Week 2 Fall 2011 Rev0

Introduction to Business Information
Systems
WEEK 2
THEME: Tour Opportunities to Contribute ( Career)
Last Week Ch 1 of Text Strategy and Technology
(Achilles heel of CIOs)
This week: More on Strategy and Information Systems
and Expectations: Answers to Case and Quiz/Exam
Questions
Course Theme: A Tour of Technologys Role in Management
Sites of Opportunities to Contribute
Weeks 1-3
Strategy and
Technology
Changing the
Organization
Profits from
Information
Collaborating
using IT
Technology
Enabling Growth

Systems
WEEK 2 OF 13
Ch 2 of Text: Identifying Competitive Advantages
Ch 4: Measuring Success
Ch 5: Org. Structures to Support Strategy
Expectations: Case (and Quiz and Exam) Answers
Enhancing Competitive Advantage with IS

First: the Enterprises Strategic Intent:
What we choose to do (and to not do) for Competitive Advantage:
Create value for attractive groups of buyers
Where our value > competitors and cost to deliver
How we do this is hard to imitate (success usually imitation)
(Porters) Generic Strategy
Then: Carve out and sustain Competitive Advantage
(Porters) Five Forces Buyer value we can keep as profits

Value Chain: More Buyer value > Costs
Why?
Avoid being Mordac the Denier

Implement, measure, organize for effective Info Systems that contribute
to strategic intent
Success Often A Generic Strategy
Dacia
D
a
c
i
a
Dacia
Cost Leadership requires:

Reducing costs from suppliers
Low cost, effective sales and service
Scale economies (problem with Cost
Leadership + Focus)
Attract/retain buyers with design, service
but not with costly quality
Differentiation:
Requires added value: safety of Quattro
May be defended by proprietary
technologythen less tangible image
(Never Follow)
Being First Mover may frustrate imitators
Scale economies perhaps less important
(at first)
Focus (2 strategic systems) Generic Strategy

Generic Strategy
Supply Chain
Customer
Management Focus Relationship Focus
Cost Leadership
Broad Market
(Hyundai)
Keep component
costs down, quality
up, volume high?
Perceived value,
service and just as
good messages?
Differentiation
Broad Market
(Audi)
Keep components
costs/quality
balanced + systems
racing ahead?
Perceived
leadership in what
Quattro fans
value?
Differentiation
Focused Market
(Hummer)
Keep components Perceived response

robust, muscular
to safety, green
with balanced costs concerns, better
+ lower weight?
gas efficiency?
Observations Generic Strategy

Generic Strategy
Supply Chain
Management Focus
Customer Relationship
Focus
Cost Leadership
Broad Market
(Hyundai)
Keep component
costs down, quality up,
volume high?
Perceived value,
service and just as
good messages?
Differentiation Broad
Keep components
Market
costs/quality balanced
+ systems racing
(Audi)
ahead?
Differentiation
Focused Market
(Hummer)
Keep components
robust, muscular with
balanced costs +
lower weight?
Perceived leadership
in what Quattro fans
value?
Perceived response to
safety, green
concerns, better gas
efficiency?
Getting beyond Generic Strategy:

Five Forces and
Value Chain Analysis
Five Forces Pushing Open Room for Profits

(Porters) Five Forces Model: assess, perhaps manipulate relative
attractiveness
Michael Porter Describing Five Forces
http://www.youtube.com/watch?v=mYF2_FBCvXw

Force
Profit is Better if Force is
Buyers Power
Less (fewer perceived

alternatives, switching
costs, loyalty rewards)
Supplier Power
Threat of Substitution
Threat of New Entrants
Rivalry among Existing
Competitors
Info Systems Influence

Loyalty programs
Cust. Relationship
Management

Force
Buyers Power

Loyalty programs
Cust. Relationship
Mgmnt.
Supplier Power
Less (more alternatives,

processes to combine
lower costs with good
quality and delivery)
Global B2B Marketplace

(many suppliers, buyers)
Private Exchange/ Reverse
Auction (one buyer)
Competitors

