Chapter 3 Effects of IT on Strategy and Competition

Chapter 1
MIS and You
- Case & Exercise
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business
Gonzaga University
Spokane, WA 99258 USA
[email protected]
Dr. Chen, Management Information Systems
Part I
Dr. Chen, Management Information Systems
2. Consider costs of a system in light of the five
components: costs to buy and maintain the
hardware; costs to develop or acquire licenses to
the software programs and costs to maintain them;
costs to design databases and fill them with data;
costs of developing procedures and keeping them
current; and finally, human costs both to develop
and use the system.
Dr. Chen, Management Information Systems
• a. Over the lifetime of a system, many experts believe that the
single most expensive component is people. Does this belief
seem logical to you? Explain why you agree or disagree.
• (Answer) It is likely that this belief is true. An information
system is only as good as the people who have developed it
and who make use of it to perform their business functions
more effectively and efficiently.
• It is very costly to hire and retain qualified, creative, and
motivated people. Without those people, however, even the
most technically sophisticated system will be of little value to
the organization.
- Creating/improving competitive advantage since
people are difficult to be replaced/replicated.
Dr. Chen, Management Information Systems
b. Consider a poorly developed system that does not meet its defined
requirements. The needs of the business do not go away, but they do not
conform themselves to the characteristics of the poorly built system.
Therefore, something must give. Which component picks up the slack when
the hardware and software programs do not work correctly? What does this
say about the cost of a poorly designed system? Consider both direct money
costs as well as intangible personnel costs.
• If a system does not meet its requirements, the people and
procedures will have to adjust and “pick up the slack.” People
will have to change their behaviors to work with the system.
This may result in reduced productivity at a minimum. In
addition, annoyance and frustration may build to the point where
people actually avoid the system in some fashion…they may
find a way not to use the system at all (thus defeating its
purpose); they may avoid using it by increasing absenteeism; or
they may find another job.
Dr. Chen, Management Information Systems
c. What implications do you, as a future business manager, take
from questions (a) and (b)? What does this say about the need
for your involvement in requirements and other aspects of
systems development? Who eventually will pay the costs of a
poorly developed system? Against which budget will those costs
• It is hoped that you (students) will appreciate how important it
is that the business professionals play an active role in systems
development. Requirements not only must be delineated for the
system, but business managers (who are paying the bills) must
ensure that the requirements are being fulfilled in the new
system. If they are not fulfilled, the business unit not only will
have wasted the development costs; it will experience ongoing
costs of decreased productivity and possibly higher staff
turnover – user involvement. (we will learn more in chapter 10)
• SDLC – which step? ____________
Dr. Chen, Management Information Systems
Next Class
• 1. Complete reading the rest of chapter.
• 2. Read chapter Case Study 1: The Amazon of
Innovation (p.27-29)
– Prepare answers for questions (1,2,3,5,6) and turn in a
hardcopy using MS/Word next class.
– We will also conduct case discussion.
• 3. Read Ethics Guide (Situations A,B,C Q:1&2; p.1617) and prepare for class discussion
• 4. If you are asked to present your answer for case
study (or “Guide”) questions but you do not prepare
for them, there will be “10” points off every time from
your final course grade.
Dr. Chen, Management Information Systems
Part II
• What company (organization) is described
in the case?
Dr. Chen, Management Information Systems
Case Study 1: The Amazon of
Innovation (pp. 27-29)
Dr. Chen, Management Information Systems
Amazon’s Business Categories
• Online retailing
 Own inventory
 Associates program
 Consignment
• Order fulfillment
• Cloud services
Dr. Chen, Management Information Systems
Amazon (cont’d)
• Operates on very thin margins
• Drives its employees incredibly hard
• Amazon Web Services (AWS)
 Organizations lease time on Amazon’s
computer equipment
• Sells order fulfillment services
• Elastic Cloud 2 (EC2)
Dr. Chen, Management Information Systems
• 1. In what ways does Amazon, as a company, evidence the
willingness and ability to collaborate?
