Achieving Business Success with Strategic Technology Initiatives
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This document summarizes the first chapter of a textbook on business and technology. It introduces key concepts of information technology (IT) and management information systems (MIS). It explains how IT impacts business operations and allows functional areas to work interdependently. It also defines data, information, and business intelligence. The chapter establishes how people, information, and technology work together and identifies four common organizational information cultures. Learning outcomes and discussion questions are also provided.
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Achieving Business Success with Strategic Technology Initiatives
- 1. Unit 1 Achieving Business Success McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
- 2. Unit One • Chapter One – Business Driven Technology • Chapter Two – Identifying Competitive Advantages • Chapter Three – Strategic Initiatives for Implementing Competitive Advantages • Chapter Four – Measuring the Success of Strategic Initiatives • Chapter Five – Organizational Structures that Support Strategic Initiatives 1-2
- 3. Chapter 1 Business Driven Technology McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
- 4. Learning Outcomes 1.1 Compare management information systems (MIS) and information technology (IT) 1.2 Describe the relationships among people, information technology, and information 1-4
- 5. Learning Outcomes 1.3 Identify four different departments in a typical business and explain how technology helps them to work together 1.4 Compare the four different types of organizational information cultures and decide which culture applies to your school 1-5
- 6. Information Technology’s Role in Business • Information technology is everywhere in business 1-6
- 7. Information Technology’s Impact on Business Operations 1-7
- 8. Information Technology’s Impact on Business Operations 1-8
- 9. Information Technology’s Impact on Business Operations 1-9
- 10. Information Technology’s Impact on Business Operations • Organizations typically operate by functional areas or functional silos • Functional areas are interdependent 1-10
- 11. Information Technology Basics • Information technology (IT) – a field concerned with the use of technology in managing and processing information • Information technology is an important enabler of business success and innovation 1-11
- 12. Information Technology Basics • Management information systems (MIS) – a general name for the business function and academic discipline covering the application of people, technologies, and procedures to solve business problems • MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources 1-12
- 13. Information Technology Basics • When beginning to learn about information technology it is important to understand – Data, information, and business intelligence – IT resources – IT cultures 1-13
- 14. Data, Information, and BI • Data - raw facts that describe the characteristic of an event • Information - data converted into a meaningful and useful context • Business intelligence – applications and technologies that are used to support decision-making efforts 1-14
- 15. Data, Information, and BI • Data in an Excel Spreadsheet 1-15
- 16. Data, Information, and BI • Data turned into information 1-16
- 17. Data, Information, and BI • Information turned into Business Intelligence 1-17
- 18. IT Resources • People use • Information technology to work with • Information 1-18
- 19. IT Cultures • Organizational information cultures include: – Information-functional culture – Information-sharing culture – Information-inquiring culture – Information-discovery culture 1-19
- 20. OPENING CASE STUDY QUESTIONS Apple-Merging Technology, Business, and Entertainment 1. Explain how Apple achieved business success through the use of information, information technology, and people 2. Describe the types of information employees at an Apple store require and compare it to the types of information the executives at Apple’s corporate headquarters require. Are there any links between these two types of information? 3. Identify the type of information culture that would have the greatest negative impact on Apple’s operations 1-20
- 21. CHAPTER ONE CASE The World is Flat – Thomas Friedman • Thomas Friedman describes the unplanned cascade of technological and social shifts that effectively leveled the economic world, and “accidentally made Beijing, Bangalore, and Bethesda next- door neighbors” 1-21
- 22. CHAPTER ONE CASE The World is Flat – Thomas Friedman • Thomas Friedman’s 10 Forces That Flattened the World 1. Fall of the Berlin Wall 2. Netscape IPO 3. Work flow software 4. Open-sourcing 5. Outsourcing 6. Offshoring 7. Supply-chaining 8. Insourcing 9. Informing 10.Wireless 1-22
- 23. Chapter One Case Questions 1. Do you agree or disagree with Friedman’s assessment that the world is flat? Be sure to justify your answer 2. What are the potential impacts of a flat world for a student performing a job search? 3. What can students do to prepare themselves for competing in a flat world? 4. Identify a current flattener not mentioned on Friedman’s list 1-23
Editor's Notes
- The Apple case offers a business example of how a company can use technology to gain a competitive advantage (such as Apple did with its iPod) Let your students know that you will be addressing the opening case throughout the text as the opening case questions are found at the end of each Chapter in the Unit UNIT ONE OPENING CASE – Additional Case Information Apple-Merging Technology, Business, and Entertainment Peter Burrows, a writer for BusinessWeek, offers a great discussion with Clayton Christensen outlining why Apple’s proprietary strategy might fail. This article works as a classroom discussion or debate. http://yahoo.businessweek.com/technology/content/jan2006/tc20060109_432937.htm This article is located in the IM for Unit 1
- Information is everywhere. Information is a strategic asset. Without information, an organization simply could not operate. This Unit introduces students to several core business strategies that focus on using information to gain a competitive advantage, including: Competitive advantages Porter’s Five Forces Model Porter’s three generic strategies Value chain Supply chain management Customer relationship management Business process reengineering Enterprise resource planning IT efficiency metrics IT effectiveness metrics Organizational structures Ethics Security Many of these concepts and strategies will be new to your students. Be sure to explain to your students that this Unit offers an introduction to these concepts and they will gain a solid understanding of the details of these concepts as they continue reading the text. For example, customer relationship management is introduced in Unit One and discussed in detail in several additional chapters and in the business plug-ins.
