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Chapter 1-6

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University of Ottawa
Suren Phansalker

Chapter  #1  -­‐  Information  Systems  and  Business  Strategy     Information  systems  role  in  business:   • Information  systems  are  everywhere  in  business     Information  Systems’  Impact  on  Business  Operations:   Greatest  benefits  from  IT-­‐   • Costumer  service,     70%   • Finance,         51%   • Sales  and  Marketing,     42%   • IT  operations,       39%   • Operations  Management,     31%   • HR,           17%   • Security,         17%     Information  System  project  goals-­‐   • Reduce  costs/improve  productivity   81%   • Improve  costumer  satisfaction/loyalty   71%   • Create  competitive  advantage     66%   • Generate  growth         54%   • Streamline  supply  chain       37%   • Global  expansion         16%     -­‐Organizations  typically  operate  by  functional  areas  or  functional  silos   -­‐Functional  areas  are  interdependent     Functional  organization  –  Each   functional  area  has  its  own  systems  and   communicates  with  every  other   functional  area.         Information  Systems  Basics:   Information  systems  (IS)  –  any  computer-­‐based  tool  that  people  use  to  work  with   information  and  that  supports  the  information  and  information-­‐processing  needs  of   an  organization     An  information  system  can  be  an  important  enabler  of  business  success  and   innovation     Information  Technology  (IT)  –  is  the  acquisition,  processing,  storage,  and   dissemination  of  vocal,  pictorial,  textual,  and  numerical  information  by  a   microelectronics-­‐based  combination  of  computing  and  telecommunications     Management  information  systems  (MIS)  –  the  function  that  plans  for,  develops,   implements,  and  maintains  IS  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     • When  beginning  to  learn  about  information  systems  it  is  important  to   understand  the  following:   – The  difference  between  data,  information  and  knowledge     – IS  resources   – IS  cultures     Data  –  Information  –  Knowledge:   Data  -­‐  raw  facts  that  describe  the  characteristic  of  an  event     Information  -­‐  data  converted  into  a  meaningful  and  useful  context     Knowledge  -­‐  information  that  can  be  enacted  upon  i.e  “actionable  information”     IS  Cultures:   – Information-­‐functional  culture     • use  information  as  a  means  of  exercising  influence  or  power   over  others   – Information-­‐sharing  culture     • departments  trust  each  other  to  use  information  (especially   about  problems  and  failures)  to  improve  performance.   – Information-­‐inquiring  culture     • search  for  information  to  better  understand  the  future  and   align  themselves  with  current  trends  and  new  directions   – Information-­‐discovery  culture   • open  to  new  insights  about  crisis  and  radical  changes  and  seek   ways  to  create  competitive  advantage     ROLES  AND  RESPONSIBILITIES  IN  IS:   • Chief  Information  Officer  (CIO)  –  oversees  all  uses  of  IS  and  ensures  the   strategic  alignment  of  IS  with  business  goals  and  objectives   • Broad  CIO  roles  include:   – Manager  –  ensuring  the  delivery  of  all  IS  projects,  on  time  and  within   budget   – Leader  –  ensuring  the  strategic  vision  of  IS  is  in  line  with  the  strategic   vision  of  the  organization   – Communicator  –  building  and  maintaining  strong  executive   relationships   • Chief  Technology  Officer  (CTO)  –  responsible  for  ensuring  the  throughput,   speed,  accuracy,  availability,  and  reliability  of  IS   • Chief  Security  Officer  (CSO)  –  responsible  for  ensuring  the  security  of   information  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     ROLES  AND  RESPONSIBILITIES  IN  IS   Skills  pivotal  for  success  in  executive  IS  roles:         The  Gap  Between  Business  Personnel  and  IS  Personnel:   • Business  personnel  possess  