Digital Organization

Introduction
A digital organization implements information systems and technologies to realize its strategic
objectives in order to achieve a competitive advantage and create stakeholder value in a rapidly
changing environment.

It’s no longer only important to look at the shareholders but also the stakeholders. Companies shouldn’t
only look at profitability but also the environment.

Examples of information systems and technologies:

 Global e-business

 E-commerce

 Enterprise Applications (ERP, CRM, SCM)

 Knowledge Management Systems

 Emerging digital solutions (AI, Cloud, Augmented and Virtual Reality)

 Cybersecurity

 Business Intelligence and Analytics

Strategies for a competitive advantage:

Lowest cost strategy:

Ryan air is a good example for this strategy. They invest in their app, less questions, less personnel costs.
The app makes sure that the customer can do as much as possible on their own from home. This leads to
lower personnel costs. This makes for an overall lower cost and lower prices.

Differentiated product:

Tesla. With this strategy, the idea is to create a product that’s different from any other existing products.
Tesla for example, focusses a lot on the development of their product. They’re constantly trying to
develop applications other than their main product.

Market Niche:

This strategy is for small niche markets. It includes products with a very specific purpose like Brauzz. They
offer environmentally friendly laundry sheets. Niche products are difficult to advertise. Because they’re
so specific it isn’t east to attract new customers. You have to reach a very specific audience.

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Customer and supplier intimacy:

The key word here is relationship. Netflix by example uses this strategy, they do this by collecting as
much data as possible about you. They want to get to know their clients so they can make specific
recommendations. Investing in AI and Big Data is very important here.

In all 4 of these categories, technology is being used to create an advantage.

The role of an information system: Company is a boat going towards a destination(goal)

 Supporting the current course

 Driver for fundamental change of the current course ex: Netflix radically changed their
ways(shipping DVD) they used technology to change( video streaming)

Constantly monitoring the state of technology. Environmental factors

are important when making choices and defining a strategy. Take into
account that environments are rapidly changing. The two are
constantly influencing one another.

Currently the 3 biggest factors are: sustainability, resilience and customer expectations.

Sustainability: Industrial manufacturing as we know it is a problem. First movements were mainly

greenwashing. Right now this is something necessary. Companies are forced to look at production,
energy ... In another way. Chances are that the government will intervene ex. Legislation. Companies
need to start thinking about a strategy for the production and how technology can help

 Limits of the planet

 Emissions
 Energy
 Water
 Circularity
 Human-centric
 Wellbeing (safety, ergonomics…)
 Empowerment
 Skilled: When using technology you have to take in account that you will need certain
skills
 War for talent: companies are trying to attract the right people
 The question is: are you going to change or stay on the same course?

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Resilience:
The last couple of years there have been a few crisis’ in our lives. Think about Covid, the Ukraine war,
climate change and all the supply chain disruptions.
Throughout the years the idea has been that companies must outsource their production because it is
more efficient and it creates higher margins and lower costs. But the recent shocks have created certain
issues in the supply chains. The question is, do we anticipate any future shocks or do we keep the same
course? Even here technology can help!
Customer expectation:
Consumer behavior is constantly changing. We want more transparency, where how and who produced
them. Personalization, is possible with a lot of products ‘should we allow the possibility of
personalization?’ We don’t just by product but we buy experiences, we want the buying to be easy and
accessible.

The classic idea of a company has changed. The question is will all jobs continue to exist, or will
technology take over these functions.
Think about:
 Banks and clerks—bank apps and bitcoin
 Translators—deepl or google translate
 Cashiers and stores—delivery and self-checkout
 Owning a car—poppy or Cambio

An example of a company that missed the opportunity. Kodak started the initial evolution but then didn’t
take future changes into account. They didn’t look at their environment and eventually went bankrupt.
Technology is a key piece in the puzzle but isn’t the only one. Digitizing organizations is an architectural
exercise with following building blocks:

 Management
 Organization
 Technology
Implementing information systems and technology alone does not deliver a competitive advantage.
There is no such thing anymore as a non-digital organization: Non-profit sector, Public sector, Start-ups,
Established firms
Business-IT fusion: everyone digital
 From purchasing to production and sales
 From production operator to CEO

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The 4 industrial revolutions:
 1st: Steam power and mechanization
Changed the way of working and the kind of jobs
Where you live, what you eat and where you work
 2nd: electrical energy, mass production
Cost of a lot of products decreased
Higher accessibility
 3th: automation, computers and electronics
Factories changed
Communicating with other countries got easier
Start of outsourcing
Robots
 4th: cyber-physical systems, IoT networks
Sharing economy
This is what the organizations are doing now
A lot of them are still stuck in the third

 5th ?: The transition to a sustainable, human-centric and resilient European industry”

(European Commission)

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Chapter 1: Information Systems in Global Business Today
Throughout the years, investments in technology have increased. Even during the crisis of 2008-2009
these investments didn’t slow down. People expect a certain value in return.

5new trends in business

1. Fast-evolving IT innovations
a. Cloud computing: no longer owning software, paying monthly for the use of it
b. Big data & Internet of Things: everything is connected. All products have sensors,
software, cameras that are connected to the internet. Think about the example of the
farmers.
c. AI and machine learning: in a production sites: Temperature, humidity; speed and
status…  operators collect data
Predictive maintenance is used the most.  you can intervene and prevent the problem
d. Blockchain: can confirm the security of the transactions
e. AR/VR/XR/Metaverse: training people(surgeons without risks); contacting maintenance
from a distance
f. 5G

2. New Business Models coming up

a. The idea of streaming movies and movies instead of owning them
3. E-commerce Expansion
a. Physical products
b. Services
c. Or both: buying product and maintenance all together
4. Management Changes
a. Use of social networks
b. BI applications
5. Changes in Firms and Organizations
a. More collaborative
b. Faster and more accurate decisions

Gartner hype cycle: Hype cycle to predict the status and

future of a hype.
Innovation trigger is the cause of the hype, it starts the
cycle.
Peak: people expect too much of the technology, they all
think this is the next big thing
Disillusionment: the vail drops, companies notice the bad
things for example: it’s too hard to implement or it
doesn’t give the needed value
Slope of enlightenment: the real success stories, the
long-term successes.
Plateau of productivity: Other companies start using it, also the non-believers

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  Good tool to check when to invest

Globalization: challenges and opportunities

Way of communicating and sharing information have changed the ways of business.

 Cost reduction for global operations and transactions

 Higher competition
 Higher interdependency between companies
 Need for new skills
 Information systems—globalization of commerce
Examples
Technology – connected to the internet
Business models– suddenly communicating with other companies got a lot easier, or some companies
used it to generate new businesses like website
management- you can have only one manager to follow up on people in other countries, new way of
managing people also internal
BUT suddenly you need to know the cultural differences
Organizational: jobs going abroad, it changed the jobs here and how they work. A lot of new
technological skills need to be taught

The digital firm

 In a fully digital firm:

o Significant business relationships are digitally enabled and mediated
o Core business processes are accomplished through digital networks
o Key corporate assets are managed digitally
 Digital firms offer greater flexibility in organization and management
o Time shifting:
o Space shifting

Strategic business objectives of IS

 Growing interdependence between:

o Ability to use information technology
o Ability to implement corporate strategies and achieve
corporate goals
Used to be a one-way relation, now it’s a constant exchange

 Investing in IS for 6 objectives

o Operational excellence
 Higher efficiency
 IS improves this and productivity
o New products, services, and business models
 IS enables creation of new products, services etc.

