ISM 158 Business Information Strategy

1. ISM 158Business Information Strategy Instructor: Kevin Ross Teaching Assistant: David Xu

2. 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.

3. 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.

4. ISM 158: Overview This class is designed for seniors and some juniors. There are few formal prerequisites, but you are expected to… • want to be here and to learn • have a broad knowledge and interest in information systems, technology, economics and business • think for yourself

5. 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.

6. Schedule

7. Schedule

8. Schedule

9. 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

10. Teaching Assistant • David Xu • fxu2@ucsc.edu • Office hours: • Thursday 12 – 2, • Baskin Engineering room 358

11. Assessment *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.

12. 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)

13. 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

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

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

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

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

18. 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

19. 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.

20. 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

21. Submission of assignments • Submit a hard copy of your assignment at the beginning of class

22. 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.

23. Prerequisites • This course is for juniors and seniors • ISM 50 or permission of instructor required • Interest in technology and business

24. 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.

25. 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

26. 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

27. 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

28. Questions

29. 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 Corporate Information Strategy & Management

30. 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

31. 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

32. 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

33. 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

34. 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

35. > 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. Module 1: IT and Business Advantage

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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

43. Business Model Framework and Definition

44. Analyzing Business Model Linkages

45. Using the DuPont Formula to Deconstruct ROE

46. Evolving the Amazon.com Business Model (1995-2000)

47. Assessing the Impact of IT on Business Model Alignment

48. Impact of IT on Industry Structure and Relationships

49. Case for Lecture 2 • IBM Evolution – Transformation and growth

50. Questions?