1. Class 10: Valuing Information Systems Investments
MIS 2101: Management Information Systems
Based on material from Information Systems Today: Managing in the Digital World, Leonard Jessup and Joseph Valacich, Pearson Prentice Hall, 2007
Also includes material by David Schuff, Paul Weinberg, and Cindy Joy Marselis.

2. Learning Objectives
Discuss how organizations can use information systems to help create a strategic advantage
Describe how to create a business case for an information system
Explain how to evaluate an information system

3. Valuing Information Systems
What are three ways an Information System can add value to an organization?
Where do you think the most value is added?

4. Valuing Information Systems
What do we mean when we say we can create business value by automating, informing, and supporting strategy?
Automating Informing Strategy Support

5. Valuing Information Systems
Automating – doing things FASTER

6. Valuing Information Systems
Informing – doing things BETTER

7. Informing: Example
Tell me more about the loan processing example from the book…

8. Learning Organization
One that is skilled at creating, acquiring and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.
David Garvin, Harvard Business Review

9. Valuing Information Systems
Supporting Strategy– doing things SMARTER

10. Strategizing: Five Types of Organizational Strategies
What are “Organizational Strategies”?
Can technology be leveraged to create value supporting these strategies?

11. Overall Low Cost Leadership Strategy
What is an example of a company that adopts an overall low cost leadership strategy?

12. Focused Low-Cost Strategy
What is an example of a company that adopts a focused low cost strategy?

13. Broad Differentiation Strategy
What is an example of a company that adopts a broad differentiation strategy?

14. Focused Differentiation Strategy
What is an example of a company that adopts a focused differentiation strategy?

15. Best-Cost Provider Strategy
What is an example of a company that adopts a best-cost provider strategy?

16. Strategizing: Five Types of Organizational Strategies
Can technology be leveraged to create value supporting these strategies?

17. Sources of Competitive Advantage
Who has …
Best-made product on the market
Superior customer service
Achieving lower costs than rivals
Having proprietary manufacturing technology
Having shorter lead times in research and development projects
Having a well-known brand name and reputation
Giving customers more value for their money
Can MIS professionals help you achieve this?

18. Competitive Advantage
How do you identify opportunities to use information systems for competitive advantage?
What are “Value Chains”?
What is “Porter’s Five Forces Model”?
Analysis tools or communication tools?

19. What is Value Chain Analysis?
Core
Value
Activities
Support
Value
Activities

20. IS and Value Chain Analysis
What are specific examples of how these IS functions add value and help create competitive advantages?
Why might it be important for systems supporting these activities to function at an enterprise level?

21. The Five Forces Model – Evaluating Business Segments
Product returns
Lower market share
Lost customers
Decision support and business intelligence
CAD product redesign
Increased costs
Reduced quality
Reduce prices
Increase quality
Value added services
Competition in price, distribution and service
Electronic connections to more suppliers
ERP to reduce costs and
react more quickly
ERP reduce costs
CRM
CAD/CAM improve quality
Better web presence
Lower costs through ERP, supply chain, etc.
Reduced prices
Lost market share

22. Buyer Power What does it mean when “Buyer Power” is high?
How to loyalty programs influence buying power?
Can IT be the “enabler”?
Examples of situations where IT has increased buyer power?
How can I become the preferred supplier?

23. Supplier Power What does it mean when “Supplier Power” is high?
How do tightly integrated supply chains influence supplier power?
Examples of situations where IT has increased supplier power?
How can I increase my number of suppliers?

24. Threat of Substitute Products or Services
When is the threat of substitute products high?
What are “switching costs” and how do they influence the threat of substitute products?
Can IT be the “enabler”?
Examples of situations where IT has increased the threat of substitutes?
Can I increase switching costs?

25. Threat of New Entrants
Give an example of when the threat of new entrants is high?
What is an “Entry Barrier” and how does this influence the threat of new entrants?
Can IT be the “enabler”?
Examples of situations where IT has affected the threat of new entrants?
Can I create barriers to entry?

26. Rivalry Among Competition
Price, product, service and distribution?
How can you use IT?

27. Learning Objectives
Discuss how organizations can use information systems to help create a strategic advantage
Describe how to create a business case for an information system
Explain how to evaluate an information system

28. Making the Business Case for an IS
Identification of benefits that the proposed information system will bring to the organization
Automating benefits
Informing benefits
Strategic benefits

29. Productivity Gains Easy to identify costs with developing an IS
How do you measure productivity gains?
Why hasn’t productivity increased at the rate of IS investments?

