ISM 158 Business Information Strategy

Instructor: Kevin Ross Teaching Assistant: David Xu

ISM 158: Overview

This class considers the role of information in business strategy. In particular, we focus on decisions regarding information technology and information systems to give a business competitive advantage over other companies. We will focus on case studies to see why some businesses are more successful than others in building information systems that lead to organizational and individual efficiencies.

We look at how information impacts industries, markets and countries, and leads to technology development. We develop an understanding of design and maintenance of networked organizations, including issues of leadership and management.

ISM 158 Perspective: CIO

We will generally look at decisions from the perspective of the chief information officer. Wikipedia: The chief information officer (CIO), or information technology (IT) director, is a job title commonly given to the most senior executive in an enterprise responsible for the information technology and computer systems that support enterprise goals. The title of Chief Information Officer in Higher Education may be the highest ranking technology executive although depending on the institution, alternative titles are used to represent this position. Generally, the CIO typically reports to the chief executive officer, chief operations officer or chief financial officer.

ISM 158: Overview

This class is designed for seniors and some juniors. There are few formal prerequisites, but you are expected to

1. want to be here and to learn 2. have a broad knowledge and interest in information systems, technology, economics and business 3. think for yourself

Class website
All schedules and assignments will be posted on the class website: http://www.soe.ucsc.edu/classes/ism158/Spring11/

Lecture notes will be posted after each lecture.

Schedule
Date Topic (Reading = corresponding chapter from text) Introduction Business Models IT and Business Models Amazon.com IT and Organization Boeing Optional: Business Proposal Draft IBM Case Assessment (Reading = correspondin g case from text)

1 2 3 4 5 6

Tue, March 28 Thu, March 30 Tue, April 4 Thu, April 6 Tue, April 11 Thu, April 13

Schedule
Date Topic (Reading = corresponding chapter from text) Making the case for IT CareGroup IT Infrastructure iPremier Business Proposal Due Project Team and Topic Due Case Assessment (Reading = correspondin g case from text)

7 8 9 10

Tue, April 18 Thu, April 20 Tue, April 25 Thu, April 27

11
12 13 14

Tue, May 2
Thu, May 4 Tue, May 9 Thu, May 11

Reliability and Security

Ford IT Service Delivery Dell Project Proposal Due

Schedule
Date Topic (Reading = corresponding chapter from text) IT Project Delivery Cisco Optional: Preliminary draft due Case Assessment (Reading = correspondin g case from text)

15 16

Tue, May 16 Thu, May 18

17 18 19 20

Tue, May 23 Thu, May 25 Tue, May 31 Thu, June 2 Thu, June 6, 12:00 3:00pm

Governance of IT Vokswagen Leadership of IT Conclusion Final Exam AtekPC Project Due Final Exam

Instructor
Kevin Ross Assistant Professor, Technology and Information Management From New Zealand PhD, Management Science & Engineering At UCSC Since 2004 Research areas: Scheduling, optimization, networks, pricing Worked with: Eli Lilly & Company, NASA, Thomson Reuters, London Councils, Fitness First kross@soe.ucsc.edu Office hours: Tuesday 3 5pm (or by appointment) E2 room 559

Teaching Assistant
David Xu fxu2@ucsc.edu Office hours:
Thursday 12 2, Baskin Engineering room 358

Assessment
Value
News Presentation Quizzes Discussion Participation Business Proposal* Project* Final Exam 5% 10% 10% 10% 40% 25%

Due date
Throughout Throughout Throughout Thu, April 27 Thu, Apr 20 and Thu, June 2 Thu, June 6, 12:00 3:00

*Optional: Early draft 2 weeks in advance will be reviewed Policy Assignments are due at the start of class on the due date. Late assignments, missed presentations and quizzes will result in zero grade unless specific permission is given by instructor at least one week in advance.

