AI Exam 2

What is the central premise of the 'Strategy Before Technology' framework?

Technology should support a chosen business strategy rather than determine the strategy itself.

What does it mean to design information systems 'from the outcome backward'?

To start with the specific value the business intends to create and work backward to determine the required system components.

Why does a 100% accurate demand-forecasting model fail to deliver customer value if store shelves remain empty?

Because a working technology does not guarantee a working business system if surrounding inventory, supplier, employee, or replenishment processes cannot act on the output.

Why does a working technology not guarantee a working business system?

Even a technically perfect system creates no business value if surrounding processes (inventory, supply, labor, execution) break down.

How does the strategic perspective shift the evaluation of Artificial Intelligence?

It shifts focus from evaluating individual AI tools tactically to designing complete information systems configured around strategic outcomes.

What three tactical evaluation questions characterized the past focus on individual AI tools?

1. Does this AI create value?

2. Does it fit the task?

3. Are the consequences acceptable?

What key question defines the 'New Focus - Design' approach to information systems?

How must the organization configure its capabilities and complete information system to deliver a chosen strategy?

What are the four sequential stages of designing backward from the strategic promise?

1. Strategic Promise

2. Required Capabilities

3. Information Requirements

4. System Design

In the backward system design process, when should technology selection occur?

Only after the organization has clarified its strategic promise, required capabilities, and information requirements.

What fundamental constraint exists when defining an organization's Strategic Promise?

An organization cannot optimize a system for everything; it must choose a primary promise.

What are examples of strategic promises an organization can choose to emphasize?

Low Cost, Convenience, Speed, Selection, Responsiveness, Differentiated Experience, and Premium Service.

What statement must an organization be able to complete before evaluating a technology investment?

“We compete by providing..."

In Step 2 of system design, what is an organizational 'capability'?

A reliable combination of resources, decisions, processes, and systems that allows the organization to consistently deliver its strategic promise.

If an organization's strategic promise is 'Rapid Delivery', what three capabilities are required?

1. Route orders in real time.

2. Fulfill orders from inventory near the customer.

3. Reallocate inventory as demand changes.

What are the four quadrant dimensions used to define Information Requirements in Step 3?

1. What (Exact data required)

2. When (Precise timing needed)

3. Who (People/systems requiring access)

4. Quality (Accuracy, currency, completeness)

Why is simply stating that a business 'needs data' insufficient for information system design?

Because effective design requires specifying exact data content, precise timing, authorized users/systems, and necessary quality levels.

What are the five essential layers of a complete information system stack?

1. Technology

2. Data

3. Policies

4. Processes

5. People

In system design, what role do 'Policies' play within the five-layer stack?

Policies define decision rules, controls, and accountability.

What four external considerations surround the complete system design stack?

1. Risk

2. Cost

3. System-Wide Effects

4. Organizational Readiness

Why are the five layers of an information system depicted as equal in size?

To show that technology is only one component; weakness in any layer (data, policies, processes, or people) can prevent achieving the business outcome.

How do Technical Metrics differ from Strategic Metrics in system measurement?

Technical metrics measure tool-level performance (e.g., forecast accuracy), while strategic metrics measure whether the system fulfills the customer promise (e.g., order-to-door time).

What is the key guideline for aligning performance measurement with strategy?

Metrics should reflect the customer promise—not merely the technical performance of the technology.

What are the five steps of the 'Applied Checkpoint: From Promise to Design' workflow?

1. Choose a strategic promise.

2. Identify required capabilities.

3. Specify information needed.

4. Identify necessary changes to people, processes, policies, and data.

5. Evaluate proposed technology investment.

Why should companies avoid copying another firm's visible technology layout directly?

Because different business strategies and operating priorities require fundamentally different system designs.

What three core questions reveal strategic differences between competing retailers?

1. Where must inventory be available?

2. What customer promise must the system support?

3. Which operating priorities matter most?

What are the four interlocking components of the Strategy-to-System Framework?