- CLASSROOM OPENER GREAT BUSINESS DECISIONS – Apple’s Decision to Develop the First Saleable Personal Computer (PC) Like all great computer companies, Apple began its life in a garage. In 1977, Steve Jobs and Steve Wozniak built the Apple 1, regarded by many as the first real personal computer. This founded the Apple Company and the invention of the Apple 2 and the Apple Macintosh. Apple’s key goal was to make computers accessible to ordinary people. Jobs and Wozniak captured an opportunity and changed the world through a combination of good fortune and technical and marketing brilliance. Instead of writing commands in computer code, Apple owners invented a mouse to click on easily recognizable icons – for example, a trash can and file folders. Other companies were quick to copy Apple’s competitive advantage, including Microsoft. The two founders eventually parted, with Wozniak leaving the company to become a teacher and Jobs continuing with the launch of the Apple Macintosh. Unfortunately, Macintosh captured only 20 percent of the desktop market, while Microsoft captured 80 percent of the desktop market with its MS-DOS operating system. One newspaper described Jobs as a “corporate Huckleberry Finn” and said his early business exploits had already made him part of American folk history. John Sculley, former Pepsi chairman, removed Jobs from Apple in 1985. Sculley was removed from Apple in 1993. Eventually, after a 13-year exile, Jobs returned to Apple in 1998. The man who founded the company had come full circle and was now its only hope for survival. Jobs’ return brought the creation of the iMac and Apple rediscovered its inventive originality. The iMac sold 278,000 units in the first six weeks and was described by Fortune as “one of the hottest computer launches ever.” The iMac and Jobs’ return contributed to doubling Apple’s share prices in less than a year.
- 1.1 Compare management information systems (MIS) and information technology (IT) MIS is not IT. MIS is a business function. IT is a computer-based tool. Most organizations have an IT Department that is responsible for performing the MIS function. This is similar to an organization having an Accounting Department that is responsible for performing the accounts payable and accounts receivable functions. 1.2 Describe the relationships among people, information technology, and information IT in and of itself is not useful unless the right people know how to use and manage IT efficiently and effectively People, information, and information technology (in that order of priority) are inextricably linked If one fails, they all fail
- 1.3 Identify four different departments in a typical business and explain how technology helps them to work together. Accounting, Finance, Human resources, Sales, Marketing, Operations management, Management information systems (MIS) Functional areas are anything but independent in a business. In fact, functional areas are interdependent . Sales must rely on information from operations to understand inventory, place orders, calculate transportation costs, and gain insight into product availability based on production schedules. For an organization to succeed, every department or functional area must work together sharing common information and not be a “silo.” Information technology can enable departments to more efficiently and effectively perform their business operations. If your students are unfamiliar with any of these areas, or business in general, point them in the direction of plug-in B1 – Business Basics. This plug-in will provide students with a solid understanding of business and will help them understand the business driven content in this text. 1.4 Compare the four different types of organizational information cultures and decide which culture applies to your school. Information-Functional Culture Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed Information-Sharing Culture Employees across departments trust each other to use information (especially about problems and failures) to improve performance Information-Inquiring Culture Employees across departments search for information to better understand the future and align themselves with current trends and new directions Information-Discovery Culture Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages This is an excellent opportunity to start a classroom debate by asking your student to determine which information culture applies to your school. Chances are the students will have different views of the school and its information culture.
