TIM158 Business Information Strategy Instructor: Kevin Ross Teaching Assistant: Brant Jameson

Today’s Outline Class logistics Overview of textbook Business Models Porter’s five forces Porter’s competitive strategies

TIM158: Overview This class considers the role of information in business strategy. In particular, we focus on decisions regarding information technology and information systems to give a business competitive advantage over other companies. We will focus on case studies to see why some businesses are more successful than others in building information systems that lead to organizational and individual efficiencies. We look at how information impacts industries, markets and countries, and leads to technology development. We develop an understanding of design and maintenance of networked organizations, including issues of leadership and management.

TIM158 Perspective: CIO We will generally look at decisions from the perspective of the chief information officer. Wikipedia: The Chief Information Officer (CIO), or information technology (IT) director, is a job title commonly given to the most senior executive in an enterprise responsible for the information technology and computer systems that support enterprise goals. The title of Chief Information Officer in Higher Education may be the highest ranking technology executive although depending on the institution, alternative titles are used to represent this position. Generally, the CIO typically reports to the chief executive officer, chief operations officer or chief financial officer.

TIM158: Overview This class is designed for seniors and some juniors. There are few formal prerequisites, but you are expected to… 1.want to be here and to learn 2.have a broad knowledge and interest in information systems, technology, economics and business 3.think for yourself

Class website All schedules and assignments will be posted on the class website: Lecture notes will be posted after each lecture.

Schedule DateTopic (Reading = corresponding chapter from text) Case (Reading = correspondin g case from text) Assessment 1Tue, April 3Introduction 2Thu, April 5Business ModelsIBM 3Tue, April 10IT and Business Models 4Thu, April 12Amazon.com 5Tue, April 17IT and Organization 6Thu, April 19BoeingOptional: Business Case Draft

Schedule DateTopic (Reading = corresponding chapter from text) Case (Reading = correspondin g case from text) Assessment 7Tue, April 24Making the case for IT 8Thu, April 26CareGroupProject Team and Topic Due 9Tue, May 1IT Infrastructure 10Thu, May 3iPremierBusiness Proposal Due 11Tue, May 8Reliability and Security 12Thu, May 10Ford and DellProject Proposal Due 13Tue, May 15IT Service Delivery 14Thu, May 17Cisco

Schedule DateTopic (Reading = corresponding chapter from text) Case (Reading = correspondin g case from text) Assessment 15Tue, May 22IT Project Delivery 16Thu, May 24VolkswagenOptional: Preliminary draft due 17Tue, May 29Governance of IT 18Thu, May 31AtekPC 19Tue, June 5Leadership of IT 20Thu, June 7ConclusionProject Due Thu, June 14, 8:00 – 11:00am Final Exam

Instructor Kevin Ross Assistant Professor, Technology and Information Management From New Zealand PhD, Management Science & Engineering At UCSC Since 2004 Research areas: Scheduling, optimization, networks, pricing Worked with: Eli Lilly & Company, NASA, Thomson Reuters, London Councils, Fitness First Office hours: Tuesday 1 – 3pm (or by appointment) E2 room 559

Teaching Assistant Brant Jameson Office hours: –Thursday 1 – 3, –E2 room 301

Assessment ValueDue date News Presentation5%Throughout Quizzes10%Throughout Discussion Participation10%Throughout Business Proposal*20%Thu, May 3 Project*35%Thu, Apr 8 and Thu, June 7 Final Exam20%Thu, June 6, 8:00– 11:00am *Optional: Early draft 2 weeks in advance will be reviewed Policy Assignments are due at the start of class on the due date. Late assignments, missed presentations and quizzes will result in zero grade unless specific permission is given by instructor at least one week in advance.

Quizzes There will be up to five surprise quizzes over the quarter. These will be fairly short and test knowledge of the text and cases. Students who are absent the day of a quiz will receive a zero grade for that quiz –unless they have informed the instructor in writing at least a week in advance that they have to miss class (for some legitimate reason)

News Presentation Each student will present one news story to the class during the quarter. –The story can be from any source, and describe an interesting recent development in the use of information or IT for business strategy. The presentation should be professionally presented using powerpoint or similar technology. –5 minutes maximum –Must include both factual information (who is doing what and why?) and some commentary (your opinion – is this a good idea – why?!) on the story. –All news sources that have been used should be acknowledged with specific references on a final slide. The student is responsible for one of (a) bringing the slides on a laptop, (b) bringing slides on a USB drive that will work on instructor’s laptop, or (c) ing slides to the instructor the night before the presentation. You are seniors and my expectations are high

