1. Business Driven Information Systems 2e
CHAPTER 1
INFORMATION SYSTEMS IN BUSINESS

2. Chapter One Overview SECTION 1.1 – INFORMATION SYSTEMS IN BUSINESS
Information Technology’s Role in Business
Information Technology Basics
Roles and Responsibilities in Information Technology
Measuring Information Technology’s Success
SECTION 1.2 – BUSINESS STRATEGY
Identifying Competitive Advantages
The Five Forces Model – Evaluating Business Segments
The Three Generic Strategies – Creating a Business Focus
Value Chain Analysis – Targeting Business Processes

3. INFORMATION SYSTEMS IN BUSINESS
SECTION 1.1
INFORMATION SYSTEMS IN BUSINESS

4. LEARNING OUTCOMES
Describe the functional areas of a business and why they must work together for the business to be successful
Explain information technology’s role in business and how you measure success
Compare management information systems (MIS) and information technology (IT) and define the relationships among people, information technology, and information

5. LEARNING OUTCOMES
Compare the responsibilities of a chief information officer (CIO), chief technology officer (CTO), chief security officer (CSO), chief privacy officer (CPO), and chief knowledge officer (CKO)
Explain the gap between IT and the business, along with the primary reason this gap exists

6. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
Information technology is everywhere in business
Anyone involved in business must understand technology

7. Information Technology’s Impact on Business Operations
Customer service: click-to-talk, call scripting, auto answering, call centers
Finance: accounting packages, Sarbanes Oxley
Sales and marketing: campaign management, customer relationship management
Operations: supply chain management
Human resources: software to track employees at risk of leaving

8. Information Technology’s Impact on Business Operations

9. Information Technology’s Impact on Business Operations
Which types of IT services can be used to meet these types of goals?
Reduce costs/ improve productivity: supply chain management, enterprise resource planning
Improve customer satisfaction/loyalty: customer relationship management, loyalty programs
Create competitive advantage: business intelligence/data warehousing
Generate growth: sales management systems
Streamline supply chain: demand planning software
Global expansion: e-business

10. Information Technology’s Impact on Business Operations

11. Information Technology’s Impact on Business Operations
Accounting - provides quantitative information about the finances of the business including recording, measuring, and describing financial information.
Finance - deals with the strategic financial issues associated with increasing the value of the business, while observing applicable laws and social responsibilities.
Human resources - includes the policies, plans, and procedures for the effective management of employees (human resources).

12. Information Technology’s Impact on Business Operations
Sales - the function of selling a good or service and focuses on increasing customer sales, which increases company revenues.
Marketing - the process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company’s products.
Operations management - includes the methods, tasks, and techniques organizations use to produce goods and services. Transportation (also called logistics) is part of operations management.

13. Information Technology’s Impact on Business Operations
Organizations typically operate by functional areas or independent, functional silos
Functional areas are interdependent
they require information from around the organization to operate

14. INFORMATION TECHNOLOGY BASICS
For an organization to succeed, every department or functional area must work together sharing common information and not be a “silo.”
Information technology can enable departments to more efficiently and effectively perform their business operations.

15. INFORMATION TECHNOLOGY BASICS
Information technology (IT) – a field concerned with the use of technology in managing and processing information
Employs computer-based tools that support the information and information-processing needs of an organization
Information technology is an important enabler of business success and innovation. IT does not guarantee success!

16. INFORMATION TECHNOLOGY BASICS
London Heathrow—The failure
Baggage handling system: original cost of $500 million
Disaster on opening day, costing $ 50 million due to over 28,000 bags being misrouted
FedEx—The success
$ 38 billion family of companies—largest express transportation company
“Information hub for business where managing information is the business”

17. **INFORMATION TECHNOLOGY BASICS
Nicholas Carr article—“IT Doesn’t Matter”
IT no longer a source of advantage on the firm level
Companies should focus IT on cost reduction and risk mitigation
Many experts disagree with his arguments
Abbie Lundberg—Interview with Carr
Don Tapscott—“The Engine That Drives Success: The Best Companies Have the Best Business Models Because They Have the Best IT Strategies”
Many successful companies use IT to support a unique business strategy

18. INFORMATION TECHNOLOGY BASICS
Management information systems (MIS) – a general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems
MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

19. Top Growth Jobs - Nov 2009 http://money. cnn

20. INFORMATION TECHNOLOGY BASICS
When beginning to learn about information technology it is important to understand the following:
Data, information, and business intelligence
IT resources
IT cultures

