2014

Digital Business

SUMMARY & NOTES FOR GEST-D-482

DAMIEN DRAIME

Table des matières 1. The digital age in perspective .................................................................................... 3

a) The technology story ................................................................................................ 3

b) The business story....................................................................................................... 4

2. Process innovation, digitization & replication ........................................................... 6

a) What is a process? .................................................................................................... 6

b) Why and how to redesign a process? ................................................................... 7

3. A Primer on Enterprise IT ............................................................................................... 9

a) Understanding Information Systems ....................................................................... 9

b) What are Information Systems made of? .............................................................. 9

c) The rise of cross-functional applications .............................................................. 10

d) Then came the WWW ............................................................................................. 11

e) The rise of business processes and the push for modularity .............................. 12

f) When IT itself gets dematerialized ........................................................................ 13

4. A Primer on Business Intelligence .............................................................................. 14

5. Competing on Analytics ............................................................................................ 16

a) What does it mean? ............................................................................................... 16

b) Internal processes .................................................................................................... 16

c) External processes ................................................................................................... 17

d) What does it take to become an analytical competitor? ................................ 17

6. Enterprise architecture as strategy ........................................................................... 18

7. Implementing IT ........................................................................................................... 19

8. Strategic management of IT ..................................................................................... 21

a) The CIO perspective ............................................................................................... 21

9. Enterprise Architecture as a Strategy....................................................................... 24

a) Building an operational model.............................................................................. 24

b) Implement operating model via enterprise architecture ................................. 24

c) Enterprise architecture maturity ............................................................................ 25

10. E-Commerce ............................................................................................................... 26

a) Why is e-Commerce different? ............................................................................. 26

b) Barnes & Noble vs Amazon .................................................................................... 28

11. IT-enabled business models & transformation ........................................................ 29

a) Deconstruction and disintermediating ................................................................ 29

12. IT and Society .............................................................................................................. 30

a) Social and ethical aspects of IT ............................................................................ 30

b) Where did the jobs go? .......................................................................................... 30

13. IT Management – Les défis de la gestion IT ............................................................. 32

1. The digital age in perspective

a) The technology story

ICT is the set of technologies enabling information storage, processing and

transmission.

Now we use computers for all kind of activities: there is, what we call, a digitalization

of the Value Chain. Thus businesses are more and more dependent of IT. But a lot of

companies are not able to align IT with their Business Strategy which can lead to a

deep loss.

- Storage

- Processing

-Transmission

Technological invariants of ICT

Technological progress in ICT is exponential in all 3 invariants

TECHNOLOGICAL

DRIVERS

- Dematerialization:

Physical products turn into information goods and services

Possession versus access

- Ubiquity:

Mobility (requires tiny equipment)

Real-time personalization

Everywhere (requires wireless)

- Multifunctionality:

Ever new applications

Human monopolies are eroding

- Modularity:

Shared platforms (ex; Dropbox, Google Drive, etc.)

Innovation even faster

Transformational capabilities are complementary

The 4 essential transformational capabilities of IT

Technology Enablers shape the industry and enable evolutions

TECHNOLOGY

ENABLERS

b) The business story

IT is most disruptive in information-intensive industries (whether information

intensive products/services, whether information-intensive processes or value

chain). We can thus anticipate business transformation because

dematerialization is likely to happen when both information content of the

product and information intensity of the value chain are high. See Porter and

Millar’s information intensity matrix:

Education

Fashion

Perishables

Legal Services

What is IT used for in the Value Chain?

IT invades Value Chains in 4 forms: Functional IT, Enterprise IT, Network IT, and

Embedded IT.

Function IT (FIT) Enterprise IT (EIT)

Productivity and optimization.

IT that assists execution of a discrete

function or task.

Increased experimentation

capacity.

Greater precision/productivity.

Examples:

1) Reduce development time of

new products by increasing

experimentation

2) The national mail company

wants to calculate the optimal

route of its mailmen to

accelerate the delivery

Standardization and monitor of work.

IT that integrates multiple functions

by imposing new work structures.

(Re-)Design of business processes.

Examples:

1) ERP, Consumers Relation

Management, Supply Chain

Management

2) Provide clear picture of

pending orders and

inventories

3) Harmonize client orders

handling across retail stores

4) An aerospace company

needs to reduce its inventory

costs by integrating its

management across its sites

Network IT (NIT) Embedded IT (MIT)

Communication and collaboration.

IT that integrates multiple functions

without imposing new work

structures.

Facilitating collaboration without

mandating how people should

interact.

Enhancing collective intelligence.

Examples:

1) Email, instant messaging,

video conferencing

2) Enable scientists to contribute

micro‐ expertise to a

technological problem

3) Create and leverage

communities of practice within

the firm

Enhancement of products or

services.

IT that is integrated or merged within

a product.

Adding features and interactivity to

existing products.

Quality control.

