CHAPTER 5

ORGANIZATIONAL STRUCTURES THAT SUPPORT STRATEGIC INITIATIVES

ORGANIZATIONAL STRUCTURES :

• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages
• Ethics and security are 2 fundamental building blocks that organizations must base their businesses upon

IT ROLES AND RESPONSIBILITIES

• Information technology is a relatively new functional area, having only been around formally for around 40 years
• Recent IT-related strategic positions :

                 * Chief Information Officer (CIO)

                 * Chief Technology Officer (CTO)

                 * Chief Security Officer (CSO)

                 * Chief Privacy Officer (CPO)

                 * Chief Knowledge Office (CKO)

• Chief Information Officer (CIO) - oversees all uses of IT and ensures the strategic alignment                                                             of IT with business goals and objectives

• Broad CIO functions include :

               >< Manager - ensuring the delivery of all IT projects, on time and within budget

               >< Leader - ensuring the strategic vision of IT is in line with the strategic vision of the                                            organization

               >< Communicator - building and maintaining strong executive relationships

• Average CIO compensation by industry

• What concerns CIO's the most

• Chief Technology Officer (CTO) - Responsible for ensuring the throughput, speed, accuracy,                                                             availability, and reliability of IT
• Chief Security Officer (CSO) - Responsible for ensuring the security of IT systems 
• Chief Privacy Officer (CPO) - Responsible for ensuring the ethical and legal use of                                                                      information
• Chief Knowledge Office (CKO) - Responsible for collecting, maintaining, and distributing                                                               the organization's knowledge

• Skills pivotal for success in executive IT roles

THE GAP BETWEEN BUSINESS PERSONNEL AND IT PERSONNEL

• Business personnel possess expertise in functional areas such as marketing, accounting, and sales
• IT personnel have the technological expertise
• This typically causes a communications gap between the business personnel and IT personnel

IMPROVING COMMUNICATIONS

• Business personnel must seek to increase their understanding of IT
• IT personnel must seek to increase their understanding of the business
• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel

ORGANIZATIONAL FUNDAMENTALS - ETHICS & SECURITY

• Ethics and security are 2 fundamental building blocks that organizations must base their businesses on to be successful
• In recent years, such events as the Enron and Martha Stewart, along with 9/11 have shed new light on the meaning of ethics and security

ETHICS

• Ethics - the principles and standards that guide our behavior toward other people
• Privacy is a major ethical issue

             - Privacy - the right to be left alone when you want to be, to have control over your own                                        personal possessions, and not to be observed without your consent

• Issues affected by technology advances

             * Intellectual property - Intangible creative work that is embodied in physical form

             * Copyright - The legal protection afforded an expression of an idea, such as a song, video                                         game, and some types of proprietary documents

             * Fair use doctrine - In certain situations, it is legal to use copyrighted material

             * Pirated software - The unauthorized use, duplication, distribution, or sale or copyrighted                                                    software

             * Counterfeit software - Software that is manufactured to look like the real thing and sold                                                           as such

• One of the main ingredients in trust is privacy
• Primary reasons privacy issues lost trust for e-business

SECURITY

• Organizational information is intellectual capital - it must be protected
• Information security - the protection of information from accidental or intentional misuse by                                         persons inside or outside an organization
• E-Business automatically creates tremendous information security risks for organizations

CHAPTER 4

MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

Measuring Information Technology's Success : 

• Key Performance Indicator - measures that are tied to business drivers
• Metrics are detailed measures that feed KPIs
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals

EFFICIENCY & EFFECTIVENESS :

• Efficiency IT metric - measures the performance of the IT system itself including throughput, speed, and availability
• Effectiveness IT metric - measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases

BENCHMARKING - Baselining Metrics :

• Regardless of what measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks - baseline values the system seeks to attain
• Benchmarking - a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance
• E-government benchmarks

THE INTERRELATIONSHIPS OF EFFICIENCY & EFFECTIVENESS IT METRICS :

• Efficiency IT metrics focus on technology and include : 

             * Throughput - the amount of information that can travel through a system at any point

             * Transaction speed - the amount of time a system takes to perform a transaction

             * System availability - the number of hours a system is available for users

             * Information accuracy - the extent to which a system generates the correct results when                                                              executing the same transaction numerous times

             * Web traffic - includes a host of benchmarks such as the number of page views, the                                                     number of unique visitors, and the average time spent viewing a web page

             * Response time - the time it takes to respond to user interactions such as a mouse click

• Effectiveness IT metrics focus on an organization's goals, strategies, and objectives and include  :

              * Usability - the ease with which people perform transactions and/or find information. A                                           popular usability metric on the internet is degrees of freedom, which measures                                     the number of clicks required to find desired information

              * Customer satisfaction - Measured by such benchmarks as satisfaction surveys,                                                                            percentage of existing customers retained, and increases in                                                                      revenue dollars per customer

