Digital Organisation samenvatting

2017-2018

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Digital Organisation

Introduction
Vision of Europe
European Commission: digital future of Europe
à Digital transformation is a global element
(Better in Asia and America, we have to keep with up with their digital transformation)
We have to invest more, but we also need the proper kills to put these technologies to effective use
(= e-skilled)

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Chapter 1: Information Systems In Business Today
Rugby Football Union Tries Big Data
• Objective of the Union
– Promote Rugby
Not typically associated with digital organisations, the main activity is playing rugby or football
• Problem
– Improving fan engagement through Big Data.
• Solutions
– Provide data visualization and real-time statistics to draw in fans.
– Provide tactical insights to players and coaches that will improve match play.
• Rugby Football Union uses Try Tracker to capture and analyse Big Data that will be useful to
both fans and players.
• Demonstrates IT’s role in increasing value and revenue in any business.
• Illustrates the potential for technology to improve customer experience.
- Modern football teams are highly levering technology to improve their business model
- Mobile phone to order food or a drink when you’re sitting in your seat at the game
- Increase the experience ands the satisfaction from the audience
= high tec
The only interest to increase the experience of the audience is to increase sales, with the help of
new technologies

How Information Systems Are Transforming Business
Over the past 2 decades the amount of capital investments has been growing
– It is not business as usual anymore in the global economy. Information systems are
transforming our economy.
– Increasing investments in IT (see next slide)
§ Mobile digital platform
For example: the banking sector, businesses like amazon.com & bol.com
§ Systems used to improve customer experience, respond to customer
demand, reduce inventories, and more
§ Growing online newspaper readership
§ Expanding e-commerce and Internet advertising
§ New federal security and accounting laws
When new business models emerge: laws ands regulations are impacted because the current law is
not really accommodating
– As a manager, you want to make sure you make the right investments.
Key question: are you capable as a manager to make the right investments?

Figure 1.1: Information Technology Capital Investment

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What’s New in Management Information Systems
Digital transformation is going at a very fast pace: each time new technologies pop up we have to
review our current business strategies
• Plenty new things, makes this area very exciting! Some important ones:
• New Technology Innovations
– Cloud computing
Store your data in the cloud: Pinterest does it: they do it in the context of their business
Risk? Example: data of a hospital was leaked on the internet. Businesses do this because of the cost
reduction but there is a risk
Salefore.com: a whole business in the cloud
– Big data and the Internet of Things (IoT)
Like a smart city: chip in garbage bin, only go to bin that’s full
Everything starts to talk to everything, highly impact the business technologies: even inventing new
things
Like Uber who fully turned down the services of a taxi, they used technology for this
– Mobile digital platform
• New business models (eg. Uber etc)
• Expanding e-commerce
• Management changes
– Online collaboration and social networking software
– Business intelligence
– Virtual meetings
Impacting the way we work together (Blackboard, google docks)
• Changes in firms & organizations
More and more parts of IT are currently outsourced

‘’It doesn’t matter’’ – Carr 2003 (!)
Parallel between IT and electricity namely the first companies who started with electricity had a
huge advantage = unique
But what happened to the electricity as an asset? It has become a commodity: we try to use it at a
low cost: same is happening to IT
There is a part in IT that has commodities: examples: laptop, iPhone, printer (outsource this kind of
IT)

‘’Business processes do matter’’ – Carr
Business technologies can really impact the businesses, for an example as bol.com IT does matter

Globalization Challenges and Opportunities: A Flattened World
• Internet has drastically reduced costs of operating on global scale
• Presents both challenges and opportunities
– Increases in foreign trade, outsourcing
Different societies are doing business with each other: the world has become flat again: the internet
brought a huge leverage in the globalization of the world
à Business have to keep reinventing themselves, so they can create a good society

Globalizations has pro’s and con’s
Pro’s: we are able to do in a much easier way business around the globe, our market has extended
Con’s: a lot of industries are leaving Europe and build businesses in China and India, outsourcing has
become much easier

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The Emerging Digital Firm
• In a fully digital firm:
– Core business processes are accomplished through digital systems (logistics)
– Key corporate assets are managed digitally (eg. HR, finance)
– Significant business relationships are digitally enabled and mediated
• Digital firms offer greater flexibility in organization and management
– Time shifting, space shifting = do business in a virtual market (online shopping)
= work 24 hours on 24 hours

Strategic Business Objectives of Information Systems
• Growing interdependence between:
– Ability to use information technology and
– Ability to implement corporate strategies and achieve corporate goals

• Firms invest heavily in information systems to achieve six strategic business objectives:
1. Operational excellence
Understand how your business process is operated and making it as cost efficient and effective as
possible
The fulfilment tac: when someone orders a package it requires a lot of technology to get it in time by
the customer
Retail: fully automated supply chain: how much milk is still available in the store and do we have to
supply more now?
2. New products, services, and business models
iTunes has turned the music industry down (highly impacted) you can now legally stream music à It
is no longer physical (CD)
Uber: taxi industry
Air bnb: hotel industry
3. Customer and supplier intimacy
Hotel chains who try to capture your data and preferences, they will make sure that in your room
your favourite song is playing and the temperature is exact what you like: fully automated
KLM: flying with airplanes has become a commodity, you chose your flight based on the price. It is
important to increase customer satisfaction
à KLM Invested a lot in social media, when u lose your baggage you can put your complaint on
Facebook or twitter and KLM guarantees that within one hour you are contacted with a solution
= creating a unique facility, considering this when choosing a flight
4. Improved decision making
A chain of bakers: educate the bakers so that they are up to date with the health regulations
Bakery battle app: game on health regulations, security regulations
à Bakers that had a bad score put together with bakers that had a good score so they could work
together and learn from each other
à Managers are able to quickly review an employee

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 5. Competitive advantage
Continuously improving experience: to be competitive: have an advantage
First bank à internet à All the banks become internet bank à First bank à Mobile bank à All the
banks become mobile banks
Very competitive industry: what is going to happen next?
6. Survival
Firms have to keep up with other companies in order to be competitive: invest in information
systems and technology: necessities of doing business

GDPR
General data production regulations: all companies in Europe have to ensure that all personal
information is guarantied to be confidential and integrated: require an investment in IT, can get a
fine if they don’t invest and don’t keep up with this regulation

Sox
CEO/CFO has to guarantee in person that all the facts in the financial report are accurate and correct
if it’s not accurate the fine is not a fine on the revenue but the CEO/CFO goes to jail
à Technology helps to keep it accurate and keeps it protected so other people don’t have access

Video Case: https://www.youtube.com/watch?v=oBOeWylSMfM
Which of the six reasons to invest in it did we come across in this video?
− Operational excellence
Moving packages is a commodity activity, making their supply chain as operational excellent as
possible
− Competitive advantage: claim to be the best in this supply chain
− Survival
− Customer intimacy
You can see where your package is, even when it is too late
− Improves decisions making
Weather forecast to improve way they use airplanes

What Is an Information System?
• Information system
– Set of interrelated components
– Collect, process, store, and distribute information
– Support decision making, coordination, and control
Capture data (input) and arrange the data so it results in information (output)
Collection of activities that collect processes and delivers information to the audience
• Information vs. data
– Data are streams of raw facts
– Information is data shaped into meaningful form
If you go to the store and you buy stuff and you get a ticket, left side of the ticket are data elements
(beer, milk) when does it become information? ‘Colruyt has sold 10 bottles of milk’
à Data has become aggregated

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Figure 1.3 data and information

Dimensions of Information Systems: Organizations
Different layers of the organization, requirements of the information systems are different from
layer to layer
• Hierarchy of authority, responsibility
– Senior management
Long-range strategic decisions about products and services: ensure financial performance of the firm
– Middle management
Carries out the plans of the senior management
– Operational management
Monitoring the daily activities of the business
– Knowledge workers
Design products or services: create new knowledge for the firm
– Data workers
Assists with communications at all levels of the firm
– Production or service workers
Produce the product: deliver the service
• Separation of business functions
– Sales and marketing
– Human resources
– Finance and accounting
– Manufacturing and production
• Unique business processes
• Unique business culture
• Organizational politics

Dimensions of Information Systems: Management
How are information systems delivering value? Information systems capture data, transform data
into information, give information to business processes and management activities
• Managers set organizational strategy for responding to business challenges
• In addition, managers must act creatively
– Creation of new products and services
– Occasionally re-creating the organization

Dimensions of Information Systems: Technology

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Change their business strategies to the disruptive technology
• Computer hardware and software
• Data management technology
• Networking and telecommunications technology
– Networks, the Internet, intranets and extranets, World Wide Web
• IT infrastructure: provides platform that system is built on


Figure 1.7: The Business Information Value Chain

It Isn’t Just Technology: A Business Perspective on Information Systems
• Investing in information technology does not guarantee good returns
• There is considerable variation in the returns firms receive from systems investments
• Factors
– Adopting the right business model
– Investing in complementary assets (organizational and management capital)

There is much more to be done than just investing in IT à Value
Assumptions: if you invest in IT the value will go up
= no correlation = IT black hole = we invest in IT but we don’t see the benefits in value

When will the benefits emerge?
When the sales and the marketing people start to use the working system
Getting value out of information systems requires investment in IT + much more investment in
changing behaviour, changing your business policy, educating your people…

Figure 1.8: Variation in Returns on Information Technology

Complementary Assets: Organizational Capital and the Right Business Model
– Assets required to derive value from a primary investment
– Firms supporting technology investments with investment in complementary assets
receive superior returns
– Example: Invest in technology and the people to make it work properly
– Complementary assets
– Examples of organizational assets
– Appropriate business model

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 – Efficient business processes
– Examples of managerial assets
– Incentives for management innovation
– Teamwork and collaborative work environments
– Examples of social assets
– The Internet and telecommunications infrastructure
– Technology standards


Academic disciplines involved

Bringing many different academic disciplines into management information systems = very
multidisciplinary course à Technical and behavioural approaches
Bringing together 2 eras: boundary between business and IT


Figure 1.10: A Sociotechnical Perspective on Information Systems

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Chapter 2: Global E-business and Collaboration
What are the business processes in an organization?
What is the role of information system depending on where u are in the organisation?
More specific: collaboration and social business

Enterprise Social Networking Helps ABB innovate and Grow
• Problem
– Outdated static technology
– Geographically dispersed
• Solutions
– Develop knowledge sharing strategy and goals
– Change knowledge and collaboration processes
– Change organizational culture
– Deploy Inside+, with Yammer, Office 365, and SharePoint
• ABB uses Inside+ to provide new channels for knowledge acquisition, innovation, and
collaboration
• Demonstrates IT’s role in helping organizations improve performance and remain
competitive
• Illustrates the ability of IT systems to support collaboration and teamwork

Building and selling power generators: widespread in the world: information system supporting the
business is rather complicated: if someone wants information of the organisation he has to log into 7
different systems
Organisations who are moving from a situation where they have to log into 7 systems to a 1
integrated system for the whole business à this can highly increase the efficiency

Business Processes
• Business processes
– Flows of material, information, knowledge
– Sets of activities, steps
– May be tied to functional area or be cross-functional
A set of activities that together transform information into a specific service or value for the
customer
• Businesses: can be seen as collection of business processes
• Business processes may be assets or liabilities
Liability: the way they operate the sales and marketing way is not being done good
The business as a whole can never have a view on everything because the working people are
sometimes keeping information behind
Asset: doing sales and marketing process very good
• Examples of functional business processes
– Manufacturing and production
• Assembling the product
– Sales and marketing
• Identifying customers
– Finance and accounting
• Creating financial statements
– Human resources
• Hiring employees

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 Figure 2.1: The Order Fulfillment Process

How Information Technology Improves Business Processes
• Increasing efficiency of existing processes
– Automating steps that were manual
• Enabling entirely new processes
– Changing flow of information
– Replacing sequential steps with parallel steps
– Eliminating delays in decision making
– Supporting new business models
Technology can make sure that the business process is run in a more efficient way
Use technology to really rethink the way we are doing business: highly automate a business process
to increase efficiency
For example:
− Tax office: every year people have to submit their salaries. In the past it was a paper
based process. Now they automated the process: fill in the income statement
online and in the tax office it was printed out: back to paper bases: little bit
different
− If you are retired it means that u receive a pension from the government: fill in
what you got from the government. Now government has integrated their data
bases: now they send u a tax claim with already all the data they have from you and
they just have to click on ‘’I agree with the statement’’ = rethinking the process

Systems for Different Management Groups
• Transaction processing systems
Systems that typically automate recurring operational activities in business processes
– Serve operational managers and staff
– Perform and record daily routine transactions necessary to conduct business
§ Examples: sales order entry, payroll, shipping, reception in the hotel:
complete the information of your booking in the system
– Allow managers to monitor status of operations and relations with external
environment
– Serve predefined, structured goals and decision making
• Systems for business intelligence
– Data and software tools for organizing and analyzing data
– Used to help managers and users make improved decisions
• A payroll transaction processing systems à keeps track of money paid to employees
It keeps track of money paid to employees: employee data is captured: when are u working at
home/when are you abroad: in the past it was paper based
• Management information systems
For example: this system will report the sales (figure 2.4)
• Decision support systems
These are typically other types of software, it can accommodate ‘’what if’’ scenarios

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For example: what will happen to our sales when we increase the price with 2%?
There is a calculating power in these systems available
For example: shipping company (figure 2.5) very different parameters: it will calculate the best route
to go from Antwerp to New York
• Executive support systems
Oriented towards the executive committees/board of an organisation
For example: a dashboard, where all different types of information are aggregated into one single
overview including external information
= non-routine, will help them take appropriate decisions in the organisation

Management Information Systems
• Serve middle management
• Provide reports on firm’s current performance, based on data from TPS
• Provide answers to routine questions with predefined procedure for answering them
• Typically, have little analytic capability

Figure 2.3: How Management Information Systems Obtain Their Data from
the Organization’s TPS

