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Chapter 1 Information Systems in Global Business Today 65 Improving Decision Making: Using the Internet to Locate Jobs Requiring Information Systems Knowledge Software skills: Internet-based software Business skills: Job searching 1-10 Visit a...

Chapter 1 Information Systems in Global Business Today 65 Improving Decision Making: Using the Internet to Locate Jobs Requiring Information Systems Knowledge Software skills: Internet-based software Business skills: Job searching 1-10 Visit a job-posting website such as EURES, the European Job Mobility Portal run by the European Com- mission. Spend some time at the site examining jobs for accounting, finance, sales, marketing, and human resources. Find two or three descriptions of jobs that require some information systems knowledge. What in- formation systems knowledge do these jobs require? What do you need to do to prepare for these jobs? Write a one- to two-page report summarizing your findings. Collaboration and Teamwork Project Selecting Team Collaboration Tools 1-11 Form a team with three or four classmates and review the capabilities of Google Drive and Google Sites for your team collaboration work. Compare the capabilities of these two tools for storing team documents, project announcements, source materials, work assignments, illustrations, electronic presentations, and web pages of interest. Learn how each works with Google Docs. Explain why Google Drive or Google Sites is more appropriate for your team. If possible, use Google Docs to brainstorm and develop a presentation of your findings for the class. Organize and store your presentation using the Google tool you have selected. 64 Part One Organizations, Management, and the Networked Enterprise Discussion Questions 1-4 Information systems are too important to be 1-6 What are some of the organizational, MyLab MIS MyLab MIS left to computer specialists. Do you agree? managerial, and social complementary Why or why not? assets that help make UPS’s information 1-5 If you were setting up the website systems so successful? MyLab MIS for a professional football team, what management, organization, and technology issues might you encounter? Hands-On MIS Projects The projects in this section give you hands-on experience in analyzing financial reporting and inventory man- agement problems, using data management software to improve management decision making about increasing sales, and using Internet software for researching job requirements. Visit MyLab MIS to access this chapter’s Hands-On MIS Projects. Management Decision Problems 1-7 Magical Toys is a South African toy store chain. The toys are sold in their five stores and from their own web shop. Each Tuesday, management needs sales reports from last week’s activities. Work at the stores is hectic, so usually at least one store fails to deliver the report, making it impossible to sum up the previous week’s sales. The reports, sent by email as spreadsheets, sometimes have inconclusive or erroneous data, and following up means that employees are unable to give their full focus to the customers. Some errors in the spreadsheets may also cause the purchasing manager to place unnecessary purchase orders. What are the main issues that Magical Toys faces in the absence of an information system? How could an information system be of help, and what issues can an information system not solve? 1-8 Diskonto operates deep-discount stores in Estonia offering housewares, cleaning supplies, clothing, health and beauty aids, and packaged food, with most items selling for a very low price. Its business model calls for keeping costs as low as possible. The company has no automated method for keeping track of inventory at each store. Managers know approximately how many cases of a particular product the store is supposed to receive when a delivery truck arrives, but the stores lack technology for scanning the cases or verifying the item count inside the cases. Merchandise losses from theft or other mishaps have been rising and now represent more than 3 percent of total sales. What decisions have to be made before investing in an information system solution? Improving Decision Making: Using Databases to Analyze Sales Trends Software skills: Database querying and reporting Business skills: Sales trend analysis 1-9 In this project, you will start out with raw transactional sales data and use Microsoft Access database software to develop queries and reports that help managers make better decisions about product pricing, sales promotions, and inventory replenishment. In MyLab MIS, you can find a Store and Regional Sales Database developed in Microsoft Access. The database contains raw data on weekly store sales of computer equipment in various sales regions. The database includes fields for store identification number, sales region, item number, item description, unit price, units sold, and the weekly sales period when the sales were made. Use Access to develop some reports and queries to make this information more useful for running the business. Sales and production managers want answers to the following questions: Which products should be restocked? Which stores and sales regions would benefit from a promotional campaign and additional marketing? When (what time of year) should products be offered at full price, and when should discounts be used? You can easily modify the database table to find and report your answers. Print your reports and results of queries.  