The Information Age in Which You Live: Changing the Face of Business

1-2 LEARNING OUTCOMES 1. Define Management Information Systems and describe the three resources within it—people, information, and information technology. 2. Describe how to use break-even analysis to assess the financial impact of Information Tech. 3. Describe how to use Porter’s Five Forces Model to evaluate an industry. 4. Compare and contrast Porter’s three generic strategies and the Run-Grow-Transform framework as approaches to the development of business strategy.

1-3 Case Study  Outrageous Industry Transformation: Cell Phones Doom Phone Revenues for Hotels

1-4 Cell Phones Doom Phone Revenues for Hotels

1-5 Revenues for Hotels Mobile bookings Tech-savvy amenities and features Providing a pleasant stay for pets, too Source: Top Hotel Trends to Watch in 2015 BY ERIN K. SHIELDS | JANUARY 27, 2015

1-6 Cell Phones Doom Phone Revenues for Hotels  This demonstrates the “outrageous” corrective and transformative nature of technology.  Cell phones and technologies of all kinds are transforming entire industries

1-7 Tech on every industry travel newspapers magazines MusicMovies Local news Financial services The list goes on and on…

1-8 INTRODUCTION  You live in a digital age  Average American relies on more than 250 computers per day  According to Time magazine, 14% of cell phone users stopped having intimate relations to take a phone call  How much do you rely on technology in your daily life?

1-9 Make a list of all the technologies you used in the last 24 hours.

1-10 This was my world… Radio- 38 years TV- 12 years Internet- 4 years iPod- 3 years FB- 2 years

1-11 INTRODUCTION  Management information systems (MIS) – planning for, development, management, and use of information technology to help people performs all tasks related to information processing and management.  Important field of study  Important business discipline

1-12 INTRODUCTION  MIS deals with the coordination and use of 3 very important organizational resources 1. People 2. Information 3. Technology

1-13 The Synergy among the Three Resources of MIS

1-14 MIS RESOURCE #1: INFORMATION Digital Age=Information Age = Knowledge is power!

1-15 MIS RESOURCE #1: INFORMATION  Data – raw facts that describe a particular phenomenon such as the current temperature, the price of movie rental, or your age (datum singular)  Information – is data that have a particular meaning within a specific context

1-16 Information Resource Information is often aggregated data that has meaning such as average age, youngest and oldest customer, and a histogram of customer ages

1-17 Information Resource  Business intelligence (BI) – collective information about…  Students  Customers  Competitors  Business partners  Competitive environment  BI can help you make important, strategic decisions

1-18 Information Resource

1-19  A critical characteristic of data, information and business intelligence is that of QUALITY Info. exhibits high quality only if it is pertinent, relevant and useful Information Resource

1-20 Information Resource – Quality Attributes  Timeliness  When you need it  Describing the right time period  Location (no matter where you are)  Form (audio, text, animation, etc.)  Validity (credibility) Lack of any of the above can create GIGO concept in a decision-making process

1-21 Information Resource – Organizational Perspective

1-22 Information Resource – Flows of Information  Upward – describes state of the organization based on transactions  Downward – strategies, goals, and directives that originate at a higher level and are passed to lower levels  Horizontal – between functional business units and work teams  Outward/inward – from and to customers, suppliers, etc

1-23 Information Resource – What It Describes  Internal information – operational aspects of the organization  External information – environment surrounding the organization  Objective information – quantifiably describes something that is known  Subjective information – describe something that is unknown

1-24 Overview  IRM provides an integrated view for managing the entire life-cycle of information, from generation, to dissemination, to archiving and/or destruction, for maximizing the overall usefulness of information, and improving service delivery and program management.

