Chapter 2: Organizational Strategy, Competitive Advantage, and Information Systems
One manifestation of technological innovation is..
"bring your own device" (BYOD): policy of permitting employees to bring personally owned mobile devices (laptops, tablet computers, and smartphones) to the workplace and to use those devices to connect to the corporate network as well as for personal use.
Societal/Political/Legal Pressures
-Social Responsibility -Compliance with Government Regulations -Protection against Terrorist Attacks -Ethical Issues
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.
A business process
Business Process Management
A management system used to support continuous BPI initiatives for core business processes over time
Business Process Reengineering
A radical redesign of an organization's business processes to increase productivity and profitability; examines business processes with a "clean slate" approach.
Business Process Management Suite
An integrated set of applications used for BPM
BPI vs BPR
BPI: Low risk / low cost Incremental change Bottom-up approach Takes less time Quantifiable results All employees trained in BPI BPR: High risk / high cost Radical redesign Top-down approach Time consuming Impacts can be overwhelming High failure rate
Business Pressures
Market Pressures Technology Pressures Societal/Political/Legal Pressures
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 pressures: 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 nonprofit association dedicated to developing a very inexpensive laptop—a technology that aims to revolutionize how the world can educate its children.
One Laptop per Child (OLPC)
Important components of BPM
Process modeling Web-enabled technologies Business Activity Monitoring (BAM)
Capturing and Storing Process Data
Processes generate data (dates, times, products etc), capture and store process data (transaction data) and provides "real time" feedback
Business Activity Monitoring
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.
Customer Relationship Management (CRM)
an organization-wide effort toward maximizing the customer experience.
Powerful Customers
consumer sophistication and expectations increase as customers become more knowledgeable about the products and services they acquire. Customers can use the Internet to find detailed information about products and services, to compare prices, and to purchase items at electronic auctions.
Emerging Trend of Social BPM
enables employees to collaborate, using social media tools on wired and mobile platforms, both internally across functions and externally with stakeholders (e.g., customers or experts), to exchange process knowledge and improve process execution.
Another major source of business pressures is...
government regulations regarding health, safety, environmental protection, and equal opportunity.
Monitoring Process Performance
- IS evaluates information to determine how well a process is being executed - Evaluations occur at two levels *Process level (i.e. process as a whole) *Instance level (i.e. a specific task or activity) -Monitoring identifies problems for process improvement
The Strategies for Competitive Advantage
1. Cost leadership strategy: produce products and/or services at the lowest cost in the industry. 2. Differentiation strategy: offer different products, services, or product features. 3. Innovation strategy: introduce new products and services, put new features in existing products and services, or develop new ways to produce them. 4. Operational effectiveness strategy: improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals. 5. Customer orientation strategy: concentrate on making customers happy.
Measures of Excellence in Executing Business Processes
1. Customer satisfaction: The result of optimizing and aligning business processes to fulfill customers' needs, wants, and desires. 2. Cost reduction: The result of optimizing operations and supplier processes. 3. Cycle and fulfillment time reduction: The result of optimizing the manufacturing and logistics processes. 4. 4. Quality: The result of optimizing the design, development, and production processes. 5. Differentiation: The result of optimizing the marketing and innovation processes. 6. Productivity: The result of optimizing each individual's work processes.
Five basic phases of successful BPI
1. Define: 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. 2. Measure: 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. 3. Analyze: the BPI team examines the "as is" process map and the collected data to identify problems with the process (e.g., decreasing efficiency or effectiveness) and their root causes. 4. Improve: 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. Common ways to improve processes are eliminating process activities that do not add value to the output and rearranging activities in a way that reduces delays or improves resource utilization. 5. Control: the team establishes process metrics and monitors the improved pro- cess after the solution has been implemented to ensure the process performance remains stable.
