Digital firm

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The Digital Firm is a kind of organization that has enabled core business relationships through digital networks In these digital networks are supported by enterprise class technology platforms that have been leveraged within an organization to support critical business functions and services. Some examples of these technology platforms are Customer Relationship Management (CRM), Supply Chain Management (SCM), Enterprise Resource Planning (ERP), Knowledge Management System (KMS), Enterprise Content Management (ECM), and Warehouse Management System (WMS) among others. The purpose of these technology platforms is to digitally enable seamless integration and information exchange within the organization to employees and outside the organization to customers, suppliers, and other business partners.

Contents

History

Origin of "The Digital Firm"

The term "Digital Firm" originated, as a concept in a series of Management Information Systems (MIS) books authored by Kenneth C. Laudon. [1] It provides a new way to describe organizations that operate differently than the traditional brick and mortar business as a result of broad sweeping changes in technology and global markets. Digital firms place an emphasis on the digitization of business processes and services through sophisticated technology and information systems. These information systems create opportunities for digital firms to decentralize operations, accelerate market readiness and responsiveness, enhance customer interactions, as well as increase efficiencies across a variety of business functions.

Acceleration of technology adoption

Technology adoption has been increasing as digital firms continually look to achieve greater levels cost savings, competitive advantage, and operational performance optimization. As organizations adopt technology, the internal appetite for additional technologies increases and in some cases accelerates. [2] This acceleration of technology adoption by digital firms creates a "digital divide". [2] Emerging technology is absorbed at varying rates across organizations. This technology divergence can affect competitive dynamics in the market place between firms that achieve operational benefits from the technology and firms which have yet to adapt.

While the growth of new technology consumption is not uniform across organizations, the trend for business-driven investment in technology across all markets has and continues to increase. During the span of 1990 to 2006, the gross U.S. domestic investment in information and communications technology, as measured by the U.S. Census Bureau, increased by 170%. [3]

The market for Enterprise Resource Planning (ERP) systems and other packaged applications started to grow substantially during the 90's to the point that the ERP market alone accounts for approximately $25 billion. [4] According to surveys conducted in 2002, nearly "75% of global Fortune 1000 firms had implemented SAP’s ERP suite". [4]

Many businesses are aware of the need to further digitalize in the post-COVID-19 climate, but those in less developed areas have traditionally been slower to do so. [5] [6]

Advantages

Through digital networks and information systems, the digital firm is able to operate core business services and functions continuously and more efficiently. This digital enablement of business processes creates highly dynamic information systems allowing for more efficient and productive management of an organization.

According to the European Commission, as of 2022, across all economic categories, digital enterprises have been more likely than their non-digital counterparts to increase employment. [7] Manufacturing (33%) or infrastructure (30%) are the two industries in Europe with the most digital and environmentally friendly businesses. [8]

Additionally, digital enablement of core business functions and services provides an organization with opportunities to:

Effects on organizational performance

Technology and information systems serve many critical roles in a digital firm by providing technology-driven capabilities that increase operational performance. For example, digital networks and information systems allow organizations to connect and integrate supply chains in ways that are real-time, uninterrupted and highly responsive to market conditions.

Another example of an information system that can increase an organization's performance awareness and management capabilities is a Real-Time Business Intelligence (RTBI) system. A RTBI system can provide a highly responsive and strategic decision support platform for an organization to analyze operational events as they occur. RTBI systems often work closely with Organizational Risk Management (ORM) systems in this capacity to increase capabilities around monitoring operational performance and assessing operational risks. These types of information systems can increase an organization's capabilities to effectively manage performance and productivity.

The three main enterprise information systems that can positively affect an organization's performance and productivity are:

Enterprise Resource Planning (ERP)

ERP deployments can be complex and require a significant shift in business operations for an organization but the benefits can be substantial.

