2. Learning objectives
• Characteristics of digital economy and digital enterprise
• Relationship between performance, environmental
pressures, organizational responses and information
technology
• Major pressures in business environment and major
organizational responses to them
• Computer based information systems and information
technology
• Concept of adaptive enterprise and its IT dependence
• Role of IT in supporting the functional areas, public
services and specific industries
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3. Digital Enterprise (Organization)
• A new business model that uses IT in a fundamental way
to accomplish one or more of three basic objectives:
– Reach and engage customers more effectively
– Boost employee productivity
– Improve operating efficiency
• It uses converged communication and computing
technologies to improve business processes
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4. • The digital enterprise shifts the focus from
managing individual IT resource to
orchestrating the services and workflows
that define the business and ultimately
deliver values to customers and end users
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5. Digital Economy
• Economy: The wealth and resources of a country or
region, esp. in terms of the production and consumption
of goods and services.
• A digital economy: economy based on electronic goods
and services produced by an electronic business and
traded through electronic commerce.
• Electronic business: the application of information and
communication technologies in support of all the
activities of business.
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•
6. • Electronic commerce: refers to the buying and
selling of products or services over electronic
systems such as the Internet and
other computer networks.
• Economy based on digital technologies
• Also called as Internet Economy
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7. • Digital networking and communication infrastructures
provide a global platform over which people and
organizations devise strategies, interact, communicate,
collaborate and search for information
• Also refers to convergence of computing and
communication technologies on the internet and other
networks and
• The resulting flow of information and technology that is
stimulating electronic transactions and vast
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organizational changes
8. Difference between product and service..
Product Services
Tangible Intangible
Can be bought Can be felt
Can be owned Can not be owned
Non-perishable Perishable
Non-ephemeral Ephemeral
Countable Not countable
can be inventoried Can not be inventoried
Location not important in providing Location is important in service design
product
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9. Characteristics of digital economy
• Globalization
• Digital systems
• Speed
• Information overload
• Online Markets
• Digitization of products
• Business models and processes
• Innovation
• Obsolescence
• Opportunities
• Fraud
• Wars 9
•
10. The business environment and its impact
• Organizations aim to Improve the performance with time
• Performance level depends on
– what you do
– what others are doing
• Combination of social, legal, economic, physical and
political factors that affect business activities is termed
as business environment
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11. • To succeed or to survive in the business
environment, organizations have to undertake
innovative activities or devise a competitive
strategies
• These reactions by organization are called as
critical response activities
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12. • Critical response activities can be performed in some or
all of the processes in an organization
• They can be in the form of
– A reaction to a existing pressure
– An initiative to defend organization against future
pressures
– An activity that exploits the opportunity created by
changing conditions
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14. Business environmental pressures
• Business environment in the information age places
pressures on companies
• Organizations may act reactively to the existing
pressures or proactively to an anticipated pressure
• IT is the solution to business pressures
• The three types of business pressures faced are:
– market
– technology and
– societal pressures. 14
16. Three Types of Business Pressures
• Market Pressures:
– The Global Economy and Strong Competition
– Need for real time operations
– The Changing Nature of the Workforce
– Powerful Customers
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17. Market Pressures (contd..)
• Global competition for trade and for labor
– Influential force for globalization is Internet
– Trade is less constrained by traditional barriers such
as borders, language, currency
– Goods and services can be produced profitably as
dictated by the competitive advantages
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18. Market Pressures (contd..)
– Labor costs differ widely from one country to other
– In western countries - $ 15 per hour + high benefits
– In developing countries - $1 per hour
– Due to low labor costs in developing countries,
companies in developed countries are moving their
manufacturing facilities to countries with low labor
cost
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19. Market Pressures (contd..)
– Such global strategies require extensive
communications in several languages under several
cultural, legal and ethical conditions
– Complexity of communication may hinder the global
competition if not supported properly by IT
– Global competition is especially intensified when
governments are involved through the use of
subsidies, tax policies, import/export regulations and
incentives
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20. Market Pressures (contd..)
