1. BUSINESS DRIVEN TECHNOLOGY
Chapter Five:
Organizational Structures that Support Strategic Initiatives
CLASSROOM OPENER
GREAT BUSINESS DECISIONS – Sam Walton’s Discounting of America
Samuel Moore Walton lived in the same neighborhood in Bentonville, Arkansas, for forty years. Walton was the sort of man that would rather borrow a newspaper than pay a quarter for a new one. He was also the sort of man that would invite a struggling young family out to lunch with his family every Sunday.
Sam Walton controlled over 20 percent of Wal-Mart’s stock, and Sam Walton appeared on Forbes 400 with a net worth of $2.8 billion in 1985 (the holdings are now worth $28 billion). Of all the inventions that helped Sam Walton achieve success and billionaire status, his greatest invention as a CEO was that he himself did not change. Sam managed his 40,000 employees as equal associates, and it was said that only his family meant more to him than his beloved associates. One manufacturer who worked for Sam for decades stated “One of Sam’s greatest contributions to Wal-Mart was his attitude toward experimentation. He constantly encouraged us to experiment on a small basis and if the idea worked, roll it out. If it failed, try something else. It was his attitude of keep trying, and don’t be afraid of failure that made us all so successful.”
Sam Walton succumbed to cancer in 1992, and the news was sent via satellite directly to the company’s 1,960 stores; when the announcement played at some stores, clerks started crying. The New York Times obituary estimated Sam’s fortune at the time of his death at $28 billion. However, this fortune didn’t mean as much to Sam Walton as the news that one of his beloved Wal-Mart associates, a cashier, had $262,000 in her retirement account after working for Wal-Mart for twenty-four years.

2. LEARNING OUTCOMES
5.1 Compare the responsibilities of a chief information officer (CIO), chief technology officer (CTO), chief privacy officer (CPO), and chief security officer (CSO)
5.2 Explain the gap between IT people and business people and the primary reason this gap exists
5.3 Define the relationship between information security and ethics
5.1 Compare the responsibilities of a CIO, CTO, CPO, and CSO
Chief Information Officer (CIO) oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives.
Chief Technology Officer (CTO) is responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT.
Chief Security Officer (CSO) is responsible for ensuring the security of IT system.
Chief Privacy Officer (CPO) is responsible for ensuring the ethical and legal use of information.
5.2 Explain the gap between IT people and business people and the primary reason this gap exists
Business personnel possess expertise in functional areas such as marketing, accounting, and sales. IT personnel have the technological expertise. This causes a communications gap between the two. IT personnel have their own vocabularies consisting of acronyms and technical terms. Business personnel have their own vocabularies based on their experience and expertise. For both sides to have effective communications, the business personnel must seek to achieve an increased level of understanding of IT, and the IT personnel must seek to achieve an increased level of understanding of the business.
5.3 Define the relationship between information security and ethics
Information security is a broad term encompassing the protection of information from accidental or intentional misuse by persons inside or outside an organization. Ethics are the principles and standards that guide our behavior toward other people. Using security in an inappropriate manner is an ethical issue. Security and ethics are two fundamental building blocks that organizations must base their businesses on to be successful.

3. CHAPTER FIVE OVERVIEW
Organizational employees must work closely together to develop strategic initiatives that create competitive advantages
Ethics and security are two fundamental building blocks that organizations must base their businesses upon
This chapter provides an overview of the different titles, roles, and responsibilities found in a typical organization
The gap between IT personnel and business personnel is highlighted
The role of ethics and security in an organization is discussed

4. IT ROLES AND RESPONSIBILITIES
Information technology is a relatively new functional area, having only been around formally for around 40 years
Recent IT-related strategic positions:
Chief Information Officer (CIO)
Chief Technology Officer (CTO)
Chief Security Officer (CSO)
Chief Privacy Officer (CPO)
Explain to your students that job titles, roles, and responsibilities often differ dramatically from organization to organization

