BCIS CYU 1 & 2

Introduction to Information Systems

• Information systems: a challenge to define—range from computers to organizational structures, processes, and human involvement.

• Importance: Society's prosperity relies on organizing and managing information effectively.

• Visionaries like Mary Parker Follett, Herbert Simon, and Peter Drucker emphasized the significance of managing information in organizations.

The Role of Technology in Information Systems

• Technology is only one component of the information system.

• True impact comes from the holistic integration of technology across all system aspects.

• Leveraging IT is essential for optimizing organizational success.

Practices for Leveraging Technology

• Optimize digital tools within the workplace.

  • Update internal systems.

  • Replace outdated tools.

  • Train team members on new technology.

• Examples of leveraging technology:

  • Implement digital marketing tools.

  • Enhance product-related technologies.

• Goals:

  • Improve operational processes.

  • Free employees for strategic tasks.

  • Convert potential customers into paying patrons.

  • Expand and innovate within markets.

Broader Perspective on Technology in Business

• Technology: a cornerstone of modern business strategies.

• Enables:

  • Global connectivity.

  • Customer engagement.

  • Innovation in business processes.

• Hallmarks of exceptional organizations:

  • Flawless customer service.

  • Operational efficiency with reduced costs.

  • Internal innovation is driven by technology.

Real-World Applications of Technology

• Personalized customer experiences using sophisticated systems.

  • Examples: credit card providers, car rentals, airlines, hotels.

  • Technology streamlines services using personal data insights.

• Supply chain efficiency:

  • Example: A supervisor pre-equipped with delivery details before a truck arrives.

• Online retail advancements:

  • Example: Amazon and Home Depot's personalized recommendations based on customer preferences.

  • Amazon's success through continuous improvement and value addition.

Key Takeaways

• Leading organizations leverage IT to:

  • Build customer loyalty through personalized, seamless experiences.

  • Continuously innovate and refine business models.

• Technology is a unifying thread across successful businesses.

Closing Remarks

• The evolution of information systems highlights the strategic role of technology.

• Organizations leveraging technology effectively achieve growth and success.

Lecture Notes: Information Technology Portfolio Management

Introduction

• Information Technology (IT) portfolios represent the collection of IT investments within an organization.

• Organizations spend billions annually on IT but struggle to evaluate these investments effectively.

• Similar to evaluating financial instruments like stocks and bonds, IT projects also require evaluation, but with unique challenges.

Key Examples of IT Challenges

1. Obamacare IT System

   • Launch issues on October 14, 2013: Website crashes due to bottlenecks in subsidy verification processes.

   • Evaluation considerations:

     • Was the system successful in meeting its objectives?

     • Did the design prioritize user needs?

     • What improvements could have been made?

2. US Airways and America West Merger (2007)

   • Transfer of 7 million reservations led to 1.5 million errors.

   • Evaluation considerations:

     • Was the chosen system integration strategy effective?

     • What were the long-term impacts on operations?

IT Portfolio Management Overview

• Definition: Systematic management of large classes of IT investments.

• Evolution: Initially project-centric, now includes application maintenance and support.

• Analogy to Financial Portfolios:

  • IT investments are less liquid.

  • Measured using financial and non-financial metrics.

Components of an IT Portfolio

1. Current Investments:

   • Existing applications and processes to manage, optimize, retire, or enhance.

2. New Initiatives:

   • Investments adding incremental value through cost savings, productivity gains, or business advantages.

3. Externally Mandated Initiatives:

   • Regulatory or industry-required projects consuming significant resources.

4. Infrastructure Investments:

   • Shared assets like hardware and networks critical for underlying operations.

Application Portfolio Management (APM)

• Links business-oriented metrics to applications.

• Benefits:

  1. Informed Maintenance Decisions: Identify overlaps, consolidate systems, and free resources for new projects.

  2. Disaster Recovery Planning: Prioritize critical applications, define service levels, and allocate resources effectively.

  3. Enhanced Outsourcing Agreements: Provide accurate visibility to partners and establish responsibility structures.

Benefits of IT Asset Management

1. License Compliance: Tracks installed software to prevent unexpected costs.

2. Better Maintenance Planning: Identifies aging hardware/software for timely replacement.

3. Improved Utilization: Avoids redundant purchases and optimizes resource use.

Strategic IT Plan Development

• Align IT spending with business goals.

• Establish priorities for investments.

• Evaluate potential investment options to ensure alignment with strategic objectives.

Advantages of IT Portfolio Management

1. Spending Allocation by Goals:

   • Relate investments to business objectives and reassess project fit.

