2 Organizational Strategy, Competitive Advantage, and Information Systems 70 slides.

2 Organizational Strategy, Competitive Advantage, and Information Systems 70 slides

[ LEARNING OBJECTIVES]
Discuss ways in which information systems enable cross-functional business processes and business processes for a single functional area. Differentiate between business process reengineering, business process improvement, and business process management. Identify effective IT responses to different kinds of business pressures. Describe the strategies that organizations typically adopt to counter Porter’s five competitive forces.

2.1 Business Processes Cross-Functional Processes
Information Systems and Business Processes

Business Processes A business process is:
an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customers. Have someone read the definition then have students copy it.

Business Processes A business process is: Comprised of three elements:
an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customers. Comprised of three elements: Inputs Resources Outputs Comprised of Inputs, Resources, and Outputs

Business Processes A business process is: Comprised of three elements:
an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customers. Comprised of three elements: Inputs Resources Outputs Efficiency vs. Effectiveness Efficiency focuses on doing things well in the process; for example, progressing from one process activity to another without delay or without wasting money or resources. Effectiveness focuses on doing the things that matter; that is, creating outputs of value to the process customer—for example, high-quality products. Efficiency is doing things right. Effectiveness involves doing the right things.

Examples of Business Processes
These are some examples of Business Processes and this is a good table to put into your notes.

Examples of Business Processes (Continued)
Here’s more. Now, you will notice that every area in business has its own specialized functions

Cross-Functional Processes
No single functional area is responsible steps executed in a coordinated, collaborative way Procurement & Fulfillment Cross-functional processes However, there are many processes that involve multiple areas of the company or involve your company working with either a customer or another company

Frequent Flyer Mileage Sufficient?
Receive Ticket Order Traveler Airline Web Site Seats Available NO Notify Traveler Plan Trip YES Reserve Seats Check Flights NO Frequent Flyer Mileage Sufficient? Use Credit Card? NO Seats Available? NO YES YES Charge Credit Card YES Subtract Mileage Submit Ticket Order Here’s an example of a company interfacing with a customer. Charge OK? NO Notify Traveler Receive e-Ticket YES Confirm Flight(s) Issue e-Ticket

Information Systems & Business Processes
IS’s vital role in three areas of business processes Executing the process Capturing and storing process data Monitoring process performance The technology, then, has to be able you to complete the transaction and warehouse the data so that you can deliver better customer service.

Executing the Process IS’s help Execute the Process by:
Informing employees when it is time to complete a task Providing required data Providing a means to complete the task Let’s try something: How do you know when it’s time to go to the ATM? What happens if you want to take out more cash then you have in your account? How does the cash finally get into your hand?

Capturing & Storing Process Data
Processes generate data Dates, times, product numbers, quantities, prices, addresses, names, employee actions IS’s capture & store process data (aka, transaction data) Capturing & storing data provides immediate, ‘real time’ feedback Instead of going for cash, you’re now a cashier at a supermarket. You scan in a bunch of items at the register. What does it do on the register? What kind of information other than the price gets updated? Why is it necessary to monitor the stock level of all the different items?

Monitoring Process Performance
IS evaluates information to determine how well a process is being executed Evaluations occur at two levels Process level Instance level Monitoring identifies problems for process improvement Have students copy and read

2.2 Business Process Reengineering, Business Process Improvement, and Business Process Management Reengineering Improvement Management So, we monitor things to see if something needs to be changed. This shows us that the changes take place in one or more of three ways. Have students read green bullets.

Measures of Excellence in Executing Business Processes
Customer Satisfaction Cost Reduction Cycle and fulfillment time reduction Quality Differentiation Productivity Have students read…

Business Process Reengineering (BPR)
A radical redesign of an organization’s business processes to increase productivity and profitability Examines business processes with a “clean slate” approach Sometimes the way that you are doing something is just not very good. You need to throw out the old way of doing it and introduce a new way…

Business Process Improvement (BPI)
An incremental approach to move an organization toward business process centered operations Focuses on reducing variation in process outputs by identifying the underlying cause of the variation Keep in mind that you have to introduce the new way of doing something as you keep on producing using the old way.

Five basic phases of successful BPI Define – As is BPI project generally follows five basic phases: Define, Measure, Analyze, Improve, and Control (DMAIC). Define Phase: documents the existing “as is” process activities, process resources, and process inputs and outputs, usually as a graphical process map or diagram; AND, documents the customer and the customer’s requirements and a description of the problem.