Presentation Schedule DateNews Presentations 1 Tue, April 3 2 Thu, April 5Austin Alexander Nelson Avelar Marissa Beltran 3 Tue, April 10Nawat Bhasaeng-Uraiporn Raashi Bhatnagar Michael Bonner 4 Thu, April 12Austin Brown Janice Chen Pablo Cuellar 5 Tue, April 17Kevin Danielson Albert Del Real Amy Donis If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule DateNews Presentations 6 Thu, April 19Jared Drechsler Miles Dreszer Tobias Fan 7 Tue, April 24Brey Foltyn-Smith Ryan Fukushima Michael Ha 8 Thu, April 26David Helgeson Brandon Holly-Overton April Dawn Kester 9 Tue, May 1Martin Ko Terry Koh Brian Nguyen Le 10 Thu, May 3Fuhai Liang Ray Liang Ray Myron Licardo If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule DateNews Presentations 11 Tue, May 8Joshua Liu Kyle Martin Dajuan McDaniel 12 Thu, May 10Alexander Merutka Anthony Moreno Francis Noonan 13 Tue, May 15Musashi Okada Adrian Oleksiewicz Jacob Rheingold 14 Thu, May 17Sofia Rodriguez Ian Ross Matthew Schoendienst 15 Tue, May 22Aagam Shah Nicholas Sutton Vincent Tang If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule DateNews Presentations 16 Thu, May 24Eleni Taousakis Austens Thompson Ngoc Vu Tran 17 Tue, May 29Darren Tsai Timothy Tse Kai Chung Wang 18 Thu, May 31Rita Wang Song Mien Wu Christopher Yap 19 Tue, June 5 20 Thu, June 7 If your name is not on the schedule, contact instructor by the end of week 2

Discussion Participation We will discuss cases approximately once per week. Active participation in the discussions of the cases and the course material is expected and examined. Read the cases with interest -learn the facts -form opinions -come prepared to challenge each other

Business Case You will be provided with a scenario for a business information system problem, and be required to make a written proposal of a solution, as the chief information officer. Details will follow.

Project The major assignment in this class is a comprehensive project. You will analyze a major (at least 1000 employees) company, and study how they use information and information systems to achieve competitive advantage. The project can be completed in groups of two or three, as you select, and the company is chosen by the group. Details will follow, but start thinking about group and topic

Submission of assignments Submit a hard copy of your assignment at the beginning of class, and an copy to the instructor and TA

Final Exam The final examination will cover the topics from the whole year. You will not be allowed to bring notes into the exam room.

Prerequisites This course is for juniors and seniors ISM/TIM 50 or permission of instructor required Interest in technology and business

Textbook Corporate Information Strategy and Management, by Applegate, Austin and Soule 8 th edition We will use the text and cases from this version, and you will be expected to have read the appropriate section before each class. - About 1/3 of the text has changed from the 7 th edition All the cases are originally published by Harvard Business Review – and can be purchased separately from their website.

Writing class This course fulfills the ‘W’ requirement –The business plan and project will give you training and evaluate your writing skills –You will have the opportunity for feedback on your writing by turning in draft assignments 2 weeks early –You must declare who writes each section of your project

Note on cheating All work must be your own Any work used as a reference must be cited appropriately Any violation of this will result in an instant failure for academic misconduct and this will go on your record

Feedback Please! Instructor has substantially revised the course material The course is for you Don’t hesitate to ask questions, give suggestions As senior students, you know that you’ll get out what you put in

Questions

Today’s Outline Class logistics Overview of textbook Business Models Porter’s five forces Porter’s competitive strategies

Corporate Information Strategy & Management IT is a source of opportunity and advantage but also uncertainty and risk Chasm between viewpoints Business executives: IT detached from real business problems Technical executives: Business leaders lack vision Undeniable rapidity of change In system architecture and interfaces In business In work and the workforce IT now embedded in: Definition and execution of strategy Organization and leadership of businesses Definitions of unique value propositions IT is changing our understanding of: Markets Industries Strategies Firm designs Information is now a major economic good

Brief history of IT in strategy Mid 1990s: World Wide Web demonstrated IT potential Structural and technical hurdles remained in using IT Late 1990s: Capital markets caught the fever VCs eager to spend on IT, regardless of long-term path to profitability 21st Century: Speculative bubble burst Downward spiral until 2003

