Assessing greater use of digital technology

• What is digital technology?

  Electronic technology which uses binary numbers (1 or 0) to store, generate and process data.

  Contrasts with analogue technology which uses electronic signals to transmit data.

  Enables a greater volume of data to be stored and processed.
• Pressures to adopt digital technology:

  - Increased competition: as barriers to entry are reduced

  - More informed customers: as there is increased transparency, prices can be compared, reviews can be looked at

  - Change: the pace of technology moved extremely fast as it can be tough to keep up with change

  - Disruptive technology: firms have to decide either to adopt the new technology or stick to how they operate
• Use of digital tech to improve business performance:

  - E-commerce

  - Big Data

  - Data mining

  - Enterprise resource planning
• What is E-commerce?

  the buying and selling of goods and services and/or the transmission of funds and data, using an electronic network, such as the internet.
• What is M-commerce?


  the buying and selling of goods and services and/or the transmission of funds and data, using an electronic network that is accessed through a mobile device, such as a mobile phone or tablet.
• Benefits of e-commerce:


  - cost-effectiveness - cut certain costs, such as renting, more flexible workforce, more accurate forecast and levels of inventory

  - Flexibility - storing goods in one particular factory or warehouse and delivering them to customers in accordance with the customers - "Click and Collect" deliveries online

  - Increased demand - increase in customer base, any business now can enter global markets, useful for customers with mobility difficulties, saves time and money

  - Improved efficiency - easy to match production to demand, less waste and average unit costs fall

  - Greater profit margins - manufacturers can sell directly to customers, profit taken from manufacturer not retailer

  - Impact on marketing - can gain understanding of customer base, marketing more cost-effective
• Drawbacks of e-commerce:


  - Greater competition - more competitive due to lower barriers to entry

  - Costs of new tech - considerable expense in establishing the systems required for online selling, website design, search engine payment and distribution network

  - Lack of tactile experience - customers want to experience physical qualities of the product.
• Benefits of e-commerce to customers:

  - Wider choice of products

  - Greater convenience

  - Improved information

  - Lower price
• Drawbacks of e-commerce to customers:

  - Security - secure payments and details

  - Lack of tactile experiences

  - Impersonal

  - Faulty products - returns
• What is big data?

  Large pools of data that can be captured, communicated, aggregated, stored and analysed.

  Expressed in terms of high volume, high velocity and variety.
• Laney (2001) introduced the idea of defining "big data" in terms of the three "V"'s:


  - Volume: quantity of data being produced for business analysis; businesses commonly lack ability to interpret data meaning and had difficulties in storing high volumes of data. Costs of storing data is now lower and analytical software enables businesses to discover relationships and correlations arising from data.

  - Velocity: the speed of with which data can be recorded has increased dramatically; analytical software allows it to be interpreted quickly, increased usefulness of big data because much of the data is very up to date and conclusions based on this info is likely to be more reliable indicators

  - Variety: traditionally, businesses relied on structured numerical data in databases, with most of its data being based on output, sales levels and financial information; big data provides opportunities for more structured information, such as emails, qualitative customer feedback and social media comments.
• Uses of Big Data:

  - Analysis of operations: increased data on the performance of a businesses operations; the speed with which data can be gathered enables businesses to correct errors in their operations; register factors such as speed of production, accuracy of specifications and customer experiences, combined with data such as costs of manufacturing and levels of repeat purchasing; recognise financial benefits.

  - Marketing information: detailed info on customers so they can understand customer needs e.g. loyalty cards, websites, credit cards or other payment systems and customer feedback; see buying habits and brand loyalty.

  - Improving decision making: analysis of internal data used to assess effectiveness of new strategies and consequences; recognise strengths and minimise the impact of its weakness.

  - Improving security: analysis of customer records enables business to reduce risks of fraud or customer default; develop systems that are more secure and prevent the possibility of security breaches in the future.
• Issues of big data:

  - data protection legislation prohibits the use of data when the person has not agreed to its use: the level of data gathering is so high that it is difficult for businesses to be sure that this is in fact the case

  - reliability of data can be questionable: external sources of opinions, incorrect data leads to incorrect analysis and conclusions

  - Uses a lot of resources: each IT job created by big data likely to generate three more non IT jobs, only occur if businesses can be sure that benefits of big data outweigh costs of using it.
• Examples of users of big data:

  - Online retailers: website navigation, e.g. Amazon

  - Transport scheduling: airports, analysis of big data provided by computers which incorporate factors, such as localised weather conditions, have improved the accuracy of arrival times. PASSUR, estimates that airports have saved several million dolars a year through the system.

  - more personalised marketing: match availability of products to demand, based on improved observations of consumer behaviour.
• What is data mining?

  The process whereby a business transforms raw data into useful information, to support the various activities of the business.

  Based on statistical techniques, the volume of data now available is likely to lead to more certainty in conclusions and predictions that arise from analysing the data .

  It allows computer programmes to analyse random links, such as the impact of website colours and present the results of these analyses where there appears to be some logical cause to present.

  It can take many forms.
• Examples of data mining techniques:

  - Data counting and analysis: compile data that can be used to improve performance

  - Clustering/grouping: grouping similar data; broaden the number of possible clusters; correlate sales and constant updates

  - Correlation and regression analysis: improves efficiencies

  - Decision trees

  - Network analysis/critical path analysis: plan projects in the most efficient manner possible - vital business tool when customers require accurate information on how long a project will take to complete
• What is enterprise resource planning?

  Business use of its information systems so that it can automate and integrate its core business processes.

  Operates through business software that brings together the activities needed to satisfy customers orders and to monitor the performance of those activities so that they are done cost-effectively and to the customer's satisfaction

  Used within businesses, but where activities are outsourced, typically shared with suppliers and subcontractors so that they can monitor standards.
• Activities automated through ERP:


  - Order processing

  - Manufacturing planning and monitoring

  - Supply chain management

  - Inventory control

  - Sales and customer service

  - HRM

  - Financial outcome
• Benefits of ERP:


  - integration of all business processes so that all aspects of a business work towards the same goals

  - greater efficiency from automation

  - closer scrutiny of all activities

  - reporting
• Businesses use ERPs to:

  - Reduce costs

  - Business more accessible for other businesses to do business with

  - Efficiently manage future growth

  - Manage growth expectations in a co-ordinated manner

  - To improve customer service response times

  - To overcome difficulties in co-ordinating activities

  - To help innovation in order to increase added value
• Benefits of digital technology:

  - Higher living standards

  - Greater competition

  - Improved efficiency and reduced waste

  - Advances in communication

  - Better quality products and services

  - New products and materials

  - Advances in communication

  - Improved working environment
• Drawbacks of digital technology:

  - Stress - employees losing jobs or concerned by change

  - Lower morale

  - Costs of introducing and updating technology

  - Possible higher barriers to entry e.g. telecomms

  - Change in global competitive environment
• Impact on operations management:

  - Robotic production

  - Automation - production planning, computer-aided design and improved quality assurance

  - Inventory control - anticipates changes in stock levels more accurately, instant access to current stock, tills to stock, establish stock location

  Leads to:

  - Reduced costs and greater productivity

  - Improved quality

  - Better co-ordination

  - Better innovation

  - Higher levels of flexibility

  - Reduced waste
• Impact on marketing:


  - Reduce the need for marketing staff

  - Flexibility

  - Data can be stored cheaply and accessed quicker

  - Social media

  - Greater scope for added value through understanding customers

  - Cuts in marketing expenditure
• Impact on finance:


  - Finance monitoring - budgeting

  - Financial management of projects/activities - improvements in levels of data collected

  - Accounting ratios - more frequent analysis
• Impact on HR:


  - Job skills - new skills required

  - Job market - higher levels of control, monitoring and improved communication, data analysis

  - Multi-skilling - greater flexibility

  - Staff independence - away from office, teleworking

  - Communications - processed and amended internal info, two-way communication

  - Improved working conditions

  - Control of staff records

  However,

  - industrial relations from job losses