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1 Explain why information systems are so essential in business today.
Learning Objectives Understanding the effects of information systems on business and their relationship to globalization. Explain why information systems are so essential in business today. Define an information system and describe its management, organization, and technology components. Students may not know exactly what is meant by globalization or may have an incomplete understanding of the term. You might ask students what they think it means. Potential answers could include: reduction of economic and cultural advantages of developed countries, increased number of companies with operations in multiple countries worldwide, and increased reliance on imports and exports of goods (and jobs). Globalization will be discussed in later slides as well.

2 Learning Objectives (cont.)
Define complementary assets and explain how they ensure that information systems provide genuine value to an organization. Describe the different academic disciplines used to study information systems and explain how each contributes to our understanding of them. Explain what is meant by a sociotechnical systems perspective. The sociotechnical systems perspective holds that optimal organizational performance is achieved by jointly optimizing the social and technical systems used in production. This helps to avoid the mistaken idea that information systems consist of computers or technology alone. You could ask students at this point whether they feel that information systems are nothing more than technology, and revisit the point later in the chapter when the topic is discussed in more detail.

3 The Role of Information Systems in Business Today
How information systems are transforming business Increase in wireless technology use, Web sites Increased business use of Web 2.0 technologies Cloud computing, mobile digital platform allow more distributed work, decision-making, and collaboration Globalization opportunities Internet has drastically reduced costs of operating on global scale Presents both challenges and opportunities New federal security and accounting laws that require companies to store for 5 years have spurred the growth of digital information, which is increasing at a rate of 5 exabytes annually. Students may be surprised to learn that 5 exabytes of data is equivalent to 37,000 Libraries of Congress. Ask the students to think about what difference it makes to the world economy, or the U.S. economy, if global operations become much less expensive? What are the challenges to American suppliers of goods and services, and to labor?

4 The Role of Information Systems in Business Today
In the emerging, fully digital firm Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks Key corporate assets are managed digitally Digital firms offer greater flexibility in organization and management Time shifting, space shifting Time shifting and space shifting are connected to globalization. You could ask students to explain why a digital firm is more likely to benefit from globalization than a traditional firm. One answer is that by allowing business to be conducted at any time (time shifting) and any place (space shifting), digital firms are ideally suited for global operations which take place in remote locations and very different time zones.

5 The Role of Information Systems in Business Today
Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals Business firms invest heavily in information systems to achieve six strategic business objectives: Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival In the Yankee Stadium opening case, the UPS Interactive Session later in the chapter, and with many of the Interactive Sessions and opening cases in the book, it will be useful to ask students to explain how various information systems succeeded or failed in achieving the six strategic business objectives. For example, in the Yankee Stadium case, information systems helped the Yankees achieve greater customer intimacy and offer new services. You might ask the students to think about some other business objectives and think about how IT might help firms achieve them. For instance, speed to market is very important to firms introducing new products. How can IT help achieve that objective?

6 The Role of Information Systems in Business Today
Operational excellence: Improvement of efficiency to attain higher profitability Information systems, technology an important tool in achieving greater efficiency and productivity Walmart’s RetailLink system links suppliers to stores for superior replenishment system Walmart is the most efficient retailer in the industry and exemplifies operational excellence. You could ask students to name other businesses that they believe to exhibit a high level of operational excellence. Do customers perceive operational excellence? Does it make a difference for customer purchasing? What Web sites strike students as really excellent in terms of customer service? If you have a podium computer, you might want to visit the Walmart site and the Amazon site to compare them in terms of ease of use.

7 The Role of Information Systems in Business Today
New products, services, and business models: Business model: describes how company produces, delivers, and sells product or service to create wealth Information systems and technology a major enabling tool for new products, services, business models Examples: Apple’s iPod, iTunes, iPhone, iPad, Google’s Android OS, and Netflix You could ask students to name other new products or business models that they’ve encountered and how they might relate to new information systems or new technology. One way to encourage participation is ask students to help you list on the blackboard some really interesting recent digital product innovations. Discussing “green technologies” like wind, solar, and hybrid vehicles is always fun. In this context, what role will IT be playing in the development of these technologies?

8 The Role of Information Systems in Business Today
Customer and supplier intimacy: Serving customers well leads to customers returning, which raises revenues and profits Example: High-end hotels that use computers to track customer preferences and use to monitor and customize environment Intimacy with suppliers allows them to provide vital inputs, which lowers costs Example: J.C.Penney’s information system which links sales records to contract manufacturer You could ask students what types of companies might rely more on customer and supplier intimacy than others and which companies they feel have served them exceptionally well. Ask the students to identify online sites that achieve a high degree of customer intimacy. Sites to visit would include Netflix, Amazon, and other sites which have recommender systems to suggest purchase ideas to consumers.

