Information Technology, Process Reengineering, and Performance Measurement: A Balanced Scorecard Analysis of Compaq Computer Corporation

Abstract

The personal computer industry is characterized by fierce competition for market share. The pace of technological change results in ever-shorter product lives and a continuous search for enhanced efficiency. To achieve these goals, firms must use information technology insightfully to redesign business processes, improve supply chain management and increase the value provided to the customer. This competitive environment in the personal computer (PC) industry provides an exceptional laboratory for evaluating how companies use information technology to create business value. Compaq Computer Corporation is one of the most successful PC manufacturers. This case study, based on publicly available data, provides a comprehensive analysis of how strategic business use of information technology in concert with business process redesign improved the economic performance of this large-scale manufacturing company. Compaq has relied on strategic use of enterprise-wide IT to enhance its competitive position as the number one supplier of personal computers in the world. This analysis begins with a review of the economics and competitiveness of the PC industry, and the role of information technology. To place Compaq's performance in perspective, we compare it to Dell Computer Company and Gateway Computer Company. We then profile the changes in Compaq's business strategy and its use of process reengineering and enterprise-wide information technology to implement strategic changes. To understand Compaq's financial success better, we use the Balanced Scorecard to develop a causal model of firm performance that highlights the contribution of information technology to four different dimensions of that performance. We conclude that 1) information technology, along with 2) process reengineering, when properly aligned with 3) Compaq's business strategy contributed substantially to Compaq's overall success and market leadership.

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