Theories of Digital Business
Lecture slides + notes
University of Amsterdam
October 2019
,Setting the stage ............................................................................................................................................... 3
Lecture 1 ......................................................................................................................................................... 3
Digital Strategy ................................................................................................................................................ 6
Digital Strategy 1 – Using digital technologies for strategic advantage (Lecture 2) .................................... 6
Digital Strategy 2 – IT Governance (Lecture 3) .......................................................................................... 10
Digital Processes ............................................................................................................................................ 20
Digital Processes 1 – Information system’s development (Lecture 5) ......................................................... 20
Digital Processes 2 – Managing IT initiatives (Lecture 6) .......................................................................... 26
Digital Processes 3 – Digital transformation and change (Lecture 7) ........................................................ 41
Digital Processes 4 – Process modeling (Lecture 10) ................................................................................. 52
Digital Technologies ...................................................................................................................................... 71
Digital Technologies 1 – A manager’s guide to telecommunicatons and the internet (Lecutre 4).............. 71
Digital Technologies 2 – Artificial Intelligence and robotics (Lecture 8) ................................................... 81
Digital Technologies 3 – Big Data and Analytics (Lecture 9) ..................................................................... 85
Overflow / Wrap-up: IT governance / exam prep ...................................................................................... 94
Final exam - Lecture 11 ............................................................................................................................... 94
2
,Setting the stage
Lecture 1
The importance of IT as a driving factor behind many societal developments can be illustrated by looking at a list of the Time
‘person of the year’ awards, which over the last two decades have included Bill Gates (as software billionaire and philanthropist),
‘You’ (consumers as producers of Wikipedia and other web 2.0 initiatives), Mark Zuckerberg (Facebook entrepreneur), and the
Arab Spring protesters (who also used Facebook to coordinate and promote their protests). Of course not all ‘persons of the year’
are linked to IT issues (such as Pope Francis, the Ebola helpers, Angela Merkel and Jamal Khashoggi). And there were some
interesting runner-ups: Edward Snowdon, linked to IT and privacy, coming in close in 2013, Jack Ma, founder of Alibaba
representing China as tech powerhouse as runner-up in 2014, and the founder of taximarket ‘disruptor’ Uber, social-media
movement #blacklivesmatter as well as social media personality Caitlyn Jenner among the runner-ups in 2015. 2016: Trump, largely
campaigning and communicating through Twitter, bypassing the traditional media. 2017’s #MeToo ”Silence Breakers” again have
a clear Twitter link. Of course other developments are also major, such as globalization, the refugee movements and developments
in life sciences, each in their own way actually quite strongly linked to IT developments.
As to the Bob Dylan quote: “If your time to you is worth savin’; Then you better start swimmin’ or you’ll sink like a stone; For the
times they are achangin’”.
Changing Software Architecture:
IT is about business (process) architecture
Focus on what, not how à you can design what you want and you can implement it right away. The logic is already created. There
is a fundamental shift, you can get the job done. Programming is accessible. “It’s a return to the world of Lego” (architect and a
builder at the same time, without knowing how to do it). It enables us to find ecosystems in organizations
Flexibility and speed is king à The competitive advantage is not having lego (modular designs), but constructing new things with
your lego. What does it enable us to do? You have to be quick! Build and kill bridges (constant change your products).
Modular design (ERP, Apps, SaaS, outsourcing…)
Changes in Strategy & Organization: economies of speed, scope and scale
Changes in how organizations work
Speed: cycle time reduction
Disappearing boundaries:
within firm: no more silos, globalization.
between companies: supply chain management, partnering.
Global Business Networks:
- Dis-aggregation, consolidation, focus on core, virtual organization, outsourcing.
ICT and Business/Industry Redefinition
Level 1-2: IT can be used to simply automate an existing isolated task (localized exploitation) or to link and integrate a number
of tasks (internal integration): both are considered ‘evolutionary’ transformations that can generate significant benefits, but usually
less than what is feasible through more ‘revolutionary’ transformations (level 3-5).
Level 3 is about streamlining and reorganizing internal processes (not simply linking them as in ‘2’),
Level 4: while 4 extends this beyond the boundaries of the organization to involve suppliers, buyers.
Level 5 describes the most radical transformation, where the entire business scope is redefined.
The importance of ICT and digital business
Fundamental changes in how we work, compete, collaborate, communicate, socialize, play, learn…
Information Management dominates and cuts across all disciplines
50% of capital expenditures
Crucial dependence on ICT for individuals, businesses, governments
ICT key source for innovation and start-ups, fastest path to entrepreneurial success
3
,Digital Business: trends and issues
Create the change rather than be affected. We spend a lot of time on IT but we
can’t get it right.
the list for basic understanding.
Largest IT investments
- 1 Business and IT alignment - 1 Analytics/Big Data
- 2 Security and Privacy - 2 ERP
- 3 Speed of IT Delivery/ IT Time to Market - 3 Security and Privacy
- 4 Innovation - 4 Software
development/maintenance
- 5 Business Productivity/ Efficiency - 5 CRM
- 6 IT Agility/Flexibility - 6 Cloud computing
- 7 Cost reduction/controls
- 8 Business agility/Flexibility
- 9 Business cost reduction/controls IT
- 10 Strategic Planning (Business)
Source: Simnet.org. 2018 survey, published in 2019. Changes in the naming of
issues for the most recent survey may overemphasize the change compared to
last year (last year’s rank between brackets). An MISQe article with more
details is added on Canvas as illustration. Data are exclusively based on US respondents. For the exam you are (of course) not
expected to know the scores of each issue, but it is important to know that ‘Business & IT alignment’ has been in the top three for
circa 15 years (and we still cannot get this right), that flexibility and business change are major issues, and that security and
privacy issues are a (somewhat more recent) major concern.
