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BU415 Textbook and Reading Notes
Technology is everyone and necessary to survive. There isn’t a single modern managerial
discipline that isn’t being deeply and profoundly impacted by technology. Tech skills are being
“built into” jobs everywhere
Chapter 1: Informa0on Systems and the Role of General and Func0onal Managers
General and Func0onal Managers
 Manager: a knowledge worker of modern business and not-for-proBt organiza0on who is
in charge of a team, a func0onal area, a business unit, or an en0re organiza0on
 Needs to have IT knowledge
 Objec0ve is business drivenused for growing or changing needs of the organiza0on
General and Func0onal Managers versus End Users
 End Users: individuals who have direct contact with soLware applica0ons as they use
them to carry out speciBc tasks (i.e a student using MicrosoL word)
 Most general and func0onal managers in modern organiza0ons are also end users
 Important to have knowledge of informa0on systems and the role that IT plays
Informa0on Systems Professionals
 Need IT professionals to build infrastructure
 Need a partnership between them and the business people
 Common gap here which is why they teach MIS in schools
Common Jobs in the Organiza0onal IT Func0on
 Chief Informa0on ORcer
o Common for CIOs to become CEOs because:
 Increasing prevalence of IT and the consequent need for those who serve
on the execu0ve teams and the board of directors to have some
understanding of how to use the crucial resource
 They have a broad view of opera0ons
 Technical Staf
o Architect: in charge of developing a framework for the development of a system,
has a strong technical background. Big picture individuals
o Developer: builds high-quality, innova0ve, and performing soLware that
complies with coding standards, technical designs, and the framework provided
by architects
o Administrator: in charge of day-to-day maintenance of a system or collec0on of
systems
 Analysts and Managerial Staf
o Analysts: general term referring to an individual who performs analysis in a
speciBc Beld or topic area
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o Project Manager: responsible for the successful comple0on of a project
o InformaLon Systems Manager: in charge of a team within the IT func0on of an
organiza0on
IT Consul0ng
Data Science and Data Scien0sts
o Data science: encompasses more than sta0s0cs, also includes the ability to
iden0fy useful data sources, tap into data streams or generate new ones
 Must have a strong business acumen, coupled with the ability to
communicate Bndings to both business and IT leaders
Advanced Analy0cs Skills and Competencies
o Following roles are cri0cal to the success of data science ini0a0ves
 Data ScienLsts: these individuals are in charge of analy0cs eforts and
have an overview of end-to-end process
 Data Engineers: these individuals can be invaluable in reducing the 0me
needed to access and prepare data for analysis
 Business Experts: these general and func0onal managers have a deep
understanding of the business and func0onal domain of analysis
 Source System Experts: These individuals have a deep understanding of
the technology underpinning the business domain of analysis. The
understand what business processes created the data and how the data
are stored
 SoOware Engineer: These individuals have tradi0onal soLware
engineering knowledge that may be needed on special projects or when
substan0al custom coding is required to extract, analyze or visualize the
data
Fundamental IT Trends: The Staying Power of Moore’s Law
 Informa0on systems: those original systems that enable the processing and
management of an ins0tu0on’s informa0on
 Moore’s Law: the observa0on that the number of transistors in a dense integrated
circuit doubles about every two years
 Processing Power and Memory Have Increased
o Processing power of microprocessors have experienced exponen&al growth
o Storage capacity of memory chips has also increased exponen0ally
 Cost of Compu0ng Power Have Declined
o Costs of compu0ng power and storage has declined
 Computers have become easier to use
o Have become more complex but are now easier to use
Other IT Trends of Managerial Interest
 Declining Storage Costs
o This trend has enables the emergence of a host of strategic ini0a0ves predicates
on the collec0on and analysis of signiBcant amounts of data
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Ubiquitous Network Access
o The internet: a global network of networks relying on distributed ownership and
openly available standards and communica0on protocols
o Increasing access + the costs of data transmission becoming negligible
Ubiquitous Compu0ng and Digital Data Genesis
o Global data networks have become widely available, more devices are now
intelligent and connected
o Rapid prolifera0on of easy-to-use compu0ng equipment has spurred more and
more digitaliza0on
How Do these Trends Afect Today’s Managers?
 Modern general and func0onal managers need to be able to devise strategies and
implement process that enables your organiza0on to take advantage of these trends and
be^er serve your increasingly IT-savvy customers
 Huge organiza0onal investment in IT equipment, soLware, and services
DeBni0ons:
 Chief Informa0on oRcer (CIO): The individual in charge of the informa0on systems
func0on
 Data scien0st: the individual in charge of the analy0cs eforts who has an overview of
the end-to-end process
 Digi0za0on: the process by which content and processes become expressed and
performed in digital form
 End users: those individuals who have a direct contact with soLware applica0ons as they
use them to carry out speciBc tasks
 Informa0on system: formal, sociotechnical, organiza0onal system designed to collect,
process, store, and distribute informa0on
 Informa0on technology (IT): Hardware, soLware, and telecommunica0on equipment
 IT professionals: those employees of the Brm who have signiBcant technical training and
are primarily responsible for managing the Brm’s technology assets
 Manager: a knowledge worker of modern business and not for proBt organiza0on who is
in charge of a team, a func0onal area, an en0re organiza0on, or a business unit
 Polymedia0on: the process of convergence of mul0ple digital devices into one.
Chapter 2: Informa0on Systems DeBned
Informa0on Systems: DeBni0on
 Informa0on Systems as Sociotechnical Systems
o Formal, sociotechnical, organiza0onal systems designed to collect, process, store
and distribute informa0on
o Sociotechnical theory ques0ons overly op0mis0c predic0ons about the poten0al
beneBts of new technology and suggested that the impact of new technologies
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on work systems was not a direct one but depend on the interplay of technology
with other aspects, or components
Four Components of an Informa0on System
o IT, people, processes, and structure
o Grouped into 2 subsystems:
 Technical subsystem
 Comprises of IT and processes
 The por0on of the informa0on system that does not include
human elements
 Social subsystem
 Comprises of people and structure
 People and people in rela0on to one another, represents the
human element
o InformaLon Technology
 Hardware, soLware and telecommunica0on equipment
 Cornerstone of any modern IS, enabling and constraining ac0on through
the rules of opera0on that stem from its design
o Process
 The speciBed series of steps necessary to complete a business ac0vity
 i.e job of a small family-owned grocery store manager and the process he
engages in when restocking inventory
 check the inventory and iden0fy the needed items
 call individual suppliers for quotes and delivery dates
 compare the various quotes
 select one or more suppliers for each of the needed items based
on the terms of agreement
 call these suppliers and place the orders
 receive the goods upon delivery, checking the accuracy and
quality of the shipped items
 pay the suppliers
 same ac0vity may be performed using various processes
 gaps exist between oRcial business process that forms the basis of
training programs and customer service protocols and the informal ways
these are performed
 this discrepancy is because although training and such is codiBed,
it is carried out by people, and people aren’t always the same
o poten0al discrepancy between the business processes as
designed by the organiza0on and the manner in which it is
actually enacted is oLen the root cause of IS failure
 when designing new IS, must consider poten0al obstacles
o People
 Individuals or groups directly involved in the IS
 End users, Managers, and their interpreta0ons
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Have their own set of skills, a`tudes, preconcep0ons, and personal
agendas that determine what they are able to do and what they will elect
to do as part of the IS
o Structure
 Refers to the organiza0onal design, repor0ng, and rela0onships within
the informa0on system
 Important to understand because of user resistance, incen0ve systems,
and rela0onships are oLen enemies of IS
o Systemic Efects
 Four components won’t work in isola0onthey interact with one
another
 Success is based on the proper interac0on of IT with the other
components
 This is known as systemic efects (a change in one component,
afects all other components of a system)
 Need to focus on op0mizing en0re IS as a whole
 Need to understand the importance of systemic efects when
designing a new system and troubleshoo0ng an exis0ng one that
is underperforming
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Why Do OrganizaLons Build InformaLon Systems?
