CLASSROOM OPENER GREAT BUSINESS DECISIONS – Sam Walton’s Discounting of America Wal-Mart is one of the largest corporations in the United States. Wal-Mart does not produce a single item, the company uses strategic supply chain management to disrupt the retail industry. Wal-Mart’s generic strategy of low cost provider is paying-off big time. Any organization wanting to compete in the 21st century must study Wal-Mart and learn how to compete in new and different ways. Samuel Moore Walton lived in the same neighborhood in Bentonville, Arkansas, for forty years. Walton was the sort of man that would rather borrow a newspaper than pay a quarter for a new one. He was also the sort of man that would invite a struggling young family out to lunch with his family every Sunday. Sam Walton controlled over 20 percent of Wal-Mart’s stock, and Sam Walton appeared on Forbes 400 with a net worth of $2.8 billion in 1985 (the holdings are now worth $28 billion). Of all the inventions that helped Sam Walton achieve success and billionaire status, his greatest invention as a CEO was that he himself did not change. Sam managed his 40,000 employees as equal associates, and it was said that only his family meant more to him than his beloved associates. One manufacturer who worked for Sam for decades stated “One of Sam’s greatest contributions to Wal-Mart was his attitude toward experimentation. He constantly encouraged us to experiment on a small basis and if the idea worked, roll it out. If it failed, try something else. It was his attitude of keep trying, and don’t be afraid of failure that made us all so successful.” Sam Walton succumbed to cancer in 1992, and the news was sent via satellite directly to the company’s 1,960 stores; when the announcement played at some stores, clerks started crying. The New York Times obituary estimated Sam’s fortune at the time of his death at $28 billion. However, this fortune didn’t mean as much to Sam Walton as the news that one of his beloved Wal-Mart associates, a cashier, had $262,000 in her retirement account after working for Wal-Mart for twenty-four years.
5.1 Compare the responsibilities of a CIO, CTO, CPO, CSO, and CKO Chief Information Officer (CIO) oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives. Chief Technology Officer (CTO) is responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT. Chief Security Officer (CSO) is responsible for ensuring the security of IT system. Chief Privacy Officer (CPO) is responsible for ensuring the ethical and legal use of information. Chief Knowledge Office (CKO) is responsible for collecting, maintaining, and distributing the organization’s knowledge. 5.2 Explain the gap between IT people and business people and the primary reason this gap exists Business personnel possess expertise in functional areas such as marketing, accounting, and sales. IT personnel have the technological expertise. This causes a communications gap between the two. IT personnel have their own vocabularies consisting of acronyms and technical terms. Business personnel have their own vocabularies based on their experience and expertise. For both sides to have effective communications, the business personnel must seek to achieve an increased level of understanding of IT, and the IT personnel must seek to achieve an increased level of understanding of the business. 5.3 Define the relationship between information security and ethics Information security is a broad term encompassing the protection of information from accidental or intentional misuse by persons inside or outside an organization. Ethics are the principles and standards that guide our behavior toward other people. Using security in an inappropriate manner is an ethical issue. Security and ethics are two fundamental building blocks that organizations must base their businesses on to be successful.
This chapter provides an overview of the different titles, roles, and responsibilities found in a typical organization The gap between IT personnel and business personnel is highlighted The role of ethics and security in an organization is discussed
Explain to your students that job titles, roles, and responsibilities often differ dramatically from organization to organization Excellent resource on how people are Microsoft’s greatest assets h ttp://www.microsoft.com/business/peopleready/overview/greatestasset.mspx
The CIO typically reports directly to the Chief Executive Officer (CEO) CIOs must possess a solid and detailed understanding of every aspect of an organization coupled with tremendous insight into the capability of IT CIOs must have strong business skills and strong IT skills Can you name any famous CEOs? Jack Welch, General Electric (retired) Jeff Bezos, Amazon.com Bill Gates, Microsoft Michael Dell, Dell computers Can you name any famous CIOs? Most students will be familiar with many famous CEOs but not CIOs, CPOs, CSOs, CKOs, or CTOs
Is this more or less than you thought a CIO would make? Do you think these salaries will increase or decrease in the future? Be sure to have your students research current IT salaries. In 2006, they are on the rise and can open your student’s eyes to IT opportunities.
Enhancing customer satisfaction is the number one concern for many CIOs This will be surprising to most students since they expect the CIO to be primarily concerned with technology Why CIOs are concerned with customer satisfaction? How does customer satisfaction affect the IT department? Rank the CIO Concerns in the right side of the figure and see if they agree with the CIOs?
Define the difference between the CIO, CTO, CSO, CPO, and CKO CIO oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives CTOs are similar to CIOs, except CIOs take on the additional responsibility for effectiveness of ensuring that IT is aligned with the organization's strategic initiatives CTOs ensure the efficiency of IT CPOs are the newest senior executive position, and many CPOs are lawyers by training CKO is one of the most recent positions added to the executive leadership team Define the general organizational structure between CIO, CTO, CSO, CPO, and CKO? This structure will vary from organization to organization A great debate is to have the entire class decide on an organizational structure, including the CFO and CEO for a fictitious company
CLASSROOM EXERCISE Reorganizing an Organization The AAA Management Company specializes in the management of rental properties and generates over $20 million in revenues each year and has over 2,000 employees throughout the United States, Canada, and Mexico. The company has just hired a new CEO, David Paul. David is planning to reorganize the company so that it operates more efficiently and effectively. Below is the new organizational structure that he plans to present to the board of directors on Monday. Break your students into groups and ask them to explain the advantages and disadvantages of such a reporting structure. Ask them to reorganize the reporting structure in the way they feel will be most beneficial to the operations of the company, being sure to give their justifications for the new structure. Student answers to this exercise will vary. See IM for Org Chart Part Two Will your proposed structure work for a video distribution company or will you need to revamp your structure?
IT personnel have their own vocabularies consisting of acronyms and technical terms Business personnel have their own vocabularies based on their experience and expertise For both sides to have effective communications, the business personnel must seek to achieve an increased level of understanding of IT, and the IT personnel must seek to achieve an increased level of understanding of the business
Ask your students what might happen at an SCM planning meeting that involved sales, marketing, productions, and operations and not IT How would the other departments know the current IT infrastructure and which SCM systems are compatible? How would the other departments know the functionality involved in an SCM system? Working together, business and IT personnel have the potential to create customer-service competitive advantages Let your students know about magazines such as InformationWeek and CIO that business managers and leaders can read to increase their IT knowledge
Share any examples of unethical behavior you have recently observed? Share any security issues you have recently encountered? Most students are very familiar with Nike and they have iPods... here is a good article to use for security. http://news.com.com/NikeiPod+raises+RFID+privacy+concerns/2100-1029_3-6143606.html Excellent movie that shows how users of the Nike+iPod SportKit can be tracked by a predator: http://www.cs.washington.edu/research/systems/nikeipod/tracker-video.mov
Privacy is an ethical issue There are numerous examples of ethical issues surrounding IT List a few ethical IT examples that are currently in the news Discuss the infamous case of Napster and present your students with the ethical issues surrounding music sharing and copyright laws Do you think tracking customer information from a Web site visit is ethical? What if the company sells the information?
Break your students into groups and ask them to find a real-world example of each type of ethical issue displayed in the figure Ask your students to find additional ethical issues stemming from technology advances not mentioned in the figure Intellectual property - Intangible creative work that is embodied in physical form Copyright - The legal protection afforded an expression of an idea, such as a song, video game, and some types of proprietary documents Fair use doctrine - In certain situations, it is legal to use copyrighted material Pirated software - The unauthorized use, duplication, distribution, or sale of copyrighted software Counterfeit software - Software that is manufactured to look like the real thing and sold as such
Privacy during Web interactions is a major concern for many individuals Violating someone’s privacy is a sure way to ruin a relationship E-business is built on the practice of exchanging large amounts of information between many parties Without privacy, there will not be any trust Have you ever had their privacy violated on the Internet? One of the most common example is someone forwarding or bcc (blind carbon copy) an e-mail without the person’s knowledge or consent For e-business to work, companies, customers, partners, and suppliers must trust each other
With business strategies such as CRM organizations can determine such things as their most valuable customers Why would an organization want to protect this type of information? Why does e-business automatically creates security risks? How much critical information is freely flowing over the Internet to customers, partners, and suppliers? How has HIPAA helped protect the privacy and security of personal health records? HIPAA requires health care organizations to develop, implement, and maintain appropriate security measures when sending electronic health information
The figure displays the typical size of an organization’s information security budget relative to the organization's overall IT budget 46% indicated that their organization spent less than 5% of the total IT budget on security CLASSROOM EXERCISE Pizza Video You can use this video in a number of classes – it relates well to both information security and ethics http://www.adcritic.com/interactive/view.php?id=5927
The figure displays the spending per employee on computer security The highest average computer security spending per employee was in the transportation industry and federal government - not surprising after 9/11
1. Predict what might have happened to Apple if its top executives had not supported investments in IT. One of the main factors that brought Apple back from near oblivion was its ability to produce, market, and sell IT products such as the iPod. If Apple’s top executives did not have the foresight to view the MP3 players as a competitive advantage, then chances are the company would not have made a strong comeback in the highly competitive electronics market. 2. Explain why it would be unethical for Apple to allow its customers to download free music from iTunes. Music is copyrighted. Each time a song is downloaded the copyright owner is entitled to a royalty payment. If Apple allowed customers to download free music it would be violating copyright laws 3. Evaluate the effects on Apple’s business if it failed to secure its customer’s information and it was accidentally posted to an anonymous Web site. Customers who purchase iTunes would not want other vendors to know all of their music choices and purchases. Most customers consider this type of information private. Apple would be violating its customers’ trust and therefore risk losing their business 4. Explain why Apple should have a CIO, CTO, CPO, CSO, and CKO. Without any of these positions Apple would not have an authority who would be responsible for defining and enforcing its IT roles and responsibilities. Each role is critical for maintaining a responsible, ethical, and secure organization
1. Explain why understanding technology, especially in the areas of security and ethics, is important for a CEO. How do CEO’s actions affect the organizational culture? Technology is everywhere in business. A CEO who ignores technology is ignoring opportunities to gain competitive advantages and will be at a disadvantage to its competitors. A CEO who ignores technology could be putting the company at risk since there are many regulatory issues being enforced that surround ethics and security, such as Sarbanes-Oxley. The CEO sets the climate for the organizational culture and if they want to create an exciting and innovative company it must start at the top. 2. Identify why executives in nontechnological industries need to worry about technology and its potential business ramifications. As many of the cases discuss, technology-related crimes and misuses can occur in any company, in any industry. Regardless of the business focus for the company, all employees need to worry about unethical uses of technology. 3. Describe why continuously learning about technology allows an executive to better analyze threats and opportunities. With new technologies being invented daily, it is critical to continuously learn and understand how these technologies can affect a company or a person. For example, radio frequency identification is new and exciting, but many people are worried about the privacy issues associated with using RFID tags to track students in schools.
4. Identify three things that a CTO, CPO, or CSO could do to prevent the above issues. There are many methods executives can use to help eliminate these types of issues such as: Implementing policies such as Internet-use policies and acceptable use policies (these policies are covered in detail in Plug-In B7 – Ethics). Training sessions on appropriate use of company e-mail. Define clear procedures for company equipment, such as computers, when terminating an employee Attend training classes on ethics and security 5. Describe how the Nike+iPod SportKit caused security issues for the company. Do you think Nike or Apple acted unethically when they developed the SportKit? Why or why not? People could use the Nike+iPod SportKit to track unsuspecting users of the product. Since the SportKit emits a frequency anyone could use the tool to track every move of an individual. This could cause tremendous security and risks for all customers. Apple should have done a complete evaluation of the tool and ensured security features for any product emitting technology that could be used to track individuals.
1. Explain how Levi Strauss & Co. achieved business success through the use of information, information technology, and people. First, Levi’s found the right people. Bergen and Marineau had the experience and the vision to lead Levi’s back up the ladder of success. Second, Bergen focused on the information needs of the organization. He knew that Marineau’s plan to anticipate customer wants would require detailed information that was currently not available at Levi’s. Third, Levi’s successful transformation of its supply chain management system allowed the company to partner with Wal-Mart. Bergen’s new systems were a success, and the percentage of products delivered on-time quickly rose from 65 percent to 95 percent. 2. Using Porter’s Five Force Model analyze Levi Strauss’s buyer power and supplier power. Which of Porter’s Five Forces did Levi Strauss address through the implementation of its updated supply chain management system? Levi’s buyer power is high since there are so many different types of jeans that a customer can choose to purchase. Levi’s supplier power is low since buyers have many choices of whom to buy from. Levi’s decreased the power of its buyers, increased its own supplier power, increased switching costs to reduce the threat of substitute products or services, created entry barriers thereby reducing the threat of new entrants, and increased efficiencies while seeking a competitive advantage through cost leadership. 3. Which of the three generic strategies is the company following? Levi’s partnership with Wal-Mart is following a cost leadership strategy in a broad market. 4. Evaluate how Levi Strauss can gain business intelligence through the implementation of a customer relationship management system. Levi’s could gain significant business intelligence through the implementation of a CRM system (that is, assuming they do not already have one). A CRM system could determine Levi’s best customers, worst customers, best products, worst products, how to increase customer spending through individualized marketing campaigns, and even identify different types of customers to help Levi’s create new products. The business intelligence gained through a CRM system is limitless.
5. How can Levi Strauss use efficiency IT metrics and effectiveness IT metrics to improve its business? Levi’s can use efficiency IT metrics to focus on its current technology. Levi’s could benchmark its existing applications to create baselines. It could then continuously monitor and measure against these benchmarks to ensure its IT applications are functioning correctly. This would be particularly important in the area of its Web applications that customers and suppliers are using. Levi’s could use effectiveness IT metrics to determine if its customers, suppliers, and even employees are satisfied with the applications. It could determine if the application is easy to use and if first-time customers are converting due to a banner ad or a pop-up ad. 6. David Bergen, Levi CIO, put together a cross-functional team of key managers from IT, finance, and sales to transform the company’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and determine why Bergen chose them to be a part of his cross-functional team. Business personnel and IT personnel must work together for an organization to succeed. If Levi’s failed to include IT personnel, finance personnel, or sales personnel in the cross-functional team, it would have had a difficult time achieving a successful system transformation. 7.Predict what might happen to Wal-Mart’s business if it failed to secure its partner’s information and all sales information for all products was accidentally posted to an anonymous Web site. Wal-Mart would be violating its partners’ trust and therefore risk losing their business. It would also be violating its fiduciary responsibility.
1. Explain why understanding information technology and management information systems can help you achieve business success-or more importantly, help you avoid business disasters-regardless of your major. If your students are wondering why they need to take this course then this case study should scare them into becoming a believer in the power of technology in business. I tell all of my students that my goal in life is to never see them on the top 10 worst business decisions of all time. If they pay attention in this course they might just avoid an embarrassing moment in business.
1. Chapter 5 Organizational Structures that Support Strategic InitiativesMcGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
2. Learning Outcomes5.1 Compare the responsibilities of a chief information officer (CIO), chief technology officer (CTO), chief privacy officer (CPO), chief security officer (CSO), and chief knowledge office (CKO)5.2 Explain the gap between IT people and business people and the primary reason this gap exists5.3 Define the relationship between information security and ethics 5-2
3. Organizational Structures• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages• Ethics and security are two fundamental building blocks that organizations must base their businesses upon 5-3
4. IT Roles and Responsibilities• Information technology is a relatively new functional area, having only been around formally for around 40 years• Recent IT-related strategic positions: – Chief Information Officer (CIO) – Chief Technology Officer (CTO) – Chief Security Officer (CSO) – Chief Privacy Officer (CPO) – Chief Knowledge Office (CKO) 5-4
5. IT Roles and Responsibilities• Chief Information Officer (CIO) – oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives• Broad CIO functions include: – Manager – ensuring the delivery of all IT projects, on time and within budget – Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization – Communicator – building and maintaining strong executive relationships 5-5
6. IT Roles and Responsibilities• Average CIO compensation by industry 5-6
7. IT Roles and Responsibilities• What concerns CIOs the most 5-7
8. IT Roles and Responsibilities• Chief Technology Officer (CTO) – responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT• Chief Security Officer (CSO) – responsible for ensuring the security of IT systems• Chief Privacy Officer (CPO) – responsible for ensuring the ethical and legal use of information• Chief Knowledge Office (CKO) - responsible for collecting, maintaining, and distributing the 5-8 organization’s knowledge
9. IT Roles and Responsibilities• Skills pivotal for success in executive IT roles 5-9
10. The Gap Between BusinessPersonnel and IT Personnel• Business personnel possess expertise in functional areas such as marketing, accounting, and sales• IT personnel have the technological expertise• This typically causes a communications gap between the business personnel and IT personnel 5-10
11. Improving Communications• Business personnel must seek to increase their understanding of IT• IT personnel must seek to increase their understanding of the business• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel 5-11
12. Organizational Fundamentals – Ethics and Security • Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful • In recent years, such events as the Enron and Martha Stewart, along with 9/11 have shed new light on the meaning of ethics and security 5-12
13. Ethics• Ethics – the principles and standards that guide our behavior toward other people• Privacy is a major ethical issue – Privacy – the right to be left alone when you want to be, to have control over your own personal possessions, and not to be observed without your consent 5-13
15. Ethics• One of the main ingredients in trust is privacy• Primary reasons privacy issues lost trust for e- business 5-15
16. Security• Organizational information is intellectual capital - it must be protected• Information security – the protection of information from accidental or intentional misuse by persons inside or outside an organization• E-business automatically creates tremendous information security risks for organizations 5-16
17. Security 5-17
18. Security 5-18
19. OPENING CASE STUDY QUESTIONSApple – Merging Technology, Business, and Entertainment1. Predict what might have happened to Apple if its top executives had not supported investments in IT2. Explain why it would be unethical for Apple to allow its customers to download free music from iTunes3. Evaluate the effects on Apple’s business if it failed to secure its customer’s information and it was accidentally posted to an anonymous Web site4. Explain why Apple should have a CIO, CTO, CPO, CSO, and CKO 5-19
20. CHAPTER FIVE CASEExecutive Dilemmas in the Information Age • The vast array of business initiatives from SCM to ERP make it clear the IT is a business strategy and is quickly becoming a survival issue • This case explores several examples of executive IT issues resulting from IT 5-20
21. Chapter Five Case Questions1. Explain why understanding technology, especially in the areas of security and ethics, is important for a CEO. How do CEO’s actions affect the organizational culture?2. Identify why executives in nontechnological industries need to worry about technology and its potential business ramifications3. Describe why continuously learning about technology allows an executive to better analyze threats and opportunities 5-21
22. Chapter Five Case Questions4. Identify three things that a CTO, CPO, or CSO could do to prevent the above issues5. Describe how the Nike+iPod SportKit caused security issues for the company. Do you think Nike or Apple acted unethically when they developed the SportKit? Why or why not? 5-22
23. BUSINESS DRIVEN TECHNOLOGY UNIT ONE CLOSINGMcGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
24. UNIT CLOSING CASE ONEHow Levi’s Got its Jeans into Wal-Mart1. Explain how Levi Strauss & Co. achieved business success through the use of information, information technology, and people2. Using Porter’s Five Force Model analyze Levi Strauss’s buyer power and supplier power. Which of Porter’s Five Forces did Levi Strauss address through the implementation of its updated supply chain management system?3. Which of the three generic strategies is the company following?4. Evaluate how Levi Strauss can gain business intelligence through the implementation of a customer relationship 5-24
25. UNIT CLOSING CASE ONEHow Levi’s Got its Jeans into Wal-Mart 5. How can Levi Strauss use efficiency IT metrics and effectiveness IT metrics to improve its business? 6. David Bergen, Levi CIO, put together a cross-functional team of key managers from IT, finance, and sales to transform the company’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and determine why Bergen chose them to be a part of his cross-functional team 7. Predict what might happen to Wal-Mart’s business if it failed to secure its partner’s information and all sales information for all products was accidentally posted to an anonymous Web site 5-25
26. UNIT CLOSING CASE TWOBusiness 2.0: Bad Business Decisions1. Explain why understanding information technology and management information systems can help you achieve business success-or more importantly, help you avoid business disasters-regardless of your major 5-26