Learning Objectives. Digital Economy Definition (II) Digital Economy Definition (I) Chapter 1: Organizational Performance: IT Support and Applications

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1 MIT-542 ระบบสารสนเทศเพ อการจ ดการ Information Systems for Management (ISM) Learning Objectives Describe the digital economy and digital enterprises Chapter 1: Organizational Performance: IT Support and Applications Walailuk University Recognize the relationship between performance, organizational pressures, and responses and technology Define IS and IT Understand what the adaptive enterprise is Understand the support role that IS and IT play in the organization Understand the importance of learning about IT Information Technology For Management 6th Edition, Turban, Leidner, McLean, Wetherbe Modified from Lecture Slides by L. Beaubien, Providence College John Wiley & Sons, Inc. Chapter 1 1 Chapter 1 2 Definition (I) Definition (II) A digital economy is an economy that is based on electronic goods and services produced by an electronic business and traded through electronic commerce. That is, a business with electronic production and management processes and that interacts with its partners and customers and conducts transactions through Internet and Web technologies. The concept of a digital economy emerged in the last decade of the 20th century. Nicholas Negroponte (1995) used a metaphor of shifting from processing atoms to processing bits. He discussed the disadvantages of the former (e.g., mass, materials, transport) and advantages of the latter (e.g., weightlessness, virtual, instant global movement). The Net is now the iconic technology of our age. Source: Source: Chapter 1 3 Chapter 1 4

2 Related Terms Electronic business vs. Electronic commerce Information economy Information society Knowledge economy Knowledge management Knowledge market Network economy Virtual economy Chapter 1 5 Electronic Business Electronic Business, commonly referred to as "ebusiness" or "e- Business", may be defined as the utilisation of information and communication technologies (ICT) in support of all the activities of business. Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. In practice, e-business is more than just e-commerce. While e-business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a subset of an overall e-business Chapter 1 6 strategy. E-business E-business involves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and cooperating with business partners. Special technical standards for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra and inter firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these. Electronic commerce Electronic commerce, commonly known as e-commerce or ecommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. A wide variety of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as as well. Chapter 1 7 Chapter 1 8

3 Information society An information society is a society in which the creation, distribution, diffusion, use, integration and manipulation of information is a significant economic, political, and cultural activity. The knowledge economy is its economic counterpart whereby wealth is created through the economic exploitation of understanding. Specific to this kind of society is the central position information technology has for production, economy, and society at large. Information society is seen as the successor to industrial society. Chapter 1 9 Knowledge economy The knowledge economy is a vague term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies (such as knowledge engineering and knowledge management ) to produce economic benefits. The essential difference is that in a knowledge economy, knowledge is a product, in knowledge-based economy, knowledge is a tool. Various observers describe today's global economy as one in transition to a "knowledge economy", as an extension of an "information society". Chapter 1 10 Knowledge management Knowledge Management ('KM') comprises a range of practices used by organisations to identify, create, represent, distribute and enable adoption of what it knows, and how it knows it. It has been an established discipline since 1995 with a body of university courses and both professional and academic journals dedicated to it. Many large companies have resources dedicated to Knowledge Management, often as a part of 'Information Technology', 'Human Resource Management' or Business strategy departments. Knowledge Management is frequently linked and related to what has become known as the learning organisation, lifelong Knowledge market Knowledge market is a mechanism for distributing knowledge resources. There are two views on knowledge and how knowledge markets can function. One view uses a legal construct of intellectual property to make knowledge a typical scarce resource, so the traditional commodity market mechanism can be applied directly to distribute it. An alternative model is based on treating knowledge as a public good and hence encouraging free sharing of knowledge. Chapter 1 11 Chapter 1 12 learning and continuous improvement.