Five basic phases of successful BPI Define – As is Measure – Numbers, Metrics Measure Phase: relevant process metrics, such as time and cost to generate one output (product or service) are identified, and data is collected to understand how the metrics evolve over time. (data sources, such as customer and employee observations, interviews, and surveys)

Five basic phases of successful BPI Define – As is Measure – Numbers, Metrics Analyze – causes, trends Analysis Phase: the BPI team examines the “as is” process map and the collected data to identify problems with the process (e.g., decreasing efficiency or effectiveness) and their root causes. If possible, the team should also benchmark the process by comparing its performance with that of similar processes in other companies, or other areas of the organization.

Five basic phases of successful BPI Define – As is Measure – Numbers, Metrics Analyze – causes, trends Improve – alternatives, solutions Improve Phase: the BPI team identifies possible solutions for addressing the root causes, maps the resulting “to be” process alternatives, and selects and implements the most appropriate solution.

Five basic phases of successful BPI Define – As is Measure – Numbers, Metrics Analyze – causes, trends Improve – alternatives, solutions Control - stabilize Control Phase: the team establishes process metrics and monitors the improved process after the solution has been implemented to ensure the process performance remains stable. An IS system can be very useful for this purpose.

Business Process Management (BPM)
A management system used to support continuous initiatives for core business processes over time Important components of BPM: Process modeling Web-enabled technologies Business Activity Monitoring (BAM) Have students read Process modeling involves using a simulation. Why do we train airline pilots using a simulator? There was a time when we used to sit down with someone at a bank and fill out a loan application. Now, we simply fill out that application online. What’s the advantage of having the customer do it on their own? There was a time when we had to re-order stock in order to have enough merchandise on our shelves to sell. Now we can just allow the company that supplies us with the merchandise to monitor our stock levels for us.

Business Process Management (BPM)
Business Process Management Suite (BPMS) An integrated set of applications used for BPM Emerging Trend of Social BPM Technologies enabling employees to collaborate across functions internally and externally using social media tools Have students read QuickBooks is an example of a BPMS used by many small business owners. A lot of companies have Facebook and Twitter pages today so that they can communicate with their customers.

2.3 Business Pressures, Organizational Responses, and Information Technology Support Business Pressures Organizational Responses You company is going to face pressure and you’re going to have to respond to those pressures.

Business Pressures Market Pressures
Market Pressures: business pressures generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers.

Business Pressures Market Pressures Technology Pressures
Technology Pressures: business pressures caused by technological innovation and information overload.

Business Pressures Market Pressures Technology Pressures
Societal/Political/Legal Pressures Societal/Political/Legal Pressures: business pressures related to social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics.

These are all diagramed in this circle
These are all diagramed in this circle. Some of the pressure your company has control over, but other pressures it’s totally powerless over.

Market Pressures Globalization Changing Nature of the Workforce
Powerful Customers Have one student read all three Changing Nature of the Workforce: The workforce, particularly in developed countries, is becoming more diversified. Increasing numbers of women, single parents, minorities, and persons with disabilities are now employed in all types of positions. Powerful Customers: consumer sophistication and expectations increase as customers become more knowledgeable about the products and services they acquire. Customers can use the Internet to find detailed information about products and services, to compare prices, and to purchase items at electronic auctions.

Globalization The integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in IT. Globalization: the integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology.

Globalization 1.0 (1st Era) 1492 - 1800
Focus: Countries Drivers: Muscle Horse power Wind power Steam power Thomas Friedman --> Three eras of globalization: Globalization 1.0: Timeframe: 1492 to 1800 Benefited: Countries You needed a ship You needed a lot of courage because you could fall off the world.

Globalization 2.0 (2nd Era) 1800 - 2000
Focus: Companies Main Driver: Multinational Companies First Half of 2.0 Driver: Falling transport costs Second Half of 2.0 Driver: Falling telecom costs Thomas Friedman --> Three eras of globalization: Globalization 2.0: Timeframe: 1800 to 2000 Benefitted Companies Driver: -- first half of this period --> Falling Transportation Costs (Steam Engine/Railroads) -- second half of this period --> Falling Telecommunication Costs (Telegraph, Telephone, Computer, Satellite, Fiber Optics, Internet) Let’s get out the product as quickly and cheaply as we can. Process automation.

Globalization 3.0 (3rd Era) 2000 - Present
Focus: Groups & Individuals Drivers: Convergence of 10 forces or “Flatteners” Thomas Friedman --> Three eras of globalization: Globalization 3.0: Timeframe: 2000 to Present Benefits Groups and Individuals Driver: Convergence of 10 forces (or Flatteners)

The Ten “Flatteners” 11/9/1989: Berlin Wall Falls
Ten things happened in the world that enabled us to make the world a lot flatter Fall of the Berlin Wall on November 9, 1989: Shifted the world toward free-market economies and away from centrally planned economies. Led to the emergence of the European Union and early thinking about the world as a single, global market.