              * Conversion rates - the number of customers an organization "touches" for the first time                                                     and persuades to purchaseits products or services. This is a popular                                                       metric for evaluating the effectiveness of banner, pop-up, and pop-                                                         under ads on the internet

              * Financial - such as return on investment, cost-benefit analysis and break-even analysis 

• Security is an issue for any organization offering products or services over the internet
• It is inefficient for an organization to implement internet security, since it slows down processing 

                  - to be effective it must implement internet security

                  - Secure Internet connections must offer encryption and Secure Sockets Layers

• Interrelationships of Efficiency & Effectiveness 

METRICS FOR STRATEGIC INITIATIVES :

• Metrics for measuring & managing strategic initiatives include :

1. WEB SITE METRICS
2. SUPPLY CHAIN MANAGEMENTS (SCM) METRICS
3. CUSTOMER RELATIONSHIP MANAGEMENT (CRM) METRICS
4. BUSINESS PROCESS REENGINEERING (BPR) METRICS
5. ENTERPRISE RESOURCE PLANNING (ERP) METRICS

WEB SITE METRICS

• Web site metrics include :

              * Abandoned registrations - number of visitors who start the process of completing a                                                                         registration page and then abandon the activity

              * Abandoned shopping cards - number of visitors who create a shopping cart and start                                                                           shopping and then abandon the activity before paying for                                                                       the merchandise

              * Click-through - count of the number of people who visit a site, click on an ad, and are                                                     taken to the site of the advertiser

              * Conversion rate - percentage of potential customers who visit a site and actually buy                                                          something

              * Cost-per-thousand - sales dollars generated per dollar of advertising. This is commonly                                                        used to make the case for spending money to appear on a search                                                            engine

              * Page exposures - average number of page exposures to an individual visitor

              * Total hits - number of visits to a Web site, many of which may be by the same visitor 

              * Unique visitors - number of unique visitors to a site in a given time. This is commonly                                                    used by Nielsen/Net ratings to rank the most popular Web sites

SUPPLY CHAIN MANAGEMENT METRICS

• Back order - an unfilled customer order. A back order is demand against an item whose current stock level is insufficient to satisfy demand
• Customer order promised cycle time - the anticipated or agreed upon cycle time of a purchase order. It is a gap between the purchase order creation date and the requested delivery date
• Customer order actual cycle time - the average time it takes to actually fill a customer's purchase order. This measure can be viewed on an order or an order line level
• Inventory replenishment cycle time - measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center
• Inventory turns (inventory turnover) - the number of times that a company's inventory cycles or turns over  per year. It is one of the most commonly used supply chain metrics

CUSTOMER RELATIONSHIP MANAGEMENT METRICS

• Customer relationship management metrics measure user satisfaction and interaction and include 

               * Sales metrics

               * Service metrics

               * Marketing metrics

BPR & ERP METRICS

• The balanced scorecard enables organizations to measure and manage strategic initiatives

CHAPTER 3

STRATEGIC INITIATIVES FOR IMPLEMENTING COMPETITIVE ADVANTAGES

Strategic Initiatives :

• Organizations can undertake high-profile strategic initiatives including

            * Supply chain management (SCM)
            * Customer Relationship Management (CRM)
            * Business Process Reengineering (BPR)
            * Enterprise Resource Planning (ERP)


SUPPLY CHAIN MANAGEMENT

• Supply Chain Management (SCM) -involves the management of information flows between                                                                and among stages in a supply chain to maximize total                                                                    supply chain effectiveness and profitability
• 4 basic components of supply chain management :

                 * Supply Chain Strategy - strategy for managing all resources to meet customer demand
                 * Supply Chain Partner - partners throughout the supply chain that deliver finished                                                                        products, raw materials, and services
                 * Supply Chain Operation - schedule for production activities
                 * Supply Chain Logistics - product delivery process

• Wal-Mart and Procter & Gamble (P&G) SCM

• Effective and efficient SCM systems can enable an organization to:

               # Decrease the power of its buyers
               # Increase its own supplier power
               # Increase switching costs to reduce the threat of substitute products or services
               # Create entry barriers thereby reducing the threat or new entrants
               # Increase efficiencies while seeking a competitive advantage through cost leadership

• Effective and efficient SCM systems effect on Porter's Five Forces

CUSTOMER RELATIONSHIP MANAGEMENT

• Customer Relationship Management (CRM) - involves managing all aspects of a customer's relationship with an organization to increase customer loyalty and retention and an organization's profitability
• Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems
• CRM is not just technology, but a strategy process, and business goal that an organization must embrace on an enterprisewide level
• CRM can enable an organization to:

                * Identify types of customers

                * Design individual customer marketing campaigns

                * Treat each customer as an individual

                * Understand customer buying behaviors

BUSINESS PROCESS REENGINEERING

• Reengineering the Corporation - book written by Michael Hammer and James Champy that recommends seven principles for BPR

FINDING OPPORTUNITY USING BPR

• Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

ENTERPRISE RESOURCE PLANNING

• Enterprise Resource Planning (ERP) - integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations
• Keyword in ERP is 'enterprise'

CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGES

WHAT IS COMPETITIVE ADVANTAGES ?