5. IT ROLES AND RESPONSIBILITIES
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
The CIO typically reports directly to the Chief Executive Officer (CEO)
CIOs must possess a solid and detailed understanding of every aspect of an organization coupled with tremendous insight into the capability of IT
CIOs must have strong business skills and strong IT skills
Ask your students if they can name any famous CIOs
Ans: Most students will be familiar with many famous CEOs but not CIOs, CPOs, or CTOs

6. IT ROLES AND RESPONSIBILITIES
What concerns CIOs the most
Enhancing customer satisfaction is the number one concern for many CIOs
This will be surprising to most students since they expect the CIO to be primarily concerned with technology
Ask your students why CIOs are concerned with customer satisfaction
How does customer satisfaction affect the IT department?
Ask your students to rank the CIO Concerns in the right side of Figure 1.22 and see if they agree with the CIOs

7. IT ROLES AND RESPONSIBILITIES
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
Ask your students to define the difference between the CIO, CTO, CSO, and CPO
Ans: CIO oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives
CTOs are similar to CIOs, except CIOs take on the additional responsibility for effectiveness of ensuring that IT is aligned with the organization's strategic initiatives
CTOs ensure the efficiency of IT
CPOs are the newest senior executive position, and many CPOs are lawyers by training
Ask your students to define the general organizational structure between CIO, CTO, CSO, and CPO?
Ans: This structure will vary from organization to organization
A great debate is to have the entire class decide on an organizational structure, including the CFO and CEO for a fictitious company

8. THE GAP BETWEEN BUSINESS PERSONNEL AND IT PERSONNEL
Business personnel possess expertise in functional areas such as marketing, accounting, and sales.
IT personnel have the technological expertise.
This typically causes a communications gap between the business personnel and IT personnel
IT personnel have their own vocabularies consisting of acronyms and technical terms
Business personnel have their own vocabularies based on their experience and expertise
For both sides to have effective communications, the business personnel must seek to achieve an increased level of understanding of IT, and the IT personnel must seek to achieve an increased level of understanding of the business
Ask your students what might happen at an SCM planning meeting that involved sales, marketing, productions, and operations and not IT
How would the other departments know the current IT infrastructure and which SCM systems are compatible?
How would the other departments know the functionality involved in an SCM system?
Working together, business and IT personnel have the potential to create customer-service competitive advantages
Let your students know about magazines such as InformationWeek and CIO that business managers and leaders can read to increase their IT knowledge

9. FUNDAMENTAL SUPPORT STRUCTURES – ETHICS AND SECURITY
Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful
In recent years, such events as the Enron and Martha Stewart fiascos along with 9/11 have shed new light on the meaning of ethics and security
Ask your students to share any examples of unethical behavior that they have recently observed
Ask your students to share any security issues that they have recently encountered

10. Privacy is a major ethical issue
Ethics
Ethics – the principles and standards that guide our behavior toward other people
Privacy is a major ethical issue
Privacy – the right to be left alone when you want to be, to have control over your own personal possessions, and not to be observed without your consent
Privacy is an ethical issue
There are numerous examples of ethical issues surrounding IT
Ask your students to list a few ethical IT examples that are currently in the news
Discuss the infamous case of Napster and present your students with the ethical issues surrounding music sharing and copyright laws
Ask your students if they think tracking customer information from a Web site visit is ethical
What if the company sells the information?

11. Ethical issues stemming from Technology Advances
Ethics
Ethical issues stemming from Technology Advances
Break your students into groups and ask them to find a real-world example of each type of ethical issue displayed in Figure 1.23
Ask your students to find additional ethical issues stemming from technology advances not mentioned in Figure 1.23

12. One of the main ingredients in trust is privacy
Ethics
One of the main ingredients in trust is privacy
For e-business to work, companies, customers, partners, and suppliers must trust each other
Privacy during Web interactions is a major concern for many individuals
Violating someone’s privacy is a sure way to ruin a relationship
E-business is built on the practice of exchanging large amounts of information between many parties
Without privacy, there will not be any trust
Ask your students if they have ever had their privacy violated on the Internet
Ans: One of the most common example is someone forwarding or bcc (blind carbon copy) an without the person’s knowledge or consent

