Part I. Managing The Value of Data and Information Technology

9th Edition Part I.
Managing the Value of Data and

Information Information Technology
Technology
for Management Chapter 1

Advancing Sustainable,
Profitable Business Growth A Look Toward the Future of Information Technology
Copyright 2013 John Wiley & Sons, Inc.

1-1
Chapter 1 Outline
 1.1 IT and Management Opportunities and
Challenges
 1.2 Top Management Concerns and the Most
Influential ITs
 1.3 IT Agility, Consumerization, and Competitive
Advantage
 1.4 Strategic Planning and Competitive Models
 1.5 Why IT Is Important to Your Career, and IT
Careers
1-2
Chapter 1 Learning Objecti ves
 Describe IT and management issues, opportunities, and
challenges.
 Identify management’s top concerns and the most influential
ITs.
 Assess the role of IT agility, IT consumerization, and changes in
competitive advantage in the second part of the Information
Age.
 Explain the strategic planning process, SWOT analysis, and
competitive models.
 Realize how IT impacts your career and the positive outlook
for IS management careers.

1-3
For Class Discussion & Debate
Crowdfunding—a Creative Integrated IT Solution
Crowdfunding—which is an integration of social networking, e-commerce, and
financing and payment systems—clearly is responsive to the needs of the
market. In tough economic times, Kickstarter and other crowdfunding
platforms offer the ability to support economic growth by funding project
creators worldwide.
Sources: Compiled from Kickstarter.com (2012), Pogue (2012), lumi.co (2012), and lunatik.com/
(2012).
Discuss
1. Visit Kickstarter.com and review the “Project of the Day.” What is the
project? Review the offerings and number of backers in each level. Which two
pledge levels ($1 through$1,000) have the highest number of backers? Which
pledge levels are sold out, if any?
Do the answers to these questions suggest that backers are actually customers
making purchases (pre-sales) rather than donors making selfless contributions?
1-4
Crowdfunding—a Creative Integrated IT
Solution
2. Explain crowdfunding and its advantages to new entrepreneurs.
3. Compare Kickstarter and eBay.
4. What characteristics make Kickstarter a social commerce site?
Decide
5. Research how Kickstarter and two other crowdfunding sites manage or provide for
the collection and transfer of pledges. Based on what you learn, is there a site that
you would recommend? Explain why or why not.
Debate
6. Crowdfunding could be viewed as a technology that disrupts the financing
industry. Or it could be viewed as so unique that it has created a new industry.
Create two teams, and have each team select one of these views. Debate which view
better reflects the impact of crowdfunding.

1-5
1.1 IT and Management Opportunities and Challenges. LIKE,
FOLLOW, FAN, SNAP, SHARE, JOIN,
SIGN UP, WATCH
Why do businesses ask you to like, follow, fan,

snap, share, sign up, watch, join, or download?
The short answer is to get access to consumers

and data about them to improve performance.

1-6
1.1 IT and Management Opportunities and Challenges. LIKE,
FOLLOW, FAN, SNAP, SHARE, JOIN,
SIGN UP, WATCH
Examples:
1. Overstock.com. Jonathan Johnson, a retail executive at Overstock.com,

explained: “We’re not trying to use social media as a sales piece as much as an
information gathering piece. Finding out what our customers want; whether
they like a product; how could we sell it better” (Jopson et al., 2011).
2. Best Buy. Electronics retailer Best Buy learned how unpopular its restocking
fees were through social media. The company changed its product-return
policies, eliminating those fees that were hurting sales.
3. Starbucks. Coffee retailer Starbucks prepared to monitor customers’ tweets
about a new coffee flavor on the day it was introduced. Managers were
surprised to learn that a huge majority of tweets were not about the coffee’s
intense taste, but were complaints about the higher price. By the next day, they
had dropped the price.

1-7
NEXT BIG TECH TRENDS FOCUSED ON
COMPETITION, GROWTH, AND INNOVATION
Common Learning Efforts to Improve Performance
 Which marketing campaigns are the most and least
effective and why
 What products to develop
 What customers value and dislike
 How to appeal to key customer groups
 How to select and implement enterprise apps that will
make a competitive difference
 What perks strengthen customer loyalty most cost-
effectively
1-8
DATA ANALYTICS— FIGURING OUT WHAT THE DATA
MEANS
Data analytics refers to the specialized software, capabilities, and
components all geared toward exploring huge volumes of data to
provide greater insight and intelligence—and doing so quickly.
Data analytic processes include:

1. Locating and collecting reliable data from multiple sources that are
in various formats.
2. Preparing the data for analysis. Collected data is not usable until it
has been organized, standardized, duplicates are removed (called
deduping), and other data cleansing processes are done.
3. Performing the correct analyses, verifying the analyses, and then
reporting the findings in meaningful ways.