9 The Role of Information Systems in Business Today
Improved decision making Without accurate information: Managers must use forecasts, best guesses, luck Leads to: Overproduction, underproduction of goods and services Misallocation of resources Poor response times Poor outcomes raise costs, lose customers Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. You could ask students if they have ever been recipients of exceptional service from a company made possible by improved decision-making and whether or not information systems contributed to that level of service. For example, perhaps they had a power outage and it took a very short (or very long) time for the utility company to correct the error.

10 The Role of Information Systems in Business Today
Operational excellence: Improvement of efficiency to attain higher profitability New products, services, and business models: Enabled by technology Customer and supplier intimacy: Serving customers raises revenues and profits Better communication with suppliers lowers costs Improved decision making More accurate data leads to better decisions This slide is a recap of the previous four slides. You might ask students which business objective they believe to be most critical to the success of a business, or whether they all carry equal weight.

11 The Role of Information Systems in Business Today
Competitive advantage Delivering better performance Charging less for superior products Responding to customers and suppliers in real time Examples: Apple, Walmart, UPS Emphasize that achieving any of the previous four business objectives represents the achievement of a competitive advantage as well.

12 The Role of Information Systems in Business Today
Survival Information technologies as necessity of business May be: Industry-level changes, e.g. Citibank’s introduction of ATMs Governmental regulations requiring record- keeping Examples: Toxic Substances Control Act, Sarbanes- Oxley Act Ask students if they can name any examples of companies that failed to survive due to unwillingness or inability to update their information systems. The Sarbanes-Oxley Act requires that public firms keep all data, including , on record for 5 years. You could ask students if they appreciate why information systems would be useful towards meeting the standards imposed by this legislation.

13 The Role of Information Systems in Business Today
The Interdependence Between Organizations and Information Technology The basic point of this graphic is that in order to achieve its business objectives, a firm will need a significant investment in IT. Going the other direction (from right to left), having a significant IT platform can lead to changes in business objectives and strategies. Emphasize the two-way nature of this relationship. Businesses rely on information systems to help them achieve their goals; a business without adequate information systems will inevitably fall short. But information systems are also products of the businesses that use them. Businesses shape their information systems and information systems shape businesses. Figure 1.2 In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do.

14 Perspectives on Information Systems
Set of interrelated components Collect, process, store, and distribute information Support decision making, coordination, and control Information vs. data Data are streams of raw facts Information is data shaped into meaningful form These are some basic background understandings needed for the course. A system refers to a set of components that work together (hopefully). Can students think of systems other than information systems? The point of an information system is to make sense out all the confusing data in the environment, and put the data into some kind of order. Information is an ordered set of data that you can understand and act on. If the students want to get a sense of raw data, show them a stock ticker on a Web financial site (or Yahoo/finance). Ask them to tell you what it means? Then show them the current value of the Dow Jones Industrial Index and the S&P 500, and its daily trend (or for that matter switch to a 1 year view of either of these indexes). Looking at the indexes students can quickly get a grasp of whether the market is up or down, and they could act on that information.

15 Perspectives on Information Systems
Data and Information Emphasize the distinction between information and data. You could, for example, ask several students to list their ages and write the numbers on one side of the board – then you could calculate the average age of those students on the other side, oldest student, youngest student, and so forth, to illustrate the difference between raw data and meaningful information. Figure 1.3 Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory.

16 Perspectives on Information Systems
Three activities of information systems produce information organizations need Input: Captures raw data from organization or external environment Processing: Converts raw data into meaningful form Output: Transfers processed information to people or activities that use it Use an example similar to the one given in the previous slide to illustrate the three activities involved in the function of an information system. Continuing with that example, the process of asking students their age would represent input, calculating the average age and determining the oldest and youngest age would represent processing, and writing that information on the board would represent output.

17 Perspectives on Information Systems
Management dimension of information systems Managers set organizational strategy for responding to business challenges In addition, managers must act creatively: Creation of new products and services Occasionally re-creating the organization How might information systems assist managers in the development of new products and services? What is meant by re-creating the organization? Why do organizations need to be continually re-created? The answer is that they quickly become obsolete unless they continue to change. Ask students to help you list some organizations that have recently failed, or are about to fail.

