Information Management

Digital Technology Trends Transforming
Part 1 How Business Is Done
Chapter
Doing Business
1 in Digital Times
Chapter Snapshot Key Terms

Case 1.1 Opening Case: McCain Foods’ Success Assuring Your Learning
Factors—Dashboards, Innovation, and Ethics • Discuss: Critical Thinking Questions
1.1 Every Business Is a Digital Business • Explore: Online and Interactive Exercises
1.2 Business Process Management and • Analyze & Decide: Apply IT Concepts
Improvement to Business Decisions
1.3 The Power of Competitive Advantage Case 1.2 Business Case: Restaurant Creates
1.4 Enterprise Technology Trends Opportunities to Engage Customers
1.5 How Your IT Expertise Adds Value to Your Case 1.3 Video Case: What Is the Value of
Performance and Career Knowing More and Doing More?
References
Learning Outcomes
1. Describe the use of digital technology in every facet of 4. Describe enterprise technology trends and explain how
business and how digital channels are being leveraged. they influence strategy and operations.
2. Explain the types, sources, characteristics, and control 5. Assess how IT adds value to your career path and per-
of enterprise data, and what can be accomplished with formance, and the positive outlook for IT management
near real time data. careers.
3. Identify the five forces of competitive advantage and
evaluate how they are reinforced by IT.
Chapter Snapshot
Make no mistake. Businesses are experiencing a digital Think how much of your day you have your phone
transformation as digital technology enables changes nearby—and how many times you check it. Nearly
unimaginable a decade ago. High-performance organi- 80 percent of people carry their phone for all but two
zations are taking advantage of what is newly possible hours of their day; and 25 per cent of 18- to 44-year-olds
from innovations in mobile, social, cloud, big data, data cannot remember not having their phone with them
analytics, and visualization technologies. These digital (Cooper, 2013).
forces enable unprecedented levels of connectivity, or As a business leader, you will want to know what
connectedness, as listed in Figure 1.1. steps to take to get a jump on the mobile, social, cloud,
1
Big data are datasets whose
size and speed are beyond An estimated 15 billion
the ability of typical database devices are connected to
Over 1 million websites
the Internet—forecasted
software tools to capture, engage in Facebook
to hit 50 billion by 2020
e-commerce.
store, manage, and analyze. as more devices connect
Examples are machine- via mobile networks.
generated data and social
media texts.
More data are collected in
Data analytics refers to the Over 200 million social a day now than existed in
use of software and statistics Figure 1.1 We are in media users are mobile the world 10 years ago.
the era of mobile-social- only, never accessing it Half of all data are in the
to find meaningful insight
cloud-big data that from a desktop or laptop. cloud and generated
in the data, or better under- Mobile use generates 30%
shape business strate- by mobile and social
stand the data. gies and day-to-day of Facebook’s ad revenue. activities—known as big
data.
Data visualization (viz) tools operations.
make it easier to understand
data at a glance by display-
ing data in summarized big data, analytics, and visualization technologies that will move your businesses
formats, such as dashboards forward. Faced with opportunities and challenges, you need to know how to lever-
and maps, and by enabling age them before or better than your competitors.
drill-down to the detailed In this opening chapter, you read about the powerful impacts of digital technol-
data. ogy on management, business, government, entertainment, society, and those it will
have on the future. You learn of the latest digital trends taking place across indus-
tries and organizations—small and medium businesses, multinational corporations,
government agencies, the health-care industry, and nonprofits.
CASE 1.1 OPENING CASE

McCain Foods’ Success Factors: Dashboards, Innovation, and Ethics
COMPANY OVERVIEW You most likely have eaten McCain Foods products (Figure 1.2, Table 1.1). McCain
is a market leader in the frozen food industry—producing one-third of the world’s
supply of french fries. The company manufactures, distributes, and sells more than
McCain Foods, Ltd.
Brand Global Reach

Frozen food manufacturer Sales offices in 110 countries
Market leader in french 55 production plants on
fries 6 continents
22,000 employees
Corporate Culture Digital Technology

Good ethics is good Dashboards
business. Data analytics
Good food, better life. Real time reporting systems
Figure 1.2 McCain Foods,
Ltd. overview.
2
CASE 1.1 Opening Case 3
TABLE 1.1 Opening Case Overview
Company McCain Foods, Ltd. www.mccain.com
Industry The global company manufactures, sells, and distributes frozen

food products.
Product lines More than 100 oven-ready frozen food products
Digital technology Dashboards are implemented throughout the organization

from boardrooms to factory floors. Dashboards have drill-down
capabilities.
Business challenges The frozen food industry faced tough challenges from health
and nutrition trends that are emphasizing fresh foods. Industry
is highly competitive because it is expected to experience slow
growth through 2018.
Taglines “Good food. Better life.” and “It’s all good.”
100 oven-ready frozen foods—pizzas, appetizers, meals, and vegetables. McCain is

Business-to-business (B2B) a global business-to-business (B2B) manufacturer with 55 production facilities on 6
commerce. The selling of continents. The company sells frozen foods to other businesses—wholesalers, retail-
products and services to ers, and restaurants from sales offices in 110 countries. McCain supplies frozen fries
other businesses. to Burger King and supermarket chains (Figure 1.3).
Voisin/Phanie/SuperStock
Figure 1.3 Frozen food is

one of the most dynamic
and largest sectors of the
food industry.
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4 Chapter 1 Doing Business in Digital Times

Supply chain. All businesses Food manufacturers must be able to trace all ingredients along their supply
involved in the production chain in case of contamination. Achieving end-to-end traceability is complex given
and distribution of a product the number of players in food supply chains. Several communication and tracking
or service. technologies make up McCain’s supply chain management (SCM) system to keep
workers informed of actual and potential problems with food quality, inventory,
and shipping as they occur. McCain’s SCM system ensures delivery of the best
products possible at the best value to customers. In addition, the company strives
to prevent food shortages worldwide by analyzing huge volumes of data to predict
crop yields.
FROZEN FOOD McCain Foods had to deal with three major challenges and threats:
INDUSTRY CHALLENGES
1. Drop in demand for frozen foods. McCain operated in an industry that was
facing tougher competition. Health-conscious trends were shifting customer
demand toward fresh food, which was slowing growth in the frozen foods
market.
2. Perishable inventory. Of all the types of manufacturing, food manufacturers face
© DustyPixel/iStockphoto
unique inventory management challenges and regulatory requirements. Their

inventory of raw materials and finished goods can spoil, losing all their value, or
food can become contaminated. Regulators require food manufacturers to able
to do recalls quickly and effectively. Food recalls have destroyed brands and
been financially devastating.
3. Technology-dependent. Food manufacturers face the pressures that are
Figure 1.4 McCain Foods common to all manufacturers. They need information reporting systems and
and Burger King jointly digital devices to manage and automate operations, track inventory, keep
developed Satisfries—a the right people informed, support decisions, and collaborate with business
french fry innovation with partners.
30 percent less fat and
McCain Foods worked with Burger King (BK) to develop lower-calorie fries
20 percent fewer calories
than BK’s current fries and called Satisfries (Figure 1.4). These crinkle-cut fries have 30 percent less fat and
40 percent less fat and 20 percent fewer calories than BK’s classic fries. This food innovation has shaken
30 percent fewer calories up the fast-food industry and given BK an advantage with end-consumers who are
than McDonald’s fries. demanding healthier options.
MCCAIN FOODS’ The McCain brothers, who founded the company, follow this simple philosophy:
BUSINESS AND IT “Good ethics is good business.” McCain prides itself on the quality and conve-
STRATEGIES nience of its products, which is reflected in the It’s All Good brand image. The It’s
All Good branding effort was launched in 2010 after surveys found that customers
were concerned about the quality and nutrition of frozen foods. Since then, many of
products have been improved and manufactured in healthier versions.
Managing with Digital Technology McCain had integrated its diverse
sources of data into a single environment for analysis. Insights gained from its data
analytics helped improve manufacturing processes, innovation, and competitive
advantage.
McCain Foods invested in data analytics and visualization technologies to
maximize its capability to innovate and gain insights from its huge volumes of data.
The company tracks, aggregates, and analyzes data from operations and business
customers in order to identify opportunities for innovation in every area of the busi-
ness. The results of data analytics are made available across the organization—from
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CASE 1.1 Opening Case 5
executive boardrooms to the factory floors—on dashboards. Dashboards are data
visualizations (data viz) that display the current status of key performance indica-
tors (KPIs) in easy-to-understand formats (Figure 1.5). KPIs are business metrics
used to evaluate performance in terms of critical success factors, or strategic and
operational goals.
Dashboards Create Productive Competition Among Factory Workers

McCain implemented 22,000 reports and 3,000 personal reporting systems that
include dashboards. Dashboards display summarized data graphically in a clear and
concise way. By clicking a graph, the user can drill down to the detailed data. The
dashboards reach most of McCain’s 18,000 employees worldwide.
Dashboards have created healthy competition that has led to better perfor-
mance. Ten-foot dashboards hang on factory walls of plants around the world. They
are strategically placed near the cafeteria so employees can see the KPIs and per-
formance metrics of every plant. With this visibility, everyone can know in near real
time exactly how well they are doing compared to other plants. The competition
among factories has totally transformed the work environment—and organizational
culture—in the plants and increased production performance.
Better Predictions, Better Results The CEO, other executives, and managers
view their dashboards from mobile devices or computers. They are able to monitor
operations in factories and farms around the globe. Dashboards keep management
informed because they can discover answers to their own questions by drilling
down. Data are used to forecast and predict crop yields—and ultimately combine
weather and geopolitical data to predict and avoid food shortages. By integrating
all of its data into one environment and making the results available in near real
time to those who need it, the organization is increasing its bottom line and driving
innovation.
© Delices/Shutterstock
Figure 1.5 Data visualizations

of KPIs make them easy to
understand at a glance.
Questions
1. All it takes is one compromised ingredient to contaminate food and
to put human lives at risk. Delays in communicating contaminated food
Food Safety Modernization increase the health risk and fines for violating the Food Safety Mod-
Act (FSMA), signed into law ernization Act. How can the SCM system help McCain Foods reduce
in early 2011, requires all the risks related to low-quality or contaminated frozen foods reaching
companies in food supply consumers?
chains to be able to trace 2. What three challenges or threats facing McCain Foods and what is the
foods back to the point of reason for each challenge or threat?
origin (farm) and forward to 3. How have dashboards on the factory floors impacted performance at
the consumer’s plate (fork). McCain Foods?
The term for the effort is 4. What might be the KPIs of a frozen food manufacturer such as McCain
farm-to-fork traceability. Foods?
Public health is the chief con- 5. Explain how visibility about operations and performance created
cern, followed by potential healthy competition among McCain’s factory workers.
liability and brand protection 6. Being able to make reliable predictions can improve business perfor-
issues. mance. Explain why.
Sources: Compiled from Smith (2013), Transparency Market Research (2013), and McCain Foods
Teradata video (2013).
1.1 Every Business Is a Digital Business