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  Value creation : everything you need to create the value proposition
 Value proposition
 Value capture: how do you capture the value by letting the customer pay

o Customer and supplier intimacy:

 Well served customers tend to come again
 Good relationships with suppliers can result in lower costs
o Improved decision making
 Managers must use forecasts, best guesses, luck
 Results in:
 Overproduction, underproduction
 Misallocation of resources
 Poor response times
 Poor outcomes raise the costs and loses customers
 Real-time data improves the ability of managers to make decisions
o Competitive advantage
 By achieving advantages over others!
 By achieving previous business objectives
 Better performance
 Lower prices for superior
products
 Better responses
 Cheapest, fastest, best quality
o Survival
 Keeping up with competitors
 Laws and regulations
 Sarbanes-oxley act: safekeeping information

An information system:

 Information vs. data

 Data are streams of raw facts

 Information is data shaped into meaningful, useful form

 Information system (IS)

 Set of interrelated components

 Collect, process, store and distribute information

 Support decision making and control

 Activities in an information system that produce information organizational decision-makers

need

 Input: Captures raw data (internal or external)

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  Processing: Converts raw data into meaningful form (i.e. information)

 Output: Transfers processed information to support decision-making

 Feedback: Output returned to appropriate members of the organization to help them

evaluate or correct the input stage

Dimensions of an IS:

Organizations

 Organization structure

• Hierarchy:

 Senior management: Makes strategic decisions about products and

services to ensure firm performance

 Middle management: Carries out the plans of senior management

 Operational management: Responsible for monitoring daily activities

• Specialties: separation of business functions

 Sales and marketing

 Human resources

 Finance and accounting

 Manufacturing and production

 Business processes

 Business culture

 Organizational politics

Management:

 Managers sense business challenges and opportunities: look for trends, other companies, etc.

 Managers set organizational strategy in response: set out a strategy

 Managers allocate resources to carry out strategy: what do we need to achieve the goals

 In addition, managers must act creatively

 Creation of new products and services

 Occasionally re-creating the organization

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 Technology:

 Information Technology (IT) represents the technical foundation of hardware, software, and

technologies

 Hardware

 Software

 Data management technology

 Network and communication technology (network, internet, intranet, extranet)

 Intranet= internet between the walls of your company

 Extranet= outside the borders of the organization but with limited access

 IT infrastructure: provides platform that system is built on

These three dimensions combined result in the IS that meets the business challenges of providing high
level services at a low cost.

Business perspective on IS

 Information system is instrument for creating value

 Investments in information technology will result in superior returns

 Productivity increases

 Revenue increases

 Superior long-term strategic positioning

Not every implementation is a success

As a company you want to be in the second quadrant

We expect a high investment and high return

We want to avoid high investment and low productivity

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 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)

 Assets required to derive value from a primary investment

 Firms supporting technology investments with investment in complementary

assets receive superior returns

Examples

Social asset:

 Standards( private and governemnetal)

 communication infrastructure
Managerial asset:

 teamwork and collaborative environments

 Incentives for management innovation
Organizational assets:

 Appropriate business model

 Efficient business processes

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Chapter 2: Management information systems
Business processes=Logically related set of tasks that define how specific
business tasks are performed
 Flows of material, information, knowledge among participants
in business processes
 May be tied to functional area or be cross-functional

Every decision you make starts a certain sequence to

follow it.

Don’t offer/offer – sequence that follows after this

 Examples of functional business processes

 Manufacturing and production
• Assembling the product
• Checking for quality
 Sales and marketing
• Identifying customers
 Finance and accounting
• Creating financial statements
• Paying creditors
 Human resources
Hiring employees

Some processes only include people from certain departments

Chain of steps – exists of another level of detailed processes

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  Businesses can be seen as collection of business processes
 Business process mapping can be used for:
 Creating a (common) understanding of the process
 Identify optimization opportunities
 Implement an IS to support/digitize that process
 Training of new employees or replacements during sick leave
 Business processes may be assets or liabilities

Improving business processes by IT

 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

Transaction processing systems

 Serve operational managers and staff
 Perform and record daily routine transactions necessary to conduct business
 Examples: sales order entry, hotel reservations, payroll
 With a transaction you translate input into a record in a database that can be used for reporting
 Allow managers to monitor status of operations
 Serve predefined, structured goals and decision making (e.g., grant credit to customer)
 GIGO = Garbage In, Garbage Out

Different systems depending on the management group

 Systems for Business Intelligence (BI)
 Data and software tools for organizing and analyzing data
 Used to help managers and users make improved decisions
 Three types of Business Intelligence systems
 Management information systems (MIS)
 Middle-management

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  Helps directing, planning, coordinating, communicating and decision
making
 Reports on current performance  based on info from TPS
 Answers routine questions
 Little analytical capabilities
 Decision support systems (DSS)
 Middle-management
 Solves unique problems/ rapidly changing
 Non-routine decision making
 Not just MIS/TPS also external info
 Model driven(estimation model/system) or data driven(e.g. marketing
analysis )
 Executive support systems (ESS)
 Senior-management
 Non-routine decisions (needs insight, evaluation and judgement)
 Uses external data and summarized DSS and MIS data

Enterprise applications
 Systems for linking the enterprise
 Span functional areas
 Execute business processes across the firm
 Include all levels of management
Four major applications
 Enterprise systems
 ERP/enterprise resource planning
 Integrates data from all key business processes
 Fast information communication throughout firm
 Greater accuracy order fulfillment
 More flexibility in responses to customers
 Overview of all operations
 Supply chain management systems
 Manage relationships with suppliers, purchasing firms, distributors
 Manage shared info
 Efficient and correct movement of goods form source to consumption
 Interorganizational: info goes over organizational boundaries

 Customer relationship management systems

 Manage customer relationships
 Coordinate all the BP that deal with sales, customer services and marketing
 Goals:
 Optimize revenue
 Improve customer satisfaction and retention

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  Identify most profitable customers
 Increase sales
 Knowledge management systems
 Capturing and applying knowledge and expertise
 About creation, production, delivery and services
 Collect and use relevant info to improve processes
Intranets and extranets
 Technology platforms that increase integration and expedite the flow of information
 Intranets:
 Internal networks based on Internet standards
 Often are private access area in company’s Web site
 Extranets:
 Company web sites accessible only to authorized vendors and suppliers
 Facilitate collaboration
 E-business
 Use of digital technology and Internet to drive major business processes
 E-commerce
 Subset of e-business
 Buying and selling goods and services through Internet
 E-government
 Using Internet technology to deliver information and services to citizens, employees, and
businesses
 Not every of these systems is a different product at a company
 All-in-one: as many functionalities as possible in one system
 ‘Best of breed’: combine and integrate the best systems for each functionality
Collaboration

 Long or short term

 Formal or informal
 Growing importance
 Change nature of work
 Changing scope of the firm
 Emphasis on Innovation
 Change in work culture
 More interaction between jobs
 Changing organization of the firm

 Requirement:
 Open culture
 Decentralized structure
 Breadth (breedte) of collaboration
 Used for implementation and operations
 Used for strategic planning

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  “Command and control organization:” just execute
the order, no collaboration
 Collaborative business culture
 Delegating work
 Managers build the teams
 Policies and products rely on the TW
 Tools
 E-mail and instant messaging (IM)
 Wikis
 Collaboration and social business platforms:
Virtual meeting systems (Blackboard
Collaborate, ZOOM), Cloud collaboration
services (Google Drive, Google Docs, etc.), Microsoft SharePoint, Enterprise social
networking tools (Microsoft Yammer)

Social business

= use social networks to engage employees, customers and suppliers

 Deepen interaction and faster info sharing

 Conversations strengthen the bond
 Spur innovation, improve operational excellence and faster decision making
Benefits of social business and collaboration

 Can create higher returns in sales and marketing, R&D

 Productivity: sharing knowledge and problem solving
 Quality: faster resolutions
 Innovation: more ideas
 Customer service: rapid handling of complaints
 Financial performance: generated by mentioned factors
The information systems department
 Often headed by Chief Information Officer (CIO): translating the strategy into plan
 Both Business knowledge and IT knowledge
 Implementation, search for new applications and oversees integration in the firm
 Information Systems managers
 IT manager
 Application manager
 Systems analysts / functional analysts
 Programmers / developers
 Representatives of departments outside the IS department: Key users, End users
Changes in IS department
 Low-code/No-code turns end-users into programmers (citizen developers)
 Decrease in programmers due to Cloud-software and outsourcing
 Increase of cybersecurity specialists, data scientists, machine learning engineers, cloud
engineers, BI analysts, etc.
 a driver for new business strategies and information-based products and services

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  both the technological development as the organizational changes
IT governance
 Strategies and policies for using IT in the organization
 Decision rights and accountability
 Who makes what decisions? Who is accountable when something goes wrong?
 Good IT governance clear answers to these questions

Chapter 3: what is an organization?

