1. Session #13: Course Review
MI 720 IT for Management
Session #13: Course Review

2. Session #13: Course Review
Agenda
Team Presentations
Final Exam Information
Course Review
Robert G. Fichman – MI 720 IT for Management Slide 2

3. Robert G. Fichman – MI 720 IT for Management Slide 3
Final Exam
Will be held Friday Dec 16th 11am-1:00 pm
Section 1: Fulton 130, Section 2: Fulton 150
Main Focus: Managerial, not technical
Except, you have to understand key features of technologies to really understand managerial implications…
Exam will be open book & open note, closed computer
Emphasis: Analysis and applications
Format: Essay
Will have some choice on which questions to answer
Will curve if necessary. Rarely necessary.
Robert G. Fichman – MI 720 IT for Management Slide 3

4. What are you responsible for?
All required readings & cases, all class discussions
Readings: Should have mastered key concepts and frameworks
Especially important: Lecture notes (Sessions 2, 10, 11, 12), Gallaugher chapters on Strategy and Social Media, “Options Thinking” Article
Cases: Should be familiar with the high points of each case, and know where to look for reminders on key details. But don’t need to memorize details
See study guide to be posted on the wiki for details
Not responsible
Tech basics web site, optional readings, team wiki projects, blog postings, individual wiki pages
Robert G. Fichman – MI 720 IT for Management Slide 4

5. Robert G. Fichman – MI 720 IT for Management Slide 5
Course Goals
Prepare students to be astute and critical observers of IT in business and society
Tech resources: Tech basics page, Team Project pages, Student blogs
Case studies: NetFlix, Harrah’s, Google, Threadless
Articles: Friedman (World is Flat)
Prepare students to take on IT responsibilities of the general manager
Identify the strategic role of IT (if any)
NetFlix, Shinsei, Harrah’s, Zara, ITC eChoupal
Select the right IT and justify the investment
Zara, Global Airlines
Managing IT adoption & deployment
Rich-Con, Shinsei Bank, BP, eChoupal
Exploiting IT appropriately to maximize value after implementation
IFA/ShopSense, eChoupal
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6. Robert G. Fichman – MI 720 IT for Management Slide 6
Unique Economics of IT
Exponential improvements in price performance
Digital products, Long Tail economics
Network effects
One-to-one marketing
Paid search
Peer-production
Crowdsourcing
Option value
Complements/complementarities
Robert G. Fichman – MI 720 IT for Management Slide 6

7. Key cases and frameworks by session
#2 - NetFlix
#3 - Rich-Con Steel
#4 - Shinsei Bank
#5 - Harrah’s Entertainment Inc.
#6 - Zara: IT for Fast Fashion
#7 - Global Airlines
#8 - Google Inc.
#9 - Threadless
#10 – BP Advocate Model
#11 - The Dark Side of Customer Analytics – IFA/ShopSense
#12 - The ITC eChoupal Initiative
#2 - Distinctive Characteristics of IT
#4 - IT innovation types, process/stages
#5 - Conditions for sustainable competitive advantage from IT
#5 - Creating an analytic capability
#7 - How to incorporate “options thinking” in to IT project mgmt
#9 - Determinants of value generated by social media communities
#10 - Innovation diffusion drivers & pitfalls; IT deployment barriers and tactics
#11 - Ethical reasoning process
#12 - Determinants of IT business value

8. Session 2: NetFlix/Distinctive Characteristics of IT
Fundamental Question
What is it about IT that make it such a strong driver of innovation and value creation?
NetFlix Case - Goals
Learn about an interesting IT-enabled business model
Apply framework (below) to a tangible example
Framework - Distinctive IT Characteristics:
Moore’s Law
Digitalization of content
Network effects/virtuous cycles in adoption
Switching costs and lock-in
Key points:
Each characteristic has key implications for value creation, and for IT strategy and management
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9. Framework: Network Effects/Virtuous Cycles
Many kinds of IT increase in value to each adopter in direct proportion to the other number of other adopters
Sources of network effects (Brian Arthur)
Direct “network” externalities (consumer-to- consumer)
Producer side effects (EOS, learning curves)
Ecosystems (complementary products, services and “people”)
Increased
value per adopter
What are the specific
mechanisms behind this
cycle?
More
adopters
Robert G. Fichman – MI 720 IT for Management Slide 9

10. Framework: Implications of Network Effects:
Distinctive adoption dynamics
Self-reinforcing adoption processes (virtuous cycles)
“Standards wars”
Winner-take-all outcomes
Path dependency
Lock-in
Implications for vendors
Understand “natural” sources of network effects
If strong, much attention to managing virtuous cycles
Any way to ADD network effects to product/service?
Implications for adopters
Pick the winner! Or at least, preserve a migration path…
Robert G. Fichman – MI 720 IT for Management Slide 10