Digital business is a social, Today, a top concern of well-established corporations, global financial institutions,
born-on-the-Web retailers, and government agencies is how to design their digital
mobile, and Web-focused
business models in order to:
business.
Business model is how a • deliver an incredible customer experience;
business makes money. • turn a profit;
Digital business model • increase market share; and
defines how a business • engage their employees.
makes money digitally.
In the digital (online) space, the customer experience (CX) must measure up
Customer experience (CX) to the very best the Web has to offer. Stakes are high for those who get it right—or
is about building the digital get it wrong. Forrester research repeatedly confirms there is a strong relationship
infrastructure that allows cus- between the quality of a firm’s CX and loyalty, which in turn increases revenue
tomers to do whatever they (Schmidt-Subramanian et al., 2013).
want to do, through whatever This section introduces the most disruptive and valuable digital technologies,
channel they choose to do it. which you will continue to read about throughout this book.
DIGITAL TECHNOLOGIES Consumers expect to interact with businesses anytime anywhere via mobile
OF THE 2010S—IN THE apps or social channels using technology they carry in their pockets. Mobile apps
CLOUD, HANDHELD, have changed how, when, and where work is done. Employees can be more produc-
AND WEARABLE tive when they work and collaborate effortlessly from their handheld or wearable
devices.
Cloud computing is a style
of computing in which IT Cloud Computing
services are delivered on- Enterprises can acquire the latest apps and digital services as they are needed and
demand and accessible via without large upfront investments by switching from owning IT resources to cloud
the Internet. Common exam- computing (Figure 1.6). Cloud computing ranges from storing your files in Dropbox
ples are Dropbox, Gmail, to advanced cloud services. In short, with the cloud, resources no longer depend
and Google Drive. on buying that resource. For example, Amazon Elastic Compute Cloud, known as
1.1 Every Business Is a Digital Business 7
© DrAfter123/iStockphoto
© hanibaram/iStockphoto
Figure 1.6 Cloud computing is an important evolution in data storage, software, apps, and
delivery of IT services. An example is Apple iCloud—a cloud service used for online storage and
synchronization of mail, media files, contacts, calendar, and more.
EC2, eliminates the need to invest in hardware up front, so companies can develop
and deploy applications faster. EC2 enables companies to quickly add storage
capacity as their computing requirements change. EC2 reduces the time it takes to
acquire server space from weeks to minutes.
Machine-to-Machine Technology
Sensors can be embedded in most products. Objects that connect themselves to
the Internet include cars, heart monitors, stoplights, and appliances. Sensors are
designed to detect and react, such as Ford’s rain-sensing front wipers that use
an advanced optical sensor to detect the intensity of rain or snowfall and adjust
wiper speed accordingly. Machine-to-machine (M2M) technology enables sensor-
Internet of things (IoT) embedded products to share reliable real time data via radio signals. M2M and
refers to a set of capabilities the Internet of Things (IoT) are widely used to automate business processes in
enabled when physical things industries ranging from transportation to health care. By adding sensors to trucks,
are connected to the Internet turbines, roadways, utility meters, heart monitors, vending machines, and other
via sensors. equipment they sell, companies can track and manage their products remotely.
TECH NOTE 1.1 The Internet of Things
The phrase Internet of Things was coined by Kevin Ashton in 1999 while he was em-
ployed at Procter & Gamble. It refers to objects (e.g., cars, refrigerators, roadways)
that can sense aspects of the physical world, such as movement, temperature, light-
ing, or the presence or absence of people or objects, and then either act on it or re-
port it. Instead of most data (text, audio, video) on the Internet being produced and
used by people, more data are generated and used by machines communicating with
other machines—or M2M, as you read at the start of this chapter. Smart devices use
IP addresses and Internet technologies like Wi-Fi to communicate with each other
or directly with the cloud. Recent advances in storage and computing power avail-
able via cloud computing are facilitating adoption of the IoT.
The IoT opens new frontiers for improving processes in retail, health care,
manufacturing, energy, and oil and gas exploration. For instance, manufacturing
processes with embedded sensors can be controlled more precisely or monitored
for hazards and then take corrective action, which reduces injuries, damage, and
costs. IoT combined with big data analytics can help manufacturers improve the
efficiency of their machinery and minimize energy consumption, which often is the
manufacturing industry’s second-biggest expense.
The health sector is another area where IoT can help significantly. For example,
a person with a wearable device that carries all records of his health could be monitored
constantly. This connectivity enables health services to take necessary measures for
maintaining the wellbeing of the person.
Big Data
There is no question that the increasing volume of data can be valuable, but only if
they are processed and available when and where they are needed. The problem is
that the amount, variety, structure, and speed of data being generated or collected
by enterprises differ significantly from traditional data. Big data are what high-
volume, mostly text data are called. Big data stream in from multiple channels and
sources, including:
• mobile devices and M2M sensors embedded in everything from airport
runways to casino chips. Later in this chapter, you will read more about the
Internet of Things.
• social content from texts, tweets, posts, blogs.
• clickstream data from the Web and Internet searches.
• video data and photos from retail and user-generated content.
• financial, medical, research, customer, and B2B transactions.
Big data are 80 to 90 per cent unstructured. Unstructured data do not have a pre-
dictable format like a credit card application form. Huge volumes of unstructured data
flooding into an enterprise are too much for traditional technology to process and ana-
lyze quickly. Big data tend to be more time-sensitive than traditional (or small) data.
The exploding field of big data and analytics is called data science. Data sci-
ence involves managing and analyzing massive sets of data for purposes such as
target marketing, trend analysis, and the creation of individually tailored products
and services. Enterprises that want to take advantage of big data use real time data
from tweets, sensors, and their big data sources to gain insights into their custom-
ers’ interests and preference, to create new products and services, and to respond
to changes in usage patterns as they occur. Big data analytics has increased the
demand for data scientists, as described in Career Insight 1.1.
CAREER INSIGHT 1 . 1 HOT CAREER

Data Scientist
Big data, analytics tools, powerful networks, and greater technology, medical testing, and so on. Demand for data
processing power have contributed to growth of the scientists is outpacing the supply of talent. It is projected
field of data science. Enterprises need people who are that the data scientist career option will grow 19 per
capable of analyzing and finding insights in data cap- cent by 2020—surpassed only by video game design-
tured from sensors, M2M apps, social media, wearable ers. Talent scarcity has driven up salaries. According to
Glassdoor data (glassdoor.com, 2014), the median salary after joining the company in 2006. At that time, LinkedIn
for data scientists in the United States is $117,500. By had less than 8 million members. Goldman noticed that
contrast, a business analyst earns an average of $61,000. existing members were inviting their friends and col-
leagues to join, but they were not making connections
Profiles of Data Scientists at Facebook, LinkedIn, with other members at the rate executives had expected.
and Bitly A LinkedIn manager said, “It was like arriving at a con-
• Facebook’s Jeff Hammerbacher. Jeff helped ference reception and realizing you don’t know anyone.
Facebook make sense out of huge volumes of user So you just stand in the corner sipping your drink—and
data when he joined the company in 2006. Facebook’s you probably leave early.” Goldman began analyzing
data science team analyzes the self-reported data on the data from user profiles and looked for patterns that
each user’s Facebook page in order to target ads to predict whose networks a given profile would land
based on things the user actually likes. in. While most LinkedIn managers saw no value in
Goldman’s work, Reid Hoffman, LinkedIn’s cofounder
• LinkedIn’s DJ Patil. DJ worked at LinkedIn as
and CEO at the time, understood the power of analytics
chief data scientist. Many of the cool products on
because of his experiences at PayPal. With Hoffman’s
LinkedIn were built using data from self-reporting
approval, Goldman applied data analytics to test what
and machine learning.
would happen if member were presented with names
• Bitly’s Hilary Mason. Hilary was chief scientist at of other members they had not yet connected with, but
Bitly, which offers URL shortening and redirec- seemed likely to know. He displayed the three best new
tion services with real time link tracking. Bitly sees matches for each member based on his or her LinkedIn
behavior from billions of people a month by analyz- profile. Within days, the click-through rate on those
ing tens of millions of links shared per day, which are matches skyrocketed and things really took off. Thanks
clicked hundreds of millions times. The clickstreams to this one feature, LinkedIn’s growth increased dra-
generate an enormous amount of real time data. matically.
Using data analytics, Hillary and her team detected The LinkedIn example shows that good data sci-
and solved business problems that were not evident. entists do much more than simply try to solve obvious
business problems. Creative and critical thinking are
Data Science Is Both an Art and a Science part of their job—that is, part analyst and part artist.
In their 2012 Harvard Business Review article titled They dig through incoming data with the goal of dis-
“Data Scientist: The Sexiest Job of the 21st Century,” covering previously hidden insights that could lead to
authors Thomas Davenport and D. J. Patil define a data a competitive advantage or detect a business crisis in
scientist as a “high-ranking professional with the train- enough time to prevent it. Data scientists often need
ing and curiosity to make discoveries in the world of big to evaluate and select those opportunities and threats
data” (Davenport & Patil, 2012). They described how that would be of greatest value to the enterprise or
data scientist Jonathan Goldman transformed LinkedIn brand.
Sources: Kelly (2013), Lockhard & Wolf (2012), Davenport & Patil (2012), U.S. Department of Labor, Bureau of Labor Statistics (2014).
SOCIAL-MOBILE-CLOUD The relationship among social, mobile, and cloud technologies is shown in
MODEL Figure 1.7. The cloud consists of huge data centers accessible via the Internet and
forms the core by providing 24/7 access to storage, apps, and services. Handhelds
and wearables, such as Google Glass, Pebble, and Sony Smartwatch (Figure 1.8),
and their users form the edge. Social channels connect the core and edge. The
SoMoClo integration creates the technical and services infrastructure needed for
digital business. This infrastructure makes it possible to meet the expectations of
employees, customers, and business partners given that almost everyone is con-
nected (social), everywhere they go (mobile), and has 24/7 access to data, apps, and
other services (cloud).
Figure 1.7 Model of the
© scanrail/iStockphoto
integration of cloud, mobile,
and social technologies. The
cloud forms the core. Mobile
devices are the endpoints.
Social networks create the
connections.
Here are three examples of their influence:

