Chapter 3: Productivity, Innovation, and Strategy

Question 1

Productivity / labour productivity

Answer 1

the ratio of the
gross domestic product (GDP) of a country divided by the total paid
hours worked by people in the country.

Question 2

primary indicator of our per

capita income

Answer 2

labor productivity (based on Conference board of Canada)

Question 3

Labour productivity in Canada

Answer 3

measures the value that Canadian workers
generate per hour, which, for the latest data available, was about $50 per
hour (compared with $67 for the U.S. and $75 for Norway ).

Question 4

Most experts agree that to enhance productivity,

Answer 4

Canada must foster a culture of innovation, open its industries to more
competition, and increase the amount of machinery and equipment
(M&E) in the economy (particularly in the Information and Communications Technology (ICT)

Question 5

Information and Communications Technology (ICT)

Answer 5

Provides products and services that other industries rely on to get their
work done.

Question 6

Productivity paradox

Answer 6

The lack of evidence of an increase in worker productivity associated with
the massive increase in investment in information technology.

Question 7

Business value

Answer 7

Tangible benefits for organizations through either more efficient use of
resources or more effective delivery of their services to customers.

Question 8

Researchers have

suggested three different ways in which the value of IT can be realized.

Answer 8

1) The first is through productivity.
2) The second way to realize the investment value of IT is through the
structure of competition
3) The final way that IT investment value is realized through benefits to the
end customer

Question 9

1) The first is through productivity.

Answer 9

IT allows a company to create more
and/or better output from the same inputs and create them faster than
before the technology was in place. For example, if you had a small
accounting firm, investing in IT might allow you to add more customers,
automate basic tasks

This investment makes the firm more
efficient and potentially more effective.

Question 10

The second way to realize the investment value of IT is through the
structure of competition

Answer 10

IT can alter the way corporations compete. For
example, if one accounting firm invests in IT, then rival firms will often
follow suit to stay current. The competitive structure changes because of
IT to include the software accounting firms offer and the technical
support they can provide.

Example: When IT enabled people to stream and watch movies at home
(usually through Netflix), it eliminated the need to patronize the local
video rental store.

Question 11

The final way that IT investment value is realized through benefits to the
end customer

Answer 11

IT helps make processes more efficient and changes the
nature of competition. With increased competition, the reduction of costs
associated with new processes is often passed on to the final consumer.
The consumer may, therefore, see cheaper and better goods and services
as a result of IT

Question 12

Innovation

Answer 12

Rogers’ five characteristics: relative advantage, compatibility, complexity,
trialability, and observability.

Question 13

Business Technology Management (BTM)

Answer 13

A category of skills focused on the ability to effectively innovate using
information technology in organizations.

Question 14

Skills Framework for the Information Age (SFIA)

Answer 14

A set of skills thought to be useful for those employees focused on
developing and maintaining information technology.

Question 15

Efficiency

Answer 15

A measure of productiveness also refers to accomplishing a business
process either more quickly with the same resources or as quickly with
fewer resources.

Question 16

Doing things

right

Answer 16

often means using just the right amount of resources, facilities, and
information to complete the job satisfactorily.

Question 17

Effectivness

Answer 17

Doing the right things.

Increased
effectiveness means that the company considers offering either new or
improved goods or services that the customer values

Question 18

Sometimes, “doing the right things” and “doing things right” can be in
conflict.

Answer 18

The organization might be doing things right, but it is not doing the right
things.

Question 19

Value chain

Answer 19

A network of value-creating activities.

a network of activities that improve the effectiveness (or
value) of a good or service. A value chain is, therefore, made up of at least
one and often many business processes.

Question 20

Value chains have directions either

Answer 20

1) upstream

2) Downstream

Question 21

Example of backward integration / upstream

Answer 21

Organizations
that expand into activities related to the basic raw materials of a process—
such as a tire company that decides to manufacture its own rubber or a
coffee store that decides to grow its own coffee

Question 22

Example of forward integration, or

moving downstream in the value chain.

Answer 22

Those that move closer to end customers—for example, a mining
company that begins to cut and finish its own diamonds rather than sell
raw stones wholesale

Question 23

Margin

Answer 23

The difference between the price the customer is willing to pay
and the cost the company incurs in moving the good (or service) through
the value chain

Raw diamonds, for example,
are sold at a much lower margin than finished diamonds.

