1. Using IS for Competitive Advantage
Part 3 Chapters 7,8,9
Using IS for
Competitive Advantage
Goals
Use the PRIDE system example to:
Provide a setting for students “to assess, evaluate, and apply emerging information technology to business.” (This is one of the major goals of the text from Chapter 1.)
Connect applications of IS to the fundamentals presented in Chapters 1–6.
Show a realistic application of mobile + cloud technology.
Demonstrate the need for, the creation of, and some of the issues involving an inter-enterprise IS.

2. Performance Recording, Integration, Delivery, and Evaluation (PRIDE)
PRIDE prototype connecting health club and home workout data with employer, insurance company, healthcare professionals.
Written in C# code, stores data in Azure database in the cloud.
Provide a setting for students “to assess, evaluate, and apply emerging information technology to business.” (One of the major goals of the text from Chapter 1.)
Connect applications of IS to the fundamentals presented in Chapters 1–6.
Show a realistic application of mobile + cloud technology.
Demonstrate the need for, the creation of, and some of the issues involving an inter-enterprise IS.
Illustrate one realistic outcome for a startup … the originator, here Dr. Flores, cannot make a go of it, so an investors buys it for pennies on the dollar and changes the strategy. Will there be success?

3. Performance Recording, Integration, Delivery, and Evaluation (PRIDE) (cont'd)
Windows Phone emulator to demonstrate phone interface.
Port application to iOS and Android devices after obtaining financing.
Flores lost interest
Required too much of time
Big financial commitment.
Risks in startup venture.

4. Cast of Characters
Zev Friedman bought PRIDE company for small amount of cash and a royalty agreement with Flores.
Jared Cooper, new general manager.
Nicki Jensen, marketing professional.
Michele Russell, sales director.
James Wu, technology manager.

5. Why Study the PRIDE Case
Future business professionals need to be able to assess, evaluate, and apply emerging information technology to business.
PRIDE system will allow you to practice that key skill.

6. Chapter 7 Processes, Organizations, and Information Systems
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258

7. “How Much Money Does a System Own?
Who are the target customers and how to induce them to buy?
Doctors?
Care about medicine and operations, some care about costs
Not focused on exercise.
Insurance companies?
Exercise doesn’t prevent disease.
When people get in good shape, they live longer, and their long-term health care expenses increase.
These questions get to the issue of how to monetize the PRIDE system.
Provide a setting for students “to assess, evaluate, and apply emerging information technology to business.” (One of the major goals of the text from Chapter 1.)
Connect applications of IS to the fundamentals presented in Chapters 1–6.
Show a realistic application of mobile + cloud technology.
Demonstrate the need for, the creation of, and some of the issues involving an inter-enterprise IS.
Illustrate one realistic outcome for a startup … the originator, here Dr. Flores, cannot make a go of it, so an investors buys it for pennies on the dollar and changes the strategy. Will there be success?

8. Who Will Pay? Health clubs. Employers.
Selling ad space to health clubs and manufacturers.
Social media–driven.
Can PRIDE support 10,000 people spinning at the same time?
Who to monetize PRIDE?

9. Study Questions
Q1: What are the basic types of processes? Q2: How can information systems improve process quality? Q3: How do information systems eliminate problems of information silos? Q4: How do CRM, ERP, and EAI support enterprise processes? Q5: What are the elements of an ERP system? Q6: What are the challenges of implementing and upgrading enterprise information systems? Q7: How do inter-enterprise IS solve the problems of enterprise silos? Q8: 2026?
This chapter explores processes and their supporting information systems within levels of an organization.
Investigate three types of processes and the scope of information systems that they use; investigate the concept of process quality and explain how information systems can be used to increase it; discuss how the use of information systems at one level of organization leads to information silos, explain the problems of such silos, and show how those problems can be solved by information systems at the next level of organization; discuss how enterprise systems such as CRM, ERP, and EAI; wrap up by showing how interenterprise IS can solve problems of enterprise-level silos. Finally, in 2026, discuss the implications of mobility and the cloud on future enterprise and interenterprise IS.

