MIS
Internet Pure play
- a company (often retail) that is purely a dot.com company and has no physical storefront; Amazon and Netflix are examples of this
Of the 5 parts in the IS Model, what parts are the hardest to change usually and why?
-5 parts of the IS model: Hardware, Software, Data, Process, and People -hardest parts to change are always process and people because people are the hardest to change. It is easy to change hardware, but takes a large amount of time to retrain the workers and teach them a different way of thinking. "PEOPLE ARE ALWAYS THE BIGGEST PROBLEM." -clint
Understand the differences between automating a process and transforming it? How do humans and technology play different roles in both?
-Automating Process- Human element is completely taken out. During automation, processes are digitized and turned into programming codes of software. Basically, automation moves work from the human side to the technology side. -Transforming Process- During transformation, processes are redesigned and restructured to fit the logic within software. Transformation changes the human side to fit the technology side, i.e. retraining the employees to adapt to the technology side. -How do humans and technology play different roles in both? Example -Starts with a lady calling a sales rep to get a product. Rep makes an order #. Warehouse guys use that order to update a pick-list (what to grab off shelves). Once it's picked, delivery # is made to be shipped. Person uses pick-list used to double check, products are boxed, scanned, and shipped. Wait for check. -OR! Customer orders online, system checks inventory and processes payment. Robot gets items, updates inventory, packs product, route box through shipper. Delivered via UPS. Saves millions in costs!
How is process innovation different from process improvement? Which is harder to do and why?
-Process Improvement is doing things better, and Process innovation is doing things differently/uniquely. ***Process Innovation is harder to do because of: ● Organizational Inertia - the bigger an organization is, the harder it is to change, i.e. higher resistance to change. ● It is disruptive by its nature, i.e. making people adapt to the new process after all those years of doing it a certain way. ● Hard to implement top-down. Refer back to the Toyota assembly video, where the worker found a new process that was more efficient after doing the same old process all those years --> this is bottom-up approach, where process innovation is discovered at the bottom. Basically the people that have been doing the process for a long time have found a better way to do the process. If it was top-down, then the higher-ups would have to figure out a new process innovation, but it would be hard for those higher-ups since they're not the ones spending hours each day doing the process.
Organizational Inertia
-Things go one way, hard to turn around/cost of ditching the old program. -Forces inside an organization that make it resistant to change. -Risk Aversion - would rather take the old certain/risk-free process that's been used over the years, over the new redesigned uncertain/risky process.
What are the various key issues holding back streaming video models? How did Netflix attempt to counteract these challenges? What have we learned from their attempts?
-cable companies are limiting bandwidth Most people want streaming for free, or as a free benefit to Netflix's DVD-by-mail service. The other issue is that for every video that is streamed, you can just as easily find it online as you can buy it. People are not receptive to paying for something that they can or have gotten for free. Because of this, Netflix's attempt to split businesses and charge for streaming backfired big time, resulting in the loss of 800,000 customers in a three month span, a drop in share price form $300/+ to $75/-. The key thing I've learned from Netflix's attempts is that communication is key. The issue blew up as big as it did because of a failure in communication between Netflix's officers and its customers.
What kind of software (Customized or Packaged) would be best for a very complicated process and why? What about a simple process?
1) Complex process = Customized software (for all the complexities of the process). 2) Simple process = Packaged software (pre-made) (for performing simple common processes).
How do we reduce the bullwhip effect? How does Zara reduce it? How does Wal-Mart reduce it?
1) Minimize turn around time, use technology 2) Zara vertically integrates itself 3) Walmart communicates with the members of its supply chain and shares customer information so they can be prepared for changes in demand, and thus match the supply
What is a typical structure of a supply chain? What parties can be involved?
1) Supplier>Manufacturer>Wholesaler>Distributor>Retailer>Customer 2) Customer>Producer>You>You factories>Your stores
Why is inventory management so important? What happens when a retailer has too much inventory? What happens when a retailer has too little inventory?
1) Too much inventory = money tied up. No money until sold. Inventory = Death 2) Small inventory = sell small batches ASAP (but if you run out of inventory then no money is being made and you have the potential to lose customers because the items they want aren't there.)
What are the advantages and disadvantages of vertical integration? What are the advantages and disadvantages of contract manufacturing?
1) Vertical integration PROS: control bottom up. Fast. Ability to adapt to changes to meet sudden demands quickly. Manager possess a view of the entire value chain. CONS: Not diversified. In house distribution = susceptible to fuel costs. Risk is all on you. If one goes down, all parts go down since you own it.Expansion in other countries is a threat because factories and logistic centers are not close by. More expensive labor 2) Contract manufacturing PROS: Saves you time. Send someone else to make it. Focus on core values of business CONS: Lack of control, rely on someone and hope they make it correctly. Partners can engage in sweatshop labor and environmental abuse
What are the five components that make up an information system?
1)hardware 2)software 3)data 4)procedures 5)people
What BI tools are available to turn data into valuable information? What are examples of these and how they add value?
1)reporting systems 2)data mining systems 3)knowledge management systems 4)expert systems
Information System (IS)-an integrated solution that combines 5 components
1. hardware 2. software 3. data 4. procedures 5. people
Click Fraud
A fake website or banner that redirects to a malicious virus-infested site
Expert System
AI system that leverages rules or examples to perform a task in a way that mimicks applied human expertise
Why did other firms find Netflix's market attractive? Why did many analysts incorrectly suspect that Netflix was doomed to fail??
Based on Netflix's IPO, other firms saw that this was a quickly growing business and a highly profitable market. Many analysts suspected Netflix would fail once its IPO was out because its rivals (Wal-Mart and Blockbuster) had significantly deeper pockets as well as a pre-established customer base that they could leverage to push Netflix out of the market.
What was the downside to Netflix's early IPO? ?
Because they had made their IPO as early as they did, they tipped off other companies to how profitable a business Netflix's business was. If they had waited two to four years, they would have been able to majorly blindside the industry and raise competitors' barriers to entry into the business.
Why is it helpful to understand the process before moving towards building your Information System? Think back to a class discussion around the grocery checkout example and what parts of the IS model need to change in order to move from a regular checkout to a self-checkout.
Because you must understand what the goal is first. You have to know exactly how the house is going to look like... down to how many nails, and what color the paint... to know what you need. If you change you mind halfway through building a house..it will be ridiculously expensive and time consuming.
What is process mapping
Breaking down a businesses process into individual tasks and events. Breaking down the process makes it easy to analyze and determine what can be changed in it, making it more efficient.
How has Zara's parent company Inditex leveraged a technology-enabled strategy to become the world's largest fashion retailer?
By solely focusing on purchasing technology that will have a positive benefit and help produce revenue/profit while being virtually integrated, thus, allowing Zara to quickly sell products due to great fashion styles, limited availability, and inexpensive prices, which constantly attracts customer attention as a result. Zara constantly monitors its customers preferences and can vary quickly adjust to any changes, preventing the kiss of death in retailing- extra inventory.
Transaction Costs
Coordination. It is costly to get all 10000 of your group members to sit down in 1 room on Wednesday 5pm and talk about what needs to be done. Same applies with business.
What types of activities, processes, or portions of your company do you not outsource?
Core competency = intellectual property. Don't outsource your secret sauce/ingredients to someone else. Keep it to yourself in house.
What is the term used to describe how Netflix "sourced" or created the Cinematch technology?
Crowdsourcing - this is the method Netflix used to improve the Cinematch technology.
Explain how data, information, knowledge, and wisdom are related.
Data refers simply to raw facts and figures. Alone it tells you nothing. The real goal is to turn data into information. Data becomes information when it's presented in a context so that it can answer a question or support decision making. And it's when this information can be combined with a manager's knowledge—their insight from experience and expertise—that stronger decisions can be made. Finally, the knowledge yields insight which ultimately births wisdom
How do data warehouses add efficiency and better utilize data in companies systems?
Data warehouses add efficiency by having ALL the company's data in one place. The business no longer has to search near and far for the desired information and doesnt have to convert andy measurements to one common measurement (ex The Saap, Oracle, and Cutsom data dilemma faced by the worldwide company in class 22, slide 9)
How does disintermediation affect this challenge?
Disintermediation is cutting out the middle men. Less lag time. Factory direct to customer. You have to have your own retail stores, or website to order from, and your own distribution to go straight to the customer
What role do scale economies play in Netflix's strategies? How do these scale economies pose an entry barrier to potential competitors?
Economies of scale allow Netflix to leverage lower prices and spend more on getting more customers/making the product better. It creates strong network effects that creates high barriers to entry. Netflix's key potential competitors, Blockbuster and Walmart, end up straddling the online and physical markets, which can break a company. Meanwhile, upstart rivals will start small and won't have the user base, the amount of data, or the selection that Netflix has, forcing them into an uphill fight.
Logistics (Outbound and Inbound) Inbound-
Entails the movement of products from suppliers to companies; tasks like: coordination of purchasing, inbound transportation, raw materials, componenet parts, work in process inventories and production scheduling
What kind of data does Zara capture and how do they derive knowledge from this data?
Gathered data by using a PDA for customer feedback(why they didn't like the clothes and what would make it better. From this PDA they also gathered POS data.Gathers directly from customers by asking what they like and don't like (ex. in fitting rooms etc). POS systems show how garments rank in sales.
Atoms to bits
Get rid of physical CDs and other medium to go straight to immediately streaming. It costs less. the idea that many media products are sold in containers (physical products or atoms) for bits (the ones and zeros that make up a video file, song, or a layout of a book); as the internet offers fast wireless delivery to TVs, music players, book readers, and other devices, the "atoms" of the container aren't necessary; physical inventory is eliminated, offering great cost savings; Netflix takes advantage of this trend in its Internet pure play business
Initial public stock offering (IPO)
Going public on the stock market. The price per stock on opening day
Why is good supply chain management a positive thing and what are the benefits?
Good supply chain management allows you to react to ouside forces faster. It costs less, is more efficient, and insures that each member of the supply chain is fully informed of changing conditions. Customer needs 1000 units? We can build it by tonight. FAST TURN AROUND TIME! Less bullwhip effect
What are benefits of having a more efficient or streamlined process?
Greater efficiency, lower costs, saves time i.e. to move from one place to another, and more revenue and profit
The more organizations a process crosses, the harder it is to what?
Harder to implement process changes...since it encompasses more..tell everyone to use Metric measurement across the US overnight.... it will be a mess process, people, and the systems (This is noted in the powerpoint on the slide that discusses order-to-cash process)
Cost per thousand (CPM)
How much a company pays you for every 1000 times ad is displayed*
Cost-per-action (CPA)
How much a company pays you for every time someone fills out a form and hits send
Cost-per-click (CPC)
How much a company pays you for every time someone just "clicks" a banner
Search engine optimization (SEO)
How to make your website appear higher on google's ranking. The more people that link to your page...the higher google links back to you.
How can you apply Complex Adaptive Systems Theory to the difficulty of process innovation? (Think top-down versus bottom-up in the Toyota example)
In Toyota.. they were innovative because they were open to suggestions from people working on the factory line. One person who was working there for many years thought that they should switch around the placement of parts.... he told his boss...and that change affected all factories. This one small process changed saved millions in costs and time. Complex Adaptive Systems...even a small suggestion from the crowd can make the difference.
Explain the 4 different ways companies can source work? Can you outsource something locally or only overseas?
Inhouse offshore - You do it. Your factory in Europe. Inhouse onshore - You do it. Your factory in US. Outsouce Offshore - Hire someone else in Europe. Outsource Onshore - Hire someone across the street.
Core competency
Intellectual property that you own/makes you unique. Intel makes computer chips. McDonalds makes fast food. Walmart has affordable stuff of everything.
How is the concept of "atoms to bits" impacting a wide range of industries?
It offers real time streaming or instant access. No need to drive to blockbuster... or wal-mart. Amazon offers shopping online too! Atoms to bits refers to the general movement towards digitization in today's current society. This has resulted in a lot of brick and mortar business (book stores, music stores, etc.) going out of business because things sold online can be sold cheaper and in bulk, offering greater profit for companies and records.
Cookies
Little files that tells websites that you logged in there before... email...blackboard...etc.
Offshoring vs Onshore
Offshore - outside the US (you still own it - Your house in Europe) Onshore - inside the US (you still own it - Your house in TX)
What are offshoring and outsourcing and how are these different?
Offshoring is bringing it outside the country. Oursourcing is hiring someone else. Location vs Who does it.
Be able to look at a scenario where I tell you where a company is headquartered and then where they are sourcing work from in a particular situation. Be able to tell me if it's outsourcing or not and if it's offshore or not.
Onshore - You own it inside the country (TX home) Offshore - You own it ouside the country (Europe home) Outsource locally - You hire your neighbor Outsource offshore - You hire someone from another country
Outsourcing vs In-house
Outsourcing is hiring another organization to perform service to Save costs Gain expertise you don't have Free up management time Refocus on core competencies
What is outsourcing? Why do companies outsource?
Outsourcing is hiring on other companies to take over part of the work. It usually saves them time, money, and frees them to do other things. You can hire for menial work... such as outsourcing someone to press a button once every 10 seconds... or you can hire an "expert" that knows more than you... hire a magician to do magic tricks for a party... instead of you doing magic tricks.
Is Outsourcing only about hiring less-expensive people? Explain why?
Outsourcing means "being handled by someone else" you can outsouce easy jobs to be handled really cheaply and quickly. You can also outsouce to "experts" who know more than you. (You can hire your little brother to mow the lawn for you. You can hire your dad to help you with your calculus HW.)
Contract manufacturing
Outsourcing production to third party firms. Firms who do contract manufacturing dont own the plants or directly fund workers who are producing the goods. (used by conventional wisdom)
Long tail
Phenomenon where less popular products get sold less. Companies can take advantage and cater to unique demographics. - the phenomenon whereby firms can make money by selling a near-limitless selection of less-popular products (or titles, in the case of Netflix); the long tail works with IPP firms because 1) selection attracts customers and 2) the internet allows large-selection inventory efficiencies that offline firms can't match
What are the key steps in good Business Process Management?
Process diagnostic-->Develop process maps-->Identify bottlenecks-->Redesign process-->Implement-->Evaluate the new process. 1. Creating a picture of the current processes. As-Is Business Process. How hardware, software, data, procedures & people interact. Example: Each dept. has its own database; they want to combine them. 2. Identify areas where process is constraining strategy. Example: Redundancy, missing data in databases - must be combined. 3. Redesign process or problematic portion of the process to help strategy be better realized. To-Be Business Process. How IT can be leveraged as a tool to better process. Example: Access, web-form, MySQL? How will the new database work? 4. Implement process changes. 5. Create policy for ongoing effectiveness assessment, i.e. feedback loop-->do the steps over again. Adjust and repeat cycles.
What is the overall purpose of a business intelligence system?
Provide information for improving decision making make it fast and effortless to get the proper data for descision making
Push Advertising vs Pull Advertising
Push advertising relies on companies to market + sell you the product.. "buy this shiny toy! Pull advertising relies on order on demand from customers. They want it. you build it.
RFM Analysis
Recency + Frequency + Money (1-high 5 low) - How recently, frequently, and how much money a customer spends per order
Crowdsourcing
Rely on the crowd to solve ideas by pooling in all the knowledge of people - the act of taking a job traditionally performed by a designated agent and outsourcing it to an undefined, generally large group of people in the form of an open call; Netflix utilized this in the form of the "Netflix Prize" in which they offered a prize to the first group/individual who could improve Cinematch's ratings accuracy by 10%
Geotargeting
Returning results relevant to location close to you
Server farm
Room full of computers that hold data
Why do you consider not outsourcing work, even if your labor/production costs go down?
Savings in production costs outweigh transaction costs. Price of labor will go down. Transaction/coordination costs will go up. The more you outsource the higher risk you need to coordinate all your peers to work together.
Query
Search
Organic (or natural) search
Search engine results returned according to relevance
What are risks of outsourcing?
Security. Lack of control. Lack of QUality
Market capitalization (market cap)
Share price x number of shares
Horizontal Integration
Single firm owns multiple stores on the same level. (Ex: Mcdonalds, Burger King, Wendy's all owned by the same person) Theyre not really owned by the same person, but that does show the idea of horizontal integration -A better example would be if H-E-B bought the Randall's company and extended their operations with their newly acquired assets from Randall's
Business Process Management
Systematic way of creating, assessing, and altering business processes as needed.
