Chapter 7: Storing Organizational Information - Databases

Relational Database Fundamentals

• Information is everywhere in business.
• Information is stored in databases.

Database – maintains information about various types of objects (inventory), events (transactions), people (employees), and places (warehouses).

• Databases models include :

1. Hierarchical database model: Information is organized into a tree-like structure (using parent/child relationships) in such a way that it cannot have too many relationships.
   
2. Network database model: A flexible way of representing objects and their relationships.
   
3. Relational database model: stores information in the form of logically related two-dimensional tables.
   

Entities and Attributes

Entity  – A person, place, thing, transaction, or event about which information is stored.

• The rows in each table contain the entities. Example in Figure 7.1 CUSTOMER includes Dave’s Sub Shop and Pizza Palace entities.

Attributes (fields, columns) – Characteristics or properties of an entity class.

• The columns in each table contain the attributes such as in Figure 7.1 attributes for CUSTOMER include Customer ID, Customer Name, Contact Name.

Keys and Relationships

Primary keys and foreign keys identify the various entity classes (tables) in the database.

Primary key - A field or group of fields that uniquely identifies a given entity in a table.

Foreign key - A primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables.

• Figure 7.1: Potential relational database for Coca-Cola
  
   

Relational Database Advantages

Database advantages from a business perspective include:

• Increased flexibility.
• Increased scalability and performance.
• Reduced information redundancy.
• Increased information integrity (quality).
• Increased information security.

Increased Flexibility

A well-designed database should:

• Handle changes quickly and easily.
• Provide users with different  views. 
• Have only one physical views.  

 Physical views - Deals with the physical storage of information on a storage device such as hard disk.

• Have multiple logical views.

 Logical views - Focuses on how users logically access information.

• The separation between logical and physical views allows each user to access database information differently.
• Example: A mail to ordering bus - 2 people view different format (logical views) but same physical views. 

Increased Scalability and Performance

• A database must scale to meet increased demand, while maintaining acceptable performance levels.

Scalability -  Refers to how well a system can adapt to increased demands.

Performance - Measures how quickly a system performs a certain process or transaction.

Reduced Information Redundancy

• Databases reduce information.

Redundancy - The duplication of information of information storing the same information in multiple places.

• Inconsistency is one of the primary problems with redundant information. There will be a problem to decide which is most current and most accurate.

Increase information Integrity (Quality)

• Information integrity - Measures the quality of information.
• Integrity constraint - Rules that help ensure the quality of information.
• Relational integrity constraint - Rule that enforces basic and fundamental information-based constraints. For example users cannot create an order for a nonexistent customer, provide a markup percentage that was negative etc.
• Business-critical integrity constraint - Rule that enforce business rule vital to an organization's success and often require more insight and knowledge than relational integrity constraints. Example product returns are not accepted for fresh product 15 days after purchase.

 

Increased Information Security

Information is an organizational asset and must be protected. Databases offer several security features including:

• Password - Provides authentication of the user.
• Access level - Determines who has access to the different types of information.
• Access control - Determines types of user access, such as read-only access.

 

Database Management System (DBMS)

 

Database management system (DBMS) - Software through which users and application programs interact with a database. 

 

 

Indirect Interaction

• User interacts with an application for example payroll application, manufacturing application, sales application.
• The application interacts with the DBMS.
• The DBMS obtains the information from the database.

Direct Interaction

• The user interacts directly with the DBMS.
• The DBMS obtains the information from the database.

 

Data-driven Websites

 

Data-driven Websites - An interactive website kept constantly updated and relevant to the needs of its customers through the use of a database.

• Data-driven Web sites are especially useful when the site offers a great deal of information, products, or services.
• A data-driven Web site invites visitors to select and view what they are interested in by inserting a query, which the Web site then analyzes and custom builds a Web page in real-time that satisfies the query.

 