• 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

There are 3 common tools used in industry to analyze and develop :

1. Porter's Five Forces Model
2. Porter's 3 Generic Strategies
3. Value Chains

THE FIVE FORCES MODEL - Evaluating Business Segments

1. BUYER POWER

• Buyer Power - high when buyers have many choices of whom to buy from and low when their choices are few
• Way to reduce buyer power is through loyalty programs

             * Loyalty program - rewards customer based on the amount of business they do with a                                                          particular organization

             * Switching costs - costs that can make customers reluctant to switch to another product or                                                   service 

2. SUPPLIER POWER

• Supplier Power - high when buyers have few choices of whom to buy from and low when their  choices are many

              * Supply chain - consists of all parties involved in the procurement of a product or raw                                                   material

• Organizations that are buying goods and services in the supply chain can create a competitive advantage by locating alternative supply sources through B2B marketplace

               * Business-to-Business (B2B) marketplace - an internet-based service that brings together                                                                                           many buyers and sellers

• 2 types of B2B marketplace :

             # Private Exchange - a single buyer posts its needs and then opens the bidding to any                                                             supplier who would care to bid

             # Reverse Auction - an auction format in which increasingly lower bids are solicited from                                                    organizations willing to supply the desired product or service at an                                                        increasingly lower price

3. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES 

• Threat of substitute products or services - high when there are many alternatives to a product   or service and low when there are few alternatives  from which to choose

              # Switching cost - costs that can make customers reluctant to switch to another product or                                                  service

4. THREAT OF NEW ENTRANTS

• Threat of new entrants - high when it is easy for new competitors to enter a market and low  when there are significant entry barriers to entering a market

             # Entry barrier - a product or service feature that customers have come to expect from                                                   organizations in particular industry and must be offered by an entering                                                   organization to compete and survive 

5. RIVALRY AMONG EXISTING COMPETITORS

• Rivalry among existing competitors - high when competition is fierce in a market and low                                                                       when competition is more complacent
• Although competition is always more intense in some industries than in others, the overall trend is toward increased competition in just about every industry

THE 3 GENERIC STRATEGIES - Creating a Business Focus

• Organizations typically follow one of Porter's 3 Generic Strategies when entering a new market

VALUE CREATION

• Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy

                 * Business process - a standardized set of activities that accomplish a specific task, such                                                        as processing a customer's order

                 * Value chain - views an organization as a series of processes, each of which adds value

                                          to the product or service for each customer

• Value Chain

• Customers determine the extent to which each activity adds value to the product or service
• The competitive advantage is to : 

                * Target high value-adding activities to further enhance their value

                * Target low value-adding activities to increase their value

                * Perform some combination of the two

CHAPTER 1

BUSINESS DRIVEN TECHNOLOGY

Learning Outcomes:

•  Compare management information systems (MIS) and information technology (IT)
• Describe the relationships among people, information technology, and information 
• Identify 4 different departments in a typical business an explain how technology helps them to work together
• Compare the 4 different types of organizational information cultures and decide which culture applies to your school

INFORMATION TECHNOLOGY'S IMPACT ON BUSINESS OPERATIONS


Business Functions Receiving the Greatest Benefits from Information Technology

Information Technology's Project Goals

 
Common Departments In An Organization

• Organizations typically operate by functional areas or functional silos
• Functional areas are interdependent



Information Technology Basics

• Information Technology (IT) - a field concerned with the use of technology in managing and processing information
• Information technology is an important enabler of business success and innovation
• Management information systems (MIS) - a general name for the business function and academic discipline covering the application of people, technologies and procedures to solve business problems
• MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources
• When beginning to learn about information technology it is important to understand 

                 * Data, Information, and Business Intelligence
                 * IT Resources
                 * IT Cultures


Data, Information, and BI

• Data - raw facts that describe the characteristics of an event

• Information - data converted into a meaningful and useful context

• Business Intelligence - applications and technologies that are used to support decision making efforts

• For example, if you were building a system to track students :

               * Data might include height, name, and hair color
              * Information might include student to professor ratio, percentage of marketing majors who                    are female, number of students who pass the course

• If you were building a system to track inventory :

               * Data might include chair manufacturer, chair color, and chair size
               * Information might include number of chairs required for students in each class, average                       number of chairs needed to be replaced each semester

• IT Resources
  

           # People use
           # Information Technology to work with
          # Information

• IT Cultures

         Organizational information cultures include: 

1. Information-Functional Culture

Employees use information as a means of exercising influence or power over others. 

2. Information-Sharing Cultures

Employees across departments trust each other to use information to improve performance. 

3. Information-Inquiring Culture

Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

4. Information-Discovery Culture

Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.