- Why do you think you need to study information technology? The picture above says it all – technology is everywhere in business Be sure to point-out that these are business magazines, not technology magazines, and yet they are filled with technology CLASSROOM EXERCISE Understanding the Relevance of Technology In Business This is a great exercise to begin the course. It clearly demonstrates why anyone involved in business must understand technology. It can be a real revelation for students who do not see the need for taking an IT course. Bring in several copies of BusinessWeek, Fortune, Fast Company, or any popular business magazine. The magazines do not have to be current. Provide a marking tool such as a small set of Post-It Notes. Ask for a few volunteers and have the students review the magazine and stick a Post-It Note on each technology-related article, advertisement, etc. When the student has completed this task, the magazine will be covered in Post-it Notes, clearly demonstrating that technology is everywhere in business, even in the popular business magazines such as BusinessWeek . Since this task can be time consuming, you can put in the Post-It Notes prior to class and simply show your students the completed magazine. You can have one student sit in the front of the class and begin the exercise, placing Post-It Notes on a copy of BusinessWeek . After they have completed several pages on their own, you can produce the same “completed” magazine with all of the Post-It Notes. This saves classroom time and still reinforces the point that technology is everywhere in business. Be sure to reinforce that these are business magazines, not technology magazines. Yet they are completely filled with technology – which is clearly demonstrated by the Post-It Notes. How can any business student today possibly argue that they do not need to know or understand technology when faced with a magazine, such as BusinessWeek , that is filled with technology? Read a few of the articles or advertisements. Ask how many of your students are familiar with Siebel, Oracle, or PeopleSoft and can articulate what they can do for a company? The goal of this course is to help your students understand the business side of technology. Being able to understand all of the technology articles in BusinessWeek is one of the benefits your students will receive upon completion of the course.
- Describe a few of the types of IT services each business function might be receiving from IT Customer service: click-to-talk, call scripting, auto answering, call centers Finance: accounting packages, Sarbanes Oxley Sales and marketing: campaign management, customer relationship management Operations: supply chain management Human resources: software to track employees at risk of leaving
- Which types of IT services can be used to meet these types of goals? Reduce costs/ improve productivity: supply chain management, enterprise resource planning Improve customer satisfaction/loyalty: customer relationship management, loyalty programs Create competitive advantage: business intelligence/data warehousing Generate growth: sales management systems Streamline supply chain: demand planning software Global expansion: e-business
- This is an excellent opportunity to discuss each business area and ensure your students have a solid understanding of business in general: Accounting provides quantitative information about the finances of the business including recording, measuring, and describing financial information Finance deals with the strategic financial issues associated with increasing the value of the business, while observing applicable laws and social responsibilities Human resources includes the policies, plans, and procedures for the effective management of employees (human resources) Sales is the function of selling a good or service and focuses on increasing customer sales, which increases company revenues Marketing is the process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company’s products Operations management (also called production management ) includes the methods, tasks, and techniques organizations use to produce goods and services. Transportation (also called logistics) is part of operations management. Management information systems (MIS) is the function that plans for, develops, implements, and maintains IT hardware, software, and the portfolio of applications that people use to support the goals of an organization If any of your students are unfamiliar with these business areas recommend Business Plug-In B1 – Business Basics , which offers a detailed introduction to business and discusses each functional area highlighted above
- Each functional area undertakes a specific core business function Sales and Marketing – forecasting, segmentation, advertising, promotions Operations and Logistics – purchasing, supplying, receiving, transportation Accounting and finance – accounting, planning, budgeting, tax, costs Human resources – hiring, training, benefits, and payroll It is important for your students to understand that functional areas are anything but independent, in fact, they are interdependent Why are functional areas interdependent? Departments cannot operate in isolation, they require information from around the organization to operate Why must sales and marketing work with operations? To know what is available for sale including overstocked items and understocked items
- IT does not equal or represent business success and innovation, it is simply an enabler of business success and innovation Will spending large amounts of money on IT guarantee automatic success? Spending large amounts of money on IT will not guarantee an organization automatic success Organizations need to allocate resources on the right types of IT that correctly support their business operations to be successful
- MIS is not technology MIS is a business function Most organizations have an IT department that is responsible for performing the MIS function This is similar to an organization having an Accounting department that is responsible for performing the accounts payable and accounts receivable functions
- Understanding these three critical areas will help you begin to understand IT The goal of Chapter 1 is to get students excited about BDT and all the different business and technology concepts they are going to learn After reading this Chapter students should begin to understand that technology is everywhere in business and if they are pursuing a career in business they need to understand technology
- When discussing Information Technology it is important to understand what information is Ask your students to look around the classroom and identify 3 pieces of data and 3 pieces of information This is a bit of a trick question, unless you know the system you are building or the problem you are trying to solve it is impossible to know what is data and what is information For example, if you were building a system to track students: Data might include height, name, and hair color Information might include student to professor ratio, percentage of marketing majors who are female, number of students who pass the course. If you were building a system to track inventory: Data might include chair manufacturer, chair color, and chair size Information might include number of chairs required for students in each class, average number of chairs needed to be replaced each semester.
- Point out to students that each column represents data that has no meaning without interpretation Sales Rep – just a name Product Name – just a name Quantity – just a number Profit – just a number Without analyzing the data it is just a bunch of names and numbers
- By analyzing the data we can start to understand the information that the data is telling us The above figure displays all chicken orders, which customers purchased chicken, for sales representative Roberta Cross
- By using analysis we can determine all kinds of business intelligence from who is our best customer to who is our best sales representative and what is our best selling product Ask your students what they could do with this information? How can BI help run a business?
