Information Systems

Ambuj Anand
ambuj@iimranchi.ac.in
What and Why
Three Propositions
 Information is becoming increasingly
important
Information Economy
 Meteoric Rise of Service Industries
◦ blurred manufacturing and service lines
 New Jobs – Information Processing
 ization

 Pace of Change
 Information Management – a separate

business function
 Increasing potential impact of IT
Three Propositions
 Information is becoming increasingly
important

 Information Technology has tremendous

potential
Strategic Importance of IT
Asian Paints
 Decorative Paints
 Per Capita Consumption < 1kg
 Linked to economic growth
 70% Concentrated organized sector
 30% highly fragmented unorganized
 Distribution
 Building the brand
Asian Paints

 Leader – 33% since 70s

 Aggressive marketing
 Largest Distribution network
 IT?
Indian Railways
 Primary Business: Transportation of
Goods and People
 15000 trains a day
 64000 kms of track
 1.6 million employees
 18 million passengers / day
IR: Old to New

 Telegraphic requests for return

 Queues and separate counters
 Any source, any destination
 Internet booking: I-ticket
 E-Ticket
e s s
s in
B u
w
Ne
Dell
 PC assembling; sales and service
 Efficient, “made-to-order”, low cost

distribution system, fast-moving inventory

 Inv T/o : 55 (Dell) 23.6 (Industry Average)
 Virtual Integration instead of vertical
 Volumes on the procurement side

◦ 1.5 million Dell part numbers across nearly 200

product families
◦ 5 million inventory movement per day
◦ 4 million BOM a year
Numbers?
 2002 - Gartner - 20 percent of all
expenditures on IT is wasted - an annual
destruction of US $600 billion

 2004 - IBM - Fortune 1000 CIOs - 40

percent of all IT spending brought no
return

 2006 - The Standish Group - 35 percent

of all IT projects succeeded - remaining
were either challenged or failed
Three Propositions
 Information is becoming increasingly
important

 Information Technology has tremendous

potential

 Organizations have failed miserably in

exploiting the potential of IT
Why
A conversation about IT
 “I don’t want to spend any more money on computers!” said
Burns, the president and founder.

“Why not?” asked Jones. “Arent you happy with what

they’ve done for you so far?”

“Happy? Hardly. I was just looking over our previous

budgets. We’ve spent more on IT every year for the last
10 years, and I really don’t know what we have to show
for it. We’ve got systems that crash way too often,
software that’s too hard to learn, hardware that needs to
be replaced every….”
“Eight years ago, all I heard about was ERP, how it was going to
make companies so much more streamlined and efficient. So
I hired consultants to come in and do an assessment of our
operations. They came back and said our headcount and
inventory levels were ‘high’ that they could be reduced so
much that ERP would pay for itself. I fell for it. The project
took 18 months longer and cost twice as much. Parts of the
company hated it and resisted and complained every step.
We finally have the system up, our inventory levels are right
where they were and now our IT staff is much larger….So
much for the reduced headcount”
“May be we are faster in some areas. But then,
so what? How do I attach a dollar value to
that?

“The costs of the system are crystal clear to

me, and I am astonished at how high they
were, but the benefits are much less obvious”
“I think you are being too hard on these
technologies. I bet your IT investments have
helped you change your competitive position”

“How could they? Our competitors all have IT

too. After all, they are for sale to everyone”
Organisations lack…..
 Understanding of Information Systems (IS)

 Understanding the strategic potential of IS

 Strategic planning for IS

 Managing IT environments
Understanding of Information
Systems
 Define IS
 Define a system

Process
Input Output

Business Activity
Understanding IS

 Types
 Transaction Processing Systems
 Decision Support Systems
 Decision Automation Systems

 Suitability
Understanding Strategic Potential

 Examples – 3 Industries
 Concept of Information Intensity
 Information Intensity Matrix
Information Content of Product
Low High