11. Session 3: Rich-Con/IT Roles of the General Manager
Central question:
How can managers effectively identify, select, configure and deploy enterprise technologies?
Goals of the Rich-Con case:
Introduce the first three of the four IT roles/responsibilities (strategy, selection, deployment)
Introduce how modern enterprise IS works (operations vs. analysis, integrated vs. non-integrated systems)
Understand why enterprise-level IT projects are inherently difficult/risky
To see that IT implementation and use are primarily managerial phenomena, not technical ones, and therefore not primarily the responsibility of outside vendors or even an internal IT department
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12. Session 4: Shinsei Bank/ IT Innovation Fundamentals
Central Question:
How can IT innovation drive business innovation, and vice- verse?
Goals of the Shinsei Bank Case:
Reinforce formal innovation terminology and concepts
Show exemplar of process and product innovation
Start understanding how process and product innovation relate and entwine
Illustrate importance of a robust/flexible IT architecture
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13. Framework: IT Innovation - Types
“Product” Innovation
(New products, services, business models)
“Process” Innovation
(New business processes, technologies, policies, structures…)
IT-Embodied Innovation
(the digital technology itself is the innovation) 1 2 4 3
IT-Enabled Innovation
(the digital technology enables something else)
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14. Framework: Innovation Stages
Product Innovation
Process Innovation
Discovery
Generation, Selection
Development
Packaging & Configuration
Diffusion
Deployment & Assimilation
Impacts
Appropriation
& Transformation
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15. Robert G. Fichman – MI 720 IT for Management Slide 15
Session #5: Harrah’s /IT Strategy & Competitive Advantage, Business Analytics
Central questions:
What are the conditions for a sustainable competitive advantage from some IT resource (system, initiative)?
What are the diverse organizational elements that have to come together to create a genuine analytic capability?
Goals of the Harrah’s Case
Understand what one-to-one (database) marketing and business analytics look like “on the ground”
Understand what it takes (beyond data and technology) to create an genuine analytic capability
Provide an opportunity to discuss the conditions for creating a sustainable competitive advantage from IT
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16. Robert G. Fichman – MI 720 IT for Management Slide 16
Framework: IT & Sustainable Competitive Advantage (Gallaugher, Chp 2 Strategy & Techology)
What is sustainable competitive advantage?
Determinants of sustainability: V.R.I.N.
“Resources” that are valuable, rare, inimitable, non- substitutable
How can IT provide competitive advantage? Use IT:
… to help build an imitation resistant value chain
… to build/reinforce a brand
… to create/reinforce scale economies
… to impose switching costs on buyer/suppliers
… to differentiate your product
… to create positive network externalities (network effects)
…to create new distribution channels
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17. Framework: Building an Analytic Capability (Davenport et al 2003)
Business Analytics: Using detailed transaction level data on some entity (customers, suppliers, products, processes) to build sophisticated mathematical models that categorize and/or predict things about that entity
Context
Strategy
Skills &
Experience
Organization
& Culture
Technology
& Data
Transformation
Outcome
Analysis
Decision
Making
Financial
Process &
Program
Behavioral
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18. Robert G. Fichman – MI 720 IT for Management Slide 18
Session 5: Zara/IT Investment Selection & Justification, Supply Chain Management
Central question:
How can managers do an effective job of selecting the right IT to meet organizational goals?
Goals of the Zara Case (Session #6)
Provide a rich example of how a radically different business model and supply chain strategy is enabled by IT
Reinforce the importance of a good qualitative process of selection/justification
Demonstrate the value of taking a discriminating approach to IT investment
If low-tech or no tech is needed, fine. Keeps costs low
If high-tech is needed, not shy about being leading edge
Robert G. Fichman – MI 720 IT for Management Slide 18

19. Session 7: Global Airlines/IT Investment, Options Thinking
Central question:
How can managers use “options thinking” to improve IT investment decision and IT project management?
Goals of the Global Airlines Case (Session #7)
Illustrate how real options/options thinking can be used to:
PROPERLY quantify things that would otherwise be left as intangibles (“flexibility”, “risk”)
Provide guideline on structuring and managing projects to maximize value
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20. Framework: Real Options & Options Thinking
Real options in an IT context:
A small investment that gives information about the payoffs of a larger follow on investment
The opportunity to redirect the path of a project through active management based on new information
“Options Thinking”
Understanding that managerial flexibility has a value
Taking the value of flexibility into account (in some way) in making investment decisions
Finding ways to structure and manage IT investments so as to create and exploit flexibility (i.e., embedding options)
Passive Management
Active Management
© Kellogg School of Management
Robert G. Fichman – MI 720 IT for Management Slide 20