1-9
IT at Work 1.1
Watson Wins Jeopardy, Leaving Human Champions in its Silicon Dust
Data analytics have interesting applications. Here is one famous

example of data analytics in action.
Watson is a computer system created by a team of 25 IBM scientists
over four years. In 2011, Watson competed against Ken Jennings on
the game show Jeopardy (see Figure 1.5) in a three-day tournament
and won. Watson received the clues as electronic texts at the same
time they were made visible to Ken. Watson would then parse the
clues into different keywords and sentence fragments in order to find
statistically related phrases. Watson won by using its ability to quickly
execute thousands of language analysis algorithms simultaneously to
compile potential answers and determine its level of confidence in any
given answer.

1-10
IT at Work 1.1
Watson Wins Jeopardy, Leaving Human Champions in its Silicon Dust
Questions
1. Explain how Watson figured out the most likely response to win
the tournament.
2. View the IBM demo, “Turning insight into outcomes,” at
ibm.com/smarterplanet/us/en/business_analytics/article/
outperform_with_smarter_analytics.html.
3. Discuss how companies in various industries are using the
insights from analytics to achieve significant outcomes in customer
satisfaction and retention, operational efficiency, financial
processes, and/or risk, fraud, and compliance management
1-11
DATA ANALYTICS—FIGURING OUT WHAT
THE DATA MEANS
Data analytics can help companies achieve these
business outcomes:
• Grow their customer base
• Retain the most profitable customers
• Continuously improve operational efficiency
• Transform and automate financial processes
• Detect and deter fraud

1-12
DATA ANALYTICS
 Messy data is the term used to refer to data (e.g.,

tweets, posts, clickstreams, images, including
medical images) that cannot be organized in a way
that a computer can easily process.
 Data sources include smartphones, social
networks, microblogs, clickstreams from online
activities, location-aware mobile devices, scanners,
and sensors that automatically collect everything
from inventory movement to heart rates.

1-13
BIG DATA ANALYTICS—THE NEXT
FRONTIER OF OPPORTUNITIES
 Big Data: Huge sets of messy data from
sources such as multi-petabyte data
warehouses, social media, and mobile devices
 Data analytics is one of the biggest
opportunities and challenges facing managers
attempting to gain insights and a competitive
edge.

1-14
1.1 IT and Management Opportunities and
Challenges: Discussion Questions
1. Why do businesses ask you to like, follow, fan,
or interact with them via social networks or web
sites?
2. Why is data analytics challenging for
companies?
3. Explain messy data.
4. What are the sources of messy data?
5. Explain big data analytics.
1-15
BUSINESS PERFORMANCE DEPENDS ON QUALITY
INFORMATION AND IT CAPABILITIES
 Business performance is directly related to the quality of
information.
 An important principle is that what a company can
accomplish or achieve depends on what its ITs can do.
 Business and technology teams need to work together and
understand the benefits of smart, cost-effective, and
collaborative data management, and the implementation of
this knowledge is key.
 Avoid the “paralysis of analysis.”
 Managers should not lose agility and flexibility in the hope of
gathering perfect data when making time-sensitive decisions.
1-16
Figure 1.6 Top 5 Management Concerns and
Five Most Influential ITs

1-17
Business Productivity and Cost Reduction
 Increasing output, while maintaining the

same level of inputs
 Maintaining output, while reducing the
level of inputs
 A combination of the above

1-18
IT and Business Alignment
 Aligning IT with business means leveraging

opportunities for IT to support business
strategy and improve success. IT-business
alignment depends on the IT department
understanding strategy, risks, and
opportunities—and the business
understanding IT’s potential and limitations.

1-19
Business Agility and Speed to Market
 As markets recover from a worldwide recession,

managers are exploring new strategies to
improve business performance or profitability.
 Becoming an agile enterprise, which is one that
has the ability to adapt and respond rapidly, has
never been a greater advantage because of
struggling economic recoveries and advances in
mobile and social technologies.

1-20
Business Process Reengineering (BPR)
 A business process is a series of tasks performed by

people or systems that are designed to produce a
specific output or achieve a predetermined outcome.
 Examples: customer ordering process, credit
approval and shipping a product.
 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.