21. Information
Data - raw facts that describe the characteristic of an event
Information - data converted into a meaningful and useful context
If you were building a system to track students data might include height, name, and hair color and information might include student to professor ratio, percentage of marketing majors who are female, number of students who pass the course.
Business intelligence – applications and technologies that are used to gather, provide access to, and analyze data and information to support decision-making efforts

22. Information

23. Information

24. Information

25. IT Resources People use Information technology to work with

26. ROLES AND RESPONSIBILITIES IN IT
Information technology is a relatively new functional area, having only been around formally for around 40 years
Recent IT strategic positions include:
Chief Information Officer (CIO)
Chief Technology Officer (CTO)
Chief Security Officer (CSO)
Chief Privacy Officer (CPO)
Chief Knowledge Office (CKO)

27. ROLES AND RESPONSIBILITIES IN IT
Chief Information Officer (CIO) – oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives
Broad CIO functions include:
Manager – ensuring the delivery of all IT projects, on time and within budget
Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization
Communicator – building and maintaining strong executive relationships

28. ROLES AND RESPONSIBILITIES IN IT
Average CIO compensation by industry

29. ROLES AND RESPONSIBILITIES IN IT
What concerns CIOs the most

30. ROLES AND RESPONSIBILITIES IN IT
Chief Technology Officer (CTO) – responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT
Chief Security Officer (CSO) – responsible for ensuring the security of IT systems
Chief Privacy Officer (CPO) – responsible for ensuring the ethical and legal use of information
Chief Knowledge Office (CKO) - responsible for collecting, maintaining, and distributing the organization’s knowledge

31. ROLES AND RESPONSIBILITIES IN IT
Skills pivotal for success in executive IT roles

32. The Gap Between Business Personnel and IT Personnel
Business personnel possess expertise in functional areas such as marketing, accounting, and sales
IT personnel have the technological expertise
This typically causes a communications gap between the business personnel and IT personnel

33. Improving Communication
Business personnel must seek to increase their understanding of IT
IT personnel must seek to increase their understanding of the business
It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel

34. SECTION 1.2
BUSINESS STRATEGY

35. IDENTIFYING COMPETITIVE ADVANTAGES
To survive and thrive an organization must create a competitive advantage
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

36. IDENTIFYING COMPETITIVE ADVANTAGES
Competitive advantages are important for an organization but it is even more important to understand that they are typically temporary since competitors are quick to copy competitive advantages
United was the first airline to offer a competitive advantage with its frequent flyer mileage (this first-mover advantage was temporary)
Sony had a competitive advantage with its portable stereo systems (this first-mover advantage was temporary)
Microsoft had a competitive advantage with its unique Windows operating system
Does Microsoft still has a competitive advantage with its Windows operating system?
Competitive advantages are important for an organization
It is even more important to understand that competitive advantages are typically temporary since competitors are quick to copy competitive advantages
Can you list a few companies that achieved success through competitive advantages?
United was the first airline to offer a competitive advantage with its frequent flyer mileage (this first-mover advantage was temporary)
Sony had a competitive advantage with its portable stereo systems (this first-mover advantage was temporary)
Microsoft had a competitive advantage with its unique Windows operating system
Does Microsoft still has a competitive advantage with its Windows operating system?
Perhaps – primarily due to its first-mover advantage since it is difficult to switch operating systems and users face interoperability if they are using different operating systems at the same organization.
How many students in your class are currently using Windows?
What are the competitors to Windows?
Linux and Macintosh
Why are there only three primary competitors in this large operating system market?
What would happen if you had 50 different operating systems to choose from?
Issues with interoperability
How many different types of Microsoft Office would be required to support all 50 different operating systems? 50

37. IDENTIFYING COMPETITIVE ADVANTAGES
Organizations watch their competition through environmental scanning
Environmental scanning – the acquisition and analysis of events and trends in the environment external to an organization
Frito-Lay does not just send its representatives into grocery stores to stock shelves—they carry handheld computers and record the product offerings, inventory, and even product locations of competitors.
This information is used to gain business intelligence on everything from how well competing products are selling to the strategic placement of its own products.
Three common tools used in industry to analyze and develop competitive advantages include:
Porter’s Five Forces Model
Porter’s three generic strategies
Value chains

38. THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS
Porter’s Five Forces Model determines the relative attractiveness of an industry

39. Buyer Power
Buyer power – high when buyers have many choices of whom to buy from and low when their choices are few
One way to reduce buyer power is through loyalty programs
Loyalty program – rewards customers based on the amount of business they do with a particular organization

40. Supplier Power
Supplier power – high when buyers have few choices of whom to buy from and low when their choices are many
Supply chain – consists of all parties involved in the procurement of a product or raw material

41. Supplier Power
Organizations that are buying goods and services in the supply chain can create a competitive advantage by locating alternative supply sources (decreasing supplier power) through B2B marketplaces
Business-to-Business (B2B) marketplace – an Internet-based service that brings together buyers and sellers

42. Supplier Power Two types of (B2B) marketplaces
Private exchange – single buyer posts needs and opens bidding to any supplier who would care to bid
Reverse auction –increasingly lower bids are solicited from organizations willing to supply product or service at a lower price

43. Threat of Substitute Products or Services
Threat of substitute products or services – high when there are many alternatives to a product or service and low when there are few alternatives
Switching cost – costs that can make customers reluctant to switch to another product or service
Examples??

44. Threat of New Entrants
Threat of new entrants – high when it is easy for new competitors to enter a market and low when there are significant entry barriers
Entry barrier – a product or service that customers have come to expect and must be offered to compete and survive
Example of high and low??

45. Rivalry Among Existing Competitors
Rivalry among existing competitors – high when competition is fierce in a market and low when competition is more complacent
Although competition is always more intense in some industries than in others, the overall trend is toward increased competition in just about every industry

46. Class Exercise
Choose two products to perform a Porter’s Five Forces analysis. The two products must compete in the same market.
Potential Products
Laptop Computer and Desktop Computer
PDA and Laptop Computer
iPod and Walkman
DVD Player and VCR Player
Digital camera and Polaroid Camera
Cell Phone and Blackberry PDA
Coca-Cola Plastic Bottle and Coca-Cola Glass Bottle
GPS Device and a Road Atlas
Roller skates and Rollerblades
Digital Books to Printed Books
Digital Paper to Paper

47. Sample Analysis for Airline Industry

48. Sample Analysis for Milk
Threat of Substitute
Products or Services
High: Soy Milk, Rice Milk
Buyer
Power
High: Customer
have
many choices
Supplier
Power
Low: Customer
have
many choices
Rivalry
High
Threat of New Entrants
Low: Hard to sell milk without meeting FDA regulations and
having a vast distribution network

49. THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS
Organizations typically follow one of Porter’s three generic strategies when entering a new market

50. THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS

51. Value Creation
Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy
Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order
Value chain – views an organization as a series of processes, each of which adds value to the product or service

52. Value Creation
Value Chain

53. Value Creation
Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services
Support value activities support the primary value activities
Customers determine the extent to which each activity adds value to the product or service
The competitive advantage is to:
Target high value-adding activities to further enhance their value
Target low value-adding activities to increase their value
Perform some combination of the two
Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services
Support value activities support the primary value activities
Customers determine the extent to which each activity adds value to the product or service
The competitive advantage is to:
Target high value-adding activities to further enhance their value
Target low value-adding activities to increase their value
Perform some combination of the two

54. Applying IT to the Value Chain
IT can be applied to add value to both primary and support value activities
Marketing campaign management system (primary)
Target marketing campaigns more efficiently thereby helping to reduce costs
Better pinpoint target market needs to help increase sales
HR system (support)
More efficiently reward employees based on performance
Identify employees at risk of leaving their jobs and find additional challenges or opportunities to help retain the employees and reduce turnover costs
Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services
Support value activities support the primary value activities
Customers determine the extent to which each activity adds value to the product or service
The competitive advantage is to:
Target high value-adding activities to further enhance their value
Target low value-adding activities to increase their value
Perform some combination of the two

55. Value Creation
Value chains with Porter’s Five Forces

56. Value Creation
If an organization wants to decrease its buyer’s or customer’s power, it can construct its value chain activity of “service after the sale” by offering high levels of quality customer service
This will increase the switching costs for its customers, thereby decreasing their power (buyer power)
If an organization wants to decrease its buyer’s or customer’s power, it can construct its value chain activity of “service after the sale” by offering high levels of quality customer service
This will increase the switching costs for its customers, thereby decreasing their power (buyer power)