Technical definition
Formal social structure that processes resources from environment (capital and labor) to produce
outputs
All the things you take from your environment!

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The revenues that come from the output can be used to create new inputs
Very simple definition– in reality there is more to it

Behavioral definition
A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period
of time through conflict and conflict resolution

Everything is stable– when you do and it

implementation a lot changes, the balance
changes

All the dimensions

When implementing new IT– first understand the
dimensions

Features of organizations

 1. 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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=>Logically sequenced set of tasks/Cross domain

Over time when companies grow, they professionalize these processes until a smooth working one
Bringing on changes in theory isn’t a problem but expect it to be a bit more difficult in reality
 2. Organizational politics
Divergent viewpoints lead to political struggle, competition, and conflict
Political resistance greatly hampers organizational change
=>What you want isn’t necessarily in line with what other employees think or believe
People have their own agenda – there will be some below the surface politics
How do we notice these and deal with them
The own agenda can cause fear when changing things
Whether your external or internal– you need to get people on the same line
 3.Organizational culture
Encompasses set of assumptions:
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
=>In many cases when you ask someone why they do something- they will tell you that’s the way they do
it in the company: The company culture

 4. Organizational structure

1: small teams, what would you focus on?

-Where the urge is highest, they invest, light and cheap solutions
-where are the limits and boundaries and how do you grow
2: not like a start-up; more stable;
 Standardizing their process , optimizing and making efficient
3: more products, multiple business units; looking for an overview
 Working on analytics in order to create this overview
5: taskforce organizations

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  Reacting to rapidly changing environments
 Software that focusses on organization
 Important to see where your organization belongs

 5.Organizational environments
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

Inertia: the inability of the organization to respond quickly to environmental change
=>As a company you are dependent on the people around you for the inputs and organization

2 directional interactions with the environment

In many cases, the organization is too slow to react

Environmental scanning:
--Environmental scanning involves searching for and determining external changes that may require

an organizational response.
IS is a key instrument for environmental scanning
-- Monitoring the external environment
-e.g. real estate: knowing if there will be a new regulation
How do the interest rates evolve? What do other companies do?

Disruptive technologies:
 Substitute products that perform as well as or better (often much better) than anything currently
produced
 Put industries out of business
 Extend the market as low-cost competitors
 Examples: personal computers, smartphones, big data, artificial intelligence, the
internet, SaaS
 First movers and fast followers
 First movers—inventors of disruptive technologies
 Fast followers—firms with the size and resources to capitalize on that technology
 New technologies need to be monitored
Typically the fast movers don’t have the means to really make it big,
keeping up with the growth
Then the fast followers come in and benefit but they really have to monitor
the environment

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Economic impact:

 IT changes relative costs of capital and the costs of information

Information systems technology is a factor of production, like capital and labor
IT affects the cost and quality of information and changes economics of information
=>The more the technology evolves the lower the costs for capital and labor
How can we use IT to replace a part of the capital or labor?
-e.g. working from home to save on rent
With IT the information gathering is a lot easier and cheaper
 Sharing your findings

Transaction costs are the costs of participating in markets

 Firms seek to economize on transaction costs
 E.g. Vertical integration (taking a bigger piece of the supply chain and doing it yourself),
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
E.g. Communicating with suppliers (SCM systems), outsourcing (communication technologies)
=>Organizations start focusing again on their core product– because outsourcing is cheaper
=> Companies get smaller, you create an ecosystem again

Agency theory:
 A principal (owner) employs agents (employees) to perform work (Self-interested individuals)
 Agents need to be supervised/monitored to make sure that they act in the principal’s interest
 Agency costs are costs related to managing/supervising employees
 Agency costs rise as firm grows/ the bigger the firm the higher the costs
 IT can reduce agency costs, making it possible for firms to grow without adding to the costs of
supervising

 The Internet increases the accessibility, storage, and distribution of information and knowledge
for organizations. The Internet can greatly lower transaction and agency costs. Organizations
become bigger without the growing of the middle management

Behavioral impacts:
 IT flattens organizations
 Decision making is pushed to lower levels (empowerment)
 IT enables faster decision making and increases span of control
 fewer managers are needed (agency theory)
 Postindustrial organizations

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  Organizations flatten because in postindustrial societies, authority increasingly relies on
knowledge and competence rather than formal positions
Resistance to change
 Information systems potentially change an organization’s structure, culture, politics, and work
 Potential for resistance when information systems are introduced
 Research on IS project failures finds that the most common reason for failure is
resistance to change importance of change management

Porter’s competitive model:

We have to find a competitive position
And analyze the threats
Why do some have become leaders?
They take all the factors into account

Traditional competitors
 All firms share market space with competitors who are continuously devising new
products, services and efficiencies --You need to differentiate based on price, product or
service

Threats: how do you protect yourself against these

 Be better than them, anticipate, choose course of action
Direct companies: the ones that already exist
New entrants: the new companies who enter the market. You want a competitive advance on them 
make sure no new ones can enter
Sometimes it’s about the brand
The new entrants have a lot of threats from those who are already there. The older ones are less likely to
change their ways
You want to obtain your position and then try to keep it by analyzing the environment
 Some industries have high barriers to entry (e.g. capital costs, required expertise)
 New companies have new equipment, younger workers, but little brand recognition
Substitutes: consider when your product is too expensive
You have to make sure your product is difficult to substitute, differentiate
The more unique the bigger the bargaining/negotiation power

IS strategies for dealing with these competitive forces:

1.Low-cost Leadership: You can use the information systems to make everything more efficient so you
can lower the price// e.g. Use the client-card to bond with the customer

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 2.Product differentiation: Enable new products or services or greatly change customer convenience and
experience (e.g. Uber) Mass customization (e.g. Nike, Sofa company)// think about apple(easy
transferring data to new phone)

3. Niche market: Use information systems to enable a focused strategy on a single market niche;
specialize (e.g. Hilton Hotels’ O N Q system)// focus on a specific part of the market. Using advertising
campaign on social media to reach the exact target

4.Customer and supplier intimacy: Use information systems to develop strong ties and loyalty with
customers and suppliers and Increase switching costs

Competitive Force Impact of the Internet

Substitute products or services Enables new substitutes to emerge (e.g. Wikipedia competes with printed encyclopedia)
Customers’ bargaining Customers can quickly compare prices, increasing
Power their bargaining power
Suppliers’ bargaining Procurement over the Internet lowers suppliers’
Power bargaining power
Threat of new entrants Internet reduces barriers to entry, increasing the
threat of new entry
Rivalry among existing competitors Widens geographic market, increasing the number of competitors
 The internet has increased the bargaining power of the customer. And
decreased the power of the supplier. It created transparency
Smart products and IoT:

 Internet of Things (IoT)

 Growing use of internet-connected sensors in products
 Smart products (e.g. smartwatches)
 E.g. agricultural, cameras and sensors
 Impact
 Increasing rivalry between competitors
 Raise switching costs
 Inhibit new entrants

Business value chain model:

 Views the firm as a series of activities that add

value to products or services
 Primary activities: directly related to
production and distribution of the
products or services

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  Support activities: make the primary activities possible
 Highlights activities where competitive strategies can best be applied
 At each stage, determine how information systems can improve operational efficiency and
improve customer and supplier intimacy
 Benchmarking effectiveness and efficiency against competitors
 Best practices: set by consultants-most successful solutions for obtaining the business goals.
 Identify the stages, optimize those, create advantages

Value Web: extension of the value chain

Value web: a highly synchronized industry value chain
 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
 Synchronizes business processes of value partners
 Flexible and adaptive
 Optimize the web relationships to make quick decisions

Synergies:
 Refers to benefits that an organization expects to realize when it merges with or acquires
another organization//E.g. pooling of expertise
 Role of IS: coordinating operations of the separate units so that they can act as a whole
Core competencies:
 Activity for which firm is world-class leader
 Relies on knowledge, experience, and sharing this across business units
 E.g. Ford focusses on manufacturing vehicles and works with UPS to deliver products

