Business Driven MIS

CHAPTER OVERVIEW

• SECTION 1.1 – BUSINESS DRIVEN MIS

– Competing in the Information Age
– The Challenge: Departmental Companies
– The Solution: Management Information Systems

• SECTION 1.2 – BUSINESS STRATEGY

– Identifying Competitive Advantages
– The Five Forces Model – Evaluating Industry
Attractiveness
– The Three Generic Strategies – Choosing a Business Focus
– Value Chain Analysis – Executing Business Strategies
 Learning Outcomes
• Sketch a general model of an organization showing how
information systems support and work within the automated
portions of an organizational process.
• Compare reengineering and continuous improvement and
explain how they are different.
• Evaluate the pros and cons of outsourcing, offshoring,and
downsizing.
• Relate the types of roles, functions, and careers available in
the field of information systems.
COMPETING IN THE INFORMATION AGE

Did you know . . .

• Avatar, the movie, took over 4 yrs to
make and cost $450 million
• Lady Gaga’s real name is Joanne
Angelina Germanotta
• It costs $2.6 million for a 30-second
advertising time slot during the
Super Bowl
 COMPETING IN THE INFORMATION AGE

• Examples of the power of business

and technology
– Amazon – Not a technology company;
primary business focus is selling books
– Netflix – Not a technology company;
primary business focus is renting
videos
– Zappos – Not a technology company;
primary business focus is selling shoes
 COMPETING IN THE INFORMATION AGE

• The core drivers of the information age

– Data
– Information
– Business intelligence
– Knowledge
 Data

• Data - Raw facts that describe the characteristics of an

event or object
Information - - Data converted into a meaningful and
useful context
Tony’s Data Sorted by
Customer “Walmart” and Sales
Representative “Roberta Cross”
 Business Intelligence

• Business intelligence -
Information collected from
multiple sources such as
suppliers, customers,
competitors, partners, and
industries that analyzes
patterns, trends, and
relationships for strategic
decision making
 Knowledge

• Knowledge - Skills, experience, and

expertise coupled with information and
intelligence that creates a person’s
intellectual resources
• Knowledge worker – Individual valued for
their ability to interpret and analyze
information
THE CHALLENGE: DEPARTMENTAL COMPANIES
Common Departments Working Independently
 THE SOLUTION: MANAGEMENT
INFORMATION SYSTEMS

Common Departments Working Interdependently

 THE SOLUTION: MANAGEMENT
INFORMATION SYSTEMS

• Systems thinking – A way of monitoring the entire

system by viewing multiple inputs being processed or
transformed to produce outputs while continuously
gathering feedback on each part
 THE SOLUTION: MANAGEMENT
INFORMATION SYSTEMS

• Management Information Systems (MIS) – A

business function, like accounting and human
resources, which moves information about people,
products, and processes across the company to
facilitate decision-making and problem-solving
 MIS Department
Roles and Responsibilities

• Chief information officer (CIO) – Oversees

all uses of IT and ensures the strategic
alignment of IT with business goals and
objectives
• Chief knowledge officer (CKO) -
Responsible for collecting, maintaining, and
distributing the organization’s knowledge
• Chief privacy officer (CPO) – Responsible
for ensuring the ethical and legal use of
information
 Chapter 1

SECTION 1.2

BUSINESS
STRATEGY

©2011 The McGraw-Hill Companies, All Rights Reserved

1-17
 LEARNING OUTCOMES

4. Explain why competitive advantages are

temporary
5. Describe Porter’s Five Forces Model and explain
each of the five forces
6. Compare Porter’s three generic strategies
7. Demonstrate how a company can add value by
using Porter’s value chain analysis
IDENTIFYING COMPETITIVE ADVANTAGES

• Business strategy – A leadership plan that achieves

a specific set of goals or objectives such as
– Developing new products or services
– Entering new markets
– Increasing customer loyalty
– Attracting new customers
– Increasing sales
IDENTIFYING COMPETITIVE ADVANTAGES

• Competitive advantage – A product or service that an

organization’s customers place a greater value on
than similar offerings from a competitor
• First-mover advantage – Occurs when an
organization can significantly affect its market share
by being first to market with a competitive advantage
IDENTIFYING COMPETITIVE ADVANTAGES

• Competitive intelligence –The process of gathering

information about the competitive environment to
improve the company’s ability to succeed

• Competitive intelligence tools

– Porter’s Five Forces Model
– Porter’s Three Generic Strategies
– Porter’s Value Chain Analysis
 THE FIVE FORCES MODEL –
EVALUATING INDUSTRY ATTRACTIVENESS

Porter’s Five
Forces Model
 Buyer Power

• Buyer power – The ability of buyers

to affect the price of an item
– Switching cost – Manipulating costs that
make customers reluctant to switch to
another product
– Loyalty program – Rewards customers
based on the amount of business they
do with a particular organization
 Supplier Power