Figure 2.4: Sample MIS Report

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Decision support systems
• Serve middle management
• Support non-routine decision making
– Example: What is the impact on production schedule if December sales doubled?
• May use external information as well TPS / MIS data
• Model driven DSS
– Voyage-estimating systems
• Data driven DSS
– Intrawest’s marketing analysis systems

Figure 2.5: Voyage-Estimating Decision-Support System

Executive Support Systems
• Support senior management
• Address non-routine decisions
– Requiring judgment, evaluation, and insight
• Incorporate data about external events (e.g., new tax laws or competitors) as well as
summarized information from internal MIS and DSS
• Example: Digital dashboard with real-time view of firm’s financial performance

Enterprise Applications
Also information system that brings everything together in one integrated whole
• Systems for linking the enterprise
• Span functional areas
• Execute business processes across the firm
• Include all levels of management
• Four major applications
– Enterprise systems
– Supply chain management systems
– Customer relationship management systems
– Knowledge management systems

2 typologies for looking at information systems
− In business (TPS, MIS, DCS, ESS)
− Around business

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 Figure 2.6: Enterprise Application Architecture

Enterprise Systems
Single central database to store all the information in: all business processes run on one single
database: all other elements are integrated à huge advantages: quality of data will be much higher
Disadvantage: you have to store your data each time again: inefficient
• Collect data from different firm functions and store data in single central data repository
• Resolve problems of fragmented data
• Enable:
– Coordination of daily activities
– Efficient response to customer orders (production, inventory)
– Decision making by managers about daily operations and longer-term planning
– Integration
– Standardization

Enterprise resource planning ERP à SAP is a brand of an ERP system (most known)
SAP has looked at the financial process in many organisations and tried to extract a genetic business
process out of it: what is a typical way of doing a typical process, this is stored in those systems:
program forces you to use this way of process (standardization): you can put a whole company
(Finance, HR, marketing) into a ERP system

Supply Chain Management (SCM) Systems
Information system that will help u optimise your supplies: system will automatically see what is still
in stock and see if your close to having nothing (in a shop for example)
• Manage firm’s relationships with suppliers
• Share information about:
– Orders, production, inventory levels, delivery of products and services
• Goal:
– Right amount of products to destination with least amount of time and lowest cost
– Example: https://www.youtube.com/watch?v=SUe-tSabKag
In the system every sold item is tracked: management information system: not only capturing the
data but also trying to forecast what u are going to buy
Decision support system: external parameters: what is happening to the sales when the weather is
bad?
Supplier can see the stock of Walmart: he can send stock to Walmart if he sees that they are running
out à Example of a supply chain management system

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Fulfilment system
how can we make sure we fulfil the wishes of the customers?
When u buy a product at bol.com/ amazon.com before 11 o’clock your product is shipped at night:
get it to your door in less than 24 hours
Everything is fully optimised when u click on ‘’buy’’ a robot starts moving: server keeps them from
colliding

Intern organisational systems
Systems that connect two types of business (for example: Walmart and the supplier)

Customer Relationship Management (CRM) Systems
Business processes: information systems that can help us to better capture the needs of the
customers
• Provide information to coordinate all of the business processes that deal with customers
– Sales
– Marketing
– Customer service
• Helps firms identify, attract, and retain most profitable customers
• Example: https://www.youtube.com/watch?v=VYoKsjPiNYA
Food service company: try to serve the customer in a personal way: it’s difficult to get new types of
customers and when u have them u have to make sure that they stay (attracting them) because of
this challenges they us CRM systems
In the past: data was not integrated, they didn’t have shared information on the customers

Sell, service and market smarter with the world
www.salesforce.com

Knowledge Management Systems (KMS)
All over the place: try to make sure to share knowledge
• Support processes for capturing and applying knowledge and expertise
– How to create, produce, and deliver products and services
• Collect internal knowledge and experience within firm and make it available to employees
• Link to external sources of knowledge
SharePoint: store and management documents over the organisation: KMS: have a better use and
leverage of the information that’s in the organisation

Intranets and Extranets
• Also used to increase integration and expedite the flow of information
• Intranets
Mostly only employees who have access to your information
– Internal company websites accessible only by employees
• Extranets
Also customers and suppliers that have access to your information
– Company websites accessible externally only to vendors and suppliers
– Often used to coordinate supply chain

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E-business, E-commerce, and E-government
• E-business
Systems that are trying to automate our primary and secondary business processes
– Use of digital technology and Internet to drive major business processes
• E-commerce
Using technology to make online market places, buy and selling goods and services to the internet
– Subset of e-business
– Buying and selling goods and services through Internet
• E-government
Same as E- business; using technology to innovate the business processes of the government
– Using Internet technology to deliver information and services to citizens, employees,
and businesses

What Is Social Business?
Business that are using technology to increase the engagement of employees, customers
• Social business
– Use of social networking platforms (internal and external) to engage employees,
customers, and suppliers
• Aims to deepen interactions and expedite information sharing
• “Conversations”
• Requires information transparency
– Driving the exchange of information without intervention from executives or others
• Example: https://www.youtube.com/watch?v=H7h4rUBsX3M
Global company: people work together in innovation teams: find a way to get groups together in
innovation groups while using technology (can’t fly them all over) like an internal social network
à how do you create the social place?
What’s presented here is very close to the concept of KMS: this type of innovation is close to that: in
an easier way share knowledge
Challenge: uses social technologies such as wiki, virtual worlds, google dockx
Not only about implementing the technologies but also changing the way of operating and
collaborating in the organisation (business (people, culture) + technology)

Business Benefits of Collaboration and Teamwork
• Investments in collaboration technology can bring organization improvements, returning
high ROI
• Benefits
– Productivity
– Quality
– Innovation
– Customer service
– Financial performance
§ Profitability, sales, sales growth

Figure 2.7: Requirements for Collaboration

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Tools and Technologies for Collaboration and Social Business
• E-mail and instant messaging (IM)
• Wikis
• Virtual worlds
• Collaboration and social business platforms
– Virtual meeting systems (telepresence)
– Cloud collaboration services (Google Drive, Google Docs, etc.)
– Microsoft SharePoint and IBM Notes
– Enterprise social networking tools

Figure 2.8: The Time/Space Collaboration and Social Tool Matrix

IT department trying to deliver and implement all the software and applications
à Running the IT department is also important

The Information Systems Department
• Often headed by chief information officer (CIO)
– Other senior positions include chief security officer (CSO), chief knowledge officer
(CKO), chief privacy officer (CPO), chief data officer (CDO)
• Programmers
• Systems analysts
• Information systems managers
• End users
CIO (chief information officer) = head of the IT department
People who develop (programmers) have to understand the functional requirements and the people
who do operations need to make sure the website is running 24/24 and 7/7

Organizing the Information Systems Function
• IT governance
– Strategies and policies for using IT in the organization
– Decision rights
– Accountability
– Organization of information systems function
§ Centralized, decentralized, and so on
IT governance
Decision rules: how do we make appropriate decisions about investing in technology?
How can we make sure that our business people and IT people are working well together so we can
achieve alignment between business and IT?
à Achieve value out of digital transformation: if you design this correctly it’s possible
IT governance à alignment à Value

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Chapter 3: Information Systems, Organizations, and Strategy

https://www.youtube.com/watch?v=hMa5YHOInIc
Old existing organizations, how do they go across digital transformation?
The core business is making engines for airplanes. They need to have a lot of smart people and
materials in house
Engines are full of sensors: when an airplane flies it creates data: help them better understand how
engines work
à Data science: all industrial space will also be impacted by the digital transformation

Tate & Lyle Devise a Global IT Strategy
• Sugar production and distribution
• Problem
– Intense competition
– Inefficient manual system of reconciliation
• Solutions
– Centralize financial accounting at a single location
– Bring together all general ledger accounts and transactions into a single system
– Integration of legacy systems into the new single system
– Revise and simplify business processes based on industry best practices
• Tate & Lyle uses technology to produce financial statements with a high degree of accuracy
• Demonstrates IT’s role in helping organizations achieve business strategic objectives and
remain competitive

The Relationship Between Organizations and Information Technology
• Information technology and organizations influence each other
– Relationship influenced by organization’s
§ Structure
§ Business processes
§ Politics
§ Culture
§ Environment
§ Management decisions

What Is an Organization?
• Technical definition
You have an input, labour and capital, the organisation produces things and in the end you have an
output back to the environment
We can replace labour by IT (robotics) and then we have another system: can we be more effective
and efficient in combining labour and capital? à IT: in practice organizations are not that technical,
they are filled with people
– Formal social structure that processes resources from environment to produce
outputs
– A formal legal entity with internal rules and procedures, as well as a social structure

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 • Behavioral definition
This element will change the impact of IT on the organization: change peoples culture and beliefs
otherwise there will be a resistant: rules, regulations, cultures, norms, values
– A collection of rights, privileges, obligations, and responsibilities that is delicately
balanced over a period of time through conflict and conflict resolution

Figure 3.2: The Technical Microeconomic Definition of the Organization

Relation to IT: how are the inputs of labor and capital combined when we introduce technology (or
replace labor by technology (robotics)?

Figure 3.3: The Behavioral View of Organizations

Relation to IT: introducing new IT is more more than just replacing, it might impact rights, value,
norms…

Features of Organizations
Have an impact on how we are going to look at IT
• Use of hierarchical structure
• Accountability, authority in system of impartial decision making
• Adherence to principle of efficiency
• Routines and business processes
• Organizational politics, culture, environments, and structures

Routines and Business Processes
People work according to a certain routine: collection of routines will become a business process: all
the business processes together form the organizations
• Routines (standard operating procedures)
– Precise rules, procedures, and practices developed to cope with virtually all
expected situations
• Business processes: Collections of routines
• Business firm: Collection of business processes

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 Figure 3.4: Routines, Business Processes, and Firms

Organizational Politics
Politics and power play will always impact our IT decision making: we have to be aware of that. How
can u move away from that power play (= attempt to gain an advantage by showing you are more
powerful) and make IT decisions more transparent?
• Divergent viewpoints lead to political struggle, competition, and conflict.
• Political resistance greatly hampers organizational change.
• (eg. investment choice influenced because of personal preference for a specific brand)

Organizational Culture
Close to the power play: the way we look at how we have to work together in an organisation
• Encompasses set of assumptions that define goal and product
– What products the organization should produce
– How and where it should be produced
– For whom the products should be produced
• May be powerful unifying force as well as restraint on change
• (eg. new CRM system is introduced but there is no “quality” assurance culture for data)
A customer relationship management system
= convert needs into sales
Culture? People at the firm who had to insert data into the system did not have a culture of quality
control on the data (person says ‘Antwerpen’ or says ‘Antwerp’)

Organizational Environments
Evolutions and IT will impact the way we organise our businesses (IoT): it may be that our business
strategy requires new technology: technology is often used as a way to look at the environment:
environment can influence or business strategy
• Organizations and environments have a reciprocal relationship
• Organizations are open to, and dependent on, the social and physical environment
• Organizations can influence their environments
• Environments generally change faster than organizations
• Information systems can be instrument of environmental scanning, act as a lens

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Disruptive Technologies
• Substitute products that perform as well as or better than existing product
• Technology that brings sweeping change to businesses, industries, markets
• Examples (winner and losers): digital photography, internet music
Losers: the people who made tapes for photos/people who made cd’s
Winners: new digital camera’s/ Apple
• First movers and fast followers
– First movers—inventors of disruptive technologies
– Fast followers—firms with the size and resources to capitalize on that technology
• Note: Garnter Hype Cycle: https://www.youtube.com/watch?v=YDbkY2UoIeo
Hype cycle is very popular in the market. It is a way to look at the technology and where they are in
the maturity

Organizational Structure
Structure of the organization will also have an impact on which technology we will use:
organizational structure will impact the information system structure
• Five basic kinds of organizational structure (Mintzberg)
– Entrepreneurial (young, simple structure, eg. start-up)
– Machine bureaucracy (bureaucracy, centralized, slow chaning, eg. midsize
manufacturing)
– Divisionalized bureaucracy (combination of bureaucracies, different
products/services, eg. General Motors)
– Professional bureaucracy (knowledge based, experts, weak centralized authority,
hospital)
– Adhocracy (task force oriented, eg. consultancy firm)
• Information system often reflects organizational structure

Other Organizational Features
• Goals
– Coercive (prison), utilitarian (business), normative (university), and so on
• Constituencies
Stakeholders: the more stakeholders are involved the more complicated the information systems
are
• Leadership styles
• Types of tasks

Economic impact: Transaction Cost Theory
Transaction cost
= costst that organziations have to make when they want to require goods and services in the
market
• Firms seek to economize on transaction costs (the costs of participating in markets)
– Vertical integration, hiring more employees, buying suppliers and distributors
• IT lowers market transaction costs, making it worthwhile for firms to transact with other
firms rather than grow the number of employees (eg. Dell)

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Become a vertical integrated company: do everything yourself: you have less transaction costs: you
can become a bigger company: IT can lower the transaction cost
Because of IT it can become more efficient because IT makes it easier to do transactions in the
market
IT is reducing the transaction cost = economic impact

Economic impact: Agency Theory
= owner of the company and the agent that works for the company
= costs that you have to make as an owner to control the agent: agent will maybe not work by
himself for your best interest
à A big company has a lot more agency costs than a small company
• Firm is nexus of contracts among self-interested parties requiring supervision
• Firms experience agency costs (the cost of managing and supervising) which rise as firm
grows
• IT can reduce agency costs, making it possible for firms to grow without adding to the costs
of supervising, and without adding employees

Impact of IT?
Agency cost can go down because of the use of technology, systems that give you more information
at hand, in real time, makes it for the owner much more efficient to control your workers
Force people to work in a specific way trough an information system
à Agency cost reduces

Organizational and Behavioral Impacts
It supports our move towards post – industrial organizations
= knowledge central systems
Middle management can just be replaced by IT: you will have a flat organizational structure
• IT flattens organizations
– Decision making is pushed to lower levels
– Fewer managers are needed (IT enables faster decision making and increases span
of control)

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 • Postindustrial organizations
– Organizations flatten because in postindustrial societies, authority increasingly relies
on knowledge and competence rather than formal positions (information systems
enable task-force & network oriented organizations in which groups comes together
to complete a specific task).
– As an example, read p. 120-121 (Can technology replace managers?)

