Copyright © 2014 Pearson Education, Inc. 1 Brad N Greenwood MIS2101 Chapter 1 - Managing in the...

Copyright © 2014 Pearson Education, Inc. 1

Brad N GreenwoodMIS2101

Chapter 1 - Managing in the Digital World


Administrivia

• Note Taker• Missing Class• IT Doesn’t Matter• Quiz 1• Subsequent Quizzes


Agenda

• The rise of the information age• How this has changed business

– Globalization and Firm Management

• Type of information Systems– How they can be used– People and Information Systems

• Does IT Matter?• Ethicality in Information Systems

This first lecture is more or less about the make vs buy decision within Porter’s puzzle.


Chapter 1 Learning Objectives

Information Systems Today• Describe the characteristics of the digital world and the advent of the Information Age.

Evolution of Globalization• Define globalization, describe how it evolved over time, and describe the key drivers of

globalization.

Information Systems Defined• Explain what an information system is, contrasting its data, technology, people, and

organizational components.

The Dual Nature of Information Systems• Describe the dual nature of information systems in the success and failure of modern

organizations.

IS Ethics• Describe how computer ethics impact the use of information systems and discuss the

ethical concerns associated with information privacy and intellectual property.


Information Systems Today

Information Systems Today• Learning Objective: Describe the characteristics

of the digital world and the advent of the Information Age.

Evolution of Globalization• Define globalization, describe how it evolved over time, and describe the key drivers of globalization.

Information Systems Defined• Explain what an information system is, contrasting its data, technology, people, and organizational

components.

The Dual Nature of Information Systems• Describe the dual nature of information systems in the success and failure of modern organizations.

IS Ethics• Describe how computer ethics impact the use of information systems and discuss the ethical

concerns associated with information privacy and intellectual property.


The Rise of the Information Age

• In 1959 Peter Drucker proposes the notion of the knowledge worker– An individual who is relatively well educated and who creates,

modifies and/or synthesizes knowledge as a fundamental part of a job

• This proposition asserts the rise of the knowledge society– i.e. the service economy– cornerstone is transferrable human capital and knowledge specific

assets

• Data Supports the existence of the economy– Meritocracy Argument - HS Diploma (23k/year) / Masters (70k/year)


Three Social Waves

• Toffler’s proposition is three waves within society

• Formalization of agricultural work – Establishment of dependable food sources

• Industrial revolution – Formalization of the economy and trade

• Double entry accounting hmm?• Information age

– The pooling and seamless dissemination of information


Why are these waves important?

Could the conventional wisdom of the day during the age of agriculture and handwork every prepare a young person to be successful during the industrial age? How would your parents and teachers tell you to prepare?


Information is a Valuable Resource


What Facilitated the Rise of the Information Age?

Arguably the five mega trends


Five IT Megatrends in the Information Age:Mobile Computing

• Many believe that we’re living in a post-PC era.

• In the developing world mobile devices often leapfrog traditional PCs.

• Implications of untethered access:– Increased collaboration– The ability to manage

business in real time– New ways to reach

customers


Five IT Megatrends in the Information Age:Social Media and Web 2.0

• Over 800 million Facebook users share status updates or pictures with friends and family

• Organizations use social media to encourage employee collaboration or to connect with their customers

• These sites facilitate:– Resolution of offline social

failure – Production of non static

content


Five IT Megatrends in the Information Age:Big Data

• IDC estimated that in 2011, 1.8 zettabytes of data were generated and consumed

• How much is 1.8 zettabytes? 1.8 trillion gigabytes, or the equivalent of 57 billion 32GB iPads (IDC, 2011)

• This number is forecast to grow by 50 times by 2020• Why does this matter?