2. Validation of Strategic Plans:

   • Identify alignment or discrepancies between top-down goals and bottom-up project suggestions.

3. Trial Portfolios:

   • Simulate resource limitations to understand trade-offs and priorities.

4. Effective Communication:

   • Transparently communicate IT plans and unfunded projects to stakeholders.

5. Increased Visibility:

   • Holistic view of IT budgets, categorizing spending by supported business processes.

6. Transparency in Decision-Making:

   • Utilize disciplined, criteria-based decision-making linked to strategic objectives.

7. Cost Reduction:

   • Identify waste, consolidate applications, and reinvest saved funds.

8. Risk Management:

   • Assign risk indices to projects, balance risks across the portfolio, and adjust as necessary.

9. Facilitating Agility:

   • Integrated databases allow for quick response to changes, new priorities, and resource reallocation.

Conclusion

• Effective IT portfolio management bridges the gap between strategic business goals and IT investments.

• It enables organizations to optimize spending, improve resource utilization, manage risks, and maintain agility.

• When fully implemented, IT portfolio management provides transparency, cost savings, and better alignment with business objectives.

Definition and Debate

• Information is central to the "Information Age," but its definition is debated.

  • Is it simply data access?

  • Does it depend on technology or individual knowledge?

• Historical and theoretical perspectives reveal its complexity, with origins in Latin words informatio (tangible/intangible) and informo (shaping/molding).

Historical Interpretations

• Early Usage: Education and shaping minds through knowledge.

• Natural Sciences:

  • Shannon’s theory: Information is transmitted without focusing on meaning.

  • Carl Friedrich: Understandable information can generate more information.

• Biology: Defines and evolves structures (e.g., fetal development).

• Psychology: Bridges human cognition and computer processing.

• Philosophy: A "difference that makes a difference."

Modern Views

• Library Science:

  1. Early documentalists evolved into information scientists.

  2. General libraries = books; special libraries = research/data-centric systems.

• Buckland’s Information Types:

  1. As a thing: Documents or data.

  2. As knowledge: Conveyed understanding.

  3. As a process: Informing or communicating.

  4. Information Processing: Manipulating or deriving data.

DIKW Hierarchy

• Data → Information → Knowledge → Wisdom (DIKW):

  • Data: Raw symbols and attributes.

  • Information: Analyzed and useful data.

  • Knowledge: Practical application.

  • Wisdom: Judgment incorporating ethics and aesthetics.

• Distortion Risks:

  • Flawed data → Distorted information → Erroneous knowledge → Ignorance.

Misinformation and Disinformation

• Disinformation: False, intentional (e.g., hoaxes, fake news).

• Misinformation: Unintentional falsehoods (e.g., misreported voting issues).

• Impact: Disrupts societal and organizational trust.

Data Analytics

• Purpose: Transform raw data into actionable insights.

• Phases:

  1. Descriptive: Summarize data (e.g., mean, standard deviation).

  2. Explanatory: Test assumptions and hypotheses.

  3. Confirmatory: Validate with statistical tools.

• Tools: Excel, MySQL, IBM Cognos, etc.

Information Systems

• Definition: Interconnected systems to collect, process, store, and disseminate information for practical purposes.

• Examples:

  • Airline Reservations: Databases like Sabre.

  • eCommerce: Systems like Amazon query databases for real-time decisions.

• Key Concepts:

  • Information involves communication via signals/messages.

  • Information systems support decision-making, coordination, and control.

Key Takeaways

• Information is multidimensional, with roots in history, science, and technology.

• Effective information systems and analytics are critical for transforming raw data into valuable insights.

• Misinformation and disinformation highlight the importance of accuracy and ethical considerations in information processing.

1. Challenges with IS Strategic Planning

• Historically, IS managers resisted strategic planning due to:

  • Legacy system issues.

  • Rapidly evolving technologies.

  • Pressures for digital transformation.

  • Demands of cost-cutting and tight deadlines.

• Strategic planning viewed as futile without clear alignment with business needs.

2. Importance of IS Planning in Times of Change

• IS planning becomes crucial during significant changes, such as:

  • Mergers (e.g., Bank of America and Nations Bank).

  • Large-scale system implementations (e.g., London ambulance service).

  • AI integration (e.g., Starbucks enhancing customer experiences).

3. Defining the IS Plan

• The IS plan comprises computer-based applications aligning with business goals.

• Collaboration between CEOs and CIOs is essential to:

  • Integrate IS strategy with business objectives.

  • Address organizational culture challenges in digital transformations.