30. The Productivity Paradox
Give an example of how information systems may be used in unintended ways.

31. Measurement Problems
Give an example of how the wrong things can be measured

32. Time Lags
When can the benefits of an information system lag behind the realized benefits?

33. Redistribution
If an information systems simply redistributes the pieces of the pie rather than make the pie bigger, does it create any value?

34. Mismanagement
Can a good information system overcome a bad business model?

35. Making a Successful Business Case
On what can we base a successful business case?

36. Arguments Based on Faith
Do you need a cost benefits analysis for an argument based on faith?

37. Arguments Based on Fear
Do you need a cost benefits analysis for an argument based on fear?
Come on, how do you instill “fear” in an organization?

38. Scenario You are the CIO of a small to mid sized company
You are meeting with an independent consultant who is trying to get you to hire him to develop a business continuity plan and a disaster recovery plan
Is a business case based on “Fear” effective?

39. Business Continuity and Disaster Recovery
Catastrophic loss of ability to deliver services from primary location
Must resume services from alternate location
Disaster recovery plan driven by the business’
Recover time objective (RTO)
Recovery point objective (RPO)
Business Continuity – How you continue to provide essential business services between time of the disaster and the execution of DR plan

40. Sobering Statistics
From the U.S. National Fire Protection Agency and the U.S. Bureau of Labor
Nearly 75% of all U.S. businesses have experienced a business interruption
20% of small to medium size businesses suffer a major disaster every five years
43% of US companies never reopen after a disaster and 29% close within three years
93% of companies that suffer a significant data lose are out of business within five years

41. It’s not always what you expect
It’s in not always an earthquake or a hurricane

42. Arguments Based on Fear
Do you need a cost benefits analysis for an argument based on fear?

43. Arguments Based on Fact
Do you need a cost benefits analysis for an argument based on fact?

44. Cost-Benefit Analysis
Identifying costs
What is “Total Cost of Ownership” (TCO)?
What are “Recurring vs. Non-recurring costs”?
What are “Tangible vs. Intangible costs”?

50. Learning Objectives
Discuss how organizations can use information systems to help create a strategic advantage
Describe how to create a business case for an information system
Explain how to evaluate an information system

51. Why is evaluation important?
Systems should address a business need
Otherwise
You waste money on what you buy
You still will have an unresolved “business problem”

52. How do you evaluate systems?
Understand what you need
Understand what the system does
Match the two up
Business
needs
Application
functionality

53. Understanding what you need
We talked about this way back
Talk to
People involved in the business process
Technical staff who have to implement the system
…to determine key features
MIS Analyst

54. Understanding what the application does
Once you have the key features…
Talk to
Vendors
People who have bought or built similar products
Now you have a basis for comparing alternatives

55. System Evaluation Questions
Who are the customers?
What are the business drivers (the business case)?
Who are the participants?
Can the system create competitive advantage?
What does the system do?
Are there risks with implementing the system?
What type(s) of information system is it?
What has to go “right” for the adopting company?
What are the processes it performs? Are they well-structured? Are they well-integrated?
What are the key evaluation measures for success?
How do you know if the system is working?

56. An Evaluation Matrix for an E-Mail System
Weighted average of feature ratings
Feature
Option
Creates mailing lists
(10%)
Overall cost
(30%)
Web access
(20%)
Reliability
(40%)
Total Score
Option A 7 1 8 5
4.6
Option B 3 9 4
5.8

57. Partial Matrix of Functional Requirements

58. Partial Matrix of Technical Requirements

59. Partial Matrix of General Requirements

62. Types of Systems
We’ve looked at different types of information systems
Transaction Processing Systems (TPS)
Decision Support Systems (DSS)
Management Information Systems (MIS)

63. Types of Systems
We’ve looked at different types of information systems
Transaction Processing Systems (TPS)
Decision Support Systems (DSS)
Management Information Systems (MIS)

64. Types of Applications…
Different types of applications
Customer relationship management
Business intelligence
Enterprise resource planning
Order entry/point-of-sale
Accounting (Accounts Payable/Receivable)

65. In-Class Activity
Working in a small team of 3-4 business professionals on a project for the CEO of Fitter Snacker…
Each team will be assigned an application which is being considered for use at Fitter Snacker
Your team will evaluate the application and prepare to answer the following questions for the CEO…

66. Can your team answer… Who are the customers?
What are the business drivers (the business case)?
Who are the participants?
Can the system create competitive advantage?
What does the system do?
Are there risks with implementing the system?
What type(s) of information system is it?
What has to go “right” for the adopting company?
What are the processes it performs? Are they well-structured? Are they well-integrated?
What are the key evaluation measures for success?
How do you know if the system is working?