Class Update - Week 5

During our 4th week, we looked at an example of how to assess the expected duration of an advantage due to technology adoption by synthesizing material from Chapter 1 (technology adoption) and 2 (resource based view). Reviewing the discussion on industry structure and its effect on profitability formed the transition to the role of technological innovation adoption on competitive environment (Chapter 3). As I mentioned in the last class update, the special report in the Economist about the effect of financial technological innovation in the banking industry provides an excellent reading on this topic.

In our seminar, we looked at the ROA decomposition as a way of assessing drivers of a firm’s financial performance, and we looked at market to book values as a way of assessing its market valuation. Combining the two of them lets us see what element of ROA seem to drive market valuation.

Topics and Readings for Week 5

Theory: We will look at IT strategy, alignment between IT and business strategy, and payoffs from IT investments.

Read Chapter 3 and revisit the Whirlpool case

Seminar: We will use sentiment analytics as a way of assessing alignment between IT and business strategy.

Read the discussion on sentiment analytics (pp. 397-400) and review the data analytics practice problems 3.9.1 and 3.9.3.

Assignments for Week 5

The fourth online quiz will be a based on Chapter 3  and material from the seminar. The quiz will be available on Friday at 12:30 pm.

You must provide your data set to your auditor no later than June 5th.

Class Update - Week 4

During our 3rd week, we completed an exercise on strategic data analytics. Our objective was to first, develop a process for comparing average profitability in the utility industry between US and Canada; and second, examine whether any differences could be associated to differences of the industry structure. We used confidence intervals to compare the average profitability between the two countries, and we learned how to leverage  accounting data to develop proxies for barriers to entry and rivalry among existing competitors.  While our discussion was specific to an industry the same process (and R script) can be used to compare difference between US  and Canada for any other industry, or for comparing two industries within US or Canada.

Topics and Readings for Week 4

Theory: Our goal this week will be to finish the discussion on business strategy (chapter 2) and transition into IT strategy (Chapter 3). While relative performance has been the major theme in our first section of chapter 2, leveraging accounting data to make sense of business strategies, such as cost leadership and product differentiation, will be our focus in the second half.

The most recent issue of the Economist has a special section on the effect of technological innovations (fintech) in the finance industry. The article will serve as our  transition to IT strategy (Chapter 3) and relates to our first topic in Chapter 3, which is the effect of IT on industry structure.

Read pp. 56-69 from chapter 2, and pp. 82-102 from Chapter 3.

Seminar: We will evaluate a firm’s competitive position and market valuation (2.9.1 and 2.9.2) and make sense of business strategy with accounting data (2.9.4). Read section A.4 (pp. 362 - focus only on market to book value) and A.5 (pp. 364-5) from Appendix A.

Assignments for Week 4

The fourth online quiz will be a based on Chapter 2  and material from the seminar. The quiz will be available on Friday at 12:30 pm.

There is going to be a quiz on SharpScholar based on material from the Seminar of Week 3. The quiz will become available on Tuesday morning and you will have till Saturday 8:0o am to complete it.

Class update - Week 3

During our second week, we worked on the following topics: We used the keywords - innovation, adoption, spending, payoffs - to summarize the content of chapter 1. The logic behind these keywords is that an new technological innovations are introduced, firms decide whether and when to adopt. Adoption implies spending, which is expected to lead to positive payoffs. Discussion on payoffs served as our transition to Chapter 2 (business strategy) and more specifically the association between industry structure and profitability.

In the seminar we reviewed briefly the theory of confidence intervals, and looked at an example of how we can use confidence intervals to classify industry in terms of their IT spending.

There is no Lecture in Week 3 (Victoria Day). In the seminar, we are going to work on the creation of accounting based proxies for industry structure. More specifically, we are going to generate accounting proxies for rivalry among existing competitors and barriers to entry. We are going to use these proxies to contrast US and Canadian wireless market (problem 2.9.3).

Readings for Week 3

Read Chapter 2 (Read pp. 40-69). For the seminar you will need to read the following material from the Appendix: How to extract data from Compustat (pp. 355-357), how to calculate performance measures using Compustat data (pp. 358-361), and how to calculate proxies for barriers to entry and for rivalry among existing competitors with accounting data (pp. 368-377).

SharpScholar is a new tool for testing your knowledge and learning from each other.  SharpScholar shows as a hyperlink on the lower left corner on Learn. If you have not visited SharpScholar yet, please do this as soon as possible.

Assignments for Week 3

The third online quiz will be a based on Chapter 2 (pp. 40-56)  and material from the seminar. The quiz will be available on Friday at 12:30 pm.

New: SharpScholar based Quiz for material from the Seminar of Week 2 (WEEK 02: Seminar). I have added a set of 12 questions associated with the material from Week 2. The questions are similar to the numeric questions from the second online quiz. You can try to answer these questions multiple times and without a time limit. I will treat this as an additional quiz. If you want this to count, you will have to answer all 12 questions before Friday 8:0o am.

Enjoy the long weekend.

Class Update - Week 2

Our primary objective during the first week was to understand the value adding proposition of the course. We discussed patterns and trends in IT spending, and explored some of the issues that firms, such as WHR face, when they invest in IT. We leveraged a combination of theory (technology adoption theory) and analytics (statistical theory and R) to demonstrate the value of data analytics in an accounting and finance setting.

Topics and Readings for Week 2

Lecture: When firms invest in IT, they expect to achieve certain objectives. The justification, possible manifestations, and expected payoffs of IT spending are the remaining topics that we will discuss in the rest of chapter 1. (Read pp. 25-29)

Firms invest in IT hoping to increase sales, reduce costs, or both. While the argument sounds reasonable, early empirical evidence showed that this expected positive association between IT spending and firm performance should not be taken for granted. Maximizing the payoffs from IT investment requires planning and the development of a vision regarding the role of IT in the organization (IT strategy) that is aligned with the firm's business strategy. We will start exploring strategic management related topics and business strategy in Chapter 2 (Read pp. 40-69)

Seminar: We will compare IT spending patterns between two industries over time (problem 1.9.1),  and leverage Compustat data to generate estimates of IT spending at WHR (problem  1.9.2).

Assignments/Quizzes

The second online quiz will be a based on Chapter 1  and material from the seminar. The quiz will be available on Friday at 12:30 pm.