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Chapter One Overview

• SECTION 1.1 – INFORMATION SYSTEMS IN BUSINESS– Information Technology’s Role in Business– Information Technology Basics– Roles and Responsibilities in Information Technology– Measuring Information Technology’s Success

• SECTION 1.2 – BUSINESS STRATEGY– Identifying Competitive Advantages– The Five Forces Model – Evaluating Business Segments– The Three Generic Strategies – Creating a Business Focus– Value Chain Analysis – Targeting Business Processes

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

SECTION 1.1SECTION 1.1

INFORMATION SYSTEMS IN BUSINESS

INFORMATION SYSTEMS IN BUSINESS

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Information Technology’s Impact on Business Operations

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Information Technology’s Impact on Business Operations

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Information Technology’s Impact on Business Operations

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Information Technology’s Impact on Business Operations

• Organizations typically operate by functional areas or functional silos

• Functional areas are interdependent

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INFORMATION TECHNOLOGY BASICS

• Information technology (IT) – any computer-based tool that people use to work with information and support the information and information-processing needs of an organization

• Information technology is an important enabler (or disabler) of business success and innovation

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INFORMATION TECHNOLOGY BASICS

• Management information systems (MIS) – the function that plans for, develops, implements, and maintains IT hardware, software, and applications that people use to support the goals of an organization

• MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

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Information

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

• Information - data converted into a meaningful and useful context

• Noise – an overload of information

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IT Resources

• People use

• Information technology to work with

• Information

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ROLES AND RESPONSIBILITIES IN IT

• 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

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ROLES AND RESPONSIBILITIES IN IT

• 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

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ROLES AND RESPONSIBILITIES IN ITBrief Summary

(CInformationO) Ensure strategic alignment

(CTechnologyO) Proper equipment/software

(CSecurityO) Protect from viruses & hackers

(CPrivacyO) restrict access to private info

(CKnowledgeO) databases and AI systems

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ROLES AND RESPONSIBILITIES IN IT

• What concerns CIOs the most

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ROLES AND RESPONSIBILITIES IN IT

• Average CIO compensation by industry

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ROLES AND RESPONSIBILITIES IN IT

• Skills pivotal for success in executive IT roles

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Why we need MIS majors

• 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

• MIS Majors bridge the gap.

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Improving Communications

• Business personnel must seek to increase their understanding of IT –Why?

• IT personnel must seek to increase their understanding of the business – Why?

• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel

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MEASURING INFORMATION TECHNOLOGY’S SUCCESS

• Key performance indicator (KPI) – measures that are tied to business drivers

• What is an example of a business driver?

• Metrics are detailed measures (numbers) that feed KPIs

• Performance metrics can measure both efficiency and effectiveness.

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Efficiency and Effectiveness Metrics

• 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

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Benchmarking – Baselining Metrics

• Regardless of what is 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

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Benchmarking – Baselining Metrics

• E-governement benchmarks

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• Efficiency IT metrics focus on technology and include:– Throughput– Transaction speed– System availability– Information accuracy– Web traffic– Response time

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:– Usability– Customer satisfaction– Conversion rates– Financial

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The Interrelationships of Efficiency and Effectiveness IT Metrics

• 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– However, to be effective it must implement Internet

security – Secure Internet connections must offer encryption

and Secure Sockets Layers (SSL denoted by the lock symbol in the lower right corner of a browser)

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The Interrelationships of Efficiency and Effectiveness IT Metrics

Reality usually involves

tradeoffs.

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

SECTION 1.2SECTION 1.2

BUSINESS STRATEGYBUSINESS STRATEGY

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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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IDENTIFYING COMPETITIVE ADVANTAGES

• Organizations watch their competition through environmental scanning– Environmental scanning – the acquisition and

analysis of events and trends in the environment external to an organization

• Three common tools used in industry to analyze and develop competitive advantages include:– Porter’s Five Forces Model– Porter’s three generic strategies– Value chains

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THE FIVE FORCES MODEL – EVALUATING BUSINESS SEGMENTS

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

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BCG Model uses metrics

• Market growth (High - Low)• Relative market share. (High – Low)

• Invest in companies that are high in both

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THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS

• Organizations typically follow one of Porter’s three generic strategies – Broad cost leadership– Broad differentiation– Focused strategy

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THE THREE GENERIC STRATEGIES – CREATING A BUSINESS FOCUS

This Porter model doesn’t cover all business situations, particularly E business.

Where do you classify Ebay, Google, Yahoo, Amazon?

What about Microsoft, Comcast, and other monopolies?

Location based businesses – barbers, childcare, car washes, etc

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Value Creation

• Once an organization chooses its strategy, it can use tools such as the value chain.– 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

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Value Creation

Value Chain