IS 340
Management
Information Systems
Case Study – Managing in the
Digital World – Home Media – You’re in Control –
e.g., TiVo – great idea, BUT recent
court cases challenging TiVo & the legality of eliminating commercials say
that you can choose to watch the show or not, but that you have an implied
responsibility to watch the commercials because they pay for the Broadcast TV
shows.
I.
Enabling Organizational Strategy Through Information Systems
A. Organizational Decision-Making Levels – every
organization has different levels of responsibility, and therefore different
informational needs (see also Problems lecture)
1. Operational Level – day-to-day business
processes and transactions; repetitive, and therefore automated; short time
frame (immediate to a few days); structured decisions
Transaction – anything that occurs as part of your daily business
of which you must keep a record
2. Managerial/Tactical Level – focus on monitoring
and controlling operational activities and providing information to higher
organizational levels; use organizational resources to achieve strategic
organizational objectives; medium time frame (a few days to a few months);
semi-structured decisions (rely on experience)
3. Executive/Strategic Level – strategic
decision (what product/service will the organization offer and how will it
compete?); long time frame; unstructured decisions
B. Organizational Functional Levels – functional
area information systems (see Table 2.1)
C. Information Systems for Automating: Doing Things Faster – completing a task
faster, more cheaply, with better accuracy and/or consistency (vs., e.g., doing
things by hand)
D. Information Systems for Organizational Learning: Doing Things Better – not only automating,
but learning to improve the day-to-day activities within that process
Informating – using
information systems to learn and improve
Organizational Learning – the
ability of an organization to improve itself by learning from its past behavior
and information
Learning Organization – one that
is skilled in creating, acquiring, and transferring knowledge, and modifying
its behavior to reflect new knowledge and insights
C. Information Systems for Supporting Strategy: Doing Things Smarter – using IS to support an
organization’s strategy to gain/sustain Competitive Advantage
1. Organizational Strategy – plan to accomplish
the firm’s mission and goals
2. Strategic Planning – vision for direction of
the firm and how to achieve desired results
3. Low-Cost Leadership – lowest prices to
customers (Walmart)
4. Differentiation – what makes you different
from the competition (Pepsi and Michael Jackson vs. Coke)
5. Best-Cost Provider – reasonably good quality
and competitive prices (Dell)
D. Sources of Competitive Advantage
1. Best-Made (quality) product
2. Superior Customer Service (early Dell)
3. Lower Costs (Wal-Mart)
4. Proprietary Technology (Apple Mac)
5. Shorter Lead Times/Testing
6.
Brand Name/Reputation (Tylenol vs. Ford)
7. Better Value
E. Identifying Where to Compete: Analyzing
Competitive Forces – Porter’s 5 Competitive Forces:
1. Rivalry among competition
2. Threat of potential new entrants
3. Bargaining power of customers
4. Bargaining power of suppliers
5. Potential for substitute products
F. Identifying How to Compete: Value Chain
Analysis – as a product moves through an organization value is added to it at
various stages (value chain) – at which stages can the firm add to the value at
the least cost and gain Competitive Advantage?
G. The Role of Information Systems in Value
Chain – the information systems is one of the primary ways for an organization
to improve their value chain
H. The Technology/Strategy Fit – IT/IS is Expensive!!!! Therefore you should align you IT/IS spending
closely to your organizational strategies to spend the least amounts and still
retrieve the best benefits; e.g., building the best quality product on the
market does not usually fit being the lowest cost provider in that market; your IS should match and support the firm’s
strategies for competing in the market
I. Assessing Value for the Information Systems
Infrastructure – facilities, hardware, software, personnel, etc. are hard to
value as a whole, so try:
1. Economic Value – what is the contribution of
the IS to the firm’s profitability
2. Architectural Value – how the IS contributes
to meeting the firm’s needs today and in the future
3. Operational Value – how the IS helps meet the
firm’s business processing requirements
4. Regulatory and Compliance Value – how the IS
helps meet requirements for control, security, etc. by a governing body
J. Changing Mind-Sets About Information Systems
– the most difficult thing to do has been to change mindsets about technology –
technology should not be seen as a cost center but as contributing to
competitive advantage and the bottom line
II.
International Business Strategies in the Digital World
Inset: When Things GO Wrong – e-Waste Is a Global
Problem – what do we do with all the waste products created by technology and
electronics? We used to send entire
shiploads of junk to China to be buried in landfills, but China has now banned
this import.
A. Home-replication Strategy (export strategy or
international strategy) – international operations are secondary to domestic
operations; focus on domestic customers’ needs and wants, exporting only for
additional sales
B. Global Business Strategy –get economies of
scale by producing large quantities of same product for many different markets
– Coca Cola essentially bottles almost the same product everywhere, differing
mostly in advertising.
