Information Systems and the Modern Organization (Chapter 2)

Information Systems and the Modern Organization

Business Processes :

Business process : is an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customer.

• One Functional Area Processes
• Cross-Functional Area Processes

Business Process Reengineering & Business Process Management :

Measurement of competitive performance in an organization :

# Customer satisfaction.

# Cost reduction.

# Cycle and fulfillment time.

# Quality.

# Differentiation.

# Productivity.

Business Process Reengineering (BPR): a radical redesign of an organization business process that improve  its efficiency and effectiveness. The key to BPR is for enterprises to examine their business process from a "clean sheet" prospective and then determine how they can best reconstruct those processes to improve their business function. 

Many organization found that BPR strategy is too difficult, too radical and too comprehensive.

Business Process Management (BPM): is a management technique that includes methods and tool to support the design, analysis, implementation, management, and optimization of business processes.

BPM help companies :

• to improve profitability by decreasing cost and increasing revenues
• Create competitive advantage by improving organization flexibility
• Increase customer satisfaction.   

Components of BPM are :

• Process modeling.
• Web-enabled technologies.
• Business activity monitoring.

Business Pressures, Organizational Responses, and Information Technology Support :

Business Pressures : The combination of social, legal, economic, physical, and political factors in which business conduct their operations.A significant changes in any of these factors will create a business pressure on the organization.

Type of business pressures :

• Market Pressures.
• Technology Pressures.
• Social/Political/legal Pressures.

Market Pressures :

★Globalization : 

Globalization : is the integration and interdependence of economic, social, cultural, and ecological facets of life made possible by rapid  advances in information technology.

The three eras of globalization identified by Friedman :

1) Globalization 1.0 (1492-1800)⇨(focus on countries)⇨the force behind globalization was how much muscle, horse power, wind power, or steam power a country could deploy.

2) Globalization 2.0 (1800-2000)⇨(focus on companies)⇨the force behind globalization was the emergence of multinational companies.

3) Globalization 3.0 ( around the year 2000)⇨(focus on groups & individuals)⇨globalizaton has been driven by the convergence of 10 forces that Friedman calls "flatteners".

Examples of globalization :

     ➡Regional agreements such as North American Free Trade Agreement (NAFTA) & European Union (EU)

     ➡BRIC.

     ➡Moving to low Labor Cost countries.

     ➡Outsourcing/Offshoring.

★The Changing Nature of the Workforce :

✔Workforce in developed countries becoming more diversified.

✔Increasing number of women, single parents, minorities, and person with disabilities are now working in all type of positions.

✔IT enabling people to work from home (Teleworking).

★Powerful customer :

Customer expectation increase as customers become more knowledgeable about the products and services they acquire. Customer use Internet to find information about product and service, to compare price, and to purchase items at e-auctions

Companies struggle to learn about their customers to better address their needs. This process called Customer Intimacy which is a component of Customer Relationship Management(CRM).

Technology pressures :

Technological Innovation and Obsolescence :

New and improved technologies rapidly create substitutes for products, alternative services, and superb quality.

e.g : New versions of smartphons & Apple ipad.

Information Overload :

The amount of information available on the Internet doubles approximately every year and much of it is free. Search engines and business intelligence applications enable managers to access, navigate, and utilize vast amount of information.

Social/Political/Legal Pressures :

↘Social Responsibility :

▶Some corporations and individuals are willing to spend time and money to address different social problems. These efforts known as organizational social responsibility or individual social responsibility.

e.g : Green IT.

▶Digital divide : refers to the wide gap between those who have access to information and communications technology and those who do not.

↖Compliance with Government Regulations :

Regulation regarding health, safety, environmental protection , and equal opportunity. Business view government regulations as expensive constraints on their activities.

↘Protection against Terrorist Attacks :

IT can help protect business by providing security systems and possibility identifying patterns of behavior associated with terrorist activities, including cyber attacks.

↖Ethical Issues :

The use of IT raises many ethical issues ranging from monitoring e-mail to invading the privacy of millions of customers whose data are stored in private and public databases.

Organizational Responses :

☆Strategic Systems :

Provide organizations with advantages that enable them to:

➡Increase their market share and/or profits.

➡Better negotiate with suppliers.

➡prevent competitors from entering their market.

