Chapter 3: Productivity, Innovation, and Strategy Flashcards Preview

MGMT 250: Information Technology Management > Chapter 3: Productivity, Innovation, and Strategy > Flashcards

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Productivity / labour productivity

the ratio of the
gross domestic product (GDP) of a country divided by the total paid
hours worked by people in the country.


primary indicator of our per
capita income

labor productivity (based on Conference board of Canada)


Labour productivity in Canada

measures the value that Canadian workers
generate per hour, which, for the latest data available, was about $50 per
hour (compared with $67 for the U.S. and $75 for Norway ).


Most experts agree that to enhance productivity,

Canada must foster a culture of innovation, open its industries to more
competition, and increase the amount of machinery and equipment
(M&E) in the economy (particularly in the Information and Communications Technology (ICT)


Information and Communications Technology (ICT)

Provides products and services that other industries rely on to get their
work done.


Productivity paradox

The lack of evidence of an increase in worker productivity associated with
the massive increase in investment in information technology.


Business value

Tangible benefits for organizations through either more efficient use of
resources or more effective delivery of their services to customers.


Researchers have
suggested three different ways in which the value of IT can be realized.

1) The first is through productivity.
2) The second way to realize the investment value of IT is through the
structure of competition
3) The final way that IT investment value is realized through benefits to the
end customer


1) The first is through productivity.

IT allows a company to create more
and/or better output from the same inputs and create them faster than
before the technology was in place. For example, if you had a small
accounting firm, investing in IT might allow you to add more customers,
automate basic tasks

This investment makes the firm more
efficient and potentially more effective.


The second way to realize the investment value of IT is through the
structure of competition

IT can alter the way corporations compete. For
example, if one accounting firm invests in IT, then rival firms will often
follow suit to stay current. The competitive structure changes because of
IT to include the software accounting firms offer and the technical
support they can provide.

Example: When IT enabled people to stream and watch movies at home
(usually through Netflix), it eliminated the need to patronize the local
video rental store.


The final way that IT investment value is realized through benefits to the
end customer

IT helps make processes more efficient and changes the
nature of competition. With increased competition, the reduction of costs
associated with new processes is often passed on to the final consumer.
The consumer may, therefore, see cheaper and better goods and services
as a result of IT



Rogers’ five characteristics: relative advantage, compatibility, complexity,
trialability, and observability.


Business Technology Management (BTM)

A category of skills focused on the ability to effectively innovate using
information technology in organizations.


Skills Framework for the Information Age (SFIA)

A set of skills thought to be useful for those employees focused on
developing and maintaining information technology.



A measure of productiveness also refers to accomplishing a business
process either more quickly with the same resources or as quickly with
fewer resources.


Doing things

often means using just the right amount of resources, facilities, and
information to complete the job satisfactorily.



Doing the right things.

effectiveness means that the company considers offering either new or
improved goods or services that the customer values


Sometimes, “doing the right things” and “doing things right” can be in

The organization might be doing things right, but it is not doing the right


Value chain

A network of value-creating activities.

a network of activities that improve the effectiveness (or
value) of a good or service. A value chain is, therefore, made up of at least
one and often many business processes.


Value chains have directions either

1) upstream
2) Downstream


Example of backward integration / upstream

that expand into activities related to the basic raw materials of a process—
such as a tire company that decides to manufacture its own rubber or a
coffee store that decides to grow its own coffee


Example of forward integration, or
moving downstream in the value chain.

Those that move closer to end customers—for example, a mining
company that begins to cut and finish its own diamonds rather than sell
raw stones wholesale



The difference between the price the customer is willing to pay
and the cost the company incurs in moving the good (or service) through
the value chain

Raw diamonds, for example,
are sold at a much lower margin than finished diamonds.


Two types of activities that support value chains

1) Primary activities
2) Support activities


1) Primary activities

activities in which value is
added directly to the product. In our example above, shipping raw
materials, designing the tires, manufacturing the tires, shipping the
finished tires, and installing the tires are all primary activities. Each of
these primary activities adds value for the customer.


2) Support activities

Support activities add value only indirectly. For example, nobody buys a
tire because a company has a great payroll system.
But a company could
not run a factory without the ability to pay its workers.


An organization’s strategy reflects its

goals and objectives


strategy is influenced by

the competitive structure of the company’s


a company’s information systems strategy
should support, or be aligned with

the overall company strategy


Organizational strategy begins with

an assessment of the fundamental
characteristics and structure of an industry