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IS312 Information Systems for IS312 Information Systems for BusinessBusiness

Lecture 1Lecture 1Business Driven Information Business Driven Information

Systems Systems (Ch . 1 )(Ch . 1 )

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LEARNING OBJECTIVES BUSINESS DRIVEN INFORMATION

SYSTEMS• Competing in the Information Age• The Challenge: Departmental Companies• The Solution: Management Information Systems

BUSINESS STRATEGY• Identifying Competitive Advantages• The Five Forces Model – Evaluating Industry

Attractiveness• The Three Generic Strategies – Choosing a

Business Focus• Value Chain Analysis – Executing Business

Strategies

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LEARNING OBJECTIVES IS IN MODERN BUSINESS ENVIRONMENT

• The global business environment and the new information technology infrastructure

• Relationships among business pressures, organizational responses, and information systems

• The role of IS and IS personnel in modern organizations

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DID YOU KNOW ?What you need to know to survive in the brave

new world !

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Tools of Trade

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Competing In The Information Age

Fact - The confirmation or validation of an event or object

Information age - The present time, during which infinite quantities of facts are widely available to anyone who can use a computer

Knowledge worker – Individual valued for their ability to interpret and analyze information

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Competing In The Information Age . . . The core drivers of the information age

• Data - Raw facts that describe the characteristics of an event or object

• Information - Data converted into a meaningful and useful context

• Business intelligence - Information collected from multiple sources for strategic decision making.

• Knowledge - Skills, experience, and expertise coupled with information and intelligence that creates a person’s intellectual resources

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THE CHALLENGE: Departmental Companies

Common Departments Working Independently

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Common Departments Working Interdependently

THE SOLUTION : Integrated Companies

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THE SOLUTION: Information Systems

Systems thinking – A way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part

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THE SOLUTION :Information Systems . . .

Business Perspective (Management Information Systems) : a business function, like accounting and human resources, which moves information about people, products, and processes across the company to facilitate decision-making and problem-solving.

Systems Perspective (Information Systems) : a combinations of hardware, software, and telecom networks that people build and use to collect, create, and distribute useful data in organizations for decision making

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IS Department Roles & Responsibilities

Chief information officer (CIO) – Oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives

Chief knowledge officer (CKO) - Responsible for collecting, maintaining, and distributing the organization’s knowledge

Chief privacy officer (CPO) – Responsible for ensuring the ethical and legal use of information

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IS Department Roles & Responsibilities . . .

Chief security officer (CSO) – Responsible for ensuring the security of IT systems

Chief technology officer (CTO) – Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT

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IDENTIFYING COMPETITIVE ADVANTAGES

Business strategy – A leadership plan that achieves a specific set of goals or objectives such as

Developing new products or services

Entering new markets

Increasing customer loyalty

Attracting new customers

Increasing sales

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IDENTIFYING COMPETITIVE ADVANTAGES . . .

Competitive advantage – A product or service that an organization’s customers place a greater value on than similar offerings from a competitor

First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

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IDENTIFYING COMPETITIVE ADVANTAGES . . .

Competitive Intelligence –The process of gathering information about the competitive environment to improve the company’s ability to succeed

Competitive Intelligence analysis tools• Porter’s Five Forces Model

• Porter’s Three Generic Strategies

• Porter’s Value Chain

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PORTER’S FIVE FORCES MODEL :

Evaluating Industry Attractiveness

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Buyer Power

Buyer power – The ability of buyers to affect the price of an item

• Switching cost – Manipulating costs that make customers reluctant to switch to another product

• Loyalty program – Rewards customers based on the amount of business they do with a particular organization

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Buyer Power . . .

Bargaining power of buyers • high when buyers have many choices

• low when buyers have few choices. Internet increases buyers’ access to information,

increasing buyer power. Internet reduces switching costs, which are the costs,

in money and time, to buy elsewhere. This also increases buyer power.

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Supplier Power

Supplier power – The suppliers’ ability to influence the prices they charge for supplies

• Supply chain – Consists of all parties involved in the procurement of a product or raw material

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Supplier Power . . .

