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Case 1-1 Opening Case iii

Information Technology for Management Digital Strategies for Insight, Action, and Sustainable Performance

10th Edition

EFRAIM TURBAN

LINDA VOLONINO, Canisius College

GREGORY R. WOOD, Canisius College

Contributing authors:

JANICE C. SIPIOR, Villanova University GUY H. GESSNER, Canisius College

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VP & EXECUTIVE PUBLISHER: Don Fowley EXECUTIVE EDITOR: Beth Lang Golub SPONSORING EDITOR: Mary O’Sullivan PROJECT EDITOR: Ellen Keohane ASSOCIATE EDITOR: Christina Volpe MARKETING MANAGER: Margaret Barrett MARKETING ASSISTANT: Elisa Wong SENIOR CONTENT MANAGER: Ellinor Wagner SENIOR PRODUCTION EDITOR: Ken Santor SENIOR PHOTO EDITOR: Lisa Gee DESIGNER: Kristine Carney COVER DESIGNER Wendy Lai COVER IMAGE © Ajgul/Shutterstock

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BRIEF CONTENTS

1 Doing Business in Digital Times 1 2 Data Governance and IT Architecture Support Long-Term

Performance 33

3 Data Management, Big Data Analytics, and Records Management 70 4 Networks for Efficient Operations and Sustainability 110 5 Cybersecurity and Risk Management 141

6 Attracting Buyers with Search, Semantic, and Recommendation Technology 181

7 Social Networking, Engagement, and Social Metrics 221 8 Retail, E-commerce, and Mobile Commerce Technology 264

9 Effective and Efficient Business Functions 297 10 Strategic Technology and Enterprise Systems 331 11 Data Visualization and Geographic Information Systems 367

12 IT Strategy and Balanced Scorecard 389 13 Project Management and SDLC 412 14 Ethical Risks and Responsibilities of IT Innovations 438

Glossary G-1

Organizational Index O-1

Name Index N-1

Subject Index S-1

Part 1

Part 2

Part 3

Part 4

Digital Technology Trends Transforming How Business Is Done

Winning, Engaging, and Retaining Consumers with Technology

Optimizing Performance with Enterprise Systems and Analytics

Managing Business Relationships, Projects, and Codes of Ethics

v

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CONTENTS

Part 1 Digital Technology Trends Transforming How Business Is Done

1 Doing Business in Digital Times 1 Case 1.1, Opening Case: McCain Foods’s Success Factors: Dashboards, Innovation, and Ethics 2 1.1 Every Business Is a Digital Business 6

1.2 Business Process Management and Improvement 15

1.3 The Power of Competitive Advantage 19

1.4 Enterprise Technology Trends 25

1.5 How Your IT Expertise Adds Value to Your Performance and Career 27 Case 1.2, Business Case: Restaurant Creates Opportunities to Engage Customers 31 Case 1.3, Video Case: What Is the Value of Knowing More and Doing More? 32

2 Data Governance and IT Architecture Support Long-Term Performance 33 Case 2.1, Opening Case: Detoxing Dirty Data with Data Governance at Intel Security 34 2.1 Information Management 37

2.2 Enterprise Architecture and Data Governance 42

2.3 Information Systems: The Basics 47

2.4 Data Centers, Cloud Computing, and Virtualization 53

2.5 Cloud Services Add Agility 62 Case 2.2, Business Case: Data Chaos Creates Risk 67 Case 2.3, Video Case: Cloud Computing: Three Case Studies 69

3 Data Management, Big Data Analytics, and Records Management 70 Case 3.1, Opening Case: Coca-Cola Manages at the Point That Makes a Difference 71 3.1 Database Management Systems 75 3.2 Data Warehouse and Big Data Analytics 86 3.3 Data and Text Mining 96 3.4 Business Intelligence 99 3.5 Electronic Records Management 102 Case 3.2, Business Case: Financial Intelligence Fights Fraud 108 Case 3.3, Video Case: Hertz Finds Gold in Integrated Data 108

4 Networks for Efficient Operations and Sustainability 110 Case 4.1, Opening Case: Sony Builds an IPv6 Network to Fortify Competitive Edge 111

4.1 Data Networks, IP Addresses, and APIs 113 4.2 Wireless Networks and Mobile Infrastructure 123

4.3 Collaboration and Communication Technologies 127 4.4 Sustainability and Ethical Issues 130 Case 4.2, Business Case: Google Maps API for Business 139 Case 4.3, Video Case: Fresh Direct Connects for Success 140