8/9/1995: Netscape Goes Public Netscape goes public on August 9, 1995: Popularized the Internet and the World Wide Web.

8/9/1995: Netscape Goes Public Development of Workflow Software Development of workflow software: Enabled computer applications to work with one another without human intervention. Enabled faster, closer collaboration and coordination among employees, regardless of their location.

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Uploading & Downloading: Empowered all Internet users to create content and put it on the Web. Led the transition from a passive approach to content to an active, participatory, collaborative approach.

The Ten “Flatteners” 11/9/1989: Berlin Wall Falls Outsourcing
8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Outsourcing: Contracting with an outside company to perform a specific function that your company was doing itself and then integrating their work back into your operation; for example, moving customer call centers to India.

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Offshoring Offshoring: Relocating an entire operation, or certain tasks, to another country; for example, moving an entire manufacturing operation to China.

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Offshoring Supply Chaining Supply chaining: This is when you give your suppliers permission to monitor your stock levels so that they can automatically ship you new merchandise

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Offshoring Supply Chaining Insourcing Insourcing: Delegating operations or jobs within a business to another company that specializes in those operations; for example, If you’re Nike, you want to design and sell shoes, you don’t want to ship the shoes. So, you allow FedEx to set up shop in your factory and so the shipping for you.

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Offshoring Supply Chaining Insourcing Informing Informing: Making all information searchable by a search engine.

8/9/1995: Netscape Goes Public Development of Workflow Software Uploading Outsourcing Offshoring Supply Chaining Insourcing Informing The Steriods The Steroids (computing, instant messaging and fi le sharing, wireless technologies, Voice over Internet Protocol, videoconferencing, and computer graphics): Making everything computer capable.

Changing Nature of the Workforce
Workforce is Becoming More Diversified Women Single Parents Minorities Persons with Disabilities IT is Enabling Telecommuting Employees The characteristics of the people that work for you are changing. The methods that they use to communicate are changing also.

Powerful Customers Increasing consumer sophistication & expectations
Consumer more knowledgeable about Products and services Price comparisons Electronic auctions Customer Relationship Management Have students read Customer Relationship Management now concentrates on knowing what makes your customers happy rather than just selling a product. That’s why you have so many buyer cards in your wallet

Technology Pressures Technological Innovation & Obsolescence
Rapid development of both New and Substitute Products & Services Technological Innovation and Obsolescence: Moore’s law – every year the processing speed of computer devices doubles. It get’s old really fast.

Technology Pressures Technological Innovation & Obsolescence
Rapid development of both New and Substitute Products & Services Information Overload Vast stores of data, information, & knowledge Difficulties in managing data for decision making Information Overload: Internet and other telecommunications networks are bringing a flood of information to managers. To make decisions effectively and efficiently, managers must be able to access, navigate, and utilize these vast stores of data, information, and knowledge. It actually takes people longer to make a decision now because of all the information there is to base that decision on.

Societal / Political / Legal Pressures
Social Responsibility Social Responsibility: doing the right thing as a company to help society

Social Responsibility Compliance with Government Regulations Making sure that you following government regulations regarding health, safety, environmental protection, and equal opportunity. Businesses tend to view government regulations as expensive constraints on their activities.

Social Responsibility Compliance with Government Regulations Protection against Terrorist Attacks Ethical Issues Making sure that your company doesn’t become the victim of a cyber-attack. It’s one thing for a hacker to break into your computer and steal your data. It’s another thing for that hacker to break into your computer and steal your customer’s information.

Social Responsibility Compliance with Government Regulations Protection against Terrorist Attacks Ethical Issues Ethical Issues: Ethics relates to general standards of right and wrong. Information ethics relates specifically to standards of right and wrong in information processing practices. Ethical issues are very important because, if handled poorly, they can damage an organization’s image and destroy its employees’ morale.

Social Responsibility
Green IT Facilities design and management Carbon management International and U.S. state environmental laws Energy management There are two topics that relate to social responsibility: IT is instrumental in organizational efforts to “go green” in three areas: Getting the most amount of computer power from the least amount energy use

Social Responsibility
Green IT Facilities design and management Carbon management International and U.S. state environmental laws Energy management Digital Divide One Laptop per Child (OLPC) Digital Divide: refers to the wide gap between those individuals who have access to information and communications technology and those who do not.