Chapter 1 Information Systems in Global Business Today 61 company provides on-the-job training in its software and consulting methods. Job responsibilities include: Supporting Financial Analytics Data Services applications. Helping the team create custom models and screens. Training clients in their offices and at seminars. Providing expert consultation to clients by telephone and on-site. Job Requirements Recent college graduate or investment professional with one to two years of experience. Applicants with backgrounds in finance, MIS, economics, ac- counting, business administration, and mathematics are preferred Knowledge of or interest in learning about financial markets Sound working knowledge of spreadsheets Very strong communication and interpersonal skills Strong desire to learn in rapidly changing environment Interview Questions 1. What is your background in finance? What courses did you take? Have you ever worked in the financial industry? What did you do there? 2. What is your proficiency level with spreadsheet software? What work have you done with Excel spreadsheets? Can you show examples of your work? 3. Are you able to discuss current trends in the financial industry and how they impact Power Financial’s business model and client base? 4. Did you ever work with clients? Can you give examples of how you provided client service or support? 5. Can you give us an example of a finance-related problem or other business problem that you helped solve? Did you do any writing and analysis? Can you provide examples? Author Tips 1. Use the web to learn about financial markets and the financial industry. 2. Use the web to research the company, its financial products, and the tools and services it offers customers. Learn what you can about its consulting services. Additionally, examine the company’s social medial channels, such as LinkedIn and Facebook, for trends and themes. 3. Inquire exactly how you would be using spreadsheets for this job. Pro- vide examples of how you used spreadsheets to solve problems in the classroom or for a job assignment. Show the spreadsheet work you did in finance. 4. Bring examples of your writing (including some from your Digital Port- folio described in MyLab MIS) demonstrating your analytical skills and project experience. Be prepared to discuss how you helped customers solve a business problem or the business problem solving you did for your courses.  Chapter 1 Information Systems in Global Business Today 59 utilization, and management cannot be explored usefully with the models used in the technical approach. Other behavioral disciplines contribute important concepts and methods. For instance, sociologists study information systems with an eye toward how groups and organizations shape the development of systems and also how systems affect individuals, groups, and organizations. Psychologists study information sys- tems with an interest in how human decision makers perceive and use formal information. Economists study information systems with an interest in under- standing the production of digital goods, the dynamics of digital markets, and how new information systems change the control and cost structures within the firm. The behavioral approach does not ignore technology. Indeed, information systems technology is often the stimulus for a behavioral problem or issue. But the focus of this approach is generally not on technical solutions. Instead, it concentrates on changes in attitudes, management and organizational policy, and behavior. Approach of This Text: Sociotechnical Systems Throughout this book, you will find a rich story with four main actors: suppliers of hardware and software (the technologists); business firms making invest- ments and seeking to obtain value from the technology; managers and employ- ees seeking to achieve business value (and other goals); and the contemporary legal, social, and cultural context (the firm’s environment). Together these ac- tors produce what we call management information systems. The study of management information systems (MIS) arose to focus on the use of computer-based information systems in business firms and government agencies. MIS combines the work of computer science, management science, and operations research with a practical orientation toward developing system solutions to real-world problems and managing information technology re- sources. It is also concerned with behavioral issues surrounding the develop- ment, use, and impact of information systems, which are typically discussed in the fields of sociology, economics, and psychology. Our experience as academics and practitioners leads us to believe that no single approach effectively captures the reality of information systems. The successes and failures of information systems are rarely all technical or all behavioral. Our best advice to students is to understand the perspectives of many disciplines. Indeed, the challenge and excitement of the information systems field are that it requires an appreciation and tolerance of many different approaches. The view we adopt in this book is best characterized as the sociotechnical view of systems. In this view, optimal organizational performance is achieved by jointly optimizing both the social and technical systems used in production. Adopting a sociotechnical systems perspective helps to avoid a purely techno- logical approach to