4. Key Elements for IS Plan Success

• Alignment between IS goals and business strategy.

• Senior executive support to reinforce its impact on the bottom line.

• Comprehensive cost-benefit analyses (tangible and intangible factors).

• Proper leadership selection, often a tech-savvy individual.

• Iterative improvements and updates to the IS plan.

Case Study: Starbucks and Digital Transformation

• Initial Challenges: Faced growth stagnation due to economic downturn (2008) and competition.

• Digital Integration:

  • Introduced Mobile Order & Pay (MOP) in 2015:

    • Increased efficiency, reduced wait times, and boosted transactions.

  • Leveraged AI and analytics to understand customer behavior and preferences.

• Pandemic Response:

  • Launched Starbucks Pickup stores for app-based orders.

  • Gained 3M new app users in Q3 2020.

• Outcome: Demonstrated innovation and adaptability, securing a leading position in digital transformation.

5. Business Strategies and IS Planning

• Strategies must address external complexities and forecast future needs.

• Tools for planning:

  • Multi-year budgets.

  • Gap analyses.

  • External market and economic research.

• Firms must innovate continuously to sustain market leadership (e.g., Amazon).

6. Categorizing Business Strategies

• Business strategies divided into four classes (Table 2.1):

  • Class 1 & 2: Operational focus, cost-center management.

  • Class 3 & 4: Transformational focus, new market creation.

• Example: Xerox's IS efforts misaligned with its mission, resulting in missed transformation opportunities.

7. Case Study: Amazon Fulfillment Centers

• Operates numerous facilities as cost centers.

• Challenges firms to shift from short-term operational efficiencies to long-term strategic innovation.

8. Tools for Business Strategy

• Boston Square Framework:

  • Links product life cycle stages (initiation, growth, maturity, decline) with market share and profitability.

  • Example: Iomega's Zip drives adapting to external threats.

• Competitive Forces Framework (Michael Porter):

  • Evaluates market dynamics and organizational positioning.

9. Product Life Cycle Implications

• Each product transitions through four stages, requiring strategic adjustments to:

  • Address external threats.

  • Extend product life cycle (e.g., Iomega’s introduction of higher-capacity drives).

• Future viability hinges on anticipating shifts (e.g., cloud computing overtaking physical storage).

10. Stars: High Market Share & High Market Growth

• Significant potential resides in existing products or services labeled as Stars.

• Stars contribute substantially to revenue but face intense competition.

• Require continuous R&D investment to sustain market share and growth.

• Example: AstraZeneca’s Symbicort (asthma & COPD drug) had FDA approval in 2006 and later released a generic version to maintain competitiveness.

• Pharmaceutical R&D is expensive (~$500M over 10–15 years), requiring companies to continually seek new Stars before patent expiration.

• Example: Pulse Oximeters during COVID-19 became a Star due to increased demand.

11. Cash Cows: High Market Share & Low Market Growth

• Mature products with strong market share but declining growth.

• Additional investments may yield limited returns.

• Incremental improvements may extend the product lifecycle.

• Example: Microsoft Office continues generating revenue despite market saturation.

12. Dogs: Low Market Share & Low Market Growth

• Once Cash Cows, but declined due to competition or obsolescence.

• Example: Philips Plasma TVs (2008) – exited US and Canada due to intense competition.

• Companies may either discontinue or continue for strategic reasons.

• Example: Microsoft & Yahoo maintaining free email services despite financial losses to support other business areas.

13. Strategic Use of the Product Portfolio Model

• Ensures balanced investment across different product categories.

• Suggests net cash flow reinvestment in future product development.

• Assumes larger market share correlates with higher profits (not always true, e.g., Boeing).

• SBU (Strategic Business Units) approach focuses on entire business areas rather than individual products.

14. IT Strategies Across Product Lifecycle Stages

a. Introduction & Growth (High Market Growth, Low Market Share)

• Innovation is critical to gain a foothold.

• Example: Amazon’s early online book sales market.

• High cash expenditure and low returns initially require diversification to maintain investor confidence.

b. Maturity (High Market Growth, High Market Share)

• Customer-centric IT strategies drive success.

• Example: American Airlines’ SABRE system improved operational efficiency.

• Example: Harrah’s Ynet CRM system saved $20M annually while increasing market revenue.

c. Cost Efficiency in Slow-Growth Markets

• Optimized operations & cost-cutting IT solutions.

• Example: Monsanto’s purchasing card system reduced invoice processing costs.

d. Decline (Low Market Growth, Low Market Share)

• Strategic divestment or sustained operations for indirect benefits.

• Example: Gmail monetization via targeted advertising.