1. Powerful social influences impact advertising and marketing: Connections and
feedback via social networks have changed the balance of influence. Consum-
ers are more likely to trust tweets from ordinary people than recommendations
made by celebrity endorsements. And, negative sentiments posted or tweeted
can damage brands.
2. Consumer devices go digital and offer new services. The Nike Fuel-
band wristband helps customers track their exercise activities and calories
burned. The device links to a mobile app that lets users post their progress
on Facebook.
3. eBay’s move to cloud technology improves sellers’ and buyers’ experiences.
The world’s largest online marketplace, eBay, moved its IT infrastructure to the
cloud. With cloud computing, eBay is able to introduce new types of landing
pages and customer experiences without the delay associated with having to buy
additional computing resources.
The balance of power has shifted as business is increasingly driven by individu-
als for whom mobiles are an extension of their body and mind. They expect to use
location-aware services, apps, alerts, social networks, and the latest digital capabili-
ties at work and outside work. To a growing extent, customer loyalty and revenue
growth depend on a business’s ability to offer unique customer experiences that
wow customers more than competitors can.
Matthew Shaw/Getty Images

Bloomberg/Getty Images
Figure 1.8 Strong interest in
smart wearable technology
reflects growing consumer
desire to be more digitally
FILIP SINGER/EPA/Newscom
connected at all times using
a collection of multiple
devices. A smartwatch used
at work, such as in a retail
store, can provide shop floor
staff with a screen to check
stock availability.
DIGITAL BUSINESS Business models are the ways enterprises generate revenue or sustain themselves.
MODELS Digital business models define how businesses make money via digital technology.
Companies that adopt digital business models are better positioned to take advan-
tage of business opportunities and survive, according to the Accenture Technology
Vision 2013 report (Accenture, 2013). Figure 1.9 contains examples of new tech-
nologies that destroyed old business models and created new ones.
Twitter dominates the Facebook became the most

reporting of news and events powerful sharing network
as they are still happening. in the world.
Figure 1.9 Digital business Location-aware technologies Smartphones, tablets, other

models refer to how track items through touch devices, and their apps
production and delivery to reshaped how organizations
companies engage their reduce wasted time and interact with customers—and
customers digitally to inefficiency in supply chains how customers want
create value via websites, and other business-to- businesses to interact with
social channels, and mobile business (B2B) transactions. them.
devices.
AP Photo/Ted S. Warren
Figure 1.10 MayDay video
chat tech support.
The ways in which market leaders are transitioning to digital business models
include the following:
• Amazon gains a competitive edge with high-tech tech support. Amazon

is well known for radically changing online shopping and e-book reading
experiences. Amazon’s CEO Jeffrey Bezos set a new standard for tech sup-
port with MayDay (Figure 1.10). Within 15 seconds of touching the MayDay
button on their Kindle Fire HDX tablet, customers get free, 24/7/365 tech
support via video chat. MayDay works by integrating all customer data and
instantly displaying the results to a tech agent when a customer presses the
MayDay button. Plus, tech agents can control and write on a customer’s Fire
screen. By circling and underlining various buttons on the display, it is dead
simple for new Fire owners to become expert with their devices. Amazon’s
objective is to educate the consumer rather than just fix the problem. In the
highly competitive tablet wars, Amazon has successfully differentiated its
tablet from those of big players like Apple, Samsung, and Asus (manufac-
turer of Google’s Nexus 7) with the MayDay button.
• NBA talent scouts rely on sports analytics and advanced scouting systems.
NBA talent scouts used to crunch players’ stats, watch live player perfor-
mances, and review hours of tapes to create player profiles (Figure 1.11).
Now software that tracks player performance has changed how basketball
and soccer players are evaluated. For example, STATS’ SportVU tech-
nology is revolutionizing the way sports contests are viewed, understood,
played, and enjoyed. SportVU uses six palm-sized digital cameras that
track the movement of every player on the court, record ball movement
25 times per second, and convert movements into statistics. SportVU
produces real time and highly complex statistics to complement the tra-
ditional play-by-play. Predictive sport analytics can provide a 360-degree
view of a player’s performance and help teams make trading decisions.
© Tribune Content/Agency LLC/Alamy
Figure 1.11 Sports analytics

and advanced scouting
systems evaluate talent
and performance for the
NBA—offering teams a
slight but critical competitive
advantage.
© lisegagne/iStockphoto
Figure 1.12 Casinos are
improving the profitability of
table games by monitoring
and analyzing betting in real
time.
Sports analytics bring about small competitive advantages that can shift
games and even playoff series.
• Dashboards keep casino floor staff informed of player demand. Competition
in the gaming industry is fierce, particularly during bad economic condi-
tions. The use of manual spreadsheets and gut-feeling decisions did not lead
to optimal results. Casino operators facing pressure to increase their bottom
line have invested in analytic tools, such as Tangam’s Yield Management
solution (TYM). TYM is used to increase the yield (profitability) of black-
jack, craps, and other table games played in the pit (Figure 1.12). The
analysis and insights from real time apps are used to improve the gaming
experience and comfort of players.
THE RECENT PAST AND We have seen great advances in digital technology since the start of this decade.
NEAR FUTURE—2010S Figure 1.13 shows releases by tech leaders that are shaping business and everyday
DECADE life. Compare the role of your mobiles, apps, social media, and so on in your per-
sonal life and work in 2010 to how you use them today. You can expect greater
changes going forward to the end of this decade with the expansion of no-touch
interfaces, mobility, wearable technology, and the IoT.
Companies are looking for ways to take advantage of new opportunities in
mobile, big data, social, and cloud services to optimize their business processes.
The role of the IT function within the enterprise has changed significantly—and
will evolve rapidly over the next five years. As you will read throughout this book,
the IT function has taken on key strategic and operational roles that determine the
enterprise’s success or failure.
2008 2010 2011–2012 2014

• Google launched • Apple launched • No tough interfaces • iWatch released
Android mobile iPad to communicate integrates with
OS to compete 100 million by simply gesturing iOS devices
with iPhones iPads sold or talking
By 2014, became in 2 years Microsoft’s Kinect for
the first billion-user Windows Apple’s Siri
mobile OS Google’s Glass
• App Store opened
on July 10, 2008
Figure 1.13 Digital via an update to iTunes
technology released By mid-2011, over 15 billion apps
since 2010. downloaded from App Store
IT at Work 1 .1
Zipcar and Other Connected Products
More objects are being embedded with sensors and gaining The payoff is lower development costs and improved oil
the ability to communicate with the Internet. This communi- flows.
cation improves business processes while reducing costs and • In the health-care industry, sensors and data links can
risks. For example, sensors and network connections can be monitor patients’ behavior and symptoms in real time
embedded in rental cars. Zipcar has pioneered the car rental and at low cost. This allows physicians to more precisely
by the hour business model. See Figure 1.14. Cars are leased diagnose disease and prescribe treatment regimens.
for short time spans to registered members, making retail For example, sensors embedded in patients with heart
rental centers unnecessary. Traditional car rental agencies disease or chronic illnesses can be monitored continu-
are starting to experiment with sensors so that each car’s use ously as they go about their daily activities. Sensors
can be optimized to increase revenue. placed on congestive heart patients monitor many of
When devices or products are embedded with sensors, these signs remotely and continuously, giving doctors
companies can track their movements or monitor interac- early warning of risky conditions. Better management
tions with them. Business models can be adjusted to take of congestive heart failure alone could reduce hospi-
advantage of what is learned from this behavioral data. For talization and treatment costs by $1 billion per year in
example, an insurance company offers to install location the U.S.
sensors in customers’ cars. By doing so, the company
• In the retail industry, sensors can capture shoppers’ pro-
develops the ability to price the drivers’ policies on how a
file data stored in their membership cards to help close
car is driven and where it travels. Pricing is customized to
purchases by providing additional information or offering
match the actual risks of operating a vehicle rather than
discounts at the point of sale.
based on general proxies—driver’s age, gender, or location
of residence. • Farm equipment with ground sensors can take into
account crop and field conditions, and adjust the
amount of fertilizer that is spread on areas that need more
Opportunities for Improvement
nutrients.
Other applications of embedded physical things are:
• Billboards in Japan scan people passing by, assessing
• In the oil and gas industry, exploration and development how they fit consumer profiles, and instantly change the
rely on extensive sensor networks placed in the earth’s displayed messages based on those assessments.
crust. The sensors produce accurate readings of the • The automobile industry is developing systems that
location, structure, and dimensions of potential fields. can detect imminent collisions and take evasive action.
Certain basic applications, such as automatic braking
systems, are available in high-end autos. The potential
accident reduction savings resulting from wider deploy-
ment of these sensor systems could exceed $100 billion
annually.
Questions
1. Research Zipcar. How does this company’s business
© Wiskerke/Alamy
model differ from that of traditional car rental companies,

