Business

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Chapter 1

• Business
• and Information Systems
• Management

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A Message from Miles Welter
Make sure that students that wrote the business
analysis papers in CS50 understand that there is
a significant difference in what is expected in
CS158. It is important that they understand that
this is not a repeat of what they did in the
earlier class. The CS50 assignment was a simple
business assessment. The CS158 assignment is a
major business analysis.
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Industry Barometer
InformationWeek Survey Results (Jan. 3, 00)
IT Spending Up Y2K Costs Down E-Business A
Priority IT Salaries Increasing Pace of Change
Accelerating
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Other Observations
There is a huge pent-up, post-Y2K demand related
to the digital economy.
Optimism regarding company growth.
IT issues include dealing with pace of change,
retaining skilled employees, improving customer
service, simplifying business processes and
understanding and meeting customer needs.
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Trends to Watch

• E-Commerce outsourcing.
• Online procurement and auctions boom.
• Shakeout of consumer E-Commerce sites.
• New privacy rules and regulations.
• Java and XML will become hotter.

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More Trends to Watch

• Policy networking for preferred customers.
• Wireless devices to access e-mail and the web.
• Servers, storage and management software will
• be investment targets.
• Simpler, sleeker PCs like HPs ePC and Compaqs
• iPaq.
• Information utilities from service providers.

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Competitiveness is the pivotal issue in the 21st
century.
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Competitiveness
How does a company compete?
What benefits does a company gain if it competes
successfully to the point of being a market
leader.
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Business and Information Systems Management
Challenges

• Business Success Factors

• The Role of Information Systems

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Running a successful business is like doing a
jigsaw puzzle. The problem is that the pieces
and the picture are both changing. Cy
ril J. Yansouni Chairman and
CEO Read-Rite Corp.
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Why is running a current-day business so
challenging?
1. 2. 3. 4. 5. 6. 7. 8.
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Business Challenges

• Business Vision and Supporting Strategies
• Globalization
• Time to market, customer and decisions
• Concurrent Engineering
• Business Process Reengineering
• Total Quality Management
• Employee Empowerment
• Health Care and Other Employee Benefits
• Right Sizing, Alliances, Outsourcing
• Change Management

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Jack Callons Key Business Issues

• Direct Business Model
• Extended Enterprise
• Supply Chain Management
• Outsourcing
• Reengineering Business Processes
• Managing Change

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Business Success Factors

• 1. Business Leadership.
• 2. The Ability to Fit the Pieces into the
  Increasingly Bigger Business Picture.
• 3. Organizational Responsiveness and Resilience.
• 4. Realizing That Most Major Customer Problems
  Are Solved Through a Combined Organizational
  Effort.

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5. A Strong Company Culture. 6. Ability and
Willingness to Innovate, Change and Take
Risks. 7. Accomplishing All of These Factors
While Maintaining a Necessary Balance 8.
Effective and Timely Communication Across
the Entire Organization
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Business Challenges
1. Relative to all of this, what role should
information systems play?
2. How do you determine relevance regarding any
of these factors?
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Three Necessary Perspectives
Business Success

• Business Environment
• Enterprise Environment
• I/T Environment

Figure 1-1
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SIMULTANEOUS REVOLUTIONS
NEW COMPETITORS
NEW RULES OF COMPETITION
NEW POLITICAL AGENDAS
INDUSTRY STRUCTURE CHANGES
NEW TECHNOLOGIES
THE BUSINESS
NEW REGULATORY ENVIRONMENT
NEW EMPLOYEES AND NEW VALUES
EVER INCREASING CUSTOMER EXPECTATIONS
Figure 1-2
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New Competitors

• Global defines the competitive landscape.
• Aircraft and communication technologies are
  shrinking the economic world.
• English has become the international language.
• There are very few countries that are not global
  players.
• Standardization of industrial and consumer
  products.
• Breakdown in industry boundaries is also
  resulting in new domestic competitors.
• Logical versus physical competition via the
  Internet.

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New Rules of Competition

• Speed has become a major success factor
  including time to market, time to decisions and
  response time to customers.
• Distribution has become a key competitive
  strategy.
• Productivity defines competitive positioning.
• Assets can become a liability.
• Quality as a competitive factor is a given.
• All business functions must contribute value to
  customers.
• Focus on core processes and outsource the rest.
• Success is a combination of leadership and
  empowerment.
• When timely to do so, reinvent the business.

