. These are underpinned by competences which ensure this success” (Johnson & Scholes, 1997, cited by Harris, 2005, p. 31). CSF Analysis is particularly attractive because it provides method for identifying strategic goals (which are the critical success factors themselves) by basing them on the core competencies (or strengths) of the firm. The CSFs are implemented through the designation of KPIs (or key performance indicators) that act as milestones towards the attainment of the strategic goals (Harris, 2005, p. 31). CSF Analysis involves six steps which Harris (2005) identifies as follows: (1) Identify the CSFs for the particular strategy intended; the number of factors is ideally kept at six or less (Justice and Jamieson, 2006, recommends between four and eight factors). Examples of CSFs are: the right store locations; good brand image; fashionable product lines; and friendly store atmosphere. (2) Identify the underpinning competences essential to gaining competitive advantage in each of the CSFs. This step necessitates a thorough study of the activities, skills, and processes that are required in order to deliver superior performance. (3) Ensure that the list of competences is sufficient to give the firm a competitive advantage. Where they are deemed insufficient, it is necessary to determine what more needs to be done in order to assure such competitive advantage. (4) Identify performance standards that must be achieved in order to outperform competitors. These are the key performance indicators, or KPIs which form the basis of a performance measurement and control system through which the strategy may be implemented and reviewed. (5) Ensure that competition will be unable to imitate or exceed the firm’s performance of each activity, else such cannot be made the basis of a secure competitive strategy. For this step, it is necessary to identify which of the rival firms are direct competitors to the business being strategized, and against which it shall measure itself. (6) Monitor competitors and predict the likely impact of their moves in terms of their impact on the firm’s CSFs. This is essentially a management prerogative, but may be assisted by advice from chartered management accountants with the necessary technical expertise (pp. 31-32). CSF Analysis is best conducted at four particular instances requiring the development or reassessment of business strategy: (1) at the beginning of a new project, business, venture or task force; (2) at crisis times for the organization, when survival is questionable; (3) in planning a particular critical project where the risk of failure is exceptionally high; and (4) following the revision of a mission statement. Also, it is important that only those CSFs which are most critical to the success of the given mission, project or goal must be planned for (Justice & Jamieson, 2006, p. 361). In the planning and implementation of an IS strategy, CSF analysis could prove of vital use; the CSF approach in Strategic IS is depicted in following diagram. Source: (Munro & Wheeler, 1980, p. 34) The foregoing diagram approximates the earlier description of the general approach to CSF Analysis for overall strategic management. This diagram pertains to a smaller scale of the firm’s operations, however, centering on the organizational unit addressing information systems planning, the specific objectives formulated, identification of the particular IS CSFs, performance metrics, and concluding with the requisite data to support the system. In the case of the Hilton earlier mentioned, the strategic IS targets a customer information system which supports the hotel’s customer relationship management thrust of customer centricity. While we may not be privy to the actual CSF Analysis performed by the company, evidence of its employment may be seen in the manner key strategic goals were matched by the development of matching competitive advantages. The solution arrived at by Hilton Hotels worldwide is known as the OnQ™, the hotel chain’s own proprietary technology platform that is implemented in all of its more than 2,200 Hilton Family Hotels worldwide, including 8 of its hotel brands. The principal goal of OnQ™ is guest recognition and service efficiency throughout the entire chain; its purpose is to develop guest loyalty and competitive advantage with proprietary technology. Hilton Hotel’s customer information system had many state of the art features, but five critical success factors appear to have provided the program’s cutting edge. These are: (1) instant recognition of hotel guests anywhere in the world; (2) optimal convenience to customers in terms of hotel and related services; (3) enhanced travel management and expense reporting; (4) greater time efficiency and ease of time management; and (5) interconnectivity among all Hilton brands and branches worldwide. Centering on one CSF, i.e. optimal convenience to customers, the following features have been installed by the hotel chain on the front-end of its OnQ™ information system: Remote, Web-based check-in 24 hours prior to arrival for guests with password-protected online accounts. This service enables a guest to select their room time and features corresponding to their preferences and their history as hotel guests, and to print their confirmation document; An electronic folio access allows individual business travellers to review their accounts online and print their hotel receipts at the conclusion of their stays at any of the more than two thousand Hilton Family of Hotels; Expansion of automated check-in kiosks strategically located at metro and airport markets. Through these easy-access kiosks, guests can avail of self-service check-in, room selection, check-out, and several other automated services; High Speed Internet Access available to guests at their rooms (SunSystems, 2011). At the heart of the entire information system (going beyond the customer information protocols) is the Hilton Hotel’s proprietary IT system which provides it the competitive advantage that will be difficult for its competitors to equal or surpass. The OnQ™ system was developed with great effort and cost and over a substantial period of time, and is tailored to the hotel chain’s particular organizational parameters, which rival firms may approximate only at great cost and effort. The fact that Hilton has pioneered in this direction provides it the advantage of time, while other competitors scramble to catch up; in the meantime, Hilton is poised to acquire an increased market share in a vulnerable hospitality industry. 