Understanding Organizational Resistance to Change
Understand the resistance of change: will always be there in organizations
Why is there resistance? If you introduce something new in an organization, you also have to change
the structure, the people, the job tasks and the information technology
• Information systems become bound up in organizational politics because they influence
access to a key resource—information
• Information systems potentially change an organization’s structure, culture, politics, and
work
• Four factors
– Nature of the innovation
– Structure of organization
– Culture of organization
– Tasks affected by innovation

The Internet and Organizations
The transaction cost and agency cost have reduced dramatically since the internet was introduced
• The Internet increases the accessibility, storage, and distribution of information and
knowledge for organizations
• The Internet can greatly lower transaction and agency costs
– Example: Large firm delivers internal manuals to employees via a corporate website,
saving millions of dollars in distribution costs
Implications for the Design and Understanding of Information Systems
• Organizational factors in planning a new system:
– Environment
– Structure
§ Hierarchy, specialization, routines, business processes
– Culture and politics
– Type of organization and style of leadership
– Main interest groups affected by system; attitudes of end users
– Tasks, decisions, and business processes the system will assist

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Porter’s Competitive Forces Model (!)
• Why do some firms become leaders in their industry?
• Michael Porter’s competitive forces model
– Provides general view of firm, its competitors, and environment
• Five competitive forces shape fate of firm:
Porter: as an organization you have to look outside: what are the competitive forces out there that
can impact your business?
– Traditional competitors
– New market entrants
– Substitute products and services
– Customers
– Suppliers

Figure 3.8: Porter’s Competitive Forces Model

Information System Strategies for Dealing with Competitive Forces
• Low-cost leadership
For example: Colruyt wants to be the cheapest so they use a supply chain management system to
make sure they deliver the cheapest
– Produce products and services at a lower price than competitors
– Example: Walmart’s efficient customer response system
• Product differentiation
For example: you can buy a fully customized shoe online
– Enable new products or services, greatly change customer convenience and
experience
– Example: Google, Nike, Apple
– Mass customization ßà mass production
• Focus on market niche
Focus only on the customers that are identified as highly profitable (using technology to create
unique services)
– Use information systems to enable a focused strategy on a single market niche;
specialize
– Example: Hilton Hotels’ OnQ system
• Strengthen customer and supplier intimacy
– Use information systems to develop strong ties and loyalty with customers and
suppliers
– Increase switching costs
Cost of switching from one product to a competing product
– Examples: Chrysler, Amazon, Starbucks, KLM

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What happened with the bargaining power of the customers of Brussels airlines since the internet?
It has become more easy for the customer to compare: chose an airline that has the lowest cost:
bargaining power has increased: Brussels airlines suffers from that

KLM invested in social media: put your complaint on social media: guarantee that within one hour
they will help u out

For example: bookstore
Competitive force: you have e-books these days (substitute products)
New market entrance, if you have a bookshop, the entry barrier to begin a new shop is very low: you
can just begin an online bookstore: because of the internet the competitive forces are changing:
they are becoming threats: how to change the threats into opportunities?
= use technology to create a strategy

The Internet’s Impact on Competitive Advantage
• Transformation or threat to some industries
– Examples: travel agency, printed encyclopedia, media
• Competitive forces still at work, but rivalry more intense
• Universal standards allow new rivals, entrants to market
• New opportunities for building brands and loyal customer bases

Smart Products and the Internet of Things
• Internet of Things (IoT)
– Growing use of Internet-connected sensors in products
• Smart products
– Fitness equipment, health trackers
• Expand product differentiation opportunities
– Increasing rivalry between competitors
• Raise switching costs
• Inhibit new entrants
• May decrease power of suppliers

The Business Value Chain Model
Tries to explain how a company creates value for the customer; always have primary and secondary
activities
– Firm as series of activities that add value to products or services
– Highlights activities where competitive strategies can best be applied
• Primary activities vs. support activities
– At each stage, determine how information systems can improve operational efficiency and
improve customer and supplier intimacy
– Utilize benchmarking, industry best practices

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 Figure 3.9: The Value Chain Model

Primary activities can only operate if there are supporting of secondary activities
Connection to IT? IT can help us make a specific activity more effective and efficient

Extending the Value Chain: The Value Web
• Firm’s value chain is linked to value chains of suppliers, distributors, customers
• Industry value chain
• Value web
– Collection of independent firms using highly synchronized IT to coordinate value
chains to produce product or service collectively
– More customer driven, less linear operation than traditional value chain

Figure 3.10: The Value Web

Synergies
Whole value chain has become digitalised: organizations use software to make those activities more
effective and efficient (RP system or many different systems)
IT helps us to create synergies
• When output of some units are used as inputs to others, or organizations pool markets and
expertise
• Example: merger of Bank of NY and JPMorgan Chase
When two bancs merge: they will merge with the potential of creating synergies: banc has merged
and IT is used in the back office to create and put together all those business processes

Core competencies
IT can be used to create a strength in core competencies
• Activity for which firm is world-class leader
• Relies on knowledge, experience, and sharing this across business units
• Example: Procter & Gamble’s intranet and directory of subject matter experts

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Network-Based Strategies
• Take advantage of firm’s abilities to network with one another
• Include use of:
– Network economics
– Virtual company model
– Business ecosystems

Network economics
Economic models that do not suffer from decreasing marginal profits: the bigger the network, the
bigger the gain for all the members in the network
• Marginal cost of adding new participant almost zero, with much greater marginal gain
• Value of community grows with size
• Value of software grows as installed customer base grows
• Compare to traditional economics and law of diminishing returns
• Eg. Uber, Airbnb

Virtual company model
Integrated trough an information system
• Virtual company
– Uses networks to ally with other companies
– Creates and distributes products without being limited by traditional organizational
boundaries or physical locations
• Example: Li & Fung
– Manages production, shipment of garments for major fashion companies
– Outsources all work to thousands of suppliers

Business Ecosystems and Platforms
• Industry sets of firms providing related services and products
• Platforms
– Microsoft, Facebook
• Keystone firms (eg. Apple)
They provide a platform
• Niche firms (eg. developers of Apps)
Thousands of little companies that make apps for the iPhone
• Individual firms can consider how IT will help them become profitable niche players in larger
ecosystems

For example: city banc was the fist banc that used technology to get money out of the wall
City bank became the biggest banc of the world because of this technology but the technology has
commoditised: first company with this competitive advantage but other players will also embrace
this technology

IT à Value
Start investing in IT more: it is not because we invest in IT that we get the value: research that
demonstrates that if you are in a position of alignment (investing in the right context in your
business strategy) IT strategy is in line with your business strategy = more value

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Challenges Posed by Strategic Information Systems
• Sustaining competitive advantage
– Competitors can retaliate and copy strategic systems
– Systems may become tools for survival
• Aligning IT with business objectives
– Performing strategic systems analysis
§ Structure of industry
§ Firm value chains
• Managing strategic transitions
– Adopting strategic systems requires changes in business goals, relationships with
customers and suppliers, and business processes

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Chapter 8: Securing Information Systems
Focus on the risk that we have while using technology in our business processes.

Story of Stuxnet: https://www.youtube.com/watch?v=7g0pi4J8auQ
The more we are becoming digitalized, the more threats there are: we have to be aware of the risk
that emerges out of technology

Hackers Attack Singapore’s Telecom Infrastructure
• Hackers targeted one of Singapore’s major telecom companies with a massive DDoS attack
• Demonstrates vulnerabilities in information technology systems
• Illustrates the some of the reasons governments and firms need to pay special attention to
information system security
Service attack: sending millions of messages to one central server and the central server will shut
down then

Why Systems Are Vulnerable
• Security
– CIA
• Controls
– Methods, policies, and organizational procedures that ensure safety of
organization’s assets; accuracy and reliability of its accounting records; and
operational adherence to management standards
One of the risks that we face is information security, the topic of information security is always
defined with the 3 letter word CIA:
− Confidentiality of information (only people who are authorized have access to
information)
− Integrity (is the date accurate?)
− Availability (information has to be available at an appropriate time)
Management controls are things that you implement in your organization to make sure there are no
CIA concerns
For example: passwords before you go on blackboard = security control to ensure confidentiality

Figure 8.1: Contemporary Security Challenges and Vulnerabilities

Where can things go wrong? Everywhere (security concerns)
− iPhone can be stolen (= confidentiality breach)
− power interruption at home and laptop is ruined (= availability, you have no
information)
The more we are depending on technology, the more challenges and threats we have

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Internet Vulnerabilities
– Network open to anyone
– Size of Internet means abuses can have wide impact
– Use of fixed Internet addresses with cable / DSL modems creates fixed targets for hackers
– Unencrypted VOIP (voice over IP)
– E-mail, P2P, IM (peer to peer, instant messaging)
• Interception
• Attachments with malicious software
• Transmitting trade secrets

Wireless Security challenges
− Radio frequency bands easy to scan (à wireless network, even at home)
− SSIDs (service set identifiers)
Identify access points: broadcast multiple times: can be identified by sniffer programs
− War driving
Eavesdroppers drive by buildings and try to detect SSID and gain access to network and resources
Once access point is breached: the intruder can gain access to networked drives and files
− Rogue access points

Figure 8.2: Wi-Fi Security Challenges

Malicious Software: Viruses, Worms, Trojan Horses, and Spyware
Malicious Software: Viruses, Worms, Trojan Horses, and Spyware
• Malware (malicious software)
Just a broad definition of all types of software that can do bad things with your machine
• Viruses (typically spreading after human action)
Piece of software that can damage your machine, there needs to be a human action to spread the
virus (for example: an e-mail)
• Worms (independent)
Also a software program, they can independently spread themselves: it makes the impact much
more severe
• Worms and viruses spread by
– Downloads and drive-by downloads
– E-mail, IM attachments
• Mobile device malware (risk to corporate systems)
Locks or reads the pin code that you press into your mobile phone
For example: for your banking app
• Social network malware (users trust messages)
Facebook and Instagram are ‘’trusted’’, virus in a message on Facebook or Instagram
• Trojan horse
It means that you are receiving something that seems to be friendly/common, but you click on it and
you can get a virus

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 • SQL injection attacks (abuse entry pages on website)
If developers of an online form did not secure the form good enough, the ‘’bad’’ guys can encrypt a
virus in those rows (database): he or she can get then access to all the information
• Ransomware
You have been on a website that has been infected, and you get a virus, your laptop will lock down
and you get a message with ‘’pay 500$ otherwise we will hack your computer’’
• Spyware
– Key loggers
Spyware will know when you open up your online banking system and will know when you are asked
to give your pin code

Hackers and Computer Crime
• Hackers vs. crackers
Crackers: are the really bad guys, want to get money
Hackers: there can be good hackers, hack a company to explain which threats they are facing, not to
damage them
• Activities include:
− System intrusion
− System damage
− Cyber vandalism
Intentional disruption, defacement, destruction of a website or a corporate information system
• Spoofing and sniffing
Sniffing: online transaction between A and B, sniffing between someone who steals the
communication à intercept a message
Spoofing: the bad guy pretends to be someone else, for example: a mail that appears to be an e-mail
from your bank (bad guy pretends to be a trusted party)
For example: go to the website of UA but the server is hacked, webpage looks like UA website but in
fact it’s something else: the spoofed website asks your login
• Denial-of-service attacks (DoS)
All computers are infected (botnet) and they will send messages to the network
• Distributed denial-of-service attacks (DDoS)
Causes the website to shut down
• Botnets
• Computer crime
− Computer may be target of crime
− Computer may be instrument of crime
• Identity theft
− Phishing (eg. email messages)
‘’Bank’’ that sends you an e-mail that your password has expired, click here to change your
password: in this way they will get access to your password
− Evil twins
You think you are on a Wi-Fi network but you actually are somewhere else (see above)
− Pharming (you type in the right URL, but you come on another webpage, infected)
You think you are on a website but you actually are somewhere else (see above)
• Click fraud
The fact that there are many banners on the internet (: company has to pay for the banner), if you
click on the link you are directed to the website: par click the company with the banner has to pay:
so you can damage the organization to click fraud: the company has to pay a lot
• Cyberterrorism
• Cyberwarfare
(eg. Stuxnet): you can execute a war, with countries attacking other countries using a virtual website

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Cause damage and disruption by penetrating its networks and computer + defending yourself

Internal Threats: Employees
• Security threats often originate inside an organization
• Inside knowledge
• Sloppy security procedures
− User lack of knowledge
• Social engineering
Is about the fact that ‘’bad’’ guys can easily convey you, you are not aware that they are stealing
information

Software Vulnerability
• Commercial software contains flaws that create security vulnerabilities
− Bugs (program code defects)
− Zero defects cannot be achieved because complete testing is not possible with large
programs
− Flaws can open networks to intruders
• Patches
− Small pieces of software to repair flaws
− Exploits often created faster than patches can be released and implemented
Our software has security holes: places where it’s not secured
Zero day: moment when hackers attack your system, the day the developer is not yet aware of the
security hole, how long will it take before the company will see there is a security hole? Main
concern is in yourself, we are way to easy to give out of information

What Is the Business Value of Security and Control?
• Failed computer systems can lead to significant or total loss of business function
A failed computer system can have an impact on your business process which has an impact on your
business
• Firms now are more vulnerable than ever
All information is in information systems: we are digitalized organization
– Confidential personal and financial data
– Trade secrets, new products, strategies
• A security breach may cut into a firm’s market value almost immediately
Imaging that your organization is noted on the stock exchange: when a city bank has been hacked
they can have all your information: people do not trust this bank anymore: the value of the company
will implode, there is a lot of damage and the stock will go down
• Inadequate security and controls also bring forth issues of liability

