MIS and Business Operations

Transcription

1 MIS and Business Operations Problems w/ Textbook? Case 1 due Sunday via at 24:00. (keep copy of sent messages, cases received after 24:00 are penalized 10% with 10%/day thereafter) See session 1 notes for case instructions. Bring hard copy to class on Monday for discussion purposes. Bring Laptop to Class on Thursday with MS Access on it if you have one. 1

2 Articles? How businesses use information systems. 2

3 Operational Goal of Business Information Systems Get data and process it into information to enable decision-making and/or communication to the right intelligent agent at the right time to enable effective, efficient and fast activities. Information system technology, agents and activities that do not add value are WASTE Business Activities are Intelligent agents using Knowledge, Capability, Skill & Technology, to transform material, information & energy into higher value material, information & energy. Workflow In Activity/Action Workflow Out Material Information Energy A Intelligent Agents Using K, C, S & T To Transform Material Information Energy B Example: Women soldering stuff onto circuit boards Mostly material transformation into a saleable good Waste Example: Tax consulting in an office Mostly information transformation: a saleable service 3

4 Business PROCESSES are Coordinated Sets of Activities Linked by Workflows of Material, INFORMATION, and/or Energy B C D Start End E F Quasar's PTH assembly comprise of highly skilled operators. They are initially and periodically trained by IPC on contemporary soldering methods. As well as undergoing internal training and evaluation. 4

5 In-class discussion Think of making dinner at home for your family. What are the workflows of material, energy and material that are inputs to this activity? What knowledge, capability/skill and technology do you use in performing this activity? What are the material, energy and information outflows of this activity? (i.e. product?) How much waste is produced? of what types? What information makes this activity more effective, efficient or fast? How do you get this information? What decisions do you have to make? Michael Porter has defined 5 primary value-adding activities (processes) in a firm that he called the VALUE CHAIN. We ve defined effective business operations as those adding customer value. From this perspective, market/customer information flows are the most important information flows in a business. What product is selling/can be sold at what price should motivate what we do. M A R K E T Material and/or Information Flow Sourcing Production Marketing/ Sales/ Payment Distribution V A L U E M A R K E T Service 5

6 Management is a secondary (support) activity from Porter s perspective Porter defines 1) administration and financial management, 2) human resource management, 3) technology management, R&D, and 4) contracting and procurement as SECONDARY/SUPPORT activities Managerial activities: Add value through improving/enabling long and short term primary activities Managerial activities that don t add value are WASTE Business Model = Value Chain A business model is the system a firm uses to source, produce, sell, distribute - and get paid for - goods and services: in other words, a firm s value chain. We will use the terms interchangeably. The design and organization of a firm s business model/value chain is one place where the art and science of management add value 6

7 How information systems can enhance business processes Increased effectiveness through improved market/customer information flows Remember must be processed and communicated to appropriate agent where it becomes knowledge, improved capacity to act. Knowing more about our CUSTOMERS provides the potential to: Increase value-added (ZARA is great example) Reduce WASTED effort and materials How information systems can enhance business processes More customer/supplier communication and involvement Personalized web portals, feedback Integration into supply chain and customer relations management information systems May provide sense of engagement/loyalty May induce switching costs 7

8 How information systems can enhance business processes Improve managerial decision-making and control communication Quicker managerial response? Improved coordination of activities? Inputs Manager Decides Control Info. Systems Agents and activities for which responsible Feedback Info. Systems Outputs How information systems can enhance business activities/processes Can support entirely new value chain/ business models. Online marketing and sales Digital payment Production/delivery/distribution of digital products 8

9 How information systems can enhance business processes Increasing efficiency/speed through transforming/eliminating certain processes Automation/INFOMATION: Infomation is automation of information/communication processes: i.e. a call stacker Moving from paper to electronic transactions Moving from people to computer processed transactions Watch for the tradeoff between effective versus efficient processes (i.e., computer answering systems are cheaper but may tick off customers) How information systems can enhance business processes Increasing efficiency/speed through transforming/eliminating certain processes Enforcing process standardization & reducing variation when IS processes are embedded in business process Change information flows replacing sequential steps with parallel simultaneous steps Eliminating delays in process links/wip handoffs 9

10 Examples of information systems enhancing value chain activities Porter s Value Chain In-class activity Analyze the value chain of a package delivery service like DHL. What information systems do you think make DHL more effective, efficient and fast? Describe the system elements of the signature for receipt system. 10