21. Framework: Common types of Real Options
Deferral Option: A decision on whether to invest can be deferred for some period without imperiling the potential benefits
Abandon Option: A project can be terminated midstream and still redeploy remaining project resources
Stage Option: A project can be divided into distinct stages where pursuit of each stage is contingent on a reassessment of costs and benefits at the time the preceding stage is completed
Strategic Growth Option: An initial baseline system opens the door to pursue a variety of potential follow-on opportunities
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22. Robert G. Fichman – MI 720 IT for Management Slide 22
Framework: Guidelines for Bringing Options Thinking into Project Management
Place a value on flexibility in some systematic way
Be willing to initiate high-risk/high-reward projects when the risks can be contained with options
Look for ways to shift “must do” product elements to “may do”
At the outset, explicitly identify factors that create uncertainty
Use incremental project funding and staging
Use design practices that create growth options by promoting future flexibility of delivered applications
Use implementation tactics that create operating options
Build-in explicit options checkpoints
Nominate an “exit champion” to balance the project champion
Create incentives for proper options exercise
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23. Takeaways on Real Options
Any time managers have the flexibility to defer, abandon, stage, grow, scale, or switch an investment there is a potential option value to be had
In the right circumstances, this value can be considerable
This potential value will only be realized if managers learn to recognize and embed these options (“options thinking”)
Embedded options have a value whether or not managers go the extra step of computing that value
But quantifying the value can lead to better decisions
Options thinking is not easy
Requires new project manage guidelines
Cultural changes
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24. Session 7: Google/Sponsored Internet Search
Central question:
What impact is Internet Search having on the world of advertising?
Goals of the case – to understand how “Google works”:
Technically, i.e., how its search technology determines the order of search results, and how it differs from the search technologies that came before.
As a business model, i.e., how Google makes money with Adwords and Adsense, and the important implications of Google’s business model for the advertising business.
In terms of culture and philosophy
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25. Session 8: Web 2.0 & Social Media/Threadless
Central Questions:
What is “peer production”? What is “crowdsourcing”?
What determines the extent and nature of the value generated by social medial communities?
How do various Web 2.0 techs work? What are their essential features?
Goals of the Threadless Case
Provide exposure to a unique “crowdsourcing” model of product development and innovation
Provide opportunity to analyze the conditions leading to successful social media communities of this sort
Peer Production: People collaborating on a large scale, usually without pay, to produce economic products without hierarchical control (firms) or market exchanges (prices, contracts) to guide them.
Crowdsourcing: The act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call [Jeff Howe]
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26. Framework: The Value of Social Media Communities
Technology
- Features
People
Motivations
Knowledge
Tastes
Governance
Norms
Rules
Patterns of Interaction & Use
Value
- Nature
- Extent
Web 2.0
(W2.0)
Role: A platform for “peer production” and an enabler for the “gift” economy
Enterprise (E2.0)
Role: a new platform for collaboration and knowledge mgmt
within firms
Community Relations (CR2.0)
Role: A new way to reach, understand, & collaborate w/ customers (and other stakeholders)
Within Organizations
In Society
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27. Key Web 2.0 Uses & Features (adapted from Gallaugher 2011)
 Web 2.0 Platform
Key Uses
Features
Blogs
Share ideas, obtain feedback, mobilize a community.
- Reverse chronology
- Comment threads, trackback
- Persistence
- Searchability, Tags
Wikis
Collaborate on common tasks or to create a common knowledge base.
- All changes are attributed
- Complete revision history, easy reversion
- Automatic notification of updates
- Searchability, Tags
Electronic Social Network
Discover and reinforce affilia-tions, identify experts, message individuals or groups, share media.
- Detailed personal profiles using multimedia
- Affiliations with groups
- Affiliations with individuals
- Messaging, public discussions, media sharing
- “Feeds” of recent activity among members
Social Tagging
Mark content with key words to enhance searching and filtering.
- User defined keywords
- Key words are multi dimensional
- Can search/filter content based on own/other’s key words
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28. Session 10: Innovation Adoption/Deployment, BP
Central questions (from the lecture notes):
What sorts of drivers and pitfalls determine the rate and pattern of IT innovation diffusion?
What typical barriers do managers face during IT implementations, and what managerial tactics are available to overcome them?
Goals of the BP Case:
Provide an example of how to design and manage an internal advanced technology group to promote IT- enabled innovation
Illustrate the trend towards a more “open” approach to innovation, one that encourages a much freer flow of ideas between a firm and its ecosystem
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29. Framework: Analyzing Diffusion Trajectories
Diffusion Drivers
1. Inherent Superiority (aka, “relative advantage”)
2. Other Generic Attributes (compatibility, low complexity, trialability, observability)
3. Network Effects (network externalities, producer EOS/Learning, ecosystem)
Technology S-Curve
Time %
Adop-
tion
100%
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30. Framework: Diffusion Pitfalls
1. Losing a Standards War
First mover advantage
Leveragable installed base
Strong IP protection
Robust ecosystem
Strong brand/reputation
High switching costs
2. Large Assimilation Gap
Time %
“Adoption”
100%
Acquisition
Thorough
assimilation
Assimilation
Gap
3: Bandwagon Pressures and “Hype”
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31. Framework: Implementation Barriers & Tactics
High uncer-tainty about costs & benefits
Do an especially thorough technology evaluation
Do technology scanning to gain deployment knowledge
Invest in hands-on learning (trials, prototypes, pilots)
Use incremental implementation
Organizational inertia
Empower an Innovation Champion
Align with a crisis (or “construct” one?)
Foster a culture of innovation
Org Learning & Murphy Curve
Do a self-assessment: can we handle it?
Promote organizational learning
Resistance to change
Diagnose likely forms of resistance and develop counter measures
Promote end user involvement in adoption and deployment
Promote grass-roots diffusion with lead users
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32. Framework: The Murphy Curve
Adjustment costs
Start up
Historic performance
Expected performance
Actual performance
Time
The Murphy Curve
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33. Session 11: IFA ShopSense Case/IT Ethics
Central Questions:
How can managers make ethically-sound decisions surrounding the use of IT?
How can managers avoid creating an environment that encourages ethically questionable behavior?
Goals of the IFA/ShopSense Case
Gain exposure to the potential “dark side” of customer analytics
Learn how to apply an ethical reasoning process
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34. Framework: The ethical reasoning process
Choose (in advance) the ethical principle to be used to guide you for a class of decisions
e.g., Utilitarianism, Rawls' "Veil of Ignorance" Principle, Universal Application Principle , Golden Rule, Shining Light Principle , Human Rights
Identify the key facts that pertain to a particular decision situation.
Apply your ethical principle.
Draw the correct logical conclusion about the suggested ethical course of action based on the facts of the situation, and then choose that course of action.
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35. Five Barriers to an Ethical Organization [Brazerman & Tenbrunsel 2011]
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36. Session 12: ITC eChoupal/IT Business Value
Central question:
What key factors affect the level of business value produced by a given level of IT investment?
Goals of ITC eChoupal Case
Provide an example of the trend towards social entrepreneurship model
Provide exposure to a rich example of effective IT deployment and exemplary IT business value creation
Robert G. Fichman – MI 720 IT for Management Slide 36

