DVD Direct: Information Systems

INTRODUCTION

DVD Direct is an entirely Web-oriented movie rental business. Unlike traditional movie rental businesses like Blockbuster, DVD Direct conducts all business over the Web at its Web storefront. For a monthly fee, their customers are able to order up to three movies at a time from a listing posted at the company Web site. The movies the customers select are delivered to them on DVD disks by mail within three working days. After viewing, customers return one or more disks by mail. They are allowed to keep the disks as long as they wish but can never have more than three disks in their possession at one time. Although in operation for only three years, DVD Direct has experienced rapid growth. To help manage and to accelerate this growth, the company has just hired Alice, a recent college graduate. Let's follow Alice on her first day at DVD Direct which begins with a meeting with Bob, the vice president of Marketing.

ALICE'S FIRST ASSIGNMENT

Bob: Oh, hi Alice . . . come on in! I know that we were scheduled for an orientation meeting this morning. But I'm afraid that will have to wait. There is an important fire to put out today. Let me introduce you to one of your coworkers. This is Jamal.

Alice and Jamal exchange hellos and Bob motions Alice to take one of the chairs across from his desk as he speaks.

12-1.jpg “She said she was concerned about how our members were connecting to our Web site.”

Bob: I just came back from a meeting with Carol, our CEO. While we were discussing the Monthly Membership Report, she said she was concerned about how our members were connecting to our Web site. This really caught me off guard! Our membership growth has exceeded projections and I had assumed that our meeting was to discuss how to handle all the new members. She requested that her Morning Report be modified to include the percentage of our customers who use high bandwidth, and she wants us to analyze the changes in low bandwidth customers versus high bandwidth customers over the past year.

Bob: Jamal, here is the Monthly Membership Report. I'd like you to review it and then create two profiles. One profile will describe our members who use low bandwidth. The other profile will be for our members who use high bandwidth. I'm interested in any differences or unique characteristics you can uncover.

Bob removes the cover page, hands the rest of the report to Jamal, and hands the cover page to Alice.

Bob: Alice, I want you to focus on these three values. Start by locating their source. Then obtain data for low and high bandwidth members for the past twelve months and prepare a graph comparing the two. Start by talking with Dennis. He is the southwest marketing manager and his team developed the Monthly Membership Report.

12-2.jpg “Focus on these values.”

Bob: Jamal, before you start your profiles, please introduce Alice to Dennis. On the way to his office, give Alice a rundown on our corporate structure. Okay, guys, get to work! Before 4:00 today, I want you to present your findings to Carol!

Alice and Jamal head toward Dennis's office.

Jamal: This is a hectic way to start your first day, but it should give you an overall view of the company.

DEPARTMENTS

DVD Direct has five departments: Accounting, Marketing, Production, Human Resources, and Research.

Jamal: We are in Marketing, which focuses on promoting and selling DVD Direct products. Production is in another building. The responsibility of production at DVD Direct is to ship, receive, and warehouse the DVDs. You dealt with Human Resources when you went through the interview process and filled out the paperwork to work at DVD Direct. Research looks into new technologies. I've heard that they are exploring the feasibility of delivering movies over the Web using streaming video technology. Accounting handles billing customers and creating the yearly shareholders report, among other responsibilities.

12-2a.jpg

Management Levels

Jamal: Each department has different management levels. Bob is one of DVD Direct's top managers. As Vice President of Marketing, he determines long range plans and sets the direction for marketing. We're on our way to see Dennis, who is middle marketing manager. He takes the long-range goals set by Bob and formulates shorter objectives such as monthly sales quotas for his southwest regional supervisors. The regional supervisors take care of day-to- day operational matters, like contacting new potential customers and ensuring that our current customers are happy.

12-2b.jpg

Alice and Jamal arrive at an open door to Dennis's office and Jamal knocks on the door frame. Looking up, Dennis asks them to come in and have a seat.

Jamal: Actually, Dennis, I have to head back. I just wanted to introduce you to our new marketing analyst, Alice. It's her first day and she has some questions about the bandwidth data in the Monthly Membership Report.

Dennis: Welcome, Alice. I've heard about Carol's interest in these figures. I don't understand why Carol is so concerned. Membership is up and everything seems positive. If things keep going this well, we will be one of the few Internet companies to post a profit this year. I'm confident in the accuracy of the numbers. They were compiled by Elizabeth, one of my best supervisors, and her team's work is always first rate.

Alice: So you didn't compile these numbers yourself?

12-3.jpg “So you didn't compile these numbers yourself?”

