1. Copyright © 2014 Pearson Education, Inc. 1 Brad N Greenwood MIS2101 Chapter 1 - Managing in the Digital World

2. Copyright © 2014 Pearson Education, Inc. 2 Administrivia Note Taker Missing Class IT Doesn’t Matter Quiz 1 Subsequent Quizzes

3. Copyright © 2014 Pearson Education, Inc. 3 Agenda The rise of the information age How this has changed business – Globalization and Firm Management Type of information Systems – How they can be used – People and Information Systems Does IT Matter? Ethicality in Information Systems This first lecture is more or less about the make vs buy decision within Porter’s puzzle.

4. Copyright © 2014 Pearson Education, Inc. 4 Chapter 1 Learning Objectives Information Systems Today Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Define globalization, describe how it evolved over time, and describe the key drivers of globalization. Information Systems Defined Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

5. Copyright © 2014 Pearson Education, Inc. 5 Information Systems Today Learning Objective: Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Define globalization, describe how it evolved over time, and describe the key drivers of globalization. Information Systems Defined Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

6. Copyright © 2014 Pearson Education, Inc. 6 The Rise of the Information Age In 1959 Peter Drucker proposes the notion of the knowledge worker – An individual who is relatively well educated and who creates, modifies and/or synthesizes knowledge as a fundamental part of a job This proposition asserts the rise of the knowledge society – i.e. the service economy – cornerstone is transferrable human capital and knowledge specific assets Data Supports the existence of the economy – Meritocracy Argument - HS Diploma (23k/year) / Masters (70k/year)

7. Copyright © 2014 Pearson Education, Inc. 7 Three Social Waves Toffler’s proposition is three waves within society Formalization of agricultural work – Establishment of dependable food sources Industrial revolution – Formalization of the economy and trade Double entry accounting hmm? Information age – The pooling and seamless dissemination of information

8. Copyright © 2014 Pearson Education, Inc. 8 Why are these waves important? Could the conventional wisdom of the day during the age of agriculture and handwork every prepare a young person to be successful during the industrial age? How would your parents and teachers tell you to prepare?

9. Copyright © 2014 Pearson Education, Inc. 9 Information is a Valuable Resource

10. Copyright © 2014 Pearson Education, Inc. 10 What Facilitated the Rise of the Information Age? Arguably the five mega trends

11. Copyright © 2014 Pearson Education, Inc. 11 Five IT Megatrends in the Information Age: Mobile Computing Many believe that we’re living in a post-PC era. In the developing world mobile devices often leapfrog traditional PCs. Implications of untethered access: – Increased collaboration – The ability to manage business in real time – New ways to reach customers

12. Copyright © 2014 Pearson Education, Inc. 12 Five IT Megatrends in the Information Age: Social Media and Web 2.0 Over 800 million Facebook users share status updates or pictures with friends and family Organizations use social media to encourage employee collaboration or to connect with their customers These sites facilitate: – Resolution of offline social failure – Production of non static content

13. Copyright © 2014 Pearson Education, Inc. 13 Five IT Megatrends in the Information Age: Big Data IDC estimated that in 2011, 1.8 zettabytes of data were generated and consumed How much is 1.8 zettabytes? 1.8 trillion gigabytes, or the equivalent of 57 billion 32GB iPads (IDC, 2011) This number is forecast to grow by 50 times by 2020 Why does this matter? – Raw data can be transformed into knowledge – Raw data can be mined for business value

14. Copyright © 2014 Pearson Education, Inc. 14 Five IT Megatrends in the Information Age: Cloud Computing Web technologies enable using the Internet as the platform for applications and data Many regard cloud computing as the beginning of the “fourth wave” – the applications and data reside in the cloud Why does this matter? – Hardware is now a service

