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ICT and evolution of business model

The information that IT systems provide can lead to a virtuous cycle of business model evolution.
A group of people discussing data on screen
© Deakin University

The information that IT systems provide can lead to a cycle of business model evolution.

As we learned so far, in order for this evolution to happen there needs to be a ‘fit’ between the business model and its technology.

Returning once again to the Pic Nic Pak cafe example: automating the order-taking process produced significant additional information that can be used for further business decisions.

The transition of IT

The transition of IT from being a tool in the business to becoming the focus of the business is a common theme and illustrates the process of how ICT creates business value.

Let’s look at YouTube as an example. YouTube’s Creator Studio dashboard shows the number of views, subscribers and watch time.

A company that invests in a YouTube channel to attract a market may turn the channel into an asset by selling content or advertising on this site. However, this will impact the business by creating the need for continual and increasingly valuable content creation. If this activity line of income becomes significant enough to the business, it may eventually drop other offerings and focus on this source exclusively, using the analytics within this system to continually improve its performance.

The following diagram, adapted from a 1995 paper by Christina Soh and M. Lynne Markus shows the process of how ICT creates business value for an organisation.

Business value model
Adopted from Soh and Markus (1995)

Any business spending money on ICT, converting this to an asset, then using it to change the business is not only harnessing the power of ICT but also starting to align the role of ICT with its business strategy.

Return on investment of IT

As the IT function matures, it is integrated into and begins to change the business model, business owners can start to look beyond the cost equation to evaluate whether greater returns are now available to them. IT becomes part of the investment portfolio.

Your task

Research an example of a business that has transitioned from IT being a tool in the business to IT becoming the main focus of the business. Share your thoughts on the most interesting part of this transition.

Reference

Soh, C. and Markus, M.L., 1995. How IT creates business value: a process theory synthesis. ICIS 1995 Proceedings.

© Deakin University
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