Examples:

1) Onboard systems in cars

2) Lift security devices

3) Add functionality to a bike for

bikers to monitor their efforts &

performance

4) Remotely monitor

performance and status of

sports cars during race

5) A bracelet worn by a football

player has to calculate the

4) Psychiatrists need to share

their knowledge of a rare

disease

distance run by the player

during a game

2. Process innovation, digitization & replication

a) What is a process?

A business process is a set of logically related tasks to accomplish a clearly defined

business goal in order to create value through a valuable product or service.

Examples: Evaluating a request for a loan, purchasing a part, hiring an

employee, conducting an advertising campaign.

Key features of business process:

1) BP have clearly defined starting and ending points

For example, Manufacturing is the procurement-to-shipment process.

2) BP are made of steps which are frequently done in sequence, but can be

conducted in parallel

3) BP require and generate a lot of information

4) BP cross functional boundaries

For example, fulfilling a customer order involves a complex set of steps that

requires the close coordination of the sales accounting and manufacturing

functions.

5) BP often cross organizational boundaries

6) BP exhibit a certain performance

7) BP can be a source of competitive advantage if they enable the company to

innovate or to execute better than its rivals

8) BP can affect the performance of a business depending its design and its

coordination

Remarque: For a process to be efficient, information (that it generates) needs to flow

rapidly and reliably within the firm, and even with suppliers, partners and customers.

Function-based versus process-based organization:

A functional business orientation organizes a company along functional lines, such as

sales and production. Silo syndrome

A process orientation means that the company focuses on business processes, such

as order processing or strategic planning.

In each case, the companies optimize their activities, either within the functional units

or for each process. The main difference is that optimizing one functional unit may

harm another function, but optimizing the business processes across organizational

lines helps the whole company.

When a functionally oriented company optimizes its work, each functionally organized

department optimizes its function independently. This means, for example, that sales

maximizes orders received while production may not be able to manufacture what

has been ordered. When companies focus on process, optimization has a different

outcome. Sales and production work together to ensure that the maximum volume of

orders is processed through the system. The result is better performance for the

company as a whole.

Business process modeling is made using modeling tools such as Bonitasoft, etc.

b) Why and how to redesign a process?

Business Process Reengineering is the fundamental rethinking and radical redesign of

business processes to achieve drastic improvements in critical measurements of

performance such as time, cost and quality

We use BPR to solve the following symptoms that harm the industry:

- Cross-functional, cross-departmental problems;

- Too many non-value-adding-steps1;

- Too many wait stages;

- Sequential instead of parallel tasks;

- Too many exceptions;

- Some processes have never been measured;

- Too many processes result from decisions made by functional units, with little

attention to effectiveness across the entire process Silo Syndrome

Those are reasons why companies decide to redesign their business processes.

Moreover, potential returns to BPR are huge because of digitization and costless

replication of processes and also because we can solve the symptoms above.

But how to implement BPR?

You need to persuade people to embrace the prospect of change through:

1) Building a case for action: Here is where we are and this is why we can’t stay

there

2) Having a vision: This is what we, as a company, need to become

But above all, how to identify business processes to redesign?

1 Bcp d’entreprises apportent ici et là des petites modifications à leur BP mais sans penser aux

conséquences que cela aura dans l’ensemble. Au final, ces entreprises se retrouvent avec

des processus qui peuvent se répéter plusieurs fois sans rien apporter de nouveaux. Le BP final

n’est alors plus toujours optimal, simple et pratique.

First, it is important to notice that no company can reengineer all its processes

simultaneously. A company needs to select a process that need to be reengineered

before the other. To select the right one, companies use three criteria:

- Dysfunction: which processes are in the deepest trouble?

- Importance: which processes have the greatest impact on customers?

- Feasibility: which processes are the most susceptible to redesign?

Many BPR projects fail because it cannot be planned perfectly and deployed step by

step. But the biggest challenges are to break old routines and to get through

employees resistance. A lot of BPR projects fail because of interference between old

and new practices.

Here are some BPR principles to observe in order to avoid a BPR fail:

- Organize around outcomes, not around tasks

- Have those who use the output of the process perform the process

- Link parallel activities instead of integrating their results

- Treat geographically-dispersed resources as though they were centralized

IT is a General Purpose Technology, a technology that can affect an entire company

like railroads, steam engine. Value is maximized by complementary innovations. GPT

needs to be in complement with other innovations to create value. For IT,

complementary innovation is organizational (work structures): It is useless to implement

in a company if we do not change the organization/work structures in order to support

IT. Thus we need changes in organizations’ configurations to maximize the impact of

new IT. IT investments only work if complemented by organizational innovation. There

are four types of organizational complements/changes of EIT:

Workflows Interdependencies

Who does what and when Who is using/needs the inputs of whom

Decision rights Data integrity and consistency

Who can take decisions within/about

the process

Are the data correct and consistent

The new process will increase the

amount of data shared between depts.

But is reliability guaranteed?