Quizzes
There will be up to five surprise quizzes over the quarter. These will be fairly short and test knowledge of the text and cases. Students who are absent the day of a quiz will receive a zero grade for that quiz
unless they have informed the instructor in writing at least a week in advance that they have to miss class (for some legitimate reason)

News Presentation
Each student will present one news story to the class during the quarter.
The story can be from any source, and describe an interesting recent development in the use of information or IT for business strategy.

The presentation should be professionally presented using powerpoint or similar technology.

5 minutes maximum Must include both factual information (who is doing what and why?) and some commentary (your opinion is this a good idea why?!) on the story. All news sources that have been used should be acknowledged with specific references on a final slide.

The student is responsible for one of

(a) bringing the slides on a laptop, (b) bringing slides on a USB drive that will work on instructors laptop, or (c) emailing slides to the instructor the night before the presentation.

You are seniors and my expectations are high

Presentation Schedule
1 2 Date Tue, March 28 Thu, March 30 News Presentations Blaise Albuquerque Clare Angami Joseph Armenta Madalina Bologa Dadalei Buth Rystian Dale Cabellon Melissa Camacho Evelyn Cano Grace Carpenter Redmond Catbagan Peter Chan Truman Chan Bryant Chang Fanghai Chen Andrew Chiu

Tue, April 4

Thu, April 6

Tue, April 11

If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule
6 Date Thu, April 13 News Presentations
Sean Chou Mark Corre Thomas Dente Brian Diaz Joshua Dodson Mohamed Elshaer Elliot Grossman Richard Hammer Matthew Hartsock Juan Hernandez William Jaffe Eric Jones John Kaplanis Marlo Kertson Sameer Khan Jennifer Kim Kevin Konopelski Alex Kumar Richard Lai Justin Lazaro

Tue, April 18

Thu, April 20

Tue, April 25

10

Thu, April 27

If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule
11 Date Tue, May 2 News Presentations
Alexander Lee Brian Lee Nathan Lee Sean Lee Ashley Levien James Liang Ray Myron Licardo Da Fu Liu Patrick Loomis Charlie Lui Tam Luu Kevin Ma Tanuja Ramanujam Swathi Rammohan Samina Reddy Alon Rogenstein Navdeep Shergill Maximillian Silveus Amandeep Singh Manjit Singh

12

Thu, May 4

13

Tue, May 9

14

Thu, May 11

15

Tue, May 16

If your name is not on the schedule, contact instructor by the end of week 2

Presentation Schedule
16 Date Thu, May 18 News Presentations Steven Sonsip Brandon Sweet Antoine Tadros Lisa Tam Sharon Tam Vincent Tang Katrina Thanh Trang To Ronald Tolentino Raymond Tsai James Tu Michael Wan Aaron Weise Frankie Wong Junie Yee Tiffany Yee David Zhu

17

Tue, May 23

18

Thu, May 25

19

Tue, May 31

20

Thu, June 2

If your name is not on the schedule, contact instructor by the end of week 2

Discussion Participation
We will discuss cases approximately once per week. Active participation in the discussions of the cases and the course material is expected and examined. Read the cases with interest - learn the facts - form opinions - come prepared to challenge each other

Business Proposal
You will be provided with a scenario for a business information system problem, and be required to make a written proposal of a solution, as the chief information officer. Details will follow.

Project
The major assignment in this class is a comprehensive project. You will analyze a major (at least 1000 employees) company, and study how they use information and information systems to achieve competitive advantage. The project can be completed in groups of two or three, as you select, and the company is chosen by the group. Details will follow, but start thinking about group and topic

Submission of assignments
Submit a hard copy of your assignment at the beginning of class

Final Exam
The final examination will cover the topics from the whole year. You will not be allowed to bring notes into the exam room.

Prerequisites
This course is for juniors and seniors ISM 50 or permission of instructor required Interest in technology and business

Textbook
Corporate Information Strategy and Management, by Applegate, Austin and Soule 8th edition
We will use the text and cases from this version, and you will be expected to have read the appropriate section before each class. - About 1/3 of the text has changed from the 7th edition All the cases are originally published by Harvard Business Review and can be purchased separately from their website.