– Raw data can be transformed into knowledge– Raw data can be mined for business value


Five IT Megatrends in the Information Age:Cloud Computing

• Web technologies enable using the Internet as the platform for applications and data

• Many regard cloud computing as the beginning of the “fourth wave” – the applications and data

reside in the cloud

• Why does this matter?– Hardware is now a service


Five IT Megatrends in the Information Age:Consumerization of IT

• Consumerization may be the most significant trend affecting organizational IT personnel– Today’s employees bring their own devices to work– Initially used for emails / social networking

• Now used for other important tasks such as enterprise resource planning

– Opens up new opportunities– Mitigates access to computing

This is the lynch pin. Instead of pedantic connectivity options, the individual can engage in front and back

office tasks to advance the firm’s position


You’ve built a bridge to nowhere, Greenwood

• Why does this matter for the firm?– Recall the purpose of the firm…– How does it accomplish this objective?

• Two Options

If I am a clever CEO, and I wishto remain competitive, howcan I exploit these trends?


Evolution of Globalization

The Rise of the Information Age• Describe the characteristics of the digital world and the advent of the Information Age.

Evolution of Globalization• Learning Objective: Be able to define

globalization, describe how it evolved over time, and describe key globalization drivers.


components.





What is globalization?

• Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture

• Like any other economic force, it isn’t good or bad, it is a response to incentives and market forces made by economic agents– i.e. it is the response of firms to demand


Globalization – Three Factors


Three factors of import

• Economic changes – Global labor and financial systems

• Cultural changes – Multiculturalism and economic

homogeneity – The spread of the capitalist ideal

• Technology changes – Communication across distance not cost prohibitive (i.e.

monitoring costs)


Thomas Friedman would argue there is globalization 1.0, 2.0, and 3.0

The World is Flat

http://video.mit.edu/watch/the-world-is-flat-9145/


5 Key Factors For Enabling Globalization 3.0

• Fall of the Berlin Wall – This led to the breakup of the eastern bloc, undermining of the socialist state, and

spurred (along with Nixon) China to enter the global market• MS Windows

– Fi and foo I say to you Steve Jobs– Windows becomes the de facto operating system in the world. No more my computer

can’t talk to yours• The Internet

– and Netscape. Allowed, seemingly, costless access to the WWW. No travel costs to communicate

• Falling Telecom Costs– Creation of the telecom infrastructure– Valacich calls this overinvestment, I disagree – Was the dot com bubble bad?

• Outsourcing – The previous four started a change in the decision to in v outsource aspects of the firm.

As technology continued to advance, the distance grew.


The Rise of Information Systems Outsourcing

• Outsourcing: moving of business processes or tasks to another company– Facilitated by declining telecommunication costs– Driven by cost reduction

• Reduced labor costs for low-skilled labor: Apple outsourcing manufacturing to China

• Reduced labor costs for relatively high-skilled labor: Boeing outsourcing 787 Aeronautical Engineering to Russia


The Rise of Information Systems Outsourcing:Key Reasons for Outsourcing

• To reduce or control costs• To free up internal resources• To gain access to world-class capabilities• To increase revenue potential of the organization• To reduce time to market• To increase process efficiencies• To be able to focus on core activities• To source specific capabilities or skills


Opportunities of Operating in the Digital World (Traditional Firms)

• Falling Transportation Costs– Shipping a bottle of wine from Australia to Europe merely

costs a few cents• Falling Telecommunication Costs

– These have helped create shared perspectives of behavior, desirable goods, and even forms of government

• Reaching Global Markets• Accessing a Global Labor Pool

– Highly skilled or low cost labor pools exist in many countries which are now economically accessible


Opportunities of Operating in the Digital World (Information Firms)

• Reaching Global Markets– I can now access any market, any time, conditional

on connectivity• Accessing a Global Labor Pool

– Highly skilled or low cost labor pools exist in many countries which are now economically accessible


Challenges of Operating in the Digital World

• Government– Political instability– Regulatory: privacy, control, standards, censorship

• Geopolitical– Time zones, infrastructure – Workforce: welfare, demographics, expertise

• Cultural– Working with, providing services too


I think it is time for a break… quick recap

• We have discussed– The rise of the information age– Megatrends in IT– Information Systems role in globalization– The role of the decision maker in IT strategy– How firms are leveraging IT


Last Session

• We discussed– The rise of the information age– Megatrends in IT– Three Factors that lead to globalization

• Information Systems role in globalization

• Today– The role of the decision maker in IT strategy– How firms are leveraging IT– Does IT Matter?– IT Ethics


Information Systems Defined


Evolution of Globalization• Define globalization, describe how it evolved over time, and describe the key drivers of

globalization.