• Need for real time operations
– Companies can not afford the “information float” -
time gap between when a business event occurs and
when an information captured about that event
reaches the necessary decision makers
– High performance telecommunication technologies
should be used
– Such technologies eliminate slow, paper-based
transactions and processes
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21. Market Pressures (contd..)
• Changing workforce
– The workforce in developed countries is changing
rapidly and becoming more diversified
– Females, single parents, minorities and physically
challenged people work in all types of positions
– more and more workers are becoming knowledge
workers
– IT enables integration of these various employees into
traditional workforce and it enables homebound
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people to work from home (telecommute).
22. Market Pressures (contd..)
• Customer orientation
– As customers become more knowledgeable about the
availability and quality of products and services, customer
sophistication and expectations increase
– These expectations translate into need for organizations to
exhibit a customer orientation
– Customers want more detailed information about products and
services such as cost, warranties, financial support, quality
comparisons etc. immediately
– Internet and e-commerce has made it possible
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23. Market Pressures (contd..)
– Customers also want customized products with high
quality and low price
– E.g. Dell Computer
– The importance of customers has created “competition
over customers.”
– This competition forces organizations to increase efforts
to acquire and retain customers.
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25. Technology pressures (continued..)
• Technological innovations and obsolescence
– Organizations look for technological breakthrough that will
give them an advantage over their competitors
– New and improved technologies enable organizations to
• produce superior products,
• customize products more easily and
• quickly alter manufacturing process as the market dictates
– Continuous innovation = faster obsolescence of products,
shorter life cycles, increasing quality standards and higher
costs for investment 25
26. Technology pressures (continued..)
– Also advances in IT allow customers to be aware of
innovations sooner, forcing companies to respond
more quickly or risk loosing market share
– Thus organizations feel the pressure of increasing
customer expectations and an increasing ability to
respond rapidly with improved products and services
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27. Technology pressures (continued..)
• Information overload
– Internet and telecommunication networks increase the
amount of information available to the organizations
and individuals
– Information and knowledge generated and stored
inside the organizations also increases exponentially
– Only some of the information is actually relevant
– The accessibility, navigation and management of
information necessary for managerial decision making
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is becoming critical
28. Business Pressures (Continued)
• Societal Pressures:
– Social Responsibility
– Government Regulation and Deregulation
– Protection Against Terrorist Attacks
– Ethical Issues
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29. Societal Pressures (contd..)
• Social responsibility
– Social issues
• the state of the physical environment
• nondiscriminatory employment practices
• the spread of infectious diseases
– active measures to respond to social issues and contribute
towards social improvements are known as social
responsibilities
– Failure to accept social responsibilities may lead to employee
dissatisfaction and turnover, a tarnished corporate reputation
with the public.
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30. Societal Pressures (contd..)
• Representative major areas of social responsibility are:
– Environmental control (pollution, noise, trash removal,
and animal welfare)
– Equal opportunity (hiring of minorities, women, the
elderly, and the disabled)
– Employment and housing (the elderly, poor, teenagers,
and unskilled)
– Health, safety, and social benefits to employees (the role
of the employer versus that of the government)
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– Employee education, training, and retraining
31. Societal Pressures (contd..)
• Government regulations and deregulations
– With failure to address certain social responsibility issues that
come to be important to the general public, government
sometimes steps in with regulations to protect their citizens
– Compliance with governmental regulations cost companies
money
– These additional costs are passed along to consumers in the
form of higher prices
– Make it more difficult to compete with companies from
countries that lack such regulations
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32. Societal Pressures (contd..)
• Hence Business organizations sometimes lobby for the
removal of rules and regulations involving business
competition
• Such deregulation can be a blessing to one company
and curse for other
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33. Societal Pressures (contd..)
