Managing the Digital Firm Fall 2002
Managing the Digital Firm
B20.2314.10 Fall 2002
Professor: Ken Laudon
Prometheus site:
Wednesday 6- 8:50 PM
Tisch UC 61
Office: MEC 8-87
Ph: 998-0815
[updated 8-17]
This course focuses on the use of information technologies to manage and organize the digital firm. The premise of the course is that digital firms are different from traditional firms. Digital firms are distinguished from traditional firms because of their near total reliance on a set of information technologies to organize and manage. For managers of digital firms, IT is not simply a useful handmaiden, an enabler, but rather it is the core of the business and a primary management tool. Insofar as traditional firms are inexorably driven to become more like digital firms, understanding something about digital firms will help us understand the future a little better.
Managers of digital firms need to identify the challenges facing their firms; discover the technologies that will help them meet these challenges; design business processes to take advantage of the technology; and create management procedures and policies to implement the required changes. The focus of the class is on managing and organizing the transition to a digital firm, and not on the technical aspects of implementing systems.
Some of the topics covered are:
Managing the digital assets of the firm
New technology infrastructure and architecture
Strategy for digital firms
Agency and transaction costs
IT-based business models
Supply chain management systems
Enterprise systems
Supply Chain Management Systems
Customer Relationship Management Systems
Collaborative Commerce
Knowledge management
Remote Work
Corporate Communities
Management of information rights and obligations
During the course we will focus on several organizations that reflect several important themes in the course. Among these ‘signature’ firms are Cisco Systems, Dell Computer, General Electric, Ariba, Wal-Mart, Expedia, and Sun Microsystems.
The Class
The class is organized as a symposium where the key ideas of each week are discussed and debated. A symposium means, literally, drinking and talking with friends. The classes will have the following approximate content:
Lecture45 minutes
Reading discussion 40 minutes
Break 15 minutes
Case analysis:30 minutes
Mgmt Workshop30 minutes
Wrap up discussion10 minutes
Assignments and Grading
There are five assignments:
- Participation
- Study question write-ups (individual)
- Participation (individual attendance)
- Case analysis discussion leadership (team)
- Management Workshop leadership (team)
- Term Paper (individual)
Participation. Participation is measured by attendance in class and receipt of the study question write-ups. Each attendance is given one point. A Study Question write-up is due at the beginning of each class. Study question write-ups also receive one point. Each student will prepare answers to one or all of the study questions assigned for each class and hand them in at the end of class on the last day of the week. These questions cover the reading and cases assigned for each class. The write-up should be a minimum of one page in length. There is no maximum. Students must complete a minimum of eight write-ups. These write ups will not be graded but read for adequacy and recorded. Inadequate responses may not be re-submitted but will be returned to students. If you do not receive a study question back, you can assume it was accepted.
Attendance will be taken after the break. All students are expected to stay for the duration of the class.
Case analysis leadership (30 minutes). A student team will lead a discussion of the case assigned for class. There are two kinds of cases assigned: Harvard/Stanford prepared business cases and student generated cases. Answer the case study questions posted on the class Web site. All students should review the case questions. For the team preparing the case, update financial data on the case by reviewing the firm’s latest 10K and 10Q, and update the class on the latest developments at the firm under analysis by reviewing popular citations on the Web with a focus on the digital firm themes being discussed for the week, including the readings,. Good sources would be hoovers.com, The Wall Street Journal or Yahoo! Present the findings to the class in a 30 minute presentation, and hand in a written paper of 5-8 pages.
A student generated case is based on a reading of the assigned firm’s 10K and 10Q filings, plus additional Web-based research on the firm e.g., Wall Street Journal articles. A sample firm analysis for a student generated case is available on the Web site.
For student generated cases the team responsible must send preliminary slides or a short rough draft paper containing their analysis of the case to the professor 24 hours in advance of the presentation. I will distribute the rough draft using Prometheus to students.
Teams will receive two grades based on content and quality of presentation.