10. What are Business Process and Business Process Management?
Business process: A set of logically related tasks performed to achieved a defined business outcome
Business process management (BPM) is a management approach focused on aligning all aspects of an organization with the wants and needs of clients. It is a holistic management approach[1] that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology.
Dr. Chen, The Trends of the Information Systems Technology
TM -10

11. Q1: What Are the Basic Types of Processes?
Business Process with Three Activities 1 2
This is a simplified view of a three-activity process for approving customer orders. 3
Fig 7-1 Business Process with Three Activities

12. How Do Structured Processes Differ from Dynamic Processes?
Fig 7-2 Structured Versus Dynamic Processes

13. How Do Processes Vary by Organizational Scope?
Fig 7-3 Common Workgroup Processes

14. Characteristics of Information Systems
Characteristics of departmental information systems are summarized in top row. Often, procedures are formalized in documentation, and users frequently receive formal training in use of those procedures.
Fig 7-4 Characteristics of Information Systems

15. Which of the following is an example of a structured process?
A) ill-defined, ambiguous situations
B) collaboration
C) customer returns
D) social networking
Answer: _______ C

16. Q2: Process Quality? Two dimensions of process quality: efficiency
Ratio of process outputs to inputs
How well a process achieves organizational strategy
How Can Processes Be Improved (by organization) ?
Change process ________
Change _______
efficiency
effectiveness
Processes are means people use to organize an activity to achieve organization’s goals.
Two dimensions of process quality are efficiency and effectiveness.
Process efficiency – a measure of the ratio of process outputs to inputs
Process effectiveness – a measure of how well a process achieves organizational strategy
structure
resources
both

17. How Can Information Systems Improve Process Quality? (cont.)
Performing an activity
Partially automated, completely automated
Augmenting human performing activity
Common reservation system
Controlling data quality process flow
Ensure data complete and correct before continuing process activities

18. Information systems improve process quality by ________.
A) duplicating data
B) entirely replacing human activity
C) changing the work culture
D) controlling process flow
Answer: _______ D

19. Islands of Automation

20. What are the problems of information silos?
Q3: How Do Information Systems Eliminate the Problem of Information Silos?
What are the problems of information silos?
Data are duplicated
Data inconsistency
Data isolated
Business processes disjointed
Lack of integrated enterprise information
Inefficiency: decisions are made in isolation
Increased cost for the organization
An information silo exists when data are isolated in separated information systems.
Information system silos arise when:
IS supports departmental processes rather than enterprise-level processes.
Personal and workgroup support applications are created over time.
Organizations grow, especially by merger and acquisitions.

21. Extra Examples of Islands of Automation at a Hospital
What are the problems?
How to solve this problem?

22. An Enterprise System for Patient Discharge
Hospital uses an enterprise-wide information system to support this process. IS provides data entry forms, reports, and notifications to human actors in this process. It also controls the flow of process activity as shown by dotted red arrow.
To use new system, staff needs to transition from a paper-based system to computer-based one.
Solution:
A centralized
Enterprised DB
Fig 7-7 Example Enterprise Process and Information System

23. Problems Created by Information Silos
This table summarizes problems of information silos.
Duplicated and inconsistent data
Separated supporting applications; difficult for two activities to reconcile their data, getting approvals will be slow and possibly erroneous
Lack of integrated enterprise data as a consequence of disjointed systems
Inefficiency results from making decisions in isolation
Information silos increase costs — duplicated data, disjointed systems, limited information, and inefficiencies all mean higher costs
Figure 7-5: Problems Created by Information Silos

24. How Do Organizations Solve the Problems of Information Silos?
Integrate data into single database
Revise applications
Allow isolation, manage to avoid problems
Fig 7-6 Information Silos as Drivers

25. Which of the following information systems eliminates data duplication and carefully manages changes to duplicated data to maintain consistency?
A) departmental information systems
B) workgroup information systems
C) personal information systems
D) enterprise information systems
Answer: ______ D

26. Islands of Automation – Another Example

27. How Do Enterprise Information Systems Eliminate Silos?
shared
The information (e.g., scheduling) can be________. Therefore, it will improve productivity and increase customer satisfaction.

28. BUSINESS FOCUS Customer centric What they need/want?
E-BUSINESS
Customer
centric
SCM
CRM
BPR
ERP
Demands
Products
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
______ are the customers?
_______are the customers?
Their purchasing ______
Who
Where
HOW TO REACH THEM?
IT/INTERNET/E-BUSINESS
habits
Supply Chain Management
Customer Relationship Management
Business Process Reengineering
Enterprise Resource Planning

