ISM 158 Business Information Strategy Instructor: Kevin Ross Teaching Assistant: David Xu ISM 158: Overview This class considers the role of information in business strategy. In particular, we focus on decisions regarding information technology and information systems to give a business competitive advantage over other companies. We will focus on case studies to see why some businesses are more successful than others in building information systems that lead to organizational and individual efficiencies. We look at how information impacts industries, markets and countries, and leads to technology development. We develop an understanding of design and maintenance of networked organizations, including issues of leadership and management. ISM 158 Perspective: CIO We will generally look at decisions from the perspective of the chief information officer. Wikipedia: The chief information officer (CIO), or information technology (IT) director, is a job title commonly given to the most senior executive in an enterprise responsible for the information technology and computer systems that support enterprise goals. The title of Chief Information Officer in Higher Education may be the highest ranking technology executive although depending on the institution, alternative titles are used to represent this position. Generally, the CIO typically reports to the chief executive officer, chief operations officer or chief financial officer. ISM 158: Overview This class is designed for seniors and some juniors. There are few formal prerequisites, but you are expected to… 1. want to be here and to learn 2. have a broad knowledge and interest in information systems, technology, economics and business 3. think for yourself Class website All schedules and assignments will be posted on the class website: http://www.soe.ucsc.edu/classes/ism158/Spring11/ Lecture notes will be posted after each lecture. Schedule Date Topic (Reading = corresponding chapter from text) Introduction 3 Tue, March 28 Thu, March 30 Tue, April 4 4 5 Thu, April 6 Tue, April 11 6 Thu, April 13 1 2 Business Models Case Assessment (Reading = correspondin g case from text) IBM IT and Business Models Amazon.com IT and Organization Boeing Optional: Business Proposal Draft Schedule Date Topic (Reading = corresponding chapter from text) 7 Tue, April 18 Making the case for IT 8 Thu, April 20 9 10 Tue, April 25 Thu, April 27 IT Infrastructure 11 Tue, May 2 Reliability and Security 12 Thu, May 4 13 14 Tue, May 9 Thu, May 11 Case Assessment (Reading = correspondin g case from text) CareGroup Project Team and Topic Due iPremier Business Proposal Due Ford Project Proposal Due IT Service Delivery Dell Schedule Date Topic (Reading = corresponding chapter from text) 15 16 Tue, May 16 Thu, May 18 IT Project Delivery 17 18 19 20 Tue, May 23 Thu, May 25 Tue, May 31 Thu, June 2 Thu, June 6, 12:00 – 3:00pm Governance of IT Case Assessment (Reading = correspondin g case from text) Cisco Optional: Preliminary draft due Vokswagen Leadership of IT Conclusion Final Exam AtekPC Project Due Final Exam Instructor Kevin Ross Assistant Professor, Technology and Information Management From New Zealand PhD, Management Science & Engineering At UCSC Since 2004 Research areas: Scheduling, optimization, networks, pricing Worked with: Eli Lilly & Company, NASA, Thomson Reuters, London Councils, Fitness First [email protected] Office hours: Tuesday 3 – 5pm (or by appointment) E2 room 559 Teaching Assistant • David Xu • [email protected] • Office hours: – Thursday 12 – 2, – Baskin Engineering room 358 Assessment Value Due date News Presentation 5% Throughout Quizzes 10% Throughout Discussion Participation 10% Throughout Business Proposal* 10% Thu, April 27 Project* 40% Thu, Apr 20 and Thu, June 2 Final Exam 25% Thu, June 6, 12:00 – 3:00 *Optional: Early draft 2 weeks in advance will be reviewed Policy Assignments are due at the start of class on the due date. Late assignments, missed presentations and quizzes will result in zero grade unless specific permission is given by instructor at least one week in advance. Quizzes • There will be up to five surprise quizzes over the quarter. • These will be fairly short and test knowledge of the text and cases. • Students who are absent the day of a quiz will receive a zero grade for that quiz – unless they have informed the instructor in writing at least a week in advance that they have to miss class (for some legitimate reason) News Presentation • Each student will present one news story to the class during the quarter. – The story can be from any source, and describe an interesting recent development in the use of information or IT for business strategy. • The presentation should be professionally presented using