Writing class
This course fulfills the W requirement
The business plan and project will give you training and evaluate your writing skills You will have the opportunity for feedback on your writing by turning in draft assignments 2 weeks early You must declare who writes each section of your project

Note on cheating
All work must be your own Any work used as a reference must be cited appropriately Any violation of this will result in an instant failure for academic misconduct and this will go on your record

Feedback Please!
Instructor has substantially revised the course material The course is for you Dont hesitate to ask questions, give suggestions As senior students, you know that youll get out what you put in

Questions

Corporate Information Strategy & Management

IT is a source of opportunity and advantage but also uncertainty and

risk

Chasm between viewpoints

Business executives: IT detached from real business problems Technical executives: Business leaders lack vision

Undeniable rapidity of change

In system architecture and interfaces In business In work and the workforce

The Embedding of IT
IT now embedded in:
Definition and execution of strategy Organization and leadership of businesses Definitions of unique value propositions

IT is changing our understanding of:

Markets Industries Strategies Firm designs

Information is now a major economic good

Riding the IT Rollercoaster

Mid 1990s:
World Wide Web demonstrated IT potential Structural and technical hurdles remained in using IT

Late 1990s:
Capital markets caught the fever VCs eager to spend on IT, regardless of long-term path to profitability

21st Century:
Speculative bubble burst Downward spiral until 2003

What Now?
What we know:
World is forever changed; IT will never return to the basement Technology as core enabler, primary business channel Global village is here to stay Rigid organization boundaries have fallen

What we need to do:

Engage in sense-making of the transformation Mine the last decade of business experimentation Synthesize in order to choose a path forward

Let the Story Telling Begin

This book examines stories of executives who are exploring uncharted waters
Through the lens of the decades of research and experience of the authors Through rich dialogue during class discussion of chapters, cases, and articles

Focal Themes
IT and Business Advantage
IT impacts the business through its effects on the three components of the business model: strategy, capabilities, and value

The Business of IT
Managing IT operations, services, and project delivery requires managing trade-offs among costs, opportunities, and risks

IT Leadership
High-level management, leadership, and governance activities set the context for leveraging IT-enabled strategic insight and ensuring IT operational excellence

Module 1: IT and Business Advantage

> US$ 2 trillion spent on IT worldwide in 2007

Continued

rapid spending growth Truly global spending distribution

Ever increasing dependence on and impact of IT

Search for Avoidance

opportunity of operational risk

Module 1 discusses how to leverage IT to create business advantage.

Overview of Module 1
Chapter 1
Introduces the organizing framework for the module Defines a business model Explores evaluation of business models

Chapters 2
Examines the impact of IT on business models

Chapter 3
Examines the impact of IT on organizational capabilities

Chapter 4
Examines the impact of IT on business value

The Five Competitive Forces that Shape Strategy

Michael Porters classical theory of strategy formulation

Original HBR article in 1979 Simple, powerful description of five forces Five forces analysis in practice Five forces distinguished from contemporary factors (e.g. the internet)

What can we learn from this article?

How economic value is created and claimed by participants in a business network or industry How IT might change the relative strength of each force

Amazon.com: The Brink of Bankruptcy

Traces evolution of Amazon.com from founding in 1994 to 2001 The case ends with the company poised at the brink of bankruptcy What can we learn from this case?
Apply business model thinking Demonstrate how IT can be used as a key driver of business value through its impact on strategy and organizational capabilities Identify how to identify IT-enabled proprietary assets that can serve as a platform to exploit disruptive change

Canyon Ranch
Founded in 1979 Leader in health resort and spa industry
Facing increasing competitive pressure

Goal: leverage customer information to increase customer loyalty and cross-selling opportunities
Role of IT in building CRM capabilities

What can we learn from this case?

How to use information assets to drive business value How IT can shape strategy and capabilities

Boeings e-Enabled Advantage

Until late 1990s, largest commercial airplane company Airline industry faces multiple challenges
Customers face increased cost pressure Fragmented suppliers
Boeing drops to #2 behind government-subsidized rival, Airbus

Strategic goal: use IT to regain market dominance

More information-driven product and service offerings Improved IT-enabled efficiency

What can we learn from this case?