Data-Driven Website Business Advantages

• Development : Allows the website owner to make changes any time-all without having to rely on a developer or knowing HTML programming. A well-structured, data-driven website enables updating with little or no training.
• Content management : A static website requires a programmer to make updates. This adds an unnecessary layer between the business and its web content, which can lead to misunderstandings and slow turnarounds for desired changes.
• Future expandability : Having a data-driven Web site enables the site to grow faster than would be possible with a static site.  Changing the layout, displays, and functionality of the site (adding more features and sections) is easier with a data-driven solution.
• Minimizing human error : Even the most competent programmer charged with the task of maintaining many pages will overlook things and make mistakes. This will lead to bugs and inconsistencies that can be time consuming and expensive to track down and fix. Unfortunately, users who come across these bugs will likely become irritated and may leave the site. A well-designed, data-driven website will have "error trapping" mechanisms to ensure that required information is filled out correctly and that content is entered and displayed in its correct format.
• Cutting production and update costs : A data-driven website can be updated and "published" by any competent data entry or administrative person. In addition to being convenient and more affordable, changes and updates will take a fraction of the time that they would with a static site. While training a competent programmer can take months or even years, training a data entry person can be done in 30 to 60 minutes.
• More efficient : By their very nature, computers are excellent at keeping volumes of information intact. With a data-driven solution, the system keeps track of the templates, so users do not have to. Global changes to layout, navigation, or site structure would need to be programmed only once, in one place, and the site itself will take care of propagating those changes to the appropriate pages and areas. A data-driven infrastructure will improve the reliability and stability of a website, while greatly reducing the chance of "breaking" some part of the site when adding new areas.
• Improved Stability : Any programmer who has to update a website from "static" templates must be very organized to keep track of all the source files. If a programmer leaves unexpectedly, it could involve re-creating existing work if those source files cannot be found. Plus, if there were any changes to the templates, the new programmer must be careful to use only the latest version. With a data-driven website, there is peace of mind, knowing the content is never lost-even if your programmer is.

 

Data-Driven Business Intelligence

• Bi in a data-driven website.
• Companies can gain BI by viewing the data accessed and analyzed from their Web site.  The figure displays how running queries or using analytical tools, such as a Pivot Table, on the database that is attached to the Web site can offer insight into the business, such as items browsed, frequent requests, items bought together, etc.

 

 

Integrating Information among Multiple Databases 

 

Integration - Allows separate systems to communicate directly with each other.

Without integration, an organization will:

• Spend considerable time entering the same info in multiple system.
• Suffer from the low quality and inconsistency typically embedded in redundant info.

An organization can choose from two integration methods.

1. Forward and backward integrations that link processes in the value chain.
2. Central repository for a particular type of information.

 

Forward Integration 

Forward integration - Takes information entered into a given system and sends it automatically to all downstream systems and processes.

• Sales enters the information when it is negotiating the sale (looking for opportunities).
• The information is then passed to the order entry system when the order is actually placed.
• The order fulfillment system picks the products from the warehouse, packs the products, labels boxes, etc.
• Once the order is filled and shipped, the customer is billed.

 

Backward Integration

Backward integration - Takes information entered into a given system and sends it automatically to all upstream systems and processes.

• Billing enters information and this information is passed back to the order system.
• The order fulfillment system passes the information back to the order entry system.
• The order entry system passes the information back to the sales system.

Central Repository

Building a central repository specifically for integrated information.

• The above figure displays an example of customer information integrated using this method.
• Users can create, read, update, and delete in the main customer repository, and it is automatically sent to all of the other databases.
• This method does not follow the business process when building the integrations.
• Business-critical integrity constraints still need to be built to ensure information is only ever entered into the customer repository, otherwise the information will become out-of-syn.

 

Chapter 6: Valuing Organizational Information

Organizational Information

• Information is everywhere in an organization.
• Employees must be able to obtain and analyze the many different levels, formats and granularity of organizational information to make decisions.
• Successfully collecting, compiling, sorting, and analyzing information can provide tremendous insight into how an organization is performing.
• Levels, formats and granularity of organizational information.

 

The Value of Transactional and Analytical Information

• Transactional information VS analytical information.

 

• Transactional information – encompasses all of the information contained within a single business process or unit of work, and its primary purpose is to support the performing of daily operational tasks.
• Analytical information – encompasses all organizational information, and its primary purpose is to support the performing of managerial analysis tasks.
• Information granularity refers to the extent of detail within the information.

The Value of Timely Information

• Timeliness is an aspect of information that depends on the situation:

1. Real-time information – immediate, up-to-date information.
2. Real-time system – provides real-time information in response to query requests.

The Value of Quality Information 

• Business decisions are only as good as the quality of the information used to make the decisions.
• You never want to find yourself using technology to help you make a bad decision faster.
• Characteristics of high-quality information include:

1. Accuracy
2. Completeness
3. Consistency
4. Uniqueness
5. Timeliness 

• Example of low quality information

Understanding the Costs of Poor Information

• The four primary sources of low quality information include:

1. Online customers intentionally enter inaccurate information to protect their privacy.
2. Information from different systems have different entry standards and formats.
3. Call center operators enter abbreviated or erroneous information by accident or to save time.
4. Third party and external information contains inconsistencies, inaccuracies, and errors.

