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Moving Towards E-Business

As Usual

Opening Case - Dell Computer

Business insight:
What is the point of this case?

What are the two management concepts


are applied in this case?

Opening Case - Dell Computer

Business insight:

Sell directly to customers

What makes this approach possible?

Outsourcing

Negative holding costs!

Mass customization

Decide how much to produce based on demand


estimates & contracts
produce on demand

Powerful order fulfillment system

Opening Case - Dell Computer

Dell: http://www.dell.com

Debate:
What is more important to Dell, the fact
that it sells computers over the Web, or
the fact that its manufacturing process
permits it to build and deliver customized
computers efficiently?

Work Systems, Information


Systems, and E-Business

E-business = the practice of performing

& coordinating business processes


through the extensive use of information
technology (IT)

IT = computer and communication


technologies
E-business does NOT equal the Internet,
though the growth of the Internet acted as a
very powerful catalyst

Work System = a system in which


people and/or machines perform a
business process using resources (e.g.,
information, technology) to create
products/services for internal or external
customers

Information System = a work system that


processes information, thereby supporting
other work systems

Capture
Transmit
Store
Retrieve
Manipulate
Display

Four Main Themes:

Businesses operate through systems


Business professionals are part of all
phases of building & maintaining
information systems
Technological advances drive business
innovation
The success of IT-based systems is NOT
guaranteed

1. Businesses Operate
Through Systems

Systems & Subsystems

System = a set of interacting components


that operate together to accomplish a
purpose

Subsystem = a system component

10

Has all the features of a system, but it is part


of a larger system

Viewing a Firm as a System

11

System Terminology:

Purpose

Boundary

Separates the system from its environment

Environment

12

The reason for the systems existence


The reference for measuring the systems success

Everything pertinent to the system that is outside the


boundary

Inputs

Outputs

13

Objects & information that enter the system


from the environment
Objects & information that enter the
environment from the system

Alters Work System Framework

14

The Work System Framework


The concept of a work system can be used to visualize
almost any system that operates in an organization.
The Work System Framework helps you think about
business processes and the information systems that
support them. It focuses on the work being done.
Work is the application of human and physical resources
such as people, equipment, time, effort, and money to
generate outputs used by internal or external customers.
It ideas from several prominent management theories
including Total Quality Management, business process

reengineering, and systems theory.

15

Examples of Information Systems


Supporting Business Processes

16

Bar-code scanners and computers identify items sold


and calculate the bill (Performing customer checkout).
Airline reservation system keeps track of flights and
accepts reservations for customers (making airline
reservations).
System that identifies people by scanning and
analyzing voice prints (preventing unauthorized
access to restricted areas).
Word processing system for typing and revising book
chapters (Writing a book).

Elements of the Work System


Framework:

17

The internal or external customers of the business


process
The products and/or services generated by the
business process.
The steps in the business process.
The participants in the business process.
The information the business process uses or
creates.
The technology (if any) the business process uses.
(Context and Infrastructure discussed later.)

18

The Work System Framework


The Work System framework implies that although
people sometimes speak of computers as systems, the
system business professionals should focus on is the
system performing the work.
The system performing the work is much broader than
the technology. It includes the business processes, the
participants, any information used, and any technology
used.
The links are two-way, implying that the elements
should be in balance. Also, changes in one place may
result in changes in other elements.

19

Consder Some Work Systems

20

Ordering a Pizza
Use of an Automated Teller Machine
Hiring a New employee

Business Processes & the Value


Chain

Business process

A related group of steps (subprocesses) and/or


activities that use resources (including
information) to create value for internal or
external customers
Subprocess = a well-defined part of a process
Activity = less well-defined process component
Often an important role of IT is to transform an
activity into a better-defined subprocess

21

A process must add value for its


customers
Always analyze whether a process or
subprocess adds value or not

22

An obvious but surprisingly often overlooked


point

Business Processes & Functional


Areas

Traditional organizational structure is


centered around functional areas

May reinforce an inward-looking orientation

Functional silos

Current trend: reorganize around

customer-oriented processes

23

Business processes and functional areas of


business

24

Three Types of Processes

Processes that cross


functional areas
Processes related to a
specific functional area
Activities &
subprocesses occurring
in every functional area