- IT in and of itself is not useful unless the right people know how to use and manage it efficiently and effectively People, information, and information technology (in that order of priority) are inextricably linked If one fails, they all fail What is one of the most important assets in an organization? Information is one of the most important assets in an organization, and the primary way that people get information is through information technology Without databases and spreadsheets how would managers gather, correlate, and analyze information? Manually Performing these tasks manually, or by hand, is extremely time consuming
- Information-Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed. Information-Sharing Culture - Employees across departments trust each other to use information (especially about problems and failures) to improve performance. Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions. Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages. Which type of information culture will help an organization achieve the greatest success? Information-discovery culture Which type of information culture would hurt an organization? Information-functional culture Organizations that encourage their employees to share ideas and openly discuss challenges and opportunities on an enterprisewide level have a competitive advantage over organizations that operate in functional silos This point is easily demonstrated by looking back at the Apple case and how many different people from different areas needed to be involved in the iPod creation Apple even purchased an outside company, SoundStep, to help bring the iPod to life.
- 1. Explain how Apple achieved business success through the use of information, information technology, and people Initially, Steve Jobs was worried that he had missed the MP3 bandwagon. Jobs was fixated on developing video editing software and was oblivious to the MP3 phenomena. Jobs took the MP3 phenomena information and crafted a strategy on how Apple could enter the MP3 market. Jobs’ strategy began by bringing together the right people to tackle the iPod project including Jeff Robbin from SoundStep and his MP3 software, an iPod development team, and an iTunes development team. Bringing together the right people, with the right information, and access to technology enabled Jobs to take the iPod from inception to product delivery in 9 months. 2. Describe the types of information employees at an Apple store require and compare it to the types of information the executives at Apple’s corporate headquarters require. Are there any links between these two types of information? Staff employees at an Apple store will look at data – how much is a certain item, how long is an item on sale for, what hours are they working, when are their days off, etc. Executives at Apple’s corporate headquarters require information – do we have enough inventory to meet demand, are prices too high or too low, what is employee turnover per store, where should we build a new store, should we close a store, etc. Of course, store employees use information to do their jobs also, it is just at a store level, not a corporate level. Executives require information from many stores and the volumes of data they use to gain information are significantly larger than store employees. 3. Identify the type of information culture that would have the greatest negative impact on Apple’s operations Information-Functional Culture Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed. With this type of culture it would be difficult for Apple to gain visibility into its overall operations.
- 1. Fall of the Berlin Wall The events of November 9, 1989, tilted the worldwide balance of power toward democracies and free markets 2. Netscape IPO The August 9, 1995, offering sparked massive investment in fiberoptic cables 3. Work flow software The rise of applications from PayPal to VPNs enabled faster, closer coordination among far-flung employees 4. Open-sourcing Self-organizing communities, such as Linux, launched a collaborative revolution 5. Outsourcing Migrating business functions to India saved money and a Third World economy 6. Offshoring Contract manufacturing elevated China to economic prominence 7. Supply-chaining Robust networks of suppliers, retailers, and customers increased business efficiency 8. Insourcing Logistics giants took control of customer supply chains, helping mom-and-pop shops go global 9. Informing Power searching allowed everyone to use the Internet as a “personal supply chain of knowledge” 10. Wireless Wireless technologies pumped up collaboration, making it mobile and personal
- 1. Do you agree or disagree with Friedman’s assessment that the world is flat? Be sure to justify your answer There is no correct answer to this question, the important point is that your students can justify their point of view. Some students will agree with Friedman that technology has made the world flat. Others, will disagree with Friedman stating that there are still many people that do not have access to technology and for them the world is still round. 2. What are the potential impacts of a flat world for a student performing a job search? Negative: In a flat world it is far more difficult to get a job because competition will be increasing at an incredible rate. There are currently 1 billion people online in 2006. It is anticipated that 4 billion people will be online by 2010. As the next 3 billion people come online in the next 4 years competition is going to dramatically increase. Positive: Students can now perform a global job search right from their apartment. A student in Chicago can accept a job in Tokyo and never leave the apartment, even when the job starts. 3. What can students do to prepare themselves for competing in a flat world? Learning about information technology and how they can use it to gain a competitive advantage in their industry or for their organization will be key. Businesses operate using technology and understanding how business and technology relate will help them achieve success. 4. Identify a current flattener not mentioned on Friedman’s list The answer to this question will vary. A few include: Cheaper technology, such as the $100 laptop from MIT, allowing more people access to the Internet Video phones and collaboration tools allowing people to meet face-to-face even when they are in different parts of the world Technologies such as Voice-over-IP that offer a cheap alternative to traditional long-distance carriers