EIT will force a significant change in workflows and this will in respond affect the

responsibilities too. Responsibilities will shift from one to the other and thus decision

rights will change too. But people hate when we change their routines but they hate

even more when a BPR changes their decision rights. It is now clear that organizational

changes (because of EIT) will always raise resistance. But the resistance is not

necessarily due to IT change rather due to implicit changes to work structures. In order

to avoid those resistances, change needs to be anticipated, planned and managed.

Moreover, a top-down approach is a must because people will not change their way

of doing by themselves.

3. A Primer on Enterprise IT

a) Understanding Information Systems

Enterprise IT is an IT systems that serve key corporate functions; involve centralized

information shared by many users; are made of one or more databases.

In an EIT workflows are coded in the systems and users are forced to follow the coded

process. Those two elements are the reason why employee don’t like EIT (because EIT

tells them how they have to work: resistance). However digitized processes can be

replicated easily by deploying EIT. Moreover EIT enables companies to develop a

system that everybody will use (=standardization). And data centralization enables

monitoring. Those three last points explain why managers do like EIT companies.

Another special point about Enterprise IT is that it often covers entire processes of the

firm and increasingly crosses firm boundaries: inter-organizational systems (no more silo

syndrome).

The key point to keep in mind is that it is all about data and processes. You can have

the best process in the world but if your data are not reliable, it will be useless and vice

versa.

An information system (IS) is a system composed of people and computers that

processes or interprets information. There are 6 components that must come together

in order to have an IS:

- Hardware, includes the computer itself

- Software, refers to computer programs

- Networks

- Data, facts that are used by programs to produce useful information

- Processes

- Users

The bulk of the problems often comes from the interaction between users and

systems.

b) What are Information Systems made of?

The data model provides a digital view of the firm’s activities and resources.

And Information System will need data (for example on products, clients, orders, etc.)

and will have to provide several functions. Functions are stored in procedures which

access the data when needed.

Architecting an information system essentially means organizing its 3 constituting

layers (MVC):

- Model (Data)

- View (Presentation)

- Control (Logic)

It is important to separate the three layers because if one day we want to change

something in one layer we need to be sure that it will not affect the other layers.

Data need to be shared by all users or inconsistencies would arise.

There are 3 main EIT architectures:

- Master-slave: 3 layer form a whole and run on mainframe computer. User

interface also runs on server.

- Client-server: User interface runs on light clients while Model and Control run

on server.

- 3-tier: Each layer runs on a different platform. Model runs on database server,

Control on application server and View runs in different ways on different

types of clients.

The thing to bear in mind is that 3-Tier architectures offer a lot more flexibility.

Advantages: It facilitates maintenance, the same data can be shared by different

users and the same logic can serve different interfaces.

c) The rise of cross-functional applications

As EIT develops, it gradually integrates different functions across departments. Business

processes need to be supported across systems.

Example: Payroll both HR department and Accounting department are

involved. Need to cross department information.

Sophistication of EIT requires cross-application integration.

Sometimes EIT can be out of control. When the scope of EIT processes gets larger and

more and more functions are integrated while data merges across applications, it can

result in a Spaghetti architecture. Spaghetti architectures raise immense barriers to

maintenance and development: Domino effects become unpredictable and

hardcoding becomes ever more difficult. Unless entire replacement of the IT

infrastructure is possible (not realistic: too expensive/complicated), the best option is

to integrate applications through an Enterprise Application Integration (EAI) solution.

What EAI solution offers?

Thanks to EAI, new and cross-systems applications can be built because they will be

built on top of the EAI solution. Moreover, EAI manages cross-application connections,

establishes data correspondences between systems and provides ad-hoc connectors

to each enterprise system.

d) Then came the WWW

At the beginning, corporate websites flourish but only provide static information. The

challenge is how to manage the content to ensure quality and consistency.

Here is the history of the Web Management:

In Content Management Systems (CMS), workflow and privileges are embedded in the

System. CMS separates content and template and builds pages by applying template

to content. Web server makes pages available to visitors. CMS gradually evolve

toward Enterprise Content Management ECM.

Websites become increasingly transactional thanks to transactional web applications

which run on dedicated server. But such applications need access to enterprise

systems.

V 1.0

•Not efficient because Content Contributors had to always submit their content to a Webmaster (who was overbooked) in order to publish it on the corporate website

•It take weeks before a content is being published

V 1.1

•More and more Content Contributors bypass the Webmaster in order to publish their content more quickly. But they have to create their own website

•Too messy

V 2.0 = CMS

•Content Management with workflow

•Each Content Contributor creates his final version of the content and submit it to their respective Content Approvers. Once validated by a Content Approvers, Content can be published on the website.

Web server

Web portals provide a single access point for all applications/services. Those are

offered through a website. Users may personalize the content and layout of their page

and select the services that are most useful to them.

e) The rise of business processes and the push for modularity

Evolution of EIT and web applications increases need for:

- Further integration of data and applications

- Mutualisation of key software functions. We need interconnections between

the infrastructures: a module may be used several times in different blocs

- Shorter development ties and faster implementation of new business

processes and services. We need to be able to react and transform the

infrastructure quickly

EIT evolves toward Service-Oriented Architectures (SOA) where each application

offers a set of ready-to-use services that can be invoked by other applications. Such

services are packaged within API’s (which says how two programs must work

together).