1. Business Strategy

2. Required Capabilities

3. System Architecture

4. Business Outcomes and Potential Advantage

In the Strategy-to-System Framework, what elements constitute 'System Architecture'?

The people, processes, data, policies, and technologies that support required organizational capabilities.

How does Amazon's network emphasis differ from Walmart's network emphasis?

Amazon emphasizes a fulfillment-network model focused on delivery speed and large assortments, while Walmart emphasizes a store-network model focused on store availability, local pickup, and cost control.

What key priorities drive Amazon's fulfillment-network emphasis?

Large assortment availability, rapid delivery forecasting, and coordination across fulfillment and last-mile operations.

What key priorities drive Walmart's store-network emphasis?

Shelf availability, omnichannel coordination and local pickup, and rigorous cost control.

How do system requirements contrast between Dollar General and Nordstrom?

Dollar General prioritizes low operating cost, focused assortments, and efficient replenishment, whereas Nordstrom emphasizes high inventory visibility, associate support, and deep customer service.

Why would installing a highly personalized, information-rich customer system at Dollar General be misaligned?

Because Dollar General competes on small-format convenience and low cost; complex personal service features add unnecessary cost and operational complexity.

In mass retail, what constitutes the 'Shared Core' between Walmart and Target?

Mass assortment, large physical store footprints, omnichannel fulfillment roles, and shared basic retail capabilities.

Where does Target pivot its analytics and system emphasis compared to Walmart?

Target pivots toward curated assortments, owned brands, store experience, and basket size, while Walmart pivots toward supply-chain scale and cost efficiency.

What is considered the core strategic variable in retail information system design?

Inventory location ("Where must the inventory be?").

How does inventory placement impact an organization's information system?

It determines what must be forecast, which data must be current, where labor is deployed, and how replenishment is managed.

What is the 'Illusion of the Fast Follower' in technology adoption?

The belief that a competitor can achieve equal strategic benefit simply by copying a leader's surface digital interface or software.

Why does adding an app or AI fail to make a store-centered retailer operate like a fulfillment-network retailer?

Because surface technology cannot bridge deep structural differences in inventory placement, last-mile capacity, store workflows, and supply chain processes.

When a customer requests a standard black T-shirt, where is the inventory located for Amazon versus Walmart?

Amazon positions it in a regional Fulfillment Center; Walmart positions it on a local store-hub shelf.

When fulfilling a standard black T-shirt request, what primary data does Amazon need versus Nordstrom?

Amazon requires ZIP-code demand history and routing data; Nordstrom requires customer history profiles and styling data.

What single rule evaluates whether an information system is a good strategic fit?

If you cannot explain the strategy, you cannot determine whether the system is a good fit.

Why do surface features alone rarely yield a durable competitive advantage?

Because competitors can easily copy user interfaces and software; lasting advantage stems from the deeply integrated organizational system underneath.

What primary goal defines Operational Improvement?

Becoming better, faster, cheaper, or higher-capacity

What primary goal defines Competitive Advantage?

Creating distinctive customer value or a meaningful, defendable cost advantage.

How do Operational Improvement and Competitive Advantage compare on imitability and durability?

Operational improvements are highly imitable and offer fleeting durability; competitive advantages have lower imitability and potentially longer-lasting durability.

Why do operational gains fail to become durable competitive advantages when widely adopted?

When all competitors can buy the same software or adopt the same process, the operational gain becomes the new industry baseline rather than a differentiator.

In the 'Strategic Iceberg' model, what sits above the waterline?

The Feature (highly visible, easily measurable, readily copyable).

In the 'Strategic Iceberg' model, what sits below the waterline?

The Underlying Capability (less visible, shaped by organizational context, and difficult to imitate).

Which five connected components generate the underlying capability in the Strategic Iceberg framework?

1. People

2. Processes

3. Data

4. Policies

5. Technology

Prior to automating a business process, what essential question must be evaluated?

Does the initiative support the desired business outcome and the organization's strategic priorities?

What risk arises when an organization automates a process before improving or aligning it strategically?

Automating an inefficient or misaligned process simply executes flawed procedures faster without producing strategic value.

