ISM 158
Business Information Strategy
Instructor: Kevin Ross
Teaching Assistant: David Xu
ISM 158: Overview
This class considers the role of information in business strategy. In
particular, we focus on decisions regarding information technology
and information systems to give a business competitive advantage
over other companies. We will focus on case studies to see why
some businesses are more successful than others in building
information systems that lead to organizational and individual
efficiencies.
We look at how information impacts industries, markets and countries,
and leads to technology development. We develop an
understanding of design and maintenance of networked
organizations, including issues of leadership and management.
ISM 158 Perspective: CIO
We will generally look at decisions from the perspective of the chief
information officer.
Wikipedia:
The chief information officer (CIO), or information technology
(IT) director, is a job title commonly given to the most senior
executive in an enterprise responsible for the information
technology and computer systems that support enterprise goals.
The title of Chief Information Officer in Higher Education may be
the highest ranking technology executive although depending on
the institution, alternative titles are used to represent this
position. Generally, the CIO typically reports to the chief
executive officer, chief operations officer or chief financial
officer.
ISM 158: Overview
This class is designed for seniors and some juniors. There are few
formal prerequisites, but you are expected to…
1. want to be here and to learn
2. have a broad knowledge and interest in information systems,
technology, economics and business
3. think for yourself
Class website
All schedules and assignments will be posted on the class website:
http://www.soe.ucsc.edu/classes/ism158/Spring11/
Lecture notes will be posted after each lecture.
Schedule
Date
Topic
(Reading =
corresponding
chapter from text)
Introduction
3
Tue, March
28
Thu, March
30
Tue, April 4
4
5
Thu, April 6
Tue, April 11
6
Thu, April 13
1
2
Business Models
Case
Assessment
(Reading =
correspondin
g case from
text)
IBM
IT and Business
Models
Amazon.com
IT and Organization
Boeing
Optional:
Business
Proposal Draft
Schedule
Date
Topic
(Reading =
corresponding
chapter from text)
7
Tue, April 18
Making the case for
IT
8
Thu, April 20
9
10
Tue, April 25
Thu, April 27
IT Infrastructure
11
Tue, May 2
Reliability and
Security
12
Thu, May 4
13
14
Tue, May 9
Thu, May 11
Case
Assessment
(Reading =
correspondin
g case from
text)
CareGroup
Project Team
and Topic Due
iPremier
Business
Proposal Due
Ford
Project
Proposal Due
IT Service Delivery
Dell
Schedule
Date
Topic
(Reading =
corresponding
chapter from text)
15
16
Tue, May 16
Thu, May 18
IT Project Delivery
17
18
19
20
Tue, May 23
Thu, May 25
Tue, May 31
Thu, June 2
Thu, June 6,
12:00 –
3:00pm
Governance of IT
Case
Assessment
(Reading =
correspondin
g case from
text)
Cisco
Optional:
Preliminary
draft due
Vokswagen
Leadership of IT
Conclusion
Final Exam
AtekPC
Project Due
Final Exam
Instructor
Kevin Ross
Assistant Professor, Technology and Information Management
From New Zealand
PhD, Management Science & Engineering
At UCSC Since 2004
Research areas: Scheduling, optimization, networks, pricing
Worked with: Eli Lilly & Company, NASA, Thomson Reuters,
London Councils, Fitness First
kross@soe.ucsc.edu
Office hours: Tuesday 3 – 5pm
(or by appointment)
E2 room 559
Teaching Assistant
• David Xu
• fxu2@ucsc.edu
• Office hours:
– Thursday 12 – 2,
– Baskin Engineering room 358
Assessment
Value
Due date
News Presentation
5%
Throughout
Quizzes
10%
Throughout
Discussion Participation
10%
Throughout
Business Proposal*
10%
Thu, April 27
Project*
40%
Thu, Apr 20 and Thu, June 2
Final Exam
25%
Thu, June 6, 12:00 – 3:00
*Optional: Early draft 2 weeks in advance will be reviewed
Policy
Assignments are due at the start of class on the due date. Late assignments, missed
presentations and quizzes will result in zero grade unless specific permission is given
by instructor at least one week in advance.
Quizzes
• There will be up to five surprise quizzes over the
quarter.
• These will be fairly short and test knowledge of
the text and cases.
• Students who are absent the day of a quiz will
receive a zero grade for that quiz
– unless they have informed the instructor in writing at
least a week in advance that they have to miss
class (for some legitimate reason)
News Presentation
• Each student will present one news story to the class during the quarter.