• Potential business effects resulting from low quality information include:

1. Inability to accurately track customers.
2. Difficulty identifying valuable customers.
3. Inability to identify selling opportunities.
4. Marketing to nonexistent customers.
5. Difficulty tracking revenue due to inaccurate invoices.

 

Understanding the Benefits of Good Information

• High quality information can significantly improve the chances of making a good decision.
• Good decisions can directly impact an organization's bottom line.

Chapter 5: Organizational Structures that Support strategic Initiatives

Organizational Structures 

• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages.

• Ethics and security are two fundamental building blocks that organizations must base their businesses upon.

IT Roles and Responsibilities 

• Information technology is a relatively new functional area, having only been around formally for around 40 years.

• Recent IT-related strategic positions:

1. Chief Information Officer (CIO) 
2. Chief Technology Officer (CTO)
3. Chief Security Officer (CSO)
4. Chief Privacy Officer (CPO)
5. Chief Knowledge Office (CKO)

Chief Information Officer (CIO)

• Oversees all uses of IT and ensures the strategic alignment of IT business goals and objectives.
• The CIO typically reports directly to the Chief Executive Officer (CEO). CIO's must possess a solid and detailed understanding of every aspect of an organization coupled with tremendous insight into the capability of IT and have strong business ad IT skills. 
• Broad CIO functions include:

1. Manager – ensuring the delivery of all IT projects, on time and within budget.
2. Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization.
3. Communicator – building and maintaining strong executive relationships. 

• Average CIO compensation by industry 

• What concerns CIO's the most

 

 

Chief Technology Officer (CTO)

• Responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT.

Chief Security Officer (CSO)

• Responsible for ensuring the security of IT systems.

Chief Privacy Officer (CPO) 

• Responsible for ensuring the ethical and legal use of information.

Chief Knowledge Office (CKO) 

• Responsible for collecting, maintaining, and distributing the organization’s knowledge.

• Skills pivotal for success in executive IT roles

The Gap between Business Personnel and IT Personnel

• IT Personnel have their own vocabularies consisting of acronyms and technical terms. It possess expertise in functional areas such as marketing, accounting and sales.
• Business Personnel have their own vocabularies based on their experience and expertise.
• This typically causes a communications gap between the business personnel and IT personnel.

Improving Communication

• Business personnel must seek to increase their understanding of IT.
• IT personnel must seek to increase their understanding of the business.
• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel. 

Organizational Fundamental - Ethics and Security

• Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful.
• In recent years, such events as the Enron and Martha Stewart, along with 9/11 have shed new light on the meaning of ethics and security.

Ethics 

• The principles and standards that guide our behavior toward other people.
• Privacy is a major ethical issue.
• Privacy is the right to be left alone when you want to be, to have control over your own personal possessions, and not to be observed without your consent.
• Issues affected by technology advances:

1. Intellectual property - Intangible creative work that is embodied in physical form.
2. Copyright - The legal protection afforded an expression of an idea, such as a song, video game, and some types of proprietary documents.
3. Fair use doctrine - In certain situations, it is legal to use copyrighted material.
4. Pirated software - The unauthorized use, duplication, distribution, or sale of copyrighted software.
5. Counterfeit software - Software that is manufactured to look like the real thing and sold as such.

• One of the main ingredients in trust is privacy. Privacy during Web interactions is a major concern for many individuals.
• Primary reasons privacy issues lost trust for e-business and ruin a relationship. E-business is built on the practice of exchanging large amounts of information between many parties. Without privacy, there will not be any trust. 

 

Security

• Organizational information is intellectual capital and it must be protected.
• Information security is a protection of information from accidental or intentional misuse by persons inside or outside an organization.
• E-business automatically creates tremendous information security risks for organizations.  

OCTOBER 2009

QUESTION 1

Identify five (5) of competitive advantages used by Air Asia.

• Launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed.
• Undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US$0.27).
• Operates scheduled domestic and international flights and is Asia's largest low fare, no frills airline.
• Pioneered low cost traveling in Asia which is then followed by Tiger Airways, Jetstar Asia, Nok Air, Lion Air and Cebu Pacific.
• The first airline in the region to implement fully ticketless travel and unassigned seats.

QUESTION 2

Which of the Porter's generic strategies were applied by Air Asia in the case study and
explain with examples.

: The Porter's generic strategies that are applied by Air Asia is cost leadership. They reach a large market segment and low cost operator. The low cost operator saves on expenses and passes the costs on the customer in the form of low prices for example Air Asia operates scheduled domestic and international flights and is Asia's largest low fare. Air Asia also pioneered low cost traveling in Asia.

QUESTION 3

Based on Porter's Five force model, analyze Air Asia;s buyer power and supplier power.