Legal and Regulatory Requirements for Electronic Records Management
More and more digitised environments: new laws and regulations are popping up
• HIPAA (Health insurance portability and accountability act)
– Medical security and privacy rules and procedures
Enforces hospitals and medical organizations to demonstrate that they can ensure your private
information: comply with the act of privacy: if they can not demonstrate this they have to pay a fine
• Gramm-Leach-Bliley Act
– Requires financial institutions to ensure the security and confidentiality of customer
data
Similar but financial institutions
• Sarbanes-Oxley Act

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 – Imposes responsibility on companies and their management to safeguard the
accuracy and integrity of financial information that is used internally and released
externally
About the accuracy of information: if organizations do not adapt to these regulations, they can not
operate

Electronic Evidence and Computer Forensics
• Electronic evidence
– Evidence for white collar crimes often in digital form
– Proper control of data can save time and money when responding to legal discovery
request
• Computer forensics
– Scientific collection, examination, authentication, preservation, and analysis of data
from computer storage media for use as evidence in court of law
– Recovery of ambient data

Information Systems Controls
• May be automated or manual
• General controls
− Govern design, security, and use of computer programs and security of data files in
general throughout organization’s information technology infrastructure (organizational
things you are going to organise that apply to all information system)
− Software controls, hardware controls, computer operations controls, data security
controls, system development controls, administrative controls,
Identity management: who works for my company? When someone is fired, the identity
management has to maker sure that they can not get access to information of the company, restrict
the access
Access management: which person has to get access to which information?
• Application controls
− Controls unique to each computerized application
− Input controls, processing controls, output controls

Risk Assessment
Determines level of risk for the firm if a specific activity or process is not properly controlled
• Types of threat
• Probability of occurrence during year
• Potential losses, value of threat
• Expected annual loss
Take this from a risk manager perspective
A risk manger is a doom thinker (= think about all the things that can go wrong with the company)
for example: risk scenario that the electricity falls out and you have lost all the information on your
laptop
He identifies the risk scenario
− Likelihood: what is the chance that this will happen
− When it happens what is the impact?
Line called risk appetite (= how much risk are you willing to /or can you take as a business)
In terms of risk, CIA are 3 examples of that: if these risk are elevated (beyond your risk appetite) we
accept the risk: how are we going to mitigate that? Take measures to make sure that the likelihood
decreases or you take measures to make sure that when it happens the impact will be reduced

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Example:

Security police for protecting the company’s assets
• Ranks information risks, identifies acceptable security goals, and identifies mechanisms for
achieving these goals
• Drives other policies
– Acceptable use policy (AUP)
§ Defines acceptable uses of firm’s information resources and computing
equipment
• Identity management
– Identifying valid users
– Controlling access

Figure 8.3: Access Rules for a Personnel System

Disaster Recovery Planning and Business Continuity Planning
When something fails how can we make sure we are up and running as soon as possible: working on
the impact: example of general control
• Disaster recovery planning
– Devises plans for restoration of disrupted services
• Business continuity planning
– Focuses on restoring business operations after disaster
• Both types of plans needed to identify firm’s most critical systems
– Business impact analysis to determine impact of an outage
– Management must determine which systems restored first

The Role of Auditing
• Information systems audit
– Examines firm’s overall security environment as well as controls governing individual
information systems
• Security audits
– Review technologies, procedures, documentation, training, and personnel
– May even simulate disaster to test responses
• List and rank control weaknesses and the probability of occurrence
• Assess financial and organizational impact of each threat

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Manager: understanding risks and implementing the control: auditor will control whether the
manager has implement the control

Figure 8.4: Sample Auditor’s List of Control Weaknesses

What Are the Most Important Tools and Technologies for Safeguarding Information Systems?
• Authentication
– Password systems
– Tokens
– Smart cards
– Biometric authentication
– Two-factor authentication (fingerprint)
• Firewall
Real walls that organizations build between the internet and the corporation: wall will track all the
information that will go in and out the organization
– Combination of hardware and software that prevents unauthorized users from
accessing private networks
– Technologies include:
• Packet filtering
• Tasteful inspection
• Network address translation (NAT)
• Application proxy filtering
• Intrusion detection system
– Monitors hot spots on corporate networks to detect and deter intruders
• Antivirus and antispyware software
– Checks computers for presence of malware and can often eliminate it as well
– Requires continual updating
• Unified threat management (UTM) systems

Figure 8.5: A Corporate Firewall

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Securing Wireless Networks
• WEP security
– Static encryption keys are relatively easy to crack
– Improved if used in conjunction with VPN
• WPA2 specification
– Replaces WEP with stronger standards
– Continually changing, longer encryption keys

Encryption and Public Key Infrastructure
• Encryption
– Transforming text or data into cipher text that cannot be read by unintended
recipients (people that sniff your communication
• Two methods of encryption
– Symmetric key encryption
§ Sender and receiver use single, shared key
– Public key encryption
§ Uses two, mathematically related keys: public key and private key
§ Sender encrypts message with recipient’s public key
§ Recipient decrypts with private key
For example: allows secure information exchange between two parties

Figure 8.6: Public Key Encryption

• Digital certificate
– Data file used to establish the identity of users and electronic assets for protection
of online transactions
– Uses a trusted third party, certification authority (CA), to validate a user's identity
– CA verifies user’s identity, stores information in CA server, which generates
encrypted digital certificate containing owner ID information and copy of owner’s
public key
• Public key infrastructure (PKI)
– Use of public key cryptography working with certificate authority
– Widely used in e-commerce

Ensuring System Availability
• Online transaction processing requires 100% availability
• Fault-tolerant computer systems
– Contain redundant hardware, software, and power supply components that create
an environment that provides continuous, uninterrupted service
• Deep packet inspection (slow networks – give priority to critical traffic-
• Security outsourcing (accountability remains)

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Security Issues for Cloud Computing and the Mobile Digital Platform
• Security in the cloud
– Responsibility for security resides with company owning the data
– Firms must ensure providers provide adequate protection:
§ Where data are stored
§ Meeting corporate requirements, legal privacy laws
§ Segregation of data from other clients
§ Audits and security certifications
– Service level agreements (SLAs)
• Securing mobile platforms
– Security policies should include and cover any special requirements for mobile
devices
§ Guidelines for use of platforms and applications
– Mobile device management tools
§ Authorization
§ Inventory records
§ Control updates
§ Lock down/erase lost devices
§ Encryption
– Software for segregating corporate data on devices

Ensuring Software Quality
• Software metrics: Objective assessments of system in form of quantified measurements
– Number of transactions
– Online response time
– Payroll checks printed per hour
– Known bugs per hundred lines of code
• Early and regular testing
• Walkthrough: Review of specification or design document by small group of qualified people
• Debugging: Process by which errors are eliminated

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Chapter 9: Achieving operational excellence and customer intimacy: enterprise
applications
Key system applications for the digital age: deep dive in how can technology improve/innovate in
each of these business domains? (marketing, production)

Alimentation Couche-Tard (Convenience store) Competes Using Enterprise Systems
• Problem
– Antiquated IT infrastructure and ERP system
– disparate processes for each country and market
– massive operational inefficiencies
• Solutions
– Numerous separate legacy systems replaced with Oracle’s JD Edwards Enterprise
One ERP system
• Demonstrates use of technology to maximize supply chain efficiency, integrate data into a
common source

Figure 9.1: How Enterprise Systems Work

ERP-systems: what is it about? ERP-systems can be highly beneficial in increasing the operational
excellence in a company
- ERP system always builds on a central data base (allows for integration)
- Allows for standardization: ERP-system will build generic business processes in software: looking
at many organizations trying to understand how typically a marketing and sales (HR, finance…)
process is organized: all these views on a business process have been summarized in a best
practices view, they are automated and implemented in the software
à allows for integration and standardization

Enterprise Software
• Built around thousands of predefined business processes that reflect best practices
– Finance and accounting
– Human resources
– Manufacturing and production
– Sales and marketing
• To implement, firms should
– Select functions of system they wish to use
If you are in an organization that decides to implement SAP: automate and integrate all of the
business processes/whole value chain: as a company, you can buy the whole ERP system (introduce
everything of your business in SAP) (all these business processes in an integrated ERP system) or you
can only buy the HR functionalities from SAP
– Map business processes to software processes
§ Use software’s configuration tables for customizing

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The way I organize my marketing and sales process is not the same as in SAP: organization wants to
customize SAP à Risk (standardization = comply with the best practice other wise the whole
business case will not fly)

Business Value of Enterprise Systems
• Increase operational efficiency
• Provide firm-wide information to support decision making
Integration: one central database: easy to connect and report management information
• Enable rapid responses to customer requests for information or products
• Include analytical tools to evaluate overall organizational performance
• Example: https://www.youtube.com/watch?v=OUwh6knoL10 (P&G)
Log in for marketing and sales in system A, finance in system B: different systems with different
databases: confusing and ineffective
One global company: all business process into one integrated application: easy access to all data:
standardized approach: all share the same business platform à work an integrated and
standardized approach across the globe

The supply chain
• Network of organizations and processes for:
– Procuring materials, transforming them into products, and distributing the products
Network of organizations: how goods flow in a network of organizations from production to
consumers
• Upstream supply chain
– Firm’s suppliers, suppliers’ suppliers, processes for managing relationships with
them
• Downstream supply chain
– Organizations and processes responsible for delivering products to customers
• Internal supply chain

Figure 9.2: Nike’s Supply Chain

Supply chain has 2 parts: down stream supply chain: make shoes à distributer à retailer
Up stream supply chain: supplier à supplier à supplier

Supply Chain Management
• Importance of timely and accurate information
Supply chain where all the elements in the supply chain will keep stock: costly business: we have to
make our supply chain efficient: timely and accurate is important
– Inefficiencies cut into a company’s operating costs
§ Can waste up to 25 percent of operating expenses
– Just-in-time strategy
§ Components arrive as they are needed
§ Finished goods shipped after leaving assembly line

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 – Safety stock: Buffer for lack of flexibility in supply chain
If organizations are at huge uncertainty they will keep safety stock: very expensive
– Bullwhip effect
§ Information about product demand gets distorted as it passes from one
entity to next across supply chain
Happens in the supply chain when information is not communicated in the right phase in the supply
chain à the bullwhip effect

Figure 9.3: The Bullwhip Effect

Local retailer makes a short time promotion campaign for milk: as a result of the short time
promotion campaign the demand will go up: if it’s not communicated in the supply chain that this
was a one time, all the other players in the supply chain might increase their stock: they are
preparing for the next time it happens: is a huge waste: it is not happening so we have to see that
the information in the supply chain is timely and accurate: information systems will help to ensure
better flows of information in the suplpy chain

Supply Chain Management Software
• Supply chain planning systems
– Model existing supply chain
– Enable demand planning (calculate how much product a business needs to satisfy
customer demand)
Help organization to calculate how much products a business requires: saves us costs
– Establish inventory levels
– Identify transportation modes
Make sure that products will be delivered in time, at the right place in the supply chain
• Supply chain execution systems
– Manage flow of products through distribution centers and warehouses (delivering
products to the right locations in the most efficient manner)
• Complexity increases in global supply chains
– Example: https://www.youtube.com/watch?v=KWABT48wTFw
175 000 small spare parts distributed around the globe at the appropriate time:
They use software to make the traject more efficient

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Demand-Driven Supply Chains: From Push to Pull Manufacturing and Efficient Customer Response

Demand-driven supply chains enables to go from a push based business model to a pull based
business model
à Customize your shoe at the nike shop online (pull-based)

Figure 9.5: The Emerging Internet-Driven Supply Chain

Nervous model: where you have all different types of companies working together

Business Value of Supply Chain Management Systems
• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
– Total supply chain costs can be 75 percent of operating budget
• Increase sales

What is Customer Relationship Management?
• Customer relationship management (CRM)
– Knowing the customer
In a small grocery store it is quite easy to know the customer, but if you have a billion customers it is
difficult to know who your customers are, what did they buy? Did they already complain?
à Building an unique customer care: business process that takes care of your customer
– In large businesses, too many customers and too many ways customers interact with
firm
• CRM systems
A lot of venders that sell CRM-tools to support this custom care business process: inside SAP,
Microsoft, salesfore.com: capture customer data: create an unique single view on the customer
– Capture and integrate customer data from all over the organization
– Consolidate and analyze customer data

41
 – Distribute customer information to various systems and customer touch points
across enterprise
– Provide single enterprise view of customers

Figure 9.6: Customer Relationship Management (CRM)

What are all the marketing campaigns we introduced to the customer, which sales, which services,
promotions?