• Example: Yahoo’s email services drive traffic to other Yahoo products.

15. IT Application Portfolio Model

• Based on the product portfolio framework, it categorizes IT applications:

  • High Potential: Innovative, early-stage applications tested through prototyping.

  • Strategic Applications: Critical for competitive advantage, requiring rapid development.

  • Key Operational Applications: Enhance efficiency, accuracy, and cost-effectiveness.

  • Support Applications: Maintain business functions but do not drive competitive advantage.

16. Key Takeaways

• The product portfolio model guides businesses in resource allocation.

• IT strategies evolve alongside product life cycle stages.

• Balancing innovation, efficiency, and cost management is crucial for long-term success.

• Businesses must reinvest in R&D to maintain growth and competitiveness.

Management Improves Performance

Management plays a crucial role in ensuring stability, reducing costs over time, and improving performance. Key operational applications are generally developed and integrated into systems to avoid duplication and misinformation. This balance between cost and benefits is critical when evaluating alternatives.

Supportive IT Applications

• Support applications are designed to enhance productivity and efficiency in existing tasks.

• Low-cost, long-term solutions often lead to selecting packaged software, sometimes at the expense of user needs.

• Many support applications are implemented due to legal requirements rather than strategic benefits.

• Modifications to support applications are generally to prevent obsolescence, given the fast pace of IT industry changes.

• Cost-effectiveness in managing support applications requires careful allocation of funds and resources.

• Firms may maintain multiple high-potential initiatives, with some evolving into strategic applications over time.

• When applications transition to strategic status, individual ownership is typically relinquished, requiring senior management support and IT department involvement.

Evolution of Applications

• Strategic applications lose their appeal over time as competitors replicate them or market needs shift.

• Businesses must integrate strategic systems into business processes to maintain effectiveness.

• Applications are often re-engineered for long-term use.

• Key operational systems may need reevaluation based on benefits, costs, and alternative lower-cost solutions.

• Standardization plays a significant role in determining whether operational systems transition into support applications.

Competitive Forces

Michael Porter outlines three fundamental competitive strategies:

1. Differentiation Strategy – Providing exceptional value through unique products, allowing for premium pricing.

2. Cost Leadership Strategy – Maintaining a low-cost structure to compete primarily on price.

3. Focused Strategy – Targeting a niche market protected by factors like geographic isolation or strong customer relationships.

Porter's Five Forces

A firm’s competitive strategy is shaped by:

1. New Entrants – Barriers to entry help deter competition.

2. Suppliers – Strengthening supplier relationships can improve negotiation power.

3. Customers – Increasing switching costs can solidify customer retention.

4. Substitutes – Developing unique offerings helps mitigate threats from alternative products.

5. Competitors – Price wars and strategic alliances can shift market dynamics.

Understanding and managing these forces enables firms to position themselves effectively in the marketplace. Technological advancements also influence these forces, impacting strategy formulation.

Value Chain Analysis

• Firms use value chain analysis to identify opportunities for competitive advantage.

• Activities are categorized into primary (product creation, marketing, delivery, post-sale services) and support activities (infrastructure, HR, procurement, and IT).

• IT plays a transformative role, enhancing coordination and operational flexibility.

Sustainable Competitive Advantage

• True competitive advantage arises when firms create barriers that competitors cannot easily overcome.

• Competitive sustainability is influenced by external factors like macroeconomics, politics, and regulations.

• Merely adopting IT does not guarantee a competitive edge, as competitors can replicate innovations quickly.

• IT adoption is necessary for maintaining market position rather than achieving a sustained advantage.

• Examples: Automated teller machines (ATMs) in banking have not yielded measurable benefits for early adopters.

Why IT Alone Fails to Deliver Competitive Advantage

1. Similar Starting Points – Competitors can recruit employees, work with the same vendors, and replicate experiences.

2. Equalized Capabilities – IT solutions can be bought and implemented by competitors at lower costs.

3. Scale Limitations – Large firms often require costly, customized systems instead of vendor-supplied packages.

4. Lack of First-Mover Benefits – Many IT innovations lack barriers to imitation.

5. Necessity vs. Skill – Some innovations are essential but require specific skills to yield benefits.

Two Paradigms for Sustained Competitive Advantage

1. Industry Structure Perspective – Certain industries have inherent structural barriers that create competitive advantages.

2. Resource-Based Perspective – Firms build unique resources and capabilities over time, leading to sustained success.

Key Concepts in IS Planning

• Information Systems (IS) Planning: Defines a portfolio of IT applications to achieve business goals.