• Supplier power – The suppliers’ ability to

influence the prices they charge for supplies
– Supply chain – Consists of all parties involved in the
procurement of a product or raw material
 Threat of Substitute
Products or Services

 Threat of substitute products or

services – High when there are
many alternatives to a product or
service and low when there are few
alternatives
 Threat of New Entrants

• Threat of new entrants – High when it is easy

for new competitors to enter a market and low
when there are significant entry barriers
– Entry barrier – A feature of a product or service that
customers have come to expect and entering
competitors must offer the same for survival
 Rivalry among
Existing Competitors

• Rivalry among existing competitors –

High when competition is fierce in a
market and low when competitors are
more complacent
– Product differentiation – Occurs when a
company develops unique differences in
its products or services with the intent to
influence demand
 Analyzing the Airline Industry

• Perform a Porter’s Five Forces analysis of each of the

following for a company entering the commercial
airline industry
– Buyer power
– Supplier power
– Threat of substitute products/services
– Threat of new entrants
– Rivalry among competitors
 THE THREE GENERIC STRATEGIES
CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

 THE THREE GENERIC STRATEGIES
CHOOSING A BUSINESS FOCUS

Porter’s Three Generic Strategies

 VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES
• Business process – A standardized set
of activities that accomplish a specific
task, such as a specific process
• Value chain analysis – Views a firm as
a series of business processes that
each add value to the product or
service
 VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES
• Primary value activities
– Inbound logistics - Acquires raw materials and resources, and
distributes to manufacturing as required
– Operations - Transforms raw materials or inputs into goods and
services
– Outbound logistics - Distributes goods and services to customers
– Marketing and sales - Promotes, prices, and sells products to
customers
– Service - Provides customer support after the sale of goods and
services
 VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES
• Support value activities
– Firm infrastructure – Includes the company format or
departmental structures, environment, and systems
– Human resource management – Provides employee
training, hiring, and compensation
– Technology development – Applies MIS to processes to add
value
– Procurement – Purchases inputs such as raw materials,
resources, equipment, and supplies
VALUE CHAIN ANALYSIS –
EXECUTING BUSINESS STRATEGIES
Porter’s Value Chain
VALUE CHAIN ANALYSIS – EXECUTING BUSINESS
STRATEGIES
Value Chain and Porter’s Five Forces Model
 Group Work

Project Focus: Competitive Advantage

1. Identify the business you are going to build throughout this course
and choose a name for your business.

2. Write an analysis of buyer power and supplier power for your business
using Porter’s Five Forces Model. Be sure to discuss how you could
combat the competition with strategies such as switching costs and
loyalty programs.
 Group Work ( continuation )
3. Write an analysis of rivalry, entry barriers, and the threat of substitute
products for your business using Porter’s Five Forces Model. Be sure to
discuss how you could combat the competition with strategies such as
product differentiation.

4. Describe which of Porter’s three generic strategies you would use for
your business. Be sure to describe the details of how you will implement
this strategy and how it will help you create a competitive advantage in
your industry.

5. Discuss how MIS can help you implement your business strategies.
 Chapter 2
Decision and
Processes: Value
Driven Business

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
 CHAPTER TWO OVERVIEW

• SECTION 2.1 – Decision Support Systems

– Making Business Decisions
– Metrics: Measuring Success
– Support: Enhancing Decision Making with MIS
– The Future: Artificial Intelligence

• SECTION 2.2 – Business Processes

– Evaluating Business Processes
– Models: Measuring Performance
– Support: Enhancing Business Processes with MIS
– The Future: Business Process Management
 SECTION 2.1

DECISION SUPPORT
SYSTEMS
 LEARNING OUTCOMES

1. Explain the importance of decision making for

managers at each of the three primary organization
levels along with the associated decision
characteristics
2. Define critical success factors (CSFs) and key
performance indicators (KPIs), and explain how
managers use them to measure the success of MIS
projects
3. Classify the different operational, managerial, and
strategic support systems, and explain how managers
can use them to make decisions and gain competitive
advantage
4. Describe artificial intelligence and identify its five main
types
 MAKING BUSINESS DECISIONS
• Managerial decision-making challenges