5 Cybersecurity and Risk Management 141 Case 5.1, Opening Case: BlackPOS Malware Steals Target’s Customer Data 142 5.1 The Face and Future of Cyberthreats 144

5.2 Cyber Risk Management 152

5.3 Mobile, App, and Cloud Security 163

5.4 Defending Against Fraud 166

5.5 Compliance and Internal Control 169 Case 5.2, Business Case: Lax Security at LinkedIn Exposed 177 Case 5.3, Video Case: Botnets, Malware Security, and Capturing Cybercriminals 179

vii

Part 2 Winning, Engaging, and Retaining Consumers with Technology

6 Attracting Buyers with Search, Semantic, and Recommendation Technology 181 Case 6.1, Opening Case: Nike Golf Drives Web Traffic with Search Engine Optimization 182 6.1 Using Search Technology for Business Success 186 6.2 Organic Search and Search Engine Optimization 198 6.3 Pay-Per-Click and Paid Search Strategies 203 6.4 A Search for Meaning—Semantic Technology 205 6.5 Recommendation Engines 209 Case 6.2, Business Case: Recommending Wine to Online Customers 217 Case 6.3, Video Case: Power Searching with Google 218

7 Social Networking, Engagement, and Social Metrics 221 Case 7.1, Opening Case: The Connected Generation Influences Banking Strategy 222 7.1 Web 2.0—The Social Web 225 7.2 Social Networking Services and Communities 235 7.3 Engaging Consumers with Blogs and Microblogs 245 7.4 Mashups, Social Metrics, and Monitoring Tools 250 7.5 Knowledge Sharing in the Social Workplace 255 Case 7.2, Business Case: Social Customer Service 259 Case 7.3, Video Case: Viral Marketing: Will It Blend? 261

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8 Retail, E-commerce, and Mobile Commerce Technology 264 Case 8.1, Opening Case: Macy’s Races Ahead with Mobile Retail Strategies 265 8.1 Retailing Technology 268 8.2 Business to Consumer (B2C) E-commerce 271 8.3 Business to Business (B2B) E-commerce and E-procurement 277 8.4 Mobile Commerce 279 8.5 Mobile Transactions and Financial Services 286 Case 8.2, Business Case: Chegg’s Mobile Strategy 293 Case 8.3, Video Case: Searching with Pictures Using MVS 294

11.4 Geospatial Data and Geographic Information Systems 384 Case 11.2, Visualization Case: Are You Ready for Football? 387 Case 11.3, Video Case: The Beauty of Data Visualization 387

viii Contents

Part 3 Optimizing Performance with Enterprise Systems and Analytics

9 Effective and Efficient Business Functions 297 Case 9.1, Opening Case: Ducati Redesigns Its Operations 299 9.1 Solving Business Challenges at All Management Levels 302 9.2 Manufacturing, Production, and Transportation Management Systems 306 9.3 Sales and Marketing Systems 312 9.4 Accounting, Finance, and Regulatory Systems 315 9.5 Human Resources Systems, Compliance, and Ethics 323 Case 9.2, Business Case: HSBC Combats Fraud in Split-second Decisions 329 Case 9.3, Video Case: United Rentals Optimizes Its Workforce with Human Capital Management 330

10 Strategic Technology and Enterprise Systems 331 Case 10.1, Opening Case: Strategic Technology Trend— 3D Printing 332 10.1 Enterprise Systems 337 10.2 Enterprise Social Platforms 341 10.3 Enterprise Resource Planning Systems 346 10.4 Supply Chain Management Systems 352 10.5 Customer Relationship Management Systems 358 Case 10.2, Business Case: Avon’s Failed SAP Implementation: Enterprise System Gone Wrong 364 Case 10.3, Video Case: Procter & Gamble: Creating Conversations in the Cloud with 4.8 Billion Consumers 365

11 Data Visualization and Geographic Information Systems 367 Case 11.1, Opening Case: Safeway and PepsiCo Apply Data Visualization to Supply Chain 369 11.1 Data Visualization and Learning 371 11.2 Enterprise Data Mashups 377 11.3 Digital Dashboards 380