• Success Factors for IS Planning:

  • Alignment between IS goals and business strategy.

  • Senior executive buy-in.

  • Proper cost-benefit analysis.

  • Selecting the right personnel.

• Business Strategy Frameworks:

  • Boston Square – Categorizes business units as Stars, Wildcats, Cash Cows, or Dogs.

  • Competitive Forces Framework – Uses Porter’s Five Forces to shape strategic decisions.

• Classification of IT Applications:

  • Strategic Applications – Provide long-term competitive advantages.

  • High-Potential Applications – May evolve into strategic assets.

  • Operational Applications – Essential for daily business functions.

  • Supportive Applications – Enhance efficiency but do not provide competitive differentiation.

Conclusion

Sustained competitive advantage requires a combination of strategic planning, market positioning, and unique capabilities. While IT is a critical enabler, it must be aligned with broader business strategies rather than relied upon as the sole driver of competitive success.

Lecture Notes: IT Application Portfolio

Introduction

• IT application portfolio defines the range of current and future applications.

• Applications are categorized as high potential, strategic, key operational, and support.

• Each category serves a distinct purpose in business strategy and operations.

1. High Potential IT Applications

• Linked to new business ideas or technological opportunities.

• Developed through rapid prototyping and evaluation.

• Aim to minimize resource wastage and quickly reject failures.

• Typically championed by individuals within the organization.

• Critical factors:

  • Alignment with business strategy.

  • Economic viability.

  • Clear responsibilities and roadmap for further development.

• Research and development oriented.

2. Strategic IT Applications

• Arise from market demands and competitive pressures.

• Driven externally by customers and suppliers.

• Require rapid development to capture business opportunities.

• Business objectives, success factors, and management vision are well-defined.

• Emphasis on:

  • Flexible solutions adaptable to business changes.

  • Integration with business initiatives to maintain commitment.

  • Continuous innovation to sustain competitive advantage.

3. Key Operational IT Applications

• Enhance performance of existing business activities.

• Focus on speed, accuracy, effectiveness, and cost efficiency.

• Depend on high-quality solutions and robust data management.

• Promote stability and cost reduction over time.

• Characteristics:

  • Integrated systems to prevent duplication and misinformation.

  • Balance between cost and benefits for optimal evaluation.

  • Standardization to ensure long-term sustainability.

4. Supportive IT Applications

• Ensure productivity and efficiency in routine operations.

• Low-cost, long-term solutions are preferred.

• Often involve packaged software, occasionally compromising user needs.

• Frequently implemented due to legal or regulatory requirements.

• Objectives:

  • Avoid obsolescence rather than provide strategic advantages.

  • Cost-effective allocation of IT resources.

  • Maintain organizational peace of mind.

Application Evolution and Transition

• Applications evolve based on market dynamics and organizational needs.

• High potential applications can become strategic if they prove valuable.

• Senior management involvement is crucial for scaling up high potential applications.

• Strategic applications may lose uniqueness as competitors adopt similar solutions.

• Over time, strategic applications integrate into business processes and may transition into key operational or support applications.

• Example: FedEx package tracking system initially strategic but later became a key operational necessity.

Case Studies

Microsoft Hotmail (1998)

• Microsoft acquired Hotmail with 8.5 million customers.

• Initially aimed at sustaining via advertising.

• Advertising covered only 20% of operational costs.

• Shifted towards non-advertising revenue models.

Yahoo Mail (2002)

• 80% of Yahoo Mail traffic used other Yahoo services.

• Advertising generated significant revenue but did not cover full operational costs.

• Email systems transitioned into a support function to sell other services.

Application Classification Exercise

• 2x2 Matrix

  • High Potential: Future business success applications.

  • Strategic: Critical for business strategy execution.

  • Key Operational: Essential for current business operations.

  • Support: Valuable but non-critical applications.

• Example: Airline Online Reservation System

  • Not High Potential: Not experimental or prototype-based.

  • Not Strategic: Lacks flexibility and rapid development.

  • Not Supportive: High quality and integral to business operations.

  • Key Operational: Ensures stability, efficiency, and cost-effectiveness.

Key Takeaways

• Defining an application's purpose within an IT portfolio is crucial for strategic alignment.

• Misclassification (e.g., treating an operational system as strategic) can lead to inefficiencies.

• Successful IT application management requires careful evaluation of cost, benefits, and business needs.

Conclusion

• Applications transition over time based on business needs and industry evolution.

• Organizations must reassess IT portfolios periodically for optimal alignment with strategy.

• Clear purpose and proper classification ensure smooth IT-business integration.