• Collaboration is the activity of two or more people working
together to achieve a common goal, result, or work product.
People who collaborate develop ideas and plans with others. A
critical aspect of effective collaboration is the ability to provide
and receive critical feedback.
• The case study does not talk directly about collaboration within
Amazon, but Amazon’s amazing track record of successful and
continual innovation suggests that its employees do collaborate
effectively. By collaborating, the employees can accomplish
more than they could on their own, and in an atmosphere that
encourages thoughtful and fearless critiques, the employees’
ideas can be refined and honed into “winning” ideas. Amazon’s
successful innovations demonstrate that this is occurring.
Dr. Chen, Management Information Systems
• 2. In what ways does Amazon, as a company, evidence the
willingness and ability to experiment?
• The textbook defines experimentation as making a reasoned
analysis of an opportunity, envisioning potential solutions,
evaluating those possibilities, and developing the most
promising ones, consistent with the resources you have.
• Amazon clearly has developed an organizational culture that
promotes and encourages experimentation. The pattern of
innovation suggests that the company supports its employees
as they develop new potential opportunities.
Dr. Chen, Management Information Systems
• 3. In what ways do you think the employees at Amazon must be
able to perform abstract and systems thinking?
• Systems thinking is the ability to model the components of the
system, to connect the inputs and outputs among those
components into a sensible whole that reflects the structure
and dynamics of the phenomenon observed.
• Abstract reasoning is the ability to make and manipulate
models. These cognitive skills are essential for Amazon
employees, who are constantly pushed to innovate and take the
company in new, pioneering directions.
• A person who cannot perform systems thinking and abstract
reasoning would be very uncomfortable in an environment
like Amazon and likely would not last too long before being
shown the door (if he/she ever got in the door in the first
Dr. Chen, Management Information Systems
#5 - FIGURE 1-7: Innovation at Amazon
Dr. Chen, Management Information Systems
• 5. Choose any five of the innovations in Figure 1-7 and
explain how you think Moore’s Law facilitated that
• Because of Moore’s Law, the cost of data communications
and data storage is essentially zero. As a result, many of the
innovations in Figure 1-7 are possible. Students may choose
different examples; here are five that illustrate the effect of
Moore’s Law:
• 1-click shopping – rather than ask a customer to enter
shipping and payment information with every order, store
this information and enable the customer to buy with only
one click.
Dr. Chen, Management Information Systems
• 5. (cont.)
• Amazon market place (sell goods and optionally have Amazon
fulfill your orders) – utilize existing storage and
communication to take and fulfill orders for others and reap a
small commission on each sale.
• Amazon Web Services (leasing computer infrastructure) –
utilize existing storage and processing infrastructure more
fully by leasing extra capacity to other businesses.
• Search Inside the Book – this feature stores more information
about the book and enables a customer to know more about it
before purchasing.
• Amazon Kindle – this device exploits the digitization of books;
the ability to store digitized book content on the Kindle, and
the ability to transmit digitized books easily over the Internet.
Dr. Chen, Management Information Systems
• 6. Suppose you work for or a company that takes
innovation as seriously as Amazon does. What do you suppose
is the likely reaction to an employee who says to his or her boss,
“But, I don’t know how to do that!”?
• A company that is serious about innovation would not tolerate
employees who are fearful of taking risks and experimenting.
Employees in these types of companies will be expected to do
things they don’t know how to do all the time!
• A boss is likely to tell the employee that he/she was hired not for
what they already know how to do, but for the new things they
can figure out how to do. It is that willingness to push into the
unknown that is valued. Employees who can’t tolerate this
expectation will not stay employed at that company for long.
• Learning to Learn and Learning to Change!
Dr. Chen, Management Information Systems
Dr. Chen, Management Information Systems
Ethics Guide
Ethics of Misdirected Information Use
(Situations A,B,C Q:1&2; (pp.14-15)
– Teach students about the problem of
unintentionally revealing sensitive information
in public places.