☆Customer Focus :

Organizations try to provide superb customer service can make the difference between attracting and keeping customers and losing them to competitors.

e.g of business like, Amazon & Expedia.

☆Make-to-Order and Mass Customization :

Make-to-Order⇨is a strategy of producing customized (made to individual specifications) products and services.

Mass Customization⇨produce large quantity of items, but customize them to fit the need and preferences of individual customers. Is also known as performing Make-to-Order on large scale.

e.g : Reebok & Dell.

☆E-Business and E-Commerce :

E-Commerce : is process of buying, selling, transferring, or exchanging products, services, or information electronically. While E-Business is a broader concept than e-business.

Competitive Advantage and Strategic Information Systems :

Competitive Advantage : an advantage over competitors in some measure such as cost, quality, or speed ; leads to control of a market and to larger-than-average profits.

Strategic Information Systems (SIS) : provide a competitive advantage by helping an organization implement its strategic goals and improve its performance and productivity.

Porter's Competitive Forces Model :

The best-known framework for analyzing competitiveness is Michael Porter's competitive forces model (porter,1985).

five forces are :

1] The threat of entry of  new competitors: is high when it is easy to enter a market and low when significant barriers to entry exist.

• A barrier to entry can be a product or service feature that customers expect from organizations in a certain industry.
• For most organizations, the Internet increases the threat that new competitors will enter a market (by creating their website).

2] The bargaining power of suppliers: is high when buyers have few choices and low when buyers have many choices.

• Internet impact is mixed. Buyers can find alternative suppliers and compare prices more easily, reducing power of suppliers
• On the other hand, as companies use the Internet to integrate their supply chains, suppliers can lock in customers.

3]The bargaining power of buyers: is high when buyers have many choices and low when buyers have few choices.

• Internet increases buyers access to information which result in increasing buyer power.
• Internet reduces switching costs, which are the costs in money and time, to buy elsewhere. This also increases buyer power. 
• in contrast, loyalty programs can reduce buyer power.

4]The threat of substitute products or services: is high when there are many substitutes for an organization's products or services and low where there are few substitutes.

• New technology create substitute products and web makes the information about these products available for all. As result, information based industries are in danger from substitute (e.g/ music, books, software..etc.). The Internet can convey these to  digital information quickly and efficiently.

5]The rivalry among existing firms in an industry: is high when there is fierce competition and low when there is not.

• The visibility of Internet applications on the web makes proprietary systems more difficult to keep secret. Which makes strategic advantage more short-lived.

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Strategies that organizations adopt to counter the five competitive forces & achieve competitive advantage.

➡Cost leadership strategy⇨produce products and/or services at the lowest cost in the industry.
e.g : Walmart automatic inventory replenishment system.

➡Differentiation strategy⇨offer different products, services, or product features.
e.g : Southwest Airlines & Dell.

➡Innovation strategy⇨introduce new products and services, put new features in existing  products and services, or develop new ways to produce them.
e.g : automated teller machines(ATMs).

➡Operational effectiveness strategy⇨improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals.

➡Customer orientation strategy⇨concentrate on making customer happy.

Porter's Value Chain Model :

This model identifies specific activities where organization can use competitive strategies for greatest impact.
Organization can be divided to two categories :
★Primary activities⇨Are those business activities that relate to the production and distribution of the firms products and services (core business), thus creating value for which customers are willing to pay. The primary activities are buttressed by supporting activities.
★Supporting activitied⇨are those business activities that do not add value directly to a firm products or services, but support the primary activities. Support activities include accounting, finance, management, human resources management, product & technology development (R&D) and procurement.

Business-Information Technology Alignment :

Business-information technology alignment :Is the tight integration of the IT function with the strategy, mission, and goals of the organization.
Six characteristics of excellent alignment :
↖Organization view IT as an engine of innovation that continually transforms the business often creating new revenue streams.
↘Organization view their internal & external customers and their customer service function as supremely important.
↖Organization rotate business and IT professionals across departments and job functions.
↘Organization provide overarching goals that completely clear to each IT and business employee.
↖Organization ensure that IT employees understand how the company makes (or loses) money.
↘Organization create a vibrant and inclusive company culture.

Reason behind failing organization in achieving these alignment :

• Business managers & IT managers have different objectives.
• The business & IT departments are ignorant of the other group's expertise.
• A lack of communication .