• Ethical issues
– Ethics in a business context refers to standards and values for
judging whether particular conduct in a workplace is right or
wrong
– Ethical issues are very important because they can damage the
image of an organization as well as destroy the morale of
employees
– What is ethical to one person/country may not seem ethical to
other person/country
– Organizations must deal with ethical issues of their employees,
customers and suppliers 33
34. Societal Pressures (contd..)
• The use of IT has raised many new ethical
issues
– surveillance of email
– potential attacks on privacy of millions of customers
whose data are stored in private and public database
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35. Societal Pressures (contd..)
• Terrorist Attacks and Protection
– Since September 11, 2001, organizations have been under
increased pressure to protect themselves against terrorist
attacks.
– Information technology and especially intelligent systems may
make a valuable contribution in the area of protection, by
providing security systems and possibly identifying patterns of
behavior that will help to prevent terrorist attacks and cyber
attacks against organizations.
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37. Organizational responses
• Strategic systems
– An important response activity is to develop a corporate strategy
of how to handle the business pressures.
– Once such strategy is developed (including the supporting role
of IT), the company can develop its tactical and operational
plans as well as specific strategic IT-supported systems.
– Strategic systems provide organizations with strategic
advantages that enable them to increase their market share and/
or profit, to better negotiate with suppliers, or to prevent
competitors from entering their territory
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38. • Customer focus and service
– The increased power of customers and stiff competition in many
industries and markets force organizations to adopt a customer
focused approach
– Pay more attention to customers and their preferences
– Providing mass customization
– Providing troubleshooting advice or help lines
– To communicate with existing customers via information on their
websites
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39. • Continuous Improvements.
– Many companies continuously conduct programs that attempt to
improve their productivity and quality and they frequently do so
with the facilitation of IT.
– Companies can increase productivity by increasing output,
reducing costs, increasing output faster than cost or combination
of both
– Examples : total quality management (TQM) and Six Sigma,
knowledge management, productivity and creativity
improvements, just-in-time (JIT) processing, improvements in
decision-making processes, change management, and customer
service improvements. 39
40. – Just-in-time inventory approach attempts to reduce the cost and
improve workflow by scheduling materials and parts to arrive at
a workstation exactly when they are needed
– This minimizes in-process inventory and waste and saves
inventory space and cost
– TQM is a corporate wide organized effort to improve quality
wherever and whenever possible
– IT can enhance TQM by improving data monitoring, collection,
analysis and reporting
– IT can also increase speed of inspection, raise the quality of
testing and reduce the cost of various quality control activities
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41. – Appropriate decision making attempts to select the best or at
least a good enough alternative course of action
– Decisions require information that is timely and accurate
– IT plays a major role in providing such information as well as in
supporting difficult decision making process
– The underlying purpose of IT support in continuous improvement
is
(1) to monitor and analyze performance and productivity and
(2) to gather, share, and better use organizational knowledge.
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42. • Restructuring Business Processes.
– continuous improvement efforts have limited effectiveness in an
environment full of strong business pressures.
– Therefore, a relatively new approach may be needed. This
approach, initially called business process reengineering (BPR),
refers to a situation in which an organization fundamentally and
radically redesigns its business processes to achieve dramatic
improvements.
– Such redesign effects a major innovation in an organization’s
structure and the way it conducts its business.
– If done on a smaller scale than corporate wide, the redesign
process may be referred to as a restructuring 42
43. • IT plays a major role in BPR
• It allows businesses to
– be conducted in different locations,
– provides automation,
– flexibility in manufacturing,
– quicker delivery to customers and
– supports rapid and paperless transactions among suppliers,
manufacturers and retailers
• It also reduces cycle time and time to market
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44. • Make-to-Order and Mass Customization.
– A major response area is the trend to produce
customized products and services. This strategy is a
part of build-to-order.
– As customers demand customized products and
services, the business problem is how to provide
customization and do it efficiently.
– This can be done, in part, by changing manufacturing
processes from mass production to mass
customization 44
45. • In mass production, a company produces a large
quantity of identical items.
• In mass customization, items are produced in a large
quantity but are customized to fit the desires of each
customer.