expertise  in  functional  areas  such  as  marketing,   accounting,  and  sales       • IS  personnel  have  the  technological  expertise       • This  typically  causes  a  communications  gap  between  the  business  personnel   and  IS  personnel     Improving  Communications:   • Business  personnel  must  seek  to  increase  their  understanding  of  IS   • IS  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  IS  personnel     • Key  performance  indicator  (KPI)  –  measures  that  are  tied  to  business   drivers     • Efficiency  IS  metric  –  measures  the  performance  of  the  information  system   itself  including  throughput,  speed,  and  availability   • Effectiveness  IS  metric  –  measures  the  impact  IS  has  on  business  processes   and  activities  including  customer  satisfaction,  conversion  rates,  and  sell-­‐ through  increases     • 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     • Efficiency  IS  metrics  focus  on  information  systems  and  include:   Throughput  –  Refers  to  how  much  material  goes  through  the  system.   Transaction  Speed  –  How  fast  you  can  do  a  transaction.   System  Availability  –  There  is  no  disruption  in  business.  Whenever  the   costumer  wants  it,  it  is  available.   Web  Traffic  –  How  many  visitors  you  get  on  your  site.   Response  Time  –  How  fast  you  respond  back  to  your  costumer.     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     – 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     THE  FIVE  FORCES  MODEL  –  EVALUATING  BUSINESS  SEGMENTS:   • Porter’s  Five  Forces  Model  determines  the  relative  attractiveness  of  an   industry       • 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     • 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     • 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   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     Value  chains  with  porter’s  forces:   • 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     • 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     • Organizations  typically  follow  one  of  Porter’s  three  generic  strategies  when   entering  a  new  market   – Broad  cost  leadership   – Broad  differentiation   – Focused  strategy                           Chapter  #2  -­‐  Decision  Making  and  Business  Processes   Decision-­‐Making,  Problem-­‐Solving,  and  Opportunity-­‐Seizing  Information  Systems:     • Reasons  for  the  growth  of  decision-­‐making  information  systems   – People  need  to  analyze  large  amounts  of  information   – People  must  make  decisions  quickly   – People  must  apply  sophisticated  analysis  techniques,  such  as   modeling  and  forecasting,  to  make  good  decisions   – People  must  protect  the  corporate  asset  of  organizational  information     Transaction  Processing  Systems   • Transaction  processing  system  (TPS)  -­‐  the  basic  business  system  that   serves  the  operational  level  (analysts)  in  an  organization     • Online  transaction  processing  (OLTP)  –  the  capturing  of  transaction  and   event  information  using  technology  to  (1)  process  the  information  according   to  defined  business  rules,  (2)  store  the  information,  (3)  update  existing   information  to  reflect  the  new  information     Decision  Support  Systems:   • Decision  support  system  (DSS)  –  models  information  to  support  managers   and  business  professionals  during  the  decision-­‐making  process.   • Online  analytical  processing  (OLAP)  –  the  manipulation  of  information  to   create  business  intelligence  in  support  of  strategic  decision  making       • Three  quantitative  models  used  by  DSSs  include:   1. Sensitivity  analysis  –  the  study  of  the  impact  that  changes  in  one  (or   more)  parts  of  the  model  have  on  other  parts  of  the  model   2. What-­‐if  analysis  –  checks  the  impact  of  a  change  in  an  assumption  on   the  proposed  solution   3. Goal-­‐seeking  analysis  –  finds  the  inputs  necessary  to  achieve  a  goal   such  as  a  desired  level  of  output   • Interaction  between  a  TPS  and  a  DSS     • Executive  information  system  (EIS)  –  a  specialized  DSS  that  supports  senior   level  executives  within  the  organization     • Digital  dashboard  –  integrates  information  from  multiple  components  and   presents  it  in    a  unified  display     ARTIFICIAL  INTELLIGENCE  (AI):   • Intelligent  system  –  various  commercial  applications  of  artificial  intelligence   • Artificial  intelligence  (AI)  –  simulates  human  intelligence  such  as  the  ability   to  reason  and  learn     • Four  most  common  categories  of  AI  include:   1. Expert  system  –  computerized  advisory  programs  that  imitate  the   reasoning  processes  of  experts  in  solving  difficult  problems   2. Neural  Network  –  attempts  to  emulate  the  way  the  human  brain   works   – Fuzzy  logic  –  a  mathematical  method  of  handling  imprecise  or   subjective  information   3. Genetic  algorithm  –  an  artificial  intelligent  system  that  mimics  the   evolutionary,  survival-­‐of-­‐the-­‐fittest  process  to  generate  increasingly   better  solutions  to  a  problem   4. Intelligent  agent  –  special-­‐purposed  knowledge-­‐based  information   system  that  accomplishes  specific  tasks  on  behalf  of  its  users     UNDERSTANDING  THE  IMPORTANCE  OF  BUSINESS  PROCESSES:   Customer  facing  processes  –  result  in  a  product  or  service  that  is  received  by  an   organization’s  external  customer.   Business  facing  processes  –  are  invisible  to  the  external  customer  but  are  essential   to  the  effective  management  of  the  business     BUSINESS  PROCESS  REENGINEERING:   Business  process  –  a  standardized  set  of  activities  that  accomplish  a  specific  task,   such  as  processing  a  customer’s  order   Business  process  reengineering  (BPR)  –  the  analysis  and  redesign  of  workflow   within  and  between  enterprises   The  purpose  of  BPR  is  to  make  all  business  processes  best-­‐in-­‐class   BUSINESS  PROCESS  MODELLING:   Business  process  modelling  (or  mapping)  –  is  the  activity  of  creating  a  detailed   flow-­‐chart  or  process  map  of  a  work  process  showing  its  inputs,  tasks,  and  activities,   in  a  structured  sequence.   Business  process  model  –  is  a  graphic  description  of  a  process,  showing  the   sequence  of  process  tasks,  which  is  developed  for  a  specific  purpose  and  from  a   selected  viewpoint.     BUSINESS  PROCESS  MANAGEMENT:   Business  Process  Management  (BPM)  –  integrates  all  of  an  organization’s  business   processes  to  make  individual  processes  more  efficient.   Key  reasons  for  using  BPM:         Chapter  #3  -­‐  The  Internet  and  E-­‐Business   DISRUPTIVE  TECHNOLOGY:   • Digital  Darwinism  –  implies  that  organizations  which  cannot  adapt  to  the   new  demands  placed  on  them  for  surviving  in  the  information  age  are   doomed  to  extinction     Disruptive  versus  Sustaining  Technology:   • What  do  steamboats,  transistor  radios,  and  Intel’s  8088  processor  all  have  in   common?       – Disruptive  technology  –  a  new  way  of  doing  things  that  initially  does   not  meet  the  needs  of  existing  customers   – Sustaining  technology  –  produces  an  improved  product  customers   are  eager  to  buy     • Innovator’s  Dilemma  -­‐  discusses  how  established  companies  can  take   advantage  of  disruptive  technologies  without  hindering  existing   relationships  with  customers,  partners,  and  stakeholders     The  Internet  –  Business  Disruption:   • One  of  the  biggest  forces  changing  business  is  the  Internet   • Organizations  must  be  able  to  transform  as  markets,  economic   environments,  and  technologies  change   • Focusing  on  the  unexpected  allows  an  organization  to  capitalize  on  the   opportunity  for  new  business  growth  from  a  disruptive  technology     • The  Internet  has  had  an  impact  on  almost  every  industry  including:   – Travel   – Entertainment   – Electronics   – Financial  services   – Retail   – Automobiles   – Education  and  training     EVOLUTION  OF  THE  INTERNET:   • The  Internet  began  as  an  emergency  military  communications  system   operated  by  the  U.S.  