37. Framework: Business Value of IT Framework
A. Level of IT
Investment
B3. Organizational
Practices & Assets
(“Digital Organization”)
B4. IT Capabilities
C. How IT is
Deployed
and Used
D. IT-Enabled
Business
Value
B2. Technological &
Competitive
Context
B1. IT & Business
Strategy
What key factors affect the level of business value produced by a given level of IT investment?
Robert G. Fichman – MI 720 IT for Management Slide 37

38. Framework: Complementary Organizational Practices
Automation of routine tasks
Highly skilled labor
Decentralized decision making
Improved info flow vertically & laterally
Strong performance-based incentives
Increased emphasis on training and recruitment
A. Level of IT
Investment
B3. Complementary Organizational
Practices
B4. IT Capabilities
C. IT Deployment
D. IT-Enabled
Business
Value
B2. Technological &
Competitive
Context
B1. IT & Business
Strategy
Robert G. Fichman – MI 720 IT for Management Slide 38

39. Framework: IT Capabilities
IT Human Assets (senior management strategic IT vision and support; highly skilled IT staff)
IT Technical Assets (robust IT architecture and infrastructure)
IT Relationship Assets (effective management of internal and external linkages)
IT Processes (defining an IT strategy & architecture; valuing & justifying IT investments; deploying IT systems; operating IT efficiently & reliably.)
A. Level of IT
Investment
B3. Complementary Organizational
Practices
B4. IT Capabilities
C. IT Deployment
D. IT-Enabled
Business
Value
B2. Technological &
Competitive
Context
B1. IT & Business
Strategy
Robert G. Fichman – MI 720 IT for Management Slide 39

40. Framework: Conclusions
Business value (D) does not automatically flow from IT investments (A)
Investment has to be joined with favorable positions on four related organizational elements (B1-B4)
The resulting IT systems have to actually be assimilated, and joined with initiative-specific organizational changes (C)
Certain general organizational practices and assets (B3) complement most kinds of IT investment
But each IT initiative has unique complements also
IT Capabilities (B4) can be judged by results, but they are driven by valuable IT assets and valuable IT processes
Non-IT managers play a crucial role in building and sustaining IT capabilities
Robert G. Fichman – MI 703 Computer Information Systems Slide 40