– The story can be from any source, and describe an interesting recent
development in the use of information or IT for business strategy.
• The presentation should be professionally presented using powerpoint or
similar technology.
– 5 minutes maximum
– Must include both factual information (who is doing what and why?) and
some commentary (your opinion – is this a good idea – why?!) on the story.
– All news sources that have been used should be acknowledged with specific
references on a final slide.
• The student is responsible for one of
(a) bringing the slides on a laptop,
(b) bringing slides on a USB drive that will work on instructor’s laptop, or
(c) emailing slides to the instructor the night before the presentation.
You are seniors and my expectations are high
Presentation Schedule
1
2
Date
Tue, March 28
Thu, March 30
3
Tue, April 4
4
Thu, April 6
5
Tue, April 11
News Presentations
Blaise Albuquerque
Clare Angami
Joseph Armenta
Madalina Bologa
Dadalei Buth
Rystian Dale Cabellon
Melissa Camacho
Evelyn Cano
Grace Carpenter
Redmond Catbagan
Peter Chan
Truman Chan
Bryant Chang
Fanghai Chen
Andrew Chiu
If your name is not on the schedule, contact instructor by the end of week 2
Presentation Schedule
6
Date
Thu, April 13
7
Tue, April 18
8
Thu, April 20
9
Tue, April 25
10
Thu, April 27
News Presentations
Sean Chou
Mark Corre
Thomas Dente
Brian Diaz
Joshua Dodson
Mohamed Elshaer
Elliot Grossman
Richard Hammer
Matthew Hartsock
Juan Hernandez
William Jaffe
Eric Jones
John Kaplanis
Marlo Kertson
Sameer Khan
Jennifer Kim
Kevin Konopelski
Alex Kumar
Richard Lai
Justin Lazaro
If your name is not on the schedule, contact instructor by the end of week 2
Presentation Schedule
11
Date
Tue, May 2
12
Thu, May 4
13
Tue, May 9
14
Thu, May 11
15
Tue, May 16
News Presentations
Alexander Lee
Brian Lee
Nathan Lee
Sean Lee
Ashley Levien
James Liang
Ray Myron Licardo
Da Fu Liu
Patrick Loomis
Charlie Lui
Tam Luu
Kevin Ma
Tanuja Ramanujam
Swathi Rammohan
Samina Reddy
Alon Rogenstein
Navdeep Shergill
Maximillian Silveus
Amandeep Singh
Manjit Singh
If your name is not on the schedule, contact instructor by the end of week 2
Presentation Schedule
16
Date
Thu, May 18
17
Tue, May 23
18
Thu, May 25
19
Tue, May 31
20
Thu, June 2
News Presentations
Steven Sonsip
Brandon Sweet
Antoine Tadros
Lisa Tam
Sharon Tam
Vincent Tang
Katrina Thanh
Trang To
Ronald Tolentino
Raymond Tsai
James Tu
Michael Wan
Aaron Weise
Frankie Wong
Junie Yee
Tiffany Yee
David Zhu
If your name is not on the schedule, contact instructor by the end of week 2
Discussion Participation
We will discuss cases approximately
once per week. Active participation in
the discussions of the cases and the
course material is expected and
examined.
Read the cases with interest
- learn the facts
- form opinions
- come prepared to challenge each
other
Business Proposal
• You will be provided with a scenario for a
business information system problem,
and be required to make a written
proposal of a solution, as the chief
information officer.
• Details will follow.
Project
• The major assignment in this class is a
comprehensive project. You will analyze a
major (at least 1000 employees) company, and
study how they use information and information
systems to achieve competitive advantage.
• The project can be completed in groups of two
or three, as you select, and the company is
chosen by the group.
• Details will follow, but start thinking about
group and topic
Submission of assignments
• Submit a hard copy of your assignment
at the beginning of class
Final Exam
• The final examination will cover the
topics from the whole year.
• You will not be allowed to bring notes
into the exam room.
Prerequisites
• This course is for juniors and seniors
• ISM 50 or permission of instructor
required
• Interest in technology and business
Textbook
Corporate Information Strategy and Management,
by Applegate, Austin and Soule
8th edition
We will use the text and cases from this version, and you will be
expected to have read the appropriate section before each class.
- About 1/3 of the text has changed from the 7th edition
All the cases are originally published by Harvard Business Review – and
can be purchased separately from their website.