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Industry Structure Changes

• The US has led the way, but the rest of the
  world is also deregulating industries and/or
  privatizing government owned businesses.
• Freedom from government imposed laws and/or
  controls frequently leads to industry structure
  change.
• IT has prompted industry change because of the
  direct access aspects of the Internet.
• Open competition over time results in industry
  change based on changing rules of competition.

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New Regulatory Environment

• One could conclude that there is a definite
  trend towards deregulation of industries. In
  some cases this can be misleading.
• Highly visible industries tend to be directly or
  indirectly regulated in some form.
• As long as there are politicians there will be
  new laws and/or regulations that can directly
  impact specific industries.
• Business managers prefer to compete openly
  despite a perception of the benefits of having a
  protected market.

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Increasing Customer Expectations
Is there such a thing as a customer that would be
happier with a more costly, lower quality product
or service?
The better you do in servicing your customer, the
more they will want (and expect)!
Time constraints and pressures on customers also
prompts an increase in their expectations since
they often do not have the time to find
alternative sources.
On the other hand, the global economy offers more
options and alternative sources.
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New Employees and Values
Salary and benefit expectations are greatly
influenced by the financial status of people
while they were growing to adulthood.
Different attitudes towards authority and
societal issues.
Surveys say that salary is not the highest
priority for many employees.
Meanwhile, an increasing number of people are
pursuing the startup route to get rich.
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New Technologies

• IT and transportation technologies have changed
  the world of competition and can greatly
  influence success or failure of a company.
• The pace of technology change adds to the
  challenge.
• New technologies often complement each other.
• The impact of the Internet as a global network
  is huge.
• Integrating IT into a rapidly changing business
  can be a major challenge.

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New Political Agenda

• Importance of government role in positioning
  industries to compete on a global basis.
• Tax policies are an important consideration.
• Regional partnerships are replacing individual
  country roles.
• Protectionism is an on-going threat.
• Monetary and fiscal policies add to challenges
  of competing in global markets.
• Political instability has not disappeared from
  the global economic world.

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Business Environment
It has become more difficult to describe a
business environment that applies to everyone.
Historically an environment that was conducive to
success within a specific industry was good for
every company in the industry.
Today, the companies within a specific industry
can have a wide range of different performances
and results.
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For Instance
Wal-Mart Kmart Sears Montgomery Ward
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Business Drivers
Market
Technology
Employees/ Work
Regulation
Organization
Business Processes
Solutions to Business Requirements
Figure 1-3
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Some Appropriate Questions

• How profound are the changes being experienced?
• How deeply rooted are any of the problems?
• Have solutions been successfully implemented to
• address the problems?
• Can the success be emulated?
• Where does a company begin to solve its
• problems?

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Business Challenges
1. Relative to all of this, what role should
information systems play?
2. How do you determine relevance regarding any
of these factors?
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IT Relevance
Industries with a high information content.
Industries with less information content.
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IS Objective
1. Efficiency--doing things better.
2. Effectiveness--broadening the scope of
individual tasks, jobs or processes.
3. Competitive advantage--doing better or
new things for the customer.
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A fundamental premise

• Innovative Uses
• of Information Systems
• Requires a Systematic Approach

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A Systematic Approach
Vision Strategy Tactics Business Plan

• Competitive Options
• Roles, Roles and Relationships
• Redefine and/or Define
• Telecommunications
• as the Delivery Vehicle
• Success Factor Profile

Figure 1-4
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A Logical Premise

• Competing with
• Information Technology
• through People.

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A Logical Goal?

• Competing with Information Technology.

• Using Information Systems to Compete.

• Creating the Necessary Environment to Use
• Information Systems to Compete.

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Business Strategy and IS

• Concepts.
• Relative To (Bigger Picture).
• Company Examples.

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The Information Technology Environment
Administrative Framework Regulated Monopoly Fre
e Market Regulated Free Market
Primary Target
Justification/ Purpose
ERA I Data Processing ERA II End User
Computing ERA III Strategic Systems
Productivity/ Efficiency
Organizational
Individual
Effectiveness
Business Processes
Competitive Advantage
Source Cash, McFarlan, McKenney and Appleton,
Corporate Information Systems Management,
Richard D. Irwin,1992, 3/E, p. 11, adapted.
Figure 1-5
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Examples of Successful Company Use of I/S to
Compete

• Boeing Airplane Company
• Wal-Mart Stores
• Bissett Nursery Corp.
• Federal Express
• Charles Schwab
• USAA
• L.L. Bean
• Progressive Corp.