With SOA, EIT becomes as modular as possible: Now EIT is made of software modules

that render specific services. Moreover new business processes can easily be

implemented by assembling pre-programmed services or modules. We can create

different functions with several modules. It is really easy to design new processes if the

structure is already in place. We can rapidly implement new ideas/functions by using

the modules we already have.

IT Architecture: SOA

Data & legacy systems

EAI

Services

Processes

Interfaces (Web, intranet, B2B)

The idea to keep in mind is that the evolution in IT architecture is drive by the need to

isolate and hide the complexity of the structure.

Moreover, Business process design is facilitated when:

- Infrastructure is organized around services (SOA architecture)

- Processes can be implemented by assembling services

- Processes can be delivered through different interfaces seemingly

f) When IT itself gets dematerialized

Latest trend is to outsource the IT infrastructure (Infrastructure as a Service: IaaS),

platform (Paas) or even software (SaaS) and purchase IT services rather than

equipment and software licenses. That is another IT architecture. It is called Cloud

Computing. Those cloud services are enabled thanks to broadband and shared

platforms.

Cloud Computing means paying for access to a remote system instead of investing in

and maintaining your own.

That is the ultimate case of dematerialization: IT dematerializes itself.

Major benefits of Cloud Computing are:

- Economies of scale for the provider because he can provide the same service

to multiple companies thanks to shared platforms

- Companies using Cloud Computing don’t have to pay the implementation

and maintenance costs anymore

- Companies using Cloud Computing can now focus on their core businesses

Major pitfalls of Cloud Computing are:

- Security: loss of control over data

- Lack of customization

- Further commoditization of IT

4. A Primer on Business Intelligence

Business Intelligence aims at analyzing data to produce exploitable business insights

and inform decisions. But BI systems don’t extract data from real databases, they

rather store a copy of all relevant data in large warehouses. The data warehouse

consolidates and standardizes information from different operational databases so

that the information can be used across the enterprise for management analysis.

Major issues of BI are:

- Analyze so much data takes time and powerful computers are needed: need

to replicate the structure

- Sending copies of data to the data warehouse takes time and requires a lot

of resources

- Standardization is needed in order to gather same data and analyze them

Here is the BI infrastructure:

Databases keep track of transactions/etc. BI systems extract, transform and load

(ETL) data from operational IT systems into Data Warehouse Data Warehouses find

patterns and insights and extract data into multidimensional cubes Analyze and

report BI: decision to respond to the data and patterns.

Remarque: Thanks to Online Analytical Processing (OLAP), we are able to

analyze data on multiple dimensions where each aspect of information

(example: product, price, region, etc.) represents a different dimension.

There are 3 main categories of analyzes:

Descriptive Parametric Non-Parametric

Averages, trends,

seasonality, distributions

Theory-based modeling

and classical inference

Data mining: Discovery-

driven techniques to

search for patterns within

data

Statistical and data mining techniques are used to analyze the data in search for

relevant and exploitable insights.

Data mining has four main tasks: Classification, prediction, estimation and clustering.

5. Competing on Analytics

a) What does it mean?

Now we can take better decisions thanks to data. We don’t have to take decisions

with your guts-feelings anymore. Indeed, analytics can be a powerful way to

outperform the competition but it need to spread everywhere within an organization.

Analytics is the extensive use of data, statistical and quantitative analysis, predictive

and explanatory models, and fact-based management to drive decisions and

actions.

Competing on analytics is now a necessity because classical sources of differentiation

are more difficult to sustain. Indeed, geographical advantage is irrelevant with

Internet, technology is commoditized, product and service differentiations vanish, etc.

Companies can now only compete on business process performance. This means

execute your business with maximum efficiency, make smartest business decisions

possible.

But to perform a positive analytical competition, some requirements are needed:

- Analytical competition needs to be align with the strategy of the company

- It needs an enterprise-level approach. It needs to be enterprise wide

- It needs the senior management commitment because organizational

changes will be huge. It must not be delegated

- It needs to have a large scale ambition. Aspiration to achieve large-scale

results

We can use analytics to perform better on intern or extern. Thus Internal and External

Analytics are viable.

b) Internal processes

Examples of Internal Analytics are:

- Financial Analytics for revenue forecasting and thus anticipate slowdown in

sales

- Manufacturing Analytics for quality control and thus identify potential quality

issues

c) External processes

Examples:

- Identify most profitable customers and most at-risk of switching to competition

using predictive modeling

- Establish prices in real time to get highest yield per transaction

- Optimize advertising and marketing strategies

- Customer Analytics

- Supplier Analytics

d) What does it take to become an analytical competitor?

