9 - Information Capital Readiness Flashcards
What is Information Capital (IC)?
The raw material for creating value in the new economy, consisting of systems, databases, libraries, and networks.
How does Information Capital relate to organizational strategy?
Information capital has value only in the context of the strategy; it must be managed to align with the organization’s strategic goals.
What are the three types of strategies that benefit from Information Capital?
- Low total cost strategy
- Customer solutions strategy
- Product leadership strategy
What are the two components of Information Capital?
- Technology infrastructure
- Information capital applications
What does technology infrastructure include?
- Central mainframes
- Communication networks
- Managerial expertise (standards, disaster planning, security)
What are the three categories of information capital applications?
- Transaction processing applications
- Analytic applications
- Transformational applications
What is a transaction processing application?
An application that automates the basic repetitive transactions of the enterprise, such as an ERP system.
What distinguishes transformational applications?
Their significant potential impact on strategic objectives and the degree of organizational change they require.
What is the purpose of a strategy map in relation to Information Capital?
It provides a point of reference for aligning information capital objectives with organizational strategy.
What is an example of a transformational application in customer management?
A customer portfolio self-management system that enables customers to analyze and manipulate their financial plans.
What is the typical percentage of IT expenditures consumed by technology infrastructure?
Nearly 60 percent.
True or False: Most organizations spend the majority of their IT budget on discretionary investments.
False. 90 percent of IT expenditures are typically locked into operating and maintaining existing applications.
What is the recommended percentage of total information capital spending that should be allocated to new applications?
Between 5 percent and 15 percent.
What are the two underlying phenomena reflected in spending on new information capital applications?
- Replacement of obsolete systems
- Application of totally new technology to new applications
What is the significance of ERP systems in financial and human resource management?
They streamline processes and support analytic applications for improved management.
What is an analytic application in customer management?
A customer profitability measurement system that provides data mining capabilities for customer segmentation.
Fill in the blank: Information Capital applications function only if supported by a foundation of _______.
[technology infrastructure]
What do benchmarking studies indicate about typical organizational spending on information capital-related activities?
Approximately 4 percent of its revenue.
What is a key factor that can lead to the failure of CRM software implementations?
Lack of linkage to change management initiatives.
What role does the IT organization play in the information capital planning process?
Responsible for acquiring, installing, and maintaining applications and integrating them into the organization’s infrastructure.
What percentage of information capital spending do average firms commit to IT infrastructure?
58 percent
In a cost-reduction strategy, what percentage do organizations invest in infrastructure?
42 percent
How much do agility-focused companies spend above the industry average on information capital?
Above the industry average
What is the recommended investment range for Consumer Bank’s information capital portfolio?
20 percent of total information capital spending
What is the consequence of a spending constraint on investment strategy?
Enforces discipline to conservatively manage the rate of change
In the moderate investment scenario, what are the percentages allocated to transaction processing and infrastructure applications?
- Transaction processing applications: 50 percent
- Infrastructure: 30 percent
What does strategic readiness of information capital measure?
The degree of preparedness of the organization’s information capital to support the enterprise’s strategy
What levels are considered normal and operational in the six-level scheme for measuring information capital?
Levels 1 and 2
What levels represent problem areas needing applications in the information capital readiness measurement?
Levels 5 and 6
What is the primary objective of the TRPIT strategy map?
Enterprise earnings (EBITDA)
What are the three themes organizing internal process objectives in TRPIT’s strategy map?
- Operational excellence
- Business unit alliance
- Solutions leadership
What is a key shift in TRPIT’s role as described in the change agenda?
From tactical support to strategic partner
What does the TRPIT strategy aim to enhance in order to create business value?
Customer service
What is the significance of the Balanced Scorecard (BSC) in TRPIT?
Improves performance measures selection and communication
True or False: The TRPIT strategy map includes objectives related to customer satisfaction.
True
What is the focus of the measurement approaches discussed in the chapter?
Strategic alignment
Fill in the blank: Information capital must be managed like an _______.
Asset
What does the BSC result in for TRPIT’s strategic initiatives?
Heightened focus on cost-benefit analysis and accountability
What does the TRPIT customer advocacy group work on?
Identifying and mapping key business processes
What financial management tool developed by TRPIT has been adopted by the enterprise CFO?
Cost-benefit analysis tool