Part 4 Managing Business Relationships, Projects, and Codes of Ethics

12 IT Strategy and Balanced Scorecard 389 Case 12.1, Opening Case: Intel’s IT Strategic Planning Process 390 12.1 IT Strategy and the Strategic Planning Process 392 12.2 Aligning IT with Business Strategy 397 12.3 Balanced Scorecard 400 12.4 IT Sourcing and Cloud Strategy 403 Case 12.2, Business Case: AstraZeneca Terminates $1.4B Outsourcing Contract with IBM 409 Case 12.3, Data Analysis: Third-Party versus Company-Owned Offshoring 410

13 Project Management and SDLC 412 Case 13.1, Opening Case: Keeping Your Project on Track, Knowing When It Is Doomed, and DIA Baggage System Failure 413 13.1 Project Management Concepts 417

13.2 Project Planning, Execution, and Budget 421

13.3 Project Monitoring, Control, and Closing 428

13.4 System Development Life Cycle 432 Case 13.2, Business Case: Steve Jobs’ Shared Vision Project Management Style 436 Case 13.3, Demo Case: Mavenlink Project Management and Planning Software 437

14 Ethical Risks and Responsibilities of IT Innovations 438 Case 14.1, Opening Case: Google Glass and Risk, Privacy, and Piracy Challenges 439 14.1 Privacy Paradox, Privacy, and Civil Rights 442 14.2 Responsible Conduct 448 14.3 Technology Addictions and the Emerging Trend of Focus Management 453 14.4 Six Technology Trends Transforming Business 454 Case 14.2, Business Case: Apple’s CarPlay Gets Intelligent 458 Case 14.3, Video Case: Vehicle-to-Vehicle Technology to Prevent Collisions 459

Glossary G-1

Organizational Index O-1

Name Index N-1 Subject Index S-1

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Business strategy and operations are driven by data, digi- tal technologies, and devices. Five years from now, we will look back upon today as the start of a new era in business and technology. Just like the way e-business started with the emergence of the Web, this new era is created by the convergence of social, mobile, big data, analytics, cloud, sensor, software-as-a-service, and data visualization tech- nologies. These technologies enable real-time insights, business decisions, and actions. Examples of how they determine tomorrow’s business outcomes are:

• Insight. Combining the latest capabilities in big data analytics, reporting, collaboration, search, and machine-to-machine (M2M) communication helps enterprises build an agility advantage, cut costs, and achieve their visions.

• Action. Fully leveraging real-time data about opera- tions, supply chains, and customers enables managers to make decisions and take action in the moment.

• Sustainable performance. Deploying cloud services, managing projects and sourcing agreements, respect- ing privacy and the planet, and engaging customers across channels are now fundamental to sustaining business growth.

• Business optimization. Embedding digital capability into products, services, machines, and business pro- cesses optimizes business performance—and creates strategic weapons.

In this tenth edition, students learn, explore, and analyze the three dimensions of business performance improve- ment: digital technology, business processes, and people.

What Is New in the Tenth Edition—and Why It Matters Most Relevant Content. Prior to and during the writing process, we attended practitioner conferences and con- sulted with managers who are hands-on users of leading technologies, vendors, and IT professionals to learn about their IT/business successes, challenges, experiences, and recommendations. For example, during an in-person interview with a Las Vegas pit boss, we learned how real-time monitoring and data analytics recommend the minimum bets in order to maximize revenue per minute at gaming tables. Experts outlined opportunities and strategies to leverage cloud services and big data

PREFACE

to capture customer loyalty and wallet share and justify significant investments in leading IT.

More Project Management with Templates. In response to reviewers’ requests, we have greatly increased cover- age of project management and systems development lifecycle (SDLC). Students are given templates for writing a project business case, statement of work (SOW), and work breakdown structure (WBS). Rarely covered, but critical project management issues included in this edition are project post-mortem, responsibility matrix, go/no go decision factors, and the role of the user community.

New Technologies and Expanded Topics. New to this edition are 3D printing and bioprinting, project portfolio management, the privacy paradox, IPv6, outsource rela- tionship management (ORM), and balanced scorecard. With more purchases and transactions starting online and attention being a scarce resource, students learn how search, semantic, and recommendation technologies func- tion to improve revenue. The value of Internet of Things (IoT) has grown significantly as a result of the compound impact of connecting people, processes, data, and things.

Easier to Grasp Concepts. A lot of effort went into mak- ing learning easier and longer-lasting by outlining content with models and text graphics for each opening case (our version of infographics) as shown in Figure P-1—from the Chapter 12 opening case.