13. Security
Organizational information is intellectual capital - it must be protected
Information security – is the protection of information from accidental or intentional misuse by persons inside or outside an organization
E-business automatically creates tremendous information security risks for organizations
With business strategies such as CRM organizations can determine such things as their most valuable customers
Ask your students why would an organization want to protect this type of information
Ask your students why e-business automatically creates security risks
How much critical information is freely flowing over the Internet to customers, partners, and suppliers?
How has HIPAA helped protect the privacy and security of personal health records?
HIPAA requires health care organizations to develop, implement, and maintain appropriate security measures when sending electronic health information

14. Organizational spending on information security
Figure 1.25 displays the typical size of an organization’s information security budget relative to the organization's overall IT budget
46% indicated that their organization spent less than 5% of the total IT budget on security

15. Computer Security Expenditures/Investment
Figure 1.26 displays the spending per employee on computer security
The highest average computer security spending per employee was in the transportation industry and federal government - not surprising after 9/11

16. OPENING CASE STUDY QUESTIONS How Levi’s Got Its Jeans into Wal-Mart
Predict what might have happened to Levi’s if its top executives had not supported investments in IT
David Bergen compiled a cross-functional team of key managers. Analyze the relationships between Levi’s three business areas and determine why Bergen chose them to be a part of his cross-functional team
Explain why it would be unethical for Wal-Mart to sell Levi’s jeans sales information to another jeans manufacturer
Evaluate the ramifications for Wal-Mart’s business if it failed to secure its partner’s information and all sales information for all products were accidentally posted to an anonymous Web site.
1. Predict what might have happened to Levi’s if its top executives had not supported investments in IT
One of the main factors that brought Levi’s back from the dead was its ability to sell jeans in Wal-Mart. Wal-Mart demands that all partners have up-to-date SCM systems that can easily integrate with Wal-Mart’s systems. If Levi’s top executives did not have the foresight to view selling jeans at Wal-Mart as a competitive advantage, then chances are the company would not have made a strong comeback in the highly competitive clothing market.
2. David Bergen, Levi’s CIO, put together a cross-functional team of key managers from IT, finance, and sales to transform Levi’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and determine why Bergen chose them to be a part of his cross-functional team
Business personnel and IT personnel must work together for an organization to succeed. If Levi’s failed to include IT personnel, finance personnel, or sales personnel in the cross-functional team, it would have had a difficult time achieving a successful system transformation.
3. Explain why it would be unethical for Wal-Mart to sell Levi’s jeans sales information to another jeans manufacturer
Wal-Mart and Levi’s are partners. Wal-Mart would risk losing Levi’s trust, and business, if it decided to share Levi’s confidential sales information with a competitor.
4. Evaluate the ramifications for Wal-Mart’s business if it failed to secure its partner’s information and all sales information for all products were accidentally posted to an anonymous Web site
Wal-Mart would be violating its partners’ trust and therefore risk losing their business

17. CHAPTER FIVE CASE Customer's Customer Relationship Management
Organizations should implement effective solutions for not only their own organizations but also their customers’ organizations
Ticketmaster wants to sell to its customer’s customer
Ticketmaster wants to sell the tickets to a Knicks game at Madison Square Garden and book dinner at a restaurant near the Garden
This could take revenue away from Madison Square Garden’s lucrative concession sales

