Information Management for Digital

Business Models
Lecture 1: Introduction

Prof. Jens Grossklags, Ph.D.

Professorship of Cyber Trust
Department of Informatics
Technical University of Munich

May 4, 2022
Recap - Mission Statement

Our mission is to equip you with the necessary skills to recognize the
potential of information technology (IT) and the ability to
establish and maintain competitive advantage through the use of IT.

This will enable you to systematically evaluate IT

from a business perspective.

We will further introduce you to appropriate models and methods

that you will be able to apply to solve relevant problems.

4
Information Management and the
Digital Transformation
It is 2005: Who would you bet on?

Founded in 2003 Founded in 2004 Founded in 2005

(DeWolfe/Anderson) (Zuckerberg et al.) (Dariani/Bemmann/Brehm)

6
It is 2005: Who would you bet on?

Source: comScore 7
Development in Germany
(2007 – 2010)

“Wer kennt wen?“

Measure: At least “weekly usage“ of a particular site Source: Fittkau and Maß
8
2005: Who would you bet on?
2020: It is obvious now.
But in 2030?
daily weekly monthly

German data: https://www.ard-zdf-onlinestudie.de/files/2020/2020-10-02_Onlinestudie2020_Publikationscharts.pdf 9

Fascinating Cases

• Take a look at these different companies and their history

– Technology perspective
– Business side
• Which new „players“
have arrived or will
arrive?

10
Learning Objectives
1. You have gained initial familiarity with the concept of
digital transformation.
2. You are comfortable with the term information and you
are able to name its particular attributes.
3. You know the importance of information as a resource
in a business management context.
4. You know the term information economy and you are
able to place it as a part of information management.
11
Agenda

I. Introduction to Digital Transformation

II. The Term “Information”
III. Importance of Information as a Resource
IV. Information Management

12
The Arrival of the Information Age

“The emergence of the Information Age and the sudden ubiquity of

information technology are among the biggest -- no, they are the
biggest -- stories of our time.“
Thomas A. Stewart, 1997 (Intellectual Capital: The new wealth of organization)

aka Information Society

aka Knowledge Economy
aka Post-industrial Society
aka Liquid Modernity
 finally: Digital Transformation

In any case, different from what we knew …

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Defining Digital Transformation (DT)

“It is critical to establish a common ground – a uniform

understanding of what digital transformation means.”
Joe Gross, Head of Group Market Management at Allianz

 Development of a commonly accepted definition still in progress

- Note: DT is more than mere digitization of existing paper-based processes

(e.g., travel reimbursement, credit applications)

14
 The Digital Transformation is …
Change happens tremendously fast

Waiting audience
at papal conclaves
2005 & 2013

Examples: pervasive usage of new devices (smart phone), or new services (“basic“ digital maps;
“specialized“ digital maps for hikers; smart city map services such as sustainable shopping) 15
 The Digital Transformation is …
Inevitable

Peak: over 9000 DVD rental by mail

stores with subscription fee

2021: only 1 store Over 200 Million

open for business subscribers in 2021
(streaming service)

Initial challenges of Netflix business model: complex logistics; no late fees; same subscription fees
irrespective of novelty and popularity of rented movies  Incentives to move to streaming 16
The Digital Transformation is …
Irreversible

“Normal” product more

lifecycle of a good New 100%
&
different
- Introduction
- Growth
- Maturity performance 100%
- Decline + Extension
70%
„Don´t confuse slow and
declining with not needed,
Disruptive innovations unnecessary, not being
reinvented“.
(“genie is out of the 30% Ginni Rometty,
14-05-2014 FT
bottle”), or saturation
t1 t2 time

Market for original

product shrinks
substantially
17
The Digital Transformation is …
Uncertain in its execution

What does the future

hold for us?