29. Manufacturing Industry Value Chain Product and Service Flow
Support Activities
Administrative and Other
Indirect Value Added
Firm as a value chain – describe the firm as a set of interrelated activities (value chain).
-- Every firm is a collection of activities performed to design, produce, market, develop, and support its product.
-- it is a reflection of
its history,
2) its decision making, and
3) its approach to implementing its decisions and
4) underlying economic of the activities themselves.
Primary activities are those involved in taking the raw materials and developing the products and services for the customers. There are five generic sets of primary activities.
Support activities can be divided into four generic categories.
Though firms in the same industry may have similar value chains, the value chains of competitors often differ.
First of all, the value chains help the firm deliver products and services to its customers.
From the customer’s point of view, the value delivered by a firm (to the customers) depends on the superiority of its products or service relative to the price paid by the customer.
The value appropriated by the firm, on the other hand, depends on the value created by the customers, but in relationship to the firm’s cost structure.
In general, the value appropriated should exceed the opportunity cost of capital.
Research and
Development
Engineering
Production
and Manufacturing
Marketing
Sales and
Distribution
Service
Primary Activities N

30. How do functional systems relate to the value chain?
Porter’s value chain model from Chapter 3 is reorganized to show primary and support activities from a customer’s perspective, beginning with Marketing and Sales on the left, to Service and Support on the right.
Competitive
Advantage
(Value)
Reorganized Porter Value Chain Model

31. Q4: How Do CRM, ERP and EAI Support Enterprise Processes?
Business Process Reengineering (BPR)
BPR means radically changing how people work - changing business policies and controls, systems and technology, organizational relationships and business practices, and reward programs.
Integrated data, enterprise systems create stronger, faster, more effective linkages in value chains
Difficult, slow, and exceedingly expensive
Key personnel determine how best to use new technology
Requires high-level and expensive skills and considerable time
Hospital needed to determine how best to change its processes to take advantage of new capability.

32. Deconstruction of the newspaper industry: BPR
Old newspaper industry value chain
Journalists
Distributors
Readers
Editors
Printers
Columnists
New newspaper industry value chain
Journalists
Columnists
Internet
Editors
Readers

33. BPR Radical Change = New organization + IT Types of Organizational =
Strategies
Industry
Structure +
Competitive
Strategies +
Cooperative
Strategies

34. Emergence of Enterprise Application Solutions
Inherent processes
Predesigned procedures for using software products
Based on “industry best practices”
Three solutions (applications)
Customer relationship management (CRM)
Enterprise resource planning (ERP)
Enterprise application integration (EAI)
Organizations can license software and obtain prebuilt procedures. Over time, three categories of enterprise applications emerged: customer relationship management, enterprise resource planning and enterprise application integration.

35. Customer Relationship Management (CRM)
Suite of applications, a database, and a set of inherent processes
Intended to support customer-_______ organization
Integrates all primary activities of value chain
Manage all interactions with customer though four phases of customer life cycle:
Marketing—marketing sends messages to target market
Customer Acquisition—customer prospects order and need to be supported
Relationship Management—support and resale processes increase value to existing customers
Loss/churn—win-back processes categorize customers according to value and attempt to win back high-value customers
centric
CRM is a suite of applications, a database, and a set of inherent processes for managing all interactions with a customer from lead generation to customer service. Every contact and transaction with customer is recorded in CRM database.

36. Which phase of the customer life cycle categorizes customers according to value and attempt to win back high-value customers?
A) loss/churn
B) customer acquisition
C) relationship management
D) Marketing
Answer: _______ A

37. Four Phases of Customer Life Cycle
Figure 7-8 depicts the four phases of the customer life cycle and shows how a CRM system integrates them into three major processes: solicitation, lead-tracking, and relationship management.
80/20 Rule?
(4)
(1)
(2)
(3)
Marketing sends messages to target market to attract customer prospects. When prospects order, they become customers who need to be supported. Additionally, relationship management processes increase the value of existing customers by selling them more products.
Over time, organization loses some customers. When this occurs, win-back processes categorize customers according to their value and attempt to win back and turn them into high-value customers.
Also 80/20 Rule?
Fig 7-8: The Customer Life Cycle

38. A(n)________ system is a suite of applications, a database, and a set of inherent processes for managing all the interactions with the customer, from lead generation to customer service.
A) business process reengineering
B) customer relationship management
C) enterprise resource planning
D) customer lifecycle management
Answer: ________ B

39. Why Do We Need Customer Relationship Management?
Organizations can find their most valuable customers through “RFM”:
Recency: How recently a customer purchased items? => leads and opportunities
Frequency: How frequently a customer purchased items? => retention
Monetary Value: How much a customer spends on each purchase? => profitability
80/20 Rule (Pareto Principle)
We will study more in chapter 9 – Business Intelligence

40. Fig (extra): Scope of CRM in Value Chain Activities
Figure 7-?? shows how a CRM system integrates the primary business activities in the value chain model.