Customer Relationship Management Software
• Packages range from niche tools to large-scale enterprise applications
CRM for universities, a large company
• More comprehensive packages have modules for:
– Partner relationship management (PRM)
§ Integrating lead generation, pricing, promotions, order configurations, and
availability
§ Tools to assess partners’ performances
– Employee relationship management (ERM)
§ Setting objectives, employee performance management, performance-
based compensation, employee training
• CRM packages typically include tools for:
– Sales force automation (SFA)
Give sales people a tablet with all the data: real time information about all the clients
§ Sales prospect and contact information
§ Sales quote generation capabilities
– Customer service
Online ask questions about the product
§ Assigning and managing customer service requests
§ Web-based self-service capabilities
– Marketing
§ Capturing prospect and customer data, scheduling and tracking direct-
marketing mailings or e-mail
§ Cross-selling

Figure 9.7: How CRM Systems Support Marketing

Type of report coming out of CRM system

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 Figure 9.8: CRM Software Capabilities

All types of tools and services that are integrated in the CRM system

Figure 9.9: Customer Loyalty Management Process Map

Automate business processes in the software: flow chart is automated in the CRM software:
standarize the way we do our customer care

Operational and Analytical CRM
• Operational CRM
In support of the real running customer care activities: how do you do loyalty programs? About the
opartions of crm, doing the customer care
– Customer-facing applications
– Sales force automation
Call center and customer service support
– Marketing automation
• Analytical CRM
Use the same database as operational CRM: they are going to generate reports out of it: get the
management information out
Based on data warehouses populated by operational CRM-systems and customer touch points
– Analyzes customer data (OLAP, data mining, etc.)
§ Customer lifetime value (CLTV)
What did we already spend on this client? What did we already earn from this client in terms of sales
and profits? Hopely positive: earned more than spend on this client

Figure 9.10: Analytical CRM Data Warehouse

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Business Value of Customer Relationship Management Systems
• Business value of CRM systems
– Increased customer satisfaction
For example: customer calls and the company will know all of your previous problems/complaints so
you don’t have to explain it all over again
– Reduced direct-marketing costs
– More effective marketing
– Lower costs for customer acquisition/retention
– Increased sales revenue
à There is a big interest in the market because it is about sales and profit
• Churn rate
A potential benefit out of CRM systems: customers that we are losing: sold prodcuts or services to
the customer but they are not coming back: you want the churn rate to be as low as possible
– Number of customers who stop using or purchasing products or services from a
company
– Indicator of growth or decline of firm’s customer base
• Example: https://www.youtube.com/watch?v=rAnNwow_E3Q (ING)
Grow and retain customer data base

Enterprise Application Challenges
These types of investments are capital intensive investments: comply your business processes
mainly to the standard process
• Highly expensive to purchase and implement enterprise applications
– Average cost of ERP project in 2015—$6.1 million
• Technology changes + Business process changes
Cost is incurred by technology cost and business chain cost
• Organizational learning, changes
• Switching costs, dependence on software vendors
Switching cost = risk: imaging that u implement everything in SAP: benefits if you do it well: risk is
that you can become dependent on SAP: not easy to change from software to software
• Data standardization, management, cleansing
Data management is making sure you are very prudent with your data: you have to know what the
qualification of your information is

Next-Generation Enterprise Applications
Market is evolving to a more flexible approach like only the financial or marketing part of the system
= there is more possible
• Enterprise solutions/suites
– Make applications more flexible, web-enabled, integrated with other systems
• Open-source applications
Not have to buy the license but buy the expertise so you can maintain the applications
• On-demand solutions
• Cloud-based versions
Salesforce.com = cloud provider of CRM tools: not running on a machine but in the cloud
• Functionality for mobile platform
• Social CRM
How can we integrate these channels like Facebook, Twitter, …?
– Incorporating social networking technologies
– Company social networks
– Monitor social media activity; social media analytics
– Manage social and web-based campaigns

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 • Business intelligence
– Inclusion of BI with enterprise applications
– Flexible reporting, ad hoc analysis, “what-if” scenarios, digital dashboards, data
visualization
Higher need for mobility platforms so that engineers have real time information on their
smartphone
Past: if you entered data into an ERP-system, batch system: only at night they recalculate the
information à SAP Hanna allows for real time calculation of all data

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Chapter 10: E-commerce: Digital Markets, Digital Goods
E-bay, amazon.com, bol.com…
Twitter: value of the shares is very high: how do they make money? Have to make sure what the
typical income models are of these kind of companies

Uber Storms Europe: Europe Strikes Back
Real e-commerce company: company where technology disrupts a whole new business and creates
a new business model (for example an income model)
• Problem
– Opportunities presented by new technology
– Political and regulatory hurdles
• Solutions
– Driver and rider apps
– Demand prediction software
• Illustrates the use of IT to create new services as well as business models
• Demonstrates the disruptive effects of new technologies

E-commerce Today
Commercial transactions that we want to execute: e-commerce is a subset of e-business (digitalizing
of the whole value chain)
• E-commerce: Use of the Internet and web to transact business
• Began in 1995 and grew exponentially; still stable even in a recession
• Companies that survived the dot-com bubble now thrive
• The new e-commerce:
– social (from eyeballs to conversations)
If u use your mobile, laptop: receiving banners where u are motivated to click on: how many people
did look at my banner (eyeballs)? Many companies these days want to move into a conversation
with the customer
For example: runner app from Nike: they did not make an ad but an app to make a conversation
with the customer in order for you to buy more shoes

– mobile (from desktop to smartphone)

Virtual markets increased dramatically the last few year, even after 2 recessions
2001 dot-com bubble
2008 financial crisis

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Why E-commerce Is different
E-commerce has grown dramatically, because it has some features that guarantee success
• Ubiquity
– Marketspace is virtual (not physical)
You could sell products all over the world (global)
– Transaction costs reduced (cost of participating in the market)
Cost of participating in the market: it becomes easier to participate in the market
• Global reach
– Transactions cross cultural and national boundaries
• Universal standards
– One set of technology standards: Internet standards
Makes it easier for businesses to communicate in a standardized way
• Richness
– Supports video, audio, and text messages
Richness of information is much bigger than if you, for example, buy a book or a brochure
• Interactivity
• Information density
– Greater price and cost transparency
More information available
• Personalization/customization
– Technology permits modification of messages, goods
For example: kinepolis.be: they use cookies and based on these cookies websites will be different for
you than for (for example) your girlfriend
• Social technology
– Promotes user content generation and social networking
Creating content yourself on the internet: for example: Pinterest

Features are quite unique as compared to the physical market place: difficult to reach in the physical
market place

Key Concepts in E-commerce: Digital Markets
Specific characteristics
• Information asymmetry reduced (eg. buying car)
In a physical market you will go the company to buy a car: seller of the car will know more than
yourself: in a virtual market it’s much easier to compare cars
• Menu costs, search and transaction costs reduced
Cost to change the price of a product: physical market has to change the written tag on the product:
in a digital market it is easier to change the price on the spot: transaction costs are much lower
• Dynamic pricing enabled
• Switching costs (up – eg. iTunes; down – buying a book)
- If you want to buy an airline ticket it is very easy to switch (air France, KLM) just from the same
seat you are sitting on
- Sometimes it’s more difficult to switch: if you want to change from iTunes to Spotify: it might
not be compatible: venders will play on that
- IPhone – Android: if you want to switch from IPhone to iPhone everything goes automatically: if
you want to change to android there is a manual effort
• Delayed gratification (delivery)
If you buy the book online you have it immediately: if you buy the book at bol.com you have to wait
for a day of 2
• Disintermediation (re-intermediation – contra-intermediation)

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 Figure 10.2: The Benefits of Disintermediation to the Consumer

Disintermediation: in the past if you wanted to buy an airplane ticket you needed to go to the shop
(retailer) but now there is disintermediation: disappearing of the intermediate players in the chain: it
becomes more interesting for the customer because all the intermediaries want to put something in
the pocket (lower price)

Re-intermediation: the situation where new players come up and try to find their space their in-
between
For example: cheaptickets.nl

Contra-intermediation: for example: opodo.com: has been created by a consortium of airplane
companies who have organised themselves as the intermediate player: manufacturer has control
over the player

Key Concepts in E-commerce: Digital Goods
Book vs e-book
• Goods that can be delivered over a digital network
• Cost of producing first unit is almost entire cost of product
If you have created the fist song in bits and bites or in an iTunes file, the cost of copying the file is
zero: something different than opposed to book: each time you print a book it costs money
• Costs of delivery over the Internet very low
Cost of sending an online book is nothing as compared to a physical book
• Marketing costs remain the same: pricing highly variable
• Industries with digital goods are undergoing revolutionary changes (publishers, record
labels, etc.)
Whole market of publishers, whole music industry, industry of movies (Netflix)

Types of E-commerce: In the end these businesses have to make money
• Three major types
– Business-to-consumer (B2C)
§ Example: Zalando
– Business-to-business (B2B)
§ Example: https://www.youtube.com/watch?v=NqURqh8Ouzc
– Consumer-to-consumer (C2C)
§ Example: E-bay
• E-commerce can be categorized by platform
– Mobile commerce (m-commerce)

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E-commerce Business Models
Each different type has a different business model: what do these business models do?
• - Portal Google
- E-tailer (online retail store) Amazon/ Zalando
- Content provider ITunes/ Netflix
- Transaction broker Airbnb
- Market provider E-bay
- Serviceprovider Google Maps
- Community provider Facebook
• Pure-play versus click&mortar
Click and morter company is derived from the world brick and morter company: a company like JBC
or Adidas, as long as these players were not selling their products online they were bricks and
mortars company’s: right now they are click and mortar companies because they have an online
shop
Pure play company is a company that has always been virtual like google/iTunes: it never had a
physical store

E-commerce Revenue Models (!)
How do they make money? They use your information (sell it)
• Advertising (google ads)
Every time you click on the banner, google makes money
• Sales (iTunes)
• Subscription (Netflix)
Abonnement: Spotify you can chose between music with a lot of adds or using a subscription
without adds
• Free/Freemium (Standaard)
If you want to read the full article you have to buy premium
• Transaction fee (e-bay)
• Affiliate (referral – blogs)
Popular bloggers who include a typical product in their blog, for example: Instagram

Bol.com
First business model is sales but they have also combined business models

How Has E-commerce Transformed Marketing?
E-commerce has highly impacted the way we do marketing
• Internet provides new ways to identify and communicate with customers
– Long tail marketing
Concept that is made possible because of e-commerce
For example: if you in the past had a bookstore you would only take the books in your shop that
have a lot of readers: if you now want to buy a specific book you can because of the e-commerce, a
bookstore now makes these specific books available in a print and demand offer: it gives also a
market to more specific products
– Internet advertising formats (more interactive, dynamic, …)
– Behavioural targeting
§ Tracking online behaviour of individuals
What types of movies are you interested in? Tracked real time: based on this information they will
send you specific information
– Native advertising (placing ads in social network feeds)

49
 • Social e-commerce & social-network marketing
- Social shopping (Pinterest)
- Wisdom of the Crowd – Crowdsourcing (BMW)

Business-to-business e-commerce:
• EDI = a standard
Electronic data interchange
Before the internet if businesses wanted to share in-voices, they had to agree up front what is an
invoice? If you had on both sides the same definition on an invoice you could send it to each other
à Internet makes the way we communicate in businesses more easy

• New ways for B2B Buying and Selling
Much bigger than consumer to consumer market: a lot of money going around in B2B markets
− Private industrial networks- Private exchange (bv. VW Group Supply)
− All the suppliers of VW have to connect with each other trough the platform (like Ariba)
− Internet marketplaces, different types of transactions:
§ Direct vs indirect goods
To build your product (like materials to build a machine) vs coffee machine
§ Contract – spot
Long term contracts (with discount) vs on the spot buy, not on contract
§ Vertical – Horizontal
Sell only products to a specific sector, specialized vs sell different types of products to any different
type of business
§ Forward – reverse auction
1 seller, many buyers and prices go up vs one buyer and many sellers and prices go down

Example auction :
https://www.youtube.com/watch?v=Slf_XNroXS8

50


10.5 What Is the Role of M-commerce in Business, and What Are the Most Important M-
commerce Applications?
• M-commerce in 2017 is 37 percent of all e-commerce
• Fastest growing form of e-commerce
§ Some areas growing at 50 percent or more
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, TV, etc.)
– In-app sales to mobile devices

Figure 10.9: Mobile Retail Commerce Revenues

Location-Based Services and Applications
• Used by 74 percent of smartphone owners
• Based on GPS map services
• Geosocial services
– Where friends are
• Geoadvertising
– What shops are nearby
• Geoinformation services
– Price of house you are passing
–
Other Mobile Commerce Services
• Financial account management apps
– Banks, credit card companies
• Mobile advertising market
– Google and Facebook are largest markets
– Ads embedded in games, videos, and mobile apps
• 55 percent of online retailers have m-commerce websites

51

10.6 What Issues Must be Addressed when Building an E-commerce Presence?
• Most important management challenges
– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve those objectives
• Develop an e-commerce presence map
– Four areas: websites, e-mail, social media, offline media
• Develop a timeline: milestones
– Breaking a project into discrete phases

Figure 10.10: E-commerce Presence Map

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Chapter 11: Managing Knowledge
What is the business process of managing knowledge and what are the challenges? How can
technology help us in managing knowledge company’s?

Fiat: Real Time Management with Business
• Problem
– Various production centers had their own database systems
– Legacy systems
• Fiat uses Oracle’s Hyperion to provide near real-time information on its operations across
the globe
• Demonstrates IT’s role in helping organizations improve performance and remain
competitive
• Illustrates the ability of IT systems to create new efficiencies
Data was spread all over the organization, because it was very difficult to share knowledge:
technology platform was introduced to make sure they had a better flow of information (managing
knowledge) in the organization

What Is the Role of Knowledge Management Systems in Business?
We are working more and more in an information based-economy: market value of a company is
more and more based on the knowledge they have
• Knowledge management systems among fastest growing areas of software investment
• Information economy
• Substantial part of a firm’s stock market value is related to intangible assets: knowledge,
brands, reputations, and unique business processes

Important Dimensions of Knowledge
• Data, information, knowledge, and wisdom
Distinguish them
Data: lowest level, for example: ticket from Delhaize, every line of this ticket is a data element
Information: if we add something to the date, for example: aggregate all the data elements of the
Delhaize: what is the total sale?
Knowledge: add management inside information
Wisdom: if you make the right decisions using it
Information technology will help us to make this steps
• Tacit knowledge and explicit knowledge
Explicit knowledge: knowledge for example a book: words written on paper, easy to manage in
information systems
Tacit knowledge: knowledge that’s in our head: in an organization having a good business manager
based on his experience: get access to the knowledge and make sure that the knowledge stays in the
organization
For example: culture of the organization
• Important dimensions of knowledge
– Knowledge is a firm asset.
– Knowledge has different forms.
Structured (book) / un-structured (Facebook, movie)
– Knowledge has a location (eg. only works in a specific context).
Position the right business manager with the right problem
– Knowledge is situational. (eg. know when it works)
You have to know when it will work: sometimes it works, sometimes it doesn’t
• Organizational learning becomes more important

53
 – Process in which organizations gain experience through collection of data,
measurement, trial and error, and feedback
Learn from the knowledge that we have and expand this knowledge: learning from the organization
from a whole

The Knowledge Management Value Chain
• Knowledge management
– Set of business processes developed in an organization to create, store, transfer,
and apply knowledge
Set of activities that you can organize in your organization (value chain) to store your knowledge
= business process
• Knowledge management value chain
– Each stage adds value to raw data and information as they are transformed into
usable knowledge
§ Knowledge acquisition
§ Knowledge storage
§ Knowledge dissemination
§ Knowledge application

Figure 11.1: The Knowledge Management Value Chain

Box with examples of all different types of information systems that you can use in that specific sub
processes

Knowledge management today involves both information systems activities and a host of enabling
management and organizational activities
This graphic details the stages of the knowledge management value chain, separating the
information system activities from the management/organizational activities involved at each stage.
It also describes two other very important requirements for the value chain, the initial data and
information acquisition that forms the basis for creating knowledge, and feedback from the
knowledge application stage that can result in new opportunities for data and knowledge creation

54
 Figure 11.2: Major Types of Knowledge Management Systems

3 different types of information systems
1. Enterprise –wide knowledge management systems: general purpose information systems
(store, capture information)
2. Knowledge work systems: focused to specialize roles in organizations
3. Intelligent techniques: new networks etc.