powerpoint or similar technology. – 5 minutes maximum – Must include both factual information (who is doing what and why?) and some commentary (your opinion – is this a good idea – why?!) on the story. – All news sources that have been used should be acknowledged with specific references on a final slide. • The student is responsible for one of (a) bringing the slides on a laptop, (b) bringing slides on a USB drive that will work on instructor’s laptop, or (c) emailing slides to the instructor the night before the presentation. You are seniors and my expectations are high Presentation Schedule 1 2 Date Tue, March 28 Thu, March 30 3 Tue, April 4 4 Thu, April 6 5 Tue, April 11 News Presentations Blaise Albuquerque Clare Angami Joseph Armenta Madalina Bologa Dadalei Buth Rystian Dale Cabellon Melissa Camacho Evelyn Cano Grace Carpenter Redmond Catbagan Peter Chan Truman Chan Bryant Chang Fanghai Chen Andrew Chiu If your name is not on the schedule, contact instructor by the end of week 2 Presentation Schedule 6 Date Thu, April 13 7 Tue, April 18 8 Thu, April 20 9 Tue, April 25 10 Thu, April 27 News Presentations Sean Chou Mark Corre Thomas Dente Brian Diaz Joshua Dodson Mohamed Elshaer Elliot Grossman Richard Hammer Matthew Hartsock Juan Hernandez William Jaffe Eric Jones John Kaplanis Marlo Kertson Sameer Khan Jennifer Kim Kevin Konopelski Alex Kumar Richard Lai Justin Lazaro If your name is not on the schedule, contact instructor by the end of week 2 Presentation Schedule 11 Date Tue, May 2 12 Thu, May 4 13 Tue, May 9 14 Thu, May 11 15 Tue, May 16 News Presentations Alexander Lee Brian Lee Nathan Lee Sean Lee Ashley Levien James Liang Ray Myron Licardo Da Fu Liu Patrick Loomis Charlie Lui Tam Luu Kevin Ma Tanuja Ramanujam Swathi Rammohan Samina Reddy Alon Rogenstein Navdeep Shergill Maximillian Silveus Amandeep Singh Manjit Singh If your name is not on the schedule, contact instructor by the end of week 2 Presentation Schedule 16 Date Thu, May 18 17 Tue, May 23 18 Thu, May 25 19 Tue, May 31 20 Thu, June 2 News Presentations Steven Sonsip Brandon Sweet Antoine Tadros Lisa Tam Sharon Tam Vincent Tang Katrina Thanh Trang To Ronald Tolentino Raymond Tsai James Tu Michael Wan Aaron Weise Frankie Wong Junie Yee Tiffany Yee David Zhu If your name is not on the schedule, contact instructor by the end of week 2 Discussion Participation We will discuss cases approximately once per week. Active participation in the discussions of the cases and the course material is expected and examined. Read the cases with interest - learn the facts - form opinions - come prepared to challenge each other Business Proposal • You will be provided with a scenario for a business information system problem, and be required to make a written proposal of a solution, as the chief information officer. • Details will follow. Project • The major assignment in this class is a comprehensive project. You will analyze a major (at least 1000 employees) company, and study how they use information and information systems to achieve competitive advantage. • The project can be completed in groups of two or three, as you select, and the company is chosen by the group. • Details will follow, but start thinking about group and topic Submission of assignments • Submit a hard copy of your assignment at the beginning of class Final Exam • The final examination will cover the topics from the whole year. • You will not be allowed to bring notes into the exam room. Prerequisites • This course is for juniors and seniors • ISM 50 or permission of instructor required • Interest in technology and business Textbook Corporate Information Strategy and Management, by Applegate, Austin and Soule 8th edition We will use the text and cases from this version, and you will be expected to have read the appropriate section before each class. - About 1/3 of the text has changed from the 7th edition All the cases are originally published by Harvard Business Review – and can be purchased separately from their website. Writing class • This course fulfills the ‘W’ requirement – The business plan and project will give you training and evaluate your writing skills – You will have the opportunity for feedback on your writing by turning in draft assignments 2 weeks early – You must declare who writes each section of your project Note on cheating • All work must be your own • Any work used as a reference must be cited appropriately • Any violation of this will result in an instant failure for academic misconduct and this will go on your record Feedback Please! • Instructor has substantially revised the course material • The course is for you • Don’t hesitate to ask questions, give suggestions • As senior students, you know that you’ll get