Cuban’s strategy to reach his business goals is to give fans the best possible experience, with a high-quality team on the court and excellent service at arena bars, barbecue stands, and souvenir shops. In the 2002 season, the “Mavs” filled the 19,200-seat American Airlines Center to 103,7 percent capacity, bringing in 2003 the best NBA city by The Sporting News.
Filling seats is critical. To track attendance, the Mavs became the first NBA team to put barcodes on tickets and then scan them in part to find out if group sales and community-organization giveaways were putting bodies in seats or just wasting tickets. The team’s business managers have found other uses for the for the attendance information as well. By enabling improved attendance forecasting for particular games, for example, the system has helped reduce beverage inventories by 50 percent.
Each of the 144 luxury suites in the Center is equipped with PCs that handle orders for merchandise, food, and beverages Wireless access from all seats in the arena is available so that fans can place orders directly from their seats. All 840 cash registers at concessions stands, restaurants, stores, and bars use a sophisticated point-of-sale system. In the big retail store in the ground floor, salespeople using hand-held computing devices ring up credit-card purchases when lines get too long. The system allows the Mavs to process credit-card transaction in only 3 seconds, because there is an always-on Internet connection to the processing facility. During a game, managers can see which concession stands are busy and which ones can be closed early to cut labor costs.
Technology also supports the Mavs on the court. The team has 10 assistant coaches, and each has a laptop computer and a hand-held computing device. Game film is streamed over the Web for coaches to view on the road or at home. A digital content management system developed in-house matches game footage with the precise, to-the-minute statistics provide for every play of every game by the NBA. The searchable database allows coaches to analyze the effectiveness of particular plays and combinations of players in different game situations.
In 2002, the Mavs started using hand-held computers to track the performance of each referee in every one of their games. The coaches can look at trends- for example, to see which referee favors a given team or which one calls more 3-second violations-and they can tell the team’s players. Another program logs different offensive and defensive schemes used against the Mavs. This system will let coaches make real-time adjustments using statistics from previous games.
Critical response activities supported: Decision making, increased sales, improved customer service inventory management, better utilization of capacity.
The Success Story of Campusfood.com. Campusfood.com’s recipe for success was a simple one: Provide interactive menus to college students, using the power of the Internet to enhance traditional telephone ordering of meals. Launched at the University of Pennsylvania, the company has taken thousands of orders for local restaurants, bringing pizza, hoagies, and wings to the Penn community.
Founder Michael Saunders began developing the site in 1997, while he was a junior at Penn, and with the help of some classmates, launched the site in 1998. After graduation, Saunders began building the company’s customer base.
This involved registering other schools, attracting students, and generating a list of local restaurants from which students could order food to be delivered. Currently, this activity is outsourced to a marketing firm, and schools nationwide are being added to the list. By 2003 there were more than 200 participating schools and more than 1 000 participating restaurants.
Financed through private investors, friends, and family members, the site was built on an investment of less than $1 million. (For comparison, another company, with services also reaching the college-student market has investment of $100 million.) Campusfood.com’s revenue is generated through transaction fees; the site takes a 5 percent commission on each order.
When you visit Campusfood.com, you can do the following: Search a list of local restaurants, their hours of operation, addresses, phone numbers, and other information. Browse an interactive menu, which shows each participating restaurant’s standard print menus, including the latest prices and a listing of every topping, every special, and every drink offered. Bypass busy-signals and place an order without being placed on hold, and avoid miscommunications on orders. Get access to more specials, including discounts and meal deals available online exclusively to Campusfood.com customers. Have access to electronic payment capabilities and your own account record (“My Account”). (Source: Prince, 2002 and campusfood.com.)
Critical response activities supported: customer service, improves cycle time, and innovative marketing method.
State-of-the-Art Human Resources Management in China.
International Information Products Company LTD (ĎĐŃ) produces IBM personal computers (PCs) in Shenzhen, China. The company is one of China’s top-10 exporters and one of the world’s most efficient manufacturers of IBM PCs. The company’s success is attributed, in part, to its world-class Human Resources Information System (powered by PeopleSoft’s HRMS). In operation since October 2011, the system includes these basic elements: employee record management, recruitment, variable pay analysis, performance appraisal, payroll, and management of fringe benefits and absence records. In addition, employees can self-manage their personal data and report leaves and absences on the intranet. Using e-kiosks placed in several locations within the plant (e.g., the cafeteria), employees who do not have Internet access at work or home can use the system as well.
China’s employee tax and benefits systems (e.g., health care and social insurance) are very complex, requiring many computations. Using HRMS and its Global Payroll component, ĎĐŃ was able to reduce the payroll cycle from 11 days to 4 days, and to reduce the computation run time from 6 hours to 2 hours, while eliminating errors. The system automates labor-intensive HR processes such as workforce administration, enabling HR staff to concentrate on staffing, training, career planning, rewards and promotions, and other nonclerical HR services. Furthermore, the data collected in the system are used by top management for supporting strategic decisions. (Source: Smith, 2002.)
Critical response activities supported: improved cycle time, improved dissemination of information, automated clerical tasks, use by employees for self-service.
Mobile Banking at Handelsbanken of Sweden.
Handelsbanken of Sweden is the largest bank in Scandinavia, where more than 80 percent of the population over 15 years old carries mobile phones. Operating in a very competitive banking
Environment, the bank is trying to meet customers’ expectations of using their mobile phones to organize their personal and working lives while on the movie. Mobile banking services, including stock trading, was an opportunity for the bank to gain a competitive edge, and so the bank become the world’s first to have mobile banking applications.