1. To fulBll its informa0on processing needs
2. Does so in an efort to improve its eRciency and efec0veness
3. To fulBll informa0on processing needs, an organiza0on has to get relevant data that are
manipulated, or processed, to produce an output that will be useful
 IT can only be successfully leveraged as an integral part of an IS, but not in isola0on
 Successful Informa0on Systems
o IS should be built according to an explicit goal designed to fulBll the special info
processing needs of the implemen0ng org – do it for a reason
o
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o InformaLon Systems Success: IS is a failure if it is abandoned or not used
o Informa0on Systems Outcomes
 have other direct and indirect efects on people within and outside the
Brm (i.e empowering employees, widening scope of their responsibility,
deskilling, loss of responsibility, and crea0on of a monotonous working
environment)
 IS may have efect on future opportuni0es available to the Brm
Informa0on Systems in the Organiza0onal Context
 Every Organiza0on is Unique
o Firm Strategy
 Represents the manner in which the organiza0on intends to achieve its
objec0ves
 Understanding the strategy tells us what the Brm is trying to do and what
course of ac0on it has chartered to get there
o Firm Culture
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DeBned as the collec0on of beliefs, expecta0ons, and values shared by
the organiza0on’s members
 Broad representa0on of how the Brm does business
 Captures the oLen unspoken and informal way in which the organiza0on
operates
o Infrastructure
 Set of shared IT resources and services of the Brm, constraints and
enables opportuni0es for future informa0on systems implementa0ons
o The External Environment
 Encompasses regula0on, the compe00ve landscape, and general business
and social trends
 Is fairly removed from day-to-day opera0ons but incuence the Brm and
the type of IS the Brm will need to introduce
Bringing It All Together
o Immediate efect of IS is whether or not they are used
o If used then outcomes (intended or not) occur (Bnancial results, efects on
people, efects on the futre opportuni0es and constraints available to the Brm
o Model shows that organiza0on doesn’t exist in isola0on
o Also shows that IS are embedded in an org context, deBned by the Brm’s
strategy, culture, and IT infrastructure
o The loop nature is important to no0ce
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Informa0on Systems and Organiza0onal Change
 First Order Change: Automate
o Involves technology and processes but does not afect the sphere of the social
subsystem
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o Occurs when an IT innova0on is introduced that modiBes how an exis0ng process
is performed
o Managing First-Order change: limited scope makes it easy to envision, jus0fy,
and manage. General and func0onal mangers understand how the new
technology impacts the Brm’s opera0ons. Requires li^le execu0ve sponsorship
and involvement
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Second-Order Change: Informate
o Has some major implica0ons for the people component of the IS and the IT
processes?
o Manner in which the process is performed + the individuals that perform it are
afected
o The way people interact with the technology is changed
o This level of change typically occurs when the info intensity of the process being
performed changes substan0ally due to the intro of the new IT
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o Managing Second-Order Change: challenging to managers, employees and
customers may be afected. Must provide appropriate training and overcoming
the human tendency to resist change are key challenges, harder to jus0fy
Third-Order Change: Transform
o Most pervasive and radical level of change
o Encompasses Brst and second order change while also causing organiza0onal
structure disrup0ons
o The interac0on between structure and technology is substan0ated by a change in
the way the organiza0on selects, uses, and manages technology
o Fla^er/permeable org, structure usually emerges aLer the technology
implementa0on
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o
o Managing Third-Order Change: requires signiBcant managerial and execu0ve
involvement, top management needs to be champions for the transi0on. Likely
to face resistance.
Implica0ons
 Don’t put the car before the horse?
o Strategies are usually inspired by the func0onali0es of a powerful soLware
product, and the selec0on of a speciBc IT product should not be the point of
departure but rather the point of departure but rather the point of arrival of your
informa0on system design efort
 Manage Systemic Efects
o Must an0cipate the ripple efects that happen in the other parts of the IS from
changing one part
 Informa0on Systems are in Flux
o Business strategy and external environment evolve con0nuously, this means that
there must be a constant revalua0on of IS goals and need informa0on processing
func0onali0es
o Design and use of an IS should be seen as an itera0ve process itera0ve process
involving the cyclical evalua0on of individual IS components and the assessment
of how diferent org systems work together to support the business
 Op0mize the Whole
o Op0mize the informa0on system rather than any of its cons0tuent parts
o Requires that one or more components be deop0mized?
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DeBni0ons:
 Efec0veness: the ability to achieve stated goals or objec0ves. Typically, a more efec0ve
Brm is one that makes be^er decisions and is able to carry them out successfully
 ERciency: the ability to limit waste and maximize the ra0o of the output produced to
the inputs consumed. In other words, a Brm is more eRcient when it produced more
with the same amount of resources, produces the same with fewer resources, or
produces more with fewer resources
 External environment: the world outside the Brm that creates incuences, such as
regula0on, the compe00ve landscape, and general business and social trends (e.g.,
outsourcing, customer self-service).
 Firm Culture: the collec0on of beliefs, expecta0ons, and values shared by the members
of an organiza0on
 Firm Strategy: the manner in which the organiza0on intends to achieve its objec0ves
 Informa0on system: a formal, sociotechnical, organiza0onal system designed to collect,
process, store, and distribute informa0on
 Informa0on technology (IT): hardware, soLware, and telecommunica0on equipment
 IT Infrastructure: the set of shared IT resources and services of the Brm, forming a Brm’s
technological backbone, that constrains and enable opportuni0es for futures
informa0on systems implementa0on
 Organiza0onal Structure: the organiza0onal design, repor0ng, and rela0onships within
the informa0on system
 Process: the series of steps necessary to complete and organiza0onal ac0vity
 Systemic Efects: the no0on that the diferent components of a system are
interdependent and that change in one component afects all other components of the
system
Chapter 3: Organiza0onal Informa0on Systems and Their Impact
Categorizing Systems
 ClassiBca0on models are useful for two reasons
o Provide you with a vocabulary to interact with your colleagues and with IS
professionals
o Provide the basis for you to develop your own thinking about the role that
technology plays in your organiza0on and on how to best manage its impacts
 Hierarchical Perspec0ve
o Recognizes that decision making and ac0vi0es in organiza0ons occur at diferent
levels
o Opera0onal Level
 Concerned with short-term ac0vi0es that deliver the Brm’s value
proposi0on