Multidomestic
Business Strategy – loose association of independent business units, low
integration of the units, each can respond quickly and independently to its
market; very flexible and responsive – different units of General Motors
produce very different automobiles for their differing markets
C. Transnational Business Strategy – a new,
emerging idea – selectively decide which aspects will be centralized and which
will be decentralized; decisions change with the situation
Note (not in text): Administrative
Heritage – the
organizational structure (and possibly corporate culture) of a global firm imposed by the
cultural environments of the home country of the firm
III. Valuing Innovations – Not in
the text: Innovation can be cultivated
and supported, but cannot be regulated, it happens when it happens; people who
deal well with innovation and people who are innovative are a personality type
sometimes not appreciated by the run-of-the-mill organization
A. The Need for Constant IS Innovation – getting
competitive advantage (thru technology) is one thing, but keeping that
competitive advantage is something else
B. Successful Innovation is Difficult – most
ways of using an IS are not able to be patented or copyrighted
1. Innovation Is Often Fleeting – anyone else
can do the same thing you just did
2. Innovation Is Often Risky – if you are the
first, it might not work out (or work out for you) – Betamax (better quality)
vs. VHS (longer and cheaper)
3. Innovation Choices Are Often Difficult –
there are a lot of technologies to choose from, and many appear (or disappear)
quickly (Consol Coal – ADSO vs. DB2)
Note:
Moore’s Law – Gordon Moore (Intel founder) – the power of the computer
chip will double every 18 months (and cost will cut in half); some studies now
say that this is no longer true, that it now happens every 12 months!
C. Organizational Requirements for Innovation
1. Process Requirements – people must be willing
to pass politics and bureaucracy for the good of the firm
2. Resource Requirements – firms need the people
resources to get the job done – knowledge, skills, training, etc.
3. Risk Tolerance Requirements – what is the
firm’s tolerance of risk?
D. Predicting the Next New Thing – got a crystal
ball? Innovation is not easily
predictable
E. The Innovator’s Dilemma – do you do a new
thing and risk failure, or follow what someone else has done successfully?
Disruptive
Innovations (Disruptive Technology) – new technologies/products/services that
surpass existing dominant technology/product in the market; Sears failed to
recognize what was happening with Wal-Mart & Home Depot; the entire
mid-range computer industry failed to see what was happening with
microcomputers and were pushed out of the market by Apple and IBM/Microsoft
1. Organizing to Make Innovation Choices – how
does a firm organize to make these choices?
a. Start Early – become a leader in identifying
and adopting disruptive innovations and make this a formal part of the
organization (risk prone culture!!!!)
b. Executive Leadership (senior management
commitment!!)
c. Build a team of Expert Innovators (corporate
culture)
d. Educate the Organization – the people need to
understand how to work with these technologies, and to be part of the culture
2. Implementing the Innovation Process
a. Choosing Enabling/Emerging Technologies –
those that help you to gain/sustain competitive advantage
b. Matching technologies to Opportunities –
match new technologies with current economic opportunities
c. Executing Business Innovation for Growth –
implement and ue that innovation for growth
d. Assessing Value – (8th step in
problem solving: monitor the solution
for success); three ways to think about investments in disruptive technologies
1. Put Technology Ahead of Strategy – believes
that technology is more important than strategy, so you should start with
technology and build your strategies from it
2. Put Technology Ahead of Marketing – as above,
tech is more important than marketing, so develop your technologies, then
develop your marketing approach to the technology already adopted
3. Innovation is Continuous – believes that
technological change will not end or even slow down, so repeat the above
processes over and over, always in the lookout for the next new thing and
adopting it early
Inset – Ethical
Dilemma – Underground Gaming Economy – sales of virtual goods in the U.S. in
2010 were ~ $1.6 billion ($6 billion worldwide); in 2005 a guy spent $100K for
a virtual resort with intent to sell space in it for real dollars and make a
profit; a person designed a virtual car and put it on eBay – bids were at $10K
(US) when eBay pulled the auction.
IV.
Freeconomics: Why Free Products
Are the Future of the Digital World
Note: Freeconomics –
leveraging digital technologies to provide free products and services as a
business strategy for gaining Competitive Advantage
A. How Freeconomics works – as costs of digital
products fall, so do resale prices until the cost of a product is essentially
zero (cost of 1 added person to free Yahoo email accounts ~ $0.00 so the price
drops to zero; they make profits from advertiser’s banner ads)
B. The Freeconomics Value Proposition – although
a product is free to a consumer, someone has to pay for it; banner ads on
Yahoo pay for free email; television ads
pay for free broadcast tv & cable tv (no ads) is not free
C. Applying Freeconomics in the Digital World –
Comcast (and Dish and DirectTV) give away DVRs (cost ~ $250) but get monthly
subscription fees from customers to use the DVRs; Prince gave away millions of
free CDs but made back more than the costs of the CDs at his concerts
Inset: Industry Analysis – Banking Industry –
regulation vs. deregulation and banking on the Internet