Chapter 3 - Creating Business Value
Business Organization and Business Processes
- A company need a business strategy.
- Strategy is a broad based formula for how a business is going to compete, what its
goals should be, and what plans and policies will be needed to carry out those goals.
- If the industry is attractive and has few barriers, more competitors will enter the indus-
try thus increasing competition.
- If the there are barriers, then it will be harder for new competitors to join the industry.
Businesses as Open Systems
- Open systems model indicates that business operates by transforming inputs into out-
puts and by constantly interacting with its environment.
Stakeholders and Boundaries in the Business Environment
- A stakeholder is a person or entity that has interest in and an influence on how a busi-
ness will function in order to succeed.
- May be external or internal relative to the system.
- Organizational boundary shows business operates by transforming inputs into outputs
and by constantly interacting with its environment.
- A business needs external information to run its operations or processes on a daily ba-
How Businesses Organize to Create Value Chapter 3 - Creating Business Value
- All business organizations possess structures that organize information, responsibility,
- When used appropriately, organizational structure helps get the job done.
- When misused, organizational structure can grow to an unmanageable size and densi-
ty and can create a bureaucracy that seems to inhibit rather than facilitate productive
- Functional and decentralized structures, the lines of authority and communication are
- Matrix structure blends the functional and decentralized organizational structures.
- A business might used a matrix structure to take advantage an of the strengths, as well
as make up for the weaknesses of functional and decentralized forms.
- To transform inputs to their main outputs, organizations need to perform a series of
step known as a business process.
- Defined as a collection of activities that takes one or more kinds of input and creates
an output that is of value to the customer.
- Input ---> Process ---> Output
- A process receives inputs, undertakes some action, and then produces outputs.
- Inputs to a process are those resources needed to start a process.
- Guides are rules or policies within which a process must operate.
- Outputs are the results of a process.
- Enablers are a special kind of input or resource that facilitates a process.
- Feedback is a special kind of measurement created by a business process that is then
retuned to the system to control the system’s future inputs, processes, and outputs.
- Businesses use feedback to monitor the efficiency and effectiveness of a given
- Business process reengineering (BPR) is the study of business processes to find ways
of making them more efficient.
- BPR goals are to reduce costs, increase throughput and speed, and increase quality
Defining Competitive Advantage
- Continuous improvement is the hallmark of successful enterprises, those that are nev-
er satisfied with good enough, but strive to to set new standards and benchmarks. Chapter 3 - Creating Business Value
- Competitive advantage = quality of insight + speed of execution + cost competitiveness
- Good IT systems are deployed to improve the quality of insight of those making deci-
sions, to improve the speed of execution, to reduce costs, and to increase t