An interactive service allows customers to access up-to-the-minute banking information, including the latest stock market and interest rate data, whenever and wherever they like. Handelsbanken’s e-banking has become so popular that it is used by tens of thousands of customers. It opens up critical business and personal information to safe and easy access from mobile devices. Both the bank’s financial advisors and its customers can access general and personalized stock market and account information, transfer money, request loans, buy and sell stock and bonds, and pay bills. This move into mobile banking is a key first step in a strategy to exploit the potential of e-business, while also extending the bank’s brand reach. (Sources: Compiled from IBM’s case study: Handelsbanken at www-3.ibm.com/e-business/doc/content/case study/35433.html, accessed March 2003, and from press releases at handelsbanken.com.)
In addition to functional areas, we can classify applications by the industry in which they are used. For example, retailing, financial services, educations, health care, social service, and government are heavy users. An example of a government service is provided in Online Minicase W1.2.
Information Systems Failures.
So far we have introduced you to many success stories. You may wonder, though, is IT always successful? The answer is, “Absolutely not.” There are many failures. We will show you some of these (marked with a “lessons from failures” icon) in this book, and in some cases we present them on our Web site. (See, for example, the 2000 U.S. Presidential Election Case in Online File W!.8 at the Web site.)We can learn from failures as much as we can learn from successes, as illustrated in IT at Work 1.2 (page 26)
One area of IT failure is that of the dot-coms. As will be seen in Chapter 4, hundreds of dot-coms folded in 2000 and 2001. It was a shakeout that resulted from a rush to capitalize on e-commerce (see Kaplan, 2002). In addition there were many failures of Internet projects in established companies. (For example, the Go.com project of Walt Disney Company was supposed to manage all the Web sites owned by Disney Company was supposed to manage all the Web sites owned by Disney and generate money from advertisers at the sites. Unfortunately, the income generated from advertising was not sufficient to keep the site going.)Like the gold rush and the rush to create companies when the automobile was invented, only a relatively few made it. The rest failed. According to Barva et al. (2001), the reason for EC failures is that many of the models used were too narrow. In place of these models, they offer an e-business value model, which we describe in Chapter 4.
Another reason for failure is that it is hard to predict the future. It is especially hard to predict the future in the field of information technology, which is evolving and continuously changing, as shown in Section 1.4.
IT at Work
How Nike’s $400 million supply chain
Managements software system failed
In certain retail stores, fans of Nike’s Air Terra Humara 2 running shoe hit the jackpot. Once selling for over $100 US, they were selling for less than $50 in fall 2001. The cheaper shoes were the aftermath of the breakdown in Nike’s supply chain, a breakdown attributed to a software problem.
Nike had installed a $400 million supply chain system in early 2001. The system was supposed to forecast sales demand and plan supplies of raw materials and finished products accordingly. However, the newly deployed demand and supply planning application apparently overestimated the demand for certain shoes in some locations and underestimated demand in others. As a result, some raw materials were overpurchased, while inventory levels of other materials were insufficient. Some shoes were overmanufactured, while the most –demanded ones were undermanufactured. To speed the right shoes to market, Nike had to spend around $5 a pair in air freight cost, compared to the usual cost of 75 cents by ocean shipping. In all, Nike attributed some $100 million in lost sales in the third quarter of 2001 alone to this problem.
What went wrong? The system was developed with software from i2, a major software producer. However, Nike insisted on modifying the i2 standart software, customizing it to its needs. Specifically, Nike wanted a forecast by style, by color, and by size (several thousand combinations). This resulted in a need to make thousands of forecasts, very rapidly, to quickly respond to changing market conditions and consumer preferences. To meet Nike’s need it was necessary to customize the standard software, and to do so quickly because Nike wanted the system fast. The software had bugs in it when it was deployed. Almost any new software contains bugs that need to be fixed; appropriate testing is critical, and it is a time-consuming task (see Murphy, 2003). Nike and i2 failed to recognize what was achievable.
Customizing standard software requires a step-by-step systematic process (see Technology Guide 6). It should be done only when it is absolutely necessary, and it must be planned for properly. Furthermore, Nike could have discovered the problem early enough if they had used appropriate deployment procedures (see chapter 14).
To avoid disasters such as the one Nike experienced, companies must fully understand what they are trying to achieve and why. They must use performance-level indicators to properly measure the system during testing. Incidentally, Nike fixed the problem after spending an undisclosed amount of time and money in 2002.
Sources: Compiles from Sterlicchi and Wales (2001) and from nike.com press releases, 2002, 2003.
For Further Exploration: Why did Nike need the detailed forecasting? How can a company determine if it really needs to customize software? Whose responsibility is it to test and deploy the software: the software vendor’s or the user’s?
Information Technology Developments and Trends
In the previous sections , we described the role of IT in supporting business activities . We also pointed out (in Table 1.1, page 5) some of the capabilities that enable IT to play a support role. Next we will describe some of IT’s developments and trends, and especially the move toward Web-based computing, wireless applications, and intelligent systems.
First imagine this scenario: It’s a Monday morning in the year 2008.Executive Joanne Smith gets into her car, and her voice activates a wireless telecommunications-access workstation. She requests that all open and pending voice and mail messages, as well as her schedule for the day, be transmitted to her car. The office workstation consolidates these items from home and office databases. The message-ordering “knowbot” (knowledge robot), which is an enhanced e-mail messaging system, delivers the accumulated messages (in the order she prefers) to the voice and data wireless device in Joanne’s car. By the time