such as Hertz or Avis?
2. Think of two physical things in your home or office that,
if they were embedded with sensors and linked to a net-
work, would improve the quality of your work or personal
Figure 1.14 A Zipcar-reserved parking sign in life. Describe these two scenarios.
Washington, DC. 3. What might the privacy concerns be?
1.2 Business Process Management and Improvement 15
Questions
1. What are the benefits of cloud computing?
2. What is machine-to-machine (M2M) technology? Give an example of a
business process that could be automated with M2M.
3. Describe the relationships in the SoMoClo model.
4. Explain the cloud.
5. Why have mobile devices given consumers more power in the marketplace?
6. What is a business model?
7. What is a digital business model?
8. Explain the Internet of Things.
IT at Work 1 .2
Wearable Technology
By 2016 wearable electronics in shoes, tattoos, and accessories just fitness by also monitoring time spent on social networks
will become a $10 billion industry, according to Gartner (2012). and photos taken.
Wearable technology builds computing, connectivity, The major sources of revenue from wearable smart
and sensor capabilities into materials. The latest wearables electronics are items worn by athletes and sports enthusiasts
are lightweight and may be found in athletic shoes, golf and devices used to monitor health conditions, such as auto-
accessories, and fitness trackers. The wearables can include matic insulin delivery for diabetics.
data analysis apps or services that send feedback or insights Applications and services are creating new value for
to the wearer. For example, Zepp Labs manufactures sensor- consumers, especially when they are combined with personal
embedded gloves for golf, tennis, and baseball that analyze preferences, location, biosensing, and social data. Wearable
1,000 data points per second to create 3D representations electronics can provide more detailed data to retailers for
of a player’s swing. The sensors track every inch of a golfer’s targeting advertisements and promotions.
swing, analyzes the movements, and then sends the wearers
advice on how to improve their game. Sensors that weigh
Questions
only half an ounce clip onto the glove. Another example is 1. Discuss how wearable electronics and the instant feedback
Sony’s SmartBand, a wristband that synchs with your phone they send to your mobile device could be valuable to you.
to track how many steps you take, the number of calories you 2. How can data from wearable technology be used to
burn each day, and how well you sleep. The Lifelog app is improve worker productivity or safety?
the key to the Smartband. The app gives a visual display of a 3. What are two other potentially valuable uses of instant
timeline and your activity, with boxes monitoring your steps, feedback or data from wearable technology?
calories, kilometers walked, and more. Lifelog goes beyond 4. How can wearable devices impact personal privacy?
1.2 Business Process Management and Improvement

Objectives define the desired All functions and departments in the enterprise have tasks that they need to com-
benefits or expected per- plete to produce outputs, or deliverables, in order to meet their objectives. Business
formance improvements. processes are series of steps by which organizations coordinate and organize tasks
They do not and should not to get work done. In the simplest terms, a process consists of activities that convert
inputs into outputs by doing work.
describe what you plan to do,
The importance of efficient business processes and continuous process improve-
how you plan to do it, or what
ment cannot be overemphasized. Why? Because 100 per cent of an enterprise’s perfor-
you plan to produce, which is mance is the result of its processes. Maximizing the use of inputs in order to carry out
the function of processes. similar activities better than one’s competitors is a critical success factor. IT at Work 1.3
describes the performance gains at AutoTrader.com, the automobile industry’s largest
online shopping marketplace, after it redesigned its order-to-cash process.
IT at Work 1 . 3
AutoTrader Redesigns Its Order-to-Cash Process
the signing and delivery of a contract. Customers were

aggravated by the unnecessary delay in revenue.
Redesigning the Order Fulfillment

Process with BPM
Management had set three new objectives for the company:
to be agile, to generate revenue faster, and to increase
customer satisfaction. They invested in a BPM (business pro-
© NetPhotos/Alamy
cess management) solution—selecting webMethods from
Software AG (softwareag.com, 2011). The BPM software
was used to document how tasks were performed using
the legacy system. After simplifying the process as much as
possible, remaining tasks were automated or optimized. The
Figure 1.15 AutoTrader.com car search site. new system cuts down the order fulfillment process to 1 day,
as shown in Figure 1.17. Changes and benefits resulting from
the redesigned process are:
AutoTrader.com is the leading automotive marketplace, list-
• There are only six human tasks even though the pro-
ing several million new and pre-owned vehicles, as shown
cess interacts with over 20 different data sources and
in Figure 1.15. AutoTrader.com is one of the largest local
systems, including the inventory, billing, and contract
online advertising entities, with profits of $300 million on
fulfillment.
$1.2 billion in revenues in 2013. The site attracts over 15 mil-
• Tasks are assigned immediately to the right people, who
lion unique visitors each month.
are alerted when work is added to their queues.
Outdated Order-to-Cash Process • Fewer than five percent of orders need to go back to
AutoTrader processes thousands of orders and contracts sales for clarification—a 400 percent improvement.
each month. Its cross-functional order fulfillment process, • Managers can check order fulfillment status anytime
or order-to-cash process, was outdated and could not using webMethods Optimize for Process, which provides
handle the sales volume. The legacy process was run on My real time visibility into performance. They can measure
AutoTrader (MAT), a system based on Lotus Notes/Domino. key performance indicators (KPIs) in real time to see
MAT took an average of 6.3 to 8.3 days to fulfill orders and where to make improvements.
process contracts, as Figure 1.16 shows. MAT created a bot-
• Dealers can make changes directly to their contracts,
tleneck that slowed the time from order to cash, or revenue
which cut costs for personnel. Software and hardware
generation. With over 100 coordinated steps, the process
costs are decreasing as the company retires old systems.
was bound to be flawed, resulting in long and error-prone
cycle times. Cycle time is the time required to complete a Sources: Compiled from Walsh (2012), softwareag.com (2011), Alesci &
given process. At AutoTrader, cycle time is the time between Saitto (2012).
Contract Contract
Signed Delivered
Quality
Fax Data Entry Fulfillment Assurance Total Avg
New 2.8 days .5 day 4 days 1 day 8.3 days
Figure 1.16 AutoTrader’s

legacy order fulfillment
process had an average cycle Up-sell 2.8 days .5 day 2 days 1 day 6.3 days
time of up to 8.3 days.
1.2 Business Process Management and Improvement 17
Submit sales Day 1:

Day 2:
order Live online
Order fulfillment
electronically processing of orders
Figure 1.17 AutoTrader’s

objective is to process and
fill orders within one day. 1 day elapsed
Questions 2. How does the reduced cycle time of the order fulfillment pro-
cess improve revenue generation and customer satisfaction?
1. Discuss how the redesigned order process supports the
3. Does reducing the cycle time of a business process also
company’s three new business objectives.
reduce errors? Why or why not?
THREE COMPONENTS Business processes have three basic components, as shown in Figure 1.18. They
OF BUSINESS involve people, technology, and information.
PROCESSES Examples of common business processes are:
• Accounting: Invoicing; reconciling accounts; auditing
• Finance: Credit card or loan approval; estimating credit risk and financing
terms
• Human resources (HR): Recruiting and hiring; assessing compliance with
regulations; evaluating job performance
• IT or information systems: Generating and distributing reports and data
visualizations; data analytics; data archiving
• Marketing: Sales; product promotion; design and implementation of sales
campaigns; qualifying a lead
• Production and operations: Shipping; receiving; quality control; inventory
management
Deliverables are the outputs • Cross-functional business processes: Involving two or more functions, for
or tangible things that are example, order fulfillment and product development
produced by a business pro-
Designing an effective process can be complex because you need a deep under-
cess. Common deliverables
standing of the inputs and outputs (deliverables), how things can go wrong, and how
are products, services, actions, to prevent things from going wrong. For example, Dell had implemented a new
plans, or decisions, such as process to reduce the time that tech support spent handling customer service calls. In
to approve or deny a credit an effort to minimize the length of the call, tech support’s quality dropped so much
application. Deliverables are that customers had to call multiple times to solve their problems. The new process
produced in order to achieve had backfired—increasing the time to resolve computer problems and aggravating
specific objectives. Dell customers.
Inputs Activities Deliverables

raw materials, work that products,
data, transforms services,
knowledge, inputs & acts on plans,
expertise data and or actions
knowledge
Figure 1.18 Three
components of a
business process. Business Process
Characteristics of Business Processes

Processes can be formal or informal. Formal processes are documented and have
well-established steps. Order taking and credit approval processes are examples.
Routine formal processes are referred to as standard operating procedures, or
SOPs. A SOP is a well-defined and documented way of doing something. An effec-
tive SOP documents who will perform the tasks; what materials to use; and where,
how, and when the tasks are to be performed. SOPs are needed for the handling of
food, hazardous materials, or situations involving safety, security, or compliance. In
contrast, informal processes are typically undocumented, have inputs that may not
yet been identified, and are knowledge-intensive. Although enterprises would pre-
fer to formalize their informal processes in order to better understand, share, and
optimize them, in many situations process knowledge remains in people’s heads.
Processes range from slow, rigid to fast-moving, adaptive. Rigid processes
can be structured to be resistant to change, such as those that enforce security or
compliance regulations. Adaptive processes are designed to respond to change or
emerging conditions, particularly in marketing and IT.
Process Improvement
Given that a company’s success depends on the efficiency of its business processes,
even small improvements in key processes have significant payoff. Poorly designed,
flawed, or outdated business processes waste resources, increasing costs, causing
delays, and aggravating customers. For example, when customers’ orders are not
filled on time or correctly, customer loyalty suffers, returns increase, and reship-
ping increases costs. The blame may be flawed order fulfilment processes and not
employee incompetence, as described in IT at Work 1.2.
Simply applying IT to a manual or outdated process will not optimize it.
Processes need to be examined to determine whether they are still necessary.
After unnecessary processes are identified and eliminated, the remaining ones are
redesigned (or reengineered) in order to automate or streamline them. Methods
and efforts to eliminate wasted steps within a process are referred to as business
process reengineering (BPR). The goal of BPR is to eliminate the unnecessary,
non-value-added processes, then to simplify and automate the remaining processes
to significantly reduce cycle time, labor, and costs. For example, reengineering the
credit approval process cuts time from several days or hours to minutes or less.
Simplifying processes naturally reduces the time needed to complete the process,
which also cuts down on errors.
After eliminating waste, digital technology can enhance processes by (1) auto-
mating existing manual processes; (2) expanding the data flows to reach more func-
tions in order to make it possible for sequential activities to occur in parallel; and
(3) creating innovative business processes that, in turn, create new business models.
For instance, consumers can scan an image of a product and land on an e-commerce
site, such as Amazon.com, selling that product. This process flips the traditional
selling process by making it customer-centric.
Business Process Management