Low

Cement
ain ty
C h en s i
t
Va n In
of atio
lue
rm

Newspapers
o

Oil Refining
Inf

Banking
Airlines
High
Strategic Planning for IS

Impln Use Benefits

Planning
Managing IT environments

 Decisions
 Perspectives

◦ Users and Providers

 Training, Awareness
 Support
 Control
 Social Implications
 Impact on Structure, Power
Your Firm
Questions

 What do you think are the important IT

applications/ IT infrastructure that they
need to have?
Road Map

 Some common approaches

 Problems with these approaches

 Two structured approaches

◦ Critical Success Factors

◦ Value Chain
Common Intuitive
Approaches
 My neighbour has it, so should I
 Obvious IT solutions
 “Good” infrastructure to have
 Improve Communications

Capability
 Give more information
 Increase Efficiency
 Achieve integration
 By-Product Approach

 TPS – Recorded and maintained data

 Aggregated data – Top management
 What is there, we give

• Low Cost • Necessary Info

• Simplicity • Too much info
• Paperwork reduction • Isolated Info
Analysis
 Null Approach

 Don’t do anything
 No formal systems in place
 Subjective and informal information

• No overload • Lack of structure

• Low Costs • Executive’s Judgment
• Inconsistency
• Necessary Info
 Key Indicator Approach

 Aggregated Information
 Set of commonly used indicators – KIs
 Provide KI-related information

• No overload • Exceptions Info

• Moderate Costs • All-inclusive
• I decide • Overall figures
• Quantitative data
 Total Study Approach

 Business Systems Planning - IBM

 Sample of managers – information needs
 Gap analysis – identify IS needed, prioritize

and provide

• Top-Down • Expensive
• Comprehensive • Data gathered
• Probability of use • Difference of opinions
So what we need is a method that
 Is not expensive
 Comprehensive enough
 Does not overload information
 Simple to execute and understand
 Consistent
 Helps executives define their own information

needs
CSF Approach

CSFs are areas which, if performed

satisfactorily, the business is likely to gain
significant competitive performance
CSFs

 are generally activities that a firm performs

 specific to the product/market domain
 Normally 4 to 6
Types of CSFs

 Industry Level
 Firm specific
 Environment
 Temporal
CSFs

 Industry-Level CSFs
◦ Automobiles
◦ Hotels
◦ Book Publishing
◦ Decorative Paints
◦ Furniture
CSFs
 Firm-level CSFs
◦ Tide versus Ariel
◦ Maruti versus BMW
◦ Hyatt versus Ginger
Environmental CSFs

 Nuclear Families
 Internet
 Oil Price Hike
 Government change
 Earthquake or Tsunami
 Land ownership
Temporal CSFs

 Cadbury
 Pesticides in Pepsi
 ICICI Bank
Deriving the CSFs

 Industry Level
 Firm specific
 Environment
 Temporal
CSFs
 Identifying Industry-Level CSFs

◦ Porter’s Five Forces

◦ Industry Structure Analysis
◦ BCG competitive advantage matrix
Porter’s Five Forces

Threat of New
Entrants

Power of Intense Power of

Suppliers Rivalry Customers

Threat of
Substitutes
Questions to ask

 Which amongst these five forces are most

powerful?
 What are the sources of their power?
 How does the industry counter/manage
them?
Decorative Paints

Low
Overcapacity
Threat of New Not-attractive
Entrants
Low
Intense – Fragmented,
Large unorganized market

Power of Intense Power of

Suppliers Rivalry Customers

High
Chuna? Threat of Low Brand Loyalty
Substitutes Low Quality awareness
Firm Level CSFs

 Identifying Firm-level CSFs

◦ Generic Competitive Strategy
◦ Miles and Snow
◦ Mintzberg – Organizational Forms