out what you put in Questions Corporate Information Strategy & Management IT is a source of opportunity and advantage but also uncertainty and risk Chasm between viewpoints Business executives: IT detached from real business problems Technical executives: Business leaders lack vision Undeniable rapidity of change In system architecture and interfaces In business In work and the workforce The Embedding of IT • IT now embedded in: – Definition and execution of strategy – Organization and leadership of businesses – Definitions of unique value propositions • IT is changing our understanding of: – – – – Markets Industries Strategies Firm designs • Information is now a major economic good Riding the IT Rollercoaster • Mid 1990s: – World Wide Web demonstrated IT potential – Structural and technical hurdles remained in using IT • Late 1990s: – Capital markets caught the fever – VCs eager to spend on IT, regardless of long-term path to profitability • 21st Century: – Speculative bubble burst – Downward spiral until 2003 What Now? • What we know: – World is forever changed; IT will never return to the basement – Technology as core enabler, primary business channel – Global village is here to stay – Rigid organization boundaries have fallen • What we need to do: – Engage in sense-making of the transformation – Mine the last decade of business experimentation – Synthesize in order to choose a path forward Let the Story Telling Begin • This book examines stories of executives who are exploring uncharted waters – Through the lens of the decades of research and experience of the authors – Through rich dialogue during class discussion of chapters, cases, and articles Focal Themes • IT and Business Advantage – IT impacts the business through its effects on the three components of the business model: strategy, capabilities, and value • The Business of IT – Managing IT operations, services, and project delivery requires managing trade-offs among costs, opportunities, and risks • IT Leadership – High-level management, leadership, and governance activities set the context for leveraging IT-enabled strategic insight and ensuring IT operational excellence Module 1: IT and Business Advantage > US$ 2 trillion spent on IT worldwide in 2007 Continued rapid spending growth Truly global spending distribution Ever increasing dependence on and impact of IT Search for opportunity Avoidance of operational risk Module 1 discusses how to leverage IT to create business advantage. Overview of Module 1 • Chapter 1 – Introduces the organizing framework for the module – Defines a business model – Explores evaluation of business models • Chapters 2 – Examines the impact of IT on business models • Chapter 3 – Examines the impact of IT on organizational capabilities • Chapter 4 – Examines the impact of IT on business value The Five Competitive Forces that Shape Strategy • Michael Porter’s classical theory of strategy formulation – – – – Original HBR article in 1979 Simple, powerful description of five forces Five forces analysis in practice Five forces distinguished from contemporary “factors” (e.g. the internet) • What can we learn from this article? – How economic value is created and claimed by participants in a business network or industry – How IT might change the relative strength of each force Amazon.com: The Brink of Bankruptcy • Traces evolution of Amazon.com from founding in 1994 to 2001 • The case ends with the company poised at the “brink of bankruptcy” • What can we learn from this case? – Apply business model thinking – Demonstrate how IT can be used as a key driver of business value through its impact on strategy and organizational capabilities – Identify how to identify IT-enabled proprietary assets that can serve as a platform to exploit disruptive change Canyon Ranch • Founded in 1979 • Leader in health resort and spa industry – Facing increasing competitive pressure • Goal: leverage customer information to increase customer loyalty and cross-selling opportunities – Role of IT in building CRM capabilities • What can we learn from this case? – How to use information assets to drive business value – How IT can shape strategy and capabilities Boeing’s e-Enabled Advantage • Until late 1990s, largest commercial airplane company • Airline industry faces multiple challenges – Customers face increased cost pressure – Fragmented suppliers – Boeing drops to #2 behind government-subsidized rival, Airbus • Strategic goal: use IT to regain market dominance – More information-driven product and service offerings – Improved IT-enabled efficiency • What can we learn from this case? – How to use IT to differentiate a product and create new revenue streams by selling packaging and selling information and