1-21
IT Reliability and Efficiency
 Managers need to know that they can trust

the data—rely on the accuracy, availability,
security, and accessibility of data and
information systems.
 Federal and state regulations have made data
privacy and protection a legal requirement
and impose huge fines for violations

1-22
5 MOST INFLUENTIAL ITs
 Business Intelligence (BI)

 Cloud Computing
 Enterprise Resource Planning (ERP)
 Software as a Service (SaaS)
 Collaboration and Workflow Tools

1-23
Business Intelligence (BI)
 BI technologies can help to run the business

more efficiently, identify trends and
relationships in organizational data, and create
or take advantage of business opportunities
 Implementing BI successfully is extremely
challenging technically because it requires the
integration, computation, and analysis of
massive data repositories

1-24
Cloud Computing
 The cloud is a term for networked computers,
including the public Internet.
 Often “cloud” means “Internet.”
 Cloud computing (or cloud infrastructure or cloud
services) does not refer to a specific arrangement,
but rather to various computing and network
arrangements.
 Cloud computing makes it possible for almost
anyone to deploy tools that can scale on demand to
serve as many users as needed.
1-25
Enterprise Resource Planning (ERP)
 ERP also refers to technology infrastructure

and/or apps that support essential business
processes and operations.
 ERP systems are commercial software
packages that are bought as modules.
 Examples of modules are: accounting,
inventory, budgeting, and sales.

1-26
Software as a Service (SaaS)
 SaaS is a pay-per-use arrangement.

 Software is available to users when they need
it.
 SaaS is an arrangement where instead of
buying and installing enterprise apps, users
access those apps from a SaaS vendor over a
network via a browser.

1-27
Collaboration and Workflow Tools
 These tools help people work together in

an organized way and manage their tasks
more effectively regardless of their location.
 Examples include Google Docs, Group Chat,
and Skype.

1-28
1.2 Top Management Concerns and
Influential IT Questions
1. What are the top five concerns of
management? Briefly explain each.
2. What are the five most influential ITs? Briefly
explain each.
3. Describe a business process.
4. Explain the Internet of things.

1-29
1.3 IT Agility, Consumerization, and
Competitive Advantage Agility
 Agility means being able to respond quickly. A
scalable cloud IT infrastructure can be more
responsive to urgent agency needs.
 Responsive means that IT capacity can be
easily scaled up or down as needed.
 Flexible means having the ability to quickly
integrate new business functions or to easily
reconfigure software or apps.

1-30
IT CONSUMERIZATION
 IT consumerization is the migration of consumer

technology into enterprise computing environments.
 With mobile devices, apps, platforms, and social media
becoming inseparable parts of work life and corporate
collaboration and with more employees working from
home, the result is the rapid consumerization of IT.
 This shift has occurred because personally-owned IT is
as capable and cost-effective as its enterprise
equivalents.

1-31
COMPETITIVE ADVANTAGE
Key Components of Corporate Profitability:

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: The edge that enables
a company to outperform its average competitor.
Competitive advantage can be sustained only by
continually pursuing new ways to compete.

1-32
COMPETITIVE ADVANTAGE
 Competitive advantage is defined as a

difference between a company and its
competitors that matters to customers.

1-33
1.3 IT Agility, Consumerization, and
Competitive Advantage Agility: Questions for
Discussion
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. What is a business model?

1-34
1.4 Strategic Planning and Competitive
Models
 Strategy planning is critical for all

organizations, including government agencies,
health care, education, military, and other
nonprofit and not-for-profits.
 Strategic technologies are those with the
potential for significant impact on the
enterprise during the next three years.

1-35
WHAT IS STRATEGIC (SWOT) ANALYSIS?
 Strategic analysis is the scanning and review

of the political, social, economic, and technical
environment of the organization.
 SWOT analysis involves the evaluation of
strengths and weaknesses, which are internal
factors, and opportunities and threats, which
are external factors.

1-36
STRATEGIC SWOT ANALYSIS
• 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
1-37
STRATEGIC SWOT ANALYSIS
 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

1-38
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 viable even when unexpected
events disrupt one or more of its businesses,
markets, products, or services.
 Strategic planning involves environmental
scanning and prediction.

1-39
WHAT IS STRATEGY?
Strategy defines the plan for how a business will
achieve its mission, goals, and objectives.
 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 it
need to share?
 What is our position compared to our competitors?
 How do we achieve competitive advantage over
rivals in order to achieve or maximize profitability?
1-40
PORTER’S COMPETITIVE FORCES MODEL
AND STRATEGIES
1. Threat of entry of new competitors.