BPR is part of the larger discipline of business process management (BPM), which
consists of methods, tools, and technology to support and continuously improve
business processes. The purpose of BPM is to help enterprises become more agile
and effective by enabling them to better understand, manage, and adapt their busi-
ness processes. Vendors, consulting and tech firms offer BPM expertise, services,
software suites, and tools.
BPM software is used to map processes performed either by computers or
manually—and to design new ones. The software includes built-in templates show-
ing workflows and rules for various functions, such as rules for credit approval. These
1.3 The Power of Competitive Advantage 19

templates and rules provide consistency and high-quality outcomes. For example, Oracle’s
WebLogic Server Process Edition includes server software and process integration
tools for automating complex business processes, such as handling an insurance claim.
But, BPM initiatives can be extremely challenging, and in order to be suc-
cessful, BPM requires buy-in from a broad cross section of the business, the right
technology selection, and highly effective change management processes. You will
read more about optimizing business processes and BPM’s role in the alignment of
IT and business strategy in Chapter 13.
Questions
1. What is a business process? Give three examples.
2. What is the difference between business deliverables and objectives?
3. List and give examples of the three components of a business process.
4. Explain the differences between formal and informal processes.
5. What is a standard operating procedure (SOP)?
6. What is the purpose of business process management (BPM)?
1.3 The Power of Competitive Advantage

In business, as in sports, companies want to win—customers, market share, and so
on. Basically, that requires gaining an edge over competitors by being first to take
advantage of market opportunities, providing great customer experiences, doing
something well that others cannot easily imitate, or convincing customers why it is
a more valuable alternative than the competition.
BUILDING BLOCKS Having a competitive edge means possessing an advantage over your competition.
OF COMPETITIVE Once an enterprise has developed a competitive edge, maintaining it is an ongoing
ADVANTAGE challenge. It requires forecasting trends and industry changes and what the company
needs to do to stay ahead of the game. It demands that you continuously track your
competitors and their future plans and promptly take corrective action. In summary,
competitiveness depends on IT agility and responsiveness. The benefit of IT agility
Agility means being able
is being able to take advantage of opportunities faster or better than competitors.
to respond quickly.
Closely related to IT agility is flexibility. For example, mobile networks are
Responsiveness means that flexible—able to be set up, moved, or removed easily, without dealing with cables
IT capacity can be easily and other physical requirements of wired networks. Mass migration to mobile
scaled up or down as needed, devices from PCs has expanded the scope of IT beyond traditional organizational
which essentially requires boundaries—making location practically irrelevant.
cloud computing. IT agility, flexibility, and mobility are tightly interrelated and fully dependent
on an organization’s IT infrastructure and architecture, which are covered in greater
Flexibility means having the
detail in Chapter 2.
ability to quickly integrate With mobile devices, apps, platforms, and social media becoming inseparable parts
new business functions or to of work life and corporate collaboration and with more employees working from home,
easily reconfigure software the result is the rapid consumerization of IT. IT consumerization is the migration of
or apps. consumer technology into enterprise IT environments. This shift has occurred because
personally owned IT is as capable and cost-effective as its enterprise equivalents.
COMPETITIVE Two key components of corporate profitability are:

ADVANTAGE 1. Industry structure: An industry’s structure determines the range of profitability
of the average competitor and can be very difficult to change.
2. Competitive advantage: This is an edge that enables a company to outperform
its average competitor. Competitive advantage can be sustained only by con-
tinually pursuing new ways to compete.
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IT plays a key role in competitive advantage, but that advantage is short-lived
if competitors quickly duplicate it. Research firm Gartner defines competitive
advantage as a difference between a company and its competitors that matters to
customers.
It is important to recognize that some types of IT are commodities, which do
not provide a special advantage. Commodities are basic things that companies need
to function, such as electricity and buildings. Computers, databases, and network
services are examples of commodities. In contrast, how a business applies IT to sup-
port business processes transforms those IT commodities into competitive assets.
Critical business processes are those that improve employee performance and profit
margins.
STRATEGIC PLANNING Strategy planning is critical for all organizations, including government agencies,
AND COMPETITIVE health care providers, educational institutions, the military, and other nonprofits.
MODELS We start by discussing strategic analysis and then explain the activities or compo-
nent parts of strategic planning.
What Is Strategic (SWOT) Analysis?

There are many views on strategic analysis. In general, strategic analysis is the scan-
ning and review of the political, social, economic, and technical environments of an
organization. For example, any company looking to expand its business operations
into a developing country has to investigate that country’s political and economic
stability and critical infrastructure. That strategic analysis would include reviewing
the U.S. Central Intelligence Agency’s (CIA) World Factbook. The World Factbook
provides information on the history, people, government, economy, geography,
communications, transportation, military, and transnational issues for 266 world
entities. Then the company would need to investigate competitors and their poten-
tial reactions to a new entrant into their market. Equally important, the company
would need to assess its ability to compete profitably in the market and impacts of
the expansion on other parts of the company. For example, having excess production
capacity would require less capital than if a new factory needed to be built.
The purpose of this analysis of the environment, competition, and capacity is
to learn about the strengths, weaknesses, opportunities, and threats (SWOT) of the
expansion plan being considered. SWOT analysis, as it is called, involves the evalu-
ation of strengths and weaknesses, which are internal factors, and opportunities and
threats, which are external factors. Examples are:
• Strengths: Reliable processes; agility; motivated workforce
• Weaknesses: Lack of expertise; competitors with better IT infrastructure
• Opportunities: A developing market; ability to create a new market or product
• Threats: Price wars or other fierce reaction by competitors; obsolescence
SWOT is only a guide. The value of SWOT analysis depends on how the analy-
sis is performed. Here are several rules to follow:
• Be realistic about the strengths and weaknesses of your organization.
• Be realistic about the size of the opportunities and threats.
• Be specific and keep the analysis simple, or as simple as possible.
• Evaluate your company’s strengths and weaknesses in relation to those of
competitors (better than or worse than competitors).
• Expect conflicting views because SWOT is subjective, forward-looking, and
based on assumptions.
SWOT analysis is often done at the outset of the strategic planning process.
Now you will read answers to the question, “What is strategic planning?”
What Is Strategic Planning?

Strategic planning is a series of processes in which an organization selects and
arranges its businesses or services to keep the organization healthy or able to func-
tion even when unexpected events disrupt one or more of its businesses, markets,
products, or services. Strategic planning involves environmental scanning and pre-
diction, or SWOT analysis, for each business relative to competitors in that business’s
market or product line. The next step in the strategic planning process is strategy.
What Is Strategy?
Strategy defines the plan for how a business will achieve its mission, goals, and
objectives. The plan specifies the necessary financial requirements, budgets, and
resources. Strategy addresses fundamental issues such as the company’s position
in its industry, its available resources and options, and future directions. A strategy
addresses questions such as:
• What is the long-term direction of our business?
• What is the overall plan for deploying our resources?
• What trade-offs are necessary? What resources will need to be shared?
• What is our position compared to that of our competitors?
• How do we achieve competitive advantage over rivals in order to achieve or
maximize profitability?
Two of the most well-known methodologies were developed by Michael Porter.
Porter’s Competitive Forces Model and Strategies