The main elements needed for an organization to take advantage of analytics are

the following ones:

- Strategy and focus to determine most relevant use of analytics

- Transactional systems to generate accurate/relevant/granular data

- Processes to get insights and act upon them

- People who embrace analytics

- Governance to share the data and foster fact-based decision

- Software technology to extract and analyze the data

6. Enterprise architecture as strategy

Smart and profitable companies do something differently with their IT. They commit to

a way of operating. They use IT to digitize this commitment. In fast changing world they

managed to create stability by digitizing their core processes and embedding them

into their foundations.

3 critical tasks:

1. Identify core processes

2. Digitize them to better support the strategy

3. Exploit the digitized foundation

7. Implementing IT

The vast majority of IT implementation costs never shows up in statistics of IT

investments.

The bulk of IT implementation costs is due to management, training, organizational

changes, etc.

Important: See notes for Bombardier

There are two types of internal integrations (Operational and Functional). Let’s analyze

them in details. But first let’s remind that internal integration is an integration within a

firm.

Definition Interdepen

dence

types

Barriers Integr

ation

effort

Potential

benefits

Internal

Operational

Integration

Integration

of successive

stages within

the primary

process

chain

Sequential

-Political

considerations

-Silos too different

and with different

objectives or too

specialized

High

-Greater

manufacturing

productivity

-Greater firm

competitivene

ss

-Lower

production

and inventory

costs

-Reduced

errors

-Improved

coordination

Internal

Functional

Integration

Integration

of

administrativ

e or support

activities of

the process

chain of a

company

Pooled

-Political

considerations

-Silos frame

differences

Low

-Products more

adjusted to

market

-Greater

interfunctional

synergy

-Greater new

product

success

-Higher

innovation rate

A company can also chose to do both operational and functional integration. They

are not mutually exclusive.

Organizational transformation projects require clear vision and to be well

communicated to employees. Moreover the vision should provide clear view of future

state of the organization, its goals, processes, and supporting systems. Thus the vision

must be goal-oriented. Vision should strengthen the organizational sense of direction

and improve the decision-making process.

Action plan describes stages required to realize the vision. Actions should be aligned

with vision goals.

To measure the success of an IT integration/implementation, we can look at:

- System quality: Does the system work? Is the system usable and reliable?

- Information quality: Are the data consistent and accurate? Is the data model

clear and standardized?

- Usage

- User satisfaction

- Individual impact

- Organizational impact

We need to be sure that the business strategy is aligned with the IT strategy.

The things to bear in mind is that EIT implementations will always create organizational

transformations. Thus global vision is critical and anticipating organizational change is

paramount.

8. Strategic management of IT

a) The CIO perspective

CIO is responsible for IT from a general business perspective. His roles are to:

- Develop IT vision/architecture

- Deploy IT resources and facilitate their use

- Maintain control over information resources and data

- Develop partnership with users to exploit IT

Implement an IT system can generate new problems by itself (example: Data

explosion).

One of the challenges for a CIO is to select the right technology without being too

much influenced by emerging technologies and trends on which we do not know if

they are reliable yet. He needs to stay objective. There are also business pressures

because of growing business expectations (more speed, performance, reliability,

etc.). Moreover when selecting a technology a CIO should take into account the

security and the business continuity.

Selection:

- Which application does the organisation need?

-Which solution is best adapted to these needs?

- How much technology is the organization able to absord?

Adoption:

- Deploying the system

-Adapting the organization

- Training the users

Exploitation:

- Maintaining the systems and data: Continuous development are needed to keep up with user needs.

-Ensuring and promoting its optimal use

-Encourage users to maximize their use of the systems

ResponsibilitiesIT staff and skills

IT Infrastructure

IT Contracts

IT Budget

Resources

IT can also be outsourced instead of the in-house solution. IT outsourcing will eliminates

a part of the internal IT department by hiring outside vendor to perform some IT

functions. Thanks to IT outsourcing, a company can reduce its costs but also:

- Avoid investments to handle peak loads

- Focus on what is core

Moreover it is harder and harder to keep pace with technology changes and demand

for new IT skill sets.

But IT outsourcing must be done selectively. A company must never outsource

elements of IT that have strategic value to the firm.

When it comes to financing IT, there are two difficulties. First it will be difficult to assess

the total project cost because we may not have the full scope of it. Moreover it is

difficult to assess the support, training, maintenance costs, etc. Second it is difficult to

assess the benefits of the IT project since some benefits may be intangible.

The idea to keep in mind is that it might be difficult to compute a ROI for IT project.

Moreover costs do not vanish when implementation is completed. There will still be the

maintenance, the support and organizational change costs. Adding that to the initial

investment gives you the Total Cost of Ownership.

User-managers must justify IT investments and not IS managers.

When it comes to globalization, there are three ways:

International IT Strategy Multinational IT Strategy Global IT Strategy

Common architecture for

IT

IS management

centralized

Highly decentralized with

only financial ties

between subsidiaries and

headquarters

IS management localized

Both high degree of

integration and high

degree of local control

Teamwork is key

One can say that centralization is best because it avoid duplication of development

efforts and resources, it allows standardization and provides organization-wide, long-

range focus. But the other will argue that decentralization allows empowerment of

local units, maintains bottom-line perspective and increases responsiveness to local

needs.