 Highly structured decision makingdetailed procedures, li^le discre0on
of front line employees
 Objec0ve is eRcient transac0on processing with limited uncertainty
 Transac0on Processing Systems (TPS): the informa0on systems that
support this org. level
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o Managerial Level
 Concerned with midterm decision making and a func0onal focus
 Ac0vi0es are semi-structured, have well known components and some
degree of uncertainty
 Decision making is semi-structured but characterized by repeatable
pa^erns and established methods
 Focused on tac0cal decision making characterized by some
discre0on
 Objec0ve is to improve the efec0veness of the org, or one of its
func0ons
 Decision Support Systems (DSSs): IS that typically support this org
level
o Provide the info needed by func0onal managers to engage
in tac0cal decision making
o Objec0ve is to produce recurring reports and excep0on
reports
o Typically focus on internal opera0ons and the data they
use for analysis stem from the Brm’s TPS
o Execu0ve Level
 Concerned with high-level, long-range decisions
 Execs are focused on strategic decision making and interpre0ng how the
Brm should react to trends in the marketplace and the compe00ve
environment
 Decision making at this level is highly unstructured, ad hoc, and reliant on
internal and external data sources
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Objec0ve is to predict future developments by evalua0ng trends, using
highly aggregated data and scenario analyses
Li^le structure + few formal methodologies exists for ac0vi0es at this
level
Execu0ve Informa0on Systems (EISs): info system that supports this org
level
 Ofered through execu0ve dashboards
o Tools that enable rapid evalua0on of highly aggregated org
and trend data
o Evolu0on of the Hierarchical Perspec0ve
 Enables managers and IS professionals to easily iden0fy the main
characteris0cs and purpose of IS and the IT products designed to support
them
 Becoming less popular due to the org trend toward ca^er hierarchy +
trend toward empowering opera0onal personnel
 DiRcult to separate informa0on systems into clear-cut categories
FuncLonal perspecLve
o Typically represented in the form of the organiza0onal chart
o Designed to support the speciBc needs of individuals in the same func0onal area
o Based on the principle of local op0miza0onsuggests that info processing needs
are unique and homogeneous within a func0onal area
o Tailored to speciBc needs of the professionals in the area
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Process Perspec0ve
o Limita0on of func0onal and hierarchical perspec0ve is the lack of integra0on
among separate systems and the intro of considerable redundancy
 Also creates ineRciency with duplica0on of similar eforts in separate
business units, and substandard service
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Led to the development of siloed applica0ons, which serves each func0on
well, but makes communica0on diRcult
o Business Process Reengineering
 BPR emerged in the early 1990s to break down org silos, when it was
realized that business processes are cross func0onal
 Business process: the series of steps that a Brm performs in order to
complete an economic ac0vity
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BPR is a managerial approach that employs a process view of
organiza0onal ac0vi0es
 Methodology for achieving internal business integra0on, uses top-down
approach to business process redesign, seeks drama0c performance
improvements
 Focuses on internal ac0vi0es
 Process focused: deBned as a way of organizing work that centres on the
steps necessary to create value for customers, disregarding what each
func0on would tradi0onally look out for
o The Dark Side of Rengineering
 SigniBcant risks  high risk of failure
 1. Radical 3rd order change might bring out resistance due to change in
their scope of work, responsibility and posi0on
 2. Opera0ons are not glamourous or highly valued
 3. BRP ini0a0ves are very expensive because they require the Brm to
re0re its legacy systems and develop a costly integrated technology
infrastructure
 4. BRP methodology has a bad reputa0on because of its complexity and
the fact that it led to downsizing and layofs
o The Role of IT in Business Process Reengineering Eforts
 IT catalyst for BPR
 When technology changes, old processes may become obsolete
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Enterprise Systems
 Integra0on
o Form, coordinate, or blend into a func0oning or undeBned whole (unite)
o 2 dimensions of integra0on eforts
 Locus
 Internal or external
 Object of Integra0on
 What assets the Brm is looking to unify or combine
 Determine between business integra0on and systems integra0on
 Business Integra0on (link between business ac0vi0es)
o UniBca0on or the crea0on of 0ght linkages among diverse
but connected business ac0vi0es carried out by
individuals, groups and departments within an
organiza0on
 Systems Integra0on (link between systems and databases)
o The uniBca0on or 0ght linkage of IT-enabled informa0on
systems and databases
o Primary focus of systems integra0on is the technological
component of the IS
o Outcome is the collec0on of compa0ble systems that
regular exchange informa0on of or the development of
integrated applica0ons that replace the old ones
o Applica0on Integra0on: Seeks to enable communica0on
among diferent soLware programs
o Data integra0on: when the systems integra0on efort seeks
to enable the merging of data repositories and databases
o Internal integra0on: the uniBca0on or linkage of
interorganiza0onal systems
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External integra0on: pertains to interorganiza0onal
ones
Enterprise Resource Planning
o
o Started in the 1960’s, when it was realized that for inventory to be eRciently
managed, it would have to be linked to produc0on schedules
 Material Requirement Planning (MRP) was bornsoLware designed to
automa0cally translate master produc0on schedules into requirements
for subassemblies, components and raw materials
 MRP-II expends MRP to encompass the en0re factory produc0on
process now called ERP
 Pic 3.9
o Modularity
 Enables RP customers to exercise some cexibility with respect to the
components of the applica0on they intend to purchase and those thay
don’t want to pay for
Applica0on and Data Integra0on
o ERPs enable applica0on integra0on
 An even that occurs in one of the modules in one applica0on,
automa0cally triggers an even in one or more of the other separate
modules
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o ConBgurable
 Parameterizedintended to serve the needs of a wide range of diferent
organiza0ons in the industry (can choose how they want it to work)
 Bolt-on modules: used to further tailor the ERP to the speciBc needs of
the organiza0on
The Advantages or ERP
o ERciency: reduce costs, streamline business process and opera0ons
o Responsiveness: allows company to respond faster to consumer demands
o Knowledge Infusion: enable infusion of knowledge into the adop0ng Brmthe
applica0on is thought to embed the state of the art industry prac0ce so that it
can be used as a vehicle for upda0ng business processes and opera0ons within
the Brm
o Adaptability: adaptable to each unique organiza0onal context; oLen a degree of
customizability using conBgura0on tables and bolt-on func0onality
The Limita0ons of ERp
o Standardiza0on and Flexibility
 Trade-of between the two
 The more areas of the Brm you reach, the less cexible itll be
 Once it is set, it is hard to change it (soLware concrete)
o Is the best prac0ce embedded in the ES really best?