41. CRM Applications
Customer Relationship Management (CRM) systems store data in a single (integrated) database and link CRM processes to one another.
CRM components exist for each stage of the customer life cycle. As shown, all applications process a common customer database. This design eliminates duplicated customer data and removes the possibility of inconsistent data. It also means that each department knows what has been happening with the customer at other departments.
Fig 7-9 CRM Applications

42. ERP Applications
Five elements of an ERP system: (1) Hardware, (2) ERP Application programs (software), (3) ERP Databases, (4) Business process procedures and (5) ______ and Consulting (people)
Training
integration
ERP is a suite of applications (modules), a database and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. ERP systems are an IS based on ERP technology.
Fig 7-10 ERP Applications

43. Pre-ERP Information System: Bicycle Manufacturer
This diagram represents processes used by a bicycle manufacturer. There are five non-integrated databases. Assume company has a separate accounting system (not shown) that is not integrated. With such a pre-ERP system, financial statements are always outdated and weeks late.
Fig 7-11 Pre-ERP Information Systems

44. ERP Information Systems
All activity processed by ERP applications and consolidated data are stored in a centralized ERP database.
What is the major difference between these two systems?
Fig ERP Information Systems

45. The primary purpose of an ERP system is ________.
A) customization
B) duplication
C) integration
D) customer acquisition
Answer: ________ C

46. ERP Enabled Sales Dashboard
With integration, ERP systems can display current status of critical business factors to managers and executives.
Fig 7-13 Sales Dashboard

47. Enterprise Application Integration (EAI)
Connects system “islands.”
Enables communicating and sharing data.
Provides integrated information.
Provides integrated layer over the top of existing systems while leaving functional applications “as is.”
Enables a gradual move to ERP.
EAI is a suite of software applications that integrates existing systems by providing layers of software that connect applications.

48. EAI: Design and Implementation for the Five Components
EAI is a suite of software applications that connects systems “islands”.
EAI Automatically Makes Data Conversions Among Different Systems
Virtual Integrated Database
EAI is a suite of software applications that integrates existing systems by providing layers of software that connect applications.
EAI enables organizations to use existing silo applications while eliminating many serious problems of isolated systems.
Fig 7-14 Design and Implementation for the Five Components

49. Q5: What Are the Elements of an ERP System?
Hardware
ERP Application programs
ERP Databases
Business process procedures
Training and Consulting

50. ERP and CRM with Value Chain Model
What is the difference between the following two systems (CRM and ERP)?

51. Fig (extra): ERP Applications and the Value Chain

52. True ERP Have Application that Integrate: (http://www. erpsoftware360
Supply chain
Manufacturing
CRM
Human resources
Accounting
Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities)
Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities)
CRM (sales prospecting, customer management, marketing, customer support, call center support)
Human resources (payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities)
Accounting (general ledger, accounts receivable, accounts payable, cash management, fixed asset accounting)

53. ERP Solution Components
ERP Application Programs
Configurable vendor applications
ERP Databases
Trigger
Computer program within database to keep database consistent when certain conditions arise
Stored Procedure
Enforces business rules
Vendor applications: Configurable, can be alter without changing program code. Set configuration parameters specifying how ERP application programs will operate: Hourly payroll application configured to specify number of hours in standard workweek, hourly wages for different job categories, wage adjustments for overtime and holiday work, etc.
ERP Databases:
- Trigger: Database program to keep database consistent when certain conditions arise
- Stored procedure: Database program to enforce business rules

54. ERP Solution Components (Cont’d)
Business Processes and Procedures
Adapt to predefined, inherent processes and procedures, or design new ones?
Training & Consulting
Training to implement
Top management support, preparing for change, dealing with resistance
Training to use
Industry-Specific Solutions
Super Users become in-house trainers; train the trainers
Vendor and third-party consultants

55. S A P Company Originated in Walldorf, Germany 1972 What is SAP?
Systems
Company Originated in Walldorf, Germany 1972
Applications
Products...
in data processing
SAP AG was founded in 1972 by 4 former IBM employees. The company headquarters are based in Walldorf, a small German town close to Heidelberg, where the university is a continuous source of employees at SAP. Many of the gurus behind this phenomenal system known as R/3 come from this university.
The company name, SAP is a German acronym, but loosely translates in English to Systems, Applications, and Products in data processing. After the introduction of SAP R/3 in 1992, SAP AG has become the world’s leading vendor of standard application software.