Engaging Students to Assure Learning The tenth edition of Information Technology for Management engages students with up-to-date cover- age of the most important IT trends today. Over the years, this IT textbook had distinguished itself with an emphasis on illustrating the use of cutting edge business technologies for achieving managerial goals and objec- tives. The tenth edition continues this tradition with more hands-on activities and analyses. Each chapter contains numerous case studies and real world examples illustrating how businesses increase productivity, improve efficiency, enhance communica- tion and collaboration, and gain a competitive edge through the use of ITs. Faculty will appreciate a variety of options for reinforcing student learning, that include three Case Studies per chapter, including an opening case, a business case and a video case.

ix

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x Preface

Throughout each chapter are various learning aids, which include the following:

• Learning Outcomes are listed at the beginning of each chapter to help students focus their efforts and alert them to the important concepts that will be discussed.

• The Chapter Snapshot provides students with an over- view of the chapter content.

• IT at Work boxes spotlight real-world cases and inno- vative uses of IT.

• Definitions of Key Terms appear in the margins throughout the book.

• Tech Note boxes explore topics such as “4G and 5G Networks in 2018” and “Data transfers to main- frames.”

• Career Insight boxes highlight different jobs in the IT for management field.

At the end of each chapter are a variety of features designed to assure student learning:

• Critical Thinking Questions are designed to facilitate student discussion.

• Online and Interactive Exercises encourage students to explore additional topics.

• Analyze and Decide questions help students apply IT concepts to business decisions.

Details of New and Enhanced Features of the Tenth Edition The textbook consists of fourteen chapters organized into four parts. All chapters have new sections as well as updated sections, as shown in Table P-1.

Strategic directional

statements

Strategic plan

gic

egic

2. Technology & Business Outlook. A team of senior management, IT, and business unit representatives develop the two-to-five-year business outlook & technology outlook.

3. Current State Assessment & Gap Analysis. Analysis of the current state of IT, enterprise systems, & processes, which are compared with results of step 2 to identify gaps and necessary adjustments to IT investment plans.

4. Strategic Imperatives, Strategies, & Budget for Next Year. Develop next year’s priorities, road map, budget, & investment plan. Annual budget approved.

5. Governance Decisions & IT Road Map. The budget guides the governance process, including supplier selection and sourcing.

6. Balanced Scorecard Reviews. Performance is measured monthly.

1. Enterprise Vision. Senior management & leaders develop & communicate the enterprise’s two-to-five-year strategic vision & mission and identify the direction & focus for upcoming year.

Figure P-1 Model of Intel’s 6-step IT strategic planning process, from Chapter 12.

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Preface xi

TABLE P-1 Overview of New and Expanded IT Topics and Innovative Enterprises Discussed in the Chapters

Chapter New and Expanded IT and Business Topics Enterprises in a Wide Range of Industries

1: Doing Business in Digital Times

• Era of Mobile-Social-Cloud-Big Data • Digital connectivity and convergence • Internet of Things (IoT), or machine-to-machine

(M2M) technology • Farm-to-fork traceability • Business process management • Near-fi eld communication (NFC)

• McCain Foods Ltd • Zipcar • Pei Wei Asian Diner • Teradata

2: Data Governance and IT Architecture Support Long-Term Performance

• Data governance and quality • Master data management (MDM) • Cloud services • Collaboration • Virtualization and business continuity • software-, platform-, infrastructure-, and data-

as-a-service

• Intel Security • Liberty Wines • Unilever • Vanderbilt University

Medical Center

3: Data Management, Big Data Analytics and Records Management

• Big data analytics and machine-generated data • Business intelligence (BI) • Hadoop • NoSQL systems • Active data warehouse apps • Compliance

• Coca-Cola • Hertz • First Wind • Argo Corp. • Wal-Mart • McDonalds • Infi nity Insurance • Quicken Loans, Inc. • U.S. military • CarMax

4: Networks for Effi cient Operations and Sustain- ability

• IPv6 • API • 4G and 5G networks • Net neutrality • Location-aware technologies • Climate change • Mobile infrastructure • Sustainable development

• Sony • Google Maps • Fresh Direct • Apple • Spotify • Caterpillar, Inc.

