Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99258 USA chen@jepson.gonzaga.edu
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

– PM, Entrepreneurship, Decision making, SDLC
(traditional waterfall model) vs. Agile development methodologies.
– Others:
• 1) disruptive technology vs. sustaining technology
• 2) First mover advantage
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
Learning Objective: The teaching objectives are to:
Introduce students to the key enablers for information technology (IT) entrepreneurship (i.e., leadership, emergent technology, scarce resources, people resources and related key decisions); Have students contrast the traditional systems development life cycle (SDLC) (i.e., the waterfall model) and agile development methodologies; Encourage students to explore approaches and tools for virtual project management and experimentation; Expose students to the need to prioritize decisions, including those related to existing and emergent growth opportunities. stry; 2001
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
• Subjects Covered: Entrepreneurship ;
Information technology; Small & medium-sized enterprises. Project management , Decision
Making
•
Setting:
– Geographic: India
– Industry: Professional, scientific & technical services
– Event Year Begin: 2010
•
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
Description: In this dialogue-styled situation, Binnj's
CEO has assembled a team of people for a 100-day
"science experiment" to determine whether a new hightech business venture is worth pursuing. He is focused on an untapped market - a new kind of restaurant menu service built on the Apple iPad platform.
• Members of the team are excited and have been furiously working on the project while retaining their full-time jobs.
• They have developed a prototype of the technology and business offering, pitched the idea to several clients, and generated significant interest.
• This case introduces students to information technology entrepreneurship, technology development approaches, service pricing issues, virtual project management techniques and tools, brainstorming revenue generation opportunities, and the challenges of prioritizing decisions.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
6

Business Strategy :
Business Strategy
IS/IT Strategy:
Organizational Strategy:
Organizational
Strategy
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
IS/IT Strategy

~Innovation
~Revenue growth
~Frist mover advantage
Business (Firm)
Strategy
Organizational Strategy
~Team work (virtual team)
~Agile development process
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
IS/IT Strategy
~Apple iPAD
~PM tools
N

1. What key enablers have allowed Binnj to engage in this
“science experiment”?
IT does not force , but, it does ________new alternatives.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Q1: Do you believe that IT was a strategic enabler for Binnj?
• Q2: If yes, what made IT strategic? (see chapters 1
& 2)
• Q3: What is “strategy”?
• Q4: Strategic Management Model
• Q5: Disruptive vs. sustaining technology
• Q6: First-mover advantage
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Note that the term strategy originated in the military
(from the Greek work strategos ).
• A strategy is
– A systemic plan of action designed to achieve a particular goal.
– A good strategy is
• Adaptable to changing conditions (e.g., in the gam of
Chess, strategic players continuously evaluate current conditions and develop long-term plans to win against their opponent).
• A strategy is a conceptual long-term plan that focuses on the “war,” and is distinguished from tactics which are more applied short-term activities that focus on te particular “battle’.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Oversee
Figure: System Hierarchy
Develop
System’s
Architecture
Design and
Structure
Management Requirements
Strategies
Information System
Infrastructure
People
Technology Process
Information/DB
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

What are Two Major Outputs for an organization?
develop
Vision
Customers, market, competition
Mission guide
Strategy create
Products,
Services
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Tactic
N

• In the context of the Binnj startup, IT was extraordinarily strategic , since it provided the very platform on which the company’s value offering was based.
• When it came to menus, the restaurant industry had not yet begun to consider using digital menus to replace traditional paper-based menus.
• The LiveMenu service was potentially disruptive , as it could directly influence many aspects of the customer buying experience while in the restaurant.
• Of course, technology was not the only strategic variable.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Disruptive versus Sustaining Technology
•
Disruptive technologies
– a new way of doing things that initially does not meet the needs of existing customers
– Disruptive technologies redefine the competitive playing fields of their respective markets
– Disruptive technologies tend to open new markets and destroy old ones
– Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies
•
Sustaining technologies
– produces an improved product customers are eager to buy, such as a faster car or larger hard drive
– Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets
– Sustaining technologies virtually never lead in markets opened by new and disruptive technologies
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Elicit and capture internal and external enablers and their sources, as summarized in diagram below.
•
Internal enablers represent capabilities that exist or are developed inside of the firm.
•
External enablers represent characteristics of the environment that exist outside of the firm and are largely not subject to direct control.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