25

Possible
problems when
functional areas
are
overemphasized

Question:
What are some typical
functional areas in a college of
university?
26

Some Functional Areas in a Typical


College or University

27

Admissions
Records and Registration
Financial Aid
Bursar
Human Resources
Accounts Payable
Budget, Finance, and
Accounting
Parking Services

Academic Department
University Advancement
Student Services
Residence Life
Public Safety
Physical Plant
Student Career
Development
Health Services

The Value Chain

The set of processes used by a firm to


create value for its customers. Includes:
Primary processes directly create the
value as perceived by the customers

Support processes indirectly create value


by supporting the primary processes

28

Primary processes for a hypothetical


restaurant

Question: Give some examples of restaurants that


follow this value chain.

29

The Supply Chain & the Customer


Experience

Note: Opportunities to increase value for the customer may exist


Outside the company.
30

Supply chain the transactions,


coordination, and movement of goods
between the firm and its suppliers
Each layer provides an opportunity to
increase value to the customer and/or
improve efficiency

Basic approach:
Standardized electronic links
Long-term agreements

31

The Trend Toward E-Business

32

Much more than a cool Web site!


E-commerce the part of e-business that
the customer experiences directly
B2B (business-to-business) vs. B2C
(business-to-consumer)

2. Phases in Building &


Maintaining Systems

33

Figure 1.7 Business Professionals Play


an Important Role in All 4 Phases

34

1. Initiation

35

Defining the need for a new work system


or for the change of an existing one
May occur as result of a known problem,
or as part of a planning process

2. Development

Acquiring & configuring hardware,


software, and other resources

36

Decide how the different parts of the system


will operate
Acquire the resources
Create the documentation
Testing

3. Implementation

Making the new process operational

37

Planning
User training
Conversion to the new system
Follow-up

4. Operation & Maintenance

38

Supporting the ongoing operation of the


system + efforts to enhance it and correct
possible problems

Table 1.4

39

3. IT As a Driving Force for


Innovation

40

Main Trends

41

Greater miniaturization, speed, and portability


Greater connectivity + continuing
convergence of computing and
communications
Greater use of digitized information &
multimedia
Better software and user interfaces
Growth of Telecommuting

IT Based Innovations in Every


Business Function

42

Product Design
Procurement Systems
Manufacturing Systems
Sales and Marketing
Delivery Systems
Customer Service Systems
Finance Systems

Computer-Aided Design

43

Enable designers to visualize how a


product will look.
The need to produce physical mock-ups
has been significantly reduced.
Originally applied in engineering and
architecture, it is now being applied in
other areas such as surgery, clothes
design, and hairdressing.

CAD in
unexpected places

44

Supply Chain Management

45

EDI (Electronic Data Interchange) is changing the entire


model of supply chain management in businesses.
The cost of processing simple transactions can be
reduced by more than an order of magnitude (e.g.
purchase orders from $55 ea. To $2.50 ea.).
SCM and EDI are essential ingredients to the
transformation of relationships between suppliers and
customers.
Among the most notable initial applications was Baxter
Healthcare where hospital supplies were ordered
directly with computer terminals in hospital stock rooms.

The Basic Supply Chain


Management Process

Customers link to suppliers using


EDI

47

Manufacturing

48

Computer-integrated manufacturing (CIM)


integrates the use of technology across the
manufacturing process, not just the design
phases.
The information content of a product is the value
that is added through use of information systems
rather than not using them.
Mass production techniques allows for mass
customization.

Mass Customization:
Building a customized bicycle

49

Sales and Marketing

IT has drastically changed the approach to


marketing.
Amazon.com capitalizes on electronic commerce.
Point of Sales (POS) systems provide new ways to
affect marketing - e.g. linking information about the
customer with the sale.

50

Loyalty Cards at Supermarkets


Ask for your Home Zip code
Discreet observation and collection.
BJs Wholesale Club product recall.

All to better improve the addressability in marketing.

Delivery and Logistics Systems

Delivery (logistics) Systems transport materials


where they are needed.
The need for accurate and accessible information
on where a product is located.

51

U.S. Army experience in Gulf War


Federal Express

New products are being developed: Instead of


delivering physical goods such as paper and forms,
consider what can be delivered over the network.
Consider impact of Global Positioning Systems.