Question 24

Two types of activities that support value chains

Answer 24

1) Primary activities

2) Support activities

Question 25

1) Primary activities

Answer 25

activities in which value is
added directly to the product. In our example above, shipping raw
materials, designing the tires, manufacturing the tires, shipping the
finished tires, and installing the tires are all primary activities. Each of
these primary activities adds value for the customer.

Question 26

2) Support activities

Answer 26

Support activities add value only indirectly. For example, nobody buys a
tire because a company has a great payroll system.
But a company could
not run a factory without the ability to pay its workers.

Question 27

An organization’s strategy reflects its

Answer 27

goals and objectives

Question 28

company’s

strategy is influenced by

Answer 28

the competitive structure of the company’s

industry.

Question 29

a company’s information systems strategy

should support, or be aligned with

Answer 29

the overall company strategy

Question 30

Organizational strategy begins with

Answer 30

an assessment of the fundamental

characteristics and structure of an industry

Question 31

Fives forces model

Answer 31

A model proposed by Michael Porter that assesses industry characteristics and profitability by means of five competitive forces—bargaining power of suppliers, threat of substitutions, bargaining power of customers, rivalry among firms, and threat of new entrants.

Question 32

The intensity of each of the five forces determines:

Answer 32

1) the characteristics of the industry,
2) how profitable the industry is,
3) and how sustainable profitability will be.

Question 33

Competitive strategy

Answer 33

The strategy an organization chooses as the way it will succeed in its

industry. According to Michael Porter, there are four fundamental competitive strategies:
1) cost leadership across an industry
2) or within a particular industry segment,
3) and product differentiation across an industry
4) or within a particular industry segment.

Question 34

Two general types of technological innovations

Answer 34

1) Sustaining technologies

2) Disruptive technologies

Question 35

1) Sustaining technologies

Answer 35

changes in technology that maintain the
rate of improvement in customer value. For example, the vulcanization of
rubber allowed tire manufacturers to produce tires that facilitated faster
and more comfortable rides. This innovation improved the experience of
driving a car and helped sustain the original innovation.

Question 36

2) Disruptive technologies

Answer 36

introduce a very new package of
attributes to accepted mainstream products. In the music industry, for
example, the advent of the MP3 file format was a disruptive technology
because it offered the ability to store and play music through digital
devices.

Question 37

Diffusion of innovation

Answer 37

The process by which an innovation is communicated through certain
channels over time among the members of a social system.

Question 38

Rogers identified five stages through which

the diffusion of an innovation occurs

Answer 38

(1) knowledge,
(2) persuasion,
(3) decision,
(4) implementation, and
(5) confirmation

Question 39

(1) knowledge,

Answer 39

occurs
when you first hear about an innovation but lack specific information
about it. For example, you may have heard about a particular phone
application such as Slack, but you may not know much about it.

Question 40

(2) persuasion,

Answer 40

when you become interested in the innovation and

find out more about it.

Question 41

(3) decision,

Answer 41

Once you have collected enough information

Here, you consider the pros and cons of
adopting the innovation, and make a decision to adopt or reject it.

Question 42

(4) implementation

Answer 42

If you decide to pursue the innovation

you use the innovation and figure out whether to
continue using it or look for an even better way

Question 43

(5) confirmation

Answer 43

If you are happy, then

you reach the peaceful state of confirmation, where you use the innovation to its full potential.

Question 44

Organizations gain a competitive advantage by

Answer 44

1) creating new products or services,
2) by enhancing existing products or services,
3) and by differentiating their products and services from those of their competitors.

Question 45

Switching costs

Answer 45

The process of locking in customers by making it difficult or expensive for
them to switch to another product

Question 46

Another way to gain competitive advantage is to establish alliances with
other organizations

Answer 46

Such alliances create standards, promote product
awareness and needs, develop market size, reduce purchasing costs, and
provide other benefits

Question 47

Sustained competitive advantage

Answer 47

The development of people and procedures that are well supported by the underlying technology.

Question 48

Companies with sustainable competitive advantage work to integrate many activities:

Answer 48

marketing, customer service, product design,

and product delivery