Network-based strategies:
 Take advantage of firm’s abilities to network with one another//Network effect= value grows
because of the participants
 Includes the use of:
 Network economics:
 Marginal cost of adding new participant almost zero, with much greater marginal
gain  law of diminishing returns
o When the economic value being produced depends on the number of people
using a product or service
o IS can be used to build and maintain the network/community//E.g. Facebook,
Airbnb, Uber, Booking.com
o Growth isn’t infinite; stages of growth:

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 1: growth
2: constant growth
3: diminishing growth

 Virtual company model:

o Uses networks (e.g. private extranet) to work together with other companies
o 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
 Does not own fabrics, factories, or machines
 Outsources all work to thousands of suppliers
 Business ecosystems and platforms:
o Business Ecosystem: loosely coupled but
interdependent network of suppliers,
distributors and outsourcing firms
o Instead of participating in a single
industry, some firms participate in
industry sets (i.e. collections of industries
that provide related products or services)
E.g. Set of industries: think about mobile
internet: software, hardware, telecom and
internet providers have to work together
for this to work
o Platform: one or two keystone firms who dominate the ecosystem and create a
platform for niche companies
o Difference between ecosystem and value web
=> Web is just one industry ;platform is a company starting from different
enterprises working together to create value

Challenges posed by strategic information systems:

 Sustaining competitive advantage
 Competitors can copy strategic systems (easier via the Internet)
 Systems may even become tools for survival
 Over time technology doesn’t give you the same advantage because it is easily copied

 Aligning IT with business objectives

 First step = Performing strategic systems analysis
• Structure of industry
• Firm value chains

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  Aligning IT with business objectives is the hardest part– start from strategy (what is
crucial for the strategy and advantage); align them and the IT need to help achieve the
goals and strategies
 Managing strategic transitions
 Adopting strategic systems requires changes in business goals, relationships with
customers and suppliers, and business processes
 It’s never done! Once implemented – need to manage the effects and consequences of
change

Chapter 8: Securing Information Systems

Why systems are vulnerable?
Main categories of threats to information systems
 Network of systems provides multiple access points
 Hardware problems (e.g. breaks down)
 Software problems (e.g. programming errors, unauthorized changes)
 Power failures, natural disasters (floods, fires, etc.)
 Use of networks/computers outside of firm’s control
 Loss and theft of portable devices

Starting from a client: can be a computer/tablet/…

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Internet vulnerabilities
 Large public network open to anyone
 Large number of internet users means abuses can have wide impact
 Information systems connected to the internet are vulnerable for external attacks
 E-mail, IM (e.g. attachments with malicious software)

Wireless security challenges

 Bluetooth and Wi-Fi networks susceptible to sniffing (e.g. monitor network traffic)
 SSIDs (service set identifiers)
 Identify access points, broadcast multiple times, can be identified by sniffer programs
 War driving
 Eavesdroppers drive by buildings or park outside
and try to detect SSID to intercept wireless
network traffic
 Once access point is breached, intruder can gain
access to networked drives and files
 Rogue access points to which unsuspecting users
connect, making their username and password visible
 SSID: identifies the identity of the
network
Broadcasted! Intruders can intercept these networks
Sniffing: intercepting the network and monitoring the data
Types of malwares

 Malware stands for malicious software

 Viruses: malicious code attached to a host file
 Worms: spread from system to system without host file (autonomously)
 Trojan Horses: claim to be something else, need to be allowed entry to the system (by
user)
 Typically spread by
 Downloads and drive-by downloads
 E-mail, IM attachments
 New challenges
 Mobile device malware
 Social network malware
 IoT devices
 People use their phone more  not just for computers the malware
Malware could damage IoT devices
 SQL injection attacks

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  Poorly coded web-applications

 Technique used to try gain unauthorized access to databases underlying websites (e.g.
steal usernames and passwords used on a website)

 Validation error when for example shopping online, then the hacker sends a rogue SQL
query to the underlying database to plant malicious software

 Ransomware (e.g. encrypting files and requesting payment)

 Spyware (e.g. monitor web-surfing or other behavior)

 Key loggers: record every keystroke made on a computer(passwords!)

Hackers vs. crackers

 Both intend to gain unauthorized access to a system

 Cracker usually refers to a hacker with criminal intent

 Certified Ethical Hacker (CEH): A qualification obtained by demonstrating knowledge of assessing

the security of computer systems

 Organizations hire certified ethical hackers to penetrate networks and computer systems
with the purpose of finding and fixing security vulnerabilities

 Spoofing and sniffing

 Spoofing: re-directing to a fake website that looks like the real one

 Sniffing: monitoring network traffic

 Denial-of-service attacks (DoS)

 Flooding a server with many false service requests

 Goal is to crash the server or network

 Distributed Denial-of-Service (DDoS): attack the server from various computers

simultaneously

 DDoS attack can be performed by botnet: many infected PCs (without owner’s
knowing)

 Botnet: PCs infected with malware are organized into a botnet to launch DDoS attacks

 Identity theft: obtaining key pieces of personal information to impersonate someone else (e.g.
Credit card information)

 Phishing: spoofing to obtain confidential data

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  Evil twins: rogue Wi-Fi networks posing as legitimate

 Pharming: redirect a website's traffic to a rogue server

 Click fraud: pay-per-click advertising

 Use techniques to click competitor’s ads frequently, thereby increasing their marketing
costs

 Cyberwarfare: state-sponsored activities to attack computers and networks of other states

(e.g. Stuxnet)

Internal threats: Employees

 Sloppy security procedures

=User lack of knowledge (e.g. employees might let others use their passwords, or login
on multiple uncontrolled devices)

 Social engineering
=Intruders might trick employees in sharing their passwords by pretending to be
colleagues from internal IT helpdesk

Software vulnerability

 Commercial software contains flaws that create security vulnerabilities

 Bugs (program code defects)
 Software without defects cannot be achieved because complete testing is not possible
with large programs
 Flaws can open networks to intruders
 Zero-day vulnerabilities: found by hackers, unknown to the creator
 Patches: Small pieces of software used to repair flaws

Business value of security and control

 Failed computer systems can lead to significant or total loss of business function (“downtime”)
 Firms now are more vulnerable than ever
 Confidential personal and financial data
 Trade secrets, new products, strategies
 A security breach may negatively affect a firm’s market value almost immediately
 Inadequate security and controls also bring forth issues of liability
 Companies can be sued for not taking appropriate protective action to prevent loss of
confidential information

Legal and regulatory requirements for electronic records management

 GDPR (General data production Regulation)

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  Requires all organizations that collect, store or process personal information of EU
citizens to properly protect this information
 Sarbanes-Oxley Act (Sox)
 Imposes responsibility on companies and their management to safeguard the accuracy
and integrity of financial information that is used internally and released externally
 a lot of financial transactions rely on the safety. When on the stock market  comply to
the act. How is it created? Has it changed? Who changed it?

 Electronic evidence
 Legal cases increasingly rely on evidence represented as digital data
 Proper control of data can save time and money when responding to legal discovery
request
 It’s in your own advantage to keep your documents safe! As a firm you should be aware
that you have to store the information.

 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(data that is no longer used or viewable)

The components for an organizational framework for security and control

 IS Security
 The prevention of unauthorized access, alteration, theft, or physical damage to
information systems
 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
Information systems controls
 May be automated or manual
 General controls: apply to all computerized applications
 Software controls: monitor use of software/prevent unauthorized access and use
 Hardware controls: detect malfunction/ take measures for back-up
 Computer operation controls: oversee computer department/ proper storage and
processing/ set-up, back-up and recovery procedures
 Data security controls: check for security of internal and externally kept data
 Implementation controls: audit development/ to ensure proper control and
management
 Administrative controls: form procedures, rules and standards to ensure that general
and application controls are properly enforced
 Application controls: unique to a computerized application
 Input controls, processing controls, output controls
 You can’t have an infinite amount of controls

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Risk assessment
 Determines level of risk to firm if specific activity or process is not properly controlled
• Likelihood that the event happens
• Impact if it happens
• Is the risk big enough to implement a control?
Security policy
 Statements ranking information risks, identifying security goals and mechanisms for achieving
these goals
 Drives other policies
 Acceptable use policy (AUP)
 Defines acceptable uses of firm’s information resources and computing equipment, and
consequences of noncompliance
Disaster recovery planning
 Focuses on restoring IT operations after disaster
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 on the business
 Management must determine which systems restored first
How can we restore these as soon as we can? Backup: where do we store it?
°restoring business operations: the moment when you change from the old to the new
system; you need a plan in case of disaster

