MIS Chapter 2
Transaction fees/Brokerage
A commission is paid to the business for aiding in the transaction. Ex: PayPal, eBay, Groupon, Scottrade, Airbnb, Uber
Traditional Sales
A consumer buys a product/service from the website. Ex: Amazon, Zappos, Nordstrom.com, iTunes
Functional Area Information
A cross-organizational-level information system designed to support a specific functional area.
Unstructured Decisions
A decision where few or no procedures to follow for a given situation can be specified in advance.
Semistructured
A decision where problems and solutions are not clear-cut and often require judgement and expertise.
Structured Decisions
A decision where the procedures to follow for a given situation can be specified in advance
Organizational Strategy
A firm's plan to accomplish its mission and goals as well as to gain or sustain competitive advantage over rivals.
Key Resources
The most important assets needed to make the business model work. What key resources are needed to enable our value proposition, channels, customer relationships, and revenue streams?
Business Processes
A set of related activities an organization performs in order to reach its business goals.
Differentiation Strategy
A strategy in which an organization differentiates itself by providing better products or services than its competitors.
Resources
An organization's specific assets that are utilized to create cost or product differentiation from its competitors. Proprietary technology Brand Recognition
How do you predict what the next trend is going to be?
Analyze market needs and trends Research Personal experience
Key partners
the network of partners and suppliers needed to make the business model work. Who are our key partners and suppliers? What resources do they offer, and what activities do they perform?
Key activities
The most important activities needed to make the business model work. What key activities are needed to enable our value proposition, channels, customer relationships, and revenue streams?
Gig Economy
An economy in which workers are not employed by a company, but are only hired for short-term, temporary jobs.
Open Innovation
Can prove to be beneficial when you integrate external stakeholders into the innovation process
Process Requirements
focus on success over other objectives
Platform
A business model that enables others--both other businesses and users--to co-create value, such that some users create value and other users consume.
Service-based Business Model
A manufacturer can offer equipment services, such as offering the product itself as a service or offering operations and optimization services, or information services, such as selling data or insights generated by the customers usage of the product.
Service Based Business Models
A manufacturer can offer equipment sevices as well as the prodcut Ex: Rolls Royce makes airplane engines and sells them at near cost. They make money off maintenance fees.
Key Performance Indicator (KPI)
A metric deemed critical to assessing progress toward a certain organizational goal.
Best-Cost Provider Strategy
A strategy to offer products or services of reasonably good quality at competitive prices
Low-Cost Leadership Strategy
A strategy to offer the best prices in the industry on goods or services.
Organizational Functions and Representative Information Systems
Accounting and finance Human Resources Marketing Production and Operations
Typical Revenue Models in the Digital World
Affiliate Marketing Advertising Subscription Licensing Transaction Fees/Brokerage Traditional Sales Freemium
Sharing (Collaborative) Economy
An economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of internet. Ex: Uber, Lyft
Disruptive (Radical) Innovations
An innovation that uses markedly new or different technology to access new customer segments and/or proved significantly greater benefits to existing customers, and eventually marginalizes or replaces existing products or services.
Focused differentiation
An organization differentiates itself by providing better products or services than its competitors by focusing on a particular segment of consumers
Broad differentiation
An organization differentiates itself by providing better products or services than its competitors by focusing on different types of consumers
Capabilities
An organization's ability to leverage its resources Shorter lead times Engineering design quality
Transaction
Any event, such as the exchange of goods or services for money, that occurs as part of daily business of which an organization must keep a record.
Distinctive Competencies
Any unique strength possessed by an organization (e.g., innovation, agility, quality, or low cost) that helps to pursue an organizational strategy. Product value Lower cost Higher quality
Freemium
Basic services are offered for free, but a premium is charged for special features. Ex: Flickr, Skype, Dropbox.com
Five General Types of Organizational Strategy
Broad Differentiation Focused Differentiation Focused low-cost differentiation Overall low-cost differentiation Best cost provider
Successful Innovation is Difficult
Can be readily copied by competitors Often fleeting Choices are often difficult Limited Resources
Process Innovations
Changing primary processes used to produce product or service
Product System Innovations
Creating bundles of complementary offerings
Product Performance Innovations
Creating novel products or improving existing products through differentiation
Components of a Business Model
Customer Segments Value Proposition Channels Customer Relationships Revenue Streams Key Resources Key activities Key partners Cost Structure
Revenue Models
Describes how the firm will earn revenue, generates profits, and produce a superior return on invested capital
Customer Engagement Innovations
Developing meaningful connections with customers
Profit Model Innovation
Finding novel ways of generating revenues from offerings
Resource Requirements
Employees with knowledge, skill, time, and resources Partner with appropriate resources
Organizational Decision Making Levels
Executive/Strategic Managerial/Tactical Operational
In-App Purchases
Extra features or content users can buy within an app.
Network Innovation
Harnessing the capabilities and strengths of others
Advertising
Free services are provided to customers and paid for by a third party. Ex: Yahoo!, Google, Facebook, Twitter
Virtual Reality (VR) Headsets
Head-mounted device enabling immersive three-dimensional experiences.
Disintermediation
Match producers and consumers directly without the need for traditional middlemen.
Mangerial/Tactical Level
Middle Management: controlling efficiency, help make semistructured decisions Functional managers focus on monitoring and controlling operational level activities and providing information to higher levels of the organization.