5: Cyber Security and Risk Management

• BYOD and social risks • Advanced persistent threats (APT), malware,

and botnets • IT governance • Cloud security • Fraud detection and prevention

• Target • LinkedIn • Boeing

6: Attracting Buyers with Search, Semantic and Recommendation Technology

• Search technology • Search engine optimization (SEO) • Google Analytics • Paid search strategies

• Nike • Netfl ix • Wine.com

(continued)

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xii Preface

TABLE P-1 Overview of New and Expanded IT Topics and Innovative Enterprises Discussed in the Chapters (continued)

Chapter New and Expanded IT and Business Topics Enterprises in a Wide Range of Industries

7: Social Networking, Engagement and Social Metrics

• Social network services (SNS) • Web 2.0 tools for business collaboration • Crowdfunding • Privacy

• Citibank • American Express • Facebook • Twitter • Cisco

8: Retail, E-commerce and Mobile Commerce Technology

• Innovation in traditional and web-based retail • Omni-channel retailing • Visual search • Mobile payment systems

• Macys • Chegg • Amazon

9: Effective and Effi cient Business Functions

• Customer experience (CX) • eXtensible Business Reporting Language

(XBRL) • Order fulfi llment process • Transportation management systems • Computer-integrated manufacturing (CIM) • SaaS • TQM • Auditing information systems

• Ducati Motor Holding • HSBC • SAS • United Rentals • First Choice Ski

10: Strategic Technology and Enterprise Systems

• 3D printing, additive manufacturing • Enterprise social platforms • Yammer, SharePoint, and Microsoft Cloud

• Avon • Procter & Gamble • Organic Valley Family

of Farms • Red Robin Gourmet

Burgers, Inc. • Salesforce.com • Food and Drug Administra-

tion (FDA) • U.S. Army Materiel

Command (AMC) • 1-800-Flowers

11: Data Visualization and Geographic Informa- tion Systems

• Data visualization • Mobile dashboards • Geospatial data and geocoding • Geographic Information Systems (GIS) • Supply chain visibility • Reporting tools; analytical tools • Self-service mashup capabilities

• Safeway • PepsiCo • eBay • Tableau • Hartford Hospital • General Motors (GM)

12: IT Strategy and Balanced Scorecard

• IT strategic planning process • Value drivers • Outsource relationship management (ORM) • Service level agreements (SLAs) • Outsourcing lifecycle • Applications portfolio

• Intel • AstraZeneca • IBM • Commonwealth Bank of

Australia (CBA)

(continued)

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Preface xiii

TABLE P-1 Overview of New and Expanded IT Topics and Innovative Enterprises Discussed in the Chapters (continued)

Chapter New and Expanded IT and Business Topics Enterprises in a Wide Range of Industries

13: Project Management and SDLC

• Project management lifecycle • Project Portfolio Management (PPM) • Project business case • Project business case, statement of work (SOW),

work breakdown structure (WBS), milestone schedule, and Gantt chart

• Triple constraint • Critical path • Systems feasibility studies

• Denver International Airport

• U.S. Census • Mavenlink Project

Management and Planning Software

14: Ethical Risks and Responsibilities of IT Innovations

• Privacy paradox • Social recruitment and discrimination • Responsible conduct • Vehicle-to-vehicle (V2V) technology • Ethics of 3D printing and bioprinting • Tech addictions • Tech trends

• Google Glass • Apple’s CarPlay • SnapChat • Target

Supplementary Materials An extensive package of instructional materials is avail- able to support this tenth edition. These materials are accessible from the book companion Web site at www. wiley.com/college/turban.

• Instructor’s Manual. The Instructor’s Manual presents objectives from the text with additional information to make them more appropriate and useful for the instructor. The manual also includes practical applica- tions of concepts, case study elaboration, answers to end-of-chapter questions, questions for review, ques- tions for discussion, and Internet exercises.

• Test Bank. The test bank contains over 1,000 ques- tions and problems (about 75 per chapter) consisting of multiple-choice, short answer, fill-ins, and critical thinking/essay questions.

• Respondus Test Bank. This electronic test bank is a powerful tool for creating and managing exams that can be printed on paper or published directly to Blackboard, ANGEL, Desire2Learn, Moodle, and other learning systems. Exams can be created offline using a familiar Windows environment, or moved from one LMS to another.

• PowerPoint Presentation. A series of slides designed around the content of the text incorporates key points from the text and illustrations where appropriate.

