Information Technology for Management

A Look Toward the Future of Information

Technology

Desired Learning Outcomes:

• Describe IT and management issues, opportunities, and challenges
• Identify management’s top concerns and the most influential Its
• Assess the role of IT agility, IT consumerization, and changes in
competitive advantage in the second part of the Information Age
• Explain the strategic planning process, SWOT analysis, and competitive
models.
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 IT and Management Opportunities and Challenges

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Common requests from companies and brands to connect

with consumers and prospects via social media or mobile
devices.
 IT and Management Opportunities and Challenges

Overstock.com uses data

analytics to discover what
their customers want,
whether they like a
product, and how they
can sell it better
IT and Management Opportunities and Challenges

1. Overstock.com. Jonathan Johnson, a retail executive at Overstock.com,

explained: “We’re not trying to use social media as a sales piece as much as
an information gathering piece. Finding out what our customers want;
whether they like a product; how could we sell it better”
2. Best Buy. Electronics retailer Best Buy learned how unpopular its restocking
fees were through social media. The company changed its product-return
policies eliminating those fees that were hurting sales.
3. Starbucks. Coffee retailer Starbucks prepared to monitor customers’ tweets
about a new coffee flavor on the day it was introduced. Managers were
surprised to learn that a huge majority of tweets were not about the
coffee’s intense taste, but were complaints about the higher price. By the
next day, they had dropped the price
IT and Management Opportunities and Challenges

Common Learning Efforts to Improve Performance

► Which marketing campaigns are the most and least effective and why
► What products to develop
► What customers value and dislike
► How to appeal to key customer groups
► How to select and implement enterprise apps that will make a competitive
difference
► What perks strengthen customer loyalty most cost-effectively
IT and Management Opportunities and Challenges

Data analytics refers to the specialized software, capabilities, and components

all geared toward exploring huge volumes of data to provide greater insight and
intelligence— and doing so quickly.

Data analytic processes include:

1. Locating and collecting reliable data from multiple sources that are in
various formats.
2. Preparing the data for analysis. Collected data is not usable until it has been
organized, standardized, duplicates are removed (called deduping), and
other datacleansing processes are done.
3. Performing the correct analyses, verifying the analyses, and then reporting
the findings in meaningful ways.
IT and Management Opportunities and Challenges

Using data analytics, Watson beats Ken and Brad playing

Jeopardy.
Top Management Concerns and
Influential ITs
Data analytics can help companies achieve these business outcomes
► Grow their customer base
► Retain the most profitable customers.
► Continuously improve operational efficiency.
► Transform and automate financial processes.
► Detect and deter fraud.
Top Management Concerns and Influential ITs

One example is Florida Power and Light (FPL). Mark Schweiger, a senior business
analyst at FPL, helped implement a data analytics program to detect electricity theft.

FPL feeds its vendor meter and customer data, which the vendor crunches to create
meaningful red flags indicating electricity theft. The program helps detect when
someone is using an unauthorized meter, is bypassing an approved meter, is using a
powerful magnet to suppress usage (and billing) data, and has reconnected service
without authorization

Messy data is the term used to refer to data (e.g., tweets, posts, click streams, images,
including medical images) that cannot be organized in a way that a computer can easily
process

Data sources include smartphones, social networks, microblogs, click streams from
online activities, location-aware mobile devices, scanners, and sensors that
automatically collect everything from inventory movement to heart rates
Top Management Concerns and Influential ITs
Summary of Characteristics of High-Quality
Information
Top Management Concerns and Influential ITs
5 Top Management Concern
5 Top Management Concern
5 Top Management Concern

BPR
5 Top Management Concern
5 Most Influential ITs
Federal Cloud Computing Strategy
Top Management Concerns and Influential ITs

► Enterprise Resource Planning (ERP). ERP also refers to technology infrastructure

