Information Systems Today: Chapter # 2

Information Systems Today
Eighth Edition, Global Edition
Chapter # 2
Gaining Competitive
Advantage Through
Information Systems
Copyright © 2018, 2016, 2014 Pearson Education, Ltd. All Rights Reserved
Business Models in the Digital World
• A business model reflects the following:
1. What does a company do?
2. How does a company uniquely do it?
3. In what way (or ways) does the company get paid for
doing it?
4. What are the key resources and activities needed?
5. What are the costs Involved?
A business model is a summary of a business’s strategic

direction that outlines how the objectives will be achieved
http://eydisrupters.films.economist.com
Managing in the Digital World: Startups
and New Business Models
• Information technology has enabled new business
models:
– Operating a platform (enables other businesses/users to co-
create value)
– Cutting out the middleman (bypassing traditional retail
channels and interacting directly with customers)
▪ Ex: Warby Parker (eyeglass vendor) and Casper (mattress
seller) use technology to disrupt traditional distribution
channels and directly connect with buyers
– Selling subscriptions (facilitated by technology through the
removal of friction from the transaction using online forms)
– Providing on-demand services
Platform-Based Business Models and the
Sharing Economy
• A digital platform enables other businesses or users to co-
create value as seen in the examples below:
Value Created/Exchanged Examples

Products Amazon Marketplace, eBay
Services Airbnb, Uber
Payments Square, PayPal
Investments and funding Kickstarter, Lending Club
Content Wikipedia, Twitter, YouTube
Communication WhatsApp, Skype
Collaboration Dropbox
Social relationships Facebook, LinkedIn
A Sharing Economy
• A sharing economy has been defined as “an economic system in
which assets or services are shared between private individuals,
either free or for a fee, typically by means of the Internet
(Oxford Dictionary, 2016)
Revenue Models in the Digital World
• A revenue model describes how the firm will earn
revenue, generate profits, and produce a superior
return on invested capital
Revenue Models
• Affiliate marketing • Transaction fees/Brokerage
• Advertising • Traditional sales
• Subscription • Freemium
• Licensing
Freemium
• Freemium is a marketing approach companies use to

obtain customers by offering something for free to build a
large customer base and then charge a premium for
unrestricted versions with more functionality
Crowdfunding
• Crowdfunding is
the securing of
business financing
from individuals in
the marketplace to
fund an initiative
Enabling Organizational Strategy through
Information Systems
• Learning Objective: Discuss
how information systems can
be used for automation,
organizational learning, and
strategic advantage.
• Organizational Decision-Making Levels

• Organizational Functional Areas
• Information Systems for Automating: Doing things Faster
• Information Systems for Organizational Learning: Doing Things Better
Organizational Decision Making Levels
• Executive/Strategic
Level
– Upper Management
• Managerial/Tactical
Level
– Middle Management
• Operational Level
– Operational
Employees, Foremen,
Supervisors
Operational Level
Managerial/Tactical Level
Executive/Strategic Level
Information Systems for Automating: Doing
Things Faster (Table 2.2)
Primary Activity Manual Loan Tech-Supported Fully Automated
Process (Time) (Time) Process (Time)
Complete and Complete at home Complete at home Completed online (15
submit application (1.5 days) (1.5 days) minutes)
Check application for Done in batches Done in batches (2.5 Computerized (1 sec)
errors (2.5 days) days)
Input data into the N/A some paper Done in batches NA (already done)
information system handling (1 hr) (2.5 days)
Assess loan apps Done by hand Computer assisted Computer processed
under $250K (15 days) (1 hr) (1 sec)
Committee decides if (15 days) (15 days) (15 days)
over $250K
Applicant notified Batches (1 week) (1 day) E-mail (1 sec)
Total time 25 to 40 days 5 to 20 days 15 min to 15 days
Information Systems for Organizational
Learning: Doing Things Better
• Information systems can track and identify trends
and seasonality
• Managers can use this to plan for timely staffing
and training of personnel
Valuing Innovations
• Learning Objective: Explain why and
how companies are continually looking
for innovative ways to use information
systems for competitive advantage
• Innovation is key for organizations attempting to gain or sustain a

competitive advantage
• Innovation involves creating new products or services that return
value to the organization
• Radical innovations, also known as disruptive innovations, use a
markedly new or different technology to access new customer
segments and significantly greater benefits
Successful Innovation is Difficult
• Innovation is often fleeting
• Innovation is often risky (such as the battle between HD-DVD
and Sony’s Blu-ray won by Blu-ray)
• Innovation choices are
often difficult
• Open innovation can
prove to be beneficial
when you integrate
external stakeholders
into the innovation
process
Organizational Requirements for
Innovation
• Process Requirements
– Focus on success over other objectives
• Resource Requirements
– Employees with knowledge, skill, time, and resources
– Partner with appropriate resources
• Risk Tolerance Requirements
– Tolerance for risk
– Tolerance for failure
Implementing the Innovation Process
The Diffusion of Innovations
Source: Based on Rogers (2003).

Learning Objectives
• 2.1 Describe how information systems support business models used by
companies operating in the digital world.
• 2.2 Discuss how information systems can be used for automation,

organizational learning, and strategic advantage.
• 2.3 Explain why and how companies are continually looking for innovative ways
to use information systems for competitive advantage.

Information Systems Today: Chapter # 2

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Information Systems Today

Eighth Edition, Global Edition

A business model is a summary of a business’s strategic

Value Created/Exchanged Examples

• Freemium is a marketing approach companies use to

• Organizational Decision-Making Levels

• Innovation is key for organizations attempting to gain or sustain a

Source: Based on Rogers (2003).

• 2.2 Discuss how information systems can be used for automation,

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