Dennis: Oh no, I rarely take part in the actual gathering of data anymore. When I was promoted to middle management, my job became more about communication and I leave much of the detail work for my team supervisors. When I was a supervisor, my communications were pretty much limited to my team and my boss. Now that I am a middle manager, I communicate with supervisors below me, middle managers from other departments, and with top management. Life has gotten more complicated since my old supervisory days when I only had to worry about my immediate manager. While almost all of my information comes from within the organization, top managers, like Bob, also use external information. For example, last week he and Carol attended the European Video Perspectives (EVEP) conference to learn how video is being used worldwide.

12-3a.jpg

Alice: That's interesting! Well, I'll need some advice about the Monthly Membership Report. From what you say it sounds like I need to talk to Elizabeth because it's at the supervisor level where the data is actually collected. Does that sound right? Do you think Elizabeth can make time in her schedule to help me track down these numbers?

Dennis: Whenever the CEO wants something, we'll make the time. Elizabeth is just down the hall on the left. I'll give her a call and tell her that you're on your way.

MANAGEMENT INFORMATION SYSTEMS AT DVD DIRECT

Alice: Hi Elizabeth, I'm Alice.

Elizabeth: Hi Alice, nice to meet you. Dennis just called and said you had some questions about the bandwidth data in the Monthly Membership Report. I did it about three months ago. When I wrote it I had no idea it would cause such a stir. Even looking at the numbers now, nothing seems particularly out of the ordinary. I wonder why Carol is so concerned.

Alice: You wrote this report three months ago? But the information in the report includes data from this month and last month.

She hands Elizabeth the cover page of the report.

Elizabeth: Well I didn't actually write this report. I determined the format and the formulas that this report is based on. This particular report was created by a program that is part of our MIS or Management Information System. The program is run at the end of each month and applies my formulas to the new monthly data to produce the report. To locate the specific formulas you are interested in, all we have to do is look at the program that generated the report. Elizabeth turns to her computer and retrieves the MIS program. After quickly reviewing the program code, she points to her screen.

Elizabeth: There they are. The formulas use data from the production TPS database.

TRANSACTION PROCESSING SYSTEMS AT DVD DIRECT

Alice: What's a TPS?

Elizabeth: A TPS is a Transaction Processing System. It is a collection of programs that keep track of routine operations and record those operations in a database. The production department's TPS records what movies have been ordered, when they are sent out, and when they are returned. For example, if you needed a report on what movies are available right now, the TPS could provide you with that information. It can also provide the bandwidth data for the past several months that you're interested in. Go see Frank, a supervisor in production. He will help you locate the data you need. His office is located in Building B. Tell him I sent you.

Alice walks down to Building B where all the DVDs for DVD Direct are received, warehoused, packaged, and shipped. Although she knows that DVD Direct ships several thousand DVDs a day, she is still surprised at the size of the operation. Workers scan incoming DVDs into the Transaction Processing System with handheld scanners, while others scan outgoing DVDs. After asking around, Alice finally locates Frank in his office on the second floor.

Alice: Excuse me, Frank? I'm new here. My name's Alice. Elizabeth said you'd help me find some data.

Frank: Hello there, Alice. Elizabeth? Sure thing!

Alice: I'm helping my boss Bob prepare something for Carol for this afternoon. She is looking for some historical data for low and high bandwidth customers for the past year. I'm tracking down the source of data used to calculate these figures here.

She hands Frank the cover page from the Monthly Membership Report and a printout of the formulas that Elizabeth identified.

Alice: As you can see, the formulas reference data in the production database captured by your department's TPS. I was hoping that you could use the TPS to analyze the bandwidths used by new customers over the past twelve months.

For a moment Frank looks at the cover page and the formulas and chews on his pencil.

Frank: So this is the report everyone is talking about. I'm afraid the TPS won't help with the analysis. The TPS stores data on day-to-day activity and current inventory, but it doesn't analyze trends.

Alice: So you don't think we can get the data for the last twelve months?

Frank: We can get the data. Our TPS collects that data automatically from our Web site whenever an order is placed. However, the TPS does not analyze data.

Alice: Can't I use the MIS to analyze the data?

Frank: Not really. Our MIS is designed to produce standardized reports. I suppose you could create an MIS program to analyze the bandwidth data, but that would require more time and money than is necessary. Besides, you only need to do this analysis once . . . not every month. The best way is to use a DSS.

DECISION SUPPORT SYSTEMS

Alice: What's a DSS?

Frank: A DSS or Decision Support System is a fancy name for a collection of tools designed to analyze data. Unlike an MIS which produces standardized reports, a DSS is a more flexible tool designed to handle unexpected and nonrecurring types of information needs.