information systems. For instance, the fact that information technology is rapidly declining in cost and growing in power does not necessarily or easily translate into productivity enhancement or bottom-line profits. The fact that a firm has recently installed an enterprise-wide financial reporting system does not necessarily mean that it will be used, or used effectively. Likewise, the fact that a firm has recently introduced new business procedures and processes does not necessarily mean employees will be more productive in the absence of investments in new information systems to enable those processes. In this book, we stress the need to optimize the firm’s performance as a whole. Both the technical and behavioral components need attention. This means that technology must be changed and designed in such a way as to fit  Chapter 1 Information Systems in Global Business Today 57 others invest little and receive little (quadrant 3). This suggests that investing in information technology does not by itself guarantee good returns. What ac- counts for this variation among firms? The answer lies in the concept of complementary assets. Information tech- nology investments alone cannot make organizations and managers more effective unless they are accompanied by supportive values, structures, and be- havior patterns in the organization and other complementary assets. Business firms need to change how they do business before they can really reap the ad- vantages of new information technologies. Complementary assets are those assets required to derive value from a pri- mary investment (Teece, 1998). For instance, to realize value from automobiles requires substantial complementary investments in highways, roads, gasoline stations, repair facilities, and a legal regulatory structure to set standards and control drivers. Research indicates that firms that support their technology investments with investments in complementary assets, such as new business models, new business processes, management behavior, organizational culture, or training, receive superior returns, whereas those firms failing to make these comple- mentary investments receive less or no returns on their information technol- ogy investments (Brynjolfsson, 2005; Brynjolfsson and Hitt, 2000; Laudon, 1974). These investments in organization and management are also known as organizational and management capital. Table 1.2 lists the major complementary investments that firms need to make to realize value from their information technology investments. Some of this investment involves tangible assets, such as buildings, machinery, and tools. However, the value of investments in information technology de- pends to a large extent on complementary investments in management and organization. Key organizational complementary investments are a supportive busi- ness culture that values efficiency and effectiveness, an appropriate business model, efficient business processes, decentralization of authority, highly dis- tributed decision rights, and a strong information system (IS) development team. Important managerial complementary assets are strong senior man- agement support for change, incentive systems that monitor and reward individual innovation, an emphasis on teamwork and collaboration, training programs, and a management culture that values flexibility and knowledge. Important social investments (not made by the firm but by the society at large, other firms, governments, and other key market actors) are the Internet and the supporting Internet culture, educational systems, network and com- puting standards, regulations and laws, and the presence of technology and service firms. Throughout the book, we emphasize a framework of analysis that considers technology, management, and organizational assets and their interactions. Perhaps the single most important theme in the book, reflected in case stud- ies and exercises, is that managers need to consider the broader organization and management dimensions of information systems to understand current problems as well as to derive substantial above-average returns from their in- formation technology investments. As you will see throughout the text, firms that can address these related dimensions of the IT investment are, on aver- age, richly rewarded. 52 Part One Organizations, Management, and the Networked Enterprise technology are called intranets. Private intranets extended to authorized users outside the organization are called extranets, and firms use such networks to co- ordinate their activities with other firms for making purchases, collaborating on design, and other interorganizational work. For most business firms today, using Internet technology is both a business necessity and a competitive advantage. The World Wide Web is a service provided by the Internet that uses uni- versally accepted standards for storing, retrieving, formatting, and displaying in- formation in a page format on the Internet. Web pages contain text, graphics, animations, sound, and video and are linked to other web pages. By clicking on highlighted words or buttons on a web page, you can link to related pages to find additional information and links to other locations on the web. The web can serve as the foundation for new kinds of information systems such as UPS’s web- based package tracking system described below. All of these technologies, along with the people required to run and man- age them, represent