Management Workshop (30 minutes). A student team will present an analysis of the implications of the week’s readings and cases for managers. This can be in the form of a To-Do List or memo to your work team or manager, seeking to implement a change in your business firm (or a hypothetical business firm). Or you could present an illustrative story based on your prior work experience. In-class presentation with slides lasting no more than 20 minutes, followed by ten minutes of questions. Hand in slides, no written paper required. A sample Management Workshop is available on the Web site.
Teams will receive two grades based on content and quality of presentation.
Term Paper: A term paper on a digital firm theme based on prior experience, or current interest, due on the day a final exam is scheduled for this class. The paper should be written to management and deal with some of the broad themes of the course. The paper is intended to demonstrate your command of the material that has been covered. Therefore, quotations and citations to the reading are in order. The paper will be graded in part based on your demonstrated knowledge—including citations-- of the articles and cases discussed in class.
Grading Weights
Assignment LengthDeliverable Weight
Case discussion / 30 mins / Slides + Paper / 25%Management workshop / 30 mins / Slides / 25%
Final term paper / 12-15 pages / Paper / 40%
Participation / Individual / 10%
ALL ASSIGNMENTS ARE DUE IN CLASS ON THE DATES GIVEN IN THE COURSE OUTLINE. THE FINAL PAPER IS DUE ON THE DAY A FINAL EXAM IS SCHEDULE FOR THE CLASS.
Readings
Most of the readings are available on the Web at no cost (a licensing fee has been paid to the publishers by the University and School). A small Readings Packet is available in the bookstore and in the Library Reserve for readings not available on the Web.
Articles: Sloan Management Review articles are available online from Bobst Library. It is important that students in the class establish an account with the Bobst online collection. Instructions will be available on the Web site for this class.
Cases: All cases are prepared by students based on SEC 10K and 10Q filings and additional publicly available research. Most cases are available on the Web site in their appropriate session. There are a few HBS Business School cases in the reading pack. .
**References. Articles and readings with a ** are for reference purposes and are not obligatory.
Background Books
The following books are recommended:
Clayton M. Christensen, Innovators Dilemma: Why Great Companies Fail, Harper Collins, 1997
Thomas H. Davenport, Mission Critical: Enterprise Systems
Don Tapscott, David Ticoll, and Alex Lowy, Digital Capital: Harnessing the Power of Business Webs, Harvard Business School Press, 2000.
Peter Weill and Michael Vitale, Trading Space for Place. Harvard Business School Press, 2001
Reference text: Kenneth C. Laudon and Jane P. Laudon (L&L), MIS: Managing the Digital Firm 7th edition, Prentice Hall, Upper Saddle River, New Jersey, 2002. On reserve. For students who want a comprehensive treatment and reference book of the management, organization, and technology issues in the digital firm.
Reference text: Kenneth C. Laudon and Carol G. Traver, E-Commerce: Business, Technology and Society. Addison Wesley, 2002. For students who want a comprehensive treatment of e-commerce, e-business, and the digital firm.
Prometheus Site
This course is hosted on the Stern Prometheus site (
Part I The Digital Firm: New Realities for Organizing and Managing the Firm
Week 1
9/4
1. The Emerging Digital Firm: Management and Organizational Issues
Introduction to the course
Understanding three literatures: information technology, organization, and management
Investment in and returns from IT
Defining the ‘Digital Firm’
What makes firms “digital”?
E-business, e-commerce and the digital firm
Management, organization and technology issues in the digital firm
Comparison of traditional and digital firms
Online with suppliers, customers, employees and “corporate” knowledge
Management issues: vision, managing the journey, devising a migration path, and living there.
Strategy: incremental vs. gloabal
Strategy: “best of breed” vs. integrated approach.
Reading: [PLEASE READ PRIOR TO FIRST CLASS]
Venkatramen and Henderson, “Real Strategies for Virtual Organizing,” Sloan Management Review, Fall 1998.
