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286 Part 2 Strategy and applications

Customers and markets
Add value
Organization C
Organization B

Manage risks Reduce costs
Market, financial, Transactions and
legal, operational processes
risks

Organization A
Each way of using information
involves using different types of
information
Create new reality
New products,
new services,
new business ideas

An evaluation tool relating information to business value. An
organization’s use of information on each axis can be assessed from 1
Figure 5.12
(low use of information) to 10 (high use of information)
Source: Marchand et al. (2002)

3 Manage risks. Risk management is a well-established use of information within organizations.
Marchand (1999) notes how risk management within organizations has created different
functions and professions such as finance, accounting, auditing and corporate performance
management. For example, Capital One uses information to manage its financial risks and
promotions through extensive modelling and analysis of customer behaviour.
4 Create new reality. Marchand uses the expression ‘create new reality’ to refer to how infor-

mation and new technologies can be used to innovate, to create new ways in which prod-
ucts or services can be developed. This is particularly apt for e-business. Capital One has
used technology to facilitate the launch of flexible new credit products which are micro-
targeted to particular audiences.

Case Study 5.1 Capital One creates value through e-business

Capital One was established in 1995. It offers credit Capital One uses what it calls an Information-Based
cards, savings, loans and insurance products in the UK, Strategy (IBS), which brings marketing, credit, risk, oper-
Canada and the US. It is a financially successful ations and IT together to enable flexible decision making.
company, achieving high returns of 20% earnings per It describes IBS as ‘a rigorously scientific test-and-learn
share growth and 20% return on equity growth. It has methodology that has enabled us to excel at product inno-
been profitable every quarter in its existence and in less vation, marketing and risk management – the essentials of
than ten years it achieved net income of over $1 billion. success in consumer financial services’. For customers it