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CHAPTER 1

CHAPTER 1. INFORMATION SYSTEMS IN BUSINESS Opening Case Apple – Merging Technology, Business, and Entertainment. Chapter One Overview. SECTION 1.1 – INFORMATION SYSTEMS IN BUSINESS Information Technology’s Role in Business Information Technology Basics

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CHAPTER 1

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  1. CHAPTER 1 INFORMATION SYSTEMS IN BUSINESS Opening Case Apple – Merging Technology, Business, and Entertainment

  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. 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

  7. Information Technology’s Impact on Business Operations

  8. Information Technology’s Impact on Business Operations

  9. Information Technology’s Impact on Business Operations • Organizations typically operate by functional areas or functional silos • Functional areas are interdependent

  10. INFORMATION TECHNOLOGY BASICS • Information technology (IT) – any computer-based tool that people use to work with information and support the information and information-processing needs of an organization • Information technology is an important enabler of business success and innovation. How it is used is key.

  11. INFORMATION TECHNOLOGY BASICS • Management information systems (MIS) – the function that plans for, develops, implements, and maintains IT hardware, software, and applications that people use to support the goals of an organization • MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

  12. INFORMATION TECHNOLOGY BASICS • When beginning to learn about information technology it is important to understand the following: • Information • IT resources • IT cultures

  13. Information • Data - raw facts that describe the characteristic of an event • Information - data converted into a meaningful and useful context

  14. IT Resources • People use • Information technology to work with • Information

  15. Organizational information cultures • Information-functional culture – employees use info to control / influence others • Information-sharing culture – info is shared across departments to solve problems. Trust exists between departments and employees

  16. Organizational information cultures • Information-inquiring culture – employees search across departments to info about current trends and new directions • Information-discovery culture – employees are open to new insights, seek ways to create competitive advantages

  17. 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)

  18. 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

  19. 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

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

  21. 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

  22. Improving Communications • 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

  23. MEASURING INFORMATION TECHNOLOGY’S SUCCESS • Key performance indicator(KPI) – measures that are tied to business drivers • 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

  24. Efficiency and Effectiveness Metrics • 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

  25. Benchmarking – Baselining Metrics • Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain • Benchmarking – a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance

  26. 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

  27. 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

  28. OPENING CASE QUESTIONSApple - Merging Technology, Business and Entertainment • What might have happened to Apple if its top executives had not supported investment in iPods? • Formulate a strategy for how Apple can use efficiency IT metrics to improve its business • Formulate a strategy for how Apple can use effectiveness IT metrics to improve its business

  29. OPENING CASE QUESTIONSApple - Merging Technology, Business and Entertainment 4. Why would it be unethical for Apple to sell its iTunes customer information to other businesses? 5. Evaluate the effects on Apple’s business if it failed to secure its customer’s information and it was accidentally posted to an anonymous Web site

  30. SECTION 1.2 BUSINESS STRATEGY

  31. LEARNING OUTCOMES • Explain why competitive advantages are typically temporary • List and describe each of the five forces in Porter’s Five Forces Model • Compare Porter’s three generic strategies • Describe the relationship between business processes and value chains

  32. 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

  33. 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 • 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

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

  35. 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

  36. 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

  37. 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 many buyers and sellers

  38. Supplier Power • Two types of business-to-business (B2B) marketplaces • Private exchange – a single buyer posts its needs and then opens the bidding to any supplier who would care to bid • Reverse auction – an auction format in which increasingly lower bids are solicited from organizations willing to supply the desired product or service at an increasingly lower price

  39. 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 from which to choose • Switching cost – costs that can make customers reluctant to switch to another product or service

  40. 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 to entering a market • Entry barrier – a product or service feature that customers have come to expect from organizations in a particular industry and must be offered by an entering organization to compete and survive

  41. 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

  42. Discussion Question • So why do you think CIOs cite customer service as their primary concern?

  43. THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS • Organizations typically follow one of Porter’s three generic strategies when entering a new market • Broad cost leadership • Broad differentiation • Focused strategy

  44. 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 for each customer

  45. Value Creation Value Chain

  46. OPENING CASE QUESTIONSApple - Merging Technology, Business and Entertainment • Did Apple gain a competitive advantage from its decision to invest in an online music business? • How can Apple use environmental scanning to gain business intelligence? • Using Porter’s Five Force Model, analyze Apple’s buyer power and supplier power • Which of the three generic strategies is Apple following? • Which of Porter’s Five Forces did Apple address through its introduction of the iPod?

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