Organizational Responses
Strategic Systems There’s one or more of five things that you’re going to consider in the way your organization responds to the pressures: Numerous IT tools and business processes for dong this. Strategic Systems: enable your company to increase market share and/or profits, to better negotiate with suppliers, and to prevent competitors from entering their markets.

Strategic Systems Customer Focus Customer Focus: Providing superb customer service can make the difference between attracting and retaining customers versus losing them to competitors. Numerous IT tools and business processes have been designed to keep customers happy.

Strategic Systems Customer Focus Make-to-Order and Mass Customization Make-to-Order: producing customized (made to individual specifications) products and services. (Kitchen Cabinets) Mass Customization: producing a large quantity of items, but it customizes them to match the needs and preferences of individual customers (Furniture)

Strategic Systems Customer Focus Make-to-Order and Mass Customization E-Business & E-Commerce E-Business and E-Commerce: Conducting business electronically is an essential strategy for companies that are competing in today’s business environment.

Competitive Advantage and Strategic Information Systems
2.4 Competitive Advantage and Strategic Information Systems Competitive Strategy A statement identifying a business’s approach to compete, it’s goals, and the plans and policies required to attain those goals. How does your company intend to gain customers when you have dozens of competitors out there?

Competitive Advantage and Strategic Information Systems
2.4 Competitive Advantage and Strategic Information Systems Strategic Information Systems (SIS) An information system that helps an organization achieve and maintain a competitive advantages How are you going to use technology to help you gain a customer base?

Porter’s Competitive Forces Model
Have students copy and paste the competitive forces model Threat of Entry of New Competitors: When there are lot of profits to be made and very few obstacles to entering the market, the threat of new competitors is high. What does a patent do? Bargaining Power of Suppliers: The more suppliers you have to buy from, the stronger your bargaining power. Bargaining Power of Customers (Buyers): The more competitors you have, the harder you have to compete for your customers. Threat of Substitute Products or Services: Same thing here. If other products or services can do the same thing your can, then you have to work harder a customer’s business. If your customers can do something for themselves, the harder you have to work for a customer’s business. Rivalry Among Existing Firms: The more competition there is between your companies and its competitors, the better the deal that you have to cut in order to get the customer.

Porter’s Value Chain Model
A sequence of activities through which the organization’s inputs are transformed into valuable outputs. Primary Activities Relate to Production & Distribution of Products & Services Support Activities Support Primary Activities Contributing to Competitive Advantage The Porter introduced the Value Chain Model. The job of a business is to make money by adding value to inputs by converting them to outputs They do this primarily through production and distribution, and then through support activities. You sell somebody a blender. The process of putting that blender together is your primary method of earning value. But you have to provide a warranty or an owner’s manual for the blender. That’s a support activity.

Primary Activities Five Primary Activities for Manufacturing
Inbound Logistics (inputs) Operations (manufacturing & testing) Outbound Logistics (storage & distribution) Marketing & Sales After Sales Services These are some Primary Activities: relate directly to the production and distribution of the firm’s products and services. These activities create value for which customers are willing to pay. Have students read

Support Activities Four Support Activities
Firm’s Infrastructure (accounting, finance, management) Human Resources Management Product & Technology Development (R&D) Procurement These are some Support activities: They are needed to contribute to the firm’s competitive advantage by supporting the primary activities, but do not add value directly to the firm’s products or services. Have students read.

Strategies for Competitive Advantage
Cost Leadership Differentiation Innovation Operational Effectiveness Customer-Orientation

FIGURE 2.5 Strategies for competitive advantage.
These are some Competitive Advantage Strategies: Students copy and paste Cost leadership strategy: I can Produce products and/or services at the lowest cost in the industry (e.g., Walmart). Differentiation Strategy: I can Offer different products, services, or product features than my competitors can’t (e.g., Southwest Airlines has differentiated itself as a low-cost, short-haul, express airline). Innovation Strategy: I can Introduce new products and services, or add new features to existing products and services, or develop new ways to produce them (Classic Example: the first introduction of automated teller machines (ATMs) by Citibank, Apple with music). Operational Effectiveness Strategy: I can get the product to you faster than my rivals. (e.g. Amazon) Customer Orientation Strategy: I can make you happy just by letting you use technology to get what you need (a lot of banks now have apps that enable you to check your balance.)

2 Organizational Strategy, Competitive Advantage, and Information Systems The End

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2 Organizational Strategy, Competitive Advantage, and Information Systems 70 slides.

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