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46. – IT and EC are ideal facilitators of mass customization,
– for example, by enabling interactive communication
between buyers and designers so that customers can
quickly and correctly configure the products they
want.
– Also, electronic ordering reaches the production
facility in minutes.
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47. • Business Alliances
– alliances with other companies, even competitors, can be very
beneficial.
– For example, General Motors and Ford created a joint venture to
explore electronic-commerce applications
– There are several types of alliances:
• sharing resources,
• doing procurement jointly,
• establishing a permanent supplier-company relationship, and
creating joint research efforts.
– Any of these might be undertaken in response to business
pressures and usually is supported by IT. 47
48. – One of the most interesting types of business alliance is the virtual
corporation,
– Operates through telecommunications networks, usually without a
permanent headquarters.
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49. – A temporary virtual corporation is typically a joint venture in
which companies form a special company for a specific,
limited-time mission.
– A permanent virtual corporation is designed to create or
assemble productive resources rapidly or frequently, on an
ongoing basis.
– All types of business alliances can be heavily supported by
information technologies.
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50. • Electronic Business and E-Commerce
– The newest and perhaps most promising business strategy that
many companies can pursue
– E-commerce is a multifaceted concept involving the exchange of
products, services, information or money with the support of
computers and networks
– It includes electronic fund transfer, between buyers and
suppliers, internet based marketing, intranet and extranet based
information networks for intra and inter-organizational support
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51. Information system
• A system is a collection of elements such as people,
resources, concepts, and procedures intended to
perform an identifiable function or serve a goal.
• Systems are divided into three distinct parts: inputs,
processes, and outputs.
• They are surrounded by an environment and frequently
include a feedback mechanism that controls some
aspect of the operation.
• In addition, a human, the decision maker, is considered
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a part of the system.
52. • Inputs - elements that enter the system.
• Examples: raw materials entering a chemical plant,
patients admitted to a hospital, or data inputted into a
computer.
• All the elements necessary to convert or transform the
inputs into outputs are included in the system’s
processes.
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53. • Outputs describe the finished products or the consequences
of being in the system.
• The connections among subsystems are the flow of
information and materials among the subsystems.
• Of special interest is the flow of information from the output
component to a control unit (or a decision maker) concerning
the system’s performance. Based on this information, which is
called feedback, the inputs or the processes may be modified.
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54. • The environment of the system is composed of several
elements that lie outside it, in the sense that they are not
inputs, outputs, or processes. However, they have a
significant impact on the system’s performance and
consequently on the attainment of its goals.
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55. Information systems (IS)
• IS collects, processes stores, analyzes and disseminates
information for a specific purpose
• It processes the inputs by using technology such as PCs
and produces outputs that are sent to users or other
systems via electronic mails
• A feedback mechanism that controls the operation may
be included
• Like other systems, IS also includes people, procedures
and operates within an environment
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57. Formal and Informal IS
• Formal IS
– Include agreed upon procedures, standard inputs and
outputs and fixed definitions
– E.g. company’s accounting system
• Informal IS
– E.g. group of friends sharing information
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58. Computer based Information system
• An information system that uses computer technology to perform its
intended tasks
• Basic components of Information system
– Hardware
• Devices such as processors, monitor, keyboard
– Software
• Set of programs that instruct the hardware to process data
– Database
• Collection of related files, tables that stores data and associations
among them
– Network
• A connecting system that permits the sharing of resources by
different computers
– Procedures
• The set of instructions about how to combine the above components
in order to process information and to generate the desired output
– People
• Individuals who work with the system, interface with it or use its
output
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59. Major capabilities of computerized IS
• Perform high speed, high volume numerical
computations
• Provide fast, accurate, reliable and inexpensive
communication within and between organizations any
time, any place
• Store huge amounts of information in an easy to access
yet small space
• Allow quick and inexpensive access to vast amounts of
information worldwide at any time
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60. • Enable collaboration anywhere any time
• Increase effectiveness and efficiency of people working
in groups in one place or in several locations
• Vividly present the information that challenges the
human mind
• Facilitate work in hazardous environments
• Automate both semiautomatic business processes and
manually done tasks
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61. • Facilitate interpretation of vast amount of data
• Facilitate global trade
• Enable automation of routine decision making and facilitate
complex decision making
• Can be wireless thus supporting unique application
anywhere
• Accomplish all of the above much less expensively than
when done manually
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62. Information technology
• In a broad way, it is a collection of computing systems
• In its narrow definition, it refers to the technological side
of IS
• Includes hardware, software, databases, networks and
other electronic devices
• A subsystem of IS
• IT describes an organization’s collection of IS, their
users and the management that oversees them
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63. Adaptive, Agile and Real time Enterprise
• Enterprise which can respond properly and in a timely
manner to changes in a business environment
• Changes can be in business models, customer services
and speed
• What is business model?
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64. Business model
• A method of doing business by which a company can
generate revenue to sustain itself
• The model spells out how the company creates value in
terms of the goods and/services in the course of its
operations
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65. Elements of business model
• Six elements
– A description of all products and services the business
will offer
– A description of business process required to make and
deliver the products and services
– A description of customers to be served and the
company’s relationships with these customers
– A list of resources required and the identification of which
ones are available, which are developed in-house and
which will need to be acquired
– A description of the organization’s supply chain including
suppliers and other business partners
– A description of the revenues expected, anticipated
costs, sources of financing and estimated profitability
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66. Popular business models
• 4 models
– Tendering via reverse auctions
– Affiliate marketing
– Group purchasing
– E-marketplaces and exchanges
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67. Tendering via reverse auctions
• Use of tendering (bidding) system to make major
purchases
• Buyer indicates the desire to receive bids on a particular
item in request for quote (RFQ)
• Would be sellers bid on the job
• The lowest bid wins (if price is the only consideration)
• Hence the name reverse auction
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68. Affiliate marketing
• An arrangement in which marketing partners place a
banner add for a company on their website
• Every time customer clicks on the banner, moved to the
advertiser’s web site and makes a purchase there
• Advertiser pays 3 to 15% commission to the host site
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69. Group purchasing
• Pay less per units when buying more units
• Using concept of e-commerce and group purchasing, purchase
orders of many buyers are aggregated and get a discount
• Electronic aggregation- a third party finds the individuals or SMEs
(Small Medium Enterprises) that want to buy the same product
• Then aggregates their small orders and then negotiates for the
best deal
• More is the number of joined groups, larger the aggregated
quantity and lower the price paid
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70. E-marketplaces and exchanges
• an Internet-based environment that brings together
business-to-business buyers and sellers so that they can
trade more efficiently online.
• Three types:
– Independent: public environments seek simply to attract buyers
and sellers to trade together;
– consortium-based: sites are established on an industry-wide
basis, typically when a number of key buyers in a particular
industry get together; and
– Private: e-marketplaces are established by a particular
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organization to manage its purchasing alone.
71. • Introduce operating efficiencies to trading
• If well organized and managed, they can provide
benefits to both buyers and sellers
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72. Process of becoming an adaptive organization
• Recognizing the environmental and organizational
changes as quickly as they occur or even before they
occur
• Deals with changes properly and correctly
• Becoming a digital and agile enterprise
• Does not wait for competitors to introduce change
• Change your information system quickly
• follow as many response activities as possible
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73. Benefits of adaptive enterprise
• Increased business agility
– Able to identify and quickly respond to challenges and
opportunities
– Adapt to changing business models, market demands
• Reduced risk
– Allows more successful deployment of new solutions and
support business changes
• Improved quality of service
– Assures appropriate levels of availability, response time and
performance
• Improved total cost of ownership
– Reduces the cost of infrastructure management, enables more
choices that can lower the cost
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74. Real time on-demand IT support
• Real time IS- provides real time access to data
• E.g. salesperson can check whether the product is in
inventory
• To implement real time enterprise, companies must
design IS that
– support all relevant business processes
– Are tightly integrated
– Are available all the times
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