 Unclear how best prac0ce are iden0Bed
 Not enough to implement a soLware program to enact new prac0ce
 Unique approach your org has developed to carry out given ac0vity, may
not be supported by the ERP (leads to strategic clash)
o Strategic Clash
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A previously established business process may not be supported by the
ERP
o High Costs and Risks
 Large scale implanta0ons, cost a lot
Supply Chain Management
o Set of coordinated en00es that contribute to moving a product form its
produc0on to its consump0on
o Upstream supply chain: concerned with gathering and providing the org with the
resources it needs to perform its transforma0on process
o Downstream supply chain: concerned with moving the outputs of the Brm’s
produc0on process to its intended consumers
o Supply chain management (SCM): set of logis0cal and Bnancial processes
associated with the planning, execu0ng, and monitoring the supply chain
opera0ons
 Interorganiza0onal systems increasingly supported by the use of the
internet
Customer Rela0onship Management
o CRM strategic orienta0on that calls for itera0ve processes designed to turn
customer data into customer rela0onships using the informa0on collected
 Is a strategic ini0a0ve, not a technology; IT is an enabler of it
 Relies on customer personal and transac0onal datadesigned to help
the Brm learn about customers
 ULTIMATE OBJECTIVE: help the Brm use customer data to make
inferences about customer behaviours, needs to increase proBtability
o Opera0onal CRM: determines how the Brm interacts with customers to create
and maintain the rela0onship
o Analy0cal CRM: precise and granular interac0on analysis with costumers
Knowledge Management
o Refers to the set of ac0vi0es and processes used to create, codify, gather, and
disseminate knowledge within the org
 Set of ac0vi0es and processes that an org does to make sure that its
properly safeguarded
o Crea0ng Knowledge
 First phase in knowledge management ini0a0ve
 Orgs employees generate new info, devise novel solu0ons, iden0fy new
explana0ons for recurrent events
o Capturing and Storing Knowledge
 Compile and use knowledge
 Knowledge repository: a central loca0on and search point for relevant
knowledge
o Dissemina0ng Knowledge
 Last phase in knowledge management ini0a0ve
 Here the investments made in knowledge crea0on and storage pay of
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Because knowledge is in readily available format, it makes search more
eRcient
Analy0cs and Big Data
 Business analy0cs: examina0on of business data in an efort to reveal useful insight that
enables superior decision making
 Descrip0ve Analy0cs: the focus of descrip0ve analy0cs is to give an account of what has
occurred; is substan0ated in reports and visualiza0on of data through execu0ve
dashboards
 Predic0ve Analy0cs: focus of predic0ve analy0cs is to es0mate what will occur;
substan0ated in sta0s0cal modeling and machine learning algorithms that extrapolate
current trends
 Prespcrip0ve Analy0cs: focus is to state what should occur; substan0ated in op0miza0on
algorithms that see to iden0fy targets to guide decisions to monitor current opera0ons
 The Batch Era
o 1950’stransac0ons were batched and processed by a mainfraime at periodic
intervals (one at a tame)
o Computer cycles were scarce and expensive, jobs were qued
o Jobs would take days to complete
o S0ll used today by Nenlix
 The Transac0on Era
o Online transac0ons were allowed by the introduc0on of computer terminals,
personal computers, and networks
o Online: in real 0me (the opposite of batch)
o Transac0on: single logical opera0on on the data, can be completed or fail
o Online transac0on processing (OLTP): systems designed to provide real-0me or
near real-0me results
 Must respect the ACID proper0es
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o Database Management Systems
 Database: a self-describing collec0on of related records
 Database Management System (DBMS): how organiza0ons manage their
databases; equips a database administrator with the tools to maintain
and administer the data and enables applica0on/data interdependence
 3.18
o The Rela0onal Model
 Way diferent from the cat Ble system
 3 layers
 The user interface layer: contains instruc0ons specifying how the
user interface should look and operate
 The applica0on logic layer: contains instruc0ons specifying the
func0onali0es of the soLware program
 The data management layer: contains instruc0ons specifying
where and how to store the applica0on’s data as how to search,
retrieve, and secure them
 Schema: the structure of the data and metadata in a rela0onal DBMSit
is in tables
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Primary Key (of the table): can’t have duplicated records, so each row
needs one or more a^ributes that iden0fy it; can’t have duplicate
elements because it would generate ambiguous results
 Focus of RM is how to op0mally manage data
Business Intelligence Era
o Began when Brms focused their a^en0on on the use of transac0on data for
decision support
o Encompasses the set of techniques, processes, and technologies designed to
gather and interpret data about the business in order to improve decision making
and advance the organiza0ons interests

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o
Shows how transac0onal data can create records of the past, becoming
raw material for BI
o Components of the Business Intelligence Infrastructure
 BI is not a technology
 To engage in BI, Brm must develop an IS focusing on each of the 4
elements, but need IT due to the high volume of data
 BI Infrastructure: the set of applica0ons and technologies designed to
create, manage, and analyze large repositories of data in an efort to
extract value from them
 Main components of a BI infrastructure: data warehouses, data marts,
query and repor0ng tools, online analy0cal processing (OLAP) and data
mining
o Data Warehouse
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Data repository that collects and consolidates data from mul0ple source
systems (internal and external) to enable analysis
Has the following characteris0cs
 Large in size (terabytes)
 Large in scope
 Enabling data integra0on
 Designed for analy0cstradi0onal databases are op0mal for fast
data retrieval

o Data Mart
 Scaled-down version of a data warehouse that focuses on the needs of a
speciBc audience
 Repository built to enable analysis; designed for the speciBc needs of a
narrowly deBned community f knowledge workers
 Smaller in scope, easier to build, uses audience speciBc data (advantage
over warehouse)
 Data redundancy and lack of data consolida0on (issues with this method;
seen because dif departments in a Brm may have their own data mart)
o Online Analy0cal Processing (OLAP)
 A class of soLware programs that enables a knowledge worker to easily
and selec0vely extract and view data from analy0cal databases (historical
data)
 User drivenanalyst has to issue a query
o Data Mining
 The process of automa0cally discovering nonobvious rela0onships in
large databases
 Used to analyze historical info
 SoLware iden0Bes signiBcant pa^erns, analyst doesn’t have to do it
 Pa^erns a data mining applica0on may Bnd:
 Associa0ons: occur when one event can be correlated to another
event
 Sequences: occur when one event leads to another subsequent
event
 Anomalies: occur when data deviate from an expected pa^ern
 ClassiBca0on: occurs when categories are generated from the data
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Forecas0ng: occurs when pa^erns in the data can be extrapolated
to predict future events
BI is about decision making and managing change
 Real-0me BI: business ac0vity monitoringBI approach focused
on real 0me awareness by constantly monitoring KPIs
 Mobile BI: trying to bring decision analysis tools mobile
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Big Data Era
o 3 part deBni0on in BI perspec0ve:
 Volume: the amount of digital data that orgs have to store and manage
 Velocity: the speed of crea0ng and use of new digital datathe need to
gather, process and communicate info in real 0me
 Variety: the kind of digital data the organiza0ons have to store and
manage
o Big Data: Technology
 NoSQL databases ofer:
 Simple and cexible schema structure to accommodate
heterogeneous data
 Horizontal scalability adapted to distributed environments
composed of commodi0zed servers
 High availability
 NoSQL can be categorized into 4 categories
 Key-value stores
o Associates a unique iden0Ber to relevant content
o

Document Stores
o Each document can have a diferent structure
o Structured on JavaScript Object Nota0on (JSON)
o In a DBMS, for example, all records in the table share a
common structure
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o
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Column Family Stores
o Similar in principle to the tables in the rela0onal model,
but the columns can be diferent
o Columns can be aggregated in column families, and a
single row may contain more families
o

Graph Databases
o Allow for eRcient storage of heavily linked data
o Can show rela0onships between diferent objects
o
Horizontal scalability: the capacity of a distributed system to improve its
performance by adding new nodes
ver0cal scalability: the capacity of a distributed system to improve its
performance by adding new nodes (single node is made more capable)
choose horizontal scalability when handling massive amounts of data
(however it is higher cost + not all tasks can be parallelized)
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CAP theorem outlines the trade-of:
o Consistency: assurance that all nodes see the same and
current data
o Availability: assurance that a request will result in a
response whether the query failed or succeeded
o Par00on: assurance that the system con0nues to operate
even when some of the distributed database nodes are
inaccessible
Compu0ng Architectures and the Cloud
 Mainframes and Terminals
o Mainframe: Support hundreds of simultaneous users and are used by large orgs
that require high performance compu0ng
o Terminal: and input/output device with no processing power used exclusively to
access a mainframe
 Have no computa0onal ability
 Centralized architecture (one machine able to perform
computa0onsthe mainframe, accessed by many input/output devices)
 Standalone Personal Compu0ng
o Network enables sharing
o Decentralized architecture
 The Client-Server Model
o (Also called Shared Processing) based on the idea of le`ng to or more machines
share the load of execu0ng the instruc0ons in a soLware applica0ondiferent
computers execute the three elements layers) of the same soLware applica0on