The role of auditing

 Information systems audit
 Examines firm’s overall security environment as well as controls governing individual
information systems
 Security audits
 Audit security effectiveness
 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
 What could be the response of the management- Screen setup/ test for difficulties

Most important tools and technologies for safeguarding information

 Identity management software
 Automates keeping track of all system users and controlling their access
 Users can have different access rights at different systems
 The systems work with roles, depending on these roles, you have access to
certain things

 Authentication
 Password systems

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  Tokens
 Smart cards
 Biometric authentication (irises, fingerprint, face, etc.)
 Two-factor authentication
 Firewall
 The wall between you/company and the outer world or between different parts of the
company

 Combination of hardware and software that prevents unauthorized users from accessing
private networks
 Controls flow of incoming and outgoing network traffic
 Acts like a “gatekeeper” that checks each user’s credentials before granting access to the
network (e.g. identify IP address)

 Intrusion detection system

 Always monitoring vulnerable spots on corporate networks to detect and deter
unauthorized access
 Alert, or even shut down (part of) network, in case of unauthorized traffic
 Antivirus and antispyware software
 Prevents, detects, and removes malware from computers
 Requires continual updating to remain effective
 Unified threat management (UTM) systems
 Comprehensive security management products, includes various security applications
 Comes in multiple sizes

Securing wireless networks

 Encryption
 Transforming data into encrypted data that can only be read by sender and intended
receiver
 Encryption key, used to encrypt and decrypt
 Encryption scrambles the content of the message so that only the receiver can read the
message
 Encryption of public key infrastructure
2 methods:
 Symmetric key encryption
 Sender and receiver use single, shared key
 Exposes the key to outsiders for interception
 Public key encryption
 Uses two, mathematically related keys: public key and private key (generated
through RSA algorithm)
 They are linked, but cannot be derived from each other
 Sender encrypts message with recipient’s public key

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  Recipient decrypts with private key
 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

 Blockchain
 Chain of digital ‘blocks’ that contain records of transactions
 Each block is connected to all the blocks before and after it (= chain)
 The blockchains are continuously updated and kept in sync
 All transactions are encrypted (private key act as a personal digital signature)
 If a record is altered, the blockchain network will immediately
 Smart contracts
 Application of blockchain
 Automatically executed when predetermined terms and conditions are met
 contains rules are kept in the blocks /Conditions are met transaction gets done
 Creates trust
 Example: NFT (Non-Fungible Token) for university degree

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
 Built-in logic to detect hardware failures and automatically switch to a backup device
 Deep packet inspection: A lot of data traffic at the same time– deep packet inspection can help
organize the data packets and prevent overload.

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  Security outsourcing: pay to use a certain platform/Managed security service provider (MSSPs)
Security issues 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): a contract between a service provider and a customer,
defining the types and standards of services to be offered

Securing mobile platforms

 Security policies should include and cover any special requirements for mobile devices
 Mobile device management tools
 Inventory records
 Control updates
 Lock down/erase lost devices
 Encryption
Ensuring software quality
 Software metrics: objective assessments of system in form of quantified measurements to
measure the performance of the system
 Number of transactions
 Online response time: time between request and action
 Known bugs per hundred lines of code
 Rigorous software testing
Chapter 9: Achieving Operational Excellence and Customer Intimacy: Enterprise
Applications

How do companies achieve operational excellence

Enterprise systems

 Commonly referred to as Enterprise Resource Planning (ERP) systems

 In essence, a cross-functional system used to link the enterprise (end-to-end)

33
 All the activities and how they are grouped

Processes can occur within the business function

Most of them run through various functions and link

everything

Data cannot be just stored in their own

departments.
They need each other’s data
Otherwise you get slow data and duplication of
data!
We would make a lot of mistakes.

 Set of integrated software modules (linked to the departments) and a

common central database
 Brings together data from all over the firm for use in many internal
business activities
 Information entered in one process is immediately available for other
processes (no delay or duplication)
 Can lead to significant increase in operational efficiency
Enterprise software

 Collection of integrated software modules (e.g. Finance & accounting, sales & marketing, human
resources etc.)
 Built around many predefined business processes that reflect best practices
 Firms can:
 Adapt its business processes to the best practices
 Customize the software to fit its business processes(If you have certain processes that
give the company an advantage)
Business value of the enterprise systems

 Increase operational efficiency (operational excellence)

 Enable rapid responses to customer requests for information or products

 Provide firm-wide information to improve decision making

 Include analytical tools to evaluate overall organizational performance and improve decision-
making in (quasi) real-time

The coordination of planning, production and logistics with suppliers

34
The supply chain

 Network of organizations and business processes for:

 Procuring materials, transforming these materials into products, and distributing the
products to customers

 From source (supplier) to consumption (customer)

 Flow of information

 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

The employees that transform materials, components and services into the actual products

The supply chain management

 Inefficiencies in supply chain (e.g. part shortage) increases operating costs

 Just-in-time strategy (assumes perfect information)

 Components arrive as they are needed

 Finished goods shipped directly after leaving assembly line

 Perfect JIT strategy isn’t possible  safety stock!

 Safety stock: buffer for lack of flexibility in supply chain

 Bullwhip effect: Information about product demand gets distorted as it

passes from one entity to next across supply chain

SCM software

 Supply chain planning systems

 Model existing supply chain

 Enable demand planning (generate demand forecasts)

 Optimize sourcing, manufacturing plans

 Establish inventory levels

 Identify transportation modes

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  Supply chain execution systems

 Manage flow of products through distribution centers and warehouses

 Ensure finished products are delivered to the right locations in the most efficient way

 Less estimating and more exact data  optimizing

Global supply chain issues

 Extend across multiple regions and time zones

 Participants from different countries

 Different performance standards

 Different legal requirements

 Internet helps manage global complexities

 Outsourcing of manufacturing

 Warehouse management

 Logistics (e.g. monitoring shipments)

Demand-driven supply chains

 Push-based model (“build-to-stock”)

 Production schedules based on demand forecasts

 Products are “pushed” to customers

 buys products on the shelf and is entirely based on a forecast. We make what we
forecasted and push them to the customers

 Pull-based model (“build-to-order”)

 Customer orders trigger events in supply chain

 Actual order information drives production schedules

 Internet supports this model

Business value of the SCM systems

 Match supply to demand

 Reduce inventory levels

 Use assets more effectively

 Total supply chain costs can be 75 percent of operating budget

 Improve delivery service

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  Faster product time to market

 Increase sales: Not only about cutting costs but also about boosting sales by a better customer
intimacy

Customer relationship management

 Capture and integrate customer data from all over the
organization
 Consolidate and analyze customer data
 Distribute customer information to various systems and
customer touch points across enterprise
 Provide single enterprise-wide view of customers
 Touch points have interesting customer information that
make it easier to communicate with the customers
Cheaper to sell something to a customer you already have
than attract a new one
CRM software
 Sales force automation (SFA)
 Improve productivity of sales staff
 Sales prospect and contact information
 Sales forecasts
 Customer service
 Increase efficiency of call centers, help desks and customer support staff
 Managing customer service requests

 Marketing
 Capturing prospect and customer data
 Scheduling and tracking direct-marketing mailings or e-mail, support targeted marketing
 Cross-selling: marketing of complementary goods
 From planning the campaign to executing and tracking the data

 Operational CRM
 Customer-facing applications
 Sales force automation
 Call center and customer service support
 Marketing automation
 Analytical CRM
 Applications that analyze customer data generated by operational CRM applications
 Identify buying patterns, create segments for targeted marketing, determine
customer profitability
 Customer’s lifetime value for the firm