resources that can be shared throughout the organization and constitute the firm’s information technology (IT) infrastructure. The IT infrastructure provides the foundation, or platform, on which the firm can build its specific information systems. Each organization must carefully design and manage its IT infrastructure so that it has the set of technology services it needs for the work it wants to accomplish with information systems. Chapters 5 through 8 of this book examine each major technology component of infor- mation technology infrastructure and show how they all work together to cre- ate the technology platform for the organization. The Interactive Session on Technology describes some examples of the technologies used in computer-based information systems today. UPS’s global delivery system provides another example. UPS invests heavily in information systems technology to make its business more efficient and cus- tomer oriented. It uses an array of information technologies, including bar code scanning systems, wireless networks, large mainframe computers, handheld computers, the Internet, and many different pieces of software for tracking pack- ages, calculating fees, maintaining customer accounts, and managing logistics. Let’s identify the organization, management, and technology elements in the UPS package tracking system. The organization element anchors the package tracking system in UPS’s sales and production functions (the main product of UPS is a service—package delivery). It specifies the required procedures for identifying packages with both sender and recipient information, taking inven- tory, tracking the packages en route, and providing package status reports for UPS customers and customer service representatives. The system must also provide information to satisfy the needs of managers and workers. UPS drivers need to be trained in both package pickup and deliv- ery procedures and in how to use the package tracking system so that they can work efficiently and effectively. UPS customers may need some training to use UPS in-house package tracking software or the UPS website. UPS’s management is responsible for monitoring service levels and costs and for promoting the company’s strategy of combining low cost and superior ser- vice. Management decided to use computer systems to increase the ease of sending a package using UPS and of checking its delivery status, thereby reduc- ing delivery costs and increasing sales revenues. The technology supporting this system consists of handheld computers, bar code scanners, desktop computers, wired and wireless communications net- works, UPS’s data center, storage technology for the package delivery data, UPS in-house package tracking software, and software to access the web. The result is an information system solution to the business challenge of providing a high level of service with low prices in the face of mounting competition.  Chapter 1 Information Systems in Global Business Today 51 Different levels and specialties in an organization create different inter- ests and points of view. These views often conflict over how the company should be run and how resources and rewards should be distributed. Conflict is the basis for organizational politics. Information systems come out of this cauldron of differing perspectives, conflicts, compromises, and agreements that are a natural part of all organizations. In Chapter 3, we examine these features of organizations and their role in the development of information systems in greater detail. Management Management’s job is to make sense out of the many situations faced by organiza- tions, make decisions, and formulate action plans to solve organizational problems. Managers perceive business challenges in the environment, they set the organiza- tional strategy for responding to those challenges, and they allocate the human and financial resources to coordinate the work and achieve success. Throughout, they must exercise responsible leadership. The business information systems described in this book reflect the hopes, dreams, and realities of real-world managers. But managers must do more than manage what already exists. They must also create new products and services and even re-create the organization from time to time. A substantial part of management responsibility is creative work driven by new knowledge and information. Information technology can play a powerful role in helping managers design and deliver new products and ser- vices and redirecting and redesigning their organizations. Chapter 12 treats management decision making in detail. Information Technology Information technology is one of many tools managers use to cope with change. Computer hardware is the physical equipment used for input, processing, and output activities in an information system. It consists of the following: comput- ers of various sizes and shapes (including mobile handheld devices); various input, output, and storage devices; and telecommunications devices that link computers together. Computer software consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an infor- mation system. Chapter 5 describes the contemporary software and hardware platforms used by firms today in greater detail. Data management technology consists of the software governing the orga- nization of data on physical storage media. More detail on data organization and access methods can be found in Chapter 6. Networking and