Force
Buyers Power

Loyalty programs
Cust. Relationship
Mgmnt.
Supplier Power


Auction (one buyer)
Less
Unique abilities CRM,

Loyalty

Competitors

Force
Buyers Power

Loyalty programs
Cust. Relationship
Mgmnt.
Supplier Power


Auction (one buyer)
Less
Uniqueness, CRM, Loyalty
Less
(higher entry barriers)
Cost/Effective Supply,
Customer, Manufacturing
systems, Integration

Competitors

Force
Buyers Power

Loyalty programs
Cust. Relationship
Mgmnt.
Supplier Power


Auction (one buyer)
Less
Uniqueness, CRM, Loyalty
Less
(higher entry barriers)
Cost/Effective Supply,
Customer, Manufacturing
systems

Competitors
Less or at least Smart
Global Environment
Scanning, Signaling
Value Chains: Targeting the Right Business Processes

Generic Strategy + Five Forces Info Systems contributions
How much/when to spend to make one of these contributions?
A framework for saying how much investment makes sense:
Business process standardized set of activities to
accomplish a specific task (e.g. processing a customer order)
Value chain views organization as a chain of processes,
each adding cost and value to the product or service
Value Chains: Targeting the Right Business Processes

Value Chain with Numbers
Reminder: Enhancing Competitive Advantage with IS

First: Identify the Enterprises Strategic Intent:
What we choose to do (and not do) for Competitive Advantage:

Why?
Avoid being Mordac the Denier a CIO not focused on strategy

Implement, measure, organize for Info Systems that enact the enterprise's
strategic intent
Enhancing Competitive Advantage with IS

First: Identify the Enterprises Strategic Intent:
What we choose to do (and not do) for Competitive Advantage:

An Example
Why?
Avoid being Mordac The Preventer

Implement, measure, organize for Info Systems that enact the enterprise's
strategic intent
What Could Canada Post Do For Banks?
Value Chain for US Banks + Canadian Industry Stats + Executive Interviews
Wrong addresses on VISA statements cost > $500 each

Millions move every year
We can save these customers $275 million annually
We can track address changes for $30 million a year
If the development costs $90 million and the system will last 20 years, and
If we can capture 20% of the savings (so our revenue would be $55 million/year)
Our IRR: Invest $90 million for a stream of $25 million in each of 20 years, our
return is 35% p.a.
Nothing can go wrong! Except development cost overruns, ongoing maintenance

costs, sales delays and expensesthere were multiple attempts to sell this
servicethen.
Source: Lucas Strategy case, 1995.
Why Would Canada Post Sell Address Changes to

Banks?
A great strategic move. Except development cost overruns, ongoing maintenance costs, sales delays and
expensesthere were multiple attempts to sell this serviceremember the alignment trap?
Source: Lucas Strategy case, 1995.
IRR and Net Present Value New?
First: Present Value http://www.youtube.com/watch?v=BXm5mZqMp6Y
Then Net Present Value http://www.youtube.com/watch?v=2sXYobpdsUA&feature=fvw
And then Internal Rate of Return: http://www.youtube.com/watch?v=T4R1jBwUlf8
In 30 seconds:
If money in the future is less valuable than cash now, and if the difference is calculated by the
interest payable until you have the money,
Net Present Value is the Future Value of Benefits from a Project the Cost of the Project given an
interest rate, and
IRR is the interest rate that makes the Net Present Value = Zero.
So what? IT decisions are projects undertaken for future benefits. How big must the benefits
be?
NPR (PV of benefits Costs) > 0 at our required rate of return or
If we have a minimum rate of return, is IRR** > our required rate (> our cost to borrow)
** There are some grounds for conceptual concern about this ratio.

Systems
WEEK 2 OF 13
Intro to Cases
Metrics: Efficiency and Effectiveness
Efficiency IT metrics system performance: throughput at particular volumes, speed,

availability, accuracy (or error rates)
Effectiveness IT metrics impact of IT on business: customer acquisition satisfaction

and retention, conversion rates, sell-through increases, financial contributions (ROI, IRR)
Tradeoffs: Security and privacy are important dimensions of effectiveness they have a
cost they reduce efficiency
How do we know if were Optimal area?

Internally: Are we doing better?
Externally: How do we Benchmark against others?


What Metric is
Missing Here?