4 Network economy The term network economy is used to describe the emerging economic order within the information society. This stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales. This is in sharp contrast to industrial-era economies, in which ownership of physical or intellectual property stems from its development by a single enterprise. Business models for capturing ownership rights for value embedded in products and services created by social networks are being explored. Virtual economy A virtual economy (or sometimes synthetic economy) is an emergent economy existing in a virtual persistent world, usually in the context of an Internet game. People enter these virtual economies recreationally rather than by necessity; however, some people do interact with them for "real" economic benefit. Virtual economies are observed in multi player online role-playing games (MMORPGs). The largest virtual economies are currently found in MMORPGs. Virtual economies also exist in life simulation games which may have taken the most radical steps toward linking a virtual economy with the real world. This can be seen, for example, in Second Life's recognisation of intellectual property rights for assets created "in-world" by subscribers, and its laissezfaire policy on the buying and selling of Linden Dollars (the world's official currency) for real money on third party websites. Virtual economies can also exist in browser-based internet games where "real" money can be spent and user-created shops opened, or as a kind of Emergent gameplay. Chapter 1 13 Chapter 1 14 New Economy E-Business: The use of electronic technologies to transact business Collaboration: People and Organizations interact, communicate, collaborate, and search for information Information Exchange: Storing, processing and transmission of information Chapter 1 15 Digital Business (I) Telecommunications Field Sales Consumer Appliance On-line Salesperson Thin Client PC Appliance Server Store 3 On-line Multi-station Store On-line Customers Consumer & Business Commercial POS Internet E-commerce On-line Single-station Store Net Appliance Store 1 Your Dom a i n / URL Internet STARS E-Commerce Server Busi ness t o Busi ness Office Suite Linux SSL Server Linux Video Conferencing SCO Unix Ser ver Unix Sybase ASE Database Tarentella Cold Fusion Windows 2000 Beacon Hill's Stars Apache Server IP Address 2 Apache Server Linux Credit Card Approval IP Address 3 IP Address 1 Hub In-house operations Networks In-office PC PC STARS Accounting Phone Orders Mail Orders Order Fulfillment Purchasing Thin Client Thin Client Chapter 1 16 PC

5 Digital Business (II) The Old Economy Taking Photo s 1. Buy film in a store 2. Load your camera 3. Take pictures 4. Take roll of film to store for processing 5. Pickup the film when ready 6. Select specific photos for enlargement 7. Mail to family and friends Chapter 1 17 Chapter 1 18 The New Economy Taking Photo s Business Models 1 st Generation Digital Photography Old economy (except 6 and 7) were replaced by using a scanner and ing 2 nd Generation Digital Photography Use a Digital Camera, no film, no processing 3 rd Generation Digital Photography Your Digital Camera is now in your mobile phone, your binoculars, or palmtop computer. A business model is a method of doing business by which a company can generate revenue to sustain itself. The model spells out how the company adds value to create a product or service. (Value Chain) Nokia makes and sells cell phones A TV station provides free broadcasting. Its survival depends on a complex model involving advertisers and content providers Internet portals, such as Yahoo, also use a complex business model. Chapter 1 19 Chapter 1 20

6 Digital Age Business Models Name-Your-Own Price Reverse Auctions Affiliate Marketing E-Marketplaces and Exchanges Electronic aggregation (buying groups) Drivers Forcing Changes In Business Models Business Pressures Environmental, organizational, and technological factors React frequently and quickly to both the threats and the opportunities resulting from this new business environment Business Critical Response Activities A response can be a reaction to a pressure already in existence, an initiative intended to defend an organization against future pressures, or an activity that exploits an opportunity created by changing conditions Chapter 1 21 Chapter 1 22 Business Pressures, Organizational Responses, and IT Support Business Pressure - The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities Significant changes in any of these factors are likely to create business pressure on the organization The three types of business pressures faced are: market, technology, and societal pressures. Three Types of Business Pressures Market Pressures: The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers Technology Pressures: Technological Innovation and Obsolescence Information Overload Societal Pressures: Social Responsibility Government Regulation and Deregulation Protection Against Terrorist Attacks Ethical Issues Chapter 1 23 Chapter 1 24

7 The Drivers of Change Business Pressures on an Organization that force change. Technology The Drivers of Change (Continued) Business Pressures on an Organization. Society Market Society Market Chapter 1 25 Chapter 1 26 Technology Organizational Responses Strategic Systems: enable organizations to increase market share and/or profits. Customer Focus enable organizations to provide superb customer service and prevent losing customers to competitors. Make-to-Order is a strategy of producing customized products and services Mass Customization is producing a large quantity of items, but customizing them to fit the desire of each customer E-business and E-commerce is the strategy of doing business electronically Why Study Information Systems? You will be more effective in your chosen career if you understand how successful information systems are built, used, and managed You also will be more effective if you know how to recognize and avoid unsuccessful systems and failures According to the US Bureau of Labor Statistics, the top seven fastest growing occupations fall within IT or computer related field Developing Computer Literacy will only enhance your Information Literacy Chapter 1 27 Chapter 1 28

