Managing the Digital Firm Lecture Note

Management Information Systems: Managing the Digital Firm Chapter 1 Information Systems in Global Business Today How Information Systems Are Transforming Business • Global spending on information technology (IT) and IT services: nearly $3.8 trillion in 2019; $160 billion spent on management consulting and services • Organizational, management, and cultural changes are often required for firms to derive full business value from IT investments Figure 1.1 Information Technology Capital Investment What’s New in Management Information Systems (1 of 3) • I T Innovations – Cloud computing, big data, Internet of Things – Mobile digital platform – AI and machine learning – Use of social networks for business objectives • New Business Models – Online streaming and downloadable video  Examples: Netflix, Apple TV Channels, Amazon What’s New in Management Information Systems (2 of 3) • E-commerce Expansion – E-commerce worldwide expands to nearly $3.6 trillion in 2019 – Growth in social commerce spurred by growth of mobile platform – Mobile retail e-commerce growing more than 20 percent a year, reaching almost $300 billion in 2020 • Management Changes – Managers becoming more mobile – Managers use social networks, collaboration tools – Business intelligence applications accelerate What’s New in Management Information Systems (3 of 3) • Firms and Organizations Change – More collaborative, less emphasis on hierarchy and structure – Greater emphasis on competencies and skills – Higher-speed/more accurate decision making based on data and analysis – More willingness to interact with consumers (social media) – Better understanding of the importance of I T Globalization Challenges and Opportunities: A Flattened World • Internet and global communications have greatly changed how and where business is done – Drastic reduction of costs of operating and transacting on global scale – Competition for jobs, markets, resources, ideas – Growing interdependence of global economies – Requires new understandings of skills, markets, opportunities The Emerging Digital Firm • In a fully digital firm: – Significant business relationships are digitally enabled and mediated – Core business processes are accomplished through digital networks – Key corporate assets are managed digitally • Digital firms offer greater flexibility in organization and management – Time shifting, space shifting Strategic Business Objectives of Information Systems (1 of 2) • Growing interdependence between: – Ability to use information technology – Ability to implement corporate strategies and achieve corporate goals Figure 1.2 The Interdependence Between Organizations and Information Systems Strategic Business Objectives of Information Systems (2 of 2) • Firms invest heavily in information systems to achieve six strategic business objectives: 1. Operational excellence 2. New products, services, and business models 3. Customer and supplier intimacy 4. Improved decision making 5. Competitive advantage 6. Survival Operational Excellence • Improved efficiency results in higher profits • Information systems and technologies help improve efficiency and productivity • Example: Walmart – Power of combining information systems and best business practices to achieve operational efficiency— and over $524 billion in sales in 2019 – Most efficient retail store in world as result of digital links between suppliers and stores New Products, Services, and Business Models • Information systems and technologies enable firms to create new products, services, and business models • Business model: how a company produces, delivers, and sells its products and services • Example: Apple – Transformed old model of music distribution with iTunes – Constant innovations—iPod, iPhone, iPad, etc. Customer and Supplier Intimacy • Customers who are served well become repeat customers who purchase more – Example: Mandarin Oriental Hotel – Uses I T to foster an intimate relationship with its customers, keeping track of preferences, etc. • Close relationships with suppliers result in lower costs – Examples: Mandarin Oriental Hotel and J C Penney (in text) – J C Penney uses I T to enhance relationship with supplier in Hong Kong Improved Decision Making • Without accurate information, managers must use forecasts, best guesses, and luck, resulting in misallocation of resources, inventory, employees • Real-time data improves ability of managers to make decisions – Example: Verizon’s web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Competitive Advantage • Often results from achieving previous business objectives • Advantages over competitors – Charging less for superior products, better performance, and better response to suppliers and customers – Examples: Apple, Walmart, UP S are industry leaders because they know how to use information systems for this purpose Survival • Businesses may need to invest in information systems out of necessity; it is simply the cost of doing business • Keeping up with competitors – Citibank’s introduction of AT Ms • Federal and state regulations and reporting requirements – Toxic Substances Control Act and the Sarbanes-Oxley Act