Alice: That sounds pretty complicated.

Frank: Not complicated at all. Are you familiar with Excel? It's a DSS and contains all the DSS tools that you'll need for this project.

Alice: Great! I'm pretty good with Excel. But where do I get the data.

Frank: I can download the data you need from the TPS database and save it for you in an Excel file.

Frank turns to his computer, accesses the database, extracts the necessary data, and saves it onto a disk. Frank hands the disk to Alice.

Frank: Here it is. Good luck!

Alice thanks Frank, returns to her new office, and uses Excel to create a chart comparing the number of low and high bandwidth customers over the past year.

12-4.jpg

EXECUTIVE SUPPORT SYSTEMS

Alice returns to Bob's office to report her findings.

Bob: Alice, glad to see you. How is the analysis going?

Alice: Hi Bob! I think I have what you need, I hope. Here is the data for the last twelve months and a chart showing the trend of low versus high bandwidth customers. I've also calculated the current percentage of our members who are high bandwidth users.

Bob: Excellent work . . . now, go down to computing services and have them add this information to Carol's ESS and then go straight to Carol's office and give her a quick rundown on the additions to the ESS.

12-5.jpg “How is the analysis going?”

Alice: ESS?

Bob: Of course, I forgot you haven't been given the full tour. An ESS is an Executive Support System that generates a customized and very concise daily report for a particular top-level manager. If the manager wants additional detail, it is readily available. In this case, Carol's ESS will present the current percentage of high bandwidth customers along with other information. More detailed information will be available at a click of the mouse.

12-5a.jpg
Opening screen for Carol's ESS

12-5b.jpg
A graphic representation of Marketing's Membership Bandwidth Ratio

12-5c.jpg Alice: I'll go down to computing services right now and request these changes for Carol's ESS.

ALICE MEETS WITH THE CEO

After visiting computing services, Alice goes to the CEO's office. Just as she arrives, the CEO's door opens and Jamal walks out, followed by Carol.

Carol: Jamal, thanks for these profiles. They'll give me a lot to think about. [Carol turns to Alice.] You must be our newest employee.

Alice: Yes, I'm Alice, your new marketing analyst.

Carol: Well come on in and show me what you've got.

At her desk Carol reviews Alice's data. Initially nervous talking to the CEO, Alice quickly warms to Carol and ventures to ask the question that everyone wants answered.

Alice: So what is it about the bandwidth data in the Monthly Membership Report that has caused you such concern? By everyone's estimate that I've talked to, membership is increasing and everything seems to be going better than anticipated. What do these numbers tell you that they don't tell them?

Carol: Right now everything does seem to be going well. But I'm concerned about our future, Alice, and I think I see evidence of upcoming problems. In this month's issue of Video Trends in America, an article discussed the rapid growth of high bandwidth users.

Carol hands Alice a graph that indicates that more and more Internet users are switching from low bandwidth to high bandwidth.

Carol: How would you expect this trend in higher bandwidth users to impact us?

Alice: I guess I would expect to see a similar increase in high bandwidth customers. However, my analysis shows that the number of our high bandwidth customers has remained fairly constant.

Carol: Exactly. It would seem that high bandwidth users don't take much interest in our services. Not only that. According to the results that Jamal compiled, 70 percent of our customers who switch from low bandwidth to high bandwidth connections cancel their membership with us! Why do you suppose that is happening?

Alice: There are several possibilities, but I am at a loss as to why a faster Internet connection would reduce a person's interest in renting our movies.

Carol: But that is exactly what is happening. As more people become high bandwidth users, we can expect to lose more and more members. Can you think of any reason why faster Internet connections would lead to fewer DVD rentals?

Alice: Well, perhaps high bandwidth users prefer to immediately download movies from the Internet rather than wait for them to be delivered by mail.

12-6.jpg “We may be seeing the beginning of the end of our present way of doing business.”

Carol: Exactly! We may be seeing the beginning of the end of our present way of doing business. It may take two or three years, but I expect that the number of movies delivered via the Internet will greatly exceed those delivered by mail. And if we don't start providing movies over the Internet, we'll continue to lose our high bandwidth customers. In fact, recently I directed our Research people to start work on the feasibility of delivering movies via streaming video over the Web. I suspect that our competitors are already exploring the feasibility of Internet delivery. If we don't adapt and adapt fast, we just might go out of business. We are going to have to make a radical shift in the way we do business here. You've joined our company at an exciting time. There are some big changes on the horizon. Welcome to the new DVD Direct!

Return to the DVD Direct menu