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  Business value of CRM systems
 Increased customer satisfaction
 Reduced direct-marketing costs
 More effective marketing
 Lower costs for customer acquisition/retention
 Increased sales revenue
 Reduce customer churn
 Churn rate
 Measures the number of customers who stop using or purchasing products or services
from a company
 Indicator of decline of firm’s customer base
 Compare with growth rate
Enterprise application challenges
 Expensive to purchase and implement enterprise applications
 Projects are expensive, take a long time and take a lot of the organization. You have to
determine whether you implement new technologies or not. Either you follow best
practices or you customize. The content of the job changes, you need to learn how to
use the new systems. Your employees learned how to work with a certain system 
won’t change that easily. All the data together, centralize it. Remove the duplicates, fill
in the gaps.
 Long development times
 Technology changes
 Business process changes
 Organizational learning, changes
 Switching costs, dependence on software vendors
 Data standardization, management, cleansing
Next-generation enterprise applications
 Enterprise solutions/suites
 Make applications more flexible, web-enabled, integrated with other systems
 Cloud-based versions: Standalone systems are a thing of the past/The suites  applications
work very closely together
 no longer just running on the server at home
 Functionality for mobile platform

Social CRM
 Incorporating social networking technologies
 Monitor social media activity; social media analytics
 Manage social and web-based campaigns
Business intelligence
 Inclusion of BI with enterprise applications
 Flexible reporting, ad hoc analysis, “what-if” scenarios, digital dashboards, data
visualization
ERP, SAP have reporting systems withing these applications

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Chapter 10: E-commerce: Digital Markets, Digital Goods

E-commerce today: Digitally-enabled commercial transactions, Exponential growth

 Current e-commerce growth > offline retail sales growth

Cheaper and easier but also more convenient and easier. Growth  recession but still growth and after
this the e-commerce grew large. Covid also contributed to the growth of e-commerce!

 Social, local and mobile aspects

 Rapid growth—social media: use of networks to discuss and integrate
Growth of social media plays an import role!!
 Social media marketing: more communication towards customers
 High numbers of smartphone use
 Local merchants are increasingly engaged not just the larger companies

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Differences from offline commerce

Set of unique features that sets it apart from others.

 Ubiquity (omnipresent)

 Digital markets are available everywhere, all the time. Everybody can access it, goes
beyond traditional boundaries.

 Global reach

 Commercial transactions can cross geographical (and cultural) boundaries easily, sell
worldwide

 Potential market size for e-commerce roughly equal to the world’s online population

 Universal standards

 Technical standards needed are universal

 Reduced market entry costs to conduct global business (entry barriers); easier to open a
business.

 Richness

 Supports video, audio, and text messages. Deep interactions, rich way of having
conversation used to be like this or you could make a commercial(one-way) you had to
make a trade-off between reach and richness. Not necessary anymore.

 Interactivity

 Two-way communication  mail ordering, one way

 Information density

 Price and cost transparency; easy comparison for customers

 Data collection for companies: it permits them to segment their groups and identify their
customers. Engage in price discrimination. The information density is used in 2 directions

 Personalization

 Personalized marketing

 Recommendation based on previous purchases

 Social technology

 Social networking and user content

 Many-to-many communication  model of mass-communication

Key concepts

Use of internet changed the way companies conduct business

40
  Higher transparency, easy comparison

 Cost of changing the price  easier

 Search and transaction cost have lowered

 Characteristics of the buyer: Some customers are willing to pay more

 Supply situation of the seller: Lower stock-change the price
 Switching costs: The easy comparison makes the price go down

 Delayed gratification: Online purchase: don’t immediately take it with you

 Disintermediation: You take away the middle-man/ third party

o No need for the distributer and the retailer. Lower cost and lower prices because less
parties have to be paid.

Digital goods

 Delivered over digital network

 Production cost of first unit almost same as entire cost (marginal cost is almost 0)

 Low delivery cost

 Same marketing cost

 Industry is going through changes

Types

Categorized by participants

1. B2C: Zalando
2. B2B: Viking direct
3. C2C: vinted
Categorized by platform

4. Mobile commerce
5. A subset of e-commerce
Business models

 Portal: “entry points” to the web (e.g. Google, Bing)

 Ads as revenue stream; portals: entry points, other contents and services integrated, get
revenues from advertisement or referral fees

 E-tailer: online retail stores (e.g. Bol.com)

 “Bricks-and-clicks”: physical store + e-commerce (e.g. Vanden Bore, Coolblue)

 Content provider : provides digital content (e.g. iTunes)

 Streaming services (e.g., Spotify, Netflix)

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  the digital goods offered, the provider is not necessary the creator// fees or advertisement

 Transaction broker: process transactions over internet

 Financial services (e.g., BinckBank)

 Travel services (e.g., Booking.com)

 Market creator: provide platform where buyers and sellers can meet (e.g. eBay, Vinted)

 creating environment for people to meet and supports the on-demand economy, supply
and demand meet

 Service provider: offer services online (e.g. WeTransfer)

 E-tailer for services

 offer services, ‘transfer’; file storing or sharing, Microsoft 365! In many cases revenues
come from subscription or advertisements

 Example: Software as a service (SaaS) (e.g. Microsoft’s Office 365)

 Community provider: provide digital online environment

 Social networking: e.g. Facebook

 online environment share content

 Displaying ads gets the revenue in

Can be combined and create variations

Revenue models

The revenue model is the most difficult

 advertising: network effects! Large base of people

 sales: selling goods or services

 subscription: access fee (monthly, -

 Freemium: some of the content is free but some features are paying

 transaction: for every transaction that happens you get paid

 affiliate: referral fee, you refer websites and companies;Every time someone clicks on a
site!

Influence on marketing

 Internet marketing

 Provides new ways to identify and communicate with customers

 Low cost

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  Long tail marketing

 Internet enables inexpensive marketing for niche products

 Behavioral targeting

 Tracking online behavior of individuals

 Expose them to personalized ads

Website visitor tracking: All the online behavior is being tracked

 e.g. shopper goes on google and clicks on a certain website

 Company sees: nationality, how long they stay on the site; Identify problems or other things; see
the preference . Later add advertisements of the things they looked at a long time

 Advertising networks

 Track users at all members sites

 Database of clickstream behavior

 Create profiles of (potential) customers

 Can show you the same personalized ads on different sites

 more interesting if we can combine data from multiple websites

 Programmatic ad buying

 Buy specific targets (users that fit a profile) and show them personalized ads

 Increase ad effectiveness (show ads only to the right people at the right time)

 Native advertising

 Placing ads in social network newsfeeds or within traditional editorial content

 Appear to be part of the story or the story itself

Social e-commerce and social network marketing

 Social e-commerce based on digital social graph

 Mapping of all significant relationships online

 Small world theory only 6 links away from anybody

 Importance of interconnectedness!!

 Social network marketing

 Seeks to leverage individuals’ influence over others

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  Targeting a social network of people sharing interests and advice

 social search for products; we like to see what other people are buying

 Social shopping sites

 Swap shopping ideas with friends, alternative for physical shopping

 Wisdom of crowds

 Consult thousands of customers to make better decisions, create new ways to markets,
find out how customers feel about your product, …

 Crowdsourcing

 Present a problem or opportunity online and let people provide suggestions, advice, or
feedback, consumers feel heard

Electronic data interchange

= Computer-to-computer exchange of standard transactions such as invoices, purchase orders

 Major industries have EDI standards

 Define structure and information fields of electronic documents

 Reducing administration to lower the costs

 EDI: computer exchange standard transaction

 Documents have standard formats

 Reduce redundancy

 Negotiating contracts aren’t possible in EDI

 More and more businesses use the same technology from B2C and use it in B2B

New way of B2B selling:

Private industrial networks= It’s a way of the firm to work together with all parties and suppliers, a
secure web-based network

Net marketplaces:

 Multiple buyers and multiple sellers

 Not owned by one big firm

 Direct/ Indirect: maintenance and office products

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  Usually catalogues available

 Can be an alternative for EDI

 Standard and additional transactions and actions

 Could be market specific/vertical and horizontal markets

Exchanges

 Independently owned third-party Net marketplaces for spot purchasing

 Specific type of net market

 One-time purchases handled in few businesses’ days

 Most of them have failed, creates competitive bidding and that makes the price drop+
no long-term relationships or contract

Role of M-commerce and most important applications

 M-commerce is 65% of all e-commerce

 Fastest growing form of e-commerce-- Growing at 20 percent or more per year

 Main areas of growth

 Mass market retailing (e.g. Amazon, eBay, etc.)

