Chapter 3: Creating Business Value

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Ryerson University
Information Technology Management
ITM 102
David Atkinson

CHAPTER 3 CREATING BUSINESS VALUE BUSINESS ORGAINZATION AND BUSINESS PROCESSES • Business strategy: a broad-based formula for how business is going to compete, what its goals should be, and what plans and policies will be needed to carry out goals • If properly constructed, strategy creates business value and competitive advantage • PORTER’S FIVE FORCES MODEL different factors for competitive rivalry (i.e. barriers of entry, substitutions, bargaining power of buyers and suppliers) • Open systems model: business operates by transforming inputs into outputs and constantly interacting with environment STAKEHOLDERS AND BOUNDARIES IN THE BUSINESS ENVIRONMENT • Stakeholder: person or entity that has an interest in and influence on how business will function • External or internal relative to system • Influence all depends on how organization’s decision makers perceive in relation to stakeholder’s interest • Organizational boundaries: must be aware of what is going on in environment so it can take steps to remain competitive by responding to opportunities or threats • Needs external information to run operations or processes on daily basis HOW BUSINESSES ORGANIZE TO CREATE VALUE • Businesses possess structures that organize information, responsibility, and authority • Four types of organizational structure: 1. FUNCTIONAL AND DECENTRALIZED STRUCTURE: lines of authority (who has right to tell whom to do what) and communication are vertically oriented. 2. MATRIX STRUCTURE: blends functional and decentralized organizational structures • Top to bottom: organized as functional structure • Left to right : follows a product-focused (or customer-focused) structure that creates teams across business units 3. DECENTRIALIZED BY GEOGRAPHY BUSINESS PROCESS • Business process: collection of activities that takes one or more kinds of input and creates an output (product or service) that is of value to customer • Process shown as INPUT -> PROCESS -> OUTPUT • Hundreds of processes running business; linked together and interact with one another to achieve various goals • Sub-processes is one or more task that accomplish significant portion or stage of process • IGOE: method used in process mapping that illustrates inputs, guides, outputs, and enablers of process • INPUTS resources needed to start a process (i.e. data, information, knowledge, labour, raw materials, capital, and technology) • GUIDES rules or policies within which a process must operate • OUTPUTS results of a process • ENABLERS special kind of input or resource that facilitates a process • Feedback: special kind of measurement created by business process that is then returned to system (“fed back”) to control system’s future inputs, processes, and outputs • Such as error or failure rates, processing speeds, process costs, and information on approvals and controls required in process • Use feedback to monitor efficiency and effectiveness of given process • Business process reengineering (BPR): study of business processes to find ways of making them more efficient • Goal is to reduce cost, increase throughput and speed, and increase quality and service DEFINING COMPETITIVE ADVANTAGE COMPETITIVE ADVANTAGE = QUALITY OF INSIGHT + SPEED OF EXECUTION + COST COMPETITIVENESS • Business must continuously focus on “staying on top of their game” • Improving quality insight of organization (market, products, customer needs, pricing, competitor behaviour) or improves speed of execution or cost competitiveness of organization’s response to insight APPLYING IT TO CREATE BUSINESS VALUE • Three aspects of creating business value and competitive advantage: 1. AUTOMATING TO DO THINGS FASTER • Automating: using automation to execute repetitive, routine tasks without human intervention • Completes tasks with more speed, economy, consistency, and possible accuracy, and frees up employees to concentrate on tasks that have potential to add high value, or asks that require judgement or insight to complete
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