and/or apps that support essential business processes and operations. ERP systems
are commercial software packages that are bought as modules. Examples of modules
are accounting, inventory management module, supply chain management
manufacturing, financial, human resources, budgeting, sales, and customer service.
The modules that are bought are integrated—and the result is an ERP. ERP solutions
are often cloud-based
► Software as a Service (SaaS). Software-as-a-service (SaaS) is pay-per-use
arrangement. Software is available to users when they need it. Since pay-per-use is
the arrangement for most utilities (electricity, water, gas) other terms for SaaS are
on-demand computing, utility computing, and hosted services. It’s tough to
understand how SaaS differs from cloud computing. Cloud computing enables users
to access data, software, or services via the Internet. SaaS is an arrangement where
instead of buying and installing enterprise apps, users access those apps from a SaaS
vendor over a network via a browser. Usually there is no hardware and software to
buy since apps are used over the Internet and paid for through a fixed subscription
fee, or on a pay-per-use basis such as electricity or gas
Top Management Concerns and the Most
Influential ITs
► Collaboration and Workflow Tools. These tools help people work together in
an organized way and manage their tasks more effectively regardless of their
location. Employees and managers expect to be able to do work from their
mobile and digital devices. Hendrick Motorsports is one of the most famous
and highest-winning NASCAR racing teams. For details on how the crew uses
Group Chat to collaborate on racetracks, view. These sets of five business
priorities and influential ITs provide a helpful foundation and framework for
understanding the strategic and operational role of IT in small and medium
businesses (SMB), multinationals, government agencies, healthcare, and
nonprofits.
 Top Management Concerns and the
Most Influential ITs
The Internet of
Things
The Internet of things refers to a set of capabilities emerging because of physical things being
connected to the Internet or networked via sensors. Networks link data from products or
operations, which can generate better information and analysis. These networks capture huge
volumes of data that flow to computers for analysis.
 IT Agility, Consumerization, and Competitive
Advantage
The Internet of
Things
Zipcar has pioneered this business model, which includes
renting cars by the hour. Cars are leased for short time
spans to registered members making rental centers
unnecessary. Traditional car rental agencies are starting
to experiment with sensors so that each car’s use can be
optimized for higher revenues
The Internet of
Things
Opportunities for
improvement:

Other applications of embedded physical things are:

• In the oil and gas industry, exploration and development can rely on extensive
sensor networks placed in the earth’s crust to produce more accurate readings of
the location, structure, and dimensions of potential fields. The payoff would be
lower development costs and improved oil flows.
• In health care, sensors and data links can monitor patient’s behavior and
symptoms in real time and at low cost, allowing physicians to better diagnose
disease and prescribe tailored treatment regimens. Sensors have been embedded
in patients with heart or chronic illnesses so that their conditions can be
monitored continuously as they go about their daily activities. Sensors placed on
congestive heart patients can now monitor
 The Internet of
Things

Opportunities for
improvement:
• In retail, sensors can capture shoppers’ profile data stored in their membership cards to help close
purchases by providing additional information or offering discounts at the point of sale.
• Farm equipment with ground sensors can take into account crop and field conditions, and adjust the
amount of fertilizer that is spread on areas that need more nutrients.
• Billboards in Japan scan passersby, assessing how they fit consumer profiles, and instantly change the
displayed messages based on those assessments.
• The automobile industry is developing systems that can detect imminent collisions and take evasive
action. Certain basic applications, such as automatic braking systems, are available in high-end autos. The
potential accident reduction savings resulting from wider deployment of these sensor systems could
exceed $100 billion annually
IT Agility, Consumerization, and
Competitive Advantage
Agility means being able to respond quickly.
a benefit of a scalable cloud IT infrastructure is that the IT function can be more responsive to
urgent agency needs.
Responsive means that IT capacity can be easily scaled up or down as needed. In contrast, with
a traditional non-cloud environment, it took months to increase the capacity of existing IT
services because of the need to acquire and install additional hardware and software. Agora
Games had the same time lag before transitioning to cloud storage. The benefit of IT agility to
business operations is being able to take advantage of opportunities faster or better than
competitors. Closely related to IT agility is flexibility.
Flexible means having the ability to quickly integrate new business functions or to easily
reconfigure software or apps. For example, mobile networks are flexible—able to be set up,
moved, or removed easily, without dealing with cables and other physical requirements of
wired networks. Mass migration to mobile devices from PCs has expanded the scope of IT
beyond traditional organizational boundaries—making location irrelevant for the most part. IT
agility, flexibility, and mobility are tightly interrelated and fully dependent on an
organization’s IT infrastructure and architecture.
 IT Agility, Consumerization, and
Competitive Advantage
IT consumerization is the migration of consumer technology into enterprise computing
environments. This shift has occurred because personally-owned IT is as capable and cost-effective
as its enterprise

Two key components of corporate profitability are:

1. Industry structure: An industry’s structure determines the range of profitability of the average competitor
and can be very difficult to change.
2. Competitive advantage: This is an edge that enables a company to outperform its average competitor.
Competitive advantage can be sustained only by continually pursuing new ways to compete. IT plays a key role
in competitive advantage, but that advantage is short-lived if competitors quickly duplicate it. Research firm
Gartner defines competitive advantage as a difference between a company and its competitors that matters to
customers. IT describes changes in opportunities for leadership. It is important to recognize that some types of
IT are commodities, which do not provide a special advantage. Commodities are basic things that companies
need to function, like electricity and buildings. Computers, databases, and network services are examples of
commodities. In contrast, how a business applies IT to support business processes transforms those IT
commodities into competitive assets. Critical business processes are those that improve employee
performance and profit margins.
Strategic Planning and Competitive
Models
Strategy planning is critical for all organizations, including government agencies,
health care, education, military, and other nonprofit ones.
strategic analysis is the scanning and review of the political, social, economic,
and technical environment of the organization
SWOT analysis, as it is called, involves the evaluation of strengths and
weaknesses, which are internal factors; and opportunities and threats, which are
external factors. Examples are:
• Strengths: Reliable processes; agility; motivated workforce
• Weaknesses: Lack of expertise; competitors with better IT infrastructure
• Opportunities: A developing market; ability to create a new market or product
• Threats: Price wars or other fierce reaction by competitors; obsolescence
 Strategic Planning and Competitive
Models
SWOT several rules to follow:
• Be realistic about the strengths and weaknesses of your organization • Be
realistic about the size of the opportunities and threats
• Be specific and keep the analysis simple, or as simple as possible
• Evaluate your company’s strengths and weaknesses in relation to those of
competitors (better than or worse than competitors)
• Expect conflicting views because SWOT is subjective, forward-looking, and
based on assumptions
Strategic Planning and
Competitive Models
Strategic planning is a series of processes in which an organization selects and
arranges its businesses or services to keep the organization viable (healthy or
functional) even when unexpected events disrupt one or more of its businesses,
markets, products, or services. Strategic planning involves environmental
scanning and prediction, or SWOT analysis, for each business relative to
competitors in that business’ market or product line. The next step in the
strategic planning process is strategy
Strategy defines the plan for how a business will achieve its mission, goals, and
objectives. It specifies the necessary financial requirements, budgets, and
resources. Strategy addresses fundamental issues such as the company’s position
in its industry, its available resources and options, and future directions.
Strategic Planning and
Competitive Models
A strategy addresses questions such as:
• What is the long-term direction of our business?
• What is the overall plan for deploying our resources?
• What trade-offs are necessary? What resources will it need to share? • What is
our position compared to our competitors?
• How do we achieve competitive advantage over rivals in order to achieve or
maximize profitability?
Five Industry Forces
 Five Industry Forces

1. Threat of entry of new competitors. Industries that have large profit

margins attract others (called entrants) into the market to a greater degree
than small margins.
2. Bargaining power of suppliers. Bargaining power is high where the supplier
or brand is powerful, such as Apple, Microsoft, and auto manufacturers.
Power is determined by how much a company purchases from a supplier.
The more powerful company has the leverage to demand better prices or
terms, which increase its profit margin. Conversely, suppliers with very
little bargaining power tend to have small profit margins.
3. Bargaining power of customers or buyers. This force is the reverse of the
bargaining power of suppliers. Examples are Dell Computers, Wal-Mart, and
governments. This force is high where there a few, large customers or
buyers in a market.
 Five Industry Forces

4. Threat of substitute products or services. Where there is

product-for-product substitution, such as Kindle for Nook or e-mail for fax, there
is downward pressure on prices. As the threat of substitutes increases, profit
margin decreases because sellers need to keep prices competitively low.
5. Competitive rivalry among existing firms in the industry. Fierce competition
involves expensive advertising and promotions, intense investments in research
and development (R&D), or other efforts that cut into profit margins. This force
is most likely to be high when entry barriers are low; threat of substitute
products is high, and suppliers and buyers in the market attempt to control.
That’s why this force is placed in the center of the model.
 Strategies for Competitive Advantage
Strategy – Description
Cost leadership – Produce product/service at the lowest cost in the industry.
Differentiation – Offer different products, services, or product features.
Niche – Select a narrow-scope segment (market niche) and be the best in quality, speed, or cost in that
segment.
Growth – Increase market share, acquire more customers, or sell more types of products.
Alliance – Work with business partners in partnerships, alliances, joint ventures, or virtual companies.
Innovation – Introduce new products/services; put new features in existing products/services; develop new
ways to produce products/services.
Operational effectiveness – Improve the manner in which internal business processes are executed so that the
firm performs similar activities better than rivals.
Customer orientation – Concentrate on customer satisfaction.
Time – Treat time as a resource, then manage it and use it to the firm’s advantage.
Entry barriers – Create barriers to entry. By introducing innovative products or using IT to provide exceptional
service, companies can create entry barriers to discourage new entrants.
Customer or Encourage – customers or suppliers to stay with you rather supplier lock-in than going to
competitors. Reduce customers’ bargaining power by locking them in.
Increase switching costs – Discourage customers or suppliers from going to competitors for economic reasons
Strategies for Competitive Advantage

Primary activities are those business activities through which a company produces goods, thus
creating value for which customers are willing to pay. Primary activities involve the purchase of
materials, the processing of materials into products, and delivery of products to customers.
Typically, there are five primary activities:
1. Inbound logistics, or acquiring and receiving of raw materials and other inputs
2. Operations, including manufacturing and testing
3. Outbound logistics, which includes packaging, storage, delivery, and distribution
4. Marketing and sales to customers
5. Services, including customer service
Strategies for Competitive Advantage

► Primary activities are supported by the following support activities:

1. The firm’s infrastructure, accounting, finance, and management.
2. Human resources (HR) management. For an IT-related HR trend
3. Technology development, and research and development (R&D).
4. Procurement, or purchasing
Thank you
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