How to use IT to differentiate a product and create new revenue streams by selling packaging and selling information and by creating new service offerings

Royal DSM N.V.: IT enabling Business Transformation

Diversified Netherlands-based company
Coal mining, industrial chemicals, life science products, etc.

Strategic shift from highly cyclical businesses to high growth businesses

Rapid divestitures and acquisitions

Use IT to enable rapid growth and acquisition integration

Standardization of IT infrastructure and applications IT function shifts from support to strategic

What can we learn from this case?

How to leverage IT in support of organizational flexibility and agility How to use IT to build an organizational platform for business transformation

Understanding Business Models

Key Learning Objectives
Understand the concept of a business model Learn how to analyze the three components of a business model strategy, capabilities, and value through a business model audit Understand the different ways that business models can evolve and recognize potential drivers of business model evolution

Business Model Framework and Definition

Analyzing Business Model Linkages

Using the DuPont Formula to Deconstruct ROE

Evolving the Amazon.com Business Model (1995-2000)

Assessing the Impact of IT on Business Model Alignment

Impact of IT on Industry Structure and Relationships

Case for Lecture 2

IBM Evolution Transformation and growth

Questions?

What is a Business Model?

Defines how enterprise relates to environment
Strategy aligns organization with environment Resources in and out How value is created for stakeholders Sets goals and ways to achieve them

Components of a Business Model

Understanding the Competitive Environment of a Company

Companies do not exist in a vacuum:
It is necessary to understand the competitive environment to assess the current competitive position of a company. It has become increasingly necessary to posture a company for challenges in its future.

Porter Competitive Model

Potential New Entrants

Bargaining Power of Suppliers

Intra-Industry Rivalry
Strategic Business Unit

Bargaining Power of Buyers

Substitute Products and Services

Competitive Model Focus

What is driving competition in the current or future industry? What are current or future competitors likely to do and how can a company respond? How can a company best posture itself to achieve and sustain a competitive advantage?

Competitive Model Forces

Intra-industry Rivals: Strategic Business Unit (SBU) and major rivals. Buyers: Categories of major customers. Suppliers: Categories of major suppliers that play a significant role in enabling the SBU to conduct its business. New Entrants: Companies that are new as competitors in a geographic market or existing companies that through a major shift in business strategy will now directly compete with the SBU.

Substitutes: An alternative to doing business with the SBU.

Porter Competitive Model Education Industry Universities U.S. Market

Potential New Entrants
Foreign Universities Shift in Strategy by Universities or Companies

Bargaining Power of Suppliers

Faculty Staff Equipment and Service Suppliers Alumni Foundations Governments IT Vendors

Intra-Industry Rivalry
SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges

Bargaining Power of Buyers

Students Parents Businesses Employers Legislators

Substitute Products and Services

Internet Distance Learning Books and Videotapes Computer-Based Training Company Education Programs

Role of Technology through Porter perspective: Can we

1. Build barriers to prevent a company from entering an industry? 2. Build in costs that would make it difficult for a customer to switch to another supplier? 3. Change the basis for competition within the industry? 4. Change the balance of power in the relationship that a company has with customers or suppliers? 5. Provide the basis for new products and services, new markets or other new business opportunities

Porter Competitive Strategies

Cost Leadership Strategies
Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies

Primary Strategies

Supporting Strategies

Porter Primary Strategies

Differentiationcustomer values the differences that you provide in products, services or capabilities.

Costis least cost. If this is the primary strategy, over time there will only one ultimate winner.

Porter Supporting Strategies

Innovationeither with business strategies or use of information systems or both. Growthdeals with growth in revenue and other business volumes. Can be a key factor in establishing a market position. Can also be a major requirement to offset high fixed operating costs.

Alliancesimportance of establishing a strong relationship with suppliers and other business partners often on a contractual basis.