2. Bargaining power of suppliers.
3. Bargaining power of customers or buyers.
4. Threat of substitute products or services.
5. Competitive rivalry among existing firms in
the industry.

1-41
Fig 1.10 Porter’s competitive forces model

1-42
Porter’s Model
Primary activities are those business activities through which a
company produces goods, thus creating value for which
customers are willing to pay. Primary activities involve the
purchase of materials, the processing of materials into
products, and delivery of products to customers
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
1-43
Fig 1.11 A
firm’s value
chain

1-44
Adaptive and Innovative Organizations
Competition not only takes place among products or services, but

also among business models, customer service, and supply chains.
The concept of value chain has been supplemented by the
concepts of value system and value network.
 A firm’s value chain is part of a larger stream of activities, which

Porter calls a value system. A value system includes the
suppliers that provide the inputs necessary to the firm and their
value chains.
 A value network is a complex set of social and technical
resources. Value networks work together via relationships to
create social goods (public goods) or economic value.
1-45
Real-Time, On-Demand IT Support
A real-time system is an IS that provides fast enough access to
information or data so that a decision can be made before the
data or situation changes.
Examples:
 Salespeople can check to see whether a product is in
inventory by looking directly into the inventory system.
 Suppliers can ensure adequate supplies by checking the
forecasting and inventory systems.
 An online order payment by credit card is checked for the
balance and the amount of the purchase is debited all in one
second. This way authorization is given fast enough for both a
seller and a buyer.
1-46
1.4 Strategic Planning and Competitive
Models: Questions for Discussion
1. Describe strategic planning.

2. Describe SWOT analysis.
3. Explain Porters’ five forces model, and give an
example of each force.
4. Describe adaptive organization.
5. Describe real-time business.

1-47
1.5 Why IT is Important to Your Career, and
IT Careers
 IT creates markets, businesses, products, and

careers.
 New technologies and IT-supported functions,
such as the 4G networks, embedded sensors,
on-demand work forces, and e-readers point
to ground-breaking changes.

1-48
Fig 1.12 Top 13 growth occupations, 2010-2020

1-49
IT as a Career: The Nature of IS and IT Work
 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.

1-50
1.5 Why IT is Important to Your Career, and
IT Careers: Questions for Discussion
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 so strong?

1-51

Part I. Managing The Value of Data and Information Technology

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9th Edition Part I.

Managing the Value of Data and

for Management Chapter 1

Profitable Business Growth A Look Toward the Future of Information Technology

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Why do businesses ask you to like, follow, fan,

The short answer is to get access to consumers

Copyright 2013 John Wiley & Sons, Inc.

1. Overstock.com. Jonathan Johnson, a retail executive at Overstock.com,

Copyright 2013 John Wiley & Sons, Inc.

Data analytic processes include:

Copyright 2013 John Wiley & Sons, Inc.

Data analytics have interesting applications. Here is one famous

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 Messy data is the term used to refer to data (e.g.,

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 Increasing output, while maintaining the

Copyright 2013 John Wiley & Sons, Inc.

 Aligning IT with business means leveraging

Copyright 2013 John Wiley & Sons, Inc.

 As markets recover from a worldwide recession,

Copyright 2013 John Wiley & Sons, Inc.

 A business process is a series of tasks performed by

Copyright 2013 John Wiley & Sons, Inc.

 Managers need to know that they can trust

Copyright 2013 John Wiley & Sons, Inc.

 Business Intelligence (BI)

Copyright 2013 John Wiley & Sons, Inc.

 BI technologies can help to run the business

Copyright 2013 John Wiley & Sons, Inc.

 ERP also refers to technology infrastructure

Copyright 2013 John Wiley & Sons, Inc.

 SaaS is a pay-per-use arrangement.

Copyright 2013 John Wiley & Sons, Inc.

 These tools help people work together in

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 IT consumerization is the migration of consumer

Copyright 2013 John Wiley & Sons, Inc.

Key Components of Corporate Profitability:

Copyright 2013 John Wiley & Sons, Inc.

 Competitive advantage is defined as a

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 Strategy planning is critical for all

Copyright 2013 John Wiley & Sons, Inc.

 Strategic analysis is the scanning and review

Copyright 2013 John Wiley & Sons, Inc.

• Strengths: Reliable processes; agility;

Copyright 2013 John Wiley & Sons, Inc.

 Strategic planning is a series of processes in

Copyright 2013 John Wiley & Sons, Inc.

 What is the long-term direction of our business?