telecommunications technology, consisting of both physical devices and software, links the various pieces of hardware and trans- fers data from one physical location to another. Computers and communica- tions equipment can be connected in networks for sharing voice, data, images, sound, and video. A network links two or more computers to share data or resources, such as a printer. The world’s largest and most widely used network is the Internet. The Internet is a global “network of networks” that uses universal standards (de- scribed in Chapter 7) to connect millions of networks in more than 230 coun- tries around the world. The Internet has created a new “universal” technology platform on which to build new products, services, strategies, and business models. This same technol- ogy platform has internal uses, providing the connectivity to link different sys- tems and networks within the firm. Internal corporate networks based on Internet  Chapter 1 Information Systems in Global Business Today 45 systems and technologies to achieve customer intimacy. These hotels use com- puters to keep track of guests’ preferences, such as their preferred room tem- perature, check-in time, frequently dialed telephone numbers, and television programs, and store these data in a large data repository. Individual rooms in the hotels are networked to a central network server computer so that they can be remotely monitored and controlled. When a customer arrives at one of these hotels, the system automatically changes the room conditions, such as dim- ming the lights, setting the room temperature, or selecting appropriate music, based on the customer’s digital profile. The hotels also analyze their customer data to identify their best customers and to develop individualized marketing campaigns based on customers’ preferences. Charles Tyrwhitt, a UK retailer specializing in dress shirts, and JCPenney, a US department store chain, exemplify the use of information systems to en- able supplier and customer intimacy. Every time a dress shirt is bought one of their stores, the record of the sale appears immediately on computers in Hong Kong at their supplier. TAL Apparel, a contract manufacturer that produces one in six dress shirts sold in the United States. TAL runs the numbers through a computer model it developed and then decides how many replacement shirts to make and in what styles, colors, and sizes. TAL then sends the shirts to each store, bypassing the retailer’s warehouses. These systems reduce inventory costs and ensure that what customers want are actually on the shelves. Improved Decision Making Many business managers operate in an information fog bank, never really having the right information at the right time to make an informed decision. Instead, managers rely on forecasts, best guesses, and luck. The result is over- or underproduction of goods and services, misallocation of resources, and poor response times. These poor outcomes raise costs and lose customers. In the past decade, information systems and technologies have made it possible for managers to use real-time data from the marketplace when making decisions. For instance, Privi Organics Ltd., a leading Indian company that manufac- tures, supplies, and exports aroma chemical products worldwide, uses the Oracle Human Capital Management system for real-time insight into individual employee information—including performance rating and compensation his- tory. The system helps managers make faster human resource decisions, such as promotions or transfers, by integrating all employee records across the orga- nization. Managers are able to quickly review employee performance ratings for the previous three years and drill down into more details. A digital dash- board helps management view and monitor hiring status in multiple locations, such as the number of open positions and the time taken to fill these positions. Competitive Advantage When firms achieve one or more of these business objectives—operational ex- cellence; new products, services, and business models; customer/supplier inti- macy; and improved decision making—chances are they have already achieved a competitive advantage. Doing things better than your competitors, charging less for superior products, and responding to customers and suppliers in real time all add up to higher sales and higher profits that your competitors cannot match. Apple Inc., Walmart, and UPS, described later in this chapter, are indus- try leaders because they know how to use information systems for this purpose.  Chapter 1 Information Systems in Global Business Today 43 Key corporate assets—intellectual property, core competencies, and financial and human assets—are managed through digital means. In a digital firm, any piece of information required to support key business decisions is available at any time and anywhere in the firm. Digital firms sense and respond to their environments far more rapidly than traditional firms, giving them more flexibility to survive in turbulent times. Digital firms offer extraordinary opportunities for more-flexible global organization and management. In digital firms, both time shifting and space shifting are the norm. Time shifting refers to business being conducted continuously, 24/7, rather than in narrow “work day” time bands of 9 a.m. to 5 p.m. Space shifting means that work takes place in a global workshop as well as within national boundaries. Work is accomplished physically