But what is clear is that IT vision, strategic planning, R&D, corporate data centers

should always be centralized.

To select the rights technology, CIO can use the strategic Threat/Opportunity Matrix

(see slides 23). He needs to put his company in this matrix but also the competitors. If

the quality of his IT resources is low and the IT value-adding potential is high, his

company needs to react quickly.

A CIO does not control the second phase alone. He needs to work with Business Units

to ensure exploitation of IT infrastructure and new IT Tools by the users.

IT produces benefits only when it comes with organizational change and/or business

innovation Need of top-down approaches.

9. Enterprise Architecture as a Strategy

a) Building an operational model

To choose your operational model you must ask yourself to which extend you want

your process to be standardized on your company. Does every employee need to use

the same IT process? We will whether choose a process standardization or a process

integration.

Process Standardization Process Integration

Define exactly how a process will be

executed, regardless of who or where

Harmonize formats and definitions +

share data between or across processes

Leads to efficiency and predictability Leads to internal integration and

superior performance

b) Implement operating model via enterprise architecture

An enterprise architecture is the organizing logic for business processes and IT

infrastructure reflecting the integration and standardization requirements of the

company’s operating model. An EA has 4 components:

Core Business processes Shared data

Small set of processes defining the

stable set of company-wide capabilities

needed to execute the operating

model and respond to market

opportunities

The pieces of data that are necessary

to execute the core processes and

integrate them

Key linking & automation technologies Key customer groups

Portals and key customer interfaces Groups of customers that are key to the

firm’s or BU’s profitability

Depending of your operating model, you will design your Enterprise Architecture

differently.

c) Enterprise architecture maturity

There are four stages of architecture maturity that need to be achieved:

Business

Silos

•Maximise individual business unit or functional needs

Standardized

Technology

•IT efficiencies through technology standardization and, in most cases, increased centralization of technology management

Optimized

Core

•Companywide data and process standardization as appropriate for the operating model

Business

Modularity

•Manage and reuse loosely coupled It-enabled business process components to preserve global standards while enabling local differences

10. E-Commerce

a) Why is e-Commerce different?

E-Commerce is just one small part of the e-Business.

E-Business is the conduct of business on the Internet, not only buying and selling but

also linking employees with each other, servicing customers, collaborating with

business partners.

Why so many companies invest in e-Business? Because of 4 main reasons:

1) Increase effectiveness through digitization

a. Reduce transaction costs

b. Reduce inventory costs

c. Enhance internal efficiency (through Intranet solutions)

2) Increase customer loyalty

a. Making it easier for customers to do business

b. Offering customers a self-service capability anytime

3) Increase revenue

a. More sales to existing customers

b. New customers and markets

c. New products and services

4) Online presence will strengthen brand name

Sometimes, it can be difficult to estimate a ROI for an IT project. Rather try to estimate

what you will lost if you don’t do it.

There is a trade-off between the richness of your message and how many people you

can reach. But internet is able to break this rule.

Internet allows us to still reach a large audience while still being customized for each

users. Indeed, Internet eliminates geographical and time limitations and extends

beyond industry boundaries.

E-Commerce will deconstruct the way of working within the industry / value chain.

Internet is able to break the block containing the content, context and infrastructure:

unbundling. The infrastructure is no more the core competency. It will no more

differentiate us from the competition. Every site is the same and the content is always

pretty much the same between each specialized sites. Now we can only differentiate

ourselves with the context (= the consumer experience).

Example: Banks can only compete on App nowadays. They compete to offer

the better consumer’s experience,…

There are 3 components of a digital business model:

If you want to be a successful firm you need to be good in the 3 layers. And if you want

to outperform competition, you will need to be excellent in at least one layer.

Mobile Commerce is the buying and selling of goods and services through wireless

hand-held devices such as mobile phones and personal digital assistants. Because

mobile commerce is everywhere and your action is limited, information need to be

specific about what you want tailored for where you are, what you are doing. It

needs to be more focus, short and contextual.

b) Barnes & Noble vs Amazon

See notes

11. IT-enabled business models & transformation

a) Deconstruction and disintermediating

IT enables new models using technology to design new business models that would

not be possible otherwise such as cross-docking, Apple Pay. Moreover IT enables

transformations using technology to fundamentally transform the way business is done

in a given industry (Home banking, Instagram, Uber). To sum up: IT enables disruptions.

It transforms industries by deconstructing value chains.

IT has also deconstructed and digitized the value chain. Once a succession of

operations, now the deconstructed supply chain has a Physical Flow and Information

Flow and a Payment Flow. This deconstruction of the value chain has enabled the

digitization of Information Flows. The result is often the disintermediation of one or more

intermediaries in the value chain such as resellers and distributors. However,

specialization can increase in specific areas of the value chain such as physical

logistics and transport.

