Download - Business Driven Information Systems, Chapter 1 by Baltzan & Phillips

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Information Technology’s Impact on Business Operations

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Information Technology’s Impact on Business Operations

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INFORMATION TECHNOLOGY BASICS

• Information technology (IT) – a field concerned with the use of technology in managing and processing information

• Information technology is an important enabler of business success and innovation

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• Management information systems (MIS) – a general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems

• MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

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• When beginning to learn about information technology it is important to understand the following:– Data, information, and business intelligence– IT resources– IT cultures

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Information

• Data - raw facts that describe the characteristic of an event

• Information - data converted into a meaningful and useful context

• Business intelligence – applications and technologies that are used to gather, provide access to, and analyze data and information to support decision-making efforts

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Information

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Information

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Information

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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)

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• 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

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• 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

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MEASURING IT’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

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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

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Benchmarking – Baselining Metrics

• Benchmarks – baseline values the system seeks to attain

• Benchmarking – a process of continuously measuring system results, comparing results (benchmark values), and identifying improvements

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Benchmarking – Baselining Metrics

• Egovernement benchmarks

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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

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• Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:– Usability– Customer satisfaction– Conversion rates– Financial

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• Security is an issue for any organization offering products or services over the Internet

• It is inefficient for an organization to implement Internet security, since it slows down processing, however, to be effective it must implement Internet security

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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

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IDENTIFYING COMPETITIVE ADVANTAGES

• Organizations watch their competition through environmental scanning– Environmental scanning

• 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

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THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS

• Porter’s Five Forces Model determines the relative attractiveness of an industry

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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

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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

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Supplier Power

• Organizations can create a competitive advantage by locating alternative supply sources (decreasing supplier power)

• Business-to-Business (B2B) marketplace – an Internet-based service that brings together buyers and sellers

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Supplier Power

• Two types of (B2B) marketplaces– Private exchange – single buyer posts

needs and opens bidding to any supplier

– Reverse auction –increasingly lower bids are solicited from organizations willing to supply product or service at a lower price

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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– Switching cost – costs that can make

customers reluctant to switch

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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– Entry barrier – a product or service

that customers have come to expect and must be offered to compete and survive

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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

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THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS

• Organizations typically follow one of Porter’s three generic strategies when entering a new market

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THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS

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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

– Value chain – views an organization as a series of processes, each of which adds value to the product or service