wherever in the world it is best accomplished. Many firms, such as Cisco Systems, 3M, and GE, are close to becoming digi- tal firms, using the Internet to drive every aspect of their business. Most other companies are not fully digital, but they are moving toward close digital inte- gration with suppliers, customers, and employees. Strategic Business Objectives of Information Systems What makes information systems so essential today? Why are businesses in- vesting so much in information systems and technologies? In the United States, more than 25 million business and financial managers, and 36 million profes- sional workers in the labor force rely on information systems to conduct busi- ness. Information systems are essential for conducting day-to-day business in most advanced countries as well as achieving strategic business objectives. Entire sectors of the economy are nearly inconceivable without substan- tial investments in information systems. E-commerce firms such as Amazon, eBay, Google, and E*Trade simply would not exist. Today’s service industries— finance, insurance, and real estate as well as personal services such as travel, medicine, and education—could not operate without information systems. Similarly, retail firms such as Walmart and Tesco and manufacturing firms such as General Motors and Siemens require information systems to survive and prosper. Just as offices, telephones, filing cabinets, and efficient tall buildings with elevators were once the foundations of business in the twentieth century, information technology is a foundation for business in the twenty-first century. There is a growing interdependence between a firm’s ability to use informa- tion technology and its ability to implement corporate strategies and achieve corporate goals (see Figure 1.2). What a business would like to do in five years often depends on what its systems will be able to do. Increasing market share, becoming the high-quality or low-cost producer, developing new products, and increasing employee productivity depend more and more on the kinds and quality of information systems in the organization. The more you understand about this relationship, the more valuable you will be as a manager. Specifically, business firms invest heavily in information systems to achieve six strategic business objectives: operational excellence; new products, services, and business models; customer and supplier intimacy; improved decision mak- ing; competitive advantage; and survival. Operational Excellence Businesses continuously seek to improve the efficiency of their operations in order to achieve higher profitability. Information systems and technologies are some of the most important tools available to managers for achieving higher 42 Part One Organizations, Management, and the Networked Enterprise It’s not just goods that move across borders. So too do jobs, some of them high- level jobs that pay well and require a college degree. For instance, since 2000, the United States has lost an estimated 5 million manufacturing jobs to offshore, low-wage producers, so manufacturing is now a small part of US employment (less than 9 percent). In a normal year, about 300,000 service jobs move off- shore to lower-wage countries, many of them in less-skilled information system occupations but also in tradable service jobs in architecture, financial services, customer call centers, consulting, engineering, and even radiology. On the plus side, the US economy created 2.6 million new jobs in 2018. Employment in information systems and the other service occupations listed previously has rapidly expanded in sheer numbers, wages, productivity, and quality of work. Outsourcing has actually accelerated the development of new systems in the United States and worldwide by reducing the cost of building and maintaining them. In 2019 job openings in information systems and tech- nologies far exceeded the supply of applicants. The challenge for you as a business student is to develop high-level skills through education and on-the-job experience that cannot be outsourced. The challenge for your business is to avoid markets for goods and services that can be produced offshore much less expensively. The opportunities are equally im- mense. Throughout this book you will find examples of companies and indi- viduals who either failed or succeeded in using information systems to adapt to this new global environment. What does globalization have to do with management information systems? That’s simple: everything. The emergence of the Internet into a full-blown international communications system has drastically reduced the costs of operating and transacting on a global scale. Communication between a fac- tory floor in Shanghai and a distribution center in Rapid City, South Dakota, is now instant and virtually free. Customers can now shop in a worldwide marketplace, obtaining price and quality information reliably 24 hours a day. Firms producing goods and services on a global scale achieve extraordinary cost reductions by finding low-cost suppliers and managing production facili- ties in other countries. Internet service firms, such as Google and eBay, are able to replicate their business models and services in multiple countries without having to redesign their expensive fixed-cost information systems infrastructure. Briefly, information systems enable globalization. The Emerging Digital Firm All of the changes we have just