CIS 3700 Ch 2

Operational effectiveness strategy.

Improve the manner in which a firm executes its internal business processes so that it performs these activities more effectively than its rivals. Such improvements increase quality, productivity, and employee and customer satisfaction while decreasing time to market.

Strategic information systems (SISs)

(SISs) provide a competitive advantage by helping an organization implement its strategic goals and improve its performance and productivity.

the instance level

(i.e., a specific task or activity)

process level (i.e., the process as a whole).

(i.e., the process as a whole).

Discuss ways in which information systems enable cross-functional business processes and business processes for a single functional area.

A business process is an ongoing collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. Examples of business processes in the functional areas are managing accounts payable, managing accounts receivable, managing post-sale customer follow-up, managing bills of materials, managing manufacturing change orders, applying disability policies, hiring employees, training staff and computer users, and applying Internet use policy

Compare and contrast business process improvement, business process reengineering, and business process management to determine the different advantages and disadvantages of each. Business process reengineering is a radical redesign of an organization's business processes that is intended to improve the efficiency and effectiveness of these processes. The key to BPR is for enterprises to examine their business processes from a "clean sheet" perspective and then determine how they could best reconstruct those processes to improve their business functions. Because BPR proved difficult to implement, organizations have turned to business process improvement. Business process improvement is an incremental approach to enhancing the efficiency and effectiveness of a process that is less risky and less costly than BPR. BPI relies on a structured approach (define, measure, analyze, improve, and control, or DMAIC), and many methodologies, such as Six Sigma, can be used to support these required steps. Business process management is a management technique that includes methods and tools to support the documentation, design, analysis, implementation, management, and optimization of business processes. BPM coordinates individual BPI activities and creates a central repository of a company's processes, generally by utilizing software such as BPMS.

Compare and contrast business process improvement, business process reengineering, and business process management to determine the different advantages and disadvantages of each. Business process reengineering is a radical redesign of an organization's business processes that is intended to improve the efficiency and effectiveness of these processes. The key to BPR is for enterprises to examine their business processes from a "clean sheet" perspective and then determine how they could best reconstruct those processes to improve their business functions. Because BPR proved difficult to implement, organizations have turned to business process improvement. Business process improvement is an incremental approach to enhancing the efficiency and effectiveness of a process that is less risky and less costly than BPR. BPI relies on a structured approach (define, measure, analyze, improve, and control, or DMAIC), and many methodologies, such as Six Sigma, can be used to support these required steps. Business process management is a management technique that includes methods and tools to support the documentation, design, analysis, implementation, management, and optimization of business processes. BPM coordinates individual BPI activities and creates a central repository of a company's processes, generally by utilizing software such as BPMS.

Customer-orientation strategy.

Concentrate on making customers happy. Web-based systems are particularly effective in this area because they can create a personalized, one-to-one relationship with each customer.

Describe the characteristics of effective business-information technology alignment. Business-IT alignment is the tight integration of the IT function with the strategy, mission, and goals of the organization. There are six characteristics of effective alignment: • Organizations view IT as an engine of innovation that continually transforms the business. • Organizations view customers and customer service as supremely important. • Organizations rotate business and IT professionals across departments and job functions. • Organizations provide clear, overarching goals for all employees. • Organizations ensure that IT employees understand how the company makes (or loses) money. • Organizations create a vibrant and inclusive company culture .

Describe the characteristics of effective business-information technology alignment. Business-IT alignment is the tight integration of the IT function with the strategy, mission, and goals of the organization. There are six characteristics of effective alignment: • Organizations view IT as an engine of innovation that continually transforms the business. • Organizations view customers and customer service as supremely important. • Organizations rotate business and IT professionals across departments and job functions. • Organizations provide clear, overarching goals for all employees. • Organizations ensure that IT employees understand how the company makes (or loses) money. • Organizations create a vibrant and inclusive company culture .

Describe the strategies that organizations typically adopt to counter Porter's five competitive forces. Porter's five competitive forces: • The threat of entry of new competitors: For most firms, the Web increases the threat that new competitors will enter the market by reducing traditional barriers to entry. Frequently, competitors need only to set up a Web site to enter a market. The Web can also increase barriers to entry, as when customers come to expect a nontrivial capability from their suppliers • The bargaining power of suppliers: The Web enables buyers to find alternative suppliers and to compare prices more easily, thereby reducing suppliers' bargaining power. From a different perspective, as companies use the Web to integrate their supply chains, participating suppliers can lock in customers, thereby increasing suppliers' bargaining power. The bargaining power of customers (buyers) : The Web provides customers with incredible amounts of choices for products, as well as information about those choices. As a result, the Web increases buyer power. However, companies can implement loyalty programs in which they use the Web to monitor the activities of millions of customers. Such programs reduce buyer power. • The threat of substitute products or services: New technologies create substitute products very rapidly, and the Web makes information about these products available almost instantly. As a result, industries (particularly information-based industries) are in great danger from substitutes (e .g., music, books, newspapers, magazines, software). However, the Web also can enable a company to build in switching costs, so that it will cost customers time and/or money to switch from your company to a competitor. • The rivalry among existing firms in the industry: In the past, proprietary information systems provided strategic advantage for firms in highly competitive industries. The visibility of Internet applications on the Web makes proprietary systems more difficult to keep secret. Therefore, the Web makes strategic advantage more short-lived.