Information Systems Defined• Learning Objective: Explain what an information

system is, contrasting its data, technology, people, and organizational components.

The Dual Nature of Information Systems• Describe the dual nature of information systems in the success and failure of modern

organizations.




What is an information system?

• Thoughts?– Combination of hardware, software, and telecom

leveraged by human capital to transform data into information and then knowledge

• Why do we want to transform data?


Data: The Root and Purpose of Information Systems

• Data is analyzed and processed into information• When there is an ability to understand the information and make decisions using it, it

becomes knowledge• What is the benefit of transforming data this way?


The Components of Information Systems

• Five Components of Information Systems:– People– Telecommunications– Hardware– Data– Software


Three Types of Systems To Transform Data

• Automated office systems– Communication tools within the firm

• Benefit?

• Transaction processing systems– Used to facilitate the interaction between the firm and

itself, and upstream or downstream partners• Benefit?

• Management information systems – sorted TPS information which facilitates managerial

decision making• Benefit?


Managerial decision making? What is the role of the knowledge worker here?

• These data and software fit into a system, they do not exist in a vacuum– What is their value?– The information contained in an IS can be leveraged

by a firm or individual– Why?

• To press market advantage• To create maintainable sustainable competitive advantage

What IS professionals do is find this leverage point (same is true of the IS competent)


Three Methods of Exploiting This Information

• Technical competency– Knowledge and skill about hardware, software, networking, and

security• the nuts and bolts approach

• Business competency– Understanding market forces and how the firm presses

strategic advantage• Porter’s puzzle

• Systems competency – The integration of technical and business competency– How does the information system allow the firm to exploit its

advantage


People: The Builders, Managers, and Users of Information Systems

• An ecosystem of Users, Builders, Managers, and those who study information systems

• As the use of information systems grows, so does the need for dedicated IS professionals

• Growing demand focused on those with advanced and/or unique skills


IS Positions Rank Among the Best Jobs in America

Rank Career Job Growth (10-year forecast) Median Pay

1 Software developer 32% $82,400

2 Physical therapist 30% $75,900

3 Financial adviser 30% $93,900

4 Civil engineer 24% $74,700

5 Marketing specialist 28% $52,200

6 Management consultant 24% $111,000

7 IT consultant 20% $96,500

8 Database administrator 20% $86,600

9 Financial analyst 20% $62,600

10 Environmental engineer 31% $81,200


The Dual Nature of Information Systems




components.

The Dual Nature of Information Systems• Learning Objective: by able to describe the dual

nature of information systems in the success and failure of modern organizations.




Question

• Does a great payroll or order entry system give your organization a competitive advantage?

• What if the order entry system is connected to a CRM system which helps you cross sell or up sell additional goods and services?

Do either of these systems grant competitive advantage?What if I define competitive advantage as maintainable

and sustainable?


IT Doesn’t Matter

• In his 2003 article Nicholas Carr argues that IT does not matter

• What is Carr’s argument?• Do you believe him?• What if I told you no academic research has

ever found a relationship between IT investment and firm productivity?– Would you believe me?

• PSST – I am telling the truth


Types of Technology

• Infrastructure– Ubiquitous Building– Standardized

• CAT-5 Cable

• Commoditized– Everyone has it– It becomes cheap and provides lower margins– Becomes the cost of doing business (electricity)

• Proprietary– Possessed by few– Provides Advantage

• Frito-Lay ERP


Types of Technology

• Consider the case of the Frito-Lay ERP• Google owns YouTube

Are these advantages fleeting?


So why is the advantage fleeting?

Two Reasons1) Because technology happens in phases2) Because strategy is a multi-period game


Suggestions By Carr

• Spend Less – Returns are higher for those who invest sparingly

• Follow, Don’t Lead – Let others take the risk of the bleeding edge. Pickup IT once it is cheap and proven

• Focus on Vulnerabilities, Not Opportunities – Shore up the weak spots of the business. Let the strategy do the rest


Carr’s Argument

IT has become ubiquitous

How can it provide an advantage if everyone has it?IT has become the cost of doing business

Hint: There is a hole in Carr’s argumentCan someone get to it before the end of the lecture


What We Want!

