CHAPTER 9

ENABLING THE ORGANIZATION (DECISION MAKING)

DECISION MAKING

• Reasons for the growth of decision-making information systems

          ➽ People need to analyze large amounts of information

          ➽ People must make decisions quickly

          ➽People must apply sophisticated analysis techniques, such as modeling and forecasting, to                    make good decisions

          ➽ People must protect the corporate asset of organizational information

• Model - a simplified representation or abstraction of reality
• IT systems in an enterprise

TRANSACTION PROCESSING SYSTEMS

• Moving up through the organizational pyramid users move from requiring transactional  information to analytical information

• Transaction processing system - the basic business system that serves the operational level (analyst) in an organization
• Online transaction processing (OLTP) - the capturing of transaction and event information using technology to 

1. Process information according to defined business
2. Store the information
3. Update existing information to reflect the new information

• Online analytical processing (OLAP) - the manipulation of information to create business intelligence in support of strategic decision making

DECISION SUPPORT SYSTEMS

• Decision support systems (DSS) - models information to support managers and business professionals during the decision making process
• Three quantitative models used by DSSs include :

1. Sensitivity analysis - the study of the impact that changes in one (or more) parts of the model                                      have on other parts of the model 
2. What-if-analysis - checks the impact of a change in an assumption on the proposed solution
3. Goal-seeking analysis - finds the inputs necessary to achieve goals such as desired level of                                              output

• Interaction between a TPS and a DSS

EXECUTIVE INFORMATION SYSTEMS

• Executive information systems (EIS) - a specialized DSS that supports senior level executives within the organization
• Most EISs offering the following capabilities :

          ⏩ Consolidation - involves the aggregation of information and features simple roll-ups to                                                 complex groupings of interrelated information

          ⏩ Drill-down - enables users to get details, and details of details, of information

          ⏩ Slice-and-dice - looks at information from different perspectives

• Interaction between a TPS and a EIS

• Digital-dashboard - integrates information from multiple components and presents it in a                                            unified display

ARTIFICIAL INTELLIGENCE (AI)

• Intelligent system - various commercial applications of artificial intelligence
• Artificial intelligence (AI) - simulates human intelligence such as the ability to reason and                                                      learn 
• The ultimate goal of AI is the ability to build a system that can mimic human intelligence

• Four most common categories of AI include :

1.  Expert system - computerized advisory programs that imitate the reasoning processes of                                      experts in solving difficult problems
2.  Neural Network - attempts to emulate the way the human brain works                                                ( Fuzzy logic - a mathematical method of handling imprecise or subjective information)
3. Genetic algorithm - an artificial intelligent system that mimics the evolutionary, survival-of-                                      the-fittest process to generate increasingly better solutions to a problem
4. Intelligent agent - special-purposed knowledge-based information system that accomplishes                                   specific tasks on behalf of its users

           ⧭ Multi-agent systems

           ⧭ Agent-based modeling

DATA MINING

• Data mining software includes many forms of AI such as neural networks and expert systems

• Common forms of data-mining analysis capabilities include :

 CLUSTER ANALYSIS

🔺 Cluster analysis - a technique used to divide an information set into mutually exclusive groups                                        such that the members of each group are as close together as possible to one                                          another and the different groups are as far apart as possible

🔺 CRM systems depend on cluster analysis to segment customer information and identity behavioral      traits

ASSOCIATION DETECTION

🔻 Association detection - reveals the degree to which variables are related and the nature and                                                        frequency of these relationships in the information

⃗ Market basket analysis - analyzes such items as Web sites and checkout scanner information to                                                    detect customers' buying behavior by identifying affinities among                                                          customers' choices of products and services

STATISTICAL ANALYSIS

🔺 Statistical analysis - performs such functions as information correlations, distributions,                                                         calculations, and variance analysis

⤗ Forecast - predictions made on the basis of time series information

⤗ Time-series information - time-stamped information collected at a particular frequency

CHAPTER 8

ACCESSING ORGANIZATIONAL INFORMATION (DATA WAREHOUSE)

DATA WAREHOUSE FUNDAMENTALS

• Data warehouse - a logical collection of information (gathered from many different operational databases - that supports business analysis activities and decision-making tasks) 

• The primary purpose of a data warehouse is to aggregate information throughout an organization into a single repository for decision-making purposes

• Extraction, transformation, and loading (ETL) - a process that extracts information from internal and external databases, transforms the information using a common set of enterprise definitions, and loads the information into a data warehouse

