Managing%20Information%20Systems%20For%20Strategic%20Advantage%20(Part%202)

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Managing InformationSystems For Strategic
Advantage (Part 2)
(Week 12, Monday 11/7/2006)
BUS3500 - Abdou Illia, Fall 2006
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LEARNING GOALS

• Describe the methods organizations use to choose
  strategic IS projects
• Balanced scorecard
• Total cost of ownership (TCO)
• IS portfolio analysis
• Explain the concept of knowledge management and
  describe the technologies that comprise knowledge
  management systems.

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Choosing Strategic IS

• IS face productivity paradox
• It is difficult to attribute cost savings
  directly to a specific information system
• It is difficult to prove that a specific IS led
  to certain financial outcomes
• Chief Information Officer help choose strategic
  IS
• By developing long-term IS strategy
• By determining how to allocate IS budget
• By aligning IS portfolio with companys
  strategies
• Tools used by CIO
• Balanced scorecard
• Total cost of ownership (TCO)
• IS portfolio analysis

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Questions

• Which of the following is true about the
  productivity paradox associated with investing in
  information systems?
• We can determine the cost associated with
  investing in information systems
• We can easily attribute observed cost savings
  directly to specific information systems
• We can easily prove that a specific information
  system led to specific profits
• All of the above
• Which of the following is NOT among the kind of
  activities usually performed by a CIO?
• Design and develop strategic IS
• Manage IS portfolio
• Align a companys IS portfolio with its
  strategies in different areas
• Determine a companys long-term IS strategy
• None of the above

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The Balanced Scorecard

• Allows a company to address non-financial
  objectives that support its financial goals
• Allows to investigate strategies in key areas and
  develop goals and measures for each

Financial Financial Financial
Goals Measures Initiatives
Improve cash flow
Reduce expenses

Internal Primary Business Processes Internal Primary Business Processes Internal Primary Business Processes
Goals Measures Initiatives
Decrease production time Units/sec
Improve quality Defect rate
..
Customers Customers Customers
Goals Measures Initiatives
Improve customer satisfaction
Decrease defects
.
Learning and Growth Learning and Growth Learning and Growth
Goals Measures Initiatives
Dev. Successful new products

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The Balanced Scorecard

• Could help align investments in strategic IS with
  overall corporate strategy

Financial Financial Financial
Goals Measures Initiatives
Improve cash flow
Reduce expenses

Customers Customers Customers
Goals Measures Initiatives
Improve customer satisfaction
Decrease defects
.
Internal Primary Business Processes Internal Primary Business Processes Internal Primary Business Processes
Goals Measures Initiatives
Decrease production time Units/sec
Improve quality Defect rate
..
Learning and Growth Learning and Growth Learning and Growth
Goals Measures Initiatives
Dev. Successful new products

Q1 What kind of Strategic IS is needed if the
Balanced Scorecard shows that Improving
customer relationships is a major goal?Q2 What
kind of Strategic IS is needed if the Balanced
Scorecard shows that Developing successful
new products is a major goal?
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Total Cost of Ownership (TCO)

• Estimating IS costs and benefits is a SWAG
• Costs include Benefits include
• Hardware Tangible benefits
• Software Intangible benefits
• Labor
• Total cost of ownership (TCO)
• Method to quantify long-term direct and indirect
  costs

Indirect costs
Training
System downtime
Direct costs
Capital expenses
- Hardware costs - Software costs - Future upgrades - Future replacements
Labor costs
- Custom develpt of software - Support and Maintenance
Overhead fees
- Telecomm services - Maintenance contracts w/ vendors
Benefits
Tangible
Intangible
- Improved customer service - life savings for a medical IS
Scientific Wild Guess
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TCO Analysis for PDA Purchase
Initial cost 100 PDAs _at_ 300 each, i.e.
30000Replacement cost 10 of PDAs replaced per
year, i.e. 3000/yearSupport cost 7000/year
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The IS Portfolio Analysis