1)Outbound
The area of logistics that involves managing the flow of finished products and information to business buyers and ultimately consumers (people like you and me); Tasks like:coordinate forecasting, finished goods inventory management, warehousing, outbound transportation, customer service and production scheduling
How does the "long tail" concept relate to Netflix's ability to offer the customer a huge selection of movies? What advantages does the longtail give online firms that actual stores can capture and why?
The longtail concept can cater to unique demographics... such as foreign films or really old movies. No one carries those DVDs or tapes anymore. Having the advantage of streaming only lets companies like Netflix prosper. The long tail concept relates to Netflix in that it can overcome geographic boundaries that actual storefronts have to deal with. More people want to see less popular films; the problem is, they're not all in one place. Netflix's variety gives it the ability to leverage the long tail effect because it isn't limited by the average customer preferences (which often just includes the most popular films, aka blockbusters) or physical boundaries like shelf space.
Click-through rate (CTR)
The ratio of viewers on a page and those that actually click the links advertised.
What are examples of how companies can use business intelligence? (Target, Wal-mart, etc...)
The target example in class 22, slide 6. Target used their transactional data to determine that the teenage girl was pregnant, so they sent pregnancy related coupons to her house Wal-Mart--determined that when a hurricane was about to strike, they needed to stock up on beer and strawberry pop tarts (random..lol)
How did streamlined operations and process innovation give Netflix a competitive advantage?
They offered many kinds of videos, they were available for instant streaming to all devices around the house, and they were usually cheaper than renting + no late fees since it's online streaming. Customers loved it. The DVD-by-mail concept was a big process innovation that gave Netflix a competitive advantage. Customers do not have to leave their homes to get a movie or return it. Moreover, once you return a movie, the next one comes to you in the mail.
What are examples of transaction costs?
Time.
Point-of-sale (POS) systems
Transaction processing systems that capture customer purchases. Cash registers and store checkout systems are examples of POS systems. They are critical to capturing sales data and are usually linked to inventory systems to subtract out any sold items.
What is the bullwhip effect and how does it impact a business in a bad way?
Variability in order size and order timing increase at each stage up the supply chain. -natural dynamic occurs due to multistage nature of supply chain -not related to erratic consumer demand -reduces overall profitability of supply chain -can lead to over supply and thus to much inventory, or not enough supply and thus empty inventory
Why is branding and customer happiness particularly important for online (aka internet pure play) firms? What factors contributed to Netflix's exceptional brand strength?
Word of mouth and ease of use made netflix so popular. For a brick and mortar store, if a consumer has a bad experience at one store, while they may not choose to frequent that particular store again, they will go to another of those outlets and the company will not lose their business. However, for an IPP business, if a customer is not happy with the service at the firm's site, the firm does not have any other site that might appease the customer, which could potentially lose the customer's business altogether (or worse, send the customer's business over to a rival). For a brick and mortar store, if a consumer has a bad experience at one store, while they may not choose to frequent that particular store again, they will go to another of those outlets and the company will not lose their business. However, for an IPP business, if a customer is not happy with the service at the firm's site, the firm does not have any other site that might appease the customer, which could potentially lose the customer's business altogether (or worse, send the customer's business over to a rival).
Does this mean companies should be vertically integrated?
Yes if they can afford it and do it well, but it carries many risks as well. Good communication between members of the supply chain can cause a horizontally integrated system to be just as or more profitable
What sort of comparisons between YouTube movie rental versus Netflix can be made and what threats does it pose for Netflix?
Youtube, because it's a completely free service and it's completely web 2.0, incurs no costs whatsoever, and instead profits entirely from ad placements. There is no cost of distribution centers, no cot of physical inventory, a Cinematch-like feature, no cost of membership, and incurs no shipping costs. Moreover, as it begins to offer movies, for free, it poses a potential threat to Netflix, especially in the DVD-by-Mail department because streaming is instantaneous, while DVD-by-mail is not. Netflix, on the other hand, has 60 distribution centers, a large physical inventory, has Cinematch, a low cost of membership, and incurs the shipping costs. Moreover, DVD-by-mail forces you to wait for your movie, while streaming via YouTube does not. YouTube poses a potential threat as Netflix attempts to shift over to the streaming business, because YouTube offers a much better deal for streaming, customers are likely to opt for YouTube, over Netflix.
How does Zara's approach differ from the conventional wisdom in fashion retail?
Zara = small inventory. Sell small batches ASAP. Zara 3 weeks design to store. Gap = 9 months. Zara is vertically integrated Zara uses tech + info systems + fast distribution + Close to airport + fast manufacture + fast putting up clothes Zara doesn't have to guess what customers want, and it has a faster turnaround speed because it is vertically integrated (60% merchandise is produced in house)
Just-in-time manufacturing
a process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials at the precise time they are needed on the production line.
Business Process
a sequence of activities to accomplish an objective, Visual interpretation of steps to achieve something
Data warehouse
a set of databases designed to assist descision making in an organization
Knowledge Management System
collect and share human knowledge
Production Costs
cost to produce good (materials, factory, etc) Total cost=Production + Transaction
What kind of discoveries does a data mining system help us uncover? (i.e. Intuitive or non-intuitive)
data mining systems help uncover patterns and relationships in data that help predict future outcomes [NON-INTUITIVE because it is based on actual, real knowledge]
Analysis phase What are your requirements?
determine and document features and functions interview and approve requirements
Market basket analysis
determining which products customers buy together, and how an organization can use this information to cross-sell more products or services.
Design phase
develop and evaluate alternatives hardware design determined by project team software design depends on source
Business Process Innovation
focuses on the transformation of existing processes that increases revenue and reduces cost. Basically eliminates the existing business process and construction of a brand new business process that is more efficient and better which results in increased revenues, reduced costs, and time-saved. How do we achieve this? By monitoring the current business process, then analyzing it, then come up with ideas to improve it, then modeling the redesigned process, then of course implement it, and then repeating the whole cycle all over again in order to innovate an even better process than the previous. Ex: Early models of Dell, Wal-Mart (cross-docking), Progressive Insurance Example: Wal-Mart's cross-docking moves product from one truck to another truck, skips the shelf --> Saves time and costs! -Example: Wal-mart's business process before: Moves inventory from distributer truck to Wal-Mart's warehouse-self and then from Wal-Mart's warehouse-self to Wal-Mart's retail delivery-warehouse truck Wal-Mart's business process after process innovation: Wal-Mart's new cross-docking process which moves inventory from distributor truck to retail-delivery truck at the warehouse, where it skips the warehouse shelf process.
Personal digital assistants
handheld computing devices made largely for mobile use outside of an office setting (smartphones & tablets)
Why would a company want to have a Knowledge Management system?
improve descision making by publishing employees' knowledge create value for existing intellectual capital foster innovation improve customer service increase organizational responsiveness reduce costs
Analytics
is the discovery and communication of meaningful patterns in data.
Business Process Improvement
is to improve an existing process that becomes faster and more efficient that would result in increased profits, reduced costs, and time-saved. -Example: The changes made in the order-to-cash process (i.e. automating some of the processes).
Legacy system
older information systems that are often incompatible with other systems, technologies, and ways of doing business. Bad legacy systems can be a major roadblock in turning data into information. Can hold back operational and strategic initiatives.
Which is hardest to change and why?
people and procedures are the hardest to change because it is difficult to alter the way a person works. You have to retrain them and change their thinking process. People are stubborn and difficult to change compared to hardware which can be changed at the click of a button.
Order-to-Cash process
process of how you receive, fulfill, and get payment for orders *all the steps that come from those processed. -Customer orders online, system checks inventory and processes payment. Robot gets items, updates inventory, packs product, route box through shipper. Delivered via UPS. Saves millions in costs!
Business intelligence (BI
set of theories, methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information for business purposes
Vertical Integration
single firm owns several levels in its own value chain
Implementation/Production phase
system must be built system testing user and data must be converted from old to new system
Operations
the organizational activities that are required to produce goods and services (development, execution, maintinence, control, and improvement of an organizations services and manufacturing procedures)
Data Mining
•Non-trivial discovery of novel, valid, comprehensible and potentially useful patterns from data