E-book Wiley E-Textbooks offer students the complete content of the printed textbook on the device of their preference— computer, iPad, tablet, or smartphone—giving students the freedom to read or study anytime, anywhere. Students can search across content, take notes, and highlight key materials. For more information, go to www.wiley.com/ college/turban.

Acknowledgments Many individuals participated in focus groups or review- ers. Our sincere thanks to the following reviewers of the tenth edition who provided valuable feedback, insights, and suggestions that improved the quality of this text:

Joni Adkins, Northwest Missouri State University Ahmad Al-Omari, Dakota State University Rigoberto Chinchilla, Eastern Illinois University Michael Donahue, Towson University Samuel Elko, Seton Hill University Robert Goble, Dallas Baptist University Eileen Griffin, Canisius College Binshan Lin, Louisiana State University in Shreveport Thomas MacMullen, Eastern Illinois University James Moore, Canisius College Beverly S. Motich, Messiah College

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http://www.wiley.com/college/turban
http://www.wiley.com/college/turban
http://www.wiley.com/college/turban
http://www.wiley.com/college/turban
xiv Preface

Barin Nag, Towson University Luis A. Otero, Inter-American University of Puerto Rico, Metropolitan Campus John Pearson, Southern Illinois University Daniel Riding, Florida Institute of Technology Josie Schneider, Columbia Southern University Derek Sedlack, South University Eric Weinstein, The University of La Verne Patricia White, Columbia Southern University Gene A. Wright, University of Wisconsin–Milwaukee

We are very thankful to our assistants, Samantha Palisano and Olena Azarova. Samantha devoted many hours of research, provided clerical support, and con- tributed to the writing of Chapter 6. Olena assisted with

research and development of graphics for Chapter 7. We are fortunate and thankful for the expert and encour- aging leadership of Margaret Barrett, Beth Golub, Ellen Keohane, and Mary O’Sullivan. To them we extend our sincere thanks for your guidance, patience, humor, and support during the development of this most recent ver- sion of the book. Finally, we wish to thank our families and colleagues for their encouragement, support, and understanding as we dedicated time and effort to cre- ating this new edition of Information Technology for Management.

Linda Volonino Greg Wood

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Chapter Snapshot

Make no mistake. Businesses are experiencing a digital transformation as digital technology enables changes unimaginable a decade ago. High-performance organi- zations are taking advantage of what is newly possible from innovations in mobile, social, cloud, big data, data analytics, and visualization technologies. These digital forces enable unprecedented levels of connectivity, or connectedness, as listed in Figure 1.1.

Think how much of your day you have your phone nearby—and how many times you check it. Nearly 80 percent of people carry their phone for all but two hours of their day; and 25 per cent of 18- to 44-year-olds cannot remember not having their phone with them (Cooper, 2013).

As a business leader, you will want to know what steps to take to get a jump on the mobile, social, cloud,

Doing Business in Digital Times1

Chapter

1. Describe the use of digital technology in every facet of business and how digital channels are being leveraged.

2. Explain the types, sources, characteristics, and control of enterprise data, and what can be accomplished with near real time data.

3. Identify the five forces of competitive advantage and evaluate how they are reinforced by IT.

4. Describe enterprise technology trends and explain how they influence strategy and operations.

5. Assess how IT adds value to your career path and per- formance, and the positive outlook for IT management careers.

Learning Outcomes

1

Digital Technology Trends Transforming How Business Is DonePart 1

Chapter Snapshot Case 1.1 Opening Case: McCain Foods’ Success Factors—Dashboards, Innovation, and Ethics

1.1 Every Business Is a Digital Business 1.2 Business Process Management and

Improvement 1.3 The Power of Competitive Advantage 1.4 Enterprise Technology Trends 1.5 How Your IT Expertise Adds Value to Your

Performance and Career

Key Terms

Assuring Your Learning

• Discuss: Critical Thinking Questions • Explore: Online and Interactive Exercises • Analyze & Decide: Apply IT Concepts

to Business Decisions

Case 1.2 Business Case: Restaurant Creates Opportunities to Engage Customers

Case 1.3 Video Case: What Is the Value of Knowing More and Doing More?

References

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big data, analytics, and visualization technologies that will move your businesses forward. Faced with opportunities and challenges, you need to know how to lever- age them before or better than your competitors.