Bargaining power of suppliers • high when buyers have few choices

• low when buyers have many choices. Buyers can use the Internet to find alternative

suppliers and compare prices more easily, reducing power of suppliers.

But companies can use the Internet to integrate their supply chains, suppliers can lock in customers.

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Threat of Substitute Products or Services

Threat of substitute products or services

• high when there are many substitutes for an organization’s products or services

• low when there are few substitutes.

Information-based industries are in the greatest danger from this threat (e.g., music, books, software). The Internet can convey digital information quickly and efficiently.

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Threat of New Entrants Threat of new entrants / competitors

• high when it is easy to enter a market

• low when significant barriers to entry exist. Entry barrier – A feature of a product or service

that customers have come to expect and entering competitors must offer the same for survival

• Internet increases the threat that new competitors will enter a market.

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Rivalry Among Existing Competitors

Rivalry among existing competitors –

• high when competition is fierce in a market

• low when competitors are more complacent

• Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand

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Sources of Competitive Advantage

• Best-made product• Superior customer service• Lower costs• Superior manufacturing technology• Shorter lead times• Well-known brand name• High value per cost

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Business Strategies Intensification: improving processes to serve current

customers better: reengineer the current processes, eliminate ineffective operations.

Extension: using efficient existing processes to enter new markets to gain competitive advantage.

Augmentation: expanding processes to provide additional services to current customers.

Conversion: taking a process that the company performs well and performing it as a service to other companies.

Innovation: applying existing processes that one performs well to create and deliver different goods or services.

Diversification: creating new processes to deliver new goods or services

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PORTER’S THREE GENERIC STRATEGIES :

Choosing A Business Focus

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PORTER’S THREE GENERIC STRATEGIES :

Choosing A Business Focus . . .Example:

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PORTER’S VALUE CHAIN : Executing Business Strategies Business process – A standardized set of

activities that accomplish a specific task, such as a specific process

Value chain analysis – Views a firm as a series of business processes that each add value to the product or service

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VALUE CHAIN ANALYSIS :Primary Activities

Inbound logistics - Acquires raw materials and resources, and distributes

Operations - Transforms raw materials or inputs into goods and services

Outbound logistics - Distributes goods and services to customers

Marketing and sales - Promotes, prices, and sells products to customers

Service - Provides customer support

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VALUE CHAIN ANALYSIS : Support Activities

Firm infrastructure – Includes the company format or departmental structures, environment, and systems

Human resource management – Provides employee training, hiring, and compensation

Technology development – Applies technologies to processes to add value

Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies

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PORTER’S VALUE CHAIN

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Value Chain & Five Forces Model

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How Companies Do Business Business Process: A collection of related

activities that produce a product or a service of value to the organization, its business, and/or its customers. (Ordering an E-ticket from an airline Web site.)

Business Process Management: A management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business process. (Business Process Reengineering / Redesign)

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IT/IS contributes to Business Process Reengineering / Redesign (BPR) :Efficient: Do thing right (cheaper)Effective: Do right thing (better)Competitive: Do thing differently

(faster/newer)

Business Process Reengineering/Redesign

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Modern Business Environment : Globalization Globalization is the integration of economies

throughout the world, enabled by technological progress.

Globalization manifests itself through changes in economy, cultures and technology.

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Globalization Technological Changes

• Availability of low cost communication systems

Economic Changes• Increase in international trade of goods and

services Cultural Changes

• Increased access to other cultures (through TV, Internet, etc.)

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Globalization

Globalization created a new world characterized by:• Worldwide

communication • Collaboration

without barriers

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Globalization 1.0

Mainly European countries are globalizing

Power is the primary driver

Industries changed

Slow pace of change

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Globalization 2.0

Companies are globalizing Reduction in transportation and

telecommunications costs Mainly Europe and America involved

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Globalization 3.0

Individuals and small groups are globalizing Fast changes Emergence of new industries

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Evolution of Globalization: Summary

The convergence of 10 Flatteners or key factors enabling globalization 3.0

The World is Flat (Thomas Friedman)

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Flattener #1: The Fall of the Berlin Wall

November 9, 1989 Fall of communism and centrally planned

economies Shifted the world toward free-market

economies The rise of European Union and the idea of

the world as a single, global market

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Flattener #2: Netscape Browser