Sawhney and Parikh, “Where Value Lives in a Networked World,” HBR January 2001
Marchand, Kettinger, Rollins, “Information Orientation: People, Technology, and the Bottom Line,” Sloan Management Review (41) 4, Summer 2000. (Proquest)
Study Questions
1. Why do Venkatramen and Henderson believe organizations are any different today than in the past? Do you agree or disagree and why.
2. How can economic value reside in a network? How does this change the management and organizational possibilities of firms? What should you do about this as a manager?
3. What does Marchand et. al. mean by an information orientation and how does it relate to firm performance, and potentially, firm strategy? What steps would you recommend as a manager for enhancing the “information orientation” of your employees? Of your business firm?
Part II Digital Firm Infrastructure
Week 2 Digital Firm Infrastructure: The Changing Hardware, Software and Network Platforms
9/11
Infrastructure is the digital plumbing upon which the digital firm is built
Why should managers care? What should they care about? What are the key developments in hardware, software, and telecommunications in the last year that you should be aware of? How might you use any of these technologies to reduce costs and enhance efficiency.
Technological and business drivers
Technology life spans
Applications, functional areas, enterprise, and ASP
Major trends in voice and data communications
Network types
The Internet
Wireless: Cellular, 3G, WiFi, Bluetooth, WAP and iMode
Connectivity and interoperability
The multi networked digital world of 2005 and beyond
Management issues
What are the vendors selling?
Reading:
Feeny and Willcocks, “Core IS Capabilities for Exploiting Information Technology,” Sloan Management Review, Spring 1998.
Graham, Gallant and Mabrucco, “Everything Connects. A Look Inside IBM’s Strategic Alliances,” IDC White Paper. IDC 2001. (On line)
Video: GM redesigns its healthcare delivery system using Palm Pilots
Assignments:
Business Case Team 1: Case: Wal-Mart’s Digital Ecosystem Web (Student Case)
Describe Wal-Mart and its supply chain management systems. How has this system contributed to Wal-Mart’s overall strategy?
Mgmt WorkshopTeam 2
Study Questions
1. What do managers need to know about IT infrastructure according to Feeney? What are the three challenges facing managers in exploiting IT for strategic gains?
2.What are the advantages to your firm of dealing with a vendor like IBM that uses alliances to deliver solutions? What are the potential costs of this approach for your firm?
Week 3 Corporate Databases and Data Mining
Alternative Sources: Outsourcing and ASPs
9/18
The firm’s database of customers, employees and suppliers is a corporate goldmine. It shapes what you know and what you might learn about customers, vendors, and employees. It is an inimitable asset that cannot be purchased in the factor markets. It has strategic value.
Major trends in databases
Web-based database servers
Data mining
Reading:
Levitan and Redman, “Data as a Resource: Properties, Implications and Prescriptions,” Sloan Management Review, Fall 1998
Outsourcing Digital Firm Infrastructure
Renting infrastructure.
Alternatives to corporate infrastructure
Costs and Risks in outsourcing
Reading
James Brian Quinn, “Strategic Outsourcing: Leveraging Knowledge Capabilities,” Sloan Management Review, Summer 1999
Jerome Barthelemy, “The Hidden Costs of IT Outsourcing,” SMR, Spring 2001.
Case: Enerline Turns to an ASP (Online case)
Assignments:
Business Case Team 3
Mgmt WorkshopTeam 4
Study Questions
1. Levitin and Redman call data “the sludge of the information age.” Why does data need to be managed? How is it any different from any other resource? How should data be managed in the digital firm and is this any different from ordinary “good management of a firm?”
2. What does Quinn mean by “strategic outsourcing” and how is it any different from ordinary outsourcing? What are the leading management challenges in strategic outsourcing?
3. In what ways can strategic outsourcing contribute to the movement towards a digital firm? What should the digital firm outsource?
4. What are the hidden costs of outsourcing and what can managers do to reduce those costs?
Part III Digital Firm System Capabilities
Week 4 Enterprise Systems
9/25
The goal of Enterprise Systems (ERP, ES) is to build a single, comprehensive system based on pre-defined business processes with existing code, that can manage all the key business processes in real-time on a global basis. There are several ways to achieve this goal, and many pitfalls along the way. While all firms can purchase enterprise system in the marketplace, there appears to be considerable variance in the ability to implement and use enterprise systems.