Information Systems' vital role in three areas of business processes
1. Executing the process 2. Capturing and storing process data 3. Monitoring process performance
IT is instrumental in organizational efforts to "go green" in three areas:
1. Facilities design and management: Organizations are creating more environmentally sustainable work environments. 2. Carbon management: companies try to reduce their carbon footprints, develop the systems needed to monitor carbon throughout the organiza- tion and its supply chain 3. International and U.S. state environmental laws: IT executives must deal with federal and state laws and international regulations that impact everything
IS's hlep execute the process by:
1. Informing employees when it is time to complete a task 2. Providing required data 3. Providing a means to complete the task
Business process comprised of three elements:
1. Inputs: Materials, services, and information that flow through and are transformed as a result of process activities 3. Resources: People and equipment that perform process activities 4. Outputs: The product or a service created by the process
Procurement comprises five steps that are completed in three differ- ent functional areas of the firm: warehouse, purchasing, and accounting
1. The process begins when the warehouse recognizes the need to procure materials, perhaps due to low inventory levels. The warehouse documents this need with a purchase requisition, which it sends to the purchasing department 2. In turn, the purchasing department identifies a suitable vendor, creates a purchase order based on the purchase requisition, and sends the order to the vendor 3. When the vendor receives the purchase order, it ships the materials, which are received in the warehouse. 4. The vendor then sends an invoice, ACCT which is received by the accounting department. 5. Accounting sends payment to the POM vendor, thereby completing the procurement process
Porter's Competitive Forces Model
1. Threat of Entry of New Competitors 2. Bargaining Power of Suppliers 3. Bargaining Power of Customers/Buyers 4. Threat of Substitute Products or Services 5. Rivalry Among Existing Firms within the Industry
Steps in fulfillment process
1.Sales -Receive customer purchase order - Create Sales order 2.Warehouse - Prepare shipment (Pick/Pack) -Send shipment (Ship) 3.Accounting -Create and send invoice -Receive payment
Compare and contrast business process reengineering and business process management to determine the different advantages and disadvantages of each
Business process reengineering is a radical redesign of business processes that is intended to improve the efficiency and effectiveness of an organization's business processes. 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 busi- ness functions. Because BPR proved difficult to implement, organizations have turned to business process management. Business process management is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes.
refers to the wide gap between those individuals who have access to information and communications technology and those who do not. government and international organizations are trying to close it.
Digital Divide
The integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in IT
Globalization
Protection against terrorist attacks
Since September 11, 2001, organizations have been under increased pressure to protect themselves against terrorist attacks. In addition, employees who are in the military reserves have been called up for active duty, creating personnel problems. Information technology can help protect businesses by providing security systems and possibly identifying patterns of behavior associated with terrorist activities, including cyberattacks.
Changing Nature of the Workforce
The workforce, particularly in developed countries, is becoming more diversified. Increasing numbers of women, single parents, minorities, and persons with disabilities are now employed in all types of positions. IT is also enabling people to work from home, which can be a major benefit for parents with young children and for people confronted with mobility and/or transportation issues.
meaning that no single functional area is responsible for their execution. Rather, multiple functional areas collaborate to perform the process.
cross-functional business processes
Green IT
a term used to describe all of a firm's activities to support a healthy environment and sustain the planet
Business Process Improvement
attempts to understand and measure the current process and make performance improvements accordingly. Focuses on reducing variation in process outputs by identifying the underlying cause of variation
Technology Pressures
business pressures caused by technological innovation and information overload.
Market Pressures
business pressures generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers.
Societal/Political/Legal Pressures
business pressures related to social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics.
Procurement Cross-Functional Processes
includes all of the tasks involved in acquiring needed materials POM externally from a vendor.
Process Modeling
involves graphically representing the processes that capture, manipulate, store, and distribute information between a system and its environment
Examples of business processes in the functional areas include...
managing accounts payable, managing accounts receivable, managing after-sale customer follow-up, managing bills of materials, managing manufacturing change orders, applying disability policies, employee hiring, computer user/staff training, and applying Internet use policy.
The fulfillment cross-functional process concern with...
processing customer orders
Technology innovation and obsolescence
rapid development of both new and substitute products and services
One important pressure that businesses in a global market must contend with is
the cost of labor, which varies widely among countries. many labor-intensive industries have moved their operations to countries with low labor costs. IT has made such moves much easier to implement.
Six Sigma is a popular methodology for BPI initiatives. Its goal is to ensure that...
the process has no more than 3.4 defects per million outputs by using statistical methods to analyze the process.
process controls
those activities that safeguard company resources, guarantee the accuracy of its financial reporting, and ensure adherence to rules and regulations.