– Analyze large amounts of information

– Apply sophisticated analysis techniques
– Make decisions quickly
 The Decision-Making Process
• The six-step decision-making process
1. Problem identification
2. Data collection
3. Solution generation
4. Solution test
5. Solution selection
6. Solution implementation
 Decision-Making Essentials
Decision-making and
problem-solving
occur at each level in
an organization
 Decision-Making Essentials
• Operational decision making –
Employees develop, control, and
maintain core business activities
required to run the day-to-day
operations
• Structured decisions –
Situations where established
processes offer potential OPERATIONAL
solutions
 Decision-Making Essentials
• Managerial decision making –
Employees evaluate company
operations to identify, adapt to, and
leverage change
• Semistructured decisions – Occur in
situations in which a few established
processes help to evaluate potential
solutions, but not enough to lead to
a definite recommended decision MANAGERIAL
•
Decision-Making Essentials
Strategic decision making –
Managers develop overall
strategies, goals, and objectives
• Unstructured decisions – Occurs in
situations in which no procedures or
rules exist to guide decision makers
toward the correct choice
STRATEGIC
METRICS: MEASURING SUCCESS
• Project – A temporary activity a company
undertakes to create a unique product,
service, or result
• Metrics – Measurements that evaluate
results to determine whether a project is
meeting its goals
 METRICS: MEASURING SUCCESS
• Critical success factors (CSFs) – The crucial
steps companies make to perform to achieve
their goals and objectives and implement
strategies
– Create high-quality products
– Retain competitive advantages
– Reduce product costs
– Increase customer satisfaction
– Hire and retain the best professionals
 METRICS: MEASURING SUCCESS

• Key performance indicators (KPIs) – The

quantifiable metrics a company uses to
evaluate progress toward critical success
factors
– Turnover rates of employees
– Number of product returns
– Number of new customers
– Average customer spending
 METRICS: MEASURING SUCCESS

• External KPI
– Market share – The portion of the market
that a firm captures (external)

• Internal KPI
– Return on investment (ROI) – Indicates the
earning power of a project
Efficiency and Effectiveness Metrics
• Efficiency MIS metrics – Measure the
performance of MIS itself, such as
throughput, transaction speed, and system
availability
• Effectiveness MIS metrics – Measures the
impact MIS has on business processes and
activities, including customer satisfaction
and customer conversation rates
The Interrelationship Between Efficiency and
Effectiveness Metrics
• Ideal operation occurs in the upper right corner
The Interrelationship Between Efficiency and
Effectiveness Metrics
• Benchmark – Baseline values the system
seeks to attain
• Benchmarking – A process of
continuously measuring system results,
comparing those results to optimal
system performance (benchmark values),
and identifying steps and procedures to
improve system performance
SUPPORT: ENHANCING DECISION MAKING WITH
MIS
• Model – A simplified
representation or abstraction of
reality
• Models help managers to
 Calculate risks
 Understand uncertainty
 Change variables
 Manipulate time to make
decisions
SUPPORT: ENHANCING DECISION MAKING
WITH MIS
Types of Decision Making MIS Systems
Operational Support Systems
• Transaction processing system (TPS) –
Basic business system that serves the
operational level and assists in making
structured decisions
• Online transaction processing (OLTP) -
Capturing of transaction and event
information using technology to
process, store, and update
• Source document – The original
transaction record
Operational Support Systems
Systems Thinking View of a TPS
 Managerial Support Systems
• Online analytical processing (OLAP)
– Manipulation of information to
create business intelligence in
support of strategic decision making
• Decision support system (DSS) –
Models information to support
managers and business
professionals during the decision-
making process
 Managerial Support Systems
• Four quantitative models used by DSSs include
1. What-if analysis
2. Sensitivity analysis
3. Goal-seeking analysis
4. Optimization analysis
Managerial Support Systems
Systems Thinking View of a DSS
Managerial Support Systems
Interaction Between a TPS and DSS
 Strategic Support Systems
Information Levels Throughout An Organization
 Strategic Support Systems

• Executive information system (EIS) – A

specialized DSS that supports senior level
executives within the organization
– Granularity
– Visualization
– Digital dashboard
Strategic Support Systems
Interaction Between a TPS and EIS
 Strategic Support Systems

• Most EISs offering the following

capabilities
– Consolidation
– Drill-down
– Slice-and-dice
 THE FUTURE:
ARTIFICIAL INTELLIGENCE (AI)

• Artificial intelligence (AI) – Simulates

human intelligence such as the ability to
reason and learn
• Intelligent system – Various commercial
applications of artificial intelligence
 Artificial Intelligence (AI)
• Five most common categories of AI
1. Expert system – Computerized advisory
programs that imitate the reasoning processes of
experts in solving difficult problems
2. Neural Network – Attempts to emulate the way
the human brain works
– Fuzzy logic – A mathematical method of
handling imprecise or subjective information
Artificial Intelligence (AI)
3. Genetic algorithm – An artificial
intelligent system that mimics the
evolutionary, survival-of-the-fittest
process to generate increasingly
better solutions to a problem
- Shopping bot – Software that will search
several retailer websites and provide a
comparison of each retailer’s offerings
including price and availability
Artificial Intelligence (AI)
4. Intelligent agent – Special-purpose
knowledge-based information system
that accomplishes specific tasks on
behalf of its users
5. Virtual reality - A computer-simulated
environment that can be a simulation of
the real world or an imaginary world
 SECTION 2.2