18 Perspectives on Information Systems
Technology dimension of information systems Computer hardware and software Data management technology Networking and telecommunications technology Networks, the Internet, intranets and extranets, World Wide Web IT infrastructure: provides platform that system is built on Information technology is at the heart of information systems. While organization and management are important too, it’s the technology that enables the systems and the organizations and managers who use the technology. The distinction between the Internet and intranets & extranets has to do with their scope. Intranets are private networks used by corporations and extranets are similar except that they are directed at external users (like customers and suppliers). In contrast, the Internet connects millions of different networks across the globe. Students may not immediately understand this distinction.

19 Perspectives on Information Systems
Dimensions of UPS tracking system Organizational: Procedures for tracking packages and managing inventory and provide information Management: Monitor service levels and costs Technology: Handheld computers, bar-code scanners, networks, desktop computers, etc. Discuss what the consequences would be if any one of the three dimensions of information systems were lacking at UPS. With poor technology, good management and organizational procedures would not significantly increase efficiency; without good organizational procedures, even the highest-quality technology wouldn’t prevent frequent errors and data loss; and without good management, the company would not make appropriate decisions about how to use the technology and what procedures to use.

20 Perspectives on Information Systems
Business perspective on information systems: Information system is instrument for creating value Investments in information technology will result in superior returns: Productivity increases Revenue increases Superior long-term strategic positioning You could ask students to consider how this view of information systems might contrast with the sociotechnical view or other views. You could also ask them to consider the circumstances under which information systems might not result in increased productivity and revenue.

21 Perspectives on Information Systems
Business information value chain Raw data acquired and transformed through stages that add value to that information Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits Business perspective: Calls attention to organizational and managerial nature of information systems During this and the next slide, emphasize that the end result of the business information value chain will always be profitability. Questions for students: What aspects of the business perspective might be lacking? Are there other perspectives that might provide a different picture? (sociotechnical)

22 Perspectives on Information Systems
Investing in information technology does not guarantee good returns Considerable variation in the returns firms receive from systems investments Factors: Adopting the right business model Investing in complementary assets (organizational and management capital) Connect this slide to the previous slide. Many firms make significant investments in IT for very little benefit to the bottom line. Discuss why companies experience a wide variety of outcomes in their efforts to invest in IT. Consider the factors we use in this book: organizational and management factors.

23 Perspectives on Information Systems
Complementary assets: Assets required to derive value from a primary investment Firms supporting technology investments with investment in complementary assets receive superior returns E.g.: invest in technology and the people to make it work properly The example used in the book for complementary assets is for automobile companies: these companies rely on investments in highways, other roads, gas stations, repair facilities, and so on to maximize the value of their primary investment. Ask students to provide a different example of another company’s or industries complementary assets.

24 Perspectives on Information Systems
Complementary assets include: Organizational assets, e.g. Appropriate business model Efficient business processes Managerial assets, e.g. Incentives for management innovation Teamwork and collaborative work environments Social assets, e.g. The Internet and telecommunications infrastructure Technology standards Emphasize that firms that make significant investment in complementary assets tend to derive greater benefit from information technology investment than those that do not. Consideration of complementary assets should be a part of any firm’s broader view of how to create and implement their information systems. Stress to students that managers must consider dimensions like complementary assets in order to derive benefit from information systems and be successful.

25 Contemporary Approaches to Information Systems
Technical approach Emphasizes mathematically based models Computer science, management science, operations research Behavioral approach Behavioral issues (strategic business integration, implementation, etc.) Psychology, economics, sociology You might ask the students whether they think it’s possible to adopt only one of the two approaches to information systems and be successful. Then emphasize that the most accurate position is that there is no single approach that can truly capture the full scope and importance of information systems by itself.

26 Contemporary Approaches to Information Systems
Management Information Systems Combines computer science, management science, operations research and practical orientation with behavioral issues Four main actors Suppliers of hardware and software Business firms Managers and employees Firm’s environment (legal, social, cultural context) Ask students to describe some of the relationships between the four main actors. For example, business firms look to acquire the components of their information systems from suppliers of hardware and software. The firm’s environment may dictate the type of software a company uses as well as the kind of employees that work there.

27 Learning Objectives Define and describe business processes and their relationship to information systems. Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other. Explain how enterprise applications improve organizational performance. This chapter is designed to provide students quick overview of the kinds of systems found in a typical corporation. Some of the concepts were introduced in Chapter 1. You could ask students to recall and describe the different levels of management in a business, intranets, and business processes using information from the previous chapter. Some are new – like enterprise wide systems. © Prentice Hall 2011

28 Learning Objectives (cont.)
Explain the importance of collaboration and teamwork in business and how they are supported by technology. Assess the role of the information systems function in a business. This is a good time to get students to talk about their experience working in organizations. How is collaboration and teamwork important in their business experience? Or the lack of team work. What kinds of work experiences do your students have? What did they think were the key organizational goals where they worked