The Impact of IT Innovations on Modern Businesses
Chapter 1: IT Innovations and Their Impact on Modern Businesses
The Landscape of IT Innovations
- Cloud Computing, Big Data, Internet of Things (IoT)
- Mobile Digital Platforms
- Artificial Intelligence (AI) and Machine Learning
- Leveraging Social Networks for Business Objectives
New Business Models Driven by IT
- Online Streaming and Downloadable Video (e.g., Netflix, Apple TV Channels, Amazon)
- E-commerce Expansion
- Growth in Social Commerce Fueled by Mobile Platforms
- Mobile Retail E-commerce Experiencing Rapid Growth
Management Transformations
- Increased Mobility and Remote Work
- Utilization of Social Networks and Collaboration Tools
- Acceleration of Business Intelligence Applications
Evolution of Firms and Organizations
- Shift Towards Collaborative Structures with Less Hierarchy
- Emphasis on Competencies and Skills
- Data-Driven and Analytical Decision-Making
- Increased Consumer Interaction through Social Media
- Growing Recognition of IT’s Importance
The Influence of the Internet and Global Communications
The internet and global communications have revolutionized how and where business is conducted.
- Significant Reduction in Costs of Global Operations and Transactions
- Increased Competition for Jobs, Markets, Resources, and Ideas
- Growing Interdependence of Global Economies
- Demand for New Skills, Market Understanding, and Opportunity Identification
- Challenges and Opportunities in a Globalized Market
- Substantial Revenue Generation from Offshore Operations for S&P 500 Firms
- Information Systems as Enablers of Global Commerce
The Rise of the Digital Firm
Characteristics of a Fully Digital Firm:
- Business Relationships Primarily Digitally Enabled and Mediated
- Core Business Processes Executed through Digital Networks
- Key Corporate Assets Managed Digitally
Digital firms offer enhanced flexibility in organization and management, including time shifting and space shifting.
There is a growing interdependence between the ability to leverage information technology and the ability to execute corporate strategies and achieve corporate goals.
Six Strategic Business Objectives of Information Systems
- Operational Excellence
- Development of New Products, Services, and Business Models
- Customer and Supplier Intimacy
- Improved Decision-Making
- Competitive Advantage
- Survival and Sustainability
Operational Excellence
- Improved Efficiency Leading to Higher Profits
- Information Systems and Technologies as Drivers of Efficiency and Productivity
- Walmart’s Success Story: Combining IT and Best Business Practices
- Leveraging Digital Links between Suppliers and Stores for Superior Replenishment (Retail Link System)
- Walmart’s Success Story: Combining IT and Best Business Practices
New Products, Services, and Business Models
- Information Systems and Technologies Empowering Innovation
- Understanding Business Models and Their Transformation (e.g., Apple’s Disruption of Music Distribution with iTunes and Continuous Innovation)
Customer and Supplier Intimacy
- Building Customer Loyalty through Excellent Service
- Examples of Customer Intimacy:
- Personalized Services in High-End Hotels (e.g., Mandarin Oriental’s Use of IT to Track Guest Preferences)
- Supplier Intimacy for Cost Reduction and Efficient Input Provision
- Examples of Supplier Intimacy (e.g., JC Penney’s IT-Enabled Supplier Relationships in Hong Kong)
Improved Decision-Making
- Challenges of Decision-Making without Accurate Information
- Real-Time Data as a Catalyst for Better Decisions (e.g., Verizon’s Web-Based Digital Dashboard for Monitoring Customer Complaints and Network Performance)
Competitive Advantage
- Competitive Advantage Stemming from Achieving Other Business Objectives
- Gaining an Edge over Competitors through:
- Superior Products at Lower Costs
- Enhanced Performance and Responsiveness
- Examples of Industry Leaders Leveraging IT for Competitive Advantage (Apple, Walmart, UPS)
- Information Systems as a Necessity for Business Survival and Competitiveness
- Examples of IT-Driven Competitive Advantage (e.g., Scotiabank’s Introduction of ATMs)
- Meeting Regulatory Requirements through Information Systems (e.g., Toxic Substances Control Act Compliance)
Understanding Key Concepts
- Information Technology (IT): The hardware and software used by businesses to achieve their objectives.
- Information System (IS): Interconnected components that manage information to support decision-making, control, analysis, visualization, and product creation.
- Data: Raw, unprocessed facts.
- Information: Data that has been processed and organized into a meaningful and useful form.
Components of an Information System
- Input, Processing, Output, and Feedback
- Feedback Loop: Output returned to relevant individuals within the organization to evaluate and improve the input stage.
Distinguishing Between Computers/Software and Information Systems
Computers and software serve as the technical foundation, similar to materials and tools used in construction.
Organizational and Managerial Aspects of Information Systems
Organization
- Hierarchy of Authority and Responsibility
- Separation of Business Functions
- Unique Business Processes and Culture
- Organizational Politics
Management
- Setting Organizational Strategy and Responding to Challenges
- Creative Leadership in Developing New Products/Services and Adapting the Organization
Technology
- Hardware and Software
- IT Infrastructure
- Data Management
- Networking and Telecommunications (Networks, Internet, Intranets, Extranets, World Wide Web)
The Importance of IT Infrastructure
IT infrastructure provides the foundation for building and supporting information systems.
Expected Returns on IT Investments
- Increased Productivity
- Revenue Growth
- Enhanced Long-Term Strategic Positioning
The Business Information Value Chain
- Transformation of Raw Data into Valuable Information through Stages
- Value of Information Systems Measured by Improved Decision-Making, Efficiency, and Profitability
The Business Perspective on Information Systems
Emphasizes the organizational and managerial nature of information systems.
Critical Success Factors
- Adopting the Right Business Model
- Investing in Complementary Assets