Writing class
• This course fulfills the ‘W’ requirement
– The business plan and project will give you
training and evaluate your writing skills
– You will have the opportunity for feedback
on your writing by turning in draft
assignments 2 weeks early
– You must declare who writes each section
of your project
Note on cheating
• All work must be your own
• Any work used as a reference must be
cited appropriately
• Any violation of this will result in an
instant failure for academic misconduct
and this will go on your record
Feedback Please!
• Instructor has substantially revised the
course material
• The course is for you
• Don’t hesitate to ask questions, give
suggestions
• As senior students, you know that you’ll
get out what you put in
Questions
Corporate Information Strategy & Management
 IT is a source of opportunity and advantage but also uncertainty and risk
 Chasm between viewpoints


Business executives: IT detached from real business problems
Technical executives: Business leaders lack vision
 Undeniable rapidity of change



In system architecture and interfaces
In business
In work and the workforce
The Embedding of IT
• IT now embedded in:
– Definition and execution of strategy
– Organization and leadership of businesses
– Definitions of unique value propositions
• IT is changing our understanding of:
–
–
–
–
Markets
Industries
Strategies
Firm designs
• Information is now a major economic good
Riding the IT Rollercoaster
• Mid 1990s:
– World Wide Web demonstrated IT potential
– Structural and technical hurdles remained in using IT
• Late 1990s:
– Capital markets caught the fever
– VCs eager to spend on IT, regardless of long-term path
to profitability
• 21st Century:
– Speculative bubble burst
– Downward spiral until 2003
What Now?
• What we know:
– World is forever changed; IT will never return to the
basement
– Technology as core enabler, primary business channel
– Global village is here to stay
– Rigid organization boundaries have fallen
• What we need to do:
– Engage in sense-making of the transformation
– Mine the last decade of business experimentation
– Synthesize in order to choose a path forward
Let the Story Telling Begin
• This book examines stories of executives
who are exploring uncharted waters
– Through the lens of the decades of
research and experience of the authors
– Through rich dialogue during class
discussion of chapters, cases, and articles
Focal Themes
• IT and Business Advantage
– IT impacts the business through its effects on the three
components of the business model: strategy, capabilities,
and value
• The Business of IT
– Managing IT operations, services, and project delivery
requires managing trade-offs among costs, opportunities,
and risks
• IT Leadership
– High-level management, leadership, and governance
activities set the context for leveraging IT-enabled
strategic insight and ensuring IT operational excellence
Module 1: IT and Business Advantage

> US$ 2 trillion spent on IT worldwide in 2007
Continued rapid spending growth
Truly global spending distribution

Ever increasing dependence on and impact of IT
Search for
opportunity
Avoidance of operational risk

Module 1 discusses how to leverage IT to create business advantage.
Overview of Module 1
• Chapter 1
– Introduces the organizing framework for the module
– Defines a business model
– Explores evaluation of business models
• Chapters 2
– Examines the impact of IT on business models
• Chapter 3
– Examines the impact of IT on organizational capabilities
• Chapter 4
– Examines the impact of IT on business value
The Five Competitive Forces that Shape Strategy
• Michael Porter’s classical theory of strategy formulation
–
–
–
–
Original HBR article in 1979
Simple, powerful description of five forces
Five forces analysis in practice
Five forces distinguished from contemporary “factors” (e.g.
the internet)
• What can we learn from this article?
– How economic value is created and claimed by participants
in a business network or industry
– How IT might change the relative strength of each force
Amazon.com: The Brink of Bankruptcy
• Traces evolution of Amazon.com from founding in 1994 to
2001
• The case ends with the company poised at the “brink of
bankruptcy”
• What can we learn from this case?
– Apply business model thinking
– Demonstrate how IT can be used as a key driver of business
value through its impact on strategy and organizational
capabilities
– Identify how to identify IT-enabled proprietary assets that
can serve as a platform to exploit disruptive change
Canyon Ranch
• Founded in 1979
• Leader in health resort and spa industry
– Facing increasing competitive pressure
• Goal: leverage customer information to increase customer
loyalty and cross-selling opportunities
– Role of IT in building CRM capabilities
• What can we learn from this case?
– How to use information assets to drive business value
– How IT can shape strategy and capabilities
Boeing’s e-Enabled Advantage
• Until late 1990s, largest commercial airplane company
• Airline industry faces multiple challenges
– Customers face increased cost pressure
– Fragmented suppliers
– Boeing drops to #2 behind government-subsidized rival, Airbus
• Strategic goal: use IT to regain market dominance
– More information-driven product and service offerings
– Improved IT-enabled efficiency
• What can we learn from this case?