by creating new service offerings Royal DSM N.V.: IT enabling Business Transformation • Diversified Netherlands-based company – Coal mining, industrial chemicals, life science products, etc. • Strategic shift from highly cyclical businesses to high growth businesses – Rapid divestitures and acquisitions • Use IT to enable rapid growth and acquisition integration – Standardization of IT infrastructure and applications – IT function shifts from support to strategic • What can we learn from this case? – How to leverage IT in support of organizational flexibility and agility – How to use IT to build an organizational platform for business transformation Understanding Business Models Key Learning Objectives Understand the concept of a business model Learn how to analyze the three components of a business model – strategy, capabilities, and value – through a business model audit Understand the different ways that business models can evolve and recognize potential drivers of business model evolution Business Model Framework and Definition Analyzing Business Model Linkages Using the DuPont Formula to Deconstruct ROE Evolving the Amazon.com Business Model (1995-2000) Assessing the Impact of IT on Business Model Alignment Impact of IT on Industry Structure and Relationships Case for Lecture 2 • IBM Evolution – Transformation and growth Questions? What is a Business Model? • Defines how enterprise relates to environment – Strategy aligns organization with environment – Resources in and out – How value is created for stakeholders – Sets goals and ways to achieve them Components of a Business Model Understanding the Competitive Environment of a Company Companies do not exist in a vacuum: It is necessary to understand the competitive environment to assess the current competitive position of a company. It has become increasingly necessary to posture a company for challenges in its future. Porter Competitive Model Potential New Entrants Bargaining Power of Suppliers Intra-Industry Rivalry Strategic Business Unit Substitute Products and Services Bargaining Power of Buyers Competitive Model Focus • What is driving competition in the current or future industry? • What are current or future competitors likely to do and how can a company respond? • How can a company best posture itself to achieve and sustain a competitive advantage? Competitive Model Forces Intra-industry Rivals: Strategic Business Unit (SBU) and major rivals. Buyers: Categories of major customers. Suppliers: Categories of major suppliers that play a significant role in enabling the SBU to conduct its business. New Entrants: Companies that are new as competitors in a geographic market or existing companies that through a major shift in business strategy will now directly compete with the SBU. Substitutes: An alternative to doing business with the SBU. Porter Competitive Model Education Industry – Universities U.S. Market Potential New Entrants Bargaining Power of Suppliers • Faculty • Staff • Equipment and Service Suppliers • Alumni • Foundations • Governments • IT Vendors • Foreign Universities • Shift in Strategy by Universities or Companies Intra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges Substitute Products and Services • Internet Distance Learning • Books and Videotapes • Computer-Based Training • Company Education Programs Bargaining Power of Buyers • Students • Parents • Businesses • Employers • Legislators Role of Technology through Porter perspective: Can we… 1. Build barriers to prevent a company from entering an industry? 2. Build in costs that would make it difficult for a customer to switch to another supplier? 3. Change the basis for competition within the industry? 4. Change the balance of power in the relationship that a company has with customers or suppliers? 5. Provide the basis for new products and services, new markets or other new business opportunities Porter Competitive Strategies Cost Leadership Strategies Differentiation Strategies Primary Strategies Innovation Strategies Supporting Strategies Growth Strategies Alliance Strategies Porter Primary Strategies Differentiation—customer values the differences that you provide in products, services or capabilities. Cost—is least cost. If this is the primary strategy, over time there will only one ultimate winner. Porter Supporting Strategies Innovation—either with business strategies or use of information systems or both. Growth—deals with growth in revenue and other business volumes. Can be a key factor in establishing a market position. Can also be a major requirement to offset high fixed operating costs. Alliances—importance of establishing a strong relationship with suppliers and other business partners often on a contractual basis.