18
Digital Transformation:
Towards an Explanatory Model
Service-Dominant Logic

Offering a service, rather than

selling a (physical) product

- Streaming on demand

- Car sharing, e.g., DriveNow/ShareNow,

Car2Go

Note: Physical platform may be

present, but focus is on selling a
service (often mediated by digital
means)
19
Digital Transformation:
Towards an Explanatory Model
Open Innovation on Platforms

Practice of businesses sourcing ideas The use of purposive inflows and outflows of knowledge
from external as well as internal sources; to accelerate internal innovation, and expand the markets
and also seeking external opportunities for for external use of innovation. (Henry Chesbrough)
collaboration on ideas

One model: Platform owner +

complementors working together

- Example DriveNow/ShareNow
1) BMW: cars (as core competence)
2) Sixt: fleet management

- Example: Customers
1) Learning from customer feedback
2) Co-developing products 20
 Digital Transformation:
Towards an Explanatory Model
Ambidexterity/
Ambidextrous organization
How do you innovate without cannibalizing
your existing product offerings (e.g., cash cows)?
Efficiently managing current business; while
“testing out” options for the future marketplace
Real Options in the Portfolio
Develop opportunities (i.e., a right, but not the
obligation) to undertake certain meaningful
investments
Example: Start-ups or joint ventures that are
not easy to connect to the company financing
these endeavors 21
Digital Transformation
Ecosystem

A working definition Culture and leadership

DT is an organizational change Use of

technologies
approach, where innovative
digital technologies allow for a
fundamental transformation of
an organization’s business Changes in Financial Structural
value creation aspects changes
model, organizational
structure, capabilities, and
culture, and the interaction with
complementary partners to co-
create value in the ecosystem.
Source: Riasanow et al. (2018) 22
Two Critical Dimensions of Digital
Transformation
• Digital capabilities (Technical Know-How)
– Understanding the technology, especially ICT
– Managing information and information technology continuously
– Knowing where and how to invest in technology

• Leadership capabilities
– Managing the necessary knowledge via a sharing culture
– Providing vision and governance
– Being committed and leading through a digital transformation

23
Where are companies focusing their
forward-looking digital strategies?

Source: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-case-for-digital-reinvention 24
(last accessed 2021.04.14)
What leading companies do
differently from the rest?

Source: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-case-for-digital-reinvention
(last accessed 2021.04.14)
25
Digital transformation, growth effect

Source:
https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/How%20six%20companies%20are%20using%20technology%20a
nd%20data%20to%20transform%20themselves/The-next-normal-the-recovery-will-be-digital.pdf - Page 121 (last accessed: 2021.04.14)
26
Digital transformation:
Success factors
• “Digital challenge”: No area is untouched by digital
transformation
– But: Digital capability concentration can boost the digitalization
process
• Plan short term, mid term and long term and define goals
– Define the savings (including savings from FTE reduction)
• Execute the plan or your business might not survive

27
Implications of Digital Trends

Established companies and start-ups in every industry sector are

being forced to compete in new ways, which drives:

New business models through digitization

28
Agenda
I. Introduction to the Digital Transformation
II. The Term “Information”
III. Importance of Information as a Resource
IV. Information Management

29
Definition of Information
Information = Knowledge or thought or message?

data- – Information reduces uncertainty resp. surprises (information

oriented theory by Shannon)

– DIN 44 300: Information = Knowledge of circumstances or

knowledge-
processes
oriented
– Information = Purpose-oriented knowledge (Wittmann
1959)

– Information is (Fuchs):
• Action determining knowledge of past, present, and future
message- conditions and/or events in reality
oriented • Action and decision influencing views and opinions of
significant persons or groups
Source: Krcmar (2015), pp. 3 et seqq. 30
 Term Hierarchy:
Character – Data – Information
knowledge & wisdom
connecting the dots
to derive insights

information
context
40 km away
(allows interpretation)

data
syntax
51° 30' 12.08''
(structure/standardized format)

character

„5“, „1“, „3“, „° “, ... character set

Source: Rehäuser/Krcmar (1996) 31
cited in Krcmar (2015), p. 4
Information Matrix Concept

The term “information” is also used

attributively for objects, such as data
and documents, that are referred to as
"information" because they are regarded
as being informative, as “having the
quality of imparting knowledge or
communicating information; instructive.”