Describe the strategies that organizations typically adopt to counter Porter's five competitive forces. Porter's five competitive forces: • The threat of entry of new competitors: For most firms, the Web increases the threat that new competitors will enter the market by reducing traditional barriers to entry. Frequently, competitors need only to set up a Web site to enter a market. The Web can also increase barriers to entry, as when customers come to expect a nontrivial capability from their suppliers • The bargaining power of suppliers: The Web enables buyers to find alternative suppliers and to compare prices more easily, thereby reducing suppliers' bargaining power. From a different perspective, as companies use the Web to integrate their supply chains, participating suppliers can lock in customers, thereby increasing suppliers' bargaining power. The bargaining power of customers (buyers) : The Web provides customers with incredible amounts of choices for products, as well as information about those choices. As a result, the Web increases buyer power. However, companies can implement loyalty programs in which they use the Web to monitor the activities of millions of customers. Such programs reduce buyer power. • The threat of substitute products or services: New technologies create substitute products very rapidly, and the Web makes information about these products available almost instantly. As a result, industries (particularly information-based industries) are in great danger from substitutes (e .g., music, books, newspapers, magazines, software). However, the Web also can enable a company to build in switching costs, so that it will cost customers time and/or money to switch from your company to a competitor. • The rivalry among existing firms in the industry: In the past, proprietary information systems provided strategic advantage for firms in highly competitive industries. The visibility of Internet applications on the Web makes proprietary systems more difficult to keep secret. Therefore, the Web makes strategic advantage more short-lived.

Efficiency

Efficiency focuses on doing things well in the process; for example, progressing from one process activity to another without delay or without wasting money or resources.

Identify effective IT responses to different kinds of business pressures. • Market pressures: An example of a market pressure is powerful customers. Customer relationship management is an effective IT response that helps companies achieve customer intimacy. • Technology pressures: An example of a technology pressure is information overload. Search engines and business intelligence applications enable managers to access, navigate, and utilize vast amounts of information. • Societal/political/legal fJressures: An example of a societal/political/legal pressure is social responsibility, such as the state of the physical environment. Green IT is one response that is intended to improve the environment.

Identify effective IT responses to different kinds of business pressures. • Market pressures: An example of a market pressure is powerful customers. Customer relationship management is an effective IT response that helps companies achieve customer intimacy. • Technology pressures: An example of a technology pressure is information overload. Search engines and business intelligence applications enable managers to access, navigate, and utilize vast amounts of information. • Societal/political/legal fJressures: An example of a societal/political/legal pressure is social responsibility, such as the state of the physical environment. Green IT is one response that is intended to improve the environment.

A process is comprised of three

Inputs: Materials, services, and information that flow through and are transformed as a result of process activities • Resources: People and equipment that perform process activities • Outputs: The product or a service created by the process If the process involves a customer, then that cus

Innovation strategy.

Introduce new products and services, add new features to existing products and services, or develop new ways to produce them.

Differentiation strategy.

Offer different products, services, or product features than your competitors.

Cost leadership strategy.

Produce products and/or services at the lowest cost in the industry.

Michael Porter's competitive forces model (Porter, 1985).

The best-known framework for analyzing competitiveness is Michael Porter's competitive forces model (Porter, 1985). Companies use Porter's model to develop strategies to increase their competitive edge. Porter's model also demonstrates how IT can make a company more competitive. Porter's model identifies five major forces that can endanger or enhance a company's position in a given industry.

The five strategies are as follows: • Cost leadership strategy-produce products and/or services at the lowest cost in the industry; • Differentiation strategy -offer different products, services, or product features; • Innovation strategy- introduce new products and services, put new features in existing products and services, or develop new ways to produce them; • 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 customers happy. 5. Describe

The five strategies are as follows: • Cost leadership strategy-produce products and/or services at the lowest cost in the industry; • Differentiation strategy -offer different products, services, or product features; • Innovation strategy- introduce new products and services, put new features in existing products and services, or develop new ways to produce them; • 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 customers happy. 5. Describe

Customer satisfaction:

The result of optimizing and aligning business processes to fulfill customers' needs, wants, and desires.

productivity

The result of optimizing each individual's work processes

• Cost reduction

The result of optimizing operatio11s and supplier processes. •

Quality:

The result of optimizing the design, development, and production processes.

Cycle and fulfillment time reduction:

The result of optimizing the manufacturing and logistics processes. •

Differentiation

The result of optimizing the marketing and innovation processes.

Porter's model identifies five major forces that can endanger or enhance a company's position in a given industry.