Contribution to
Strategic Intent!

Metrics: Efficiency, Effectiveness and

Alignment
Textbooks Trade-offs
More than Trade-off: Linkage
On the left: a theoretical and technical view

On the right: a fact-based management view

Alignment

Alignment
A fact-based management view: a direction toward good results

Systems
WEEK 2 OF 13
Intro to Cases
IT Executive Roles
Chief Information Officer (CIO):oversees IT uses, alignment of IT with strategic

intent (see week 2): a leader, a manager and a communicator. Main concerns:
Chief Technology Officer (CTO): responsible for ensuring the throughput, speed,
accuracy, availability, and reliability of IT
Chief Security Officer (CSO): the security of IT systems
Chief Privacy Officer (CPO): the ethical and legal use of information
IT Executive Roles
Chief Information Officer (CIO):oversees IT uses, alignment of IT with strategic

intent (see week 2): a leader, a manager and a communicator. Main concerns:
Anything Missing?
Chief Technology Officer (CTO): responsible for ensuring the throughput, speed,
accuracy, availability, and reliability of IT
Chief Security Officer (CSO): the security of IT systems
Chief Privacy Officer (CPO): the ethical and legal use of information
Looking for the Missing Concern:

Six Decisions IT Shouldnt Make
Decision Area Six Decisions
Strategy
How much to spend on IT?

Which processes to spend
on?
Execution
What Role for The Executive Top

Which IT functions should be Leadership?
firm-wide?
What happens if the Top Leadership
How good do IT functions
doesnt fulfil that role (Abdicate)?
need be?
Privacy security risks
acceptable?
Blame if IT initiative fails?
Looking for the Missing Concern:

Six Decisions IT Shouldnt Make
Decision Area Six Decisions
Exec Role
Abdication
Strategy
How much to spend on IT?
Define/fund role
No impact for big $
Which processes to spend

on?
Decide
Overwhelmed MIS
Which IT functions should be Decide

firm-wide?
Bureaucracy/chaos
Execution
How good do IT functions

need be?
Business choices Poor ROI on IT
Privacy security risks

acceptable?
Ethical choices
Someone else
makes them
Blame if IT initiative fails?
Assign a leader
Measure results
Poor ROI in IT
Research by MIT professors, Harvard Business Review, November 2002
Ultimate Challenge to CIOs Effectiveness?
Some Other Challenges for IT Executives

1.
A Gap in Perspectives:
2.
3.
Business expertise: functions like marketing, accounting, and sales.

IT expertise: technological expertise
Frequent communication gaps
Ethics and security increasingly important

Security needs attention > its Financial Importance
Ask CIBC.on January 19, 2007
The bank saidit lostpersonal

details of 470,000 accountsin late
December
The informationcould be used by

criminals foridentity theft
A CIBC spokesman
said.reassurance, reassurance,
reassurance
Is Anyone Reassured?
CIBC Story
Winners
Story
National Post: January 19, 2007, page A10
How Easily Could a Firms Data Leak?

Accidentally:
http://www.cbsnews.com/video/watch/?id=6412572n&tag=mg;eveningnews
No Accident:
Shady RAT (August 2011):
http://www.youtube.com/watch?v=xEXdvLUSd0k
Then there are Anonymous (anon-sec) and lulzsec (July 2011)
http://www.youtube.com/watch?v=c388dGiKmoM&feature=relmfu
A Lesson.
a CIOs challenges include getting Top Leadership Support for:

Appointing and supporting a Chief Security Officer,
Paying attention, and
Sustaining Executive Leadership involvement to security
Ethics (like Security) Require Leadership
Ethical issues stemming from Technology Advances
They matter to Customers

Systems
WEEK 2 OF 13
Expectations: Case (and Quiz and Exam) Answers
Week 4s Quiz 1: on B3, B4, B5 and Let IT Rise

Up to 50 minutes
Part A: 50%
Fill in blanks
Multiple Choice (watch for questions choices spilling across page breaks)
True or False
1-2% each
Part B: 50%
Answer one of two questions
Use the space provided (if you use space for other questions, make a
clear, big note of what youve done)
Next 4 slides: expectations for Part B.
Levis Jeans Into Wal-Mart

