OIM 210 Lecture Notes Sept - Nov PDF

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OIM 210 - Introduction to Business Information Systems
Professor: Nora Junaid
Lecture notes for the semester (twice a week) with the topics she covered from the book and her powerpoint slides....

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OIM 210 Prof. Nora Junaid Lecture Notes Sept 11 2016 (Chapter 1)  

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Incremental or Sustaining Technology: relies on incremental improvements to an established technology Radical or disruptive technology: one that displaces an established technology and shakes up the industry. o EG: smartphones replaces cell phones. Information System: Five Component Framework o Hardware o Software o Data o Procedures o People Difference between IT and IS o IS cannot be bought.  IT can be bought, rented, leased, etc. o People execute procedures to employ new IT What is OIM? o OM and IM have a natural intersection  OM uses technology-driven thinking to solve problems. It refers to the administration of business practices to create the highest level of efficiency possible within an organization.  IM addresses business problems using a constellation of digital tools. Many of the world’s most successful technology firms were created by young people o Bill Gates o Michael Dell o Mark Zuckerberg o Steve Jobs

Sept. 14 2016 (Chapter 2) Technology & Competitive Advantage: Strategy, Industry Competitiveness, Resource Creation, and Timing  Issues Covered: o Basics of strategy & competitive advantage  Competitive advantage is something that gives you an edge over your competitors; something that is unique.  Michael Porter: father of Modern Strategy  Operational Effectiveness

Performing the same tasks better than your rivals o Design o Customer Service o Technology o Quality Strategic Positioning  Performing different tasks than your rivals, or performing the same tasks in a different way. Characteristics of Assets that may yield competitive advantage (sustaining profits for a long period of time) Key Resources for Competitive Advantage Industry/Competitive Analysis 

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September 27 2016 (Chapter 4) Netflix (Reed Hastings)  Why Netflix? o Tech Shift  Market Shift  Act 1: Netflix and DVD-by-Mail o Startups vs. Established Firms o Resources for Competitive Advantage  Brand, scale, data o Virtual vs. Physical Storefronts o Why Long Tail Industries?  A typical physical retailer is limited by the terrane of geography and shelf space.  Long Tail Advantages: building a business that can profitably offer a great volume of less popular products. o Value of Moving Early  Act 2: Netflix – Blown to Bits o A very different business  Costs, inventory, legal, rivals, allies, infrastructure & access, global expansion and more. Act 1  Going Public Too Early o Entrepreneurs would want to go public o Going public is typically good o Why was going public considered bad for Netflix?  Secrecy? The whole world had access to Netflix’s financial documents.  Blockbuster and Walmart copied Netflix for DVDs.  The world saw that subscribers, profits, and demands were all going up.  Key Resources for Competitive Advantage o Brand

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o Scale  Distribution Centers  Customers  Selection o Data/Switching Costs Today: Netflix is estimated to be over a $100 per share. Walmart was late in the game. o Walmart is a setup with big inventories that receive in big bulks before distributing it. They don’t have the software infrastructure for that either. o Netflix is setup where it sends individual items to people who will then mail it back. Netflix is rare, valuable, non-imitable, and non-substitutable. Has 58 distribution centers throughout the US and can service 90% of the US with a one night turn around. Economies of Scale o Scale Advantages: Advantages related to size o Economies of Scale: when a firm can spread costs across increasing units of production Collaborative Filtering: technology that monitors trends among customers and uses this to personalize a given customer’s experience. Churn: the rate at which customers leave a product or service.

Act 2: Netflix & The Uncertain Future of Atoms to Bits  25/58 distribution centers closed o Economies of Scale became a liability of scale o 28% contribution by mail  Content Access – What are the issues? o Digital goods  Marginal cost = zero (For content owners) o Netflix doesn’t own most content  A movie is differentiated  Cost to license content is variable and going up  Many owners won’t license content to Netflix  Windowing: content is available to a given distribution channel for a specified period of time (window).  Why are streaming costs high? o DVD content acquisition  Purchase a DVD? Rent it forever  Content is usually available from multiple sources (owner, distributor, retail outlets) o Streaming Content Acquisition  Only available from studios or designated distributors  Owners are an oligopoly