The sequence of prioritizing strategy design before choosing software tools is known as _____.

Strategy Before Technology

Summary statement: Technology follows _____ — not the other way around.

strategy

Which system emphasis most closely supports Amazon’s dominant retail operating model?

Positioning inventory across fulfillment nodes for rapid delivery.

In the strategic iceberg model, what appears above the water?

The customer facing feature that competitors can readily observe.

Which sequence best represents designing backward from a strategic promise?

Strategic promise, capability, information requirements, technology.

What is necessary for an operational feedback loop to strengthen a capability?

Trustworthy information that leads to adjustments in how work is performed.

A fast follower copies the appearance of a competitor’s successful service but achieves weaker results. What is the most likely explanation?

The follower did not reproduce the capability supporting the service.

What distinguishes operational improvement from competitive advantage?

Operational improvement raises performance, while competitive advantage creates difficult-to-match separation.

What are complementary choices?

Organizational choices that become stronger by reinforcing one another.

A company adds a same-day delivery button to its website. What would most strongly indicate that the feature represents a genuine capability?

The company can coordinate inventory, fulfillment, and delivery reliability.

A restaurant promises fast service but rewards employees primarily for minimizing ingredient costs. What problem does this illustrate?

The restaurant’s organizational choices do not reinforce one another.

Why should two retailers with different customer promises avoid automatically building identical information systems?

Different promises require different capabilities and system priorities.

An AI model classifies returns accurately, but customers still wait because specialist reviews are delayed. What should the process owner do?

Evaluate the complete flow, including escalations and customer outcomes.

What task characteristic most strongly supports the use of AI-enabled automation?

The task follows rules with few exceptions in a stable interface.

Which activity would be classified as necessary protection rather than waste?

Checking a refund to prevent fraud and protect company funds.

Why might adding another reviewer to an overloaded approval queue fail to solve the problem permanently

The upstream cause could continue sending avoidable work into the queue.

A team can normally complete 100 requests per day, but 140 new requests arrive each day. What should a manager expect if conditions remain unchanged?

The unfinished work will accumulate because arrivals exceed capacity.

How should managers set a confidence threshold for routing AI-classified cases?

Use testing evidence, error consequences, and available review capacity.

Managers identify several weaknesses in a process but cannot address all of them at once. Which issue should receive priority?

The issue with the largest supported effect on the final outcome.

Which task is the best fit for robotic process automation?

Entering approved return data into stable fields in a legacy system.

What is the primary responsibility of a process owner?

Monitoring whether the end-to-end process delivers its intended result.

A company changes the layout and field names in an application used by an RPA bot. What is the most likely concern?

The bot may fail because it depends on a stable interface and input format.

Why should an organization trace data lineage after discovering an error on a dashboard?

To identify the source and downstream uses instead of repairing only the visible report.

Which responsibility most closely belongs to a data steward?

Maintaining day-to-day consistency and investigating recurring quality problems.

Which characteristic most clearly identifies structured data?

It is organized into consistent fields that support sorting and summarizing.

Which statement best distinguishes a data point from an insight?

A data point is a recorded observation, while an insight is an interpreted pattern worth examining.

Marketing counts recent email openers as active customers, while finance counts recent purchasers. Both calculations are correct. What should the organization do next?

Clarify the definitions and purposes before treating the measures as a comparable.

Customer satisfaction scores decline while written reviews increasingly mention defective zippers. What is the most responsible initial conclusion?

The combined pattern supports investigating zipper problems as a possible cause.

Sales are below target, but pending returns have not been included in the result. Which recommendation best matches the available evidence?

Investigate the variance and pending returns before taking a larger action.

A manager needs to monitor a focused set of current indicators and notice exceptions that may require attention. Which communication form best fits this need?

A monitoring dashboard.

Why might a store manager and a chief financial officer need different views of the same sales performance?

Each person needs evidence matched to a different decision and level of control.

A bar chart displays values of 95,94, and 93 but begins its vertical axis at 85. What is the main communication risk?

The scale may exaggerate the visual difference among the values.