After implementation of an ERP system within an organization there are measurable performance and productivity gains that can be directly correlated to the ERP system go-live event. [4] This study conducted a detailed analysis of the ERP data produced and found that there was a direct causal relationship between ERP systems and performance gains in an organization. [4]

Organizations that deploy ERP systems typically, based on performance and productivity gains, also implement both of the following enterprise platforms as well. [4]

Customer Relationship Management (CRM)

Organizations leverage CRM systems to improve the overall management of their relationships with customers. CRM systems operate as enterprise platforms that provide digital firms with opportunities to closely manage all aspects of interactions with customers through customer-oriented business processes. [11]

Organizations which implement CRM systems may encounter some lag time until the CRM productivity affects are fully realized in the firm based on studies. [11] However, the lag effects are difficult to measure and based in part on the organization's ability to leverage the new CRM system and adapt to the changes in business operations as a result. [11]

Supply Chain Management (SCM)

Studies of organizations that implemented SCM systems to improve supply chain management capabilities found that those systems had a significant impact on productivity and performance within the organization. [4] Additionally, the implementation of SCM and CRM systems differed from an ERP implementation in that organizational performance could be directly correlated "with both the initial purchase and go-live event". [4]

SCM and CRM systems are often viewed as "extended enterprise systems" due to the way that they integrate with ERP systems and the benefits that they bring to organizations. [4]


See also

Related Research Articles

Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information.

<span class="mw-page-title-main">Enterprise resource planning</span> Corporate task of optimizing the existing resources in a company

Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities. ERP systems can be local based or cloud-based. Cloud-based applications have grown in recent years due to information being readily available from any location with Internet access. Traditional on-premises ERP systems are now considered legacy technology.

<span class="mw-page-title-main">Supply chain management</span> Management of the flow of goods and services

In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels so that the raw materials can be converted into a finished product and delivered to the end customer. A more narrow definition of the supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally".This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

A management information system (MIS) is an information system used for decision-making, and for the coordination, control, analysis, and visualization of information in an organization. The study of the management information systems involves people, processes and technology in an organizational context.

Marketing management is the organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and activities.

Salesforce management systems are information systems used in customer relationship management (CRM) marketing and management that help automate some sales and sales force management functions. They are often combined with a marketing information system, in which case they are often called CRM systems.

Business performance management (BPM), also known as corporate performance management (CPM) and enterprise performance management (EPM),) is a set of performance management and analytic processes that enables the management of an organization's performance to achieve one or more pre-selected goals. Gartner retired the concept of "CPM" and reclassified it as "financial planning and analysis (FP&A)," and "financial close" to reflect two concepts: increased focus on planning and the emergence of a new category of solutions supporting the management of the financial close.

Enterprise software, also known as enterprise application software (EAS), is computer software used to satisfy the needs of an organization rather than individual users. Such organizations include businesses, schools, interest-based user groups, clubs, charities, and governments. Enterprise software is an integral part of a (computer-based) information system; a collection of such software is called an enterprise system. These systems handle a number of operations in an organization to enhance the business and management reporting tasks. The systems must process the information at a relatively high speed and can be deployed across a variety of networks.

Oracle Applications comprise the applications software or business software of the Oracle Corporation both in the cloud and on-premises. The term refers to the non-database and non-middleware parts. The suite of applications includes enterprise resource planning, enterprise performance management, supply chain & manufacturing, human capital management, and advertising and customer experience.

A federal enterprise architecture framework (FEAF) is the U.S. reference enterprise architecture of a federal government. It provides a common approach for the integration of strategic, business and technology management as part of organization design and performance improvement.

The eCRM or electronic customer relationship management coined by Oscar Gomes encompasses all standard CRM functions with the use of the net environment i.e., intranet, extranet and internet. Electronic CRM concerns all forms of managing relationships with customers through the use of information technology (IT).

Core banking is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices.

<span class="mw-page-title-main">NetSuite</span> Technology company

NetSuite Inc. is an American cloud-based enterprise software company that provides products and services tailored for small and medium-sized businesses (SMBs) including accounting and financial management, customer relationship management, inventory management, human capital management, payroll, procurement, project management and e-commerce software. NetSuite was founded in 1998 with headquarters in Austin, Texas. The company is widely seen as the first cloud computing software company, with its founding pre-dating that of Salesforce.com by about a month. Oracle Corporation acquired NetSuite for approximately US$9.3 billion in November 2016. The Oracle NetSuite Global Business Unit is managed by Executive Vice President Evan Goldberg as "Oracle’s Cloud ERP for Small and Mid-sized Enterprises with the ability to scale to Fortune 500 firms."