Michael Porter’s competitive forces model, also called the five-forces model, has
been used to identify competitive strategies. The model demonstrates how IT
can enhance competitiveness. Professor Porter discusses this model in detail in a
13-minute YouTube video from Harvard Business School.
Video 1-1 The model recognizes five major forces (think of them as pressures or drivers) that
Five Competitive Forces influence a company’s position within a given industry and the strategy that manage-
that Shape Strategy, by ment chooses to pursue. Other forces, including new regulations, affect all companies
Michael Porter: youtube.com/ in the industry, and have a rather uniform impact on each company in an industry.
watch?v mYF2_FBCvXw According to Porter, an industry’s profit potential is largely determined by the
intensity of competitive forces within the industry, shown in Figure 1.19. A good
understanding of the industry’s competitive forces and their underlying causes is a
crucial component of strategy formulation.
Basis of the competitive forces model Before examining the model, it is
helpful to understand that it is based on the fundamental concept of profitability
and profit margin:
PROFIT TOTAL REVENUES minus TOTAL COSTS
Profit is increased by increasing total revenues and/or decreasing total costs. Profit
is decreased when total revenues decrease and/or total costs increase:
PROFIT MARGIN SELLING PRICE minus COST OF THE ITEM
Profit margin measures the amount of profit per unit of sales, and does not take into
account all costs of doing business.
Five industry forces According to Porter’s competitive forces model, the five
major forces in an industry affect the degree of competition, which impact profit
margins and ultimately profitability. These forces interact, so while you read about
them individually, their interaction determines the industry’s profit potential. For
example, while profit margins for pizzerias may be small, the ease of entering that
Threat of
New Entrants
Rivalry
Supplier Power Buyer Power
(Bargaining Power of Our Competing (Bargaining Power of
Suppliers and Brands) Company Companies Buyers and Distribution
Channels)
Threat of Substitute
Figure 1.19 Porter’s Products or Services
competitive forces model.
industry draws new entrants. Conversely, profit margins for delivery services may
be large, but the cost of the IT needed to support the service is a huge barrier to
entry into the market.
The five industry (or market) forces are:
1. Threat of entry of new competitors. Industries that have large profit margins
attract entrants into the market to a greater degree than industries with small
margins. The same principle applies to jobs—people are attracted to higher-paying
jobs, provided that they can meet the criteria or acquire the skills for that job.
In order to gain market share, entrants usually need to sell at lower prices as an
incentive. Their tactics can force companies already in the industry to defend
their market share by lowering prices—reducing profit margin. Thus, this threat
puts downward pressure on profit margins by driving down prices.
This force also refers to the strength of the barriers to entry into an industry,
which is how easy it is to enter an industry. The threat of entry is lower (less pow-
erful) when existing companies have ITs that are difficult to duplicate or very
expensive. Those ITs create barriers to entry that reduce the threat of entry.
2. Bargaining power of suppliers. Bargaining power is high where the supplier or
brand is powerful, such as Apple, Microsoft, and auto manufacturers. Power is
determined by how much a company purchases from a supplier. The more pow-
erful company has the leverage to demand better prices or terms, which increase
its profit margin. Conversely, suppliers with very little bargaining power tend to
have small profit margins.
3. Bargaining power of customers or buyers. This force is the reverse of the bar-
gaining power of suppliers. Examples are Walmart and government agencies.
This force is high when there are few large customers or buyers in a market.
4. Threat of substituting products or services. Where there is product-for-product
substitution, such as Kindle for Nook, there is downward pressure on prices. As
the threat of substitutes increases, the profit margin decreases because sellers
need to keep prices competitively low.
5. Competitive rivalry among existing firms in the industry. Fierce competition in-
volves expensive advertising and promotions, intense investments in research
and development (R&D), or other efforts that cut into profit margins. This force
is most likely to be high when entry barriers are low, the threat of substitute
products is high, and suppliers and buyers in the market attempt to control it.
That is why this force is placed in the center of the model.
The strength of each force is determined by the industry’s structure. Existing
companies in an industry need to protect themselves against these forces.
Alternatively, they can take advantage of the forces to improve their position or to
challenge industry leaders. The relationships are shown in Figure 1.19.
Companies can identify the forces that influence competitive advantage in their
marketplace and then develop their strategy. Porter (1985) proposed three types of
strategies—cost leadership, differentiation, and niche strategies. In Table 1.2, Porter’s
three classical strategies are listed first, followed by a list of nine other general
strategies for dealing with competitive advantage. Each of these strategies can be
enhanced by IT.
TABLE 1.2 Strategies for Competitive Advantage
Strategy Description
Cost leadership Produce product/service at the lowest cost in the

industry.
Differentiation Offer different products, services, or product

features.
Niche Select a narrow-scope segment (market niche) and

be the best in quality, speed, or cost in that segment.
Growth Increase market share, acquire more customers, or

sell more types of products.
Alliance Work with business partners in partnerships, alli-

ances, joint ventures, or virtual companies.
Innovation Introduce new products/services; put new features

in existing products/services; develop new ways to
produce products/services.
Operational effectiveness Improve the manner in which internal business

processes are executed so that the firm performs
similar activities better than its rivals.
Customer orientation Concentrate on customer satisfaction.
Time Treat time as a resource, then manage it and use it

to the firm’s advantage.
Entry barriers Create barriers to entry. By introducing innovative

products or using IT to provide exceptional service,
companies can create entry barriers to discourage
new entrants.
Customer or supplier Encourage customers or suppliers to stay with

lock-in you rather than going to competitors. Reduce
customers’ bargaining power by locking them in.
Increase switching costs Discourage customers or suppliers from going to

competitors for economic reasons.

Primary activities are those business activities directly involved in the production
of goods. Primary activities involve the purchase of materials, the processing of materi-
als into products, and delivery of products to customers. The five primary activities are:
1. Inbound logistics, or acquiring and receiving of raw materials and other inputs
2. Operations, including manufacturing and testing
3. Outbound logistics, which includes packaging, storage, delivery, and distribution
4. Marketing and sales to customers
5. Services, including customer service
The primary activities usually take place in a sequence from 1 to 5. As work
progresses, value is added to the product in each activity. To be more specific, the
incoming materials (1) are processed (in receiving, storage, etc.) in activities called
inbound logistics. Next, the materials are used in operations (2), where significant
value is added by the process of turning raw materials into products. Products need
to be prepared for delivery (packaging, storing, and shipping) in the outbound logis-
tics activities (3). Then marketing and sales (4) attempt to sell the products to cus-
tomers, increasing product value by creating demand for the company’s products.
The value of a sold item is much larger than that of an unsold one. Finally, after-
sales service (5), such as warranty service or upgrade notification, is performed for
the customer, further adding value.
Primary activities rely on the following support activities:
1. The firm’s infrastructure, accounting, finance, and management
2. Human resources (HR) management (For an IT-related HR trend, see IT at
Work 1.4.)
3. Technology development, and research and development (R&D)
4. Procurement, or purchasing
Each support activity can be applied to any or all of the primary activities.
Support activities may also support each other, as shown in Figure 1.20.
Innovation and adaptability are critical success factors, or CSFs, related to
Porter’s models. CSFs are those things that must go right for a company to achieve
its mission.
Accounting, legal & Legal, accounting, financial management

finance
Support Activities
Human resources Personnel, recruitment, training, staff planning, etc.

management
Product and Product and process design, production

technology engineering, market testing, R&D
development
Procurement Supplier management, funding, subcontracting
INBOUND OPERATION OUTBOUND SALES & SERVICING

LOGISTICS LOGISTICS MARKETING
Quality control, Manufacturing, Order handling, Sales Warranty,
Primary Activities
receiving, packaging, delivery, campaigns, maintenance

raw materials production invoicing order taking,
control control, quality social
control networking,
sales analysis,
market
Figure 1.20 A firm’s value research
chain. The arrows represent
the flow of goods, services,
and data.
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1.4 Enterprise Technology Trends 25
IT at Work 1 .4
Finding Qualified Talent
Managers at a global energy services company could not • InnoCentive is an “open innovation” company that
find or access their best talent to solve clients’ technical takes R&D problems in a broad range of areas such as
problems because of geographic boundaries and business engineering, computer science, and business and frames
unit barriers. The company’s help desks supported engineers them as “challenge problems” for anyone to solve. It
well enough for common problems, but not for difficult gives cash awards for the best solutions to solvers who
issues that needed creative solutions. Using Web technolo- meet the challenge criteria.
gies to expand access to experts worldwide, the company
set up new innovation communities across its business units, Sources: Compiled from McKinsey Global Institute (mckinsey.com/
which have improved the quality of its services. insights/mgi.aspx), Amazon Mechanical Turk (aws.amazon.com/
Dow Chemical set up its own social network to help mturk), and InnoCentive (Innocentive.com).
managers identify the talent they need to carry out projects
across its diverse business units and functions. To expand Questions
its talent pool, Dow extended the network to include former 1. Visit and review the Amazon Mechanical Turk website.
employees and retirees. Explain HITs. How do they provide an on-demand work-
Other companies are using networks to tap external tal- force?
ent pools. These networks include online labor markets such 2. Visit and review the InnoCentive website. Describe what
as Amazon Mechanical Turk and contest services such as the company does and how.
InnoCentive that help solve business problems.
• Amazon Mechanical Turk is a marketplace for work that

requires human intelligence. Its web service enables
companies to access a diverse, on-demand workforce.
Questions
1. What are the characteristics of an agile organization?
2. Explain IT consumerization.
3. What are two key components of corporate profitability?
4. Define competitive advantage.
5. Describe strategic planning.
6. Describe SWOT analysis.
7. Explain Porter’s five-forces model, and give an example of each force.
1.4 Enterprise Technology Trends

At the end of his iPhone presentation at MacWorld 2007, Apple’s visionary leader
Steve Jobs displayed advice once expressed by legendary hockey player Wayne
Gretzky (Figure 1.21): “I skate to where the puck is going to be, not where it has
been.” Steve Jobs added: “And we’ve always tried to do that at Apple. Since the
very very beginning. And we always will.” He was telling us that Apple always
moves toward where it expects the future will be.
Looking at Apple’s history, you see innovative products and services that shaped
the future. For example, launching the iTunes store in April 2003 jumpstarted the
© ZUMA Wire Service/Alamy

Jeff Vinnick/Getty Images
Figure 1.21 Wayne Gretzky’s strategy for success in hockey was to skate to
where the puck was going to be. Steve Jobs followed a similar forward-looking
strategy. In October, 2003, Jobs announced a Windows version of the iTunes
store, saying “Hell froze over,” which brought a big laugh from the audience in
San Francisco.
digital music industry. iTunes was a significant breakthrough that forever changed
the music industry and the first representation of Apple’s future outside its traditional
computing product line. You are familiar with the success of that future-driven busi-
ness model.
Three IT directions for the late 2010s are outlined next. Throughout all the
chapters in this book, you will learn how these and other digital technology are
transforming business and society.
MORE MOBILE The direction is away from the traditional desktop and documents era and toward
BUSINESS APPS, FEWER business apps in the cloud. Why? Google Apps offers apps that provide work-
DOCS ON DESKTOPS ers with information and answers with low effort—instead of having to complete
tedious actions, such as logging in or doing extensive searches. This ongoing move
to mobile raises data security issues. Data stored on mobiles are at higher risk, in
part because the devices can be stolen or lost.
MORE SOCIALLY Engaging customers via mobiles and social media sites—and those customers who
ENGAGED—BUT do not tolerate delays—is the norm. However, customers probably do not know of
SUBJECT TO restrictions on financial institutions and health–care providers that make it illegal
REGULATION to respond to individuals publicly via social media. That is, for regulatory purposes,
financial institutions cannot post or respond to comments or e-mails through social
media sites because of privacy and security.
MORE NEAR-FIELD Near-field communication (NFC) technology is an umbrella description covering