 Sales of digital content (e.g. iTunes)

 In-app sales to mobile devices

 Services (e.g. Uber, Airbnb)

 Location based services and applications

 Used by 74% of smartphone owners

 Based on GPS technology

 Geosocial services: sharing location

 Geoadvertising: local advertisements

 Geoinformation services: neighborhood info

 Others

 Financial account management apps: Banks, credit card companies

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  Mobile advertising market: Google and Facebook are largest markets

 Ads embedded in games, videos, and mobile apps

 M-commerce websites and apps: 55% of online retailers have m-commerce websites

Issues

 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

Chapter 11: Managing Knowledge and Artificial Intelligence

What is the Role of Knowledge Management Systems in Business?

 Knowledge management systems among fastest growing areas of software investment

o Sharing knowledge throughout the firm
o Make knowledge-driven decisions
 Information economy: creating and managing knowledge is major source of business value
o Strategic importance
 Network effect

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 o The more people can share knowledge
 Law of diminishing returns isn’t applicable here

Important dimensions of Knowledge

 Data, information, knowledge, and wisdom

 Data: transactions captured by an organization’s systems
 Information: organized data to provide understanding
 Knowledge: discover patterns, rules, and applicable contexts
 Wisdom: results from applying knowledge in problem-solving
 All about knowing when/how and where knowledge should
be applied
 Individual or collective
 Tacit knowledge and explicit knowledge (location)
 Tacit: resides in the head of employees
 Explicit: formally documented in libraries, documents etc.
 Sticky: not easy to move knowledge
 Situational & contextual: knowing when to apply the procedure is just as important as knowing
the procedure. It only works in certain situation

 Knowledge-based core competencies

 The things the firm does best
 Source of competitive advantage
 Based on specific knowledge

 Organizational learning
 Process in which organizations gain experience through collection of data, measurement,
trial and error, and feedback

The Knowledge Management Value Chain

 Knowledge management
 Set of business processes developed in an organization to create, store, transfer, and
apply knowledge
 Knowledge management value chain
 The process from creating (or acquiring) to applying knowledge
 Each stage adds value to raw data and information as they are transformed into usable
knowledge

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• Knowledge acquisition:
 Documenting tacit and explicit knowledge (e.g. storing
documents/reports/presentations, e- mail, developing online expert
networks)
 Creating knowledge (e.g. by using data mining techniques on the data)
 Tracking data from TPS and external sources

• Knowledge storage:
 How do we make sure the knowledge is easily accessible
 Often about tagging
 Databases
 Document management systems
 Management must support the storage system

• Knowledge dissemination:
 Portals, wikis
 E-mail, instant messaging
 Search engines, collaboration
tools (e.g. Microsoft Yammer)
 The sharing of the knowledge

• Knowledge application:
 New business practices
 New products and services
 New markets
 Each stage adds value. Raw data all the way to usable information.
 Not just the technology but also the managerial aspect.

 Developing new organizational roles and responsibilities for the

acquisition of knowledge
 Chief Knowledge Officer (CKO) executives
 Dedicated staff / knowledge managers
 Communities of practice (COPs)=Informal social networks of
professionals and employees. Activities include education,
online newsletters, sharing knowledge. To optimally use the
knowledge.

Types of knowledge systems

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  Enterprise-wide knowledge management systems
 General-purpose
 Firm-wide
 Collect, store, distribute, and apply digital content and knowledge
 Knowledge work systems (KWS)
 Specialized systems built for knowledge workers (e.g. engineers, scientists) charged with
discovering and creating new knowledge
 E.g. computer-aided design (CAD): help engineers with the creation of new products

 Intelligent techniques
 Diverse group of techniques such as data mining used for various goals: discovering
knowledge, distilling knowledge, discovering optimal solutions

What is AI? (Example of an intelligent technique)

 Grand vision
 Computer hardware and software systems that are
as “smart” as humans
 Realistic vision
 Systems that take data inputs, process them, and
produce outputs (like all software programs)
 AI programs differ from traditional software
programs in the techniques and technologies they
use
They can perform many complex tasks that would be
difficult or impossible for humans to perform.

 Major Types of AI
 Expert systems
 Machine learning
 Neural networks and deep learning networks
 Genetic algorithms
 Natural language Processing
 Computer vision
 Robotics
 Intelligent assets

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Capturing the knowledge; Expert systems:

 Capture tacit knowledge in very specific and limited domain of human expertise
 Typically perform limited tasks (e.g. diagnosing malfunctioning machine, determining
whether to grant credit for loan)

 Used for discrete, highly-structured decision-

making

 Capture knowledge as set of rules,

typically IF-THEN-ELSE rules

 Key elements

 Knowledge base: Set of hundreds or thousands of rules

 Inference engine: Strategy used to search knowledge base

Machine learning:

 How computer programs improve performance without explicit programming

 Recognize patterns and relationships in large data sets
 Examples: Netflix or Amazon recommender systems, identify patterns of fraud for PayPal
 Two types of learning
 Supervised learning: System is “trained” by providing specific examples of desired inputs
and outputs identified by humans in advance
 Unsupervised learning: Same procedures, but humans do not feed the system examples

 Accomplished by:
 Neural networks:
 Find patterns and relationships in massive amounts of
data too complicated for humans to
 analyze using pattern detection programs
 Humans “train” network by feeding it data inputs for
which outputs are known
 “Learn” patterns by searching for relationships, building
models, and correcting over and over again

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  Inspired by the structure of the human brain
 Contains highly interconnected units or nodes
 Examples: computer vision, speech recognition, machine diagnostics, language
translation, transaction analysis, targeted online ads, etc.

 Deep learning
 Deep learning networks, consist of many layers of neural
networks
 Specific kind of machine learning
 More complex than neural system
 Not that far developed
 Pattern detection
 Self-taught system

 Genetic algorithms:

 Useful for finding optimal solution for specific problem by examining very large
number of possible solutions for that problem
 Able to evaluate many solution alternatives quickly
 Conceptually based on process of evolution
 Solutions to problems are examined by the system. The best solution is retained for
future use, while the worst solutions are discarded.
 Based on evolutionary concepts such as inheritance, mutation, selection
 Used in optimization problems in which hundreds or thousands of variables exist
 E.g. minimization of costs, efficient scheduling
 Used to solve more dynamic problems.

Disadvantages/Limitations:
°No sense of ethics
°The necessary large data bases aren’t available
°Black box: we don’t know how It arrived at the result

Natural language processing

 Enable computers to understand, and speak in natural language, read natural language and
translate.
 Typically based on machine learning, aided by very large databases of common phrases and
sentences in a given language
 E.g. Google Translate or digital assistants: Siri, Alexa, Cortana, Google Assistant

Computer vision systems

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  Digital image systems that create a digital map of an image (like a face, or a street sign), and
recognize this image in large databases of images in near real time
 Not just the known data but also new data
 Examples:
 Facebook’s DeepFace can identify friends in photos across their system, and the entire
web
 Autonomous vehicles can recognize signs, road markers, people, animals, and other
vehicles with good reliability
 Passport control at airports
 Identifying people in crowds
Image classification: is there a deer in the image?
Object detection: where in the image is the deer?
Image segmentation: where exactly is the deer (pixels)?
Anomaly detection: is there something unexpected?
->recognizing emotions

Robotics

 Design, construction, and operation of machines that can substitute for humans in many factory,
office, and home applications (e.g. home vacuums)

 Generally programmed to perform specific and detailed actions in limited domains (e.g. robots
spray paint autos, and assemble certain parts)

 Used in dangerous situations (e.g. bomb disposal)

 Surgical robots are expanding their capabilities

Intelligent agents

 Work without direct human intervention to carry out repetitive, predictable tasks

 E.g. Deleting junk e-mail, finding cheapest airfare

 Some are capable of self-adjustment using machine learning and NLP

 E.g. Siri will adapt to the user’s individual preferences over time

 Chatbots for customer service: ask specific questions, can understand the language, provide
actions and answers

 Autonomous and response

 Agent-based modeling applications:

 Model behavior of consumers, stock markets, and supply chains

Enterprise-wide knowledge management

 Three major types of knowledge in an enterprise

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  Structured documents
• Reports, presentations
• Formal rules
 Semi structured documents
• E-mails, videos
 Unstructured, tacit knowledge
• Resides in the minds of employees
 80% of an organization’s business content is semi structured or unstructured

Functions

 Help organizations manage structured and semi structured knowledge

 Help capture, store, retrieve, distribute, preserve documents and semi structured
knowledge

 Bring in external sources of information (e.g. research)

 Tools for communication and collaboration (e.g. blogs, enterprise social networking)

Key problem: developing taxonomy; Need to think about a taxonomy

so that everybody can easily access the information. When you
figured out the taxonomy it’s a matter of distributing the knowledge

 Digital asset management systems: help companies classify, store

and distribute digital objects (e.g. photographs, video and audio
content)

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

Learning and management systems (LMS)

 Provide tools for management, delivery, tracking, and assessment of employee learning and

training

 Support multiple modes of learning (e.g. Web-based classes, online forums, instructional
videos)

 Automates selection and administration of courses

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  Assembles and delivers learning content

 Measures learning effectiveness and who followed what training

 It needs to align with the management side. Give a summary of what is learned so that
everyone knows what knowledge is shared.