Licenses for a limited period of time Many buyers, often with deep pockets. First Scale Doctrine: firms can distribute legally acquired physical products of trademarked or copyright goods. Does not apply to streaming! What do you do? Fighting Back o Try to buy your own exclusives o From “Long tail” to “Long enough Tale”  More customers, more content o July 2015 (Netflix had 65.6 million subscribers) More Fighting Back… Create your own Title o Original Content  Critically acclaimed o Data’s “Big” Role  Better data than DVD-by-mail  Content Acquisition  Costs, popularity  Site Design  Mass-customization  Promoting titles via pages and customer-targeted ads  Creative  Casting decisions o An attractive partner Bit Player o Bandwidth caps: last mile firms threaten crackdown on bit guzzlers o Fees for faster, direct connection o Public cloud infrastructure o Net Neutrality:  The principle that all internet traffic should be treated equally and that ISPs should not discriminate. Global Expansion o Scale (bigger than all) o No warehouses o License by country The Qwikster Debacle o Netflix splits single plan into two.  Two firms  Two billing items, two websites, two databases and management teams.  Brand eroded and fell from number one spot.  Stock Value  Even after pullback was still rich at 30+   

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Crowdsourcing: outsourcing a task to a large and undefined population in the form of an open call.

October 2 2016 (Chapter 5) Moore’s Law and More: Fast, Cheap Computing & What It Means for the Manager  Terms o Semiconductor  Business context: refers to ‘computer chips’ (microprocessors or storage chips) o Microprocessor  The calculating brain of a computer. Intel dominates this market in PCs. o Volatile Memory  Requires a charge to hold its value (EG: the ram in your PC) o Non-Volatile Memory  Retains value even when not charged (EG: The flash memory in a camera) o Solid State  Electronics without moving parts (EG: chips)  The Moore Definition o Chip performance per dollar doubles every eighteen months:  Microprocessors  calculation doubles  Storage  storage doubles o The “Per Dollar” is what is important in this definition:  Things are getting faster and/or cheaper  Costs Diagram: Parabolically Downwards o If today an IT is not fast enough or if there isn’t enough storage or it is too expensive, that won’t be the case in the future. o Computing costs are declining while computing power is on the rise o EG: Disney gives out wristbands with chips which radically improves your experience and their costs.  Six Waves of Computing o First Wave – The 60s – Mainframes o Second Wave – The 70s – Minicomputers o Third Wave – The 80s – Personal Computers o Fourth Wave – The 90s – Internet Computing o Fifth Wave – Mobile Computing o Sixth Wave – Ubiquitous/Pervasive Computing October 5 2016 (Chapter 5)  What’s behind Moore’s Law? o Everything is going to get smaller, and smaller, and smaller, and smaller.  Triple Threat to Moore’s Law o Size  Can’t shrink forever

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o Heat  Electrons close together get very hot o Power  Costly to keep your cool All Together Now! o Multi-core  Many processor ‘cores’ on a single chip o Multi-processor  Many chips in one device  Delivering massively-parallel supercomputing o Grid & Cluster Computing  Multiple devices working in tandem as one computer. The Cloud o Replacing computing resources with services provided over the internet. o Rent or pay-per-use rather than buy o Benefits  World-class infrastructure  Scalable – Need more capacity? Buy more  Huge savings: support, upgrading, networking, security, etc. handled by someone else. o But powerful cloud computing is less useful when answers need to arrive quickly.  Latency = delay  Net is still too slow for some processor-intensive functions (EG: Gaming) Mickey’s Wearable (Disney’s latest bands for customers) o Benefits  Cut turnstile transaction time by 30%  Guests spend more money  Disney can serve 3,000-10,000 more guests per day.  Happy customers don’t go to Universal. o Moore on your wrist  From $35 to $5 each o Over $1 billion systems behind it  Integration with 100+ existing systems.  IOS mobile devices for cast members/staff  Retrofit 28,000 door locks while customers staying at hotel.  Upgrade wired network and wifi  Training for a staff of 70,000 o Personnel challenges of big systems  Internal and external groups  Success through CEO-level backing, focus on goals & customers rather than project ownership.