Department  of  Defense   • Gradually  the  Internet  moved  from  a  military  pipeline  to  a  communication   tool  for  scientists  to  businesses   – Internet  –  computer  networks  that  pass  information  from  one  to   another  using  common  computer  protocols   – Protocol  –  standards  that  specify  the  format  of  data  as  well  as  the   rules  to  be  followed  during  transmission     • World  Wide  Web  (WWW)  –  a  global  hypertext  system  that  uses  the  Internet   as  its  transport  mechanism   • Hypertext  transport  protocol  (HTTP)  –  the  Internet  standard  that  supports   the  exchange  of  information  on  the  WWW     • The  Internet’s  impact  on  information   – Easy  to  compile     – Increased  richness     – Increased  reach     – Improved  content     • The  Internet  makes  it  possible  to  perform  business  in  ways  not  previously   imaginable   • It  can  also  cause  a  digital  divide   – Digital  divide  –  when  those  with  access  to  technology  have  great   advantages  over  those  without  access  to  technology     • Web  2.0  is  a  set  of  economic,  social,  and  technology  trends  that  collectively   form  the  basis  for  the  next  generation  of  the  Internet.     ACCESSING  INTERNET  INFORMATION:   • Four  tools  for  accessing  Internet  information   1. Intranet  –  internalized  portion  of  the  Internet,  protected  from  outside   access,  for  employees   2. Extranet  –  an  intranet  that  is  available  to  strategic  allies   3. Portal  –  Web  site  that  offers  a  broad  array  of  resources  and  services   4. Kiosk  –  publicly  accessible  computer  system  that  allows  interactive   information  browsing     PROVIDING  INTERNET  INFORMATION:   • Three  common  forms  of  service  providers   1. Internet  service  provider  (ISP)  –provides  individuals  and  other   companies  access  to  the  Internet     2. Online  service  provider  (OSP)  –  offers  an  extensive  array  of  unique   Web  services     3. Application  service  provider  (ASP)  –  offers  access  over  the  Internet   to  systems  and  related  services  that  would  otherwise  have  to  be   located  in  organizational  computers     • Common  ISP  services  include:   – Web  hosting   – Hard-­‐disk  storage  space   – Availability   – Support           Wireless  Internet  service  provider  (WISP)     • ISPs,  OSPs,  and  ASPs  use  service  level  agreements  (SLA)  which  define  the   specific  responsibilities  of  the  service  provider  and  set  the  customer   expectations     E-­‐BUSINESS  BASICS:   • How  do  e-­‐commerce  and  e-­‐business  differ?   – E-­‐commerce  –  the  buying  and  selling  of  goods  and  services  over  the   Internet     – E-­‐business  –  the  conducting  of  business  on  the  Internet  including  not   only  buying  and  selling,  but  also  serving  customers  and  collaborating   with  business  partners     Business-­‐to-­‐Business  (B2B):   • Electronic  marketplace  (e-­‐marketplace)  –  interactive  business   communities  providing  a  central  market  where  multiple  buyers  and  sellers   can  engage  in  e-­‐business  activities     Business-­‐to-­‐Consumer  (B2C):   • Common  B2C  e-­‐business  models  include:   – e-­‐shop  –  a  version  of  a  retail  store  where  customers  can  shop  any   time  without  leaving  their  home     – e-­‐mall  –  consists  of  a  number  of  e-­‐shops;  it  serves  as  a  gateway   through  which  a  visitor  can  access  other  e-­‐shops   • Business  types  include:   – Brick-­‐and-­‐mortar  business   – Pure-­‐play  business   – Click-­‐and-­‐mortar  business     Consumer-­‐to-­‐Business  (C2B):   • Priceline.com  is  an  example  of  a  C2B  e-­‐business  model     Consumer-­‐to-­‐Consumer  (C2C):   • Online  auctions   – Electronic  auction  (e-­‐auction)  -­‐  Sellers  and  buyers  solicit  
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