Buyer Power
Number of customers Price sensitivity Ability to substitute Cost of changing
Supplier Power
Number of suppliers Size of Suppliers Uniqueness of service Your ability to substitute Cost of changing
Focused Low Cost Leadership
Offer the best prices in the industry on goods or services to a particular segment of consumers
Overal Low Cost Leadership
Offer the best prices in the industry on goods or services to different types of consumers
Affiliate Marketing
Paying businesses that bring or refer customers to another business. Revenue sharing is typically used. Ex: Amazon's Associates Program
Examples of Platform-Based Business Models
Products (eBay) Services (Uber) Payments (PayPal) Investments and Funding (Lending Club) Content (Twitter) Communication (Skype) Collaboration (Dropbox) Social Relationships (LinkedIn)
Ten Types of Innovation
Profit model Network Structure Process Product Performance Product System Service Channel Brand Customer Engagement
Brand Innovations
Positioning the brand in innovative ways
Organizational Requirements for Innovation
Process Requirements Resource Requirements Risk Tolerance Requirements
Sources of Competitive Advantage
Quality Service User Base Proprietary Innovation Brand Value Data Examples of resources, capabilities, and distinctive competencies used by companies to sustain competitive advantage.
Functional Areas
Represents a discrete area of an organization that focuses on a specific set of activities.
Strategic Necessity
Something an organization must do in order to survive.
Organizing to Make Innovation Choices
Start early Display executive leadership Build a team of expert innovatiors Educate the organization
Business/IT Alignment
The alignment of information systems with a business's strategy.
Threat of Substitution
Substitute performance Cost of change
Business Models
Summary of a business strategic direction that outlines how the objectives wll be achieved Specifies how a company will create, deliver, and capture value.
Service Innovations
Supporting and enhancing value of offering
Marketing
Systems used for managing new product development, distribution, pricing, promotional effectiveness, and sales forecasting of the products and services offered by the organization. Market research and analysis, new product development, promotion and advertising, pricing and sales analysis, product location analysis
Accounting and Finance
Systems used for managing, controlling, and auditing the financial resources of the organization Accounts payable, Expense accounts, Cash Management, Payroll Processing
Human Resources
Systems used for managing, controlling, and auditing the human resources of the organization Recruiting and hiring, education and training, benefits management, employee termination, workforce planning
Production and Operations
Systems used for managing, controlling, and auditing the production and operations resources of the organization Inventory management, cost and quality tracking, materials and resource planning, job costing, resource utilization
First-Mover Advantage
Temporary competitive advantage derived from being the first to enter a market.
Organization Learning
The ability of an organization to learn from past behavior and data, improving as a result.
uOperational Level
The bottom level of an organization, where the routine, day-to-day business processes and interactions with customers occur. Making structured decisions and optimizing employee schedules
Cost structure
The costs incurred when operating the business model. What are the costs incurred when operating the business model? Which resources and activities are most expensive?
Innovation
The creation of new products, processes, or services that return value to the organization.
Customer Segments
The customers targeted with the product/service offering Who will be our target customers? Who are the most important customers?
Efficiency
The extent to which goals are accomplished faster, at lower cost, or with relatively little time and effort.
Effectiveness
The extent to which goals or tasks are accomplished well.
Value Creation
The outcome of an organization's activities that increase the worth of products or services for the customer.
Value Chain Analysis
The process of analyzing an organization's activities to determine where value is added to products and/or services and the costs that are incurred for doing so.
Strategic Planning
The process of forming a vision of where the organization need to head, converting that vision into measurable objectives and performance targets, and crafting a plan to achieve the desired results.
Customer Relationships
The relationships formed with the target customers. What types of relationships do we build with our customers? How do we maintain these relationships?
Crowdfunding
The securing of business financing from individuals in the marketplace--the "crown" to fund an initiative.
Value Chain
The set of primary and support activities in an organization where value is added to a product or service.
Threat of New Entry
The threat that a new company will come in and become a serious competitor
Value Proposition
The utility that the product/service has to offer to customers Why do customers need our product/service? What problems will our product/service solve? Why would customers choose our product/service over our competitors' products/services?
Revenue Streams
The way a firm generates income. How do we generate income? What are we selling? What are customers willing to pay for?
Channels
The ways in which the product/service offerings reach the target customers. How will our customers be reached? Which channels are best in terms of cost and convenience for the customers?
Five Force Analysis:
Threat of New Entry Buyer Power Threat of Substitution Supplier Power Competitive Rivalry
Risk Tolerance Requirements
Tolerance for risk Tolerance for Failure
XaaS (X as a service)
Type of business model centered around not selling products, but providing these as services.
Executive/Strategic Level
Upper Management: look over all levels, planning tools, makes data driven decisions, roll out new initiatives
Licensing
Users pay a fee for using protected intellectual property (e.g., software). Ex: Symantec, Norton
Subscription
Users pay a monthly or yearly recurring fee for the used of the product/service. Ex: Netflix, World of Warcraft, Spotify
Automating
Using information systems to do an activity faster, cheaper, and perhaps with more accuracy and/or consistency.
Channel Innovations
Using innovative ways to connect offerings with customers
Structure Innovations
Using the company's talent and assets in innovative ways
A business model reflects:
What does a company do? How does a company uniquely do it? In what way(s) does the company get paid for doing it? What are the key resources and activities needed? What are the costs involved?
Managers use value chain analysis
to identify opportunities where information systems can be used to gain a competitive advantage.