EXAM 1 REVIEW

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In lab On Moodle 50 minutes 50 multiple choice questions Examples: o The _ is the part of a computer that executes the instructions of a computer program  A. Software  B. Flash memory  C. DWDM  D. random-access memory or RAM  E. microprocessor  ANSWER IS E o The third wave of computing was characterized by the introduction of ____.  Personal computers. A EXAM CONTENT o Setting The Stage (CHAPTER 1) (4 questions)  Know what people founded which companies:  Zappos  Youtube  Amazon  Microsoft – bill gates  Google – Sergey Brin and Larry Page  Yahoo  Important: have a general idea of how the world is changing and how IT is impacting the business landscape.  Less important: Impact of IT on other disciplines. o Strategy and Technology (CHAPTER 2) (8 questions)  IT can be copied!  Sustainable competitive advantage types (operational effectiveness & strategic positioning)  4 characteristics for resources to have competitive advantage  difficult to imitate  value  difficult to substitute  early entrants vs. late entrants  powerful resources for competitive advantage (imitation resistant value chains, brand, scale, etc.)  Five Forces Model  Value Chain o Zara: IT Fashion (Chapter 3) (11 questions)  What is a business model? What is Zara’s business model?  How do you evaluate enterprise systems (CCR)?  What is vertical integration? Price collusion/fixing?  Understand the Value Chain

 Define an Information System o Netflix (Chapter 3) (14 Questions)  Know about the company  What they do  Long tail advantage (for customers and studios)  Business Model  Churn  Marginal Cost/ o Moore’s Law (Chapter 4) (13 Questions)  Terminology: Microprocessor, volatile, non-volatile, memory, and semiconductor.  Moore’s Law and the areas it impacts  Price Elasticity  6 Waves of Computing October 11 2016 (Chapter 6) Disruptive Innovation  Disruptive innovation offers a lower performane according to what the mainstream market has historically demanded. o At the same time, it provides some new performance attributes which makes it prosper in a different market.  As it improves along the traditional performance parameters, it eventually displaces the former technology. o  Kodak o Steve Sasson – a Kodak research scientist who invented the first digital camera back in 1975  8-pound, toaster-size digital camera. .01 Megabytes Resolution  Awful Product o Was a very respected name in film. o Today, the company is bankrupt and is selling assets to try and stay in business.  Two Key Characteristics of Disruptive Technologies o Come to market with a set of performance attributes not initially valued by existing customers. o Performance attributes that customers value improve to the point where new technology invades the established market.  Creating the Killer-App o Blindness and pressures  Existing customers and market pressure  No one wants it.  Financial performance measures  Small market and small margins  Identify technologies

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 External conversations (VCs, academics, etc.)  Internal conversations (Engineering, marketing, planning) Managing an Option Portfolio of Innovations  Separate organizations  Hedge financial risk, market focus, incentives.

Amazon  Founded by Jeff Bezos (Net Worth: 45.2 Billion Dollars) Number 5 on the list of richest people.  Shipping Stuff o Warehouse efficiency o Negative cash conversion cycle o Network Effects, Brand, Scale, the Long Tail, and creating a destination of “first choice”  Kindle on Fire o New distribution channels that are changing the economics of media publishing o Channel Pressure  Cloud – AWS (Amazon Web Services)  What’s Amazon Doing? o Plowing as much cash as they can to create assets that can give them global advantage.  Fulfillment Centers: o Radically different from conventional retailers o Similar items? Don’t put them together  The Flywheel o Three pillars driving growth:  Selection  Low Prices  Customer Experience (Convenience)  Fulfillment Centers o Radically different from conventional retailers o Similar items? Don’t put them together.  Amazon’s Negative Cash Conversion Cycle o Cash Conversion Cycle: period between distributing funds and collecting cash for a given operation. o Amazon has a NEGATIVS CCC because it collects cash from customers BEFORE distributing funds to its suppliers. o Inventory Turns for Full Product Line  Amazon = 16 (payment terms = Net 53 days)  Best Buy = 5  Wal-mart = 7  Offline vs. Onlien Retail Efficiencies

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o Amazon  Turnover  16 times/year  average book in house 22 days  Average 28 days of float/title.  Inventory  All warehouse stock  Few returns o Barnes & Nobles  Turnover  3 times/year  average book in store 121 days.  Book on shelf 68+ days after paying suppliers.  Inventory  Shelf & warehouse tock  30% returns Amazon does not take profits: it builds scale with its cash. Better pricing through better margins o Private-label brands  No middleman  Pressure to suppliers to grant best price, payment terms, and complete product line access. Data Advantage o A/B Testing  A randomized group of experiments used to collect data and compare performance among two options studied (A and B) o Personalization o Operations o Advertising Retargeting: o Showing ads for product & services from a site that a user has previously visited. Also called “Remarketing”. Affiliate Program: o When program sponsors pay referring websites a percentage of revenue earned from the referral. Building & Leveraging the Long Tail o First-choice shopping  Brand: Lower search costs, proxies quality, inspires trust. o Third-party sellers  Up to 40% of unit sales  Risk of slow-moving & new products assumed by others  Fulfillment option (3rd party vendors gain access to Prime) o Amazon keeps customer relationship (Data)

