Information Systems Today

1. Information Systems Today Eighth Edition Chapter # 2 Gaining Competitive Advantage Through Information Systems

2. Learning Objectives 2.1 Discuss how information systems can be used for automation, organizational learning, and strategic advantage. 2.2Describe how information systems support business models used by companies operating in the digital world. 2.3 Explain why and how companies are continually looking for innovative ways to use information systems for competitive advantage.

3. Enabling Organizational Strategy through Information Systems (1 of 2) • Learning Objective: Discuss how information systems can be used for automation, organizational learning, and strategic advantage. • Organizational Decision-Making Levels • Organizational Functional Areas • Information Systems for Automating: Doing things Faster • Information Systems for Organizational Learning: Doing Things Better

4. Enabling Organizational Strategy through Information Systems (2 of 2) Information Systems for Supporting Strategy Identifying Where to Compete: analyzing Competitive Forces Identifying How to Compete: Choosing a Generic Strategy Identifying How to Compete: Resources and Capabilities Identifying How to Compete: Analyzing the Value Chain The Role of Information Systems in Value Chain Analysis The Technology/Strategy Fit

5. Organizational Decision Making Levels • Executive/Strategic Level • Upper Management • Managerial/Tactical Level • Middle Management • Operational Level • Operational Employees, Foremen, Supervisors

6. Operational Level

7. Managerial/Tactical Level

8. Executive/Strategic Level

9. Organizational Functional Areas

10. Information Systems for Automating: Doing Things Faster (Table 2.2)

11. Information Systems for Organizational Learning: Doing Things Better • Information systems can track and identify trends and seasonality • Managers can use this to plan for timely staffing and training of personnel

12. Information Systems for Supporting Strategy: Doing Things Smarter • Firms have a competitive strategy • Information systems should be implemented to support the organization’s strategy • A strategic mentality towards information systems results in finding ways to use information systems to achieve a chosen strategy by innovation, streamlining operations, or optimizing the value chain • A strategic view of information systems results in creating a computer based loan application process to process loans faster and better than rivals

13. Identifying Where to Compete: Analyzing Competitive Forces

14. Identifying Where to Compete: Analyzing Competitive Forces (Table 2.3)

15. Identifying How to Compete: Choosing a Generic Strategy

16. Identifying How to Compete: Resources and Capabilities (Resources) • Resources — Reflect the organization’s specific assets that are utilized to achieve cost or differentiation from it’s competitors

17. Identifying How to Compete: Resources and Capabilities (Capabilities) • Capabilities — Reflect the organization’s ability to leverage their resources in the marketplace

18. Identifying How to Compete: Analyzing the Value Chain • Value Chain Analysis • The process of analyzing an organization’s activities to determine where value is added to products or services • Used to identify opportunities where information systems can be used to gain a competitive advantage

19. The Role of Information Systems in Value Chain Analysis

20. The Technology/Strategy Fit • Organizations are constrained by time and money to build or acquire only those systems that add the most value • Therefore, organizations try to maximize business/IT alignment • In any significant IS implementation, there must be commensurate, significant organizational change • This typically comes in the form of business process management (a method of improving functioning of an organization)

21. Business Models in the Digital World (1 of 2) • Learning Objective: Describe how information systems support business models used by companies operating in the digital world. • Revenue Models in the Digital World • Platform-Based Business Models and the Sharing Economy • Service-Based Business Models A business model is a summary of a business’s strategic direction that outlines how the objectives will be achieved

22. Business Models in the Digital World (2 of 2) • A business model reflects the following: • What does a company do? • How does a company uniquely do it? • In what way (or ways) does the company get paid for doing it? • What are the key resources and activities needed? • What are the costs Involved?

23. Revenue Models in the Digital World • A revenue model describes how the firm will earn revenue, generate profits, and produce a superior return on invested capital Revenue Models • Transaction fees/Brokerage • Traditional sales • Freemium • Affiliate marketing • Advertising • Subscription • Licensing

24. Freemium • Freemium is a marketing approach companies use to obtain customers by offering something for free to build a large customer base and then charge a premium for unrestricted versions with more functionality

25. Platform-Based Business Models and the Sharing Economy • A digital platform enables other businesses or users to co-create value as seen in the examples below:

26. A Sharing Economy • A sharing economy has been defined as “an economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the Internet (Oxford Dictionary, 2016)

27. Service-Based Business Models • Under a service-based business model, a manufacturer can offer equipment services as well as the product • For example, Rolls-Royce might sell jet engines near cost in a competitive market with the real revenue coming from the maintenance contracts to service those engines

28. Valuing Innovations • Learning Objective: Explain why and how companies are continually looking for innovative ways to use information systems for competitive advantage • Innovation is key for organizations attempting to gain or sustain a competitive advantage • Innovation involves creating new products or services that return value to the organization • Radical innovations, also known as disruptive innovations, use a markedly new or different technology to access new customer segments and significantly greater benefits