COMMUNICATION several technologies that communicate within a limited distance. Using radio fre-
(NFC) TECHNOLOGY quency identification (RFID) chip-based tags, as shown in Figure 1.22, devices relay
identifying data, such as product ID, price, and location, to a nearby reader that
captures the data. It is projected that the global market for NFC handsets will reach
1.6 billion units by 2018, according to a recent Global Industry Analysts research
report. According to the report, strong demand is “driven by growing penetration
of mobile phones, continued rise in demand and production of smartphones, rising
penetration of NFC in consumer devices, and chip level technology developments”
1.5 How Your IT Expertise Adds Value to Your Performance and Career 27
© Chris Pearsall/Alamy
© RioPatuca/Alamy
Figure 1.22 NFC technology relies on sensors or RFID chips. NFC is used
for tracking wine and liquor to manage the supply chain efficiently. NFC
smartphones are being integrated into payment systems in supermarkets so
customers can pay for purchases without cash or credit cards.
(NFC World, 2014). Innovative ways in which businesses are applying NFC include
the following:
• Amsterdam’s Schiphol Airport has installed an NFC boarding gate allowing pas-
sengers to validate their boarding pass with a touch of their NFC smartphone.
• French leather goods brand Delage has partnered with NFC object identi-
fication specialist Selinko to integrate NFC tags into its range of premium
leather bags. Each bag will have a unique chip and a unique digital serial
number. Consumers with an NFC smartphone equipped with Selinko’s free
mobile app will be able to use the tag to access information about their
product and confirm its authenticity as well as access marketing offers.
• iPhone owners in the United States can make Isis payments following
AT&T’s introduction of a range of phone cases that add NFC functionality
to the devices. To use the Isis Mobile Wallet on an iPhone, the owner selects
the Isis-ready NFC case, slides the iPhone in, downloads the Isis Mobile
Wallet app from the App Store, and taps the iPhone at hundreds of thou-
sands of merchants nationwide for a quick way to pay.
These trends are forces that are changing competition, business models, how
workers and operations are managed, and the skills valuable to a career in business.
Questions
1. What was the significance of Apple’s introduction of the iPhones music
store?
2. What are three IT trends?
3. What are three business applications of NFC?
1.5 How Your IT Expertise Adds Value to Your Performance

and Career
Every tech innovation triggers opportunities and threats to business models and
strategies. With rare exceptions, every business initiative depends on the mix of IT,
knowledge of its potential, the requirements for success, and, equally important, its
limitations. Staying current in emerging technologies affecting markets is essential to
the careers of knowledge workers, entrepreneurs, managers, and business leaders—
not just IT and chief information officers (CIOs).
• What do we do?
Strategic direction; • What is our direction?
industry, markets, • What markets & customers should
and customers we be targeting and how do we
prepare for them?
• How do we do it?
Business model • How do we generate revenues &
profits to sustain ourselves and
build our brand?
Business
• How well do we do it?
processes,
producers, • How can we be more
and technology efficient?
Figure 1.23 Key strategic
and tactical questions.
WHAT COMPANIES What companies can do depends on what their information technology and data
CAN DO DEPENDS management systems can do. For over a decade, powerful new digital approaches
ON THEIR IT to doing business—and getting through your day—have emerged. And there is
sufficient proof to expect even more rapid and dramatic changes due to IT break-
throughs and advances. Understanding trends that affect the ways business is done
and getting in front of those trends give you a career edge.
Key strategic and tactical questions that determine an organization’s profitabil-
ity and management performance are shown in Figure 1.23. Answers to each ques-
tion will entail understanding the capabilities of mundane to complex ITs, which
ones to implement, and how to manage them.
IT CAREERS OUTLOOK Having a feel for the job market helps you improve your career options. According
to the U.S. Department of Labor, and the University of California Los Angeles
(UCLA), the best national jobs in terms of growth, advancement, and salary
increases in 2013 are in the fields of IT, engineering, health care, finance, construc-
tion, and management. It is projected that these job categories will see above-
average national growth over the next several years. The U.S. Department of Labor
projections are generally 6–10 years in reference.
With big data, data science, and M2M, companies are increasing their IT staff.
In addition, many new businesses are seeking more programmers and designers.
Data security threats continue to get worse. The field of IT covers a wide range that
includes processing of streaming data, data management, big data analytics, app
development, system analysis, information security, and more.
Job growth is estimated at 53 percent by 2018, according to the U.S. Department
of Labor; and salaries in many IT jobs will increase by 4 to 6 percent. The lack of
skilled IT workers in the U.S. is a primary reason for the outsourcing of IT jobs.
Digital Technology Defines and Creates

Businesses and Markets
Digital technology creates markets, businesses, products, and careers. As you con-
tinue to read this book, you will see that exciting IT developments are changing how
organizations and individuals do things. New technologies and IT-supported func-
tions, such as 4G or 5G networks, embedded sensors, on-demand workforces, and
e-readers, point to ground-breaking changes. CNN.com, one of the most respected
Key Terms 29
news media, has created a new market whose impacts are yet to be realized. Visit
iReport.com where a pop-up reads, “iReport is the way people like you report the
news. The stories in this section are not edited, fact-checked or screened before
they post.”
IT as a Career: The Nature of IS and IT Work

IT managers play a vital role in the implementation and administration of digital
technology. They plan, coordinate, and direct research on the computer-related
activities of firms. In consultation with other managers, they help determine the
goals of an organization and then implement technology to meet those goals.
Chief technology officers (CTOs) evaluate the newest and most innovative
technologies and determine how they can be applied for competitive advantage.
CTOs develop technical standards, deploy technology, and supervise workers
who deal with the daily IT issues of the firm. When innovative and useful new
ITs are launched, the CTO determines implementation strategies, performs
cost-benefit or SWOT analysis, and reports those strategies to top management,
including the CIO.
IT project managers develop requirements, budgets, and schedules for their
firm’s information technology projects. They coordinate such projects from devel-
opment through implementation, working with their organization’s IT workers, as
well as clients, vendors, and consultants. These managers are increasingly involved
in projects that upgrade the information security of an organization.
IT Job Prospects
Workers with specialized technical knowledge and strong communications and
business skills, as well as those with an MBA with a concentration in an IT area, will
have the best prospects. Job openings will be the result of employment growth and
the need to replace workers who transfer to other occupations or leave the labor
force (Bureau of Labor Statistics, 2012–2013).
Questions
1. Why is IT a major enabler of business performance and success?
2. Explain why it is beneficial to study IT today.
3. Why are IT job prospects strong?
Key Terms
agility competitive advantage inbound logistics productivity
barriers to entry competitive forces model industry structure radio frequency
big data (five-forces model) informal process identification (RFID)
business model critical success factor (CSF) Internet of Things (IoT) real time system
business process cross-functional business IT consumerization responsiveness
business process process IT project manager services
management (BPM) customer experience (CX) key performance social, mobile, and cloud
business process cycle time indicators (KPIs) (SoMoClo)
reengineering (BPR) dashboards machine-to-machine standard operating
business-to-business data analytics (M2M) technology procedures (SOPs)
(B2B) data science near-field communication supply chain
chief technology officer dashboard (NFC) technology support activities
(CTO) deliverables objectives SWOT analysis
cloud computing digital business model operations unstructured data
commodity formal process process wearable technology
www.Ebook777.com
Assuring Your Learning

DISCUSS: Critical Thinking Questions
1. Why are businesses experiencing a digital transfor- engage you, keep you informed, or create a unique
mation? customer experience? How effective is each use of
2. More data are collected in a day now than existed in digital technology to keeping you a loyal customer?
the world 10 years ago. What factors have contrib- 9. Describe two examples of the influence of SoMoClo
uted to this volume of data? on the financial industry.
3. Assume you had no smartphone, other mobile de- 10. What is a potential impact of the Internet of things
vice, or mobile apps to use for 24 hours. How would on the health-care industry?
that mobile blackout disrupt your ability to function? 11. How could wearable technology be used to create
4. What were three highly disruptive digital technolo- a competitive edge in the athletic and sportswear
gies? Give an example of one disruption for each industry?
technology. 12. Why does reducing the cycle time of a business
5. Why are enterprises adopting cloud computing? process also help to reduce errors?
6. What is the value of M2M technology? Give two 13. Research firm Gartner defines competitive advantage
examples. as a difference between a company and its competi-
7. Starbucks monitors tweets and other sources of big tors that matters to customers. Describe one use of
data. How might the company increase revenue M2M technology that could provide a manufacturer
from big data analytics? with a competitive advantage.
8. Select three companies in different industries, such 14. What IT careers are forecasted to be in high de-
as banking, retail store, supermarket, airlines, or mand? Explain why.
package delivery, that you do business with. What 15. Why or how would understanding the latest IT
digital technologies does each company use to trends influence your career?
EXPLORE: Online and Interactive Exercises

16. Research the growing importance of big data ana- uses BEA measures. Identify two users of indus-
lytics. Find two forecasts of big data growth. What try data and two users of international trade and
do they forecast? investment data.
17. Go to the U.S. Department of Commerce website b. Click on the Glossary. Use the Glossary to
and search for U.S. Economy at a Glance: Perspec- explain GDP in your own words.
tive from the BEA Accounts. c. Under the NEWS menu, select U.S. Economy at
a. Review the BEA homepage to learn the types of a Glance. Review the GDP current numbers for
information, news, reports, and interactive data the last two reported quarters. How did GDP
available. Search for the page that identifies who change in each of these two quarters?
ANALYZE & DECIDE: Apply IT Concepts to Business Decisions