What Now? What we know: –World is forever changed; IT will never return to the basement –Technology as core enabler, primary business channel –Global village is here to stay –Rigid organization boundaries have fallen What we need to do: –Engage in sense-making of the transformation –Mine the last decade of business experimentation –Synthesize in order to choose a path forward

Focal Themes Three modules in the text 1.IT and Business Advantage IT impacts the business through its effects on the three components of the business model: strategy, capabilities, and value 2.The Business of IT Managing IT operations, services, and project delivery requires managing trade-offs among costs, opportunities, and risks 3.IT Leadership High-level management, leadership, and governance activities set the context for leveraging IT-enabled strategic insight and ensuring IT operational excellence

Module 1: IT and Business Advantage Continued rapid spending growth Truly global spending distribution Ever increasing dependence on and impact of IT Search for opportunity Avoidance of operational risk How to leverage IT to create business advantage.

Overview of Module 1 Chapter 1 Introduces the organizing framework for the module Defines a business model Explores evaluation of business models Chapters 2 Examines the impact of IT on business models Chapter 3 Examines the impact of IT on organizational capabilities Chapter 4 Examines the impact of IT on business value

What is a Business Model? Defines how enterprise relates to environment –Strategy aligns organization with environment –Resources in and out –How value is created for stakeholders –Sets goals and ways to achieve them

Components of a Business Model

Business Model Framework and Definition

Analyzing Business Model Linkages

Assessing the Impact of IT on Business Model Alignment

DuPont Formula to Deconstruct Return on Equity

Evolving the Amazon.com Business Model ( )

Case for Lecture 2 IBM Evolution – Transformation and growth

Questions?

The Five Competitive Forces that Shape Strategy Michael Porter’s classical theory of strategy formulation –Original HBR article in 1979 –Simple, powerful description of five forces –Five forces analysis in practice –Five forces distinguished from contemporary “factors” (e.g. the internet) What can we learn from this article? –How economic value is created and claimed by participants in a business network or industry –How IT might change the relative strength of each force

Understanding the Competitive Environment of a Company Companies do not exist in a vacuum: It is necessary to understand the competitive environment to assess the current competitive position of a company. It has become increasingly necessary to posture a company for challenges in its future.

Competitive Model Focus What is driving competition in the current or future industry? What are current or future competitors likely to do and how can a company respond? How can a company best posture itself to achieve and sustain a competitive advantage?

Porter Competitive Model Intra-Industry Rivalry Strategic Business Unit Bargaining Power of Buyers Bargaining Power of Buyers Bargaining Power of Suppliers Bargaining Power of Suppliers Substitute Products and Services Substitute Products and Services Potential New Entrants Potential New Entrants

Competitive Model Forces Intra-industry Rivals: Strategic Business Unit (SBU) and major rivals. Buyers: Categories of major customers. Suppliers: Categories of major suppliers that play a significant role in enabling the SBU to conduct its business. New Entrants: Companies that are new as competitors in a geographic market or existing companies that through a major shift in business strategy will now directly compete with the SBU. Substitutes: An alternative to doing business with the SBU.

Intra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges Bargaining Power of Buyers Bargaining Power of Buyers Bargaining Power of Suppliers Bargaining Power of Suppliers Substitute Products and Services Substitute Products and Services Potential New Entrants Potential New Entrants Faculty Staff Equipment and Service Suppliers Alumni Foundations Governments IT Vendors Internet Distance Learning Books and Videotapes Computer-Based Training Company Education Programs Students Parents Businesses Employers Legislators Foreign Universities Shift in Strategy by Universities or Companies Porter Competitive Model Education Industry – Universities U.S. Market

Role of Technology through Porter perspective: Can we… 1. Build barriers to prevent a company from entering an industry? 2. Build in costs that would make it difficult for a customer to switch to another supplier? 3. Change the basis for competition within the industry? 4. Change the balance of power in the relationship that a company has with customers or suppliers? 5. Provide the basis for new products and services, new markets or other new business opportunities

Porter Competitive Strategies Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Cost Leadership Strategies Primary Strategies Supporting Strategies

Porter Primary Strategies Differentiation—customer values the differences that you provide in products, services or capabilities. Cost—is least cost. If this is the primary strategy, over time there will only one ultimate winner.

Porter Supporting Strategies Innovation—either with business strategies or use of information systems or both. Growth—deals with growth in revenue and other business volumes. Can be a key factor in establishing a market position. Can also be a major requirement to offset high fixed operating costs. Alliances—importance of establishing a strong relationship with suppliers and other business partners often on a contractual basis.