◦ Process, Assets, Situation or Access to

resources
 E.g. Pharmaceuticals or Music Industry
◦ Life Cycle
Firm Level CSFs

 Maruti 800 GCS: Cost

◦ Availability of Finance

◦ Reducing maintenance costs

◦ Improving access to spare-parts and service

Firm Level CSFs

 Maruti 800 GCS: Cost

◦ Availability of Finance

◦ Reducing maintenance costs

◦ Improving access to spare-parts and service

True Value?
Firm Level CSFs

 Miles and Snow

◦ Prospector
 Locate new Prod/Mkt opportunities
 Capacity to survey range of environmental conditions
◦ Defender
 Good/Services as efficiently as possible
 Intensive planning oriented towards cost and efficiency
◦ Analyzer
 Combination of Prospector and Defender
 Seek flexibility and Stability
◦ Reactor
 Residual strategy
Mintzberg’s Organizational
Typologies
Simple Structure
Machine Bureaucracy
Professional Bureaucracy
Adhocracy
Divisionalized Form
CSF Approach
 Use I,F,E,T CSFs to arrive at a list of CSFs
CSF Approach

 Use I,F,E,T CSFs to arrive at a list of CSFs

 Identify measures for CSFs. Measures for

each CSF help determine what kind of
information is required
CSF Approach

 Use I,F,E,T CSFs to arrive at a list of CSFs

 Identify measures for CSFs. Measures for

each CSF help determine what kind of
information is required

 Measures ≡ Information Analysis ≡ IS/IT

Applications
Foodworld Case

 Power of Customers is high

 GCS: Differentiation
◦ Prospector
Foodworld - Analysis

Threat of New
LOW/MED Entrants
MOD/HIGH

Power of Intense Power of

Suppliers Rivalry Customers

HIGH
LOW/MED Threat of
Substitutes LOW
Myntra - Analysis

 Power of Customers – High

◦ Choices
◦ Undifferentiated products
◦ Switching costs are low

 Intensity of Rivalry – Mod/High

◦ Diverse competitors
◦ Size
Myntra - Analysis
 Power of Customers – High
◦ DIFFERENTIATE
◦ TIE-IN

 Intensity of Rivalry – High

◦ BUILD A BRAND
Myntra - Analysis
 Generic Competitive Strategy

◦ DIFFERENTIATION
 BASIS?
Critical Success Factors
 Ensuring Appropriate Variety of Products

 Ensuring Availability of Products

 Designing Appropriate Interface

 Ensuring Appropriate Variety
DSS

Understand Identify
Customer Identify Identify New Needs
Expectations “Moving” “associations”
Products
Identify New
Identify
Products
“Mix”
Competitor
Customer
Offerings
Feedback
 Ensuring Appropriate Variety

Understand Identify
Identify Identify
DSS
New Needs
Customer
Expectations “Moving” “associations”
Products
Identify
Identify
New
Customer “Mix”
Products
Feedback
Competitor
Offerings Track
Identify
“captive”
potential
products
“bundles”
Types of IS

 Monitoring

 Analyzing

 Improvement-oriented
Types of IS
 Monitoring:
◦ How have we performed in this CSF?
◦ Know the data
◦ In which direction are we moving?
◦ What is the rate of change?
 Analyzing
◦ Establish the Cause-Effect relationships
◦ Where are things going wrong and why
◦ What has caused the performance?
Types of IS
 Improvement-Oriented
◦ What can we do about the performance in this CSF?
◦ Can we use IT to improve it?
So why is it good?

 Structured Top-down planning approach

 User acceptance
 Identify IS needs of the firm

 Are managers able to really identify CSFs?

 Only CSF approach?
 Value Chain

Firm Infra

HRD
Technology
Development
Procurement

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales
Primary Activities

 Inbound Logistics: Receiving, storing

various inputs
 Operations: Transforming input to output
 Outbound logistics: Collecting, storing and
physical distribution of final product
 Marketing and Sales: Providing a means of
inducement
 Service: Enhance, maintain the value of the
product
Support Activities