What Types of Systems Are Used for Enterprise-Wide Knowledge Management?
Unstructured data (passive knowledge, knowledge in a video, e-mail) vs structured data (book,
PowerPoint)
Enterprise-wide knowledge management: store, process and disseminate all types of knowledge in
the organization (when most of the knowledge is unstructured or semi-structured)
• Three major types of knowledge in an enterprise
– Structured documents
§ Reports, presentations
§ Formal rules
– Semi structured documents
§ E-mails, videos
– Unstructured, tacit knowledge
• 80% of an organization’s business content is semi structured or unstructured

Enterprise Content Management Systems
• Help capture, store, retrieve, distribute, preserve documents and semi structured
knowledge
• Bring in external sources
– News feeds, research
• Tools for communication and collaboration
– Blogs, wikis, and so on
• Key problem: developing taxonomy

Figure 11.3: An Enterprise Content Management System

55
Challenge: to be able to derive data from the central database, have to be clear on a taxonomy
(identifying the characteristic of the data in your database)
Combine unstructured + semi structured information in a taxonomy

Locating and Sharing Expertise
• Provide online directory of corporate experts in well-defined knowledge domains
• Search tools enable employees to find appropriate expert in a company
• Social networking and social business tools for finding knowledge outside the firm
– Saving
– Tagging
– Sharing web pages
For example: consultancy firm: a lot of knowledge is implicit (in the heads of the consultants) how
can I find the appropriate consultant for a specific assignment for this client? Store the
knowledge/experience of the consultants in a database to share with the other consultants: build a
taxonomy around that

Learning Management Systems (LMS)
• Provide tools for management, delivery, tracking, and assessment of employee learning and
training
• Support multiple modes of learning
– CD-ROM, web-based classes, online forums, and so on
• Automates selection and administration of courses
• Assembles and delivers learning content
• Measures learning effectiveness
• Massively open online courses (MOOCs)
Massive open online courses: courses that are put online for the whole world and it’s free of charge
(emerging area)
How are we as a university going to work with this MOOCs? Import them? Create them? What will
be the business model? Give it away for free: how are you going to make money?
– Web course open to large numbers of participants
For example: blackboard: tacit information (slides) and unstructured data (videos)

Knowledge Workers and Knowledge Work
• Knowledge workers
– Researchers, designers, architects, scientists, engineers who create knowledge for
the organization
Specific job to play, require specialized experience to execute their job
– Three key roles
§ Keeping organization current in knowledge
§ Serving as internal consultants regarding their areas of expertise
Share their expertise
§ Acting as change agents, evaluating, initiating, and promoting change
projects
• Knowledge work systems
– Systems for knowledge workers to help create new knowledge and integrate that
knowledge into business
Specific characteristics: huge calculating power for example

56
Requirements of Knowledge Work Systems
• Sufficient computing power for graphics, complex calculations
• Powerful graphics and analytical tools
• Communications and document management
• Access to external databases
• User-friendly interfaces
• Optimized for tasks to be performed (design engineering, financial analysis)

Figure 11.4: Requirements of Knowledge Work Systems

Hardware: high calculating power needed
Software: graphical user interface: easy put it in our document

Examples of Knowledge Work Systems
• CAD (computer-aided design)
For example: if a car manufacturer wanted to make a new car he first needed to build a prototype of
the car: very expensive: complex, powerful tools that are used to make prototypes (for example in
3D)
– Creation of engineering or architectural designs
– 3D printing
• Virtual reality systems
For example: company’s that sell houses do not invite you anymore to visit the houses physically but
visit it virtually
– Simulate real-life environments
3D movie with wind or smell in the the cinema
– 3D medical modeling for surgeons
– Augmented reality (AR) systems
– VRML

What Are the Business Benefits of Using Intelligent Techniques for Knowledge
Management?
Specific for very specific tasks
• Intelligent techniques: used to capture individual and collective knowledge and to extend
knowledge base
– To capture tacit knowledge: expert systems, case-based reasoning, fuzzy logic

Expert systems: are used a lot in for example banks: when u are applying for a loan: if you go to the
office, the banker will ask you some question: he follows a decision three: have the loan or not have
it: you can easy automate the implicit information in the head of the banker (put in to an expert
system) à you can do the decision tree fully online

57


Case-based reasoning: for example: in the medicine area: doctor will ask you questions and give you
a diagnose and give you a treatment: in the medicine world every situation is seen as a case: the
case-based reading is a big database with all the cases (what are the symptoms or diagnoses) case
based system will become smarter with every case added (more powerful)

Fuzzy logic: things like heat controller in your house: sometimes the definitions of the concepts are
fuzzy: when is it warm in your room? Depends on different element (humidity, temperature
outside): based on different parameters it will decide if it’s warm or not: fuzzy logic system combines
all these parameters to control the temperature

– Knowledge discovery: Neural networks and data mining
Neural networks: information systems that learns by itself (complex and advanced)
For example: company who created a neural network that can read/ scan a paper of the doctor and
translate it with an accuracy of 99% in something readable: immediately send the information to the
pharmacist
– Automating tasks: Intelligent agents – chat-box
Chat-box: automated person: type in your question: the information system can answer
• Artificial intelligence (AI) technology:
– Computer-based systems that emulate human behavior

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Chapter 12: Enhancing Decision Making
What is decision making? What is the business process of decision making? How can technology help
in improving our decision making?

Roche: Changing Medical Care with Mobile Technology and Big Data
• The connected healthcare model collects data from smartphones and sends it to a health
facility that monitors in real time.
• Demonstrates IT’s role in providing information and business intelligence that help
organizations improve services
• Illustrates how information systems improve decision making
How ‘Roche’ tries to sell to you all types of trackers and devices in your smartphones
For example: walking, heart beat, transpirations
They will send you information on for example which medicine you need: creates data around your
health to improve their decision making of their sales

What Are the Different Types of decisions, and How Does the Decision Making Process Work?
• Business value of improved decision making
Difficult to calculate the value of improved decision making
For example: inventory manager: how much stock do you want to keep? Estimate the value of the
decision: wrong decision: what did we lose? (-1000)
Yearly value of improved decision making 365*1000= 365000
Improving their decision making, the business can earn 365000 euros
See this example in the book
– Improving hundreds of thousands of “small” decisions adds up to large annual value
for the business
• Types of decisions
– Unstructured: Decision maker must provide judgment, evaluation, and insight to
solve problem
– Structured: Repetitive and routine; involve definite procedure for handling so they
do not have to be treated each time as new
– Semi structured: Only part of problem has clear-cut answer provided by accepted
procedure
• Senior managers
– Make many unstructured decisions
• Middle managers
– Make more structured decisions but these may include unstructured components
• Operational managers and rank and file employees
– Make more structured decisions

Figure 12.1: Information Requirements of Key Decision-Making Groups in a Firm

59
Do we see information systems that help us here? Yes, information systems that support the
decision making process in each of these layers

The Decision Making Process
• Intelligence
– Discovering, identifying, and understanding the problems occurring in the
organization
• Design
– Identifying and exploring solutions to the problem
• Choice
– Choosing among solution alternatives
• Implementation
– Making chosen alternative work and continuing to monitor how well solution is
working

Figure 12.2: Stages in Decision Making

Decision making always follows a specific route: different levels in different ways

Managerial Roles
Manager make decisions
• Information systems can only assist in some of the roles played by managers
• Classical model of management: five functions
– Planning, organizing, coordinating, deciding, and controlling
It never works like that because managers do not have plenty of time, managers have lots of stuff to
do
• More contemporary behavioral models
– Actual behavior of managers appears to be less systematic, more informal, less
reflective, more reactive, and less well organized than in classical model

Mintzberg’s 10 Managerial Roles
A manager who takes decisions can play 10 different roles in a company
• Interpersonal roles
– Figurehead
– Leader
– Liaison
• Informational roles
– Nerve center
– Disseminator
– Spokesperson

60
 • Decisional roles
– Entrepreneur
– Disturbance handler
– Resource allocator
– Negotiator
E.g. Depending on the role he has to play, there might be some technology to help him
For example: online conference in support of the figurehead role
BI (business interllegence tools) for resource allocator

Real-World Decision Making
• Three main reasons why investments in IT do not always produce positive results
– Information quality
§ High-quality decisions require high-quality information
Quality of the data can be poor: quality of the information systems can work against you
– Management filters
§ Managers have selective attention and have variety of biases that reject
information that does not conform to prior conceptions
• Data is there but the manager does not want to see it, political reasons etc. Management
often filters the data
– Organizational inertia (traagheid) and politics
§ Strong forces within organizations resist making decisions calling for major
change
We know the problem and the solution, but it is difficult to change the existing way of working in the
company

High-Velocity Automated Decision Making
• Made possible through computer algorithms precisely defining steps for a highly structured
decision
– Humans taken out of decision
Computers take over the roll of the managers
• For example: High-speed computer trading programs
– Trades executed in 30 milliseconds
Flash crash: if you look at the stock markets most of the trades are made by computers
(milliseconds): there was a huge crash of the stock that went down dramatically and went up again
in just one second: computers were taking over the stock: dangerous piece about it, when does it
stop? How can we still intervene as humans? How much decision making are we giving to the
computers?
• Require safeguards to ensure proper operation and regulation

What Is Business Intelligence?
• Business intelligence
– Infrastructure for collecting, storing, analyzing data produced by business
– Databases, data warehouses, data marts
• Business analytics
– Tools and techniques for analyzing data
– statistics, models, data mining
• Business intelligence vendors
– Create business intelligence and analytics purchased by firms
For example: SAS: they sell tools to support the executive committee in making better decisions

61
 Figure 12.3: Business Intelligence and Analytics for Decision Support

Infrastructure: database where we capture all the date (data lake)
Data mining tools to understand and calculate the data and do stuff with it
Reporting formats: to bring the data back to the manager: support different types of players in the
organization: all in some way BI tools, depending on who you are reporting back to

Business Intelligence and Analytics Capabilities
• Goal is to deliver accurate real-time information to decision makers
• Main analytic functionalities of BI systems
– Production reports
– Parameterized reports
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecasts, scenarios, models

Table 12.4: Examples of Business Intelligence Predefined production reports

Predictive Analytics
We are going to predict, for example: who is coming to buy our product? Use BI tools to get better
inside information and to try to segment your 1000 customers into those who are likely to buy your
product and those who are not going to buy your product
Focus your marketing and sales campaign on the people who are likely to buy your product: cost
efficient
• Uses variety of data, techniques to predict future trends and behavior patterns
– Statistical analysis
– Data mining
– Historical data
– Assumptions
• Incorporated into numerous BI applications for sales, marketing, finance, fraud detection,
health care

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 – Credit scoring
– Predicting responses to direct marketing campaigns
Fraud detection: to see how flow of financial information goes to the markets and based on the
flows to see in which organizations there can be fraud

Support for Semi Structured Decisions
• MIS
• DSS
• ESS

Decision Support for Senior Management
• ESS: decision support for senior management
– Help executives focus on important performance information
• Balanced scorecard method
– Measures outcomes on four dimensions
§ Financial
§ Business process
§ Customer
§ Learning and growth
– Key performance indicators (KPIs) measure each dimension

Figure 12.7: The Balanced Scorecard Framework

(!) Executive support systems: we are here at the level of the top management: if we report things
back with a BI tools it has to be reported in an easy and understandable way
Often use balance scorecard: important instrument: creates a dashboard (figure 12.7) that captures
all the important information of your company: you always have to look at 4 different parameters
- Financials
Not sufficient as information because they only say something about the past performances of the
company: you want to know something about the future performances
- Customers
The more customers are happy, the more likelihood we have of future performances
- Business processes organizing in an appropriate way to make the customers happy
- Learning and growth
How are we preparing for the future? The more we prepare for the future the more our business
process are organized in an appropriate way, the more our customers are happy and the more our
financials will be okay
Dashboard: template to understand it easy

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For example: Bol.com
Pure play e-business company: e-business balance score card? Good matric? Where does it fit?
Fulfillment time: you buy a product at 11 o’clock in the evening and it will be at your door in the
morning: unique strong capacity of Bol.com to deliver in time and in the right place: the better your
fulfillment time I,,your customers will become happier (satisfaction rate goes up): you can measure:
how much recurring sales do we have? (financial)

How prepare for the future? The number of new functionalities/ features that we have installed on
our e-business website: innovate: fulfillment time will be better: customers will be happy: recurring
sales
BI system has to make sure we can easy see the key parameters for the executive committee, to
make sure they can make better decisions

Group Decision-Support Systems (GDSS)
Software to help us to make a decision as a group: the group has to give a score: score will be
calculated and report it back
• Interactive system to facilitate solution of unstructured problems by group
• Specialized tools
– Virtual collaboration rooms
– Software to collect, rank, edit participant ideas and responses
• Promotes collaborative atmosphere, anonymity
• Cisco’s Collaboration Meeting Rooms Hybrid (CMR)
• Skype for Business
•
First part of the course: connection between technology and strategy
Second part of the course: deep dive on some business processes and how information technology
relates to this
Last part of the course: specific focus on building and managing information systems

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Chapter 13: Building Information Systems

Figure 13.1: Organizational Change Carries Risks and Rewards

How information technology can make the business processes more efficient and effective:
technology can change the whole business model: different types on how information technology
can impact a business, from low risk to high risk: depending on the risk, the return will be low or high

Automation of the business process: return is low, risk is low
Example: look at HR, when people came into an organization at 9 o’clock in the past you had to go to
HR to make sure that you were in time and also passing by HR when you leave: right now it’s all
automatically: automation of an existing process
Rationalization: are there maybe ways to make the process more efficient when we automate a
process? Changing the business process: higher risk but also higher return
Example: allow staff to work at home, rationalize the process by letting the staff check in on their
laptop: their can be abuse, staff can not be working while they are checked in (risk)
Redesign: work in an other way
Example: fill in your taxes: system will say how much taxes you need to pay: in the first round it was
automation, fill your taxes in online: what happened? It was send to Brussel then it was printed out
and given in to an other system: now rationalization: let out the middle men: then redesign: people
that are retired receive a fully completed tax report: click on one button and everything is set
Paradigm shifts: fully transforming our business models: don’t change the business process but you
invent a new way of doing business: high risk but if you succeed high return
Examples: Air bnb, Spotify, Uber

Business Process Redesign (!)
• Business process management (BPM)
Always about the business process: how technology can innovate the business process: how change
a process by using technology
– Variety of tools, methodologies to analyze, design, optimize processes
– Used by firms to manage business process redesign
• Steps in BPM
– Identify processes for change
– Analyze existing processes
– Design the new process
– Implement the new process
– Continuous measurement

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 Figure 13.2: As-is Business Process for Purchasing a Book from a Physical Bookstore

View of a business process management tool
First step: understand the business process: business process management tool will help to
visualized how a business process is organized/working
Whole flow of buying a book is decomposed into sub steps: how can I for example make a step more
efficient?

