1. Business Driven Information Systems

2. INFORMATION SYSTEMS IN BUSINESS
SECTION 1.1
INFORMATION SYSTEMS IN BUSINESS
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3. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
Information technology is everywhere in business
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4. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
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5. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
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6. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
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7. INFORMATION TECHNOLOGY’S ROLE IN BUSINESS
Organizations typically operate by functional areas or functional silos
Functional areas are interdependent
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8. INFORMATION TECHNOLOGY BASICS
Information technology (IT)
Information technology is an important enabler of business success and innovation
Information technology (IT) – a field concerned with the use of technology in managing and processing information
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9. INFORMATION TECHNOLOGY BASICS
Management information systems (MIS)
MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources
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 not technology
MIS is a business function
Most organizations have an IT department that is responsible for performing the MIS function
This is similar to an organization having an Accounting department that is responsible for performing the accounts payable and accounts receivable functions
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10. Business intelligence
INFORMATION
Data
Information
Business intelligence
Data - raw facts that describe the characteristic of an event
Information - data converted into a meaningful and useful context
Business intelligence – applications and technologies that are used to gather, provide access to, and analyze data and information to support decision-making efforts
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11. IT RESOURCES People use Information technology to work with
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12. IT CULTURES Organizational information cultures include:
Information-functional culture
Information-sharing culture
Information-inquiring culture
Information-discovery culture
Information-Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed.
Information-Sharing Culture - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.
Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.
Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.
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13. 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
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14. MEASURING IT’S SUCCESS
Questions executives should ask regarding IT systems
Is the internal IT operation performing satisfactorily?
Should I outsource some or all of the IT operations?
How is my outsourcer performing?
What are the risk factors to consider in an IT project?
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15. MEASURING IT’S SUCCESS
Key performance indicator (KPI)
Metrics are detailed measures that feed KPIs
Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals
Key performance indicator (KPI) – measures that are tied to business drivers
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16. EFFICIENCY AND EFFECTIVENESS METRICS
Efficiency IT metric
Effectiveness IT metric
Efficiency IT metric – measures the performance of the IT system itself including throughput, speed, and availability
Effectiveness IT metric – measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases
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17. BENCHMARKING – BASELINING METRICS
Benchmarks
Benchmarking
Benchmarks – baseline values the system seeks to attain
Benchmarking – a process of continuously measuring system results, comparing results (benchmark values), and identifying improvements
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18. THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS
Efficiency IT metrics focus on technology and include:
Throughput
Transaction speed
System availability
Information accuracy
Web traffic
Response time
Efficiency metrics monitor technology
Efficiency metrics are easier to measure and monitor than effectiveness metrics
Throughput - the amount of information that can travel through a system at any point
Transaction speed - the amount of time a system takes to perform a transaction
System availability - the number of hours a system is available for users
Information accuracy - the extent to which a system generates the correct results when executing the same transaction numerous times
Web traffic - includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a Web page
Response time - the time it takes to respond to user interactions such as a mouse click
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19. THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS
Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:
Usability
Customer satisfaction
Conversion rates
Financial
Effectiveness metrics are more difficult to measure and monitor, for example, how do you measure customer satisfaction?
Which metrics are more important to a company like eBay – efficiency or effectiveness?
Both - eBay continuously measures both efficiency and effectiveness
The company must ensure constant availability and reliability of its systems
Usability - The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.
Customer satisfaction - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.
Conversion rates - The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up,and pop-under ads on the Internet.
Financial - Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).
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20. THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS
Security is an issue for any organization offering products or services over the Internet
It is inefficient for an organization to implement Internet security, since it slows down processing, however, to be effective it must implement Internet security
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21. THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS
Ideally, an organization should operate in the upper right-hand corner
Operating in the upper left-hand corner or the lower right-hand corner may be in line with an organization's particular strategies
No organization would want to operate in the lower left-hand corner
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22. BUSINESS STRATEGY SECTION 1.2 CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Cyrus McCormick’s Reaper
On a hot summer day in 1831, several dozen farmers and hired laborers gathered in a wheat field in Virginia to watch a horse-drawn wood-and-iron device mow down rows and rows of golden wheat. On this day, twenty-two-year-old Cyrus McCormick demonstrated the reaper that his father invented and changed history as the mechanization of farming began. Soon the process of industrialization began, which turned the nation’s economy into the world’s most productive workforce. As the historian William Hutchinson noted, “Of all the inventions during the first half of the nineteenth century which revolutionized agricultures, the reaper was probably the most important.”
Interestingly, the McCormicks were not the only individuals to build and develop a reaper. In fact, many other companies and individuals developed similar technology; however, Cyrus McCormick invented the business of making reapers and selling them to the farmers of America and foreign countries. His real genius was in the area of gaining and protecting patents for his technology. McCormick turned the reaper into a commercially viable product and introduced many new business practices including free trials, money-back guarantees, and installment payment plans.
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23. IDENTIFYING COMPETITIVE ADVANTAGES
To survive and thrive an organization must create a competitive advantage
Competitive advantage
First-mover 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
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24. IDENTIFYING COMPETITIVE ADVANTAGES
Organizations watch their competition through environmental scanning
Environmental scanning
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
Environmental scanning – the acquisition and analysis of events and trends in the environment external to an organization
Technology has the opportunity to play an important role in environmental scanning
For example, Frito-Lay, a premier provider of snack foods such as Cracker Jacks and Cheetos, 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. Frito-Lay uses this information to gain business intelligence on everything from how well competing products are selling to the strategic placement of its own products.
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25. THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS
Porter’s Five Forces Model
Buyer power – high when buyers have many choices of whom to buy from and low when their choices are few
Supplier power – high when buyers have few choices of whom to buy from and low when their choices are many
Threat of substitute products or services – high when there are many alternatives to a product or service and low when there are few alternatives from which to choose
Threat of new entrants – high when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market
Rivalry among existing competitors – high when competition is fierce in a market and low when competition is more complacent
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26. BUYER POWER Loyalty program
Buyer power – high when buyers have many choices of whom to buy from and low when their choices are few
Loyalty program – rewards customers based on the amount of business they do with a particular organization
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27. SUPPLIER POWER Supply chain
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
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28. Business-to-Business (B2B) marketplace
SUPPLIER POWER
Business-to-Business (B2B) marketplace
Private exchange
Reverse auction
Business-to-Business (B2B) marketplace – an Internet-based service that brings together buyers and sellers
Private exchange – single buyer posts needs and opens bidding to any supplier
Reverse auction –increasingly lower bids are solicited from organizations willing to supply product or service at a lower price
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29. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES
Switching cost
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
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30. THREAT OF NEW ENTRANTS Entry barrier
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
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31. RIVALRY AMONG EXISTING COMPETITORS
Although competition is always more intense in some industries than in others, the overall trend is toward increased competition in just about every industry
Rivalry among existing competitors – high when competition is fierce in a market and low when competition is more complacent
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32. THE THREE GENERIC STRATEGIES
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33. VALUE CREATION Business process Value chain
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 for each customer
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34. VALUE CREATION Value Chain
Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide after-sales services
Support value activities support the primary value activities
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35. VALUE CREATION Value chains with Porter’s Five Forces
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)
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