• Data mart - contains a subset of data warehouse information

MULTIDIMENSIONAL ANALYSIS AND DATA MINING

• Databases contain information in a series or two-dimensional tables
• In a data warehouse and data mart, information is multidimensional, it contains layers of columns and rows (Dimension - a particular attribute of information)
• Cube - common term for the representation of multidimensional information

       

• Data mining - the process of analyzing data to extract information not offered by the raw data                           alone
• To perform data mining, users need data-mining tools

           ⇰ Data-mining-tool - uses a variety of techniques to find patterns and relationships in large                                                    volumes of information and infers rules that predict future behavior                                                        and guide decision making

INFORMATION CLEANSING AND SCRUBBING

• An organization must maintain high-quality data in the data warehouse
• Information cleansing or scrubbing - a process that weeds out and fixes or discards inconsistent, incorrect, or incomplete information
• Contact information in an operational system

• Standardizing Customer name from Operational Systems

• Information cleansing activities

• Accurate and complete information

BUSINESS INTELLIGENCE

• Business Intelligence - information that people use to support their decision-making efforts
• Principle BI enablers include :

         ↠ Technology

         ↠ People

         ↠ Culture

CHAPTER 7

STORING ORGANIZATIONAL INFORMATION (DATABASES)

      

RELATIONAL DATABASE FUNDAMENTALS

• Information is everywhere in an organization
• Information is stored in databases  

           * Database - maintains information about various types of objects(inventory),                                                           events(transactions), people(employees), and places(warehouses)

• Database models include :

          * Hierarchical database model - information is organized into a tree-like structure(using                                                                          parent/child relationships)in such a way that it cannot have                                                                      too many relationships

             * Network database model - a flexible way of representing objects and their relationships

             * Relational database model - stores information in the form of logically related two-                                                                           dimensional tables

ENTITIES AND ATTRIBUTES 

• Entity - a person, place, thing, transaction, or event about which information is stored
• Attributes (fields, columns) - characteristics or properties of an entity class 

KEYS AND RELATIONSHIPS

• Primary keys and foreign keys identify the various entity classes (tables) in the database

             * Primary key - a field(or group of fields) that uniquely identifies a given entity in a table

             * Foreign key - a primary key of one table that appears an attribute in another table and acts                                          to provide a logical relationship among the two tables 

RELATIONAL DATABASE ADVANTAGES

• Database advantages from a business perspective include

             * Increased flexibility

                - A well designed database should

                    > Handle changes quickly and easily

                    > Provide users with different views

                    > Have only one physical view( deals with the physical storage of information on a                                 storage device. eg:hard disk)

                    > Have multiple logical views( focusses on how users logically access information)

                    > Eg : a mail-order buss-2 people view different format (logically views) but same                                           physical view

             * Increased scalability and performance

               - A database must scale to meet increased demand, while maintaining acceptable                                   performance levels

                   < Scalability - refers to how well a system can adapt to increased demands

                   < Performance - measures how quickly a system performs a certain process or                                                                  transaction 

             * Reduced information redundancy

               - Databases reduce information redundancy

                  > Redundancy - the duplication of information or storing the same information in                                                            multiple places

               - Inconsistency is one of the primary problems with redundant information- difficult to                           decide which is most current and most accurate

             * Increased information integrity (quality)

               - Information integrity - measures the quality of information

               - Integrity constraint - rules that help ensure the quality of information

                  < Relational integrity constraint - rule that enforces basic and fundamental information-                                                                            based constraints

                  < Eg : Users cannot create an order for a nonexistent customer, provide a markup                                             percentage that was negative

                  < Business-critical integrity constraint - rule that enforce business rules vital to an                                                                                                organization's success and often require more                                                                                          insight and knowledge than relational integrity                                                                                        constraints

                  < Eg : Product returns are not accepted for fresh product 15 days after purchase

             * Increased information security

                - Information is an organizational asset and must be protected

                - Databases offer several security features including :

                   > Password - provides authentication of the user

                   > Access level - determines who has access to the different types of information

                   > Access control - determines types of user access, such as read-only access

DATABASE MANAGEMENT SYSTEMS

• Database management systems (DBMS) - software through which users and application programs interact with a database

DATA-DRIVEN WEB SITES

• Data-driven Web sites- an interactive Web site kept constantly updated and relevant to the needs of its customers through the use of a database