August 9, 1995 First mainstream browser Gave individuals access to the Internet &

World Wide Web• Failures and over-investments of dot-com

companies make telecommunication infrastructure affordable to public

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Flattener #3: Work Flow Software

Applications that allow people worldwide to communicate

XML allows applications to “talk” to each other New possibilities for information sharing

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Flattener #4: Open Sourcing

Software and source code freely available to everyone• Linux operating system, Apache web server, Firefox web

browser, OpenOffice suite

• Constant evolution contributed by users

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Flattener #5: Outsourcing

Outsourcing companies profited from the drop in telecommunications costs

Companies can now use talented engineers from anywhere in certain activities

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Flattener #6: Offshoring

Companies set up entire factories in countries such as China• Mass production

• Low costs

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Flattener #7: Supply Chaining

Integration of retailers, suppliers, and customers• Faster in collaboration in production,

scheduling

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Flattener #8: Insourcing

Delegation of company’s key operations to a subcontractor• UPS provides complete supply chain

solutions to companies

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Flattener #9: Informing

Informing is to individuals what outsourcing, offshoring, and insourcing is to companies

Individuals have access to massive amounts of information (search engines)

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Flattener #10: The Steroids

Technologies that support different types of collaboration, amplify other flatteners• Digital

• Mobile

• Virtual

• Personal

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The Great Convergence

The convergence of three powerful, technological forces: • Cheap and ubiquitous computing devices

• Low-cost, high bandwidth

• Open standards

Computing everywhere and anywhere, anytime and all the time, with access to limitless amounts of information, services, and entertainment.

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The Great Convergence … The creation of a global, Web-enabled

playing field that allows for multiple forms of collaboration – the sharing of knowledge and work – in real time, without regard to geography, distance, or even language. 

The field now includes some 3 billion new people, formerly digitally disenfranchised.

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Business Pressures, Organizational Responses, and

IT Support Business Pressures

• Technology Pressures

• Market Pressures

• Societal Pressures

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Business Pressures, Organizational Responses, and IT Support

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Technology Pressures Technological innovation and

obsolescence (new hardware every year, new software every 3 years)

Information overload

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Market Pressures

New ways to do business with new technology

The global economy and strong competition (competitors, suppliers)

The changing nature of the workforce (employees)

Powerful customers

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Societal Pressures

Social Responsibility Government Regulation and

Deregulation Protection Against Terrorist Attacks Ethical Issues

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Organizational Responses

Strategic systems Customer focus Make-to-order and mass customization E-business and e-commerce

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IS for Modern Business

Does organization “really” need IS ? Can we live without it ?• Modern organizations have computers and

computer-based applications in all their functional areas (Accounting, Finance, HR, Production, etc..)

• IS contributes to meeting organizational goals: Effective: Do right thing Efficient: Do thing right Competitive: Do thing differently

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IS for Competitive Advantage

How can business system gain organizational competitive advantage?

Competition: doing things faster, better, cheaper.

Strategic Systems meeting strategic plan.

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Some Visions of “Visionary” Business Leaders

2011 Your “Visionary” Manager: “We don’t need the passing fad IS !!!”

2012 Your “Visionary” Manager declares bankruptcy !!!

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Why Are Information Systems Important to YOU ?

IS applies to nearly every functional area within a firm

One may become indispensable in a firm through mastering tech skills

Anticipated growth in tech hiring (although upward fluctuation)

Be prepared, don’t miss the train

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Misinformation about Information Systems Career

Opportunities Myth #1: There are no computing jobs. Myth #2: There will be no IT jobs when I

graduate. Myth #3: All IT-related jobs are moving offshore. Myth #4: IT salaries are lower due to cheap

overseas labor.

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What Makes IS Personnel Valuable ?

Integrated knowledge and skills in three areas:• Technical Competency - skills in hardware,

software, networking and security

• Business Competency – understanding of the nature of the business; this is key in addition to the technical competency

• System Competency – understanding of how to build and integrate large scale systems

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Best Jobs for the Next Decade

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Show Me The Money !!!

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Show Me The Money ( Again ) !!!