EXTERNAL
Strong brand (Apple)
Revolutionary device (iPAD)
(category creator)
Strong development platform (iOS, SDK)
Binnj
Enablers
Free project management tools (Dropbo, Skype)
Market inertia
(no innovation e.g. paper menus)
INTERNAL
Strong network of contacts
(Hutcherson’s network))
“Dream team” with deeep/ complemantary skill sets
Visionary leadership
Committed to “ agile ” development processes
First-mover advantage
Appetite for risk
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• When Corscadden was asked whether he believed technology was a strategic enabler for
Binnj, he offered the following:
– “ Absolutely, but by no means the only one. Building in a repeatable process to continually bring in new innovations and rapidly prototype and adopt them is one of my core responsibilities. As new unthought-of technologies become available, Binnj will continually evaluate and provide compelling ways to integrate them in a simple manner for customers.”
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

2. Have you ever worked on, or led, a virtual team? What tools did you rely on, and what problems did you experience?
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Qs for #2: What activities can help virtual team member to establish their identity within the team and to strengthen their shared understanding and objective, which Binnj accomplished by using a weekly scrum (which they referred to as a “jam session”?
• Answers:
– Regular interpersonal meetings
– See LPP Cycle model on next slide
– Others …
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
#2
• Most people today work in a virtual environment. For example, every time we send a work-related email or text, update a group calendar, attach a spreadsheet or slide deck, or edit a shared document (e.g., Google Docs), we are working virtually. We use these tools to coordinate our activities, and they have become commonplace for managing day-to-day tasks. For more complex projects, other more sophisticated coordination tools exist.
• Even when one has access to high-quality tools and the discipline to use them, working at different places and times from other team members can be challenging. Regular interpersonal meetings can help virtual team members to establish their identity within the team and to strengthen their shared understanding and objectives, which Binnj accomplished by using a weekly scrum (which they referred to as a “jam session”).
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• #2 (cont.)
• The following model, which is based on research into voluntary open-source, virtual-developer teams, indicates that deep, sustained developer participation depends on an iterative combination of
– (a) situated learning
(both conceptual “thinking” and practical “doing”); and
– (b) ongoing identity construction (both through regulated activities such as recruitment and promotion, and through normal work activities within the social context).
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

#2
Continuous LPP Cycle
Initial
Access
Situated Learning
-
Conceptual (“thinking”)
Practical (“doing”)
Sustained
Participation
Initial
Motivation
Identity Construction
Identity-regulation
Identity-work
Through regulated activities such as recruitment and promotion, and through normal work activities within the social context
Newcomers become experienced members and eventually old timers of a community of practice or collaborative project.
Figure: A Conceptual Process Model (Legitimate Peripheral Participation) of
Participation in the OSS (Open Source Software) Community
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

3. Binnj seems to have embraced the “agile” development approach. In what circumstances might a firm choose to use the slower, more traditional “waterfall” approach to develop a new system? Also, discuss the advantages and disadvantages of both approaches.
• The waterfall approach can be more efficient over the long run for certain IT development projects with long lead times between each step.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
10-25

Project Identification and Selection
Project Initiation and Planning
Analysis
Logical Design
Physical Design
Implementation
Maintenance
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
#3
Waterfall Approach Advantages
• The waterfall development model is derived from the manufacturing sector, which focuses on lowering the cost per unit of manufactured project.
• The long lead times between each step – requirement, design, implementation, verification, maintenance – allow for suggested changes to e carefully considered before implementation.
• For example, a defect might require many more times the effort to be fixed after the project has been completed than if it had been fixed during the development stage.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Waterfall Approach Advantages (cont.)
• We all might recall the many issues faced by Microsoft when it released the error-prone Vista OS. The cost to fix the errors post-release included repairing the damage to the Microsoft brand.
Waterfall Approach Disadvantages
• The deliberate nature of the waterfall approach to development means that lead times are long. Because
“requirements” are gather only in the early stages (why?), adhering to a waterfall development process will not allow developers to adjust for last-minute changes.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Agile Development Approach Advantages
• The agile development approach allows for rapid prototyping of software, providing access to a workable version at each step in development. Thus, developers spend a greater proportion of their time actually developing, rather than documenting.
• Agile development is an iterative process that requires iterations with a multi-functional team, rather than working in silos.
• This type of development is becoming more prevalent, especially among “ startups
,” which typicaly face time constraints and are eager to be first to market ( first-mover advantage ).
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Figure: The prototyping (Agile) methodology and database development process
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
30