: Buyer Power
Air Asia assessed by analyzing the ability of buyers to directly impact the price to pay for an item. As an example Air Asia giving a low cost traveling to their customers and also operate s with the world's lowest unit cost of US$0.023(ASK). Usually airline industry has high buyer power because of customer have many choices.

: Supplier Power
Air Asia assessed by the suppliers' ability to directly impact the price they are charging for suppliers. For example Air Asia is currently the main customer of the Airbus A320. The company has place an order of 175 units of the same plane to service its route network by connecting all the existing cities in the region and expending further. Usually airline industry has high supplier power has an there are limited plane and engine manufactures to choose from.

Chapter 4: Measuring the Success of Strategic Initiatives

Measuring Information Technology’s Success

• Key performance indicator measures that are tied to business drivers.
• Metrics are detailed measures that feed KPIs.
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals.

Efficiency and Effectiveness

• Efficiency IT metric measures the performance of the IT system itself including throughput, speed, and availability. It focuses on the extent to which an organization is using its resources in an optimal way, “Doing things right”.
• Effectiveness IT metric measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases. Effectiveness focuses on how well an organization is achieving its goals and objectives, “Doing the right things”.

Benchmarking – Base lining Metrics

• Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain.
• Benchmarking is a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance.
• E-government benchmarks

The Interrelationships of Efficiency and Effectiveness IT Metrics

• Efficiency metrics monitor technology.
• Efficiency metrics are easier to measure and monitor than effectiveness metrics.
• Efficiency IT metrics focus on technology and include:

1. Throughput - the amount of information that can travel through a system at any point.

2. Transaction speed - the amount of time a system takes to perform a transaction.

3. System availability - the number of hours a system is available for users.

4. Information accuracy - the extent to which a system generates the correct results when executing the same transaction numerous times.

5. Web traffic - includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a Web page.

6. Response time - the time it takes to respond to user interactions such as a mouse click.

·         Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:

1. Usability - The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.

2. Customer satisfaction - Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.

3. Conversion rates - The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.

4. Financial - Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

• Effectiveness metrics are more difficult to measure and monitor, for example, how do you measure customer satisfaction?
• Which metrics are more important to a company like eBay – efficiency or effectiveness? Both, eBay continuously measures both efficiency and effectiveness. The company must ensure constant availability and reliability of its systems.

• Security is an issue for any organization offering products or services over the Internet.
• It is inefficient for an organization to implement Internet security, since it slows down processing. However, to be effective it must implement Internet security. Secure Internet connections must offer encryption and Secure Sockets Layers (SSL denoted by the lock symbol in the lower right corner of a browser).
• Ideally, an organization should operate in the upper right-hand corner.
• Operating in the upper left-hand corner or the lower right-hand corner may be in line with an organization's particular strategies.
• No organization would want to operate in the lower left-hand corner.

Metrics for Strategic Initiatives

• Metrics for measuring and managing strategic initiatives include:

1.    Web site metrics.

2.    Supply chain management (SCM) metrics.

3.    Customer relationship management (CRM) metrics.

4.    Business process reengineering (BPR) metrics.

5.    Enterprise resource planning (ERP) metrics.

Web Site Metrics

• Abandoned registrations: Number of visitors who start the process of completing a registration page and then abandon the activity.
• Abandoned shopping carts: Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.
• Click-through: Count of the number of people who visit a site, click on an ad, and are taken to the site of the advertiser.
• Conversion rate: Percentage of potential customers who visit a site and actually buy something.
• Cost-per-thousand (CPM): Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.
• Page exposures: Average number of page exposures to an individual visitor.
• Total hits: Number of visits to a Web site, many of which may be by the same visitor.
• Unique visitors: Number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular Web sites.

Supply Chain Management Metrics

• Back order: An unfilled customer order. A back order is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand.
• Customer order promised cycle time: The anticipated or agreed upon cycle time of a purchase order. It is a gap between the purchase order creation date and the requested delivery date.
• Customer order actual cycle time: The average time it takes to actually fill a customer’s purchase order. This measure can be viewed on an order or an order line level.
• Inventory replenishment cycle time: Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.
• Inventory turns (inventory turnover): The number of times that a company’s inventory cycles or turns over per year. It is one of the most commonly used supply chain metrics.

Customer Relationship Management Metrics

• Customer relationship management metrics measure user satisfaction and interaction and include:

BPR and ERP Metrics

• The balanced scorecard is a management system, (in addition to a measurement system), that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise
• The balanced scorecard views the organization from four perspectives, and users should develop metrics, collect data, and analyze their business relative to each of the perspectives.