Figure 13.3: Redesigned Process for Purchasing a Book Online

Business process was dramatically made more simple: bringing in technology which allows us to
make the complex business process more efficient: when you can reduce the business process it will
be cost efficient
à Automate or redesign steps

What are the core activities in the systems development process?
Redesign to change the way we do sales by technology: find a new way using this technology, to turn
leads in to hot leads to turn leads in to sales to in the end make more money: how is it being
organized?

Figure 13.4: The Systems Development Process

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 1. System analysis: understanding the problem: what do you want to do with this new system?
I want to find better ways to turn leads in to sales of better ways to find leads
2. System design: going to articulate in more detail (business owner) what are the
functionalities that you will require from the customer management tool? What does the
system need to do?
3. Programming: give the system design to IT: make an application that answer the functional
requires
4. Testing: before we move into production: verify whether all the functional requirements
work = functional testing: technical testing = can it operate?
5. Conversion: only required when you have an existing system: before we go into production
we need to migrate the data from the old system into the new system: conversion
6. Production and maintenance: it’s now available and we have to keep it running

Traditional Systems Life Cycle
Classical way of building information systems: solid: disadvantage of this approach? The end user
doesn’t know what he wants (vague requirements)
It takes time: might take a year before you have a working system:
Whole supply chain supported by technology needs to be stable and robust: using the traditional life
cycle: thinking everything trough
• Traditional life cycle (1)
• Proto-typing (2)
The whole process into little pieces: interactively working with the end user: deliver things fast and
close to the end-user: disadvantage is that you don’t really know where you going to end
(1) And (2) are competing, both have pro’s and con’s
• End-user computing
Spread sheet terror (!): it means that we are going to build as manager ourselves in excel our own
small databases: for example, the overall sales of the company: advantage is that the manager can
build his own application: disadvantage there are nog controls: no one tests if the data is still
accurate: if you use it for strategic decisions you have to make sure that you know the assumptions
and that the data is accurate
Terror: firing people on the base of false information
• “Off-the-shelf”
we are not going to develop the application ourselves: buy off-the-shelf packages: Microsoft SRM,
SAP: we typically have predefined best practice business process, put into the application and start
working from there: business process imbedded in the application you have to change the current
business process to the application
• Outsourcing (offshore/nearshore/onshore)
I’m not going to develop myself (very expensive): outsource everything: for example, move it to
India because the cost is much lower (good developers in India)
Outsource the development of our application to other cheap countries: risk? Cost-efficient but the
risk is that the Indian people have an other understanding than what you are trying to say: manage
this relationship
Nearshore: go to closer countries: such as Poland, Hungary, Spain and Portugal: cheaper but makes
the risk of the other people having an other understanding lower
Onshore: do it in Belgium near to the company

Select the appropriate approach in function of what you want

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Agile Development and DevOps
• Agile development
– Focuses on rapid delivery of working software by breaking large project into several
small subprojects
Find faster ways of developing
• DevOps
– Builds on Agile development principles as an organizational strategy
Development and operations where you would develop a new website and then it goes into
operation: two different groups in the company who don’t really talk to each other: if you want to
create a new website you have to create a whole new flow: bringing these two groups together in a
way that your website can evolve continuously: continuously improving your applications

Component-Based Development and Web Services
• Component-based development
– Groups of objects that provide software for common functions (e.g., online
ordering) and can be combined to create large-scale business applications
Buy services: make own combinations of services depending on the needs in your company
• Web services
– Reusable software components that use XML and open Internet standards (platform
independent)
– Enable applications to communicate with no custom programming required to share
data and services
– Can engage other web services for more complex transactions

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Chapter 14: Managing Projects
In the end these are all projects: principals of project management

Runaway Projects and System Failure
Understand that IT projects have a bad reputation in the market:
Standish group: produces every year a report ‘’chaos reports’’: about the success (or not) by its
enabled projects
• Runaway projects: 30–40 percent IT projects are being reported as successful
– Exceed schedule, budget
– Fail to perform as specified
• Types of system failure
– Fail to capture essential business requirements
Difficult to articulate the requirements
– Fail to provide organizational benefits
2 types of benefits: will lead to increase sales or to reduce costs: can be that many of the claimed
benefits have never been realized: IT black hole: spend money on IT but you don’t see the benefits
– Complicated, poorly organized user interface
– Inaccurate or inconsistent data

Runaway Projects and System Failure

Should find a way to manage the project in a more effective way to make them more successful

Project Management Objectives
Project manager will organize all types of activities to make sure that the project is in time, in
budget, in scope….
• Project management
– Activities include planning work, assessing risk, estimating resources required,
organizing the work, assigning tasks, controlling project execution, reporting
progress, analyzing results
• Five major variables
– Scope
– Time
– Cost
– Quality
– Risk

Management Structure for Information Systems Projects
• Corporate strategic planning group
– Responsible for firm’s strategic plan
Sets business strategy including the IT strategy
• Information systems steering committee
– Reviews and approves plans for systems in all divisions
Business and IT strategy in their mind: every meeting 10 potential projects pop up: decide which of
these projects are the most in line with our strategy and relating to our budget
• Project management group
– Responsible for overseeing specific projects
• Project team

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 – Responsible for individual systems project
Need to deliver, for example, the new website: who is getting the benefits? Party that is getting the
benefits has to be in charge: in practice? Often IT: first wrong way of organizing: they don’t get the
benefits

Figure 14.2: Management Control of Systems Projects

Project management is a part of a bigger government structure

Portfolio Analysis
Some investment are tangible (more sales) but some are intangible (business intelligence will
increase our decision making power) which investments are most inline with our strategy? Portfolio
view to compare the risk with the benefits
• Used to evaluate alternative system projects
• Inventories all of the organization’s information systems projects and assets
• Each system has profile of risk and benefit
– High benefit, low risk
– High benefit, high risk
– Low benefit, low risk
– Low benefit, high risk
• To improve return on portfolio, balance risk and return from systems investments

Figure 14.3: A System Portfolio

Plotting all potential investments

Scoring Models
Decided to invest in an ERP system: standarize and integrate our value chain using an ERP system:
most ERP investments have a high risk and high benefit: now assume that the benefit is high and the
risk is low (identify and develop): deciding as a company between the different applications: scoring
models: what types of application fits the best our business process?
• Used to evaluate alternative system projects, especially when many criteria exist
• Assigns weights to various features of system and calculates weighted totals
• Many qualitative judgments involved
• Requires experts who understand the issues and the technology

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 Table 14.2 Example of a Scoring Model for an ERP System

A: SAP
B: Microsoft
Asses how much of the functionality is supported by the application: try to make the decision
making more transparent

Information System Costs and Benefits
• Tangible benefits
If we would only have tangible benefits, we could limit ourselves to use the financial models: you
miss out on strategic opportunities
– Can be quantified and assigned monetary value
– Systems that displace labor and save space:
§ Transaction and clerical systems
• Intangible benefits
– Cannot be immediately quantified but may lead to quantifiable gains in the long run
§ For example, more efficient customer service, enhanced decision making
– Systems that influence decision making:
§ ESS, DSS, collaborative work systems

Capital Budgeting for Information Systems
• Capital budgeting models
– Measure value of long-term capital investment projects
– Rely on measures of the firm’s cash outflows and inflows
• Principle capital budgeting models used to evaluate IT projects
– Payback method
– Accounting rate of return on investment (ROI)
– Net present value
– Internal rate of return (IRR)
• Limitations of financial models

Dimensions of Project Risk
• Project size
– Cost
The more costs the investment will take, the more risk we take: you should manage the risk
– Time
If the project takes a long time it can be quite risky: world can change: better if we cut it into pieces
– Number of organizational units affected
The more units that are involved the more risk there is
– Organizational complexity
• Project structure
– Structured, defined requirements run lower risk

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Example: do we know upfront what the requirements are? Vague requirement so very high risk:
clearly articulate the functionalities
• Experience with technology
– Team familiar with hardware and software
System developed in a technology that no one knows about

Change Management and the Concept of Implementation
• Change management
– Required for successful system building
– New information systems have powerful behavioral and organizational impact
• Change agent
– One role of systems analyst
– Redefines the configurations, interactions, job activities, and power relationships of
organizational groups
• Role of end users
– With high levels of user involvement
• System more likely to conform to requirements
• Users more likely to accept system
• User–designer communication gap
– Users and information systems specialists
• Management support and commitment
– Effects positive perception by both users and technical staff
– Ensures sufficient funding and resources
– Helps enforce required organizational changes

Change Management Challenges for Business Process Reengineering, Enterprise Applications, and
Mergers and Acquisitions
• Very high failure rate among enterprise application and BPR projects (up to 70 percent for
BPR)
Because of their complexity: requires to change business process so risk becomes higher: business
process reengineering
– Poor implementation and change management practices
§ Employee concerns about change
§ Resistance by key managers
§ Changing job functions, career paths, recruitment practices
• Mergers and acquisitions
Bring together 2 organizations and their business processes: IT fusion is a big risk: complex
– Similarly, high failure rate of integration projects
– Merging of systems of two companies requires:
§ Considerable organizational change, complex systems projects

Formal Planning and Control Tools
• Used for documenting and monitoring project plans
• Help identify bottlenecks and impact of problems
• Gantt charts
Slice big project in pieces: planning
– Visual representation of timing and duration of tasks
– Human resource requirements of tasks
• PERT charts
– Graphically depict tasks and interrelationships
– Indicate sequence of tasks necessary

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Understand how the different activities are connected to each other: might help to reduce the risk
and make sure that the project is being done in time

Figure 14.4: A Gantt Chart

Figure 14.5: A PERT Chart

Project Management Software Tools
• Can automate many aspects of project management
• Capabilities for defining, ordering tasks
– Assigning resources to tasks, tracking progress
– Manage very large numbers of tasks and relationships
• Microsoft Project
• Cloud-based software
• Project portfolio management software

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Disruptive technology & organizations guest lecture by Laura Caluwé
Business leaders need to prepare for future technology

Disruptive technology - Definition
“A disruptive technology or disruptive innovation is an innovation that helps create a new market
and value network, and eventually goes on to disrupt an existing market and value network.”
(Christensen, 2013)
“Disruptive technology is technology that changes the bases of competition by changing the
performance metrics along which firms compete.” (Danneels, 2004)

Disruptive technology – Consequences
Disruptive technologies could affect society, business and economies: radical changes: it will change
how we live, how our society is structured and how businesses operate
• Implications for individuals and societies
− Changes of life, health and environment
− Changes patterns of consumption
For example: 3D Printer
− Changes nature of work
• Creates opportunities for entrepreneurs
• Implications for established businesses an other organizations
− Creates new products and services
− Shifts surplus between producers or industries
− Shifts surplus from producers to consumers
− Changes organizational structures
Block chain can change the structure of an organization by eliminating management
• Implications for economies and governments
− Drives economic growth or productivity
− Changes comparative advantages for nations
− Affects employment
Artificial intelligence: the idea that machines can have a kind of human intelligence because they can
learn on their own, you do not have to programme everything
à Might affect the employment of humans
− Poses new regulatory and legal challenges
For example: internet of things (= connecting devices like a washing machine to the internet) the
machine sends a lot of data to the internet, but the secure of this machines is not always that good
à They do not only impact IT companies but also the real world
Sometimes the early adapters really reap the benefits in investing first in a special technology

Disruptive technology – questions to ask
How do new technologies impact the competitive advantages on which we have based our strategy?
Strategy-based on competitive advantage of the organisation: make sure products are as low cost as
possible

How can new technologies bring us new customers or force us to defend our existing bases? E-
commerce: shops had as customers only the people who live in the neighbourhood: now they have
customers all over the world

How can new technologies inspire us to invent new strategies? How business have applied
disruptive technologies (next slides)

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Disruptive technology – the value
The value does not lie in the technology itself, but how these technologies are used to create
business value
à Technology has to fit into your strategy and the organisation if you want to reap the benefits

Gartner hype cycle
It lists interesting emerging technology: 5
phases:
− Innovation trigger
Technologies in this phase receive a lot of
attention: not yet useable: not known yet
what the business value is: rising expectations
− Peak of inflated expectations
Expectations are very high: still not very clear
what the business value is
− Trough of disillusionment
Because of the high expectations and several
implementations: implementations do not
keep up with the expectations: can survive if
some organizations keep believing in it
− Slope if enlightenment
Some success stories: clear what the business
value is
− Plateau of productivity
Product becomes mainstream: more and more
organizations are using this technology

Blockhain
An open, distributed ledger

What?
No Bitcoin: bitcoin uses the idea of block chain but it is an application: it is based on block chain
technology
= A decentralized database that stores a registry of assets and transactions across a peer-to-peer
network.
= A form of open, distributed, digital ledger consisting of “blocks” of information. Each “block”
contains a record of the transactions that occur within a network.
Notion of “trust”

Block chain technology
Simple ideas behind it, but very difficult
Stores data more specifically information about transactions: it’s decentralized in contrast with a
traditional data base: all the data in the data base is represented by blocks: behind block chain we
should be able to trust a lot of people we don’t know: trust the information that is in the block chain
even though you don’t know all the participants

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Trusted third party (for example a banc)
= identify B, is it really B, what is it banc account? Counting a fee
Eliminate the trusted third party is the idea of block chain = reduce transaction cost (cheaper) and
make it faster

How does it work?