Agile Development Approach Disadvantages
• The agile development approach requires a strong project management focus to keep communication lines open among the team members. At times, choices will need to be made between developing to meet a deadline versus incorporating yet another change request.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Keen’s Six-Stage Competitive Advantage Model
Stimulus for action
First major move
Customer acceptance
Competitor catch-up moves First-mover expansion moves
Commoditization
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
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Advantages
•Build brand recognition
•Control scarce resources
•Establish networks
•Early Economies-of-Scale
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Disadvantages
•Newer technology
•Higher development costs
•Reverse engineering by competitors

4. Since the start of the Binnj science experiment, a plethora of new tablets have been announced (e.g., from companies such as Research in Motion, Samsung, and
Hewlett Packard). Has Binnj chosen the right platform?
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• The device’s operating system (OS) is important because of “ lockin
” - that is, the inability to run an application designed for one OS on an unsupported OS.
• If a device other than the iPad were to become popular, and other software developers flocked to it, the iPad could then become a relic. Technical superiority takes a back seat to standardization.
– E.g., Beta vs. VHS, Firewire vs. USB, Mozilla Netscape/Firefox vs. Internet
Explorer.
• Hutcherson referred to Binnj’s general development approach as
“ technology-agnostic
.” By designing the cloud-based , server-side processing functions and data structures using open standards (e.g.,
Apache framework, ANSI-SQL), the service is flexible and agile .
• In other words, a new front-end OS can be created and tied into the common back end fairly easily, without having to reinvent the back end, which is what makes LiveMenu an “ enterprise-class ” solution.
In this sense, much of the risk in choosing a particular platform (in this case, the Apple iPad) has been mitigated.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

#4 (more for Q4)
• Corscadden offered the following commentary regarding
Apple’s strategy of making its software development kit (SDK) free of cost to developers:
• “The lack of cost around the SDK has definitely paid off for
Apple, similar to Java’s lack of financial cost. What completes the success, however, is how well Apple has built the software frameworks around the Objective C language. Many tasks that are still difficult in other frameworks (language localization, threading, memory management, software distribution/OAM&P, user experience) are nearly trivial using Apple frameworks. As beautiful as Apple's physical products undoubtedly are, I believe their software frameworks are equivalently elegant to work in as a software developer.”
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Other Qs for #4: Please name products became relics because the companies chose the wrong platforms.
• The followings are examples:
• Beta vs. VHS, Firewire vs. USB, Dvorak vs.
QWERTY, Mozilla Netscape/Firefox vs. Internet
Explorer.
• The risk in choosing the wrong platform is that if another device becomes the standard, and the market rejects the iPad, Binnj could potentially lose access to the market - even if it has a technically superior product.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

5. How should Binnj establish a price for the LiveMenu service?
• Hutcherson is unsure how to price the offering.
• Three potential Enterprise Restaurant Group
(ERG) clients are excited about LiveMenu, yet none has asked about the price, which is unsettling.
• Are the clients price insensitive, or have they made an assumption that the cost will be low?
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

High
Pricing Strategies Matrix
Skimming Premium
Economy Penetration
Low
Low
Figure: Pricing Strategies Matrix
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
High