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o Network Effect!  Buyers + Sellers  Broaden reach (Amazon Associates = affiliate marketing) Amazon Prime o Unlimited 2-day shipping  First choice destination  Brand strengthener (convenience, efficiency)  No need to aggregate purchases to reach super-saver discount o Don’t create a “shopping list”, one-click & forget it! o Additional Benefits  Free media! Amazon Fresh o Same day or early AM delivery of fresh groceries. Amazon’s Personal Clouds o Amazon Cloud Drive o Amazoun Cloud Player o Kindle Cloud Storage

 October 19 2016 (Network Effects)  Understanding Network Effects o “The network effect is a phenomenon whereby a good or service becomes more valuable when more people use it.”  EG: Internet  There were initially very few internet users, and as more users gained access, the internet became extremely valuable with more websites and stuff.  MORE USERS = MORE VALUE o When present, product or services become more valuable is its installed base expands.  Sources of this value:  Exchanging Opportunities o some kind of exchange is happening. A network becomes more valuable because its users can potentially communicate with more people.  Data, information, media, money, goods  Fax Machine and FB Example  Staying power o Switching costs, Nook vs. Kindle  Complementary benefits o Windows phone? Market Characteristics: Early competition, bandwagons, monopolistic  tendencies.  “Best” Products don’t always win.

o Innovation Effect  Lowers competition against an established standard  Increases innovation within a standard.  EG: Glu – 56 different versions of Monopoly o From Products to Platforms  Platforms: allowing for the integration of third-party software products and other complementary goods. o Market Characteristics: early competition, bandwagons, monopolistic tendencies.  Blue Ray DVD (backed by Sony) vs. HD DVD (backed by Microsoft & Toshiba)  Monopolistic Effect: Mac vs. Windows ---- Windows dominates 90% of user desktops. EBay dominates most auctions in the world. o Radical innovation may be necessary if an incompatible technology is to overthrow an established standard. The technical benefits of the new innovation must exceed the exchange, staying power, and complementary benefits of the incumbent. o Congestion Effects  When increasing number of users lower the value of a product or service (usually due to over-consumption of a finite resource) o Strategies for Competing in Network Markets  Move early  Subsidize product adoption  Leverage viral promotion  Redefine the market or leverage convergence  Alliances and partnership  Distribution channels  Seed the market with complements  Encourage the development of complementary goods  Maintain backward compatibility  Rivals: be compatible with larger networks  Incumbents: constantly innovate to create a moving target October 23 2016 (Social Media and Peer Production)  Social Media and Peer Production o Social Media: content that is created, shared, and commented on by a broader community of users. o Peer Production (subset): when users work, often collaboratively, to create content and provide service.  6 of Top 10 Most Used Apps are Messaging Apps – All are Social o 1. Facebook o 2. Whatsapp o 3. Messenger

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o 4. Instagram o 5. LINE o 6. Viber o 7. Kakao Talk o 8. Clash of Clans o 9. WeChat o 10. Twitter Four “Ms” of Social Media o Four Roles of Corporate Social Media Presence  Magnet (inbound from customer)  Megaphone (outbound to customer)  Monitor (outbound listening to customers, competitors, and ‘best practice’ role models)  Mediate (customer and community dialog) TERMS: o Owned Media  Communication channels that an organization controls.  Includes firm-run blogs and web sites, apps and social media accounts. o Paid Media  Efforts where an organization pays to leverage a channel or promote a message.  EG: Advertisements and sponsorships. o Earned Media  Promotions that grow organically from customer efforts or other favorable publicity.  Key driver of earned media is social media. o Inbound Marketing  Leveraging online channels to draw consumers to the firm with compelling content rather than conventional forms of promotion such as advertising, e-mail marketing, etc. Key Types of Social Media o Blogs – online journal that keeps a running chronology of entries o Wikis – a website that anyone can edit directly from within the browser. o Social Networks – Online community that allows user to establish a personal profile and communicate with others. o Twitter/microblogging – Public/private messaging in 140 characters max. o Messaging apps – exchange messages or images with individuals or groups permanently or ephemerally, attributed or anonymously. FIRMS LEVER...