1-25 Stacy Snyder Woman Denied Degree Over 'Drunken Pirate' MySpace

1-26 MIS RESOURCE #2: PEOPLE  People are the most important resource in any organization, with a focus on  Technology literacy  Information literacy  Ethical responsibilities

1-27 People Resource  Technology-literate knowledge worker – knows how and when to apply technology  Information-literate knowledge worker  Can define information needs  Knows how and where to obtain information  Understands information  Acts appropriately based on information  Ethics – principles and standards that guide our behavior toward other people

The Information Age in Which You Live: Changing the Face of Business

1-29 Some blog thoughts… Paige: For many people with just a swipe here and there you don't always have the physical proof of how much you are spending and if its out of sight its out of mind. Katie: Our generation is being brought up with so much technology for communication that it is ruining our communication skills when it comes to being able to talk to someone in person. Nicole: We live in a society where there have been news stories of people forgetting their children in their car but, they have their cell phones with them. Michael: People are using the online newspaper vs the paper version way more because it just can be accessed anywhere. This gives us another reason to stare at screens and brings us back to the "problem" of how people are spending to much time staring at their devices and less time interacting face to face. Sabrina: …this approach can make people become reliant on the convenience of what’s in front of them instead of having to go and access the means of using the library or a bookstore. Theresa:…countless resources online that can either help or hurt one's education Veronica: Many retail companies are closing up there shops

1-30 Some blog thoughts… Mamako: I do not even know how much a postal stamp costs. Shannon: In hospitals today there is less of a demand for workers in certain departments due to the advanced machinery that is being used to detect different problems within the patient, rather than things being read by a doctor or nurse. Richard: We now have things like electrical power to light things up Carly: So in contrast the postal service and places like UPS and FedX are benefiting from websites like Amazon that have these services. Nicole: Due to the production of video games, kids no longer want to play and interact with board games, or even want to go outside. Donna: everything must be charted in "real time". Justine: Industries need to constantly evolve and use the latest technology in order to prosper Coulson: most stores that specialized in movie rental have gone out of business

1-31 Scenario  Your team is working on a computer-controlled device for treating cancerous tumors. The computer controls direction, intensity, and timing of a beam that destroys the tumor. Various delays have put the project behind schedule, and the deadline is approaching. There will not be time to complete all the planned testing. The system has been functioning properly in the routine treatment scenarios tested so far. You are the project manager, and you are considering whether to deliver the system on time, while continuing testing and making patches if the team finds bugs.

1-32  What is the central issue?  Who is affected by your decision?

1-33 Law & Ethics Law can be defined as a consistent set of universal rules that are widely published, generally accepted, and usually enforced.  Consistent  Universal  Published  Accepted  Enforced

1-34 Law & Ethics Ethics is derived from the Greek word ethos (character), and from the Latin word mores (customs). Together they combine to define how individuals choose to interact with one another.

1-35 Laws & Ethics Characteristics  Ethics involves learning what is right and wrong, and then doing the right thing.  Most ethical decisions have extended consequences.  Most ethical decisions have multiple alternatives.  Most ethical decisions have mixed outcomes.  Most ethical decisions have uncertain consequences.  Most ethical decisions have personal implications.

1-36 People Resource - Ethics You always want your actions to fall in Quadrant I – both ethical and legal.

1-37 MIS RESOURCE #3: INFORMATION TECHNOLOGY  Information technology (IT) – computer-based tools that people use to work with information  Hardware – physical devices that make up a computer  Software – set of instructions that your hardware executes to carry out a specific task for you

1-38 Information Technology – Hardware

1-39 Information Technology – Hardware 1. Input device – tool for entering information and commands 2. Output device – tool for see or hearing results 3. Storage device – tool for storing information

1-40 Information Technology – Hardware 4. CPU – hardware that interprets and executes instructions (RAM temporarily stores information and software for the CPU) 5. Telecommunications device – for sending info 6. Connecting devices – like cables, ports, etc.

1-41 Information Technology – Software  Two types of software  Application software – enables you to solve specific problems and perform specific tasks (Word, payroll, inventory management, etc)  System software – handles tasks specific to technology management (operating system, anti-virus, etc)

1-42 FINANCIAL IMPACT OF INFORMATION TECHNOLOGY  Regardless of the resource, you must always assess its financial impact  Many times, you will do so using break-even analysis  IT can definitely impact break-even analysis

1-43 Break-Even Analysis Example

1-44 Why is this important from a technological point of view? Technology can help do one or any combination of the following three: Reduce fixed costs Reduce variable costs Increase revenue