Trends conclusion
Business and IT alignment has been in the top three for 15years (and we still can’t get it right). That flexibility and business
change are major issues, and that security and privacy issues are a new big concern.
4
,Linking our course outline to the earlier mentioned issues should show how our course agenda is linked to both current concerns
as well as to underlying more stable conceptual foundations.
NBT 1 - Big Data, mining for gold or information overload?
Main characteristics, 3 V’s:
1. Volume
2. Variety
3. Velocity
4. Veracity (IBM added this one) – data is not always consistent or truthful.
It’s about what you can do with it, about storytelling. Think of Trump.
When decisions matter: Math genius hacked a dating site. The algorithms use only the questions that both potential matches
decide to answer and the questions he had chosen were very unpopular. He sets up multiple accounts and started harvesting 6
million questions from 20.000 different accounts. Then he clustered the data into seven categories, and had to decide which
cluster suited him best.
NBT 2 - Internet of things:
When walls do talk: sensors, optimizing. Data and connectivity as value drivers (billions of things are connected now). And it
increases exponentially. If all these things are connected there is a lot of magnitude. You can start sniffling and changing the
strategy of a company to the demand of the customers. More and more is about software. Software is eating the world.
NBT 3 - Artificial intelligence:
- AI 1.0 started in the 1960’s, with simple rule-based logic: IF … THEN ... Using this logic Weizenbaum constructed ‘Eliza’, a
Rogerian-style simulated ‘psycho-therapist’ that could interact with a user, parsing their questions and replying with follow-up
questions.
- AI 2.0 uses much more sophisticated natural language interaction, such as that found today in Siri or ‘OK Google’.
- Today’s state-of-the-art ‘AI 3.0’ (not a universally used term, but you get the idea) uses genetic or evolutionary algorithms, self-
learning algorithms that do not even need to be told how to accomplish a specific goal. In many ways they are structured around
biological metaphors such as neural networks.
Plug and pray. Intelligence killer robots and many other things form a threat, it’s already there. Also, consequences for jobs: a lot
of professions will end soon.
NBT 4 - Work redefined: hyper specialization
4-hour workweek, freelancing, crowdsourcing
Disrupt: Imagine no possessions: the sharing economy and trust
Sharing economy – economic and social activity involving online transactions. Growing out of the open-source community to
peer-to-peer based sharing of goods and services, now it’s even bigger: any sales transactions that are done via online market
places, even the B2B (business to business) ones. Access is the new ownership
Based on:
1. Identity and verification – credit card verification (buyer)
2. Trust – insurance, deposit, reputation (platform)
2. Identity and verification – reviews, referrals, social activity/relationships, online behavior (seller)
NBT – 5 - Privacy
Privacy, security and censorship: google, it’s not about whenever you have something to hide it’s about what it done with the
information. Plus, there is nowhere to hide.
A combination of social media and search engine giants, combined with mobile devices that are constantly tracked, cloud
services, a small number of dominant players that are often closely aligning with governments, and governments that also
increasingly monitor and collect data even without concrete suspicions, together forms a recipe where privacy is non-existent.
Very few organizations or whistleblowers counter this, and those that do often end up in difficult situations. Case in point is the
Dutch referendum-initiative run by several Amsterdam students, starting on September 4 to block a law allowing the Dutch
government to collect an unprecedented amount of data without –the initiative argues- sufficient privacy safeguards. Good to
follow this and form your own opinion!
5
, Digital Strategy
Digital Strategy 1 – Using digital technologies for strategic advantage (Lecture 2)
The World Is Flat: A Brief History of the Twenty-first Century,
http://www.thomaslfriedman.com/bookshelf/the-world-is-flat
This classic book offers a good historical backdrop for our course, showing how digital technology became a driving force behind
globalization and major geopolitical issues that came up in the early 2000’s and are now defining the global landscape. The author
and New York Times foreign affairs columnist describes how “the convergence of technology and events that allowed India,
China, and so many other countries to become part of the global supply chain for services and manufacturing, [created] an
explosion of wealth in the middle classes of the world's two biggest nations, giving them a huge new stake in the success of
globalization.” This development has continued since this book appeared, but the underlying analysis remains valid today and
offers a good understanding of what is – arguably- one of the most important developments in the 21st century. Friedman earned
an Mphil in Middle Eastern Studies from Oxford rather than being a tech-savvy writer, and his awakening to the influence of the
Internet some ten years after the Internet really took off (i.e., the first pizza was sold online in 1994) shows how big the timelaps
between technological innovation and societal realization can be. Similarly, the (non-tech) world is now waking up to a new
paradigm shift where data (and data-rich and –smart companies) are playing a major role in influencing users in their
purchasing behavior, voting behavior, etc.
Many IT innovations follow the 'hype-cycle' (made popular by Gartner), where after the introduction
expectations are quickly becoming unrealistically high. Once people realize this, the expectation (perceived
value) changes from hype to disillusion. Real developments (the green line) are typically different from the hype
and disillusion and it is important for managers to understand both real and perceived importance. The X-axis in
the chart shows the development of the e-business hype over time (with the 'New Economy' perceived as
replacing the 'Old Economy' in the late 1990's, and the disillusion represented by the burst of the dot-com bubble
in 2001), the terms at the top of the Yaxis show various concepts related to IT that have gone (or are going)
through a similar hype-cycle at different points in time.
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