Digitizing the value chain has had 4 main consequences:

Dramatic fall in cost of doing business Dramatic increase in quality or

convenience of the product, process,

service

Example : distribution of e-journals is

much cheaper than printing and

shipping copies

Example : Video-on-demand more

convenient than video rental stores

Dramatic shift in benefits of vertical

integration

Dramatic increase in scalability (scale

without mass)

IT-mediated collaboration shifts firm

boundaries

Digitized goods or processes are cheap

to replicate/distribute globally

But above all, digitizing the value chain creates new barriers (cost structure and

customer lock-in) and substitution. Those are the two main threats for incumbents.

12. IT and Society

a) Social and ethical aspects of IT

IT raises ethical, social and political issues such as:

- Information rights and obligations

What obligations do individuals and organizations have concerning this

information?

- Property rights and obligations

How will traditional intellectual property rights to be protected in a

digital society in which tracing and accounting for ownership are

difficult?

- Quality of life

What values should be preserved in an information and knowledge-

based society?

- Political issues

To what extent should government intervene, protect?

Ethics in an information society: Responsibility, accountability (assessing responsibilities

for decisions and actions), liability, due process (ensures laws are applied properly),

integrity (doing the right thing even when no one is watching).

Ethical questions regarding Internet are still difficult to assess because the neutrality of

the web is still in shaping: laws are not so clear about those new questions.

When it comes to the quality of life, we need to maintain boundaries between work

and home. Moreover, there are health risks and increasing racial and social class

cleavages.

But it exists some ethical principles that can guides you to keep a code of ethics:

Golden rule, Descartes’ rule of change, Kant’s categorical imperative,…

b) Where did the jobs go?

Despite the economic recovery, unemployment rates remain abnormally high.

According to Krugmann, it is because growth is too weak to recreate employment.

But many other theories exist to explain the problem.

According to Rifkin, “we are entering a new phase in world history, one in which fewer

and fewer workers will be needed to produce the goods and services for the global

population. More sophisticated software technologies are going to bring civilization

ever closer to a near-workerless world”. There are indeed numerous examples of

‘technological displacement’ such as ATM, E-Commerce, Automatic check-out at

grocery stores. It is worth noting that digital revolution has created winners and losers.

The wage gap between high- and low- skill workers has increased despite increase in

average level of qualification. We call this the Skill-Biased Technological Change.

High-skilled workers are less affected by innovation that low-skilled workers.

But we can ask ourselves why does the SBTC occur only now? Indeed, job destructions

have always been compensated by job creations in new sectors (for example: jobs in

agriculture have been absorbed by industry and services). But the problem with digital

revolution is that technological progress is faster than institutional adjustment lag.

Moreover digital revolution was preceded by several technological revolutions. Digital

revolution was compensated partly by household debt but the great recession of 2008

created a shock in terms of household indebtedness.

Technological progresses go faster than us. We are much slower to absorb those new

technologies. Moreover the rate of progress is quickly increasing. Now technologies

can do a lot of tasks that were before performed only by human brains. Several human

monopolies have now collapsed. And humans can not catch up with this evolution,

partly because education is lagging behind and organizational change cannot keep

pace.

But what will happen in the future. The Moravec’s paradox points out that high-skilled

and very-low-skilled workers are better protected against technological progress. But

medium-skilled workers will suffer more because the relation between automation and

labor is U-shaped: it is easier to automate itinerary planning than truck driving,

accounting than gardening, etc. Indeed, tasks requiring fine motor skills, vision,

advanced pattern recognition and locomotion are harder to automate. Humans are

still better at facial and spatial recognition as well as object handling. However IT

progress makes complex tasks increasingly accessible to machines.

So we will need to adapt organizations to make them robust to technological

evolution and able to seize new opportunities. We also need to educate people to

new technologies.

13. IT Management – Les défis de la gestion IT

Gestion patrimoniale = La banque Degroof gère les comptes de riches clients.

A quoi sert l’informatique à la banque Degroof ?

- Gérer les données des clients (Customer Relationship Management)

- To record financial operations/transactions

- Risk Management

- Gestion de portefeuilles

- Intranet = Day to day work at the bank

- Data Warehouse

- Back Office

- Comptabilité

- Pouvoir être capable de dire aux clients ce qu’ils ont sur leurs comptes en

temps réel, pouvoir retransmettre les sorties et entrées d’argents et savoir dire

quand cela s’est produit.

- Documents management : every time a customers sign a document we need

to store it and be able to fin dit when needed

Infrastructure: tous les éléments physiques qui font que l’IT fonctionne.

Storage is a bulk pat of the IT expense. Buying all the disks to store the data is very

expensive.

On double les datacenters et on a des backups pour pouvoir continuer à fonctionner

et ne rien perdre en cas de problèmes.

Le département IT est constitué de 3 pôles:

- Project&support : traduit les besoins financiers/business en IT. Cela requière de

bien comprendre les notions d’IT et de business.

- Application Développement.

- Systems &Operations : se concentre sur le fait qu’on utilise bien la bonne

technologie pour ce type de projet IT.