Oracle Fusion Applications (OFA) are a suite of applications built on Oracle Cloud that include cloud-based applications for enterprise resource planning (ERP), enterprise performance management (EPM), supply chain management and manufacturing (SCM), human capital management (HCM), and customer experience (CX).

Real-time enterprise is a concept in business systems design focused on ensuring organisational responsiveness that was popularised in the first decade of the 21st century. It is also referred to as on-demand enterprise. Such an enterprise must be able to fulfill orders as soon as they are needed, and current information is available within a company at all times. This is achieved through the use of integrated systems including ERP, CRM and SCM.

Capability management is the approach to the management of an organization, typically a business organization or firm, based on the "theory of the firm" as a collection of capabilities that may be exercised to earn revenues in the marketplace and compete with other firms in the industry. Capability management seeks to manage the stock of capabilities within the firm to ensure its position in the industry and its ongoing profitability and survival.

Yonyou is principally engaged in the development and distribution of enterprise management software and cloud services.

Adaxa Suite is a fully integrated Open Source Enterprise Resource Planning (ERP) Suite.

<span class="mw-page-title-main">Business Information Technology Institute</span>

The BIT – Business Information Technology Institute in Mannheim, Germany is a computer science and information systems research institute and affiliated with University of Mannheim. Under the leadership of Franz Steffens, president of the Institute, BIT employs a staff of about 20 researchers. The BIT was established in Mannheim in 2007 and is still headquartered there. BIT is organized as a research group within the University of Mannheim and belongs to the Mannheim School of Computer Science and Mathematics. The institute addresses standard business application software and perceives itself as a mediator between science and enterprise practice.

Microsoft Dynamics 365 is a product line of enterprise resource planning (ERP) and customer relationship management (CRM) intelligent business applications announced by Microsoft in July 2016 and released on November 1, 2016. It was formerly Microsoft Dynamics.

References

  1. 1 2 3 Laudon, Kenneth C, and Jane P Laudon (2009). Management Information Systems Managing The Digital Firm. Upper Saddle River, New Jersey: Prentice Hall. ISBN   978-0-13-033066-6.
  2. 1 2 Koellinger, Philipp, and Christian Schade "Acceleration of Technology Adoption within Firms: Empirical Evidence from the Diffusion of E-business Technologies", http://opim.wharton.upenn.edu/risk/library/2008SchadeKoellinger.pdf
  3. ↑ "The 2012 Statistical Abstract: Information and Communications Technology (ICT) Equipment and Computer Software Expenditures" U.S. Census Bureau, https://www.census.gov/compendia/statab/2012/tables/12s0783.pdf
  4. 1 2 3 4 5 6 7 8 9 Aral, Sinan, Erik Brynjolfsson, and D.J. Wu. "Which came first, IT or productivity? A virtuous cycle of investment and use in enterprise systems" https://fridaycrm.com/blog/which-came-first-it-or-productivity-a-virtuous-cycle-of-investment-and-use-in-enterprise-systems/
  5. ↑ "Digital adoption through COVID-19 and beyond | McKinsey". www.mckinsey.com. Retrieved 2022-08-16.
  6. ↑ "Embracing digital: from survival to thriving in the post-COVID-19 world". Deloitte Netherlands (in Dutch). Retrieved 2022-08-16.
  7. ↑ "Digital skills and jobs | Shaping Europe's digital future". digital-strategy.ec.europa.eu. Retrieved 2022-08-16.
  8. ↑ "Regional Cohesion in Europe 2021-2022". EIB.org. Retrieved 2022-08-09.
  9. 1 2 Bartel, A.; Ichniowski, C.; Shaw, K. (2007). "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills". Quarterly Journal of Economics . 122 (4): 1721–1758. doi:10.1162/qjec.2007.122.4.1721.
  10. ↑ Weill, Peter, and Marianne Broadbent (1998). Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology. Harvard Business Review Press. ISBN   978-0-87584-830-3.
  11. 1 2 3 4 Dong, Shutao, Kevin Zhu. "The Business Value of CRM Systems: Productivity, Profitability, and Time Lag" http://digital.mit.edu/wise2006/papers/5b-2_crm%20productivity%20%20profitability_for%20wise%202006.pdf
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