11 Agency Theory Firm is nexus of contracts among self interested agents requiring supervision. Agency costs rise as firms take on more employees. IS s enables firm to economize on managers through more efficient decision making, coordination and communication (increasing span of control). This allows firms to grow revenues while maintaining the same size. Also IS s (expert systems) can move decision making down to the operations level, EMPOWERING production staff Two ways IS s flattens organizations 11

12 Transaction Cost Theory Firms seek to economize on cost of participating in market (transaction costs) This logic tends to move activities into the firm to save transaction costs; vertical and horizontal integration. IT lowers market transaction costs for firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees. Another way IT flattens organizations Outsourcing Supply chain management Partnership Organizational Resistance to Change Information systems become bound up in organizational politics because they influence access to a key resource information Information systems potentially change an organization s structure, culture, politics, work, and division of labor Most common reason for failure of large projects is due to organizational and political resistance to change 12

13 Sustainable Competitive Advantage Firms strategize to obtain sustainable competitive advantage: financial performance that consistently outperforms industry averages Achieving sustainable competitive advantage is not easy Rapid emergence of new products and new competitors New competitors and copycat products cutting costs, prices and increasing features that may benefit customers but erode profits industry-wide Resource-based view of sustainable competitive advantage If a firm is to sustain competitive advantage, it must control an exploitable resource, or set of resources, that have four critical characteristics Valuable Rare Imperfectly imitable Non-substitutable 13

14 Technology-enabled effectiveness: necessary, but not sufficient Operational effectiveness is critical, but not sufficient enough to yield sustainable competitive advantage Technology itself is often very easy to replicate, but it is essential to creating and enabling imitation resistant value chains that are defensibly different and can be quite difficult for others to copy Fast follower problem: Exists when rivals watch and learn from pioneers successes and failures, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate Especially problematic with new, smaller startup firms Microsoft M&As are frequent and constant Sources of potentially sustainable competitive advantage 1. Imitation resistant value-chain/business model 2. Product differentiation 3. Brand (a proxy for quality that inspires trust) based on customer experience and marketing 4. Economies of scale and scope 5. Network effects 6. Knowledge/Data 7. Switching costs 8. Control of distribution channels 9. Patents & Copyrights BUT, NOTHING LASTS FOREVER: The only constant is change, so in the long run, agility and innovation may be the only sustainable competitive advantage 14

15 What firms need is: Strategy Strategic positioning: Performing different activities from those of rivals, or the same activities in a different way Porter s 5 competitive forces strategic framework Forces acting on a firm s competitive position. 4. Threat of New Entrants 3. Supplier Power 2. Existing Competitor Rivalry Firm 5. Threat of Substitutes 1. Customer Power Market Power is a function of information about options and dependencies 15

16 Market Forces Substitutes provide similar product value via a different business model/value-chain, often using different technologies. The web is enabling a lot of these Barriers to Entry are obstacles in the path of New Market Entrants that make it difficult to enter a given market. The web is reducing some of these Switching costs and Data Switching costs: Exist when consumers incur an expense to move from one product or service to another Sources of switching costs: Learning costs Information and data Financial commitment Contractual commitments Search costs Loyalty programs Data can be a particularly strong switching cost for firms leveraging technology 16

17 Strategic Decision: When to buy/outsource vs. develop systems in-house? Firms can buy/outsource services/systems Supply chain management (SCM) Customer relationship management (CRM) Enterprise resource planning software (ERP) Potential danger If a firm adopts software that changes a unique process into a generic one, it may have co-opted a key source of competitive advantage particularly if other firms can buy the same stuff The WWW s impact on markets The world wide web has become a huge, near universal global communications network with Universal standards Media Richness Interactivity Information density And it is relatively inexpensive! a huge set of marketing/sales/service channels a huge distribution channel for digital products 17

18 The internet s impact on markets 1. Increasing product availability and pricing information (Price Transparency) to buyers and sellers prices where multiple sellers and few buyers prices where multiple buyers and few sellers 2. search and transaction costs 3. menu/cataloging costs 4. intermediaries and distributors for some products Encyclopedias, music, movies, books 5. Enabling secondary markets, resale: Ebay 6. Social networking has increased the speed and scope of word of mouth advertising (word of web advertising) The world wide web in Copyright , Miniwatts Marketing Group. All rights reserved worldwide. Accessed 8/18/2010 World Region Popul n Millions Internet Users Millions User % of Pop. %User Growth % of World Users Africa 1, Asia 3, Europe Middle , East North America Latin America , Oceania WORLD 7,018 1,

19 E-Commerce: Digital Products and Markets 19