La fonction d’opérateurs est celle sui contrôle au quotidien l’activité de l’IT. Il va

essayer de voir s’il y a des problèmes émergents,…

Quels sont les défis auxquels on fait face lorsqu’on est responsable d’IT dans une

banque ?

- Gestion des demandes: cela fait référence aux attentes des utilisateurs. Il est

important de savoir quelle priorité on donnera pour chaque demande, car

cela peut vite devenir problématique. En effet si dans une entreprise 1000

personnes souhaitent voir son idée être réalisée par le département IT, il va

devenir difficile de savoir laquelle il serait intéressant de réaliser et comment les

prioriser. De plus l’IT doit pouvoir fournir des documents concernant les

risques,… ?aux régulatrices ?. De plus des évolutions techniques sont

obligatoires. En effet, quand un système d’exploitation n’est plus à jour ou

supporté par le développeur on est obligé d’évoluer et de tout changer. Et

pour couronner le tout, cela doit être réalisé avec un budget défini et restreint.

Pour pouvoir prioriser les demandes et attentes, on demande un business

plan/case pour savoir ce que l’on retirera d’un projet IT et savoir combien cela

nous coutera. Mais il est possible que certains projets ne créent pas de valeur,

ce n’est pas pour cela qu’on ne les fera jamais. Par exemple pour des raisons

de sécurité il faudra peut-être développer le risk management pour rester

cohérent avec le strategic alignement.

De plus il faut une implication du top management pour faire face à ce défi.

- Centralisation >< décentralisation : Vu que l’IT est déjà en retard (on attend

toujours que l’IT délivre ce qu’on attend mais ça n’arrive pas toujours très vite),

alors on décide de le faire nous-même localement (=décentralisation).

Bien que la décentralisation ait ses avantages (plus de rapidité, proximité de

l’utilisateur, expertise), elle a aussi des désavantages (gouvernance,

intégration, sécurité, redondance).

- Cycles technologiques : Les cycles sont de plus en plus courts et il existe de plus

en plus de technologies distinctes. On doit pourvoir s’adapter rapidement mais

si on s’adapte pour les iPhones et puis après plus personne n’en veut et change

de technologie pour les iWatch. Dès lors avant d’investir dans un

projet/s’adapter, il faut bien estimer les projets et leurs rentabilités. Pour savoir si

un projet est viable, il faut se poser les bonnes questions : est-ce qu’il y a un

besoin pour cela ? etc. et savoir si cela est en accord avec les business

requirements. Il ne faut pas se laisser aller à des effets de modes. De plus il faut

prendre tous les couts ; le temps d’apprentissage pour chaque apprentisage,

les licences, la maintenance,… Total Cost of Ownership

On doit pouvoir convertir les documents lorsque la version d’une application

change pour être sûr que le document sera toujours exploitable dans la

nouvelle version. De plus ces cycles sont rapides donc à peine fini la migration

que la nouvelle version fait surface.

- Gestion de la complexité : Implémenter un nouveau IT system peut créer plus

de complexité car cela peut avoir des impacts dans d’autres départements.

Ajouter des nouveaux éléments rend toute la structure plus complexe. Il y a

donc une nécessité d’une intégration « intelligente » et une nécessité de

réflexion avant de rajouter des nouveaux systèmes. Il faut également

standardiser les données.

- Supplier management : Il y a de nombreux fournisseurs et donc ils ont peu de

pouvoir de négociation. Mais ce n’est pas toujours possible car dans certains

domaines, les fournisseurs sont concentrés sous forme d’oligopoles. Il est alors

impossible de négocier avec eux. Il faut alors challenger tous ces compétiteurs

et les mettre en compétition si possible pour obtenir de meilleurs prix et services.

- Cloud : Les avantages du cloud sont nombreux (délégation de la complexité,

rapidité de mise en œuvre, économies d’échelle, etc.), tout comme ses

désavantages (localisation des données, services standards, question de la

responsabilité, etc.). Ce qu’il faut retenir c’est que lorsqu’on a commencé à

utiliser le Cloud, il est difficile de s’en passer et de retourner en arrière (=lock-in).

- Gestion des coûts : IT = Poste de budget le plus important (hors personnel). Ainsi

investir dans l’IT peut permettre d’épargner beaucoup d’argents. Pour garder

les coûts sous contrôle on pensera notamment à limiter la complexité et

standardiser, négocier et mettre en concurrence, outsourcer intelligemment,

exploiter les synergies internes,…

Il y a donc là une nécessité de mettre en place une stratégie d’investissement

IT.

- Sécurité : la sécurité est également une préoccupation omniprésente et

multiforme. Trade off : si on laisse l’accès à internet aux employés mais on risque

alors des attaques via internet Zero risk : remove internet but nobody want it

Q&A:

IT can be a differentiation tool between banks but only for customer’s management.

IT can thus provide a competitive advantage! Tools/services related to Clients

relationships are thus strategic.

Open-source software yes but only if there is support. We need a solution when there

is a problem with a critical software within an hour. Commercial software has support

that’s why they use it