o Client: any soLware program that can make structured requests to a server
o Server: the soLware program that makes resources available to clients
 Cloud Compu0ng
o Info accessed by clients through the internet infrastructure
o 3 main delievery modes:
 SoLware as a Service (SaaS): when an applica0on runs in the cloud
 Planorm as a service (PaaS): when what is being rented from the provider
is not a full-cedged applica0on but rather a planorm on which the client
builds its own applica0ons
 Infrastructure as a service (IaaS): level closest to hardware; the client
purchases the use of hardware func0onality; you rent the virtualized
hardware
 The all follow one of the following 2 approaches:
 Single-tenant: customers access their own dedicated soLware
resources
 Mul0tenant: a single instance of the soLware serves all
customers, and hardware resources are shared by all users
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DeBni0ons:
 Business integra0on: the uniBca0on or crea0on of 0ght linkages among the diverse but
connected business ac0vi0es carried out by individuals, groups, and departments within
an organiza0on
 Business intelligence (BI): Thee ability to gather and make sense of informa0on about
your business. It encompasses the set of techniques, processes, and technologies
designed to enable managers to gain superior insight into and understanding of their
business and make be^er decisions
 Business intelligence infrastructure: the set of applica0ons and technologies designed to
create, manage, and analyze large repositories of data in an efort to extract value from
them
 Business process: the series of steps a Brm performs in order to complete and economic
ac0vity
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Chapter 4: The Changing Compe00ve Environment
Network Economics
 Rela0onship between the scarcity and the value of a resource is the rule
o This includes skilled labour, managerial talent, and physical resources
Networks are Diferent: Value in Plen0tude
 Value in a network is propor0onal to the number of connected nodes
 Value is 0ed to how many other nodes are in the network (plen0tude) rather than how
few (scarcity)
Physical and Virtual Networks
 Physical networkswhere the nodes of the network are connected by physical links
(railroad, telephone wires)
 Virtual networkconnec0ons between network nodes are not physical but intangible
and invisible, nodes re typically people rather than devices
 Whether physical or virtual, the value of the network for its members is a func0on of its
size
Key Concepts and Vocabulary
 Posi0ve Feedback
o Adop0on of a new technology product or service typically follows the pa^ern
represented by the s-curve
o DeBned as that self-reinforcing mechanism by which the strong gets stronger and
the weak gets weaker
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o
o Sets in mo0on a virtuous cycle, beneB0ng the larger Brm, and vicious, penalizing
the smaller one
Nega0ve feedback
o The term used to refer to the opposite dynamic
o Where the stronger gets weaker and the weaker gets stronger
o Characterizes economies of scale and takes efect when the dominant Brm has
reached a signiBcant size, in which further growth is hampered and costs
increase
Network Efects
o Posi0ve and nega0ve feedback play a crucial role in physical and virtual networks
because the value of a network to its members is a func0on of the number of
nodes in the same network
o Network efects occur when a new node creates value for all the other members
of the network by making the network larger and thus more valuable
o Evangelist efectwhere current members of the network are incen0vised to
spread the word for others to join
Tipping Point
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o The watershed of dominancethe 0pping point is the moment in the evolu0on
of a market where one organiza0on or technology reaches cri0cal mass and goes
on to dominate it, where winners and losers are deBned
Tippy Market
o One that is subject to strong posi0ve feedback, so that the market will 0p in
favour of the Brm that is able to reach cri0cal mass and dominate it
o
How to recognize a 0ppy market
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o
o The presence and strength of economies of scaleprovides an advantage to
larger Brms
o The variety of the customer needsniche markets the dominant player may be
unable to fulBll
o When economies of scale are limited and the market has a wide range of
diferent needs, the poten0al for market 0ppiness is the weakest
Two-Sided Network
 Networks that have two types of members, each crea0ng value for the other
 The value of the network to one type of member depends on the number of members
form the other side who take part in the member
Networks, Marketplaces, and Planorms
 Marketplacestwo-sided or mul0sided networks where demand and ofer meet;
enables this encounter and oLen facilitates transac0ons between par0cipants
 Planormstwo-sided networks with speciBc members on the two sides: users and
developers; soLware founda0on on which other soLware is built
Implica0ons for General and Func0onal Managers
 Network Efect, not just networks
 The threshold of signiBcance
 Users select a network
 Controlling the network provides compe00ve advantage
 The importance of mutual exclusivity
The Economics of Informa0on
 One of the most important results of managerial interest had been the unprecedented
amounts of data and info that are being captured stored, processed and distributed by
modern organiza0ons
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Data and informa0on
 DatadeBned as codiBed raw facts; things that have happened
 Informa0ondeBned as data in contact; data become informa0on when they are given
meaning and can therefore be interpreted
Classic Informa0on Goods
 Those products where informa0on is at the heart of the value proposi0on
 Those products that a customer purchases for the sole purpose of gaining access to the
informa0on they contain
 If the product can be digi0zed it is an informa0on good
The Economic Characteris0cs of Informa0on
 Informa0on has high produc0on costs
 Informa0on has negligible replica0on costs
 The informa0on is not the carrier
 Informa0on has negligible distribu0on costs
 Costs are sunk
 Informa0on has no natural capacity limits
 Informa0on is not consumed by use
 Informa0on goods are experience goods
Implica0ons
 Informa0on is customizable
 Informa0on is reusable
 Informa0on is oLen 0me valued
 Informa0on goods can achieve signiBcant gross proBt margins
Informa0on-Intensive Goods
 Most industries rely on informa0on to create and bring to market their product or
service
The Richness and Reach Trade-Of
 Richnessrepresents the amount of informa0on that can be transmi^ed, and degree to
which the informa0on can be tailored to individual needs, and the level of interac0vity
of the message
 Reachrepresents the number of possible recipients of the message
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Mew technology is making it increasingly possible to reach many people with more
informa0on-intensive, interac0ve and personalized message
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Process Virtualiza0on Theory
 Provides a general framework for understanding the trade-of between richness and
reach
o The increasing number and variety of ac0vi0es performed in the digital space
 Virtual: something that does not physically exist but it is made to appear to exist through
soLware
 Process virtualizabilitythe degree to which a goal-oriented series of ac0vi0es can be
performed without the physical interac0on among par0cipants or among par0cipants
and objects involved in the process
 Sensory Requirements
o Represents the need for process par0cipants to be able to experience a range of
sensory s0muli in order to engage in the process, including tas0ng, seeing,
hearing, smelling, and touching the other process par0cipants and/or objects
 Rela0onship Requirements
o Encompass the need for process par0cipants to interact in a social or
professional context so as to acquire knowledge or develop trust and friendship
 Synchronism Requirements
o Represent the degree to which the ac0vi0es that make up a process need to
occur in real 0me or with minimal delay
 Iden0Bca0on and control requirements
o Concern the degree to which the process requires the unique iden0Bca0on of all
par0cipants and the ability to incuence or to exert control over their behavior
 Representa0on
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o The capability of IT to efec0vely simulate actors, objects, their proper0es and
characteris0cs, and the manner in which users interact with them
Reach
o The capability of IT to overcome both 0me and space constraints
Monitoring and iden0Bca0on
o The capability of IT to authen0cate process par0cipants and objects and track
their ac0vity
Managerial Implica0ons
 Con0nued ques0oning of tradi0onal business models
 The importance of the customer interface
 The decreasing value of asymmetric informa0on
Obstacles
 New technology must replace all characteris0cs of the old one
 Retalia0on from incumbents
o Retalia0on can come in many forms
 Legal means
 Legisla0ve means
 Hybrid ofers
 Heightened comple0on
 Human resistance to change
 A^en0on challenges
A Note About Disrup0ve Technology
 Managers must be aware of the poten0al disrup0ve impact of new technologies
 Must be able to iden0fy and manage the impacts
Sustaining Technology
 Sustaining technologies maintain or rejuvenate the current rate of performance
improvement of the products and services that use them
 S-curve suggest that as a product is Brst introduced, its performance is limited
 Enables a products performance to con0nue to grow
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Disrup0ve Technology
 DeBned by the following two characteris0cs
o The technology ofers a diferent set of a^ributes than the technology the Brm
currently uses in its products
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o The performance improvement rate of technology is higher than the rate of
improvement demanded by the market
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Implica0ons for Managers
 Diferen0al rates of improvements
o Rate of evolu0on on the currently established performance metrics
 Diferent sets of a^ributes become relevant
o As disrup0ve technologies close the gap between the performance level they
ofer and mainstream customer needs, the novel set of a^ributes they ofer may
become increasingly a^rac0ve to poten0al customers
 Listening closely to customers might spell trouble
o Listening a^en0vely to aggressive customers will create a bias toward prompt
adop0on of sustaining technology and reluctance to buy into disrup0ve
technology
What to do?