18. CHAPTER FIVE CASE QUESTIONS
Describe the dilemma an organization faces when attempting to access its customer’s customers
Compare customer relationship management and customer’s customer relationship management
Explain why directly accessing a customer’s customer is considered unethical
Assess the adverse impact to Ticketmaster if it failed to ensure the security of its customer information such as credit card numbers
1. Describe the dilemma an organization faces when attempting to access its customer’s customers
This is a classic channel conflict. Accessing my customer’s customer could cause my customer to lose revenue. For example, if Ticketmaster sells a dinner along with tickets to a game at Madison Square Gardens, it would be potentially losing revenue through concession sales for Madison Square Gardens
2. Compare customer relationship management and customer’s customer relationship management
CRM is compiling information and maintaining relationships with your direct customers. CCRM is compiling information and maintaining relationships with your customer’s customers.
3. Explain why directly accessing a customer’s customer is considered unethical
Many brokers think twice before giving detailed information about their customers to a mutual fund. The mutual fund would benefit greatly from marketing directly to the customers; however, the brokers would not want the competition. Directly accessing a customer’s customer is considered unethical because it is a violation of trust and privacy.
4. Assess the adverse impact to Ticketmaster if it failed to ensure the security of its customer information such as credit card numbers
If Ticketmaster failed to protect its customer information, its customers would quickly lose confidence in its business, and potential customers would think twice before giving Ticketmaster their credit card numbers. The majority of Ticketmaster’s revenue is generated from online and phone sales. It is impossible to make online and phone sales without credit cards. Ticketmaster must protect its customers’ information if it wants to stay in business.

19. BUSINESS DRIVEN TECHNOLOGY
UNIT ONE CLOSING

20. Unit Closing Case One Motivating and Rewarding Employees
Using Porter’s Five Forces determine if you would enter the EIM market. Provide support for your answer
Explain why you think the EIM market is expected to grow so significantly over the next few years
Describe how managers can change an organization’s efficiency and effectiveness by being able to view incentive plans online
Explain why EIM software can have a direct impact on an organization's bottom line
1. Using Porter’s Five Forces determine if you would enter the EIM market. Provide support for your answer
Answers to this question will vary. If your students can support their answer with a correct Five Forces analysis, it is a good sign that they are grasping the material.
In general, buyer power is low and supplier power is high because there are only a handful of vendors currently offering EIM packages. As the popularity of EIM grows, and more vendors enter the market, buyer power will increase and supplier power will decrease. The threat of substitute products is high because as EIM software gains popularity, big ERP vendors will begin offering EIM solutions as part of an ERP package. Customers will be more likely to buy an EIM package from a partner vendor than from a new vendor (primarily due to software integration issues.) Threat of new entrants is low to medium. The only real entry barrier is developing the EIM software, which is becoming easier with the advances in software development tools such as Web services.
2. Explain why you think the EIM market is expected to grow so significantly over the next few years
The EIM market is expected to grow from $200 million in 2003 to 2.5 billion in The reasons for this growth are numerous. One reason is that any business issue involving a measurable objective can be helped by an incentive program. Organizations are also realizing the value of loyal employees. The days of employees working at the same companies for years are gone. Today, it is impressive if an employee has been at the same organization for five years. The cost of retraining and lost knowledge can be significant for many organizations. Organizations can also realize cost savings from a reduction in incentive plan errors. Using tools that can help retain employees will be crucial for successful organizations.
3. Describe how managers can change an organization’s efficiency and effectiveness by being able to view incentive plans online.
If salespeople can view their performance online, along with the incentive that corresponds to their performance, they will be more motivated to increase their performance. They will receive instant feedback on their performance and will feel more empowered to control their future. EIM systems offer managers direct access to their team’s performance online. This will allow managers to dedicate their efforts to helping those that are falling behind or failing, which will directly increase an organization’s efficiency and effectiveness.
4. Explain why EIM software can have a direct impact on an organization’s bottom line.
EIM can help determine when sales personnel are being overpaid, which directly affects an organization’s bottom line. EIM can also help motivate employees, which will increase efficiency and effectiveness, which also directly impact an organization’s bottom line.

21. Unit Closing Case One Motivating and Rewarding Employees
Summarize how an EIM can impact a company’s value chain
Define ethics and explain why it is unethical for people to fail to report when they are overpaid for their sales efforts
Explain why an organization would want to ensure that its incentive program information is highly secure
5. Summarize how an EIM can impact a company’s value chain
EIM can impact primary value activities by motivating employees who are responsible for marketing and selling the product or service. EIM can impact support value activities by increasing the business value of human resource management processes.
6. Define ethics and explain why it is unethical for people to fail to report when they are overpaid for their sales efforts
Ethics are the principles and standards that guide our behavior towards other people. Failing to report an inaccurate payment is similar to stealing from the company, which is highly unethical.
7. Explain why an organization would want to ensure that its incentive program information is highly secure
Typically, employee salaries are confidential. In some organizations you can be fired for sharing salary information. It is the same for incentive salary. If employees find out that similar level employees are making more money or receiving higher incentives, they will be tempted to quit, or become disgruntled employees.