In this opening chapter, you read about the powerful impacts of digital technol- ogy on management, business, government, entertainment, society, and those it will have on the future. You learn of the latest digital trends taking place across indus- tries and organizations—small and medium businesses, multinational corporations, government agencies, the health-care industry, and nonprofits.

Big data are datasets whose size and speed are beyond the ability of typical database software tools to capture, store, manage, and analyze. Examples are machine- generated data and social media texts.

Data analytics refers to the use of software and statistics to find meaningful insight in the data, or better under- stand the data.

Data visualization (viz) tools make it easier to understand data at a glance by display- ing data in summarized formats, such as dashboards and maps, and by enabling drill-down to the detailed data.

Figure 1.1 We are in the era of mobile-social- cloud-big data that shape business strate- gies and day-to-day operations.

CASE 1.1 OPENING CASE McCain Foods’ Success Factors: Dashboards, Innovation, and Ethics

COMPANY OVERVIEW You most likely have eaten McCain Foods products (Figure 1.2, Table 1.1). McCain is a market leader in the frozen food industry—producing one-third of the world’s supply of french fries. The company manufactures, distributes, and sells more than

Figure 1.2 McCain Foods, Ltd. overview.

2

An estimated 15 billion devices are connected to the Internet—forecasted to hit 50 billion by 2020 as more devices connect via mobile networks.

Over 1 million websites engage in Facebook e-commerce.

Over 200 million social media users are mobile only, never accessing it from a desktop or laptop. Mobile use generates 30% of Facebook’s ad revenue.

More data are collected in a day now than existed in the world 10 years ago. Half of all data are in the cloud and generated by mobile and social activities—known as big data.

Sales offices in 110 countries

55 production plants on 6 continents

22,000 employees

Global Reach

Good ethics is good business.

Good food, better life.

Corporate Culture Dashboards

Data analytics

Real time reporting systems

Digital Technology

Frozen food manufacturer

Market leader in french fries

Brand

McCain Foods, Ltd.

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CASE 1.1 Opening Case 3

TABLE 1.1 Opening Case Overview

Company McCain Foods, Ltd. www.mccain.com

Industry The global company manufactures, sells, and distributes frozen food products.

Product lines More than 100 oven-ready frozen food products

Digital technology Dashboards are implemented throughout the organization from boardrooms to factory fl oors. Dashboards have drill-down capabilities.

Business challenges The frozen food industry faced tough challenges from health and nutrition trends that are emphasizing fresh foods. Industry is highly competitive because it is expected to experience slow growth through 2018.

Taglines “Good food. Better life.” and “It’s all good.”

Figure 1.3 Frozen food is one of the most dynamic and largest sectors of the food industry.

100 oven-ready frozen foods—pizzas, appetizers, meals, and vegetables. McCain is a global business-to-business (B2B) manufacturer with 55 production facilities on 6 continents. The company sells frozen foods to other businesses—wholesalers, retail- ers, and restaurants from sales offices in 110 countries. McCain supplies frozen fries to Burger King and supermarket chains (Figure 1.3).

Business-to-business (B2B) commerce. The selling of products and services to other businesses.

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4 Chapter 1 Doing Business in Digital Times

Food manufacturers must be able to trace all ingredients along their supply chain in case of contamination. Achieving end-to-end traceability is complex given the number of players in food supply chains. Several communication and tracking technologies make up McCain’s supply chain management (SCM) system to keep workers informed of actual and potential problems with food quality, inventory, and shipping as they occur. McCain’s SCM system ensures delivery of the best products possible at the best value to customers. In addition, the company strives to prevent food shortages worldwide by analyzing huge volumes of data to predict crop yields.

Supply chain. All businesses involved in the production and distribution of a product or service.

FROZEN FOOD INDUSTRY CHALLENGES

McCain Foods had to deal with three major challenges and threats:

1. Drop in demand for frozen foods. McCain operated in an industry that was facing tougher competition. Health-conscious trends were shifting customer demand toward fresh food, which was slowing growth in the frozen foods market.

2. Perishable inventory. Of all the types of manufacturing, food manufacturers face unique inventory management challenges and regulatory requirements. Their inventory of raw materials and fi nished goods can spoil, losing all their value, or food can become contaminated. Regulators require food manufacturers to able to do recalls quickly and effectively. Food recalls have destroyed brands and been fi nancially devastating.

