ISM 158Business 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 learn2. have a broad knowledge and interest in information systems,

technology, economics and business3. 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.

ScheduleDate Topic

(Reading = corresponding chapter from text)

Case(Reading = corresponding case from text)

Assessment

1 Tue, March 28

Introduction

2 Thu, March 30

Business Models IBM

3 Tue, April 4 IT and Business Models

4 Thu, April 6 Amazon.com5 Tue, April 11 IT and Organization

6 Thu, April 13 Boeing Optional: Business Proposal Draft

ScheduleDate Topic

(Reading = corresponding chapter from text)

Case(Reading = corresponding case from text)

Assessment

7 Tue, April 18 Making the case for IT

8 Thu, April 20 CareGroup Project Team and Topic Due

9 Tue, April 25 IT Infrastructure10 Thu, April 27 iPremier Business

Proposal Due

11 Tue, May 2 Reliability and Security

12 Thu, May 4 Ford Project Proposal Due

13 Tue, May 9 IT Service Delivery14 Thu, May 11 Dell

ScheduleDate Topic

(Reading = corresponding chapter from text)

Case(Reading = corresponding case from text)

Assessment

15 Tue, May 16 IT Project Delivery16 Thu, May 18 Cisco Optional:

Preliminary draft due

17 Tue, May 23 Governance of IT18 Thu, May 25 Vokswagen19 Tue, May 31 Leadership of IT20 Thu, June 2 Conclusion AtekPC Project Due

Thu, June 6, 12:00 – 3:00pm

Final Exam 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

kross@soe.ucsc.edu

Office hours: Tuesday 3 – 5pm

(or by appointment)

E2 room 559

Teaching Assistant

• David Xu• fxu2@ucsc.edu• Office hours:

– Thursday 12 – 2, – Baskin Engineering room 358

Assessment

Value Due dateNews 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

PolicyAssignments 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 ScheduleDate News Presentations

1 Tue, March 282 Thu, March 30 Blaise Albuquerque

Clare AngamiJoseph Armenta

3 Tue, April 4 Madalina BologaDadalei ButhRystian Dale CabellonMelissa Camacho

4 Thu, April 6 Evelyn CanoGrace CarpenterRedmond CatbaganPeter Chan

5 Tue, April 11 Truman ChanBryant ChangFanghai ChenAndrew Chiu

If your name is not on the schedule, contact instructor by the end of week 2

Presentation ScheduleDate News Presentations

6 Thu, April 13 Sean ChouMark CorreThomas DenteBrian Diaz

7 Tue, April 18 Joshua DodsonMohamed ElshaerElliot GrossmanRichard Hammer

8 Thu, April 20 Matthew HartsockJuan HernandezWilliam JaffeEric Jones

9 Tue, April 25 John KaplanisMarlo KertsonSameer KhanJennifer Kim

10 Thu, April 27 Kevin KonopelskiAlex KumarRichard LaiJustin Lazaro

If your name is not on the schedule, contact instructor by the end of week 2

Presentation ScheduleDate News Presentations

11 Tue, May 2 Alexander LeeBrian LeeNathan LeeSean Lee

12 Thu, May 4 Ashley LevienJames LiangRay Myron LicardoDa Fu Liu

13 Tue, May 9 Patrick LoomisCharlie LuiTam LuuKevin Ma

14 Thu, May 11 Tanuja RamanujamSwathi RammohanSamina ReddyAlon Rogenstein

15 Tue, May 16 Navdeep ShergillMaximillian SilveusAmandeep SinghManjit Singh

If your name is not on the schedule, contact instructor by the end of week 2

Presentation ScheduleDate News Presentations

16 Thu, May 18 Steven SonsipBrandon SweetAntoine TadrosLisa TamSharon Tam

17 Tue, May 23 Vincent TangKatrina ThanhTrang To

18 Thu, May 25 Ronald TolentinoRaymond TsaiJames Tu

19 Tue, May 31 Michael WanAaron WeiseFrankie Wong

20 Thu, June 2 Junie YeeTiffany YeeDavid 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 Soule8th 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 ObjectivesUnderstand 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

Intra-Industry RivalryStrategic Business Unit

BargainingPower of Buyers

Bargaining Power

of Suppliers

Substitute Products

and Services

PotentialNew Entrants

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.

Intra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges

BargainingPower of Buyers

Bargaining Power

of Suppliers

Substitute Products

and Services

PotentialNew Entrants

• Faculty• Staff• Equipment and Service Suppliers• Alumni• Foundations• Governments• IT Vendors

• Internet Distance Learning• Books and Videotapes• Computer-Based Training• Company Education Programs

• Students• Parents• Businesses• Employers• Legislators

• Foreign Universities• Shift in Strategy by Universities or Companies

Porter Competitive Model Education Industry – Universities U.S. Market

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

Differentiation Strategies

Innovation Strategies

Growth Strategies

Alliance Strategies

Cost Leadership Strategies Primary

Strategies

Supporting

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.