15. Copyright © 2014 Pearson Education, Inc. 15 Five IT Megatrends in the Information Age: Consumerization of IT Consumerization may be the most significant trend affecting organizational IT personnel – Today’s employees bring their own devices to work – Initially used for emails / social networking Now used for other important tasks such as enterprise resource planning – Opens up new opportunities – Mitigates access to computing This is the lynch pin. Instead of pedantic connectivity options, the individual can engage in front and back office tasks to advance the firm’s position

16. Copyright © 2014 Pearson Education, Inc. 16 You’ve built a bridge to nowhere, Greenwood Why does this matter for the firm? – Recall the purpose of the firm… – How does it accomplish this objective? Two Options If I am a clever CEO, and I wish to remain competitive, how can I exploit these trends?

17. Copyright © 2014 Pearson Education, Inc. 17 Evolution of Globalization The Rise of the Information Age Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Learning Objective: Be able to define globalization, describe how it evolved over time, and describe key globalization drivers. Information Systems Defined Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

18. Copyright © 2014 Pearson Education, Inc. 18 What is globalization? Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture Like any other economic force, it isn’t good or bad, it is a response to incentives and market forces made by economic agents – i.e. it is the response of firms to demand

19. Copyright © 2014 Pearson Education, Inc. 19 Globalization – Three Factors

20. Copyright © 2014 Pearson Education, Inc. 20 Three factors of import Economic changes – Global labor and financial systems Cultural changes – Multiculturalism and economic homogeneity – The spread of the capitalist ideal Technology changes – Communication across distance not cost prohibitive (i.e. monitoring costs)

21. Copyright © 2014 Pearson Education, Inc. 21 Thomas Friedman would argue there is globalization 1.0, 2.0, and 3.0 The World is Flat

22. Copyright © 2014 Pearson Education, Inc. 22 5 Key Factors For Enabling Globalization 3.0 Fall of the Berlin Wall – This led to the breakup of the eastern bloc, undermining of the socialist state, and spurred (along with Nixon) China to enter the global market MS Windows – Fi and foo I say to you Steve Jobs – Windows becomes the de facto operating system in the world. No more my computer can’t talk to yours The Internet – and Netscape. Allowed, seemingly, costless access to the WWW. No travel costs to communicate Falling Telecom Costs – Creation of the telecom infrastructure – Valacich calls this overinvestment, I disagree – Was the dot com bubble bad? Outsourcing – The previous four started a change in the decision to in v outsource aspects of the firm. As technology continued to advance, the distance grew.

23. Copyright © 2014 Pearson Education, Inc. 23 The Rise of Information Systems Outsourcing Outsourcing: moving of business processes or tasks to another company – Facilitated by declining telecommunication costs – Driven by cost reduction Reduced labor costs for low-skilled labor: Apple outsourcing manufacturing to China Reduced labor costs for relatively high-skilled labor: Boeing outsourcing 787 Aeronautical Engineering to Russia

24. Copyright © 2014 Pearson Education, Inc. 24 The Rise of Information Systems Outsourcing: Key Reasons for Outsourcing To reduce or control costs To free up internal resources To gain access to world-class capabilities To increase revenue potential of the organization To reduce time to market To increase process efficiencies To be able to focus on core activities To source specific capabilities or skills

25. Copyright © 2014 Pearson Education, Inc. 25 Opportunities of Operating in the Digital World (Traditional Firms) Falling Transportation Costs – Shipping a bottle of wine from Australia to Europe merely costs a few cents Falling Telecommunication Costs – These have helped create shared perspectives of behavior, desirable goods, and even forms of government Reaching Global Markets Accessing a Global Labor Pool – Highly skilled or low cost labor pools exist in many countries which are now economically accessible

26. Copyright © 2014 Pearson Education, Inc. 26 Opportunities of Operating in the Digital World (Information Firms) Reaching Global Markets – I can now access any market, any time, conditional on connectivity Accessing a Global Labor Pool – Highly skilled or low cost labor pools exist in many countries which are now economically accessible