18. A transportation company is considering investing 20. Visit YouTube.com and search for two videos on
in a truck tire with embedded sensors—the Internet Michael Porter’s strategic or competitive forces
of Things. Outline the benefits of this investment. models. For each video, report what you learned.
Would this investment create a long-term competi- Specify the complete URL, video title, who uploaded
tive advantage for the transportation company? the video and the date, video length, and number of
19. Visit the website of UPS (ups.com), Federal Express views.
(fedex.com), and one other logistics and delivery 21. Visit Dell.com and Apple.com to simulate buying a
company. laptop computer. Compare and contrast the selection
a. At each site, what information is available to process, degree of customization, and other buying
customers before and after they send a package? features. What are the barriers to entry into this mar-
ket, based on what you learned from this exercise?
b. Compare the three customer experiences.
CASE 1.2 Business Case 31
CASE 1.2
Business Case: Restaurant Creates Opportunities to Engage Customers
Back when phones were used only to make calls, few infrastructure and architecture are needed to meet the de-
retailers and restaurants could have predicted that mo- mands of high-volume senders.
bile technology was going to transform their industries. Another feature of ExactTarget is the ability to respond in
Smartphones and other portable devices are access points a real time environment. Companies need to be able to react
to customers. Companies can push real time, personally to the real time actions that their customers are taking across
targeted ads to customers’ phones using text messages, or all channels. That is why it is necessary to be able to quickly
interact with them using location-aware mobile apps. And and easily configure messages that are triggered by external
potential customers can access product or brand informa- events like purchases or website interactions. Finally, software
tion using 2D codes, and comparison-shop right in the helps companies immediately respond to customers with
store. burst sending capabilities—sending millions of e-mails in a
Brands are always looking for more effective ways few minutes.
to integrate social media with traditional media, such as
print and TV, when implementing marketing campaigns.
Why the Campaign Was a Success
Managing these campaigns and interactions requires
Within two weeks, about 20,000 people had responded to
specialized software, and possibly support from the
the offer by registering. The BOGO coupon redemption rate
vendor or consulting firm if the company lacks in-house
at Pei Wei’s 173 locations was 20 percent. It was the restau-
expertise.
rant chain’s most successful new e-mail list growth effort to
date.
Pei Wei Asian Diner’s Mobile Effective marketing requires companies or brands to cre-
and Cloud Campaign ate opportunities with which to engage customers. Pei Wei
Pei Wei Asian Diner (www.peiwei.com), a fast-food casual was successful because it used multiple interactive channels
restaurant chain owned by P.F. Chang’s China Bistro, is an to engage—connect with—current and potential custom-
example of a company that invested in technology to ers. Brands have a tremendous opportunity to connect with
manage multichannel (also called cross-channel) marketing consumers on their mobiles in stores and on Twitter and
campaigns. In mid-2011 Pei Wei introduced a new entrée, Facebook.
Caramel Chicken. The company integrated traditional A 2010 ExactTarget study of more than 1,500 U.S.
in-store promotions with mobile and Web-based consumers entitled The Collaborative Future found that:
marketing efforts to motivate people to subscribe to
• 27 percent of consumers said they are more likely to
its e-mail marketing campaign. It also reached out to
purchase from a brand after subscribing to e-mail.
fans via Facebook and Twitter. The success of the new
campaign depended on investing in appropriate software • 17 percent of consumers are more likely to purchase after
and expertise. With thousands of tweets, Facebook posts, liking a brand on Facebook.
and Google searches per second, companies need IT
A study by Forrester Consulting found that 48 percent
support to understand what people are saying about their
of interactive marketing executives ranked understanding
brands.
customers’ cross-channel interactions as one of the top
challenges facing marketing today.
Campaign Management
Software Vendor Questions
Software vendor ExactTarget was selected to run and 1. What software capabilities did Pei Wei need to launch its
manage Pei Wei’s marketing campaigns. Famous brands— marketing campaign?
like Expedia, Best Buy, Nike, and Papa John’s—also used 2. What factors contributed to the success of Pei Wei’s
ExactTarget to power their mission-critical messages. campaign?
With ExactTarget’s software, Pei Wei invited guests to join 3. Why is a high-capacity (massive) infrastructure needed to
(register) its e-mail list via text, the Web, Twitter, or Face- launch e-mail or text campaigns?
book in order to receive a buy-one, get-one free (BOGO) 4. Visit ExactTarget.com. Identify and describe how the
coupon. vendor makes it easy for companies to connect via e-mail
Using ExactTarget’s software and infrastructure, clients and Twitter.
such as Pei Wei can send more than thousands of e-mails per 5. What solutions for small businesses does ExactTarget
second and millions of messages in 15 minutes. A massive offer?
CASE 1.3
Video Case: What Is the Value of Knowing More and Doing More?
Teradata (Teradata.com) is a leading provider of big data If You Knew?”™ at http://www.teradata.com/Resources/

and data analytics solutions. In a video, Teradata explains Videos/What-would-you-do-if-you-knew/
that when you know the right thing to do, you can do Questions
more of what truly matters for your business and your
1. What did you learn from the video?
customers. View the video entitled “What Would You Do
2. What is the value of knowing and doing more?
References
Accenture Technology Vision 2013. McCain Foods. “McCain Foods: Integrating Data from the
Alesci, C. & S. Saitto. “AutoTrader.Com Said to Be in Talks Plant to the Boardroom to Increase the Bottom Line.”
About Possible IPO of Buyer-Seller Site.” Bloomberg, Teradata.com, 2013.
February 4, 2012. NFC World. “News in Brief.” February 2014.
Bureau of Labor Statistics. Occupational Outlook Handbook. Pogue, D. “Embracing the Mothers of Invention.” The New
U.S. Department of Labor, 2012–2013. York Times, January 25, 2012.
Central Intelligence Agency (CIA). World Factbook. Porter, M. E. The Competitive Advantage: Creating and Sustaining
Cooper, B. B. “10 Surprising Social Media Statistics That Will Superior Performance. NY: Free Press. 1985.
Make You Rethink Your Social Strategy.” Fast Company, Porter, M. E. “Strategy and the Internet.” Harvard Business
November 18, 2013. Review, March 2001.
Davenport, T.H. & D.J. Patil. “Data Scientist: The Sexiest Job Schmidt-Subramanian, M., H. Manning, J. Knott, & M. Murphy.
of the 21st Century.” Harvard Business Review Magazine. “The Business Impact of Customer Experience, 2013.” For-
October 2012. rester Research, June 10, 2013.
“Gartner Reveals Top Predictions for IT Organizations and Smith, Gavin. “Frozen Food Production in the US Industry
Users for 2013 and Beyond.” Gartner Newsroom. October 24, Market Research Report from IBISWorld Has Been Updated.”
2012. PRWeb, March 27, 2013.
glassdoor.com. “Data Analyst Salaries.” May 8, 2014. softwareag.com. “Orders Are in the Fast Lane at AutoTrader.
Gnau, S. “Putting Big Data in Context.” Wired, September 10, com—Thanks to BPM.” 2011.
2013. Transparency Market Research. “Frozen Food Market—Global
Joy, O. “What Does It Mean to Be a Digital Native?” CNN, Industry Analysis, Size, Share, Growth, Trends and Forecast,
December 8, 2012. 2013–2019.” September 2013.
Kelly, M. “Data Scientists Needed: Why This Career Is U.S. Department of Labor, Bureau of Labor Statistics. 2014.
Exploding Right Now.” VentureBeat.com, November 11, 2013. Walsh, M. “Autotrader.com Tops In Local Online Ad Dollars.”
Lockard, C.B. & M. Wolf. “Occupational Employment Projec- MediaPost.com, April 3, 2012.
tions to 2020.” Monthly Labor Review, January 2012.

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Digital Technology Trends Transforming

Part 1 How Business Is Done

Chapter Snapshot Key Terms

CASE 1.1 OPENING CASE

McCain Foods, Ltd.

Brand Global Reach

Corporate Culture Digital Technology

TABLE 1.1 Opening Case Overview

Company McCain Foods, Ltd. www.mccain.com

Industry The global company manufactures, sells, and distributes frozen

Product lines More than 100 oven-ready frozen food products

Digital technology Dashboards are implemented throughout the organization

Taglines “Good food. Better life.” and “It’s all good.”

100 oven-ready frozen foods—pizzas, appetizers, meals, and vegetables. McCain is

Figure 1.3 Frozen food is

4 Chapter 1 Doing Business in Digital Times

unique inventory management challenges and regulatory requirements. Their

Dashboards Create Productive Competition Among Factory Workers

Figure 1.5 Data visualizations

1.1 Every Business Is a Digital Business

TECH NOTE 1.1 The Internet of Things

CAREER INSIGHT 1 . 1 HOT CAREER

Figure 1.7 Model of the

Here are three examples of their influence:

Matthew Shaw/Getty Images

Twitter dominates the Facebook became the most

Figure 1.9 Digital business Location-aware technologies Smartphones, tablets, other

• Amazon gains a competitive edge with high-tech tech support. Amazon

Figure 1.11 Sports analytics

2008 2010 2011–2012 2014

model differ from that of traditional car rental companies,

1.2 Business Process Management and Improvement

the signing and delivery of a contract. Customers were

Redesigning the Order Fulfillment

New 2.8 days .5 day 4 days 1 day 8.3 days

Figure 1.16 AutoTrader’s

Submit sales Day 1:

Figure 1.17 AutoTrader’s

Inputs Activities Deliverables

Characteristics of Business Processes

Business Process Management

1.3 The Power of Competitive Advantage 19

1.3 The Power of Competitive Advantage

COMPETITIVE Two key components of corporate profitability are:

What Is Strategic (SWOT) Analysis?

What Is Strategic Planning?

Porter’s Competitive Forces Model and Strategies

TABLE 1.2 Strategies for Competitive Advantage

Cost leadership Produce product/service at the lowest cost in the

Differentiation Offer different products, services, or product

Niche Select a narrow-scope segment (market niche) and

Growth Increase market share, acquire more customers, or

Alliance Work with business partners in partnerships, alli-

Innovation Introduce new products/services; put new features

Operational effectiveness Improve the manner in which internal business

Customer orientation Concentrate on customer satisfaction.

Time Treat time as a resource, then manage it and use it

Entry barriers Create barriers to entry. By introducing innovative

Customer or supplier Encourage customers or suppliers to stay with

Increase switching costs Discourage customers or suppliers from going to