• Economy pricing
– keep costs low and the service basic (no frills), set price low
•
Penetration pricing
– looking for market share, set price low
• Skim pricing
– no competition, go after price-insensitive customers, set price high
•
Premium pricing
– unique product, set price high
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Without any strong precedents, Binnj had established a tentative price of $0.49 per day per device. This price approximates the current direct costs associated with printing restaurant menus, but essentially ignores new value creation (i.e., 70 menus per location x $0.49 per day x 365 days per year = $12,520 = the approximate annual cost for printed menus per location).
• Hutcherson’s reasoning was that this pricing level should be an “easy sell,” especially considering the new valueadded components. According to the pricing strategies described in the model (matrix), Hutcherson’s reasoning suggests penetration pricing .
Video for pricing: http://www.marketingteacher.com/lesson-store/lessonpricing.html#
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Is “penetration” pricing strategy the correct strategy for
Binnj?
• Yes. Why?
•
Price – low (low cost so that can attract customers and LOCK IN), especially for the new products
•
Quality – High (difficult to substitute)
High
Skimming Premium
Economy
Low
Low
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Penetration
High

6. What other revenue opportunities might Binnj create through LiveMenu, in addition to the digital menu?
• LiveMenu can open up many new revenue streams for which an enterprise-class back end and touchbased front end could be applied:
– Business intelligence reporting, customer satisfaction surveys, back-end restaurant inventory management, payment-processing systems, restaurant reservations, social media sites and new (i.e., non-restaurant) industry verticals.
• The possibilities are exciting. Yet without focus, the company could easily flounder.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

7. Should Hutcherson slow down (i.e., wait another two months before making a formal product announcement, as per Philips’ suggestion) or speed up (i.e., push LiveMenu more aggressively, as per Hayes’s suggestion)?
• This is to be a tough question.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• #7 (cont.)
• The reasons for the “science experiment” approach were:
– to mitigate risk (i.e., to minimize upfront financial and reputational costs);
– to keep the project in stealth mode as long as possible (to avoid creating competition too early);
– to promote a sense of mystery and intrigue (to attract employees and, eventually, angel investors); and
– to create an opportunity to under-promise and over-deliver
(e.g., to delight the customers and secure the sale).
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• #7 (cont.)
• Risks of speeding up:
– creating excessive expectations and demand, inviting competition, becoming unfocused and running out of money
(employees must be paid at some point).
• Risks of slowing down:
– possible stealth competitors, missing the boat, getting bored and ongoing uncertainty (will this thing even sell?)
• There is not a simple answer to the question.
Hutcherson chose the slower approach, and it appeared to be paying off (at least, at the time of this writing).
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

•
8. What is an entrepreneur? Has Clay Hutcherson
“got what it takes”?
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Shane and Venkataraman’s scholarly definition of entrepreneurship is “ how , by whom , and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited”
• The authors go on to explain the key questions of interest:
– (a) why, when and how opportunities for the creation of goods and services come into existence;
– (b) why, when and how some people and not other discover and exploit these opportunities and
– (c) why, when and how different modes of action are used to exploit entrepreneurial opportunities.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Binnj appears to provide a significant entrepreneurial opportunity . Hutcherson has taken key actions and assembled the resources to exploit this opportunity. In addition, he has sold the idea to other people and invited them in to take some risk along with himself.
• Together, this group of founders appears meet the classic definition of entrepreneurialism.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Does IT entrepreneurship differ from this classic form entrepreneurship? There do appear to be some differences between a high-technology entrepreneurial startup, such as Binnj, and a more traditional manufacturing-based entrepreneurial startup.
•
The service is scalable at very little cost :
– Unlike a manufacturing concern, growing and scaling up an
IT-based entrepreneurship does not require purchasing expensive equipment or massively increasing the number of workers.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• Low-cost/no-cost “maintenance” :
– Manufacturing “tools” - in this case software and hardware - are either free (provided by Apple) or available at minimal cost (hardware that is already owned). An ITbased startup has less need to train and update staff skills in terms of providing service. Improvements to the product can be immediately updated.
•
Intellectual property protection :
– In a traditional manufacturing business, the factors of production are arguably more controllable and can provide more significant barriers to entry. In an IT-based startup, however, because the intellectual property resides with people, it can literally “walk out the door” every evening.
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John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices