Moving Towards E-Business
As Usual
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Opening Case - Dell Computer
Business insight:
What is the point of this case?
What are the two management concepts
are applied in this case?
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Opening Case - Dell Computer
Business insight:
Sell directly to customers
Decide how much to produce based on demand
estimates & contracts produce on demand
What makes this approach possible?
Outsourcing
Negative holding costs!
Mass customization
Powerful order fulfillment system
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Opening Case - Dell Computer
Dell: [Link]
Debate:
What is more important to Dell, the fact
that it sells computers over the Web, or
the fact that its manufacturing process
permits it to build and deliver customized
computers efficiently?
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Work Systems, Information
Systems, and E-Business
E-business = the practice of performing
& coordinating business processes
through the extensive use of information
technology (IT)
IT = computer and communication
technologies
E-business does NOT equal the Internet,
though the growth of the Internet acted as a
very powerful catalyst
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Work System = a system in which
people and/or machines perform a
business process using resources (e.g.,
information, technology) to create
products/services for internal or external
customers
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Information System = a work system that
processes information, thereby supporting
other work systems
Capture
Transmit
Store
Retrieve
Manipulate
Display
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Four Main Themes:
Businesses operate through systems
Business professionals are part of all
phases of building & maintaining
information systems
Technological advances drive business
innovation
The success of IT-based systems is NOT
guaranteed
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1. Businesses Operate
Through Systems
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Systems & Subsystems
System = a set of interacting components
that operate together to accomplish a
purpose
Subsystem = a system component
Has all the features of a system, but it is part
of a larger system
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Viewing a Firm as a System
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System Terminology:
Purpose
The reason for the system’s existence
The reference for measuring the system’s success
Boundary
Separates the system from its environment
Environment
Everything pertinent to the system that is outside the
boundary
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Inputs
Objects & information that enter the system
from the environment
Outputs
Objects & information that enter the
environment from the system
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Alter’s Work System Framework
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The Work System Framework
The concept of a work system can be used to visualize
almost any system that operates in an organization.
The Work System Framework helps you think about
business processes and the information systems that
support them. It focuses on the work being done.
Work is the application of human and physical resources
such as people, equipment, time, effort, and money to
generate outputs used by internal or external customers.
It ideas from several prominent management theories
including Total Quality Management, business process
reengineering, and systems theory.
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Examples of Information Systems
Supporting Business Processes
Bar-code scanners and computers identify items sold
and calculate the bill (Performing customer checkout).
Airline reservation system keeps track of flights and
accepts reservations for customers (making airline
reservations).
System that identifies people by scanning and
analyzing voice prints (preventing unauthorized
access to restricted areas).
Word processing system for typing and revising book
chapters (Writing a book).
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Elements of the Work System
Framework:
The internal or external customers of the business
process
The products and/or services generated by the
business process.
The steps in the business process.
The participants in the business process.
The information the business process uses or
creates.
The technology (if any) the business process uses.
(Context and Infrastructure discussed later.)
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The Work System Framework
The Work System framework implies that although
people sometimes speak of computers as systems,
the system business professionals should focus on is
the system performing the work.
The system performing the work is much broader than
the technology. It includes the business processes, the
participants, any information used, and any technology
used.
The links are two-way, implying that the elements
should be in balance. Also, changes in one place may
result in changes in other elements.
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Consder Some Work Systems
Ordering a Pizza
Use of an Automated Teller Machine
Hiring a New employee
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Business Processes & the Value
Chain
Business process
A related group of steps (subprocesses) and/or
activities that use resources (including
information) to create value for internal or
external customers
Subprocess = a well-defined part of a process
Activity = less well-defined process component
Often an important role of IT is to transform an
activity into a better-defined subprocess
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A process must add value for its
customers
Always analyze whether a process or
subprocess adds value or not
An obvious but surprisingly often overlooked
point
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Business Processes & Functional
Areas
Traditional organizational structure is
centered around functional areas
May reinforce an inward-looking orientation
Functional silos
Current trend: reorganize around
customer-oriented processes
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Business processes and functional areas of
business
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Three Types of Processes
Processes that cross
functional areas
Processes related to a Possible
problems when
specific functional area
functional areas
Activities & are
subprocesses occurring overemphasized
in every functional area
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Question:
What are some typical
functional areas in a college of
university?
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Some Functional Areas in a Typical
College or University
Admissions Academic Department
Records and Registration University Advancement
Financial Aid Student Services
Bursar Residence Life
Human Resources Public Safety
Accounts Payable Physical Plant
Budget, Finance, and Student Career
Accounting Development
Parking Services Health Services
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The Value Chain
The set of processes used by a firm to
create value for its customers. Includes:
Primary processes – directly create the
value as perceived by the customers
Support processes – indirectly create value
by supporting the primary processes
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Primary processes for a hypothetical
restaurant
Question: Give some examples of restaurants that
follow this value chain.
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The Supply Chain & the Customer
Experience
Note: Opportunities to increase value for the customer may exist
Outside the company.
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Supply chain – the transactions,
coordination, and movement of goods
between the firm and its suppliers
Each layer provides an opportunity to
increase value to the customer and/or
improve efficiency
Basic approach:
Standardized electronic links
Long-term agreements
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The Trend Toward E-Business
Much more than a cool Web site!
E-commerce – the part of e-business that
the customer experiences directly
B2B (business-to-business) vs. B2C
(business-to-consumer)
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2. Phases in Building &
Maintaining Systems
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Figure 1.7 – Business Professionals Play
an Important Role in All 4 Phases
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1. Initiation
Defining the need for a new work system
or for the change of an existing one
May occur as result of a known problem,
or as part of a planning process
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2. Development
Acquiring & configuring hardware,
software, and other resources
Decide how the different parts of the system
will operate
Acquire the resources
Create the documentation
Testing
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3. Implementation
Making the new process operational
Planning
User training
Conversion to the new system
Follow-up
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4. Operation & Maintenance
Supporting the ongoing operation of the
system + efforts to enhance it and correct
possible problems
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Table 1.4
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3. IT As a Driving Force for
Innovation
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Main Trends
Greater miniaturization, speed, and portability
Greater connectivity + continuing
convergence of computing and
communications
Greater use of digitized information &
multimedia
Better software and user interfaces
Growth of Telecommuting
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IT Based Innovations in Every
Business Function
Product Design
Procurement Systems
Manufacturing Systems
Sales and Marketing
Delivery Systems
Customer Service Systems
Finance Systems
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Computer-Aided Design
Enable designers to visualize how a
product will look.
The need to produce physical mock-ups
has been significantly reduced.
Originally applied in engineering and
architecture, it is now being applied in
other areas such as surgery, clothes
design, and hairdressing.
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CAD in
unexpected places
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Supply Chain Management
EDI (Electronic Data Interchange) is changing the
entire model of supply chain management in
businesses.
The cost of processing simple transactions can be
reduced by more than an order of magnitude (e.g.
purchase orders from $55 ea. To $2.50 ea.).
SCM and EDI are essential ingredients to the
transformation of relationships between suppliers and
customers.
Among the most notable initial applications was
Baxter Healthcare where hospital supplies were
ordered directly with computer terminals in hospital
stock rooms.
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The Basic Supply Chain
Management Process
Customers link to suppliers using
EDI
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Manufacturing
Computer-integrated manufacturing (CIM)
integrates the use of technology across the
manufacturing process, not just the design
phases.
The information content of a product is the value
that is added through use of information
systems rather than not using them.
Mass production techniques allows for mass
customization.
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Mass Customization:
Building a customized bicycle
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Sales and Marketing
IT has drastically changed the approach to
marketing.
[Link] capitalizes on electronic commerce.
Point of Sales (POS) systems provide new ways to
affect marketing - e.g. linking information about the
customer with the sale.
Loyalty Cards at Supermarkets
Ask for your Home Zip code
Discreet observation and collection.
BJ’s Wholesale Club product recall.
All to better improve the addressability in marketing.
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Delivery and Logistics Systems
Delivery (logistics) Systems transport materials
where they are needed.
The need for accurate and accessible information
on where a product is located.
U.S. Army experience in Gulf War
Federal Express
New products are being developed: Instead of
delivering physical goods such as paper and forms,
consider what can be delivered over the network.
Consider impact of Global Positioning Systems.
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Customer Service
The need for information on a customer’s current
status.
Work is still needed to integrate some voice-response
systems with customer databases (e.g. Bank Help
Centers).
Have the right information available when you need it.
Optical Scan relevant documents
Be able to initiate transactions and process them
immediately.
E.g. Car Rental Returns
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Finance Systems
Consider how technology is being used to
replace currency as a form of barter.
Direct Deposit Payroll.
Smart cards.
Electronic stock trading.
Web-Based Real Estate Marketing (2% vs. 6%).
Eliminate the “middleman” and commissions.
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Question?
How have any of these innovations
affected you?
Can you identify any IT-based
innovations that have affected
business functions?
Why does the technology provide
such innovation?
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Data Processing Progress
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Dramatic Progress in Processing
Data
Data Processing functions: capture, transmit,
store, retrieve, manipulate, display
Greater Miniaturization, Speed, and Portability
Greater Connectivity and Convergence of
Computing and Communications
Greater Use of Digitization and Multimedia
Better Software Techniques and Interfaces with
People
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Six Data Processing Functions Performed by IT
FUNCTION: CAPTURE
Definition: Obtain a representation of information in a form permitting it to
be transmitted or stored
Example: Keyboard, bar code scanner, document scanner, optical character
recognition, sound recorder, video camera, voice recognition software
FUNCTION: TRANSMIT
Definition: Move information from one place to another
Example: Broadcast radio, broadcast television via regional transmitters,
cable TV, satellite broadcasts, telephone networks, data transmission
networks for moving business data, fiber optic cable, fax machine, electronic
mail, voice mail, internet
FUNCTION: STORE
Definition: Move information to a specific place for later retrieval
Example: Paper, computer tape, floppy disk, hard disk, optical disk,
CD-ROM, flash memory
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Six Data Processing Functions Performed by IT
FUNCTION: RETRIEVE
Definition: Find the specific information that is currently needed
Example: Paper, computer tape, floppy disk, hard disk, optical disk,
CD-ROM, flash memory
FUNCTION: MANIPULATE
Definition: Create new information from existing information through
summarizing, sorting, rearranging, reformatting, or other types of
calculations
Example: Computer (plus software)
FUNCTION: DISPLAY
Definition: Show information to a person
Example: Laser printer, computer screen
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Miniaturization:
Comparison of a vacuum tube and an
integrated circuit
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Progress in Memory Chip Capacity Since
1973
Approximate date
of widespread Capacity in
commercial availability Type of chip number of bits
1973 1 kilobit 1,024
1976 4 kilobit 4,096
1979 16 kilobit 16,384
1982 64 kilobit 65,536
1985 256 kilobit 262,144
1988 1 megabit 1,048,576
1991 4 megabit 4,194,304
1994 16 megabit 16,777,216
1997 64 megabit 67,108,864
2000 256 megabit 268,435,456
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Using a portable computer to give
parking tickets
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Important Concept:
Convergence of computing and
communications.
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Convergence: GPS
A leading edge flat panel monitor and
a computer terminal from the 1980s
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The positive and negative
impacts of technical change
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4. Obstacles When Applying
IT in the Real World
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Unrealistic Expectations &
Techno-hype
Technology is almost never a solution by
itself
Often vendors claim to “sell solutions”
Be skeptical about the Internet hype
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Difficulty Building & Modifying IT
Systems
Factors most often associated with
success:
User involvement
Executive support
Clear statement of requirements
Proper planning
Realistic expectations
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Difficulty Integrating IT Systems
One of the most difficult issues –
examples:
Medicare’s insurance claims (aborted) system
A unified system would have had to integrate 72
existing systems, built & operated by different
insurance companies
Y2K problem
Integrated supply chains
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Organizational Inertia
Often a change that has a positive impact
in some areas, may also have a negative
impact in other areas
Natural tendency of both organizations &
individuals to resist change
Overcoming inertia may require a
consistent effort across all phases of the
system life cycle
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Genuine Difficulty Anticipating
What Will Happen
No one really knows how a particular
innovation will develop in time
Eye-opening examples in table 1.7
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Reality Check!
What are some examples of “techno-hype”
you have encountered?
Have you experienced any of these
“obstacles” when applying IT?
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