56. SAP Ordering Business Process
Fig 7-15 SAP Ordering Process

57. Characteristics of Top ERP Vendors
Fig 7-16 SAP Characteristics of Top ERP Vendors

58. ERP training falls into two broad categories
ERP training falls into two broad categories. One of the categories is training on how to use the ERP application software. What does the training include?
A) steps for obtaining top-level management support
B) steps for using the applications to accomplish the activities in various processes
C) procedures to deal with employee resistance to the new system
D) procedures to prepare for organizational changes while implementing ERP solutions
Answer: _______ B

59. Collaborative management Requirements _____ Transition problems
Q6: What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?
Five Primary Factors
Collaborative management
Requirements _____
Transition problems
Employee _________
New ____________
gaps
resistance
technology
Implementation is challenging, difficult, expensive, and risky. It is not unusual for enterprise system projects to be well over budget and a year or more late.
Implementation is challenging, difficult, expensive, and risky. It is not unusual for enterprise system projects to be well over budget and a year or more late.

60. Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos?
Isolation of data causes problems. Doctors want reports on exercise data stored on patient devices and in health clubs. Patients want prescription data from their providers as well as exercise data from their health clubs. Health clubs want exercise prescriptions and home workout data to integrate with data they have.
Fig 7-18 Information Silos Without PRIDE

61. Benefits of ERP Efficient business processes that are effective
Inventory reduction
Lead-time reduction
Improved customer service
Greater real-time insight into organization
Higher profitability
No data inconsistency problems due to integrated database
Business process blueprints tested in hundreds of organizations

62. Inter-Enterprise PRIDE System
PRIDE is a distributed system because processing is distributed across multiple computing devices. Standards such as http, https, html5, CSS3, JavaScript, and others enable programs on varied and disparate devices to flexibly communicate with cloud servers and database, and indirectly communicate with each other.
Fig 7-19 Inter-enterprise PRIDE System

63. THE CONNECTED CORPORATION: THE FUTURE OF ERP
Data points where SCM, CRM, and ERP integrate.
Lines between SCM, CRM, and ERP will continue to blur
Internet – continue to help organizations integrate data and process across functional departments
Interface – customizable employee browsers
Wireless technology – support a mobile workforce

64. The Wireless Revolution
Radio Frequency Identification (RFID) systems
RFID uses low-powered radio transmitters to read data stored in a tag at distances ranging from 1 inch to 100 feet. The reader captures the data from the tag and sends them over a network to a host computer for processing.

65. Joseph wishes to increase the operational efficiency of his new startup. In order to achieve this, what should Joseph do?
A) Joseph should use integrated data stored in his firm's central database to analyze its day-to-day activities.
B) Joseph should avoid analyzing his firm's distribution systems as they do not play a role in the firm's daily activities.
C) If Joseph plans to support formally defined and documented activities in his firm, he should use a dynamic planning system over a structured planning system.
D) If Joseph plans to include less specific and fluid activities in his firm, he should use a structured planning system over a dynamic planning system.
Answer: _______ A

66. The Wireless Revolution
Radio Frequency Identification (RFID) systems
Use tiny tags (transponders) with embedded microchips that transmit radio signals over short distance to RFID readers
Operate in various unlicensed frequency bands
Low frequency systems have short reading ranges (up to few feet)
Requires special middleware to filter, aggregate RFID data
Usually requires companies to upgrade hardware and software to handle massive amounts of data produced by RFID systems
Used to track movement of goods through supply chain
RFID systems can track each pallet, lot, or even unit item in shipment

67. Business Applications of using RFID
Wal-Mart Grapples with RFID
What conditions would make adopting RFID more favorable for suppliers?
Should Wal-Mart require all its suppliers to use RFID? Why or why not? Explain your answer.

68. Q8: 2026?
ERP vendors and customers resolved problems of cloud-based ERP.
Hybrid model
ERP customers store most of their data on cloud servers managed by cloud vendors and store sensitive data on their own servers.
Gov’t, accounting, financial standards for monitoring organizations for appropriate compliance.
Delicate balance between risk of loss and improvement to processes.
Machines able to employ ERP system to schedule own maintenance.
Companies want to move to lower costs of the cloud, but cannot plunge into new cloud-based solutions without causing considerable organizational turmoil, if not failure Cloud-based SaaS now applications enable organizations to keep their core SAP installation and data, while adding mobile-enabled cloud applications to that data.

69. END of CHAPTER 7