1-45 Break-Even Analysis  Consider and chart the following financial information  Fixed costs – costs you incur even if you don’t sell anything  Variable costs – costs you incur when you sell something (COGS)  Revenue – how much you sell one unit for

1-46 Break-Even Analysis Example  Assume online movie poster business  $1,500 – online store, domain name registration, search engine placement, etc (fixed costs)  $6 - $4 to buy poster from supplier and $2 to ship to customer (var costs)  $9 – price at which you sell a move poster

1-47 Reducing Fixed Costs with IT  Digital storefronts – no physical retail space  Telecommuting – fewer expenses related to office space  VoIP – using the Internet for phone calls

1-48 Reducing Fixed Costs with IT

1-49 Reducing Variable Costs with IT

1-50 Reducing Variable Costs with IT  Virtual goods – because they are digital, there is no cost to duplicate and sell again and again  Crowdsourcing – use non-paid non- employees to create value

1-51 Increasing Revenue with IT  Recommendation engines – to drive complementary sales  Long-tail economics – to sell products/services that are too expensive for physical stores to carry  Physical stores only carry what they can sell large amounts of  Because of fixed costs

1-52 INDUSTRY IMPACT OF INFORMATION TECHNOLOGY  Porter’s Five Forces Model helps business people understand the relative attractiveness of an industry and the industry’s competitive pressures in terms of 1. Buyer power 2. Supplier power 3. Threat of substitute products or services 4. Threat of new entrants 5. Rivalry among existing competitors

1-53 PORTER’S FIVE FORCES MODEL

1-54 Buyer Power  Buyer power – high when buyers have many choices and low when their choices are few  Competitive advantages are created to get buyers to stay with a given company  NetFlix – set up and maintain your movie list  United Airlines – frequent flyer program  Apple iTunes – buy/manage your music

1-55 Buyer Power  Competitive advantage – providing a product or service in a way that customers value more than what the competition is able to do  First-mover advantage – significant impact on gaining market share by being the first to market with a competitive advantage  All competitive advantages are fleeting

1-56 Supplier Power  Supplier power – high when buyers have few choices and low when choices are many  The opposite of buyer power

1-57 Threat of Substitute Products and Services  Threat of substitute products and services – high when there are many alternatives for buyers and low when there are few alternatives  Switching costs can reduce this threat  Switching cost – a cost that makes buyers reluctant to switch to another product/service

1-58 Threat of New Entrants  Threat of new entrants – high when it is easy for competitors to enter the market and low when entry barriers are significant  Entry barrier – product or service feature that customers have come to expect and that must be offered by an entering organization  Banking – ATMs, online bill pay, etc

1-59 Rivalry Among Existing Competitors  Rivalry among existing competitors – high when competition is fierce and low when competition is more complacent  General trend is toward more competition in almost all industries  IT has certainly intensified competition in all sectors of business

1-60 STRATEGY IMPACT OF INFORMATION TECHNOLOGY  Porter identified 3 generic business strategies for beating the competition 1. Overall cost leadership 2. Differentiation 3. Focus

1-61 Overall Cost Leadership  Overall cost leadership – offering the same or better quality product or service at a price that is less than what any of the competition is able to do  Walmart (Always Low Prices, Every Day Low Prices)  Dell – a computer the way you want it at an affordable price  Hyundai and Kia – reliable low-cost cars  Grocery stores – high-volume, low-margin

1-62 Differentiation  Differentiation – offering a product or service that is perceived as being “unique” in the marketplace  Hummer – Like Nothing Else  Audi and Michelin – safety  Lund’s & Byerly’s – high-end grocery store  Apple

1-63 Focus  Focus – focusing on offering products or services  To a particular segment or buyer group  Within a segment of a product line  To a specific geographic market  Examples  Restaurants  Physician offices  Legal offices

1-64 Run-Grow-Transform (RGT) Framework  Run-grow-transform (RGT) framework – the allocation in terms of percentages of IT dollars on various types of business strategies

1-65 RGT Framework  How will you allocate IT dollars to  Run – optimizing execution of existing processes  Grow – increasing market share, products, and service offerings  Transform – innovating business processes, products, and/or services

1-66 Porter and RGT  Run = overall cost leadership  Grow = focus and differentiation  Transform = (new) differentiation