8 Doing Business in the Digital Economy The digital economy is an economy based on digital technologies, including communication networks (the Internet, intranets, and extranets), computers, software, and other related technologies Also called the Internet economy, the new economy, or the Web economy The Global Platform of the New Economy A huge number of digitizable products; that is products that can be converted to digital format. Most common are: books, movies, magazines, TV and radio programming, electronic games, music CDs, and computer software. Consumers and firm conducting financial transaction digitally. Physical goods such as home appliances and automobiles that contain embedded computer chips and connectivity capabilities. Digital infrastructures provide a global platform over which people and organizations interact, communicate, collaborate, and search for information. Chapter 1 29 Chapter 1 30 Electronic Business Businesses increasingly perform their basic functions: buying and selling goods and services, servicing customers, and collaborating with business partners electronically This process is known as electronic business (E-business) or electronic commerce (E-commerce) Example Buying and selling textbook Registering for classes Photography Paying for Gasoline Paying for Transportation Paying for goods Supplying commercial photos Old Visit the bookstore Walk around campus to Departments, Registrar s office, etc. Buy film, use camera, take picture, take it for processing Fill up your car, go inside, pay cash or credit card Pay cash, metal tokens Visit store, select item, pay, go Use newspapers, paper, catalog, or online New Visit publishers /retailers web Access campus web site Use digital camera Use speed pass token; wave over the sensor and go Metro cards electronic cards Use self-service kiosks Use hub-like supply chain with digitized picture Chapter 1 31 Chapter 1 32

9 Example #1: Registering for Classes Old Economy: You would go to the Registrar s Office on campus with a paper registration document New Economy: You access your campus website, log into registration site, and electronically register for classes from anywhere Example #2: Buying and Selling Textbooks Old Economy: You go to the bookstore in person and buy new or sell used books New Economy: You go online to the Publisher s Web site or to Web-based services such as Amazon.com to buy or sell books Chapter 1 33 Chapter 1 34 Example #3: Photography Old Economy: You use a camera with film, which you have to purchase and have developed; you mail copies of pictures. New Economy: You can scan photos, make copies and them. Digital cameras require no film or processing. Digital photography and video integrated into cell phones for immediate viewing Example #4: Paying for Gasoline Old Economy: You pump your gas and go inside to pay using cash or credit New Economy: Insert credit card at pump, receive authorization, pump gas, get receipt, drive away. Another example is Speedpass technology. Chapter 1 35 Chapter 1 36

10 Example #5: Paying for Transportation in New York City Example #6: Paying for Goods, Checkout Old Economy: Use tokens for bus and subway transportation New Economy: Bus and subway riders now use MetroCards; contactless cards that have a small radio transmitter that transmit account information to a reader Old-old Economy: Customer selects goods, waits in line for the cashier to key in price of items, and then pays in cash Old Economy: The clerk swipes the barcode of each item and customer pays in cash, credit, or debit. Information scanned is available for immediate analysis known as source-data automation Chapter 1 37 Chapter 1 38 (Ex. #6 Continued) Example #6: Paying for Goods, Checkout continued Old Economy: Shoppers take their items to a selfservice kiosk and swipe the barcodes themselves New Economy: Wireless technology affixed to each item. Allows you to select items that pass through a scanner, which reads wireless signal, generates a bill, automatically debits your designated account for payment and you leave Three Types of Business Pressures Market Pressures: The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers Technology Pressures: Technological Innovation and Obsolescence Information Overload Societal Pressures: Social Responsibility Government Regulation and Deregulation Protection Against Terrorist Attacks Ethical Issues Chapter 1 39 Chapter 1 40

11 Organizational Response to the drivers Strategic Systems Continuous Improvement Operational Efficiency Restructuring business processes Manufacturer to order Customer Focus Strategy Employ E-business tools Business Alliances Technology is required to effectively implement these critical responses. Chapter 1 41 Organizational Responses Strategic Systems provide advantages that enable organizations to increase market share and/or profits, better negotiate with suppliers, or prevent competitors from entering their markets Customer Focus is the difference between attracting and keeping customers by providing superb customer service and losing them to competitors Make-to-Order is a strategy of producing customized products and services Mass Customization is producing a large quantity of items, but customizing them to fit the desire of each customer E-business and E-commerce is the strategy of doing business electronically Chapter 1 42 Why Should You Learn about Information Technology (IT)? IT is essential for work in organizations IT will reduce the number of middle managers IT will change the manager s job IT impacts employees at work IT impacts employees health and safety IT is used by all departments IT provides opportunities for people with disabilities IT provides quality-of-life improvements Improvements in health care Crime fighting and other benefits Managerial Issues Recognizing opportunities for using IT and Web-based systems. Who will build, operate, and maintain the information systems. How much IT? How much and HOW important is IT? Is the situation going to change? Globalization Ethics and social issues Transforming the organization to the digital economy. Chapter 1 43 Chapter 1 44