Example of focusing Information Systems on Strategic Intent:
Levis flagging performance 1996 to 2003, caught in the jaws of
death between low and high-end competitors
High volume distributors like Wal-Mart were key to recovery
Wal-marts requirement for up-to-date supply chain
management systems
Levis didnt have them
Levis organized to address the gap and sales recovered
Levis Jeans Into Wal-Mart (continued)

Consider a Question:
Explain how Levis achieved business success through the use of
information, information technology and people.
Next 2 slides illustrate A, B and C case answers
A answers: 8 - 10
B answers: 7 7.9
C answers: 6 - 6.9
Other answers would need to be very creative or entertaining
to get much of anything
Case, Quiz and Exam Qualitative Expectations
http://www.utm.utoronto.ca/regcal/WEBGEN94.html

Explain how Levis achieved business success through the use of
information, information technology and people.
Grade
Attribute of Answer
Says what key

elements of course
content made the
difference
Excellent: Strong evidence of

original thinking; good
organization, capacity to
analyze and synthesize;
superior grasp of subject
matter with sound critical
evaluations; evidence of
extensive knowledge base
Ties the answer to

course material
Good: Evidence of grasp of

subject matter, some evidence
of critical capacity and analytic
ability; reasonable
understanding of relevant
issues; evidence of familiarity
with the literature
C + IS components include
IT, people, procedures, data
and purpose
States the answer
Adequate: Student is profiting

from the university experience;
understanding of the subject
matter; ability to develop
solutions to simple problems in
the material
Levis made the changes

needed to meet Wal-Marts
IS requirements (SCM)
Quality (UTM Calendar)
Example
See Next Slide
http://www.utm.utoronto.ca/regcal/WEBGEN94.html

Explain how Levis achieved business success through the use of information,
information technology and people.
Simplified Example: Grade A Answer
First, Levis found the right people. CIO (Bergen) and CEO
(Marineau) had the experience and the vision to lead Levis back up
the ladder of success. (give examples of experience)
Second, Bergen focused on the information needs of the
organizations Strategic Intent. He knew that Marineaus plan to
anticipate customer wants would require detailed information that
was currently not available at Levis. (example: supply chain
management system (SCM) status dashboard)
Third, Levis successful transformation of its SCM allowed the
company to partner with Wal-Mart. Bergens new systems were a
success, and the percentage of products delivered on-time quickly
rose from 65 percent to 95 percent.
Fourth: The SCM technical decisions and Implementation
2 4 page Word document (see Course outline)
Why
an A?
Levis Jeans Into Wal-Mart (concluded)

Purpose:
What strategic purpose is served by this system? (strategic purpose =
choice extraordinary value for attractive customers competitive
advantage + hard to imitate)
Correct
Order
!
People and Procedures:
Who will use an IS to achieve its purpose?

What will motivate them to do that?
How will they know how?
What else might they do (ask Mordac)?
Information Technology and Data

What COMPUTER-BASED TOOLS work together to process what DATA
to meet what PURPOSE.these component Interact
Complex interactions Mordacs surprise SYSTEMS
Levis Jeans Into Wal-Mart (concluded)

Purpose:
What strategic purpose is served by this system? (strategic purpose =
choice extraordinary value for attractive customers competitive
advantage + hard to imitate)
Correct
Order
!
People and Procedures:
Who will use an IS to achieve its purpose?

What will motivate them to do that?
How will they know how?
What else might they do (ask Mordac)?
Information Technology and Data

What COMPUTER-BASED TOOLS work together to process what DATA
to meet what PURPOSE.these component Interact
Complex interactions Mordacs surprise SYSTEMS

Where have you seen
this?
Submitting Your Case Answer for Marking

Before midnight the day before the tutorial when your team answer will be presented:
Submit your written answer to the case question (in a Word document see the
course outline for format) to turnitin.com
New User Log in as student
MGM371 Fall 2011 course ID is 4302733 and password is Introbisf11M
MGT371 Fall 2011 course ID is 4302740 and password is Introbisf11T
Follow the prompts
Upload Word Document
Keep your reference number/receipt of case answer
Email TA (cc. Me) your presentation slides, and put the slides on a USB memory stick
Yes both a Word written answer (to turnitin) and PowerPoint slides (to me).
Answer the peer review survey (on individual contributions to the case) at:
http://www.surveymonkey.com/s/LHQ6B82
A Note on Presenting Case Answers
You have 15 minutes: that means 3 to 5 slides!