Source: https://casci.umd.edu/wp-content/uploads/2019/09/Buckland_1991_InformationAsThing.pdf 32
 Different Views on Information
pragmatic as producer or user
dimension = relation between the sign system
human and sign-using agents
information
syntactic Schematic based on four
dimension semiotic dimensions
= relationship between
linguistic signs Charles Morris: syntax,
meaning semantics, and pragmatics
structure Information message
data Georg Klaus: sigmatic
semantic dimension
= relationship of the
agent to an already
established intermediate
sigmatic dimension reality reality of conceptual content
= original relationship
of the agent to
Source: Steinmüller 1993
non-linguistic reality 33
 Information is a Model
Who is using the model?
„about what,
for whom,
subject
for what purpose“ subject

in order to affect disposes of

person/ organization A
information information
= model/abstraction
What do we want
to achieve? about
A
= recipient of
message original
original object
in reality
Source: Steinmüller 1993 34
What do we want to model?
Information as a Production Factor
• Adam Smith: land, labor, and capital
• Information is the fifth production factor beside the already
named factors from Erich Gutenberg (1979):
– Labor
– Resources basic factors

– Materials
– Dispositive factors: leadership, planning etc. (extension of labor)

• Witte (1972) describes information as an immaterial

resource that has economic value and is not free 35
Thought Exercise

What is required for information to become an asset, i.e.,

something of economic value?

36
Information as an Asset

• Many factors that impact value of information (e.g., our human

perceptions; structure of information resources)

• In order to use information as an asset

– There must be a relative scarcity
– There must be an economic demand for this information (i.e.,
positive willingness to pay, trade, or barter)

Source: Bode (1993)

37
Another Thought Exercise

What is special about Information?

Compare characteristics of Information to characteristics

of Material Assets.

38
What Makes Information Special?
Material Asset
High reproduction costs
Convergence of marginal costs to average
costs (i.e., total cost of production divided by
the total number of units produced)
Depreciation by use
Individual ownership
Depreciation by sharing, limited divisibility
Identification and protection is possible
Often expensive logistics
Price/value ascertainable (by considering
cost of production, and markup)
Limited possibilities of combination,
extension etc.
Information
Low reproduction costs
Marginal costs of (re-)production nearly zero
(however, costs of first copy can be substantial)
No depreciation by use
Multiple ownership possible
No depreciation by sharing; divisibility is nearly
unlimited
Controlling access is challenging; Problems of
data safety and data security
Simple logistics
Price/value hard to determine
Even collecting information creates added
value; diverse possibilities of extending and
condensing information
Attributes of Information

• Valuation is difficult to determine, but can be influenced:

– Value can be highly subjective
– Value often depends on context and temporal use (e.g., location information)
– Value can be influenced by adding, selecting, concretizing, or excluding
– Value can be influenced via quality (e.g., accuracy, completeness, reliability)

• Need to consider technical aspects to manipulate valuation:

– Buyer receives copies, which makes it difficult to enforce exclusive rights,
especially ownership rights
– Common data standards for information goods are required

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Information Valuation Methods

Source: https://www.gartner.com/smarterwithgartner/why-and-how-to-value-your-information-as-an-asset/ (last accessed 2021.04.15)

41
Agenda
I. Introduction to the Digital Transformation
II. The Term “Information”
III. Importance of Information as a Resource
IV. Information Management

42
 Information in Enterprises
INFORMATION SYSTEM (e.g., ERP)
Summary on the i Sales market
Strategy
next slide Capital market i

IS
Shareholder Management Customer
Methods:
i

Market for subproducts

and complex services
Administration

i
Venture i
i i
Capitalist
Products P
P
Cooperation
Partner
Production Process
i = Information

P = Product

Boundary of the enterprise

43
Information in Enterprises

• Information is both used and produced within enterprise environments

– For example, ERP systems store various different types of information
• Planning and strategy creation is based on the available information
• Information can come from external sources like customers or
suppliers and go to external partners like capital markets
• Management can use available information to reach the objectives
– When new information becomes available then the information control circuit
(see next slide) will initiate an update