27. Copyright © 2014 Pearson Education, Inc. 27 Challenges of Operating in the Digital World Government – Political instability – Regulatory: privacy, control, standards, censorship Geopolitical – Time zones, infrastructure – Workforce: welfare, demographics, expertise Cultural – Working with, providing services too

28. Copyright © 2014 Pearson Education, Inc. 28 I think it is time for a break… quick recap We have discussed – The rise of the information age – Megatrends in IT – Information Systems role in globalization – The role of the decision maker in IT strategy – How firms are leveraging IT

29. Copyright © 2014 Pearson Education, Inc. 29 Last Session We discussed – The rise of the information age – Megatrends in IT – Three Factors that lead to globalization Information Systems role in globalization Today – The role of the decision maker in IT strategy – How firms are leveraging IT – Does IT Matter? – IT Ethics

30. Copyright © 2014 Pearson Education, Inc. 30 Information Systems Defined The Rise of the Information Age Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Define globalization, describe how it evolved over time, and describe the key drivers of globalization. Information Systems Defined Learning Objective: Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

31. Copyright © 2014 Pearson Education, Inc. 31 What is an information system? Thoughts? – Combination of hardware, software, and telecom leveraged by human capital to transform data into information and then knowledge Why do we want to transform data?

32. Copyright © 2014 Pearson Education, Inc. 32 Data: The Root and Purpose of Information Systems Data is analyzed and processed into information When there is an ability to understand the information and make decisions using it, it becomes knowledge What is the benefit of transforming data this way?

33. Copyright © 2014 Pearson Education, Inc. 33 The Components of Information Systems Five Components of Information Systems: – People – Telecommunications – Hardware – Data – Software

34. Copyright © 2014 Pearson Education, Inc. 34 Three Types of Systems To Transform Data Automated office systems – Communication tools within the firm Benefit? Transaction processing systems – Used to facilitate the interaction between the firm and itself, and upstream or downstream partners Benefit? Management information systems – sorted TPS information which facilitates managerial decision making Benefit?

35. Copyright © 2014 Pearson Education, Inc. 35 Managerial decision making? What is the role of the knowledge worker here? These data and software fit into a system, they do not exist in a vacuum – What is their value? – The information contained in an IS can be leveraged by a firm or individual – Why? To press market advantage To create maintainable sustainable competitive advantage What IS professionals do is find this leverage point (same is true of the IS competent)

36. Copyright © 2014 Pearson Education, Inc. 36 Three Methods of Exploiting This Information Technical competency – Knowledge and skill about hardware, software, networking, and security the nuts and bolts approach Business competency – Understanding market forces and how the firm presses strategic advantage Porter’s puzzle Systems competency – The integration of technical and business competency – How does the information system allow the firm to exploit its advantage

37. Copyright © 2014 Pearson Education, Inc. 37 People: The Builders, Managers, and Users of Information Systems An ecosystem of Users, Builders, Managers, and those who study information systems As the use of information systems grows, so does the need for dedicated IS professionals Growing demand focused on those with advanced and/or unique skills

38. Copyright © 2014 Pearson Education, Inc. 38 IS Positions Rank Among the Best Jobs in America RankCareerJob Growth (10-year forecast)Median Pay 1Software developer32%$82,400 2Physical therapist30%$75,900 3Financial adviser30%$93,900 4Civil engineer24%$74,700 5Marketing specialist28%$52,200 6Management consultant24%$111,000 7IT consultant20%$96,500 8Database administrator20%$86,600 9Financial analyst20%$62,600 10Environmental engineer31%$81,200

39. Copyright © 2014 Pearson Education, Inc. 39 The Dual Nature of Information Systems The Rise of the Information Age Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Define globalization, describe how it evolved over time, and describe the key drivers of globalization. Information Systems Defined Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Learning Objective: by able to describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

40. Copyright © 2014 Pearson Education, Inc. 40 Question Does a great payroll or order entry system give your organization a competitive advantage? What if the order entry system is connected to a CRM system which helps you cross sell or up sell additional goods and services? Do either of these systems grant competitive advantage? What if I define competitive advantage as maintainable and sustainable?