described, coupled with equally significant or- ganizational redesign, have created the conditions for a fully digital firm. A digital firm can be defined along several dimensions. A digital firm is one in which nearly all of the organization’s significant business relationships with cus- tomers, suppliers, and employees are digitally enabled and mediated. Core busi- ness processes are accomplished through digital networks spanning the entire organization or linking multiple organizations. Business processes refer to the set of logically related tasks and behaviors that organizations develop over time to produce specific business results and the unique manner in which these activities are organized and coordinated. Developing a new product, generating and fulfilling an order, creating a mar- keting plan, and hiring an employee are examples of business processes, and the ways organizations accomplish their business processes can be a source of competitive strength. (A detailed discussion of business processes can be found in Chapter 2.)  Chapter 1 Information Systems in Global Business Today 39 in jeopardy. Facebook and other social networking sites such as YouTube, Twit- ter, and Tumblr, along with Netflix, Apple Music, and many other media firms, exemplify the new face of e-commerce in the twenty-first century. They sell services. When we think of e-commerce, we tend to think of selling physical prod- ucts. While this iconic vision of e-commerce is still very powerful and the fastest- growing form of retail worldwide, growing up alongside is a whole new value stream based on selling services, not goods. It’s a services model of e-commerce. Growth in social commerce is spurred by powerful growth of the mobile platform: 98 percent of Facebook’s users access the service from mobile phones and tablets. Information systems and technologies are the foundation of this new services- based e-commerce. Mobile retail e-commerce worldwide approached $2.55 billion in 2020 (and is growing at almost 20 percent a year) (eMarketer, 2020). Management Changes The management of business firms has changed: With new mobile smartphones, high-speed wireless Wi-Fi networks, and tablets, re- mote salespeople on the road are only seconds away from their managers’ ques- tions and oversight. Management is going mobile. Managers on the move are in direct, continuous contact with their employees. The growth of enterprise- wide information systems with extraordinarily rich data means that managers no longer operate in a fog of confusion but instead have online, nearly instant access to the really important information they need for accurate and timely decisions. In addition to their public uses on the web, social networking tools, wikis, and blogs are becoming important corporate tools for communication, collaboration, and information sharing. Changes in Firms and Organizations Compared to industrial organizations of the previous century, new fast-growing twenty-first-century business firms put less emphasis on hierarchy and structure and more emphasis on employees taking on multiple roles and tasks and collaborating with others on a team. They put greater emphasis on competency and skills rather than position in the hierarchy. They em- phasize higher-speed and more-accurate decision making based on data and analy- sis. They are more aware of changes in technology, consumer attitudes, and culture. They use social media to enter into conversations with consumers and demonstrate a greater willingness to listen to consumers, in part because they have no choice. They show better understanding of the importance of information technology in creating and managing business firms and other organizations. To the extent organi- zations and business firms demonstrate these characteristics, they are twenty-first- century digital firms. You can see some of these trends at work in the Interactive Session on Organizations, which examines the impact on work and management as many companies had their employees work remotely during the coronavirus pan- demic of 2020. Globalization Challenges and Opportunities: A Flattened World Prior to AD 1500, there was no truly global economic system of trade that con- nected all the continents on earth although there were active regional trade markets. After the sixteenth century, a global trading system began to emerge based on advances in navigation and ship technology. The world trade that ensued after these developments has brought the peoples and cultures of the world much closer together. The Industrial Revolution was really a worldwide phenomenon energized by expansion of trade among nations, making na- tions both competitors and collaborators in business. The Internet has greatly heightened the competitive tensions among nations as global trade expands 38 Part One Organizations, Management, and the Networked Enterprise FIGURE 1.1 INFORMATION TECHNOLOGY CAPITAL INVESTMENT Information technology capital investment, defined as IT equipment, software and research and development (R&D) spending, amounted to over 40 percent of total US capital spending (in nominal GDP) between 1999 and 2019. A similar pattern has oc- curred globally. Source: US Bureau of Economic Analysis. IT EQUIPMENT, SOFTWARE, and R&D SPENDING IN NOMINAL GDP (as a percent of total capital spending in nominal GDP) 100 95 90 85 80 75 70 65 60 Percent 55 50 IT Equipment, Software, & R&D 46.8% 45 40 35 30 25 20 15 10 5 19 8 