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How Fragile is Business Success?
How much of the answer to this question is
related to business leadership and strategies?
How much of the answer to this question is
related to information technology leadership
and strategies?
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IT Significance
If you business lives by information technology
can it also die by information technology?
How much of an IT dependency does a company have?
How much change must they deal with in defining
their business to be successful in the future?
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PROFILE ORGANIZATIONS

• MENS WEARHOUSE
• THE PROGRESSIVE CORP.
• SAN JOSE MERCURY NEWS
• CHARLES SCHWAB
• USAA
• UPS
• USA TODAY
• WAL-MART STORES
• WHIRLPOOL
• XEROX

• AMERICAN AIRLINES
• BANC ONE CORP.
• L.L. BEAN
• BOEING
• CISCO SYSTEMS
• DELL COMPUTER
• FEDERAL EXPRESS
• FRITO-LAY
• GM SATURN
• HARLEY-DAVIDSON

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Analysis Term Paper Companies
Will the Internet fundamentally change discount
retailing and negatively impact Wal-Mart?
Has Intel exceeded the processing speed needs of
PC users and minimized its future markets?
Will smart cards eliminate 80 of Visas online
credit authorizations?
Does the San Jose Mercury News face an inevitable
decline in readership and business volumes?
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A Quick IS Assessment

• 1. How is Business?
• 2. Is the Information Systems Manager a Member of
  the Top Management Team?
• 3. What Percentage of the Operating Budget of the
  Business is for Information Systems?

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Best ISTC Industries

• Transportation Industry
• American Airlines
• American President Co.
• British Airways
• CSX
• Delta Airlines
• FedEx
• Singapore Airlines
• Union Pacific
• United Airlines
• UPS

• Retail Industry
• L. L. Bean
• Dillards
• The Gap
• Home Depot
• Kmart
• Mens Wearhouse
• Mervyns
• J C Penney
• Toys R Us
• Wal-Mart Stores

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WORST ISTC INDUSTRIES

• Construction Industry

• Petroleum Industry

• Federal Government

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An IT Perspective

• There has never been a time in history when there
  was better Information Technology
  price/performance and so many choices of
  hardware, software and services.
• There has never been a time when it was less
  clear as to the way to best utilize Information
  Technology.

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The Promise of IT
Better technology, better systems, better
processes and better employees.
The ideal situation within a company is IT that
helps employees make decisions in organizations
that encourage them to do so.
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Can the IS be right if
1. The business climate is wrong.
2. The business strategy is wrong.
3. The business leadership is wrong.
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A Valid Theory of Business
Defines what a business is paid for.
Based on assumptions about the environment of the
company

• Customers
• The market
• Society and its structure
• Technology

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Assumption Premises
The assumptions about the environment, the
company mission and core competencies must fit
reality.
The assumptions in the three areas must fit
together.
The theory of the business must be known and
understood throughout the organization.
The theory of the business has to be tested
constantly.
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Mission Assumption
Assumptions about the mission of the business
define what an organization considers to be
meaningful results at some future time.
Mission is how a business expects to make a
difference in the economy and society at large.
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IBM Missions
First, we must strive to lead in the creation,
development and manufacture of the industrys
most advanced information technologies including
computer systems, software, networking systems,
storage devices and microelectronics.
Second, we must translate these advanced
technologies into value for our customers through
our professional solutions businesses worldwide.
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Core Competencies
Assumptions about core competencies define where
an organization must excel in order to achieve
and sustain market leadership.
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Theory of Business
Some theories last a long time, but they do not
last forever.
A theory of business becomes obsolete when the
company achieves its original objectives.
Any company that doubles or triples in size in a
short period of time has outgrown its original
theory.
Unexpected failure is as much a warning sign as
unexpected success and must be taken seriously.
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Theory of Business
To turn around an ailing company (or to start a
new one) is not genius it is hard work. It is
not being clever it is being conscientious. It
is what CEOs are paid to do.
Peter Drucker