Week 11 Valuing Information Systems Douglas M Schutz MIS 2101 Management Information Systems Based on material from Information Systems Today Managing in the Digital World Leonard Jessup and Joseph Valacich Pearson Prentice Hall 2007 Also includes material by David Schuff Paul Weinberg Cindy Joy Marselis Munir Mandviwalla and Mart Doyle Learning Objectives Learn how organizations can use MIS systems to help create strategic advantage Learn how to make a business case for an MIS system Learn how to evaluate an MIS system From Module 1 Definition of an MIS System A set of interrelated components that collect or retrieve process store and distribute information to support decision making and control in an organization Source Laudon K Laudon J Managing Information Systems 3 MIS Adding Value to the Organization MIS systems can enable innovative growth and productivity throughout the organization Used strategically enable firms to gain and sustain competitive advantage over rivals Need to constantly innovate to stay ahead competitors can copy and improve how MIS systems are used New constantly advancing innovations and opportunities make MIS an exciting field MIS Systems Adding Value MIS Systems Can be Used in Three Ways for adding business value from lowest to highest to an organization 1 Automating 2 Informating 3 Strategizing Which approach can add the most value Automating Informating Strategizing 5 1 Automating Example Loan application processing comparison Process start customer takes the application Process end customer notified of the decision Manual loan process 25 to 40 days Technology Supported Process 5 to 20 days Fully automated process 1 hour to 15 days 6 2 Informating Learning Example Computerbased loan system identifies peak times during the year when specific loans are processed 7 3 Strategizing Five Types of Organizational Strategies Strategic Planning forming a vision of where the organization needs to head crafting an organizational strategy defining the way in which a company plans to gain sustain 8 1 Overall Low Cost Leadership Strategy Offer best prices in the industry or product service category Broad range of buyers What is an example 9 2 Focused Low Cost Strategy Offer lower prices in the industry or product service category Focus on niche e g Dell 10 3 Broad Differentiation Strategy Offer better products services than the competitors Broad Buyer Range e g Starbucks 11 4 Focused Differentiation Strategy Offer better products services than the competitors Focus on niche Apple IPad Home market segment HP HP Slate Vs Apple s IPad 12 5 Best Cost Provider Strategy Provide products of reasonably good quality at competitive prices Target 13 Sources of Competitive Advantage can be gained or sustained using MIS 1 2 3 4 5 6 7 Best made product on the market Superior customer service Achieving lower costs than rivals Having proprietary manufacturing technology Having shorter lead times in research and development projects Having a well known brand name and reputation Giving customers more value for their money 14 Achieving Competitive Advantage How do you identify opportunities to use MIS systems for competitive advantage Value Chain what is this Porter s Five Forces Model Value Chain Analysis 1 5 Core Value Activities Phases 2 Support Value Activities 1 5 Core Value Activities 2 Support Value Activities Improving Value Chains by using MIS System How MIS systems add value and help create competitive advantage throughout the value chain Why would it be important for MIS systems supporting these activities to function in an integrated manner 17 Porter s Five Forces Model What are They Evaluating Business Segments seeking MIS System Opportunities for Supporting Strategy Strategizing Product returns Lower market Increased costsshare Competition in price Lost customers Reduced quality and distribution service Electronic connections to more suppliers Reduced prices Lost market share 18 Decision support and business intelligence Reduce prices CAD product redesign Increase quality Value added services ERP to ERP reduce reduce costs costs and Better presence react CRM moreweb quickly Lower costs improve through ERP CAD CAM quality supply chain etc Learning Objectives Learn how organizations can use MIS systems to help create strategic advantage Learn how to make a business case for an MIS system Learn how to evaluate an MIS system Making the Business Case for an MIS System Identification of benefits that the proposed MIS system will bring to the organization Will the proposed MIS system provide 1 Automating benefits 2 Informating benefits 3 and or Strategizing benefits 20 Beware of Productivity Costs vs Gains Relatively easy to identify the costs for developing an MIS system More difficult to identify productivity gains Productivity Paradox The observation of lower or higher productivity gains than expected with the implementation of new MIS systems Reasons Why 21 The Productivity Paradox Reason for Limited Productivity Gains at the User Level MIS systems may be used in ways e g Web surfing Junk mail Games What else can Be added to the List 22 More Reasons Contributing to the Productivity Paradox of MIS Investments 1 Measurement 2 Time Lags 3 Redistribution 4 Mismanagement 23 1 Measurement Problems Benefits are difficult to quantify Wrong things measured For example volume of transactions cost savings 24 2 Time Lags Benefits do not always occur at the same time the MIS system is Some MIS implementations require people to first gain experience MIS systems normally need to be integrated with existing systems 25 3 Redistribution MIS system may redistribute the pieces of the pie rather than make the pie bigger Increases in market share come at the expense of other firm s market share 26 4 Mismanagement Bad business model can not be overcome by good MIS systems MIS system implementation as temporary fix Creation of unanticipated bottlenecks 27 Making a Successful Business Case On what can we base a successful business case for an MIS system Faith Fear and or Fact 1 Arguments Based on Faith Is a cost benefits analysis needed for an argument based on faith Email System Migration cc Mail to Outlook Migration Manager struggled to make business case based on fact Sticking with cc Mail would be less expensive than migrating to Outlook in the short run Outlook migration however was necessary for the organization to benefit from additional office automation tools e g integrated calendars