41. Copyright © 2014 Pearson Education, Inc. 41 IT Doesn’t Matter In his 2003 article Nicholas Carr argues that IT does not matter What is Carr’s argument? Do you believe him? What if I told you no academic research has ever found a relationship between IT investment and firm productivity? – Would you believe me? PSST – I am telling the truth

42. Copyright © 2014 Pearson Education, Inc. 42 Types of Technology Infrastructure – Ubiquitous Building – Standardized CAT-5 Cable Commoditized – Everyone has it – It becomes cheap and provides lower margins – Becomes the cost of doing business (electricity) Proprietary – Possessed by few – Provides Advantage Frito-Lay ERP

43. Copyright © 2014 Pearson Education, Inc. 43 Types of Technology Consider the case of the Frito-Lay ERP Google owns YouTube Are these advantages fleeting?

44. Copyright © 2014 Pearson Education, Inc. 44 So why is the advantage fleeting? Two Reasons 1) Because technology happens in phases 2) Because strategy is a multi-period game

45. Copyright © 2014 Pearson Education, Inc. 45 Suggestions By Carr Spend Less – Returns are higher for those who invest sparingly Follow, Don’t Lead – Let others take the risk of the bleeding edge. Pickup IT once it is cheap and proven Focus on Vulnerabilities, Not Opportunities – Shore up the weak spots of the business. Let the strategy do the rest

46. Copyright © 2014 Pearson Education, Inc. 46 Carr’s Argument IT has become ubiquitous How can it provide an advantage if everyone has it? IT has become the cost of doing business Hint: There is a hole in Carr’s argument Can someone get to it before the end of the lecture

47. Copyright © 2014 Pearson Education, Inc. 47 What We Want! Recall Porter’s Puzzle From Day One – What do we search for as managers and consultants? Carr asserts that IT provides temporal advantage – Well that’s no good – IT is commoditized – IT can be imitated – IT is risky when unproven – IT is valuable when the advantage goes to a few – IT is standardized – IT is replicable

48. Copyright © 2014 Pearson Education, Inc. 48 Greenwood will not be tricky IT is commoditized IT can be imitated IT is risky when unproven IT is valuable when the advantage goes to a few IT is standardized IT is replicable

49. Copyright © 2014 Pearson Education, Inc. 49 SHAZAM! Just in time inventory is commoditized Just in time inventory can be imitated Just in time inventory is risky when unproven Just in time inventory is valuable when the advantage goes to a few Just in time inventory is standardized Just in time inventory is replicable

50. Copyright © 2014 Pearson Education, Inc. 50 SHAZAM AGAIN! A patentable pharmaceutical is commoditized A patentable pharmaceutical can be imitated A patentable pharmaceutical is risky when unproven A patentable pharmaceutical is valuable when the advantage goes to a few A patentable pharmaceutical is standardized A patentable pharmaceutical is replicable That just happened!

51. Copyright © 2014 Pearson Education, Inc. 51 What does Carr Miss?

52. Copyright © 2014 Pearson Education, Inc. 52 What does Carr Miss? Use – Nowhere does Carr discuss how people use IT, he only looks at investment.