Customer Service

The need for information on a customers current


status.
Work is still needed to integrate some voice-response
systems with customer databases (e.g. Bank Help
Centers).
Have the right information available when you need it.

Be able to initiate transactions and process them


immediately.

52

Optical Scan relevant documents

E.g. Car Rental Returns

Finance Systems

53

Consider how technology is being used to


replace currency as a form of barter.
Direct Deposit Payroll.
Smart cards.
Electronic stock trading.
Web-Based Real Estate Marketing (2% vs. 6%).
Eliminate the middleman and commissions.

Question?
How have any of these innovations
affected you?
Can you identify any IT-based
innovations that have affected
business functions?
Why does the technology provide
such innovation?

54

Data Processing Progress

55

Dramatic Progress in Processing


Data

56

Data Processing functions: capture, transmit,


store, retrieve, manipulate, display
Greater Miniaturization, Speed, and Portability
Greater Connectivity and Convergence of
Computing and Communications
Greater Use of Digitization and Multimedia
Better Software Techniques and Interfaces with
People

Six Data Processing Functions Performed by IT


FUNCTION: CAPTURE
Definition: Obtain a representation of information in a form permitting it to
be transmitted or stored
Example: Keyboard, bar code scanner, document scanner, optical character
recognition, sound recorder, video camera, voice recognition software

FUNCTION: TRANSMIT
Definition: Move information from one place to another
Example: Broadcast radio, broadcast television via regional transmitters,
cable TV, satellite broadcasts, telephone networks, data transmission
networks for moving business data, fiber optic cable, fax machine, electronic
mail, voice mail, internet

FUNCTION: STORE
Definition: Move information to a specific place for later retrieval
Example: Paper, computer tape, floppy disk, hard disk, optical disk,
CD-ROM, flash memory

57

Six Data Processing Functions Performed by IT


FUNCTION: RETRIEVE
Definition: Find the specific information that is currently needed
Example: Paper, computer tape, floppy disk, hard disk, optical disk,
CD-ROM, flash memory

FUNCTION: MANIPULATE
Definition: Create new information from existing information through
summarizing, sorting, rearranging, reformatting, or other types of
calculations
Example: Computer (plus software)

FUNCTION: DISPLAY
Definition: Show information to a person
Example: Laser printer, computer screen

58

Miniaturization:
Comparison of a vacuum tube and an
integrated circuit

59

Progress in Memory Chip Capacity Since


1973
Approximate date
of widespread
commercial availability
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000

60

Type of chip

Capacity in
number of bits

1 kilobit
4 kilobit
16 kilobit
64 kilobit
256 kilobit
1 megabit
4 megabit
16 megabit
64 megabit
256 megabit

1,024
4,096
16,384
65,536
262,144
1,048,576
4,194,304
16,777,216
67,108,864
268,435,456

Using a portable computer to give


parking tickets

61

Important Concept:
Convergence of computing and
communications.

62

Convergence: GPS

A leading edge flat panel monitor and


a computer terminal from the 1980s

65

The positive and negative


impacts of technical change

66

4. Obstacles When Applying


IT in the Real World

67

Unrealistic Expectations &


Techno-hype

Technology is almost never a solution by


itself

68

Often vendors claim to sell solutions

Be skeptical about the Internet hype

Difficulty Building & Modifying IT


Systems

Factors most often associated with


success:

69

User involvement
Executive support
Clear statement of requirements
Proper planning
Realistic expectations

Difficulty Integrating IT Systems

One of the most difficult issues


examples:

Medicares insurance claims (aborted) system


A unified system would have had to integrate 72
existing systems, built & operated by different
insurance companies

Y2K problem

70

Integrated supply chains

Organizational Inertia

71

Often a change that has a positive impact


in some areas, may also have a negative
impact in other areas
Natural tendency of both organizations &
individuals to resist change
Overcoming inertia may require a
consistent effort across all phases of the
system life cycle

Genuine Difficulty Anticipating


What Will Happen

72

No one really knows how a particular


innovation will develop in time
Eye-opening examples in table 1.7

Reality Check!

73

What are some examples of technohype you have encountered?


Have you experienced any of these
obstacles when applying IT?