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.

Chapter 3: Strategic Initiatives for Implementing Competitive Advantages

Strategic Initiative

Organizations can undertake high-profile strategic initiatives including:

• Supply chain management (SCM)
• Customer relationship management (CRM)
• Business process reengineering (BPR)
•  Enterprise resource planning (ERP)

 Supply Chain Management (SCM)

Supply Chain Management involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability. Four basic components of supply chain management include:

1.  Supply Chain Strategy is the strategy for managing all the resources required to meet customer demand for all products and services.  
2. Supply Chain Partners are the partners chosen to deliver finished products, raw materials, and services including pricing, delivery, and payment processes along with partner relationship monitoring metrics.  
3. Supply Chain Operation is the schedule for production activities including testing, packaging, and preparation for delivery.
4.  Supply Chain Logistics is the product delivery processes and elements including orders, warehouses, carriers, defective product returns, and invoicing.

An organization will generate an efficient operation when it applies these steps and information flows among the members in the organizational.

Wal-Mart and Procter & Gamble (P&G) SCM

 

Wal-Mart and P&G implemented a tremendously successful Supply Chain Strategy (SCM). The system links Wal-Mart’s distribution centers directly to P&G’s manufacturing centers. Whenever, a Wal-Mart customer purchases a P&G product, the system will send a message directly to P&G’s factory for a reorder. 

The effective and efficiencies SCM systems for an organization

• Decrease the power of its buyers
• Increase its own supplier power
• Increase switching costs to reduce the threat of substitute products or services
• Create entry barriers thereby reducing the threat of new entrants
• Increase efficiencies while seeking a competitive advantage through cost leadership

The effective and efficiencies SCM systems effect on Porter’s Five Forces

 Customer Relationship Management (CRM)

Customer Relationship Management (CRM) involves managing in all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability. The systems help organizations understand and manage their customers well.

Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems.

For Charles Schwab, he had recouped the cost of a multimillion-dollar CRM system in less than 2 years. The system allowed Schwab to segment his customers in terms of serious and non-serious investors. The CRM system looked for customers that had automatic withdrawal from a bank account as a sign of a serious investor. The CRM system looked for stagnant balances as a sign of a non-serious investor. Charles Schwab could then focus efforts on selling to serious investors, and spend less time attempting to sell to non-serious investors. While for Kaiser, he used CRM to enforce more rigorous eye-screening for diabetic patients.

CRM is not just technology but a strategy, process and business goal that an organization must embrace on an enterprise wide level. Although CRM has many technical components, it is actually a process and business goal simply enhanced by technology. Organizations must first decide that they want to build strong customer relationships and then they determine how IT can support their goals.

CRM overview

Business Process Reengineering (BPR)

Business process is a standardized set of activities that accomplish a specific task such as processing a customer’s order. Business process reengineering (BPR) is the analysis and redesign of workflow within and between enterprises. The purpose of BPR is to make all business processes best-in-class. In the Reengineering the Corporation, the book that is written by Michael Hammer and James Champy there are seven principles for BPR that are recommended.

Finding Opportunity using BPR

(First Case) The diagram below shows the different ways to travel the same road.

A company could improve the way that it travels the road by moving from foot to horse and then from horse to car. However, true BPR would look at taking a different path. A company could forget about traveling on the same old road and use an airplane to get to its final destination. Companies often follow the same indirect path for doing business, not realizing there might be a different, faster, and more direct way of doing business.

(Second Case) Progressive Insurance Mobile Claims Process based on the diagram provided below.

 

Radical and fundamentally new business processes enabled Progressive Insurance to slash the claims settlement from 31 days to four hours. Typically, car insurance companies follow this standard claims resolution process: The customer gets into an accident, has the car towed, and finds a ride home. The customer then calls the insurance company to begin the claims process, which usually takes over a month (refers the left Figure). 

Progressive Insurance improved service to its customers by offering a mobile claims process. When a customer has a car accident he or she calls in the claim on the spot. The Progressive claims adjustor comes to the accident and performs a mobile claims process, surveying the scene and taking digital photographs. The adjustor then offers the customer on-site payment, towing services, and a ride home. (refers the right Figure).

A true BPR effort does more for a company than simply improve it by performing a process better, faster, and cheaper. Progressive Insurance’s BPR effort redefined best practices for its entire industry. The figure displays the different types of change an organization can achieve, along with the magnitude of change and the potential business benefit.

Enterprise resource planning (ERP)

Enterprise resource planning (ERP) integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise wide information on all business operations. Keyword in ERP is “enterprise”.

The true benefit of an ERP system is its ability to collect the many different forms of data from across the different organizational systems and correlate, aggregate, and provide an enterprise wide view of organizational information. 

Sample data from a sales database

Sample data from an accounting database

These are the spreadsheets display, examples of differences in data that can be fixed by using an ERP system.