BUSINESS PROCESSES
 LEARNING OUTCOMES
5. Explain the value of business processes for a
company and differentiate between customer-
facing and business-facing processes
6. Demonstrate the value of business process
modeling and compare As-Is and To-Be models
7. Differentiate among business process
improvements, streamlining, and reengineering
8. Describe business process management and its
value to an organization
 EVALUATING BUSINESS PROCESS

• Businesses gain a
competitive edge
when they
minimize costs and
streamline business
processes
 EVALUATING BUSINESS PROCESS
• Customer facing process - Results in a product or
service that is received by an organization’s
external customer
• Business facing process - Invisible to the external
customer but essential to the effective
management of the business
EVALUATING BUSINESS PROCESS
The Order-to-Delivery Process
MODELS: MEASURING PERFORMANCE
• Business process modeling (or mapping) -
The activity of creating a detailed flow chart
or process map of a work process showing its
inputs, tasks, and activities, in a structured
sequence
• Business process model - A graphic
description of a process, showing the
sequence of process tasks, which is
developed for a specific
– As-Is process model
– To-Be process model
MODELS: MEASURING PERFORMANCE
MODELS: MEASURING PERFORMANCE
MODELS: MEASURING PERFORMANCE
MODELS: MEASURING PERFORMANCE
MODELS: MEASURING PERFORMANCE
SUPPORT: CHANGING BUSINESS PROCESSES
WITH MIS
• Workflow – Includes the tasks, activities, and
responsibilities required to execute each step
in a business process
SUPPORT: CHANGING BUSINESS PROCESSES
WITH MIS
• Types of change an
organization can
achieve, along with
the magnitudes of
change and the
potential business
benefit
IMPROVING OPERATIONAL BUSINESS
PROCESSES - AUTOMATION
• Customers are demanding
better products and services
• Business process
improvement – Attempts to
understand and measure the
current process and make
performance improvements
accordingly
• Automation – The process of
computerizing manual tasks
IMPROVING OPERATIONAL BUSINESS
PROCESSES - AUTOMATION

Steps in Business Process Improvement

IMPROVING MANAGERIAL BUSINESS PROCESSES
- STREAMLINING
• Streamlining – Improves business
process efficiencies by simplifying or
eliminating unnecessary steps
• Bottleneck – Occur when resources
reach full capacity and cannot
handle any additional demands
• Redundancy – Occurs when a task
or activity is unnecessarily repeated
IMPROVING STRATEGIC BUSINESS PROCESSES -
REENGINEERING
• Business process reengineering (BPR) -
Analysis and redesign of workflow within and
between enterprises
IMPROVING STRATEGIC BUSINESS PROCESSES -
REENGINEERING
• A company can improve the way it travels the
road by moving from foot to horse and then
horse to car
• BPR looks at taking a different path, such as an
airplane which ignore the road completely
IMPROVING STRATEGIC BUSINESS PROCESSES -
REENGINEERING
Progressive Insurance Mobile Claims Process
THE FUTURE: BUSINESS PROCESS
MANAGEMENT
• Business process management (BPM)
– Focuses on evaluating and improving
processes that include both person-to-
person workflow and system-to-
system communications
Information Systems in Organizations
 Learning Outcomes

• Sketch a general model of an organization showing

how information systems support and work within
the automated portions of an organizational process.
• Compare reengineering and continuous improvement
and explain how they are different.
• Evaluate the pros and cons of outsourcing,
offshoring,and downsizing.
• Relate the types of roles, functions, and careers
available in the field of information systems.
 Amazon Fresh and Amazon Go

Amazon Fresh - https://youtu.be/UdIzm_fy6nM

Amazon Go - https://youtu.be/NrmMk1Myrxc
Organizations and Information Systems
 ZARA’S

https://youtu.be/bkcAmCqIaao
 Virtual Teams and Collaborative Work
BENEFITS
• enable organizations to enlist the best people in different geographical regions to solve important
organizational problems
• provide the ability to staff a team with people who have a range of experience and knowledge that stems
from a variety of professional experiences and cultural backgrounds.
• quick communication exchanges among members

DOWNSIDE
• virtual team members may need to continually monitor their email, instant messages, and
team Web site and be prepared to participate in an audio or video teleconference on short notice.
• Virtual team members must be prepared to do work anywhere, anytime.
Reengineering and Continuous Improvement
 Outsourcing, Offshoring, and Downsizing
outsourcing: A long-term business
arrangement in which a company
contracts for services with an outside
organization that has expertise in
providing a specific function.
offshore outsourcing (offshoring )
An outsourcing
arrangement where the organization
providing the service is located in a
country different from the firm obtaining
the services.

downsizing: Reducing the number of employees to cut

costs.