When you start presenting, you wont have extra time. Get on with your answer
Suggestion:
Slide one: the question

Slide two: what we think is the answer
Slide three: why we chose our answer
Slide four: why this question and answer matter in understanding business
information systems
Fifteen minutes:
Practice
Changing presenters wastes time (Ill survey who contributed to the answer)
TA will stop you when times up (even if youre not finished)
These tutorials are yours - make them count!
Case Answer Marking

1.
2.
3.
Written case answers: see the Levy Case example of expectations

Usually, the presentation can only raise the case answer mark
Presentation may lower the case answer mark if:
a)
b)
c)
4.
No presentation made in the scheduled tutorial, or

The presentation over-runs time and the team wont give up the floor, so the next
team can present, or
The presentation has no learning value for other students.
The marking the presentation

a)
b)
c)
d)
If it answers the case question (the written answer grade is the grade)
If it answers the case question with a clear and thoughtful statement of why the
answer might be important for the rest of the course (add 5% to 10%)
If it fulfils b) and leads to a discussion that adds to students understanding of the
course contents (add 5%)
Bonus for being one of the first 6 teams and at least fulfilling a) add 5%
Reminder: Course Outline

Whats due in 2-3 weeks?
Quiz 1 preparation
First case team answers (on turnitin) and presentations in tutorials.
What to read before next weeks lecture?

Ch 3: Implementing Competitive Advantage
Ch 6: Valuing Org. Info. Ch 7: Storing. Ch 8: Viewing & Protecting,
Ask yourself these two questions every week. Answers vary from week to
week. Theyre in the Course Outline.
In event of conflict between this slide and Course Outline, the outline
governs unless the course outline is varied in a lecture (and clearly called a
variation).

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Introduction to Business Information

Course Theme: A Tour of Technologys Role in Management

Sites of Opportunities to Contribute

Introduction to Business Information

Enhancing Competitive Advantage with IS

What we choose to do (and to not do) for Competitive Advantage:

Create value for attractive groups of buyers

Where our value > competitors and cost to deliver

How we do this is hard to imitate (success usually imitation)

(Porters) Generic Strategy

Then: Carve out and sustain Competitive Advantage

(Porters) Five Forces Buyer value we can keep as profits

Avoid being Mordac the Denier

Success Often A Generic Strategy

Success Often A Generic Strategy

Cost Leadership requires:

Success Often A Generic Strategy

Focus (2 strategic systems) Generic Strategy

Keep components Perceived response

Observations Generic Strategy

Getting beyond Generic Strategy:

Five Forces Pushing Open Room for Profits

Michael Porter Describing Five Forces

Five Forces Pushing Open Room for Profits

Profit is Better if Force is

Less (fewer perceived

Info Systems Influence

Five Forces Pushing Open Room for Profits

Profit is Better if Force is

Info Systems Influence

Less (fewer perceived

Less (more alternatives,

Global B2B Marketplace

Five Forces Pushing Open Room for Profits

Profit is Better if Force is

Info Systems Influence

Less (fewer perceived

Less (more alternatives,

Global B2B Marketplace

Unique abilities CRM,

Threat of New Entrants

Five Forces Pushing Open Room for Profits

Profit is Better if Force is

Info Systems Influence

Less (fewer perceived

Less (more alternatives,

Global B2B Marketplace

Uniqueness, CRM, Loyalty

Threat of New Entrants

Rivalry among Existing

Five Forces Pushing Open Room for Profits

Profit is Better if Force is

Info Systems Influence

Less (fewer perceived

Less (more alternatives,

Global B2B Marketplace

Uniqueness, CRM, Loyalty

Threat of New Entrants

Rivalry among Existing

Less or at least Smart

Value Chains: Targeting the Right Business Processes

Value Chains: Targeting the Right Business Processes

Reminder: Enhancing Competitive Advantage with IS