29. Predicting the Next New Thing Above are examples of some new technologies and systems

30. Successful Innovation is Difficult • Innovation is often fleeting • Innovation is often risky (such as the battle between HD-DVD and Sony’s Blu-ray son by Blu-ray) • Innovation choices are often difficult • Open innovation can prove to be beneficial when you integrate external stakeholders into the innovation process

31. Organizational Requirements for Innovation • Process Requirements • Focus on success over other objectives • Resource Requirements • Employees with knowledge, skill, time, and resources • Partner with appropriate resources • Risk Tolerance Requirements • Tolerance for risk • Tolerance for failure

32. Organizing to Make Innovation Choices • A book, The Innovator’s Solution, by Christensen and Raynor (2003) outlines a process called the disruptive growth engine that organizations can follow to more effectively respond to radical innovation in their industry. This process has the following steps: • Start early • Display executive leadership • Build a team of expert innovators • Educate the organization

33. Implementing the Innovation Process

34. Thinking About Investments in Radical Innovation • The disruptive innovation cycle suggests three new ways to think about investments in radical innovation: • Put Technology Ahead of Strategy • Because of importance you must begin with technology • You must begin by understanding technology and develop a strategy from there • Put Technology Ahead of Marketing • Marketing comes into play later in this model • Innovation is Continuous • Emerging technologies are constantly on the lookout for the next new thing

35. Crowdfunding • Crowdfunding is the securing of business financing from individuals in the marketplace to fund an initiative

36. END OF CHAPTER CONTENT

37. Managing in the Digital World: Startups and New Business Models • Information technology has enabled new business models: • Operating a platform (enables other businesses/users to co-create value) • Cutting out the middleman (bypassing traditional retail channels and interacting directly with customers) • Ex: Warby Parker (eyeglass vendor) and Casper (mattress seller) use technology to disrupt traditional distribution channels and directly connect with buyers • Selling subscriptions (facilitated by technology through the removal of friction from the transaction using online forms) • Providing on-demand services

38. Green IT: The Electric Navy • New navy ship, USS Zumwalt, uses a hybrid propulsion system • Allows for more efficient generation and flexible distribution of power between propulsion, sensors, and weapon systems • Modern navy combat is as much about technology as it is brute force • Also investigating biofuels as a greener more available solution

39. Who’s Going Mobile: Digital Nomads • Digital Nomads — People who live and work wherever they feel like, using the Internet and mobile technology to connect with their customers or employers • Location must be appealing place to live and work • Low cost of living • Good weather • Good connectivity using Wi-Fi or cellular networks • Some changes • Must be conducive to the work style and skill set • Maintain good relationship with customers or employers • Must be able to build and maintain networks

40. When Things Go Wrong: The Pains of Uber in China • DidiKuaidi, formed by rival taxi-hauling services Alibaba and Tencent (two of China’s Internet giants) competed directly with Uber (later renamed DidiChuxing) • Actually disrupted Uber by offering customers a choice between a taxi, private car, shared car, shuttle van or bus • Arranged more than 1.4 billion rides since its inception (more than Uber did worldwide since its founding) • Plans to expand in the future to include car loans to drivers, passengers booking test drives of new cars, and match-making by allowing drivers and passengers to select each other

41. Ethical Dilemma: The Ethics of the Sharing Economy • Uber and Airbnb are providing a service bypassing the middleman thus providing a service in the sharing economy by removing transactional friction from markets for services that are already permissible by law • Unregulated like taxis and hotels are • Not subject to controlled markets • The challenge remains that the existing laws and regulations framework provide for and protect existing economic stakeholders • Are these ethical? Existing stakeholders will not take this lying down

42. Coming Attractions: The CITE Project • CITE (The Center for Innovation, Testing, and Evaluation) is designed to be a full scale city (without residents) designed to be a realistic test for emerging technologies • Built in the desert of New Mexico close to Mexico • Allow new innovations to be tested at scale with minimal risk to the public • Will include self-driving cars, smart homes, advanced thorium-based power supplies • Major challenge is finding unintended consequences when real people are allowed to use, misuse, and abuse them

43. Security Matters: The Bangladesh SWIFT Theft • SWIFT (The Society for Worldwide Interbank Telecommunications) is an organization that enables banks to rapidly clear financial transactions on a global scale. • Owned by its member banks who pay a fee • Organized since 1970 linking 9,000 banks in 209 countries • In 2016, attackers penetrated the central banking system of Bangladesh and used SWIFT to transfer US$81 million dollars • They used malware to cover up their activity

44. Industry Analysis: Education Cost of higher education in the United States has steadily increased (16% every five years) Average college graduate owes $37,000 in student loans Trend in globalization—increased collaboration in research and curriculum Trend in online delivery—leads to cost savings, but may be less engaging to students Massively open online courses (MOOCs)—free to students