– Explore ethical issues concerning the use of
misdirected information.
– Differentiate between unethical and illegal
Dr. Chen, Management Information Systems
What are the only two questions that a business
professional can ask in an elevator?
• Usually someone will have worked in a law or
CPA office and they’ll know. The standard
answer is:
– What floor?
– How is the weather?
• That’s it. No other question is allowed in an
• Airplanes and public places, like Starbucks in this
story, are other places to avoid conversations
about sensitive matters.
Dr. Chen, Management Information Systems
Guide: Ethics of Misdirected
Information Use
[Situations A,B,C only and Questions#1,2 only]
• Situation A: Suppose you overhear a
confidential conversation from which you
could get information that would give you
advantage in real estate negotiations.
• Should you listen?
• Do you use that information?
Dr. Chen, Management Information Systems
Guide: Ethics of Misdirected
Information Use
• Situation B: Suppose you receive that same
information in an email. Perhaps an administrative
assistant at the agent’s office confuses you and the
other customer and mistakenly sends you the terms
of the other party’s offer.
• Do you read that email?
• If so, do you use the information that you read to
your advantage?
Dr. Chen, Management Information Systems
Guide: Ethics of Misdirected
Information Use
• Situation C:
Suppose you sell computer software. In
the midst of a sensitive price negotiation, your customer
accidentally sends you an internal email that contains the
maximum amount that the customer can pay for your
• Do you read that email?
• Do you use that information to guide your negotiating
• If your customer discovers that the email may have
reached you and asks, “Did you read my email?” how do
you answer?
Dr. Chen, Management Information Systems
Discussion Questions
• 1. Answer the questions in situations A &
B. Do your answer differ? Does the medium
by which the information is obtained make
a difference? Is it easier to avoid reading an
email than it is to avoid hearing a
conversation? If so, does that difference
Dr. Chen, Management Information Systems
• 1. I don’t think the medium should make a difference.
• Using the lawyer’s criteria mentioned earlier, the use of
information in either case is unethical. Also, there’s a
difference in that the email server at the real estate office has
a record that it sent that email to you. In scenario A, no one
could prove you heard.
• That difference doesn’t change the ethics - it just changes the
chance that you might be discovered.
• Also, in scenario B there is another possibility: If you
received the terms of their offer, there’s a good chance the
addresses were switched and they received the terms of your
offer. From a practical perspective, setting aside the ethical
issues, it’s probably best to let your agent know what
Dr. Chen, Management Information Systems
Discussion Questions
• 2. Answer the questions in situations B &
C. Do our answers differ? In situation B, the
information is for your personal gain; in C,
the information is for both your personal
and your organization’s gain. Does this
difference matter? How do you respond
when asked if you have read the email?
Dr. Chen, Management Information Systems
• 2. Scenario C is more complicated.
• For one, what if the customer wants you to have that
information? Or, what if that information is false, the real
number is higher, but the customer wants you to think that’s
their top number? This could be a mistake or a negotiating
ploy. I think notifying the customer is not only ethical, it’s
also smart. Nothing is more serviceable than the truth.
• Maybe it’s not the most convenient, but it’s the easiest in the
long run.
• I don’t think whether the information gives you or your
company an advantage is relevant. By the way, your
company may have a written ethical policy that governs your
behavior here. You could lose your job by not following
those guidelines.
Dr. Chen, Management Information Systems
Ethics Guide: Ethics of Information from
Misdirected Data (Summary)
• How do you define the difference between legal
and ethical?
• Can something be against corporate policy and
still be legal?
• What is your personal policy about dealing with
information that is misdirected to you?
• Did your thoughts about this matter change as a
result of this discussion? If so, how?
Dr. Chen, Management Information Systems
Figure displays the four quadrants of ethical and legal behavior. The ideal
goal for organizations is to make decisions within quadrant I that are both
legal and ethical.
Can you name a company that operates in each quadrant?
Some lawyer
Dr. Chen, Management Information Systems
(antitrust issue)
Drug Dealer

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