DATA-DRIVEN WEB SITE BUSINESS ADVANTAGES

• Development - Allows the Web site owner to make changes any time-all without having to rely on a developer or knowing HTML programming. A well-structured, data-driven Web site enables updating with little or no training

• Content management - A static Web site requires a programmer to make updates. This adds an unnecessary layer between the business and its Web content, which can lead to misunderstandings and slow turnarounds for desired changes

• Future expandability - Having a data-driven Web site enables the site to grow faster than would be possible with a static site. Changing the layout, displays, and functionality of the site is easier with a data-driven solution

• Minimizing human error - Even the most competent programmer charged with the task of maintaining many pages will overlook things and make mistakes. This will lead to bugs and inconsistencies that can be time consuming and expensive to track down and fix. Unfortunately, users who come across these bugs will likely become irritated and may leave the site. A well designed, data-driven Web site will have "error trapping" mechanisms to ensure that required information is filled out correctly and that content is entered and displayed in its correct format.

• Cutting production and update costs - A data-driven Web site can be updated and "published" by any competent data entry or administrative person. In addition to being convenient and more affordable, changes and updates will take a fraction of the time that they would with a static site. While training a competent programmer can take months or even a years, training data entry person can be done in 30 to 60 minutes.

• More efficient - By their very nature, computers are excellent at keeping volumes of information intact. With a data-driven solution, the system keeps track of the templates, so users do not have to. Global changes to layout, navigation, or site structure would need to be programmed only once, in one place, and the site itself will take care of propagating those changes to the appropriate pages and areas. A data-driven infrastructure will improve the reliability and stability of  a Web site, while greatly reducing the chance of "breaking" some part of the site when adding new areas.

• Improved Stability - Any programmer who has to update a Web site from "static" templates must be very organized to keep track of all the source files. If a programmer leaves unexpectedly, it could involve re-creating existing work if those source files cannot be found. Plus, if there were any changes to the templates, the new programmer must be careful to use only the latest version. With a data-driven Web site, there is peace of mind, knowing the content never lost   

DATA-DRIVEN BUSINESS INTELLIGENCE

INTEGRATING INFORMATION AMONG MULTIPLE DATABASES

• Integration - allows separate systems to communicate directly with each other

          ⇒ Forward integration - takes information entered into a given system and sends it                                                                     automatically to all downstream systems and processes
          ⇒ Backward integration - takes information entered into a given system and sends it                                                                      automatically to all upstream systems and processes

• Forward integration

• Backward integration

• Building a central repository specifically for integrated information

• Without integration, an organization will :

          ↳ Spend considerable time entering the same info in multiple system
          ↳ Suffer from the low quality and inconsistency typically embedded in redundant info 

CHAPTER 6

VALUING ORGANIZATIONAL INFORMATION

ORGANIZATIONAL INFORMATION

• Information is everywhere in an organization
• Employees must be able to obtain and analyze the many different levels, formats, and granularities of organizational information to make decisions
• Successfully collecting, compiling, sorting and analyzing information can provide tremendous insight into how an organization is performing
• Levels, formats, and granularities of organizational information

THE VALUE OF TRANSACTIONAL AND ANALYTICAL INFORMATION

THE VALUE OF TIMELY INFORMATION

• Timeliness is an aspect of information that depends on the situation

            * Real-time information - immediate, up-to-date information

            * Real-time system - provides real-time information in response to query requests

THE VALUE OR QUALITY INFORMATION

• Business decisions are only as good as the quality of the information used to make the decisions
• You never want to find yourself using technology to help you make a bad decision faster
• Characteristics of high-quality information include :

            * Accuracy

            * Completeness

            * Consistency

            * Uniqueness

            * Timeliness

• Low quality information example

UNDERSTANDING THE COSTS OF POOR INFORMATION

• The 4 primary sources of low quality information include :

           1. Online customers intentionally enter inaccurate information to protect their privacy

           2. Information from different systems have different entry standards and formats

           3. Call center operators enter abbreviated or erroneous information by accident or to save time

           4. Third party and external information contains inconsistencies, inaccuracies, and errors

• Potential business effects resulting from low quality information include :

          * Inability to accurately track customers

          * Difficulty identifying valuable customers

          * Inability to identify selling opportunities

          * Marketing to nonexistent customers

          * Difficulty tracking revenue due to inaccurate invoices

          * Inability to build strong customers relationships

UNDERSTANDING THE BENEFITS OF GOOD INFORMATION

• High quality information can significantly improve the chances of making a good decision
• Good decisions can directly impact an organization's bottom line

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'