– How to use IT to differentiate a product and create new revenue
streams by selling packaging and selling information and by
creating new service offerings
Royal DSM N.V.: IT enabling Business Transformation
• Diversified Netherlands-based company
– Coal mining, industrial chemicals, life science products,
etc.
• Strategic shift from highly cyclical businesses to high
growth businesses
– Rapid divestitures and acquisitions
• Use IT to enable rapid growth and acquisition integration
– Standardization of IT infrastructure and applications
– IT function shifts from support to strategic
• What can we learn from this case?
– How to leverage IT in support of organizational flexibility
and agility
– How to use IT to build an organizational platform for
business transformation
Understanding Business
Models
Key Learning Objectives
Understand the concept of a business model
Learn how to analyze the three components of a
business model – strategy, capabilities, and value –
through a business model audit
Understand the different ways that business models
can evolve and recognize potential drivers of
business model evolution
Business Model Framework and Definition
Analyzing Business Model Linkages
Using the DuPont Formula to Deconstruct ROE
Evolving the Amazon.com Business Model
(1995-2000)
Assessing the Impact of IT on Business Model
Alignment
Impact of IT on Industry Structure and Relationships
Case for Lecture 2
• IBM Evolution – Transformation and
growth
Questions?
What is a Business Model?
• Defines how enterprise relates to
environment
– Strategy aligns organization with
environment
– Resources in and out
– How value is created for stakeholders
– Sets goals and ways to achieve them
Components of a Business Model
Understanding the Competitive
Environment of a Company
Companies do not exist in a vacuum:
It is necessary to understand the competitive
environment to assess the current competitive
position of a company.
It has become increasingly necessary to posture a
company for challenges in its future.
Porter Competitive Model
Potential
New Entrants
Bargaining
Power
of Suppliers
Intra-Industry Rivalry
Strategic Business Unit
Substitute
Products
and Services
Bargaining
Power of Buyers
Competitive Model Focus
• What is driving competition in the current or
future industry?
• What are current or future competitors likely
to do and how can a company respond?
• How can a company best posture itself to
achieve and sustain a competitive advantage?
Competitive Model Forces
Intra-industry Rivals: Strategic Business Unit (SBU) and
major rivals.
Buyers: Categories of major customers.
Suppliers: Categories of major suppliers that play a
significant role in enabling the SBU to conduct its business.
New Entrants: Companies that are new as competitors in
a geographic market or existing companies that through a
major shift in business strategy will now directly compete
with the SBU.
Substitutes: An alternative to doing business with the
SBU.
Porter Competitive Model Education Industry –
Universities U.S. Market
Potential
New Entrants
Bargaining
Power
of Suppliers
• Faculty
• Staff
• Equipment and
Service Suppliers
• Alumni
• Foundations
• Governments
• IT Vendors
• Foreign Universities
• Shift in Strategy by Universities
or Companies
Intra-Industry Rivalry
SBU: UCSC
Rivals: UC campuses, CSU,
Private universities,
Community Colleges
Substitute
Products
and Services
• Internet Distance Learning
• Books and Videotapes
• Computer-Based Training
• Company Education Programs
Bargaining
Power of Buyers
• Students
• Parents
• Businesses
• Employers
• Legislators
Role of Technology through
Porter perspective: Can we…
1. Build barriers to prevent a company from entering
an industry?
2. Build in costs that would make it difficult for a
customer to switch to another supplier?
3. Change the basis for competition within the
industry?
4. Change the balance of power in the relationship
that a company has with customers or suppliers?
5. Provide the basis for new products and services,
new markets or other new business opportunities
Porter Competitive
Strategies
Cost Leadership Strategies
Differentiation Strategies
Primary
Strategies
Innovation Strategies
Supporting
Strategies
Growth Strategies
Alliance Strategies
Porter Primary Strategies
Differentiation—customer values the differences that you
provide in products, services or capabilities.
Cost—is least cost. If this is the primary strategy, over time
there will only one ultimate winner.
Porter Supporting Strategies
Innovation—either with business strategies or use of
information systems or both.
Growth—deals with growth in revenue and other business
volumes. Can be a key factor in establishing a market
position. Can also be a major requirement to offset high fixed
operating costs.
Alliances—importance of establishing a strong relationship
with suppliers and other business partners often on a
contractual basis.