1. Open ledger
A new block on the bloc chain appears with a new transaction and it is linked to the previous block in
the chain (only then it is valid)
Benefit? Open so that every participant in the network can see where the money is, they can all
validate transactions

2. Distributed ledger
But we didn’t want a centralised intermediary so now every participant has a copy of this ledger
= decentralised: we have to synchronise all this information: need minders

3. Miners
Idea: to trust all the information in the block chain
Specific special notes (A and D miners) competing with each other to validate this transaction and to
link it to the previous block in the block chain: miners invest power and time to guess this key,
search for this key: guess randomly what this key is: the one who finds it first can validate this
transaction and link the block to the previous block in the block chain: publish the block and the key
(need the key to link to the previous block)

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Applications
• Cryptocurrencies
• Diamond industry
• Testament
• Supply chain management
• Networking & IOT
• Insurance
Trust: insurance companies can use the block chain to identify the insured person
• Private transport & ride sharing
• Online data storage
• Charity
• Voting
Block chain might really disrupt the world of voting: block chain can be used to register this votes so
you can’t change or do something with this votes
• Healthcare
• Energy management
• Retail
• Real estate
• Crowd funding
• …

Example 1: Energy management (Power Ledger)
A block chain technology that enables peer-to-peer trading of electricity
Idea is that if you have solar panels and you produce a lot of energy but you don’t use all this energy:
would be interesting to sell your energy to your neighbours: uses block chain to enable this peer to
peer energy

Smart contracts
A smart contract is an agreement between a couple or more parties online that can be automatically
executed on a transparent block chain.
If… then… logic

Example 2: Supply chain management (Provenance)
Trace the origins and histories of products
Organisation that uses block chain that traces the origin of products: created a supply chain
management applications based on block chain: trust the origin of the products that you buy: it’s
applicable to almost every type of product
A lot of steps between the supplier supplier and the customers: you can not mess with this
information because all the other notes will see that this is wrong

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 Supply chain management














Example 3: Charity (Bitgive)
Block chain technology allows donors to trace transactions on a public platform in real time. Donors
can see how funds are spent and ensure they reach their final destination.
Use block chain technology to trace your donations, to see what is really happening with them: also
interesting for the organization because they can find fraudulent organizations

Issues
• Security concerns
Says the block chain is safe and can’t be messed with but not totally true
51% attack: we introduce miners: sometimes a lot of power is needed to find the key so miners will
work together (pool miner) if it’s more than 51% they can mess with the block chain
• Performance issues
Bitcoin is slow: idea about block chain is to speed the transactions up: the speeding up is not really
happening: as the network grows it’s more difficult to implement it and the network becomes
slower

Recap – Impact
• Increase transparency
• Eliminating third parties

Internet of things
Idea is that you have devices that are connected to the internet (smartphones, refrigerator)

What?
The Internet of Things (IoT) is the network of physical objects that contain embedded technology to
communicate and sense or interact with their internal states or the external environment

Broad concept
Consumer IoT (biggest for now) vs industrial IoT

78
 Figures

Forecast 2020 in detail

Applications
• Retail store beacons
• Bank branch beacons
• Risk mitigation/insurance
• Preventive/diagnostics care monitoring
• Pre-emptive maintenance
• Renewable power forecasting
• Asset optimization
• Smart irrigation
• Smart medication
• Wearables – infant monitoring
• Smart hospital bed
• …

IoT for insurance
Cars can be equipped with IoT devices: gives feedback on the way you drive: also the insurance
company can get this information
Sensors can alert you when bad weather is coming

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Example 1: IoT and Retail
• Customer experience
• Beacons
• Gathering data to enhance customer experience
• The supply chain
• Inventory tracking
• Adjust pricing real-time for consistency between online and brick and mortar stores
• Monitor lighting and temperature to ensure cost-effective energy
• Automate employee functions
• New channels and revenue streams
• Offer smart products => Connected home
• Gather data
• Create IoT platform

Cross industry:
Uses internet of things to make sure that you don’t have to pass trough the cash desk
= amazon go shop
Would enable retail and banking industry to work together: much more industries are working
together
Expecting 20,8 billion units of IoT applications in the world by 2020

A store of the future
Use IoT to increase customer experience by giving them specialized coupons adapted to the buying
industry
à A store of the future:
Red circles: sensor that identifies the customer (for example things that you have bought in the
past): if you enter you can get a personalized coupon because you’re such a loyal customer: adds of
products that are adapted to what you want: shopping car that leads you trough the store: scan the
product and see if there are good/bad reviews, what is the origin? (= more information)
Grey circles: Benefit from smart advertisement

Example 2: Smart cities: city of Things – Antwerp
Smart cities
− A mobile sensor to measure different aspects of air quality
− Bike sensors improve quality of life in the city
− Using location and event-based triggers to stimulate interactions with citizens


The value of IoT

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Strategic technology map

How should you decide which IoT devices you can use?
Strategic technology map = hot spot

Issues – security
A lot of requests from a lot of computers, website falls out: now they are using IoT devices that are
not well secured to attack websites

Issues – IoT platforms
An IoT platform is software and hardware, which may include an operating environment, storage,
computing power, security, development tools, and many other common functions.
Crowded and fragmented IoT platform market!
No clearly standards on how you should manage these devices, store the data of this devices

Recap – impact
• It is all about data
• Customer experience
• Operational excellence

Artificial intelligence

What?
Artificial intelligence is technology that appears to emulate human performance typically by
learning, coming to its own conclusions, appearing to understand complex content, engaging in
natural dialogs with people, enhancing human cognitive performance (also known as cognitive
computing) or replacing people on execution of non routine tasks.

Machine has the same intelligence as humans: machines (software) can learn on his own: look at
Gartner hype cycle: many of this applications are part of artificial intelligence

81

Machine learning is a type of data analysis technology that extracts knowledge without being
explicitly programmed to do so. Data from a wide variety of potential sources (such as applications,
sensors, networks, devices and appliances) is fed to a machine learning system, which uses that data
and applies algorithms to build its own logic to solve a problem, derive insight or make a prediction.
= learn on his own
Deep learning is a rapidly evolving variant of machine learning. Deep learning systems are "trained"
using extremely large datasets, large-scale, interconnected computational layers and compute- and
data-intensive heuristics and numerical optimization techniques.
= larger scale of data sets that can learn

Applications
• Autonomous vehicles
• Speech recognition
• Sentiment analysis
• Image processing
• Natural language processing
• Natural language generation
• Virtual agents
• Legal advice
• Chatbots
• …

Example 1: Music (Jukedeck) compose music and generate audio










Example 2: news articles
“Tuesday was a great day for W.Roberts, as the junior pitcher threw a perfect game to carry Virginia
to a 2-0 victory over George Washington at Davenport Field.”

“A shallow magnitude 4.7 earthquake was reported Monday morning five miles from Westwood,
California, according to the U.S. geological survey. The temblor occurred at 6:25
A.M. Pacific time at a depth of 5.0 miles.”

Which one was written by a computer? Both: Used for natural language generation: new article was
produced automatically so they could produce the fastest

Example 3: Healthcare (IBM Watson)
Providing information regarding therapeutic options to physicians

Example 4: Sales & Marketing (Conversica)
Automating lead engagement for Sales and Marketing organizations

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Recap – impact
It is all about learning.
Artificial Intelligence enables:
• Flexibility
• Responsiveness
• Speed

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Business Intelligence & Analytics guest lecture by Tim Huygh

Big data
Dataset are so big that they can not be stored in a traditional database
• Big data: datasets with volumes so large that they can no longer be processed by traditional
database management systems (DBMS) (e.g. relational databases)
• 3V:
- Volume: big amounts of data
- Variety: it can be anything
- Velocity: speed at which it comes in the organization

New technologies: opportunities and challenges for organizations

Over time in the late sixties computers/information technology started to enter: more and more
technology becomes available: opportunities + challenges: competitive advantages but competitors
can also do this

Business intelligence
What does this data mean? Using relevant information for decision making in the organization
• “The process of transforming data into information, which should lead to the creation of
knowledge and enabling adequate action”
à Goal: competitive advantage by using the relevant information and better decision-
making

DATA INFORMATION KNOWLEDGE ACTION

• Raw data • Make sense • Relevant • Using

• The challenge: integration of data/information from different sources

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Data Warehousing: architecture that we use to save our data
Integrate data from different sources
• Integrating data/information from different sources (e.g. ERP, CRM, internet, …)
• Architecture that enables the usage of data for business decision-making

Data warehouse operations
• ETL (Extract – Transform – Load)
- Extract: from different, heterogeneous sources
- Transform: convert from original format to format used in data warehouse (e.g. UA, U.A. à
Uantwerpen)
- Load: transformed data into data warehouse
- Refresh: propagate changes from original sources to the data warehouse (usually at least
once a day!)
• Data warehouse project cost:
- 75 to 90% for building and populating the data warehouse: didn’t gain any competitive
advantage
- 10 to 25% for running analyses on the data in the data warehouse: total cost of ownership
Setting up this data warehouse architecture is also a project

Data marts
For marketing, finance, logistics….
• Data warehouse: stores end-to-end information (i.e. Sourced in the entire organization)
• Data mart: subsets based on departments (e.g. marketing, HR)

Data warehouse: Analytical applications
10-20% of the cost goes to this: here comes the value in
• Enterprise reporting: reports, dashboards, and alerts (can be customized for a specific user
or user group)
• (M)OLAP (Online Analytical Processing): (multidimensional) data analysis (e.g. Amount of
product X sold in region Y during summer holidays)
à Users need to specify what they are looking for a priori
• Data mining (& data visualization)
à More exploratory, looking for “hidden” patterns

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Enterprise Reporting: reports, dashboards, alerts

(M)OLAP: Multidimensional data analysis

We need to know before hand what we are looking for: use this for decision making

Data mining: 9/11 terrorist network (social network analysis)
CIA did email communication, network communication to gain inside in how these potential
suspects were connected

Target audience of business intelligence techniques mapped to analytical complexity
Requires knowledge because it is very complex: CEO wilt not likely be involved: people with specific
skills for analytical complexity

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Data mining: definition and techniques
Explore: we do not know what we are looking for when we start the project
• “Discovering patterns in data”
à Goal: interesting patterns (to support decision-making): need people that can interpret
the outcome
• Techniques:
- Association rules
- Sequential patterns
- Regression
- Classification
- Clustering

Association rules
• Goal: Mining items that frequently appear together (e.g. Each transaction)
• Example: Product recommendations in web shops
You buy an iPhone à Recommendation for a glass

Sequential patterns
Association rules over multiple transactions
• Goal: Mining items that frequently appear together, over a certain time period (e.g. Multiple
transactions)
à Cfr. Association rules, but over time
• Example: Recommendations based on a recent purchase
à E.g. Customer who recently bought a digital camera receives a mail containing specialized
lenses that fit this camera
• Example: “60% of the customers who bought products X and Y, bought product Z within the
month”
Regression
Technique to predict future values based on historical data
• Goal: Predicting future values based on previous information
• Example: Predicting sales, …

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You can not account for something that will happen in the model
à you need to be cautious because something very unexpected can happen

Classification
Used to classify observations in pre-determined classes (ßà clustering: not pre-determined
classes)
• Goal: Classify observations in predetermined classes based on attributes (i.e. Variables)
<-> clustering: classes are “discovered”, not predetermined
• Example: SPAM classification (binary), tax brackets (multi)
• Techniques/models:
- Mathematical models (linear or non-linear functions of attributes)
- Rule or Tree based models (classification trees)

classification tree

Clustering
Groups are not determined: don’t know what we’re looking for: let the data speak
• Goal: grouping observations based on values of attributes (i.e. Variables)
à Groups are not determined a priori
• The goal of the process is to achieve:
- Maximal similarity of observations within a cluster
- Minimal similarity of items between different clusters
• Examples: market segmentation, customer profiling

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Interpretation after data mining (“post-processing”)
• Not all output of data mining is useful
• Garbage in – Garbage out
• Example: Everyone who ate an apple in the middle ages is already dead, so apples were
poisonous
à Correlatie ≠ Causatie
Poisoned apple: apple was not responsible for this
• Example: A bank discovered a big cluster of ex-customers during a project aimed at
increasing customer retention. The ex-customers in this cluster appeared to be significantly
older than in other clusters. The bank then investigated its popularity with elderly
customers.
à Almost all ex-customers in this cluster appeared to be deceased, therefore setting up a
marketing campaign targeted at elderly people might not be very useful after all…

Data mining: Ethical issues
• Privacy
- Which data is being stored?
- For what purpose is the data used?
Edward Snowden & the NSA PRISM program
- PRISM could be used to collect data worldwide from some major US internet companies (e.g.
Microsoft, Google, Facebook)
- The data which NSA reportedly collected included: e-mail, chat, video, photo, file How technology
can help organizations in better sharing information
à value of the data streams

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