Management of Information Systems in the Digital Age

Prof: David Dufour (davdufour@hotmail.com)

Lecture 1: Information systems for business managers

Smart stores reinvent the retail space. Online shopping apps invest into physical stores.

Online shopping has surged but (brick and mortar) retails stores are still here.
Ex: Sunning buys Carrefour China in June 2016 especially to have warehouse near residential
buildings and be even closer to the customer.

Ex: Curb side pick-up is placing an order online and then driving to the store to pick it up.

Middle manager’s role: to execute the organization strategy, to translate ideas into actions.

NB: Companies are investing averagely 46,8% in IT equipment, Software and R&D.

6 keys IS decisions that business executives must make:

1. How much should we spend on IS?
2. Which business processes should receive the IS dollars?
3. Which IS capabilities need to be companywide?
4. How good do our IS services really need to be?
5. What security and privacy risks will we accept?
6. Whom do we blame if an IS initiative fails?
VRIO Test

To be sustained, the source of advantage must be:

 Valuable
 Rare
 Hard to imitate
 Organized
IT on its own does not qualify – competitors can acquire the same IT.
Lesson 3

Network effect: Metcalfe's law states that the financial value or influence of a
telecommunications network is proportional to the square of the number of connected users
of the system.
! If people leave the network, it loses its value at a very rapid rate.

Traditional vs network economics

Network economics is actually a special case of traditional economics.
Valuable networks are scarce and the scarcer they are, the more valuable they are. Value
comes from scarcity.
The larger the network, the fewer (scarcer), there will be competing networks.

The business of platforms

A two-sided network has four networks effects

 A same-side effect for each side, i.e., preference regarding number of other users on own
side
 A cross-side effect in each direction, i.e., preference regarding number of users on other
side
 Each effect can be positive or negative (e.g. Covisint a B2B exchange organized by auto
manufacturers)
Networks that have two parallel networks:
- Supplier network
- Consumer network

Examples :
1. Youtube / Douyin creators vs viewers
2. Online marketplace sellers vs buyers
3. Smartphone app developers vs users
Each network is more valuable when network on the other side is larger.

Basic strategy for network owner growth and revenue:

 Create large consumer network (e.g. free usage)
 Reaching a critical mass
 Charge sellers for participation in network
 Sellers may charge consumers directly, instead of network owner

Some implications of network economics

Customers prefer the most valuable network
Even if not the best product or service
Controlling a dominant network
Source of sustained competitive advantage
Sometimes more than one successful network
If large user groups have very different needs. Should you fight to be the sole network, or
carve out separate network?

Tippy effect
Recognizing tippy markets

Electronic commerce – Business Models

Portals like Baidu, Yahoo or Facebook.

Gateways to the Web, users set as their home page.
Allows to search emlail news, calenders, maps…
They generate revenue by generic or targeted advertising.

Content provider
“Content” is defined broadly to include all forms of intellectual proporety such as Youtube,
Tiktok, Netflix, etc.

Transaction Broker
They provide convenience in transaction, travel (c-trip) and stock market.
Such as Alipay or Wechat.

Market creator or digital platform

They build a digital environment in which buyers and sellers can meet, display products,
search for products, and establish prices.
Such as Amazon, Taobao. In shared economy: Uber, AirBnB,…

Service Provider
offer services online such as applications, photo sharing, and online sites for data backup
and storage all use a service provider (storage in the cloud) - One Drive, Google Drive
//software as a service (SaaS) – Steam, MS Office 365

Community Provider
create a digital online environment where people with similar interests can
– transact (buy and sell goods);
– share interests,
– photos, videos;
– communicate with like-minded people;
– receive interest-related information;
– and even play out with adopting online personalities avatars.
Such as Instagram, WeChat, etc.

Wisdom of crowds.
– Large numbers of people can make better decisions about
topics and products than a single person (Surowiecki, 2004)
– Traditional marketing survey.
– Crowdsourcing: asking publicly for business
solution.
Ex: Netflix offered 1millon $ and received 44,014 entries from 5,169 teams on a method for
improving by 10% movies purchasing prediction
– Crowdfunding: Kickstarter, provide investor a
clear idea on solution popularity, while still in
development phase

Prediction markets:
– Peer-to-peer betting markets on specific outcomes (elections, sales
figures, designs for new products, sports events)
– Betclick
(Ex: Sports Betting, movie industry)

Revenue models

1. Advertising (Yahoo, Google)

They generate revenue by attracting a large audience of visitors who can then be exposed to
advertisements.
Most widely used revenue model; viewers don’t pay for content.
Ex : Yahoo (Banners) – Google (Adwords)

2. Sales (Amazon, iTunes)

They derive revenue by selling goods, information, or services.
Ex: Taobao, JD, Amazon, iTunes
Tech. enablers: Micropayment platform

3. Subscription (Newspapers, Netflix)

They offer content or services charges a subscription fee for access to some or all of its
offerings.
Content Producers often use this revenue model.
Content is perceived as having high added value, differentiated, and not easily available
elsewhere or easily replicated (! Google news)

offer basic services or content for free, while charging a

 4. Free / Freemium (Apps, Flicker)
premium for advanced or special features
Ex: Flicker - $24.95 “premium” provides unlimited
storage, high-definition video and playback, and no
advertising
Problem: convince to buy

5. Transaction Fee (eBay, Stock Trade, C-trip)

Charges a fee for enabling or executing a transaction
Good acceptance, brings ease and convenience, often
discounted and cost is not apparent.

6. Affiliate
send visitors to other Web sites in return for a referral fee or
percentage of the revenue
from any resulting sales.
Influencers (KOL) blogs – specialised news.

Mobile Commerce
They are always physically with the consumer.
They are uniquely identifiable to one consumer.
They allow to be aware of its geographic location.

Social Media
Jobs of social media is to have the brain time of their consumers.
For business it allows to reach a large number of potential consumers.

In China
Brands should design a go-to-market strategy that understands young Chinese consumers’
interests.
Trust digital marketing teams to make quick decisions and experiment with local, emergent
media.
Balancing “media” spend beyond classic channels to include stores and digital media and e-
commerce.

Competition between companies is fierce and brand recognition is crucial to stand out.
With the rise of e-commerce, consumers have access to a vast array of products and brands,
Making it more difficult for companies to capture their attention.

Business Intelligence framework

Business intelligence (BI) is a set of strategies and technologies for analyzing all data available
to a company and transforming it into actionable insights that inform strategic and tactical
business decisions.
 1 - Identify and collect data from all
internal and external sources available

2 - Transform the data into one

consistent format

3 - Data is organized as a data

warehouse or market

4 - Query and reporting: showing the

data in an intelligible form

1. Obtain data
- Operational data (inside)
- External data (outside)

2. Extraction, transformation and loading (ETL)

- Extraction: retrieve data from internal and external data sources
- Transformation: convert data into consistent formats so they can be meaningfully
combined
- Loading: create a single database or data file with all data together