53. Copyright © 2014 Pearson Education, Inc. 53 What does Carr Miss? Use – Nowhere does Carr discuss how people use IT, he only looks at investment. IT Success vs. IT Failure – There are risks associated with making business gambles

54. Copyright © 2014 Pearson Education, Inc. 54 What does Carr Miss? Use – Nowhere does Carr discuss how people use IT, he only looks at investment. IT Success vs. IT Failure – There are risks associated with making business gambles Branding and Differentiation in Service

55. Copyright © 2014 Pearson Education, Inc. 55 What does Carr Miss? Use – Nowhere does Carr discuss how people use IT, he only looks at investment. IT Success vs. IT Failure – There are risks associated with making business gambles Branding and Differentiation in Service Imitation Cannot be Stopped – Preposterous to the point of utter absurdity

56. Copyright © 2014 Pearson Education, Inc. 56 What does Carr Miss? Use – Nowhere does Carr discuss how people use IT, he only looks at investment. IT Success vs. IT Failure – There are risks associated with making business gambles Branding and Differentiation in Service Imitation Cannot be Stopped – Preposterous to the point of utter absurdity Strategic Positioning and Fit

57. Copyright © 2014 Pearson Education, Inc. 57 This is a transition slide

58. Copyright © 2014 Pearson Education, Inc. 58 IS Ethics The Rise of the Information Age Describe the characteristics of the digital world and the advent of the Information Age. Evolution of Globalization Define globalization, describe how it evolved over time, and describe the key drivers of globalization. Information Systems Defined Explain what an information system is, contrasting its data, technology, people, and organizational components. The Dual Nature of Information Systems Describe the dual nature of information systems in the success and failure of modern organizations. IS Ethics Learning Objective: Describe how computer ethics impact the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

59. Copyright © 2014 Pearson Education, Inc. 59 A Brief Statement on Ethics Remember: Unethical and illegal are not synonymous... don't confuse them, you need to draw your own line

60. Copyright © 2014 Pearson Education, Inc. 60 Computer Ethics What are computer ethics? – Issues and standards of conduct pertaining to the use of information systems

61. Copyright © 2014 Pearson Education, Inc. 61 Information Privacy What information should you have to reveal? What information you might want to keep private? What is identity theft

62. Copyright © 2014 Pearson Education, Inc. 62 Information Privacy (cont’d) Companies seem to know about our every move—how much information do we need to reveal? Amazon.com is famous for personalization What are the costs?

63. Copyright © 2014 Pearson Education, Inc. 63 Information Accuracy Who is responsible for ensuring of the authenticity and fidelity of information?

64. Copyright © 2014 Pearson Education, Inc. 64 Information Property Who owns information about individuals? How can this information be sold and exchanged?

65. Copyright © 2014 Pearson Education, Inc. 65 Data Privacy Statements Company maintaining the database with customer information legally owns it – Is free to sell it? – Must it ensure proper data handling practices? Social networking complicates matters – Complexity of privacy settings – Friends can tag you without your knowledge.

66. Copyright © 2014 Pearson Education, Inc. 66 Information Accessibility Who has the right to monitor the information?

67. Copyright © 2014 Pearson Education, Inc. 67 The Need for a Code of Ethical Conduct: Computer Ethics Institute Guidelines The guidelines prohibit: – Using a computer to harm others – Interfering with other people’s computer work – Snooping in other people’s files – Using a computer to steal – Using a computer to bear false witness – Copying or using proprietary software without paying for it – Using other’s resources without authorization or compensation – Appropriating other people’s intellectual output The guidelines recommend: – Review social consequences of programs and systems you design – Use computers in ways that show consideration and respect for others

68. Copyright © 2014 Pearson Education, Inc. 68 The Digital Divide Many people are being left behind in the information age – Strong linkage between computer literacy and a person’s ability to compete in the information age – People in rural communities, the elderly, people with disabilities, and minorities lag behind national averages for Internet access and computer literacy – The challenges in overcoming the digital divide are even greater in developing countries Consider the prospect of job search without the internet Now consider the competitive advantage you have

69. Copyright © 2014 Pearson Education, Inc. 69 A thought exercise… How do these firms use IT?

70. Copyright © 2014 Pearson Education, Inc. 70 Recap Types of IT Systems IT Doesn’t Matter – Validity of Carr’s Arguments – Weaknesses of his argument IT and Ethics – Components – Need for a code of ethical conduct – Implications of the digital divide