3. Examine the relevance of competitive intelligence to strategic planning. Competitive intelligence involves gathering information to gain early warning of possible threats to a firm’s competitiveness. This is particularly helpful in staving off the adverse effects of quickly changing market situations, the prospects of which may turn from optimistic to pessimistic within a very short span of time. Murphy (2005) emphasizes that it is not sufficient to gather information from one’s competitors with the sole intent of acting to outperform them; this does not define the success of the firm. Real and useful competitive intelligence encompasses all factors that may endanger a company’s revenues and profits. There are three factors that impact greatly upon the firm’s continued financial health, and these are technological developments, changes in consumer tastes, and general economic climate (Murphy, 2005, p. 6). These are all sources of risks that an effective competitive intelligence system should be competent to address. The following diagram provides a graphical presentation of the CI process. Source: Anica-Popa & Cucui, 2009, p. 328 The following diagram shows a proposed framework for a Decision Support System using Web mining capabilities. The framework depicted below proposes a three-tier DSS that is intended to support a comprehensive CI system which is intended to support competitive intelligence. Developed by Anica-Popa and Cucui (2009), the framework is intended to meet the objectives of a CI system in organizations, which include: (1) enhancing organizations’ competitiveness; (2) predicting, with a high confidence level, the evolution of the business environment, competitors’ actions, customers’ requirements, and influences generated by political changes; and (3) providing an increasingly better support for strategic decision making (Anica-Popa & Cucui, 2009, p. 330). Source: Anica-Popa & Cucui, 2009, p. 332 There are a number of ways competitive intelligence may be carried out in practice. Gray (2007) provides the following techniques that would tend to support an effective competitive intelligence effort: (1) Start with a list of competitors, including home address, top executives top sales personnel, and build a profile of each competitor that would include forecasted sales, target markets, core services and products, and recent or planned innovations, among others, based on past trends and company disclosure reports. (2) Create a profile for your own company, listing orders or bids won or lost, and decisions pending for resolution. Together with this, create a profile of customers’ attributes, focusing both on current and prospective customers, particularly those whose business the company lost or which contract the company failed to acquire during bidding. (3) On the basis of these profiles, conduct an honest assessment of your firm or business, both in points where the company excelled and where it fell short of its objectives. From this assessment, get a sense of what competitors have succeeded in and the company has failed, and on this basis determine what strategy to apply that best suits the firm’s strengths, as per the assessment. (4) It is also advisable to search the Web and gather data, particularly from competitor’s sites. Seek to interview clients as to what they liked or did not like about your competitors. It is also immensely helpful to debrief clients on their decision to purchase, in order to determine the top five decisions points around which it revolved. Gain information about where your company is strongest and where it is weakest. In addition to the foregoing, Murphy (2005) emphasizes the need to seek out published information, particularly if the competitor firm is a publicly listed company which is required by the SEC to observe full disclosure of its dealings. The auditor’s report of such companies would be an important source of information. Finally, it is important that in assessing gathered information, data quality should provide a hierarchy by which a solid foundation for decision-making and strategic planning could be built upon (p. 183). Taking the CI initiative one step further, there are a number of commercial CI tools already in the market, three of which are: TIBCO Spotfire which delivers an interactive, visual experience to the user rather than the reporting approach, used by gasoline and fuels distributor Global Partners LP; clearCI solution, employed by a large Swiss biotechnology company with annual sales of $50 billion; and AttaainCI, which also tracks real time information from social media, developed and used by Telmar worldwide (Lamont, There are several benefits which have been acknowledged by researchers and practitioners through the years that are directly attributable to the development of competitive information systems. According to Gilad (1989) an organized CI system increases the analytical skill of managers and their ability to anticipate moves of other actors in the industry (competitors, suppliers, customers) in response to subtle changes in the business environment. Furthermore, the sharing of ideas and knowledge within the organization is facilitated by an organized information system specifically geared for competitive enhancement, which in turn gives rise to the development of new ideas or knowledge and their improved integration with existing knowledge in the organization. Other findings on likely benefits brought about by CI, according to Kahaner (1996), include: (1) discovery of new potential competitors as well as potential customers; (2) supporting information that could point to new business prospects or areas of expansion; (3) early identification and appraisal of new technologies, products and processes which would have gone unnoticed, but which lead to material impacts upon the organization’s competitive sphere; (4) timely cognizance of political and legislative innovations which result in changes in the regulatory standards and requirements to which the organization must comply; and (5) awareness of the more subtle and profound factors concerning competitors, customers, suppliers, and other publics which eventually lead to long-term success or failure. Example of Competitive Intelligence for Hilton Hotels While much of Hilton Hotels’ intelligence is customer centric and focuses on building long-term loyalties, it also pursues competitive intelligence with its customer research and its ongoing economics and liability model. Understandably, companies would not want to divulge the particulars of its competitive intelligence systems, but suffice it to say that much of the legitimate aspects of this system has much to do with constant environmental scanning of the industry and economy. Competitive intelligence involves gaining information about one’s competitors because of this, it has broad implications which sometimes border on the unethical. One questionable aspect of Hilton Hotel’s competitive intelligence strategies became the subject of litigation by Starwood Hotels when Hilton shipped back eight boxes containing thousands of documents and electronic files belonging to Starwood. According to Hilton’s letter accompanying the boxes, the materials were found in the homes and offices of employees that Hilton recruited from Starwood. The files included Starwood’s strategic development plans; one of this was the development plans and information for a prospective boutique hotel tagged as “zen den.” Subsequently, Hilton opened its own boutique hotel which it called “Denizen,” thereby fuelling speculation that Hilton used Starwood’s information in its own strategy formulation. This has prompted accusation by Starwood that Hilton condoned and benefitted from industrial espionage (Rosenwald, 2009; Jackson, 2009). The entry into the lifestyle and boutique hotel business is considered a particularly lucrative branding strategy for hotels because of its strong appeal among members of the young and trendy generation, its high room rates, modish decor and pillow menus (Rosenwald, 2009). 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Accessed 20 December 2011 from http://www.hotel-online.com/News/PR2004_3rd/Aug04_OnQ.htm Read More