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 Control Circuit:
Inform - Decide - Control

Information
Management
+/-
Administration
Business process
Engineering–inspired Information Measurement - Analysis
Process unit - Control
view of information flow Regulator
and use within an
enterprise
Employee
Information
Actuator

Component of a system responsible for driving

a particular mechanism within the system
45
Agenda
I. Introduction to the Digital Transformation
II. The Term “Information”
III. Importance of Information as a Resource
IV. Information Management

46
Flood of Information: Early 2000s
1 Kilobyte 1024 Bytes
1 Megabyte 1024 to the power of 2 Bytes (= 1.048.576 Bytes)
1 Gigabyte 1024 to the power of 3 Bytes (= 1.073.741.824 Bytes)
1 Terabyte 1024 to the power of 4 Bytes (= 1.099.511.627.776 Bytes)
1 Petabyte 1024 to the power of 5 Bytes (= 1.125.899.906.842.624 Bytes)
1 Exabyte 1024 to the power of 6 Bytes (= 1.152.921.504.606.846.976 Bytes)

• In the year 2002, five exabytes were saved on paper, film, magnetic, and optical
storage
– However, this already equals to all words humankind has ever spoken
• If you digitalize all 19 million books and papers of the American Library of
Congress, it would result in 10 terabytes of data
• For saving all the data that was produced in 2002 you would need half of a million
of these libraries.
Source: School of Information, University of California at Berkeley
https://groups.ischool.berkeley.edu/archive/how-much-info-2003/ (accessed at: April 15, 2021)
47
 One Internet Minute: A few years later

48

http://www.businessinsider.de/everything-that-
happens-in-one-minute-on-the-internet-2017-
9?r=US&IR=T
Information Supply
• Question: How much information do you need to make a decision?
• Answer: Not much, but the relevant information.  Search of the “needle in a haystack”

Processed information Amount of information needed

supply for the management for a decision
e.g., 10 numbers with brief
 ~ 500 Bytes
1 Report  ~ 500 Kilobytes explanation

Whole information supply -

Selection of data storages:
Printed matter, videos, various
storage mediums Source: Krcmar (2015), p. 29

49
Information Management (IM)

IM is a section of business management, which is responsible for

ensuring the best use of the resource information with respect to
the business objectives.

• Primary tasks:
– Management of aspects of the overall information economy,
– and more specifically the various information systems, and information
and communication technology of an enterprise.
– In addition, IM involves the general executive and organizational tasks.

Source: Krcmar (2015), p. 10

50
Objectives and Tasks of
Information Management
The overarching objective of information management is to balance between
demand and supply of information in an enterprise (Link 1982).

• Balancing information demand and supply

• Supplying decision makers with relevant information
• Ensuring high information quality
• Implementing information management as a cross-departmental function
• Application of ICT to support the fulfillment of tasks
• Timely optimization of information flows
• Considering the economic efficiency principle

51
Layers of Information Management

Business Management: What

Inform, Decide, Control

Information Economy: Information Supply and Demand

Information Systems: Socio-technical systems How

Information and Communication Technology

52
Framework of Information Management

Managerial
Management of Supply
Functions of
Information Demand
Information Usage
Guiding framework (information economy)
Management
for this course
IT Strategy Data
Note: mostly a rotated Management of Processes
IT Governance
version of the previous Information Systems Application
schematic IT Processes lifecycle

IT Personnel
Management of Storage
IT Controlling Information and Processing
Communication Communication
IT Security
Technology Technology Bundles

Source: Krcmar (2015)

53
Takeaways: Important terms

• Digital Transformation
• Information as a Resource
• Information Economy
• Flood of Information (Information Overload)
• Information Management

54
Takeaways: Learning objectives

1. You have gained initial familiarity with the concept of

digital transformation.
2. You are comfortable with the term information and you
are able to name its particular attributes.
3. You know the importance of information as a resource
in a business management context.
4. You know the term information economy and you are
able to place it as a part of information management.
55
The End. For Today.

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