 Monitor market developments for the emergence of new technologies and determine
whether they are of the sustaining or disrup0ve kind
 When disrup0ve technologies emerge, envision the new market they would likely be
best suited for
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Spin of a new division that focuses exclusively on the commercialisa0on of products
based on the disrup0ve technology
DeBni0ons:
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Chapter 5: Digital Business
The Internet
 Interneta network of networks
 The internet is an infrastructure upon which services are delivered
Internet Services
 Distributed Ownership
o Internet is publicly accessible
 No single en0ty owns it, regulates its use or controls it
 Mul0plicity of Devices
o Internet is a digital network consis0ng of millions of smaller digital networks
o Nodes
 Open Standards
o Internet relies on open technology standards and protocols
o Protocolan agreed-upon set of rules or conven0ons governing communica0on
among the elements of a network
Web 2.0
 The second wave of innova0on and evolu0on occurring on the internet aLer the
shakeout following the original thrust of mainstream internet innova0on
 Two-way conversa0ons
o Internet used to just allow people to publish things, now it allows for
conversa0on
 Interac0ve user Experience
 User-Generated content
 Emergent Structure
The Mobile Planorm
 Don’t have to be constrained to desktops anymore
 Ubiquity
o Represents the idea that users of the device can access needed resources from
anywhere
o Mobile devices ofer the highest level of poten0al ubiquity among commercially
available IT because they team portability with connec0vity
 Iden0Bability
o Represents the idea that mobile devices uniquely iden0fy their user (SIM cards)
 Context
o Enabled by the fact that mobile devices can be geolocatedmodern
smartphones that incorporates a GPS receiver can communicate their posi0on to
any soLware applica0on running on them
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Digital Business Innova0on
 Digital Business Modeling
o Abstrac0on that captures the Brm’s concept and value proposi0on while also
conveying what market opportunity the company is pursuing, what product or
service it ofers, and what strategy it will follow to seek a dominant posi0on
o Also iden0Bes what org capabili0es the Brm plans to leverage to turn the concept
into reality
 The Elements of the Business Model Canvas
o Customer segments
 All the people or organiza0ons for whom your Brm is crea0ng value
o Value Proposi0on
 The speciBc set, or bundle, of products and services that create value for
customers
o Channels
 SpeciBc or physical or digital conduits, or touch points, the Brm u0lizes to
deliver value to its customers
o Customer Rela0onships
 Tangible and emo0onal connec0ons the Brm establishes with the
customer
o Key Resources
 Pertain to that sec0on of the business model that focuses on the tasks
and assets that the Brm needs to bring to bear to create and deliver its
value proposi0on to customers
o Key Ac0vi0es
 The ac0ons that characterize the business modelthe ac0vi0es the Brm
must be able to perform well in order to ofer its value proposi0on
o Key Partnerships
 Complete that sec0on of the business model that focuses on how the
value proposi0on is created and delivered
o Cost Structure
 The equivalent of the revenue stream building block
 Aims to answer 4 ques0ons
o 1. Who is the business designed to serve?
o 2. What will the Brm do for those customers?
o 3. How will the Brm create its value proposi0on?
o 4. How will cash cow in and out of the business?
Categorizing Digital Business Ini0a0ves
 Electronic commerce: an online exchange of value; the process of distribu0ng, buying,
selling, marke0ng and servicing products and services over computer networks such as
the internet
 Electronic Business: referred to the digital enablement of internal organiza0onal
business processes, such as logis0cs and the use of intranets
Categorizing Ventures by Transac0on Type
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Business-to-Consumer (B2C)transac0ons that involve a for-proBt organiza0on on one
side and an end consumer on the other
 Business-to-business (B2B)transac0ons in which two or more business en00es take
part
 Consumer-to-Consumer (C2C)transac0ons that enable individual consumers to
interact and transact directly
 Consumer-to-business (C2B)transac0ons occur when individuals transact with
business organiza0ons not as buyers of goods and services but as suppliers
 eGovernmentrefers to all transac0ons involving legisla0ve and administra0ve
ins0tu0ons
Categorizing Ventures by Company Structure
 Brick and Mortartradi0onal organiza0ons; Brms that have physical opera0ons and
loca0ons and don’t provide their services exclusively through the internet
 Bricks and Clicksused to refer to organiza0ons that have hybrid opera0ons; typically
bring-and-mortar that now incorporate digital business opera0ons
 Pure Playused to iden0fy those organiza0ons “born online”; Brms with no stores and
provide their services en0rely through the internet
Dominant Business Models for Digital Business
 Online retailingtake control of inventory that they then resell at a proBt
 Infomediariesorganiza0ons that use the internet to provide specialized informa0on on
behalf of product or service providers
 Content Providersorganiza0ons that develop and publish content
 Social Networkingthe evolu0on of online communi0es; a group of people brought
together through a network
 Crowdsourcingthe ability to connect people through social networking applica0ons
consolidated, the opportunity to mone0ze the internet of people beyond adver0sement
spurred a business model innova0on
o An online ac0vity in which an individual or organiza0on proposes via an open call
to a heterogeneous “crowd” of individuals the voluntary undertaking of a task
o Can be categorized on the basis of the class of problems they address
 Knowledge discovery and management
 Distributed human intelligence tasking
 Broadcast search
 Peer-ve^ed crea0ve produc0on
 Marketplacesorganiza0ons that enable ofer and demand for some product or service
to meet and transact; does not take control of inventory
 Cloud Compu0ng
Dominant Revenue Models for Digital Business
 Pay for servicethe Brm ofers a product or a service for sale, and it is compensated
much like a tradi0onal store or service provider
 Subscrip0oncustomers pay for the service they receive, which in this case is content,
based on access rather than usage
 Adver0sement Supportrevenue model of the network economy is the adver0sementsupported model

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ARliateseeks to generate revenue from a third party based on customer traRc to the
Brm’s website
FreemiumBrm gives away its product or service for free and a^empts to build a large
customer base by reducing the obstacle created by the payment
Issues to Consider
 Disintermedia0onrefers to the process by which Brm’s distribu0on chain is shortened
through the elimina0on of one or more intermediaries
o Has a direct impact on things like travel agents or car dealers
 Reintermedia0onwhere new intermediaries can exist alongside their brick-and-mortar
counterparts
 Market ERciencyIT has contributed and reduced search costs and improved eRciency
of markets
 Channel Concictemergence of the online channel created a conundrum of many
organiza0ons that had an established distribu0on chain; should they disintermediate etc
 Customer and Employee Self-Service
 Long-Tail Strategiesa phenomenon by which the frequency of an event is related to
some characteris0c of that same event

o
Online-to-ORcerefers to the use of digital technology to spur transac0ons in physical
stores
DeBni0ons:
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Chapter 8: Value Crea0on with Informa0on Systems
Tradi0onal Models of Value Crea0on with IT
 Three analy0cal tools were introduced or adapted to the search for strategic informa0on
systems opportuni0es at this 0me:
o Industry Analysis
 Grounded in the basic no0on that diferent industries ofer diferent
poten0al for proBtability
 Suggest that industry diferences can be analyzes a priori by managers
using an analy0cal framework now known as the Bve forces framework
 Five Compe00ve Forces
o

o The threat of new entrants
o The threat of subs0tute products or services
o The bargaining power of buyers
o The bargaining power of suppliers
o The rivalry among exis0ng compe0tors
Industry analysis and the role of informa0on systems
o Ques0ons that are typically asked during 5 forces analysis
 Can the use of IT create or increase barriers to
entry in the industry?
