1 ADM1370 Info Systems in Business Prof Craig Kuziemsky Sections M,N and P January 10/11, 2011.

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ADM1370 Info Systems in

BusinessProf Craig Kuziemsky

Sections M,N and P

January 10/11, 2011

Course TA’s

Section M Shalik Nath : [email protected] Vijay Te   : [email protected]

Section N Ryan Briggs : [email protected] David Ilonze: [email protected]

Section P manmohan parmar: [email protected]

Balaharish Chandrasekaran: [email protected]

Last Class

Introduced digitization and the role ICTs will play in the changing business environment

Five factors related to the impact of IT on business

Globalization and flattening

Today’s Class

Role of business processes and types of IT found in business

More on flattening – Start the chapter on Friedman

Next class and next week – specific examples of IT supported business

Examples of the Power of the Internet

http://www.ctv.ca/CTVNews//20100805/air-canada-twitter-100805/

Employee loses job http://www.thestar.com/News/Ontario/article/422864

Period of public backlash occurs facilitated by the Internet

Employee gets job back http://www.theglobeandmail.com/news/national/article684498.ece

Information Systems Components

Iivari, Hirschheim and Klein (2004) classify IS body of knowledge as needing:

1. technology knowledge

2. application domain knowledge

3. systems development knowledge

4. organizational knowledge

5. IS application knowledge

Three Key Concepts

1. Business Processes and how IT supports these processes

2. Changing paradigm of information and communication technologies

3. How to leverage #2 to better do #1

1. Business Processes and IT

The interdependence between organizations andinformation systems

Business Processes and Information Systems

Business processes:• Manner in which work is organized, coordinated,

and focused to produce a valuable product or service

• Concrete work flows of material, information, and knowledge – sets of activities

• Unique ways to coordinate work, information, and knowledge

• Ways in which management coordinates work

Business Processes and Information Systems

• Information systems help organizations achieve great efficiencies by automating parts of processes

• IS also contributes to completely rethinking processes

• Business processes typically span several different functional areas

Examples of Business Processes

Manufacturing and production: • Assembling product, checking quality, producing

bills of materials

Sales and marketing: • Identifying customers, creating customer

awareness, selling

Examples of Business Processes (continued)

Finance & accounting:Paying creditors, creating financial statements, managing cash accountsHuman resources: Hiring employees, evaluating performance, enrolling employees in benefits plans

Business Processes and Information Systems

Cross-Functional Business Processes:

Transcend boundary between sales, marketing, manufacturing, and research and development

• Group employees from different functional specialties to a complete piece of work

• Example: Order Fulfillment Process

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IDENTIFYING COMPETITIVE ADVANTAGES

To survive and thrive an organization must create a competitive advantage Competitive advantage – a product or

service that an organization’s customers place a greater value on than similar offerings from a competitor

First-mover advantage – occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

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THE FIVE FORCES MODEL – Evaluating Business Processes and Strategy

Porter’s Five Forces Model determines the relative attractiveness of an industry

Porter’s 5 Forces Model

Buyer power - high when buyers have many choices of whom to buy from and low when their choices are few

Use IT to reduce buyer power (thus creating a competitive advantage) through loyalty programs Loyalty program rewards customers based on the

amount of business they do with a particular organization (frequent flyer programs, Shopper’s optimum, coffee shops where you get your 10th cup of coffee free, etc.)

ENTERPRISE IT SYSTEMS

Organizations use specific IT to support strategic initiatives including: Supply chain management (SCM) systems Customer relationship management (CRM)

systems Enterprise resource planning (ERP) systems

Each of those systems are complex and will be discussed in detail in ADM2372

Enterprise Systems

Overview of Supply Chain Management (SCM) Systems

• Close linkage and coordination of activities involved in buying, making, and moving a product

• Integrates supplier, manufacturer, distributor, and customer logistics time

• Reduces time, redundant effort, and inventory costs

• Network of organizations and business processes

Overview of Supply Chain Management (SCM) Systems (continued)

Helps in procurement of materials, transformation of raw materials into intermediate and finished productsHelps in distribution of the finished products to customersIncludes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller

Overview of Customer Relationship Management (CRM) Systems

Manages all methods a firm uses to deal with existing and potential customersUses information system to coordinate entire business processes of a firm to better understand and deliver customer’s needs

Overview of Customer Relationship Management (CRM) Systems (continued)

Provides end-to-end customer careProvides a unified view of customer across the companyConsolidates customer data from multiple sources and provides analytical tools for answering questions

More Flatteningfrom Friedman pp 151-185

Organizational/Behavioral Impacts

Note that: IT broadens the distribution of timely information Increases the speed of decision-making Empowers lower-level employees Increases management span of control

Flattening organizations, more virtual firms, increasing flexibility

Behavioral Impacts - Flattening organizations

IT facilitates flattening of hierarchies by: Distributing information to empower lower-level

employees and increase management efficiency less number of middle managers

Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower-level employees more decision-making authority.

Flattener #1: The Fall of the Berlin Wall

November 9, 1989 Fall of communism People from the

former communist countries gained more freedom

Flattener #2: Netscape Browser

August 9, 1995

First mainstream browser

Gave individuals access to the Internet

THEN

NOW

Flattener #3: Work Flow Software

Applications that allow people worldwide to communicate

XML allows applications to “talk” to each other

New possibilities for information sharing

Flattener #4: Open Sourcing

Software and source code freely available to everyone

Blogs, Wikis, Wikipedia a

huge success

Flattener #5: Outsourcing

Outsourcing companies profited from the drop in telecommuni-cations costs

Companies can now use talented engineers from anywhere

Flattener #6: Offshoring

Companies set up entire factories in countries such as China Mass production Low Costs

Flattener #7: Supply Chaining

Integration of retailers, suppliers, and customers

RFID tags used

Wal-Mart became an early leader

Flattener #8: In-Sourcing

Delegation of company’s key operations to a subcontractor E.g.: UPS

provides complete supply chain solutions to companies

Flattener #9: In-Forming

In-Forming is to individuals what outsourcing, offshoring, and in-sourcing is to companies

Individuals have access to massive amounts of information

Flattener #10: The Steroids Personal digital devices like mobile phones,

iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP).

Digital, Moble, Personal and Virtual – all analog content and processes (from

entertainment to photography to word processing) can be digitized and therefore shaped, manipulated and transmitted;

virtual - these processes can be done at high speed with total ease;

mobile - can be done anywhere, anytime by anyone;

personal - can be done by you.

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Impact of the Internetpositive impact

Opportunities to alter how business processes are conducted (e.g. efficiency)

New opportunities for building brands and developing customer relationships (CRM)

Companies that are better at using IS in general and the Internet in particular do a better job of dealing with Porter’s 5 threats

Dell, Wal-Mart, eBay, etc.

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Impact of the Internetnegative impact

Substitute products or services New substitutes emerge (e.g., online music lowers the value

of record stores) Customers’ bargaining power

Customers have access to info on products & pricing, thus can bargain

Suppliers’ bargaining power Suppliers have more options to sell their products

Threat of new entrants The Internet reduces barriers to entry, such as physical

location and changes the business environment (e.g. Blockbuster & www.netflix.ca )

Rivalry among existing competitors The Internet widens geographic market, increasing the

number of competitors, pressure to lower prices

Summary

Think of processes, IT and strategies as an integrated bundle

IT (especially the Internet) has changed how we access, share and use information

The forces of business have shifted and continue to shift at an incredible rate

For Next Class

Finish reading pp 151-170 of the World is Flat

Make sure you have a group