The struggle to build a comprehensive view of the firm
Re-designing the firm from a digital flow, business process perspective
Re-engineering, BPR and workflow analysis
Enterprise wide systems: the promise and reality
Strategies: incremental vs. global
Strategies:
Reading:
Davenport, “Putting the Enterprise in the Enterprise System,” Harvard Business Review, 1998.
Willcocks and Sykes, “The Role of the CIO and IT Function in ERP,” Communications of the ACM, 43, No. 4. 2000.
Case: SAP and the Online Procurement Market Stanford EC-5 online
Assignments:
Business Case Team 5
Mgmt WorkshopTeam 6
Study Questions
1. Why does Davenport claim that implementing an Enterprise system is primarily a management problem? Does this mean failed ERP systems are management failures?
2. Why do Willcocks and Sykes believe so many ERP projects have failed?
Week 5 Supply Chain Management Systems (SCM): B2B Network Markets and Collaborative Commerce
10/2
The objective of SCM systems is to reduce the cost of procurement and reduce time delays and buffers through the development of systems that digitally connect vendors with their customers. There are several different approaches to this goal, some of which have succeeded in unexpected ways.
Types of Network Markets
Procurement systems
Private industrial networks and collaborative commerce
Reading:
Corbett, Blackburn, and Wassenhove, “Partnerships to Improve Supply Chains,” Sloan Management Review, Summer 1999.
Cohen, Cull, Lee and Willen, “Saturn’s Supply-Chain Innovation: High Value in After-Sales Service, SMR, 41,4, Summer 2000.
Case: Covisint (student generated case)
Assignments:
Business Case:Team 7
Mgmt Workshop:Team 8
Study Questions:
1. According to Corbett, et. al., What are the critical success factors for achieving supply chain integration? Are these factors primarily technical, managerial, or organizational?
2. What’s the relationship between service criticality and service strategy, and how are these two balanced in Saturn’s supply chain management system according to Cohen, et. al.?
Week 6 Customer Relationship Management Systems (CRM)
10/9
The objective of CRM systems is to increase the profitability of the customer base by developing a firm-wide, comprehensive view of the firms customers regardless of how they contact the firm or where they are located. This information can be used to drive sales, improve product design, increase order size, reduce customer frustration, and enhance customer loyalty.
The challenge of building an integrated view of customers
Reading
Glazer, “Winning in Smart Markets,” SMR, 40,4, Summer 1999.
Davenport, “How Do They Know Their Customers So Well,” Sloan Management Review, Winter 2001
Case: Siebel Systems Inc. (Stanford EC-1)
Assignments:
Business Case:Team 9
Mgmt Workshop:Team 10
Study Questions:
1. What are some of the factors Davenport et. al. identify as important for getting to know the customer? Why isn’t the technology by itself enough?
2. What strategies does Glazer recommend to maximize the value of customer information?
Week 7 Knowledge Management Systems (KWS)
10/16
The objective of KWS is to increase the productivity of employees by creating, storing and disseminating the relevant knowledge required for employees to perform their jobs efficiently and effectively. “Knowledge chunks” (one output of a KWS) can also become products for sale to customers and generate direct revenues. Arguably, knowledge cannot be purchased in the factor markets and therefore has strategic significance.
Defining “firm knowledge”
Organizing and managing firm knowledge
Types of knowledge management systems
Knowledge systems: promise and reality
Reading:
Cross and Baird, “Technology is Not Enough: Improving Performance by Building Organizational Memory, SMR Spring 2000.
Davenport, Thomas H., David W. DeLong, and Michael C. Beers. “Successful Knowledge Management Projects.” Sloan Management Review 39, no. (Winter 1998).
Case: Knowledge Management at Andersen Consulting, HBS Case #499032