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Can the use of IT decrease suppliers’ bargaining
power?
Can the use of IT decrease buyers’ bargaining
power?
Can the use of IT change the basis of industry
compe00on?
o Value Chain analysis
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
Transforma0on of input resources into Bnal products
Value chain model maps the set of economic ac0vi0es that a Brm engages
in and groups them into two sets:
Primary and Support Ac0vi0es
 Primary ac0vi0esrepresent the Brm’s ac0ons that are directly
related to value crea0on; ac0vi0es that deBne the Brm’s unique
transforma0on process such that they are typically performed by
all Brms engaged in the same or similar line of business
o 5 primary ac0vi0esinbound logis0cs, opera0ons,
outbound logis0cs, marke0ng and sales, and service
 Support Ac0vi0esthe Brm’s ac0ons that, while not directly
related to the transforma0on process, are nevertheless necessary
to enable it
o 4 support ac0vi0esBrm infrastructure, HR management,
technology development, and procurement
Value Chain Analysis and the Role of Informa0on Systems
 Using the value chain to iden0fy opportuni0es to deploy ITdependent strategic ini0a0ves requires managers to iden0fy,
understand, and analyze the ac0vi0es the Brm performs that that
they can be enhanced or transformed using IS resources
 The value network
o A Brm has rela0onships both upstream and
downstreamBrms own value chain exists in a larger
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value network that comprises the Brm’s suppliers
upstream and the Brm’s customers downstream
o
o
o Customer service life cycle analysis
 Primary objec0ve is to help management iden0fy stages where their
organiza0on’s customers are frustrated or underserved and where the
interac0on can be improved through the deployment of IT-dependent
strategic ini0a0ves
 Breaks down the Brm-customer rela0onship into 13 stages, grouped into
4 primary stages
 Four Phases
 Suggests that managers step into their customers’ shoes and think
about the needs and problems that customers experience at each
of four major phases in their rela0onship and interac0on with the
Brm
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13 Stages
 Stage 1: Establish Requirements
o Customer iden0Bes a need for the Brm’s product or service
 Step 2: SpeciBca0on
o Must now specify the characteris0cs of that product or
service in order to know which par0cular one to acquire
 Stage 3: Source Selec0on
o Find where to buy product
 Step 4: Ordering
o ALer selec0ng a source, customers must order it
 Stage 5: Authoriza0on and payment
 Stage 6: Acquisi0on
o Customer takes possession of the product
 Stage 7: Tes0ng and Acceptance
o Must make sure product works as expected
 Stage 8: Integra0on
o Customer must add it into their exis0ng inventory of
resources
 Stage 9: Using Monitoring
o Must ensure that resources remain in an acceptable state
of opera0on while they are in use or during the 0me they
receive service
 Stage 10: Upgrading
o May become necessary to modify or improve it
 Step 11: Maintain
o Help the customer analyze, diagnose, and repair the
product or service etc
 Stage 12: Transfer or Disposal
 Stage 13: Audi0ng and Accoun0ng
Virtual Value Chain
 Maps out the set of sequen0al ac0vi0es that enable a Brm to transform data in input
into some output informa0on that has a higher value than the original data
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Five ac0vi0es
o Gathercollect info from transac0on processing systems and any other sources
o OrganizeBrm stores the gathered data in a way that makes later retrieval and
analysis simple and efec0ve
o Selectusers iden0fy and extract the needed data from the data repository
created in the previous step
o SynthesizeBrm packages the selected informa0on so that it can be readily used
by the intended consumer for the speciBc purpose to which it is directed
o DistributeBrm transfers the packaged informa0on to its intended user or
customer
 Three Classes of Strategic Ini0a0ves
o Visibility
 Firm uses the sequen0al ac0vi0es in the virtual value chain to see
through organiza0onal processes that it was previously trea0ng as a black
box
o Mirroring capabili0es
 Consists of shiLing some of the economic ac0vi0es previously completed
in the physical value chain to the informa0on deBned world of the virtual
value chain
o New customer rela0onships (new digital value)
 Concerned with the organiza0on’s rela0onship with the customer and the
Brm’s ability to increase customers’ willingness to pay using the
informa0on generated through the virtual value chain
Value Crea0on with Customer Data
 Analysis of the Value Proposi0on
o Value propwhat the Brm specializes in
o Constrained by the speciBc industry
 Repurchase and Customizability: The Dimensions of Decision Making
o Theore0cal Repurchase Frequencyrepresents the regularity with which the
average customer acquires goods and services ofered by the Brms in the
industry or segment of interest
 Firm that has high theore0cal repurchase frequency is either doing a poor
job or missing an opportunity
o Degree of Customizabilityrepresents the extent to which the product or service
your Brm ofers can be tailored to speciBc needs and requirements of individual
customers or a segment of the customer base
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General
Customer Data Strategies
o
o Personaliza0on Strategytypical service personaliza0on or product
customiza0on strategy is most appropriate for Brms compe0ng in industries
characterized by both a high theore0cal repurchase frequency and a high degree
of customizability
o Rewards StrategyBrm’s product and service will be purchased frequently
o Acquisi0on StrategyBrm in an industry with a high degree of customiza0on
may beneBt from an acquisi0on strategy
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o No poten0alwhen a Brm is in an industry characterized by low theore0cal
repurchase frequency and rela0vely low degree of customizability; li^le poten0al
for craLing a strategy around customer data
CraLing Data-Driven Strategic Ini0a0ves
 Methodology used to iden0fy opportuni0es to create value
o Iden0fy relevant transac0on processing systems (TPS)
o Inventory data currently available in these systems
o Conceptualize ini0a0ves that use the available data
o Priori0ze among the selected ini0a0ves
 Priori0za0on matrix
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

Based on the evalua0on of two dimensions: Upside poten0al and data
availability
Upside Poten0alprovides an assessment of the Bnancial beneBts
associated with the ini0a0ve in terms of revenue liL or cost reduc0on
 Time sensi0vitydegree to which the impact of the decisions that
the analysis of the data allows depends on how closely to the 0me
of data collec0on the analysis is made
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Impact immediacythe degree to which the informa0on is
directly usable aLer it is generated, as opposed to needing
aggrega0on or manipula0on
 Aggrega0on requirementsthe extent to which the beneBts of
the analysis are dependent on substan0al aggrega0on of mul0ple
data sources
 Trending requirementsthe extent to which the beneBts of the
analysis are dependent on substan0al trending of data over 0me
 Data Availabilityprovides an assessment of the immediacy with which
the ini0a0ve can be implemented and a measure of the costs associated
with it
 Accuracyextent to which the available informa0on is reliable,
without duplica0on, inaccuracies, or outdated elements
 Comprehensivenessextent to which the data needed to carry
out he ini0a0ve are complete and free of missing elements and/or
values
o Quadrants
 Impera0ves
 Projects have signiBcant upside poten0al
 Rely on readily available informa0on
 Can be implemented quickly and with limited investment of
resources beyond sunk costs
 Quick Wins
 Low upside poten0al
 High data availability
 Do not require signiBcant resources and a demanding approval
cycle
 Can be used as proof of concept to gain momentum and establish
a track record of successful implementa0on
 Trade-ofs
 High upside poten0al
 Low data availability
 Require substan0al cot beneBt analysis and a rigorous approval
cycle before the alloca0on of the needed resources can be
jus0Bed
 Losing Causes
 Li^le upside poten0al that rely on informa0on that is not readily
available
 Should not be implemented

DeBni0ons
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Chapter 9: Appropria0ng IT-Enabled Value over Time
The Ned for A Priori Analysis
 Is there a way to reduce uncertainty about whether an IT-dependent strategic ini0a0ve
can lead to a sustainable advantage?