22. Unit Closing Case Two Delta Airlines Plays Catch-Up
What business risks would Delta be taking if it decided not to catch up with industry leaders in using IT to gain a competitive advantage?
What competitive advantages can a company reap it if is the first-mover in introducing an innovative IT system? What are the pros and cons of being a fast follower?
What other industries could potentially benefit from the use of yield management systems?
Explain how American and United used customer information to gain a competitive advantage and how the competitive advantage affected their value chains
1. What business risks would Delta be taking if it decided not to catch up with industry leaders in using IT to gain a competitive advantage?
Delta would fall behind the industry and its customer expectations. If Delta’s business processes were significantly inefficient and ineffective compared with its competitors, it would lose business. Airline customers are typically running under time pressures to catch flights and connections, and they do not want to be inconvenienced by inefficient and ineffective business processes
2. What competitive advantages can a company reap if it is the first-mover in introducing an innovative IT system? What are the pros and cons of being a fast follower?
First-mover advantages can be enormous and place an organization in the position to significantly impact its market share. A fast follower can also increase its market share by tagging onto the first-movers ideas. It also has the advantage of avoiding some of the mistakes or pitfalls that the first-mover might have made. Of course, a fast follower will only obtain a temporary advantage as many competitors will begin to implement the innovative IT system
3. What other industries could potentially benefit from the use of yield management systems?
Almost all industries could benefit from the use of a yield management system. Potential answers include other transportation industries such as trains, trucks, and buses, health care industry for doctor visits, and even the telecommunications industry for shared modem services
4. Explain how American and United used customer information to gain a competitive advantage and how the competitive advantage affected their value chains
Both airlines used their innovative IT systems to gain valuable business intelligence into their customer information. They conceived and rolled out hugely successful frequent flyer programs, which increased the likelihood that frequent business travelers, their most profitable customers, would fly with them instead of with a competitor. Frequent flyer programs require sophisticated computer system to properly account for and manage the flight activity of millions of customers. Ultimately, frequent flyer programs became an entry barrier for the industry because all airline companies felt they could not compete for the best customers without having their own frequent flyer systems.

23. Unit Closing Case Two Delta Airlines Plays Catch-Up
Select two efficiency and effectiveness metrics that Delta can implement to measure the success of its gate and boarding application
Delta’s board of directors questioned the need to spend additional funds on IT when the airline was under great pressure to reduce its costs. Determine a strategy for how the CEO, CIO, CTO, and CPO can work together to ensure IT projects are supported by both the business and IT departments
Explain how an airline can use information technology to ensure the security of its airplanes
5. Select two efficiency and effectiveness metrics that Delta can implement to measure the success of its gate and boarding applications
Delta could use throughput and speed efficiency metrics to baseline and benchmark its gate and boarding applications. It could also use usability and customer satisfaction effectiveness metrics to determine the satisfaction in its gate and boarding applications
6. Delta’s board of directors questioned the need to spend additional funds on IT when the airline was under great pressure to reduce its costs. Determine a strategy for how the CEO, CIO, CTO, and CPO can work together to ensure IT projects are supported by both the business and IT departments
The CEO, CIO, CTO, and CPO need to work together to gain the proper support for future IT investments. They need to remind everyone of the success gained in the past from IT investments. Continuously measuring the efficiency and effectiveness of IT investments and distributing these results to the business will also help to ensure future funding of IT projects
7. Explain how an airline can use information technology to ensure the security of its airplanes
Airline security is one of the hottest topics today. Have your students research the Web to find out the latest uses of IT to secure airports and airlines. One of the hottest issues today is the ethical use of profiling airline customers. Students will also uncover a large amount of material on baggage scanning and bomb detection technologies.