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 9 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 IT Innovations A continuing stream of information technology innovations is transforming the traditional business world. Examples include the emergence of cloud computing, the growth of a mobile digital business platform based on smartphones and tablet computers, big data and the Internet of Things (IoT), business analytics, machine learning systems, and the use of social networks by managers to achieve business objectives. Most of these changes have oc- curred in the past few years. These innovations are enabling entrepreneurs and innovative traditional firms to create new products and services, develop new business models, and transform the day-to-day conduct of business. In the process, some old businesses, even industries, are being destroyed while new businesses are springing up. New Business Models For instance, the emergence of online video services for streaming or downloading, such as Netflix, Apple TV Channels, and Ama- zon, has forever changed how premium video is distributed and even cre- ated. Netflix by early 2020 had attracted more than 167 million subscribers worldwide to what it calls the “Internet TV revolution.” Netflix has moved into premium TV show production with nearly 1,200 original shows in 2019, such as American Vandal, Suburra, The Crown, Friends From College, House of Cards, and Orange Is the New Black, challenging cable and broadcast producers of TV shows, and potentially disrupting cable network dominance of TV show pro- duction. Apple has struck deals with major Hollywood studios for recent mov- ies and TV shows. A growing trickle of viewers are unplugging from cable and using only the Internet for entertainment. E-commerce Expansion E-commerce sales worldwide amounted to nearly $3.6 trillion in 2019 and are expected to approach $5 trillion by 2021 (Lipsman, 2019). E-commerce is changing how firms design, produce, and deliver their products and services. E-commerce has reinvented itself again, disrupting the traditional marketing and advertising industry and putting major media and content firms 36 Part One Organizations, Management, and the Networked Enterprise In March 2020 AWM opened a low-contact cashierless micromarket called QuickEats at a luxury apartment community owned by Greenwood & McKenzie in Santa Ana California. QuickEats utilizes AWM Frictionless and features grab- and-go products such as sodas, water, juice drinks, sandwiches, cheese plates, fruit, and household cleaning items. AWM Smart Shelf is able to personalize shoppers’ experiences when they are in stores based on the items they pick up, even if they don’t purchase them. For example, if a customer picks up a box of cookies and then puts it back, the re- tailer can use the system to offer a discount on the shelf beneath that item the next time the shopper encounters it in the store. Cofounder Kurtis Van Horn believes that Smart Shelf can provide the same level of customization and per- sonalization as found in online shopping to brick-and-mortar stores. AWM also offers an anonymous consumer behavior tracking application that can direct customers to other parts of a store using digital signage, enabling up-to-the-minute advertising and pricing. AWM solutions can be implemented in a wide range of store sizes and formats, from micromarkets, to convenience stores, to larger-format retailers. Technology is redefining the role of the shelf in retail marketing. Sources: www.smartshelf.com, accessed April 29, 2020; AWM SmartShelf Launches Southern California’s First Autonomous Micromarket in Santa Ana’s Nineteen01 Community,” Businesswire, March 24, 2020; Jared Council, “Retailers Hope In-Store Tech Will Keep Shoppers in Stores,” Wall Street Journal, January 15, 2020. T he companies and technologies described here show how essential in- formation systems are today. Today, retail stores are struggling to stay alive and relevant as more shoppers gravitate to online shopping and the Internet. One solution is to use leading-edge innovative information tech- nology to provide new ways of drawing buyers into physical stores and mak- ing the in-store buying experience more efficient, safe, and pleasant. The information flows that drive these reimagined retail businesses have be- come much more digital, making use of mobile tools and object-recognition technology. The chapter-opening diagram calls attention to important points raised by this case and this chapter. To compete more effectively against online retailers and take advantage of new technology solutions, brick-and-mortar retail stores are using innovative systems based on object-recognition technology, sensors, and smartphones. The use of leading-edge digital technologies to drive business operations and management decisions is a key topic today in the MIS world and will be discussed throughout this text. It is also important to note that deploying information technology has changed the way customers of Acrelec and AWM Smart Shelf run their busi- nesses. To effectively use new digital tools, these companies had to redesign jobs and procedures for gathering, inputting, and accessing information. These changes had to be carefully planned to make sure they enhanced efficiency, service, and profitability. Here are some questions to think about: How do Acrelec’s and AWM’s systems change retail operations? How do they improve the customer experience?