Appropria0ng Value over Time: Sustainability Framework
 Sustainable Compe00ve Advantage
o The ability of a Brm to protect its compe00ve advantage, known as sustainability
of the advantage
o Compe0tors cant replicate it
 Resource-Based View
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o With this approach, a Brm is modeled as a bundle of resources
o Firm’s compe00ve advantage depends on the characteris0cs of the resources at
its disposal
o 4 characteris0cs
 Valuableresource is valuable when it underpins a value-adding strategy;
when it allows the Brm to ofer a value prop that is superior to
compe0tors at a lower cost
 Rareresource is rare when it is idiosyncra0cally distributed; it is scarce
and not readily available for acquisi0on by compe0tors
 Inimitablewhen compe0tors Bnd it impossible, or diRcult, to duplicate
it
 Nonsubs0tutablewhen compe0tors are unable to replicate the Brm’s
overall value proposi0on using surrogate resources for the ones that are
rare, valuable and inimitable
Response Lag
o Think about sustainability in terms of how much 0me and money it would take
compe0tors to erode the advantage that the leading Brm has
o Barriers to erosion^
o Response lagthe 0me it takes compe0tors to respond aggressively enough to
erode a Brm’s compe00ve advantage, is a measure of the delay in compe00ve
response
o Response lag driversthe characteris0cs of the technology, the Brm, its
compe0tors, and the value system in which the Brm is embedded that combine
to made replica0on of the IT-dependent strategic ini0a0ve diRcult and costly
Four Barriers to Erosion
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o Barrier 1: IT Resources
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IT Assets:
Technology resources available to the organiza0on including hardware
components and planorms, soLware applica0ons and environments and
data repositories
 IT InfrastructureSet of IT components that are interconnected
and managed by IT specialists with the objec0ve of providing a sat
of standard services to the organiza0on
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o Takes years to develop, barrier to imita0on is likely to be
substan0al
 Informa0on Repositorieslarge data stores containing extensive
informa0on about customers, suppliers, products, or opera0ons,
organized in a structured form that is accessible and useable for
decision-making purposes
o For compe0tors to replicate it, must duplicate the IT and
accumulate a comparable informa0on resource
 IT Capabili0es: derived from the skills and abili0es of the Brm’s workforce;
enable efec0ve and 0mely implementa0on, maintenance, and use of the
technology
 IT Technical Skills and Business Understandingrelate to the
ability to design and develop efec0ve computer applica0ons;
include proBciency in systems analysis and design, soLware
design, and programming
 IT-Management Skillsrefer to the Brm’s ability to provide
leadership for the IS func0on, manage IT projects, integrate
diferent technical skills, evaluate technology op0ons, select
appropriate tech sources, and manage change ensuing from the
introduc0on of IT
 Rela0onship Assetaccumulated over 0me and Bnds its roots in a
mutual respect and trus0ng rapport between the IS func0on and
business managers
o Barrier 2: Complementary Resources
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Structural Resourcescomprise non-IT-related tangible and intangible
internal assets used by the Brm in the enactment of its IT-dependent
strategic ini0a0ves
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Tangible Assetscan underpin an IT-dependent strategic
ini0a0ve; include compe00ve scope, physical assets, scale of
opera0ons and market share, organiza0onal governance, and
slack resources
 Intangible Assetscan support an IT-dependent strategic ini0a0ve
 Capabili0esdeBne how the Brm carries out its produc0ve ac0vi0es;
specify what ac0vi0es are performed and what steps or business
processes make up those ac0vi0es
 Ac0vity Systemrelies on a set of economic ac0vi0es that are
both interlocking and mutually reinforcing, expressly showing
internal consistency and appropriately conBgured, given the Brm’s
external environment
 Business Processesseries of steps the Brm performs in order to
complete an economic ac0vity; creates barrier when BP has
characteris0cs of uniqueness and diferen0a0on
 External Resourcesassets that do not reside internally with the Brm but
accumulate with other Brms and with consumers; usually developed over
0me
o Barrier 3: IT Project
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IT Characteris0cstypes of informa0on technology difer with respect to
their complexity, dis0nc0veness, and visibility to compe0tors
 IT Complexityraises the IT project barrier by increasing
development lead 0mes for a compe00ve response
 IT Uniquenessmakes it more diRcult to imitate
 Visibilitythe extent to which compe0tors can observe the
enabling technology; IT that is highly visible and readily available
for inspec0on by compe0tors limits the strength of the IT project
barrier
Implementa0on Process
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Implementa0on-process complexitya func0on of the size and
scope of the project, the number of func0onal units involved, the
complexity of user requirements, and possible poli0cal issues,
among other things
 Degree of process change
o Barrier 4: Preemp0on
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Switching coststhe total costs borne by the par0es of an exchange
where one of them leaves the exchange
 Co-specialized tangible investmentstotal capital outlay
necessary to obtain these assets; more=stronger barrier
 Co-specialized intangible investments0me and money channel
partners must invest to take part in IT-dependent strategic
ini0a0ves; include set up costs, ongoing costs
 Value System StructureBrm is a link in a larger value chain or system
that includes upstream and downstream members; can provide
opportuni0es for preemp0ve strategies and for the exploita0on of the
response-lag drivers discussed here
 Rela0onship Exclusivityexclusive rela0onship exists when
par0cipants in the value system elect to do business with only one
Brm that provides a par0cular set of products or services
 Concentrated Value System Linkthe degree of concentra0on at
each link in the value system is inversely propor0onal to the
number of suitable business en00es popula0ng that link
The Dynamics of Sustainability
o Managers proposing IT-dependent strategic ini0a0ves should have a plan for
con0nuously remaining ahead of the compe00on
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o
o Capability Development
 Refers to the process by which an organiza0on improves its performance
over 0me by developing its ability to use available resources for maximum
efec0veness
 Consists of the ability to engage in learning by using (process by which a
Brm becomes more efec0ve over 0me in u0lizing and managing an
informa0on system and the technology at its core
o Asset-Stock Accumula0on
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Usually the assets needed to implement an IT-dependent strategic
innova0ve will need to be internally developed, meaning they are not
readily available
Represents the process by which a Brm accrues or builds up a resource
over 0me
Example: Google search engine data
Applying the Framework
 Prerequisite Ques0ons
o Is the proposed ini0a0ve aligned with the Brm’s strategy?
o Is the proposed ini0a0ve focused on reducing the Brm’s cost or increasing
customers’ willingness to pay?
o What is the IS design underpinning the proposed ini0a0ve?
 Sustainability Ques0ons
o What compe0tors are appropriately posi0oned to replicate the ini0a0ve?
o Low long before compe0tors can ofer the same value proposi0on?
o Will replica0on do compe0tors any good?
o What evolu0onary paths does the innova0on create?
Making Decisions
 3 possible outcomes from the analysis
o Develop the IT-dependent strategic ini0a0ve independently
 God when a leader can gain the return from the innova0on, and Brm sees
value in the long run
o Develop the IT-dependent strategic ini0a0ve as part of a consor0um
 If the ini0a0ve won’t be proBtable for the innovator, but will increase
overall industry proBtability with replicators, innovator should look to
start a joint venture
o Shelve the IT-strategic ini0a0ve
 When the ini0a0ve wont ofer strong barriers to erosion, and retalia0on
by compe0tors will degrade the average proBtability of the industry
DeBni0ons:
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