• Treats investments in IS assets like a portfolio
  of investment assets to find redundancies and
  achieve balance in IS projects
• Five steps
• Create an IS projects database
• Content Project name, Description, Cost, Time
  line, staff assigned,
• Objectives Identify conflicting projects, lack
  of staff, etc.
• Prioritize the IS projects
• Based on costs, benefits, chance of success
• Categorize IS projects
• Infrastructure Keep the basic companys info.
  Systems running
• Upgrades Bring certain systems up to date
• Strategic initiatives Have potential to give a
  strategic advantage
• Automate the entire process
• Enter new IS projects in database, Re-prioritize,
  Re-categorize
• Perform a Modern Portfolio Theory analysis

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Sample IS Portfolio
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Questions

• Which of the following tools or techniques could
  be useful in identifying conflicting IS projects
  assignments like two big projects assigned to the
  same manager during the same time?
• Balanced Scorecard
• IS portfolio analysis
• Knowledge Work System
• Project Analysis
• Using the Balanced Scorecard, the CIO has
  determined that improving customer relationship
  must be one of the major goals for the company
  during the next five years. What kind of
  strategic IS the company should consider
  investing in?
• Transaction Processing System
• EDI
• Knowledge Work System
• SCM
• None of the above

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Knowledge Management (KM)

• Knowledge assets is key for long-term competitive
  advantage
• Knowledge assets include
• Tacit knowledge within the minds of employees
• Explicit knowledge in a tangible form such as
  databases, documents, and reports
• Knowledge management (KM)
• Process by which organizations extract value from
  their knowledge assets to implement Knowledge
  Management Systems (KMS)
• Chief Knowledge Officer
• Designs and implements KMS

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KM Systems

• Information systems that enable the exchange of
  knowledge among employees and the storage of
  knowledge in repositories
• KMS components
• Expert directories
• Knowledge repositories
• Knowledge sharing technologies
• Knowledge representation technologies
• KMS usually available through companys intranet
  and extranet

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KM Systems

• Expert directory
• Electronic Phonebook that includes employees
  contact information and domain of expertise
• Knowledge repository
• Includes a companys explicit knowledge retrieved
  from reports, documents, etc. and put in a
  database management system
• Provides tools for searching the database
• Knowledge sharing technologies
• Communications and collaboration tools for
  knowledge sharing
• Emails, Instant Messaging, and discussion boards
  widely used
• Knowledge representation technologies
• Contain tacit knowledge retrieved from employees
  or experts mind
• Include tools for processing that knowledge
• Are mainly Expert Systems that help non-expert
  employees to make decisions in a specific domain
  of expertise

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Questions

• What KMS component contains tacit knowledge
  retrieved from employees or experts mind as well
  as tools for processing that tacit knowledge?
• Expert directory
• Knowledge repository
• Knowledge sharing technology
• Knowledge representation technology

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Summary Questions
See Exercise 1, Exercise 2, and Exercise 3 at
http//www.eiu.edu/a_illia/BUS3500/Chapter10(2)-ReviewExercises.htm
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Expert System

• Knowledge base database of the expertise, often
  in IF THEN rules.
• Inference engine derives recommendations from
  knowledge base and problem-specific data
• User interface controls the dialog between the
  user and the system
• Explanation system Explain the how and why of
  recommendations

User
Domain Expert
UserInterface
Expertise
System Engineer
InferenceEngine
Knowledge Engineer
Knowledgebase
ExplanationSystem
Encoded expertise
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KMS
Document Z
Document Z
Document Z
Document Z
Document Z
Document Z
Document Z
Document Z
Document
Report
Report
Report
Report
Report
Tacit knowledge
Report
Report
Report
Report
Report
Knowledge Management System
Database 10
Input
Process
Output
Database 10
Database 10
Database 10
Database 10
Database 10
Database