The threat of entry of new competitors The bargaining power of suppliers The bargaining power of customers (buyers). The threat of substitute products or services The rivalry among existing firms in the industry.

support activities.

Unlike primary activities, support activities do not add value directly to the firm's products or services.

business process management (BPM),

a management system that includes methods and tools to support the design, analysis, implementation, management, and continuous optimization of core business processes throughout the organization. BPM integrates disparate BPI initiatives to ensure consistent strategy execution.

BPI project generally follows five basic -- DMAIC

define, measure, analyze, improve, and control, or DMAIC

Web-enabled web enabled technologies

display and retrieve data via a Web browser. They enable an organization to integrate the necessary people and applications into each process, across functional areas and geographical locations.

Effectiveness

focuses on doing the things that matter; that is, creating outputs of value to the process customer-for example, high-quality products.

The value chain model

identifies points where an organization can use information technology to achieve competitive advantage

Web-enabled business activity monitoring (BAM) failures in real time.

is a real-time approach for measuring and managing business processes. Companies use BAM to monitor their business processes, identify failures or exceptions, and address these failures in real time.

A value chain

is a sequence of activities through which the organization's inputs, whatever they are, are transformed into more valuable outputs, whatever they are. The value chain model identifies points where an organization can use information technology to achieve competitive advantage

A competitive strategy

is a statement that identifies a business's approach to compete, its goals, and the plans and policies that will be required to carry out those goals (Porter, 1985).

business process reengineering (BPR),

is a strategy for making an organization's business processes more productive and profitable. The key to BPR is for enterprises to examine their business processes from a "clean sheet" perspective and then determine how they can best reconstruct those processes to improve their business functions.

Make-to-order

is a strategy of producing customized (made to individual specifications) products and services

BPMS

is an integrated set of applications that includes a reposito1y of process information, such as process-maps and business rules; tools for process modeling, simulation, execution, coordination across functions, and re-configuration in response to changing business needs; as well as process-monitoring capabilities.

A business process

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

business environment

is the combination of social, legal, economic, phys ical, and political factors in which businesses conduct their operations.

Globalization

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

Business-information technology alignment

is the tight integration of the IT function with the organization's strategy, mission, and goals.

In mass customization,

it also produces a large quantity of items, but it customizes them to fit the needs and preferences of individual customers

business process improvement (BPI).

less radical, less disruptive, and more incremental approach, called business process improvement (BPI). BPI focuses on reducing variation in the process outputs by searching for root causes of the variation in the process itself (such as a broken machine on an assembly line) or among the process inputs (such as a decline in the quality of raw materials purchased from a certain supplier). BPI is usually performed by teams of employees that include a process expert- usually the process owner (the individual manager who oversees the process) - as well as other individuals who are involved in the process.

cross-functional business processes

meaning that no single functional area is responsible for their execution. Rather, multiple functional areas collaborate to perform the process.

Important components of BPM are

process modeling, Web-enabled technologies, and business activity monitoring. .

The fulfillment process is concerned with tracks the progress of the

processing customer orders. Fulfillment is triggered by a customer purchase order that is received by the sales department. Sales then validates the purchase order and creates a sales order. The sales order communicates data related to the order to other functional areas within the organization, and it tracks the progress of the order

flow chart symbols

rectangles (steps) are activities that are performed by process resources (reserve seats, issue e-ticket). Diamond-shaped boxes indicate decisions that need to be made (seats available?). Arrows are used as connectors between steps; they indicate the sequence of activities. D-shapecl boxes are used instead of rectangles when a waiting period is part of a process; ovals can show start and stop points; and process resources can be attached to activities with resource connector lines, or included as an annotation or property for each activity box.

Competitive advantage

refers to any assets that provide an organization with an edge against its competitors in some measure such as cost, quality, or speed.

Primary activities

relate to the production and distribution of the firm's products and services. These activities create value for which customers are willing to pay.

Procurement comprises five steps

that are completed in three different functional areas of the firm: warehouse, purchasing, and accounting.

define phase,

the BPI team documents the existing "as is" process activities, process resources, and process inputs and outputs, usually as a graphical process map, or diagram.

the analysis phase,

the BPI team examines the "as is" process map and the collected data to identify problems with the process (such as decreasing efficiency or effectiveness) and their root causes..

improve phase,

the BPI team identifies possible solutions for addressing the root causes, maps the resulting "to be" process alternatives, and selects and implements the most appropriate solution.

measure phase,

the BPI team identifies relevant process metrics, such as time and cost to generate one output (product or service), and collects data to understand how the metrics evolve over time.

control phase,

the team establishes process metrics and monitors the improved process after the solution has been implemented to ensure the process performance remains stable. An IS system can be very useful for this purpose.

process modeling,

which is a graphical depiction of all of the steps in a process.

ISs play a vital role in three areas:

• Executing the process • Capturing and storing process data • Monitoring process performance In this section, you will learn about each