 Massively open online courses (MOOCs)

 Web course open to large numbers of participants (e.g. Microsoft, Coursera)

 More and more education outside the company

 Learning management systems need to be capable of organizing all the data of who
followed what courses

Knowledge work-systems

 Knowledge workers

 Researchers, designers, architects, scientists, engineers who create knowledge for the
organization

 Three key roles

• Keeping organization’s knowledge up-to-date

• Serving as internal consultants/experts: if anyone needs advice/questions

• 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

More requirements!

 Sufficient computing power for graphics, complex calculations

 Powerful graphics and analytical tools

 Communications and document management

 Access to external databases

 User-friendly interfaces: so that people don’t lose time, need to be as efficient as possible

 Designed and optimized for specific tasks to be performed (e.g. design engineering, financial
analysis)

Example:

 CAD (computer-aided design)

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  Creation of engineering or architectural designs

 3D printing: makes processes more efficient

 Help the engineers and knowledge workers

 Enables collaboration

 Virtual reality

 Makes simulation possible

 Much closer to reality than CAD

 Test lay-outs, simulations

 Augmented reality

 Adds digital aspects to the reality

 Engineers used to have to move a lot

 Now they can work remotely

 Increases the efficiency

 Metaverse

 Simulate

 Enter the virtual reality and simulate how they would work

 In real time change things

Knowledge work systems are very diverse, different kinds of jobs/requirements etc.

Chapter 12: Enhancing Decision Making

Different types of decisions

 Unstructured:

• Involves judgment, evaluation, and insight to solve problem

• Each decision is nonroutine, with no agreed-on procedure for making the

decision

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  Structured:

• Repetitive and routine: procedures available

• Involve definite procedure for handling

 Semi structured:

• Part of problem structured and part unstructured

• Somewhere in-between

The higher up in the

hierarchy, the less
structured the decisions

Middle management: partly structured,

partly unstructured.

Operational management: mostly dealing

with structured decisions. Peer-rules

The decision-making process

 Intelligence / Problem discovery

 Discovering, identifying, and understanding the problems occurring in the organization

 Design / Solution discovery

 Identifying and exploring solutions to the problem

 Choice / Choosing solutions

 Choosing among solution alternatives

 Implementation / Solution testing

 Making chosen alternative work and continuing to monitor how well solution is working

 Is the solution working? How can we make it work better?

 Either the solution works or it won’t

 Need to re-evaluate after a while

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Business intelligence

 Business intelligence and analytics is about the enterprise-wide integration of data and then
analyze the data to support decision-making. Build reports to support the business decision
making.

 Business intelligence

 Infrastructure for collecting, storing, analyzing data

 Storing data in data warehouses

 Business analytics

 Tools and techniques for analyzing data

 For instance statistics and data mining

 Six elements in the business intelligence environment

 Data from the business environment

 Business intelligence infrastructure

 Business analytics toolset

 Managerial users and methods

 Delivery platform—MIS, DSS, ESS

 User interface: Data visualization tools

Important managerial aspects:

Need the right people to be able to get the necessary

information

Different kinds of decisions ask for different kinds of reports

Mostly the visual reports so that anyone can use it

 Goal is to deliver accurate real-time information to

decision makers

 Main analytic functionalities of BI systems:

 Production reports

 Pre-defined reports: forecasts

 Follows a certain template

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  Gives the newest information

 Parameterized reports

 Typically fields that contain certain parameters

 Filter the information

 Not static, use to make comparisons

 Dashboards/scorecards

 Give everything in one table

 visual

 Ad hoc query/search/report creation

 Middle-management often doesn’t need the predefined info

 Create their own reports

 Drill down

 Allows to see the info on just one aspect

 Drill down on the info

 Start from a global overview and make it more specific

 Forecasts, scenarios, models

 Shows actual data and based on the historical data it makes forecasts

Predictive analysis

 Uses variety of data, techniques to predict/model future trends and behavior patterns

 Using statistical analysis, data mining, historical data to generate the prediction to answer
the questions

 E.g. How will customers respond to price changes? How successful will new sales
locations be?

 Incorporated into numerous BI applications for sales, marketing, finance, fraud detection,
Healthcare

 Doesn’t work as well in dynamic environments

Big data analysis

Analyzing massive datasets for different purposes

 Big data: Massive datasets collected from social media, online and in-store customer
data, etc.

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  Often discovery-oriented

 Looking for patterns

 Can be used for predictive analysis but not just that

 E.g. Online retailers: create real-time, personalized shopping experiences

 E.g. Not just companies but also smart cities: use public records, sensors, location data
from smartphones to make better decisions about running cities and serving their
residents

Operational intelligence and analytics

 Business activity monitoring

 Using the real-time data to optimize our activities

 Collection and use of data generated by sensors

 Internet of Things

• Creating huge streams of data from web activities, sensors, and other
monitoring devices

 E.g. Monitor and analyze the performance of power generators

Location analytics and geographic information systems

 Location analytics

 Ability to gain business insight from the location (geographic) component of data (e.g.
location data of mobile phones, sensors or scanning devices)

• E.g. UPS’s package tracking and delivery-routing systems

 Geographic information systems (GIS)

 Visualize location data on maps and run business scenarios

 E.g. Identify the optimal location to open a new Starbucks without harming sales at other
Starbucks locations

Business intelligence users

2 main categories:

The casual users: the consumers of the reports

and use it to make their decisions

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Producers: the power users, they create the report, some reports have to be solid and load very quickly
others are used to search. Both used by different groups

Decision support for operational and middle management

 Management information systems (MIS)

 Delivery platform for BI to support structured decisions

 View reports on performance of key business aspects

 Repetitive structured decisions

 Reports always look the same

 Exception report: report those anomalies

 Decision-support systems (DSS)

 Delivery platform for BI to support semi structured decisions

 Relies more heavily on analytics than MIS

 Use mathematical or analytical models: not as much routine

 Allow varied types of analysis

• “What-if” decisions use sensitivity analysis models: predict outcomes if changes

occur

 Sensitivity analysis: if the price changes than how much…

• Multidimensional data

 Use pivot table: to understand patterns

 Shows relation between 2 dimensions

Senior management decision making

 Executive support systems (ESS)

 Delivery platform for BI to support non-routine strategic decision-making (unstructured)

 Focus on information of strategic importance

 Balanced scorecard

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  Tells us the useful factors; looks at different dimensions

 Strategic evolutions in the company

 Provides measurable outcomes related to strategic objectives on four dimensions (=

“balanced)

 Start from strategy and objectives and translate it into the different dimensions

• Financial

• Business process

• Customer

• Learning and growth

• Key performance indicators

 Data for ESS

 Internal data from enterprise applications (ERP, CRM, SCM)

 External data: strategic decisions so you also need info e.g. financial market databases, news
services

 Drill-down capabilities: senior management can drill-down; they determine where the issues
lie

 Think customer satisfaction

Group decisions support systems (GDSS)

 Interactive system to facilitate solution of unstructured problems by group

 Virtual collaboration rooms

 Software to collect, rank, edit participant ideas and responses

 Stores information generated during meetings

 Enables collaboration between geographically separated employees

 E.g. Microsoft Teams, Miro

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