MIS Chapter 2

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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.


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