• Recall Porter’s Puzzle From Day One– What do we search for as managers and consultants?

• Carr asserts that IT provides temporal advantage– Well that’s no good– IT is commoditized– IT can be imitated– IT is risky when unproven– IT is valuable when the advantage goes to a few– IT is standardized– IT is replicable


Greenwood will not be tricky

• IT is commoditized• IT can be imitated• IT is risky when unproven• IT is valuable when the advantage goes to a

few• IT is standardized• IT is replicable


SHAZAM!

• Just in time inventory is commoditized• Just in time inventory can be imitated• Just in time inventory is risky when unproven• Just in time inventory is valuable when the

advantage goes to a few• Just in time inventory is standardized• Just in time inventory is replicable


SHAZAM AGAIN!

• A patentable pharmaceutical is commoditized• A patentable pharmaceutical can be imitated• A patentable pharmaceutical is risky when unproven• A patentable pharmaceutical is valuable when the

advantage goes to a few• A patentable pharmaceutical is standardized• A patentable pharmaceutical is replicable

That just happened!


What does Carr Miss?



• Use– Nowhere does Carr discuss how people use IT, he

only looks at investment.




only looks at investment.• IT Success vs. IT Failure

– There are risks associated with making business gambles






• Branding and Differentiation in Service






• Branding and Differentiation in Service• Imitation Cannot be Stopped

– Preposterous to the point of utter absurdity



• Use– Nowhere does Carr discuss how people use IT, he only

looks at investment.• IT Success vs. IT Failure


• Branding and Differentiation in Service• Imitation Cannot be Stopped

– Preposterous to the point of utter absurdity• Strategic Positioning and Fit


This is a transition slide


IS Ethics




components.


IS Ethics• Learning Objective: Describe how computer ethics impact

the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.


A Brief Statement on Ethics

• Remember: Unethical and illegal are not synonymous... don't confuse them, you need to draw your own line


Computer Ethics

• What are computer ethics?– Issues and standards of conduct

pertaining to the use of information systems


Information Privacy

• What information should you have to reveal?

• What information you might want to keep private?

• What is identity theft


Information Privacy (cont’d)

• Companies seem to know about our every move—how much information do we need to reveal?

• Amazon.com is famous for personalization

• What are the costs?


Information Accuracy

• Who is responsible for ensuring of the authenticity and fidelity of information?


Information Property

• Who owns information about individuals?

• How can this information be sold and exchanged?


Data Privacy Statements

• Company maintaining the database with customer information legally owns it– Is free to sell it?– Must it ensure proper data

handling practices?

• Social networking complicates matters– Complexity of privacy settings– Friends can tag you without your

knowledge.


Information Accessibility

• Who has the right to monitor the information?


The Need for a Code of Ethical Conduct:Computer Ethics Institute Guidelines

• The guidelines prohibit:– Using a computer to harm others– Interfering with other people’s computer work– Snooping in other people’s files– Using a computer to steal– Using a computer to bear false witness– Copying or using proprietary software without paying for it– Using other’s resources without authorization or compensation– Appropriating other people’s intellectual output

• The guidelines recommend:– Review social consequences of programs and systems you design– Use computers in ways that show consideration and respect for others


The Digital Divide

• Many people are being left behind in the information age– Strong linkage between computer literacy and a person’s

ability to compete in the information age– People in rural communities, the elderly, people with

disabilities, and minorities lag behind national averages for Internet access and computer literacy

– The challenges in overcoming the digital divide are even greater in developing countries

• Consider the prospect of job search without the internet• Now consider the competitive advantage you have


A thought exercise…How do these firms use IT?


Recap

• Types of IT Systems• IT Doesn’t Matter

– Validity of Carr’s Arguments– Weaknesses of his argument

• IT and Ethics– Components – Need for a code of ethical conduct– Implications of the digital divide

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