 Procurement: Function of purchasing the

inputs
 Technology Development: Efforts to

improve product or process

 HRD: Hiring, training, development and

compensation of all personnel

 Firm Infrastructure: Usually supports

entire chain
Value Chain

 Technologically and economically distinct

 Buyer is willing to pay
 Value > Cost (Margins?)
 Cost -> Cost Chain
Cost Chain

Firm Infrastructure
Human Resource Development

634Technology Development
Procurement
?
56034 6089

Inbound Outbound Marketing

Operations
45330 3400 Service
Logistics Logistics and Sales
Value Chain
 Competitive Advantage from individual
activities
◦ IBL (Sugar)
◦ Operations (HE Institutes)
◦ OBL (Paints)
◦ Marketing and Sales (FMCG)
◦ Technology Development (Bank, Steel)
◦ HRM (Software, Consultancy)
◦ OLA/UBER ??
◦ AMAZON/FLIPKART/SNAPDEAL??
Value Chain
 Generic Competitive Strategy:
◦ Cost
 Assign costs
 Identify activities that are ‘cost’ly
 Identify means of lowering costs

◦ Differentiation
 Identify activities that contribute to basis
 Value-Adding
 Ways to enhance them
Implications for IS
 Physical component and information
component

 Identify Information Intensive activities

Implications for IS
Information Intensity

+
High-Value Adding

=
CANDIDATES FOR ICT BASED INNOVATION
 Value Linkage

Firm Infra

HRD
Technology
Development
Procurement

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales
 Value Linkage

Firm Infra

HRD
Technology
Development
Procurement

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales
Linkages
 Connect value activities inside the value chain
 Change in one activity
 Integration – Vertical, Horizontal
 Value Linkages
Firm Infrastructure
Human Resource Development
Technology Development
Procurement
Oper
Mkt Serv
IBL ation OBL
g ice
s

Firm Infrastructure Firm Infrastructure Firm Infrastructure

Human Resource Development Human Resource Development Human Resource Development
Technology Development Technology Development Technology Development
Procurement Procurement Procurement
Oper Oper Oper
Mkt Serv Mkt Serv Mkt Serv
IBL ation OBL IBL ation OBL IBL ation OBL
g ice g ice g ice
s s s

SUPPLIER FIRM CUSTOMER

Firm Infrastructure
Human Resource Development
Technology Development
Procurement
Oper
Mkt Serv
IBL ation OBL
g ice
s
 Value System

Firm Infrastructure Firm Infrastructure Firm Infrastructure

Human Resource Development Human Resource Development Human Resource Development
Technology Development Technology Development Technology Development
Procurement Procurement Procurement
Oper Oper Oper
Mkt Serv Mkt Serv Mkt Serv
IBL ation OBL IBL ation OBL IBL ation OBL
g ice g ice g ice
s s s

SUPPLIER FIRM CUSTOMER

 Vendors Selling Online
 Identifying the right product mix
 Sourcing from manufacturers
 Cataloging
 Creating an online storefront ??
 Warehousing
 Accounting – Tax compliance
 Shipping to the customer
 Managing returns, after sales support
 Vendors Selling Online
 Dealing with online frauds (intentional
breakage, cancellation)
 Reviews and ratings
 Challenge of differentiation??
 Managing waste??
 Financing

◦ Reducing delay in payment settlement

Customers
 Buying assistance
◦ Review
◦ Rating
◦ Product description (including pictures)
◦ Technical assistance
 Scraping (exchange offers)
 Reselling (OLX, QUIKR)
 After sales support
◦ Installations
◦ Repair, warranty, spares
Customers
 Parties, Outing
 Hobbies
 Classes
 Activity based learnings
◦ Cooking
◦ Painting
◦ Yoga
Linkages
 Optimization Linkages
◦ Reflect Tradeoffs among activities to
achieve the same overall result
 More costly product design,
 greater in-process inspection
 Coordination Linkages
◦ Operations - O/L – Service
◦ Reduces cost or enhances differentiation
Linkages
 Optimization Linkages
◦ Purchase of Raw Material (Pre-Cut Steel)
◦ Stringent product specification  service costs
◦ Costly product design
 Coordination Linkages
◦ On time delivery (IBL, Ops, OBL)
◦ Marketing  Operations
◦ Service  Tech Dvt
◦ JIT