3. Technology-dependent. Food manufacturers face the pressures that are common to all manufacturers. They need information reporting systems and digital devices to manage and automate operations, track inventory, keep the right people informed, support decisions, and collaborate with business partners.

McCain Foods worked with Burger King (BK) to develop lower-calorie fries called Satisfries (Figure 1.4). These crinkle-cut fries have 30 percent less fat and 20 percent fewer calories than BK’s classic fries. This food innovation has shaken up the fast-food industry and given BK an advantage with end-consumers who are demanding healthier options.

Figure 1.4 McCain Foods and Burger King jointly developed Satisfries—a french fry innovation with 30 percent less fat and 20 percent fewer calories than BK’s current fries and 40 percent less fat and 30 percent fewer calories than McDonald’s fries.

MCCAIN FOODS’ BUSINESS AND IT STRATEGIES

The McCain brothers, who founded the company, follow this simple philosophy: “Good ethics is good business.” McCain prides itself on the quality and conve- nience of its products, which is reflected in the It’s All Good brand image. The It’s All Good branding effort was launched in 2010 after surveys found that customers were concerned about the quality and nutrition of frozen foods. Since then, many of products have been improved and manufactured in healthier versions.

Managing with Digital Technology McCain had integrated its diverse sources of data into a single environment for analysis. Insights gained from its data analytics helped improve manufacturing processes, innovation, and competitive advantage.

McCain Foods invested in data analytics and visualization technologies to maximize its capability to innovate and gain insights from its huge volumes of data. The company tracks, aggregates, and analyzes data from operations and business customers in order to identify opportunities for innovation in every area of the busi- ness. The results of data analytics are made available across the organization—from

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CASE 1.1 Opening Case 5

Figure 1.5 Data visualizations of KPIs make them easy to understand at a glance.

executive boardrooms to the factory floors—on dashboards. Dashboards are data visualizations (data viz) that display the current status of key performance indica- tors (KPIs) in easy-to-understand formats (Figure 1.5). KPIs are business metrics used to evaluate performance in terms of critical success factors, or strategic and operational goals.

Dashboards Create Productive Competition Among Factory Workers McCain implemented 22,000 reports and 3,000 personal reporting systems that include dashboards. Dashboards display summarized data graphically in a clear and concise way. By clicking a graph, the user can drill down to the detailed data. The dashboards reach most of McCain’s 18,000 employees worldwide.

Dashboards have created healthy competition that has led to better perfor- mance. Ten-foot dashboards hang on factory walls of plants around the world. They are strategically placed near the cafeteria so employees can see the KPIs and per- formance metrics of every plant. With this visibility, everyone can know in near real time exactly how well they are doing compared to other plants. The competition among factories has totally transformed the work environment—and organizational culture—in the plants and increased production performance.

Better Predictions, Better Results The CEO, other executives, and managers view their dashboards from mobile devices or computers. They are able to monitor operations in factories and farms around the globe. Dashboards keep management informed because they can discover answers to their own questions by drilling down. Data are used to forecast and predict crop yields—and ultimately combine weather and geopolitical data to predict and avoid food shortages. By integrating all of its data into one environment and making the results available in near real time to those who need it, the organization is increasing its bottom line and driving innovation.

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Questions 1. All it takes is one compromised ingredient to contaminate food and

to put human lives at risk. Delays in communicating contaminated food increase the health risk and fi nes for violating the Food Safety Mod- ernization Act. How can the SCM system help McCain Foods reduce the risks related to low-quality or contaminated frozen foods reaching consumers?

2. What three challenges or threats facing McCain Foods and what is the reason for each challenge or threat?

3. How have dashboards on the factory fl oors impacted performance at McCain Foods?

4. What might be the KPIs of a frozen food manufacturer such as McCain Foods?

5. Explain how visibility about operations and performance created healthy competition among McCain’s factory workers.

6. Being able to make reliable predictions can improve business perfor- mance. Explain why.

Sources: Compiled from Smith (2013), Transparency Market Research (2013), and McCain Foods Teradata video (2013).

Digital business is a social, mobile, and Web-focused business.

Business model is how a business makes money. Digital business model defines how a business makes money digitally.

Customer experience (CX) is about building the digital infrastructure that allows cus- tomers to do whatever they want to do, through whatever channel they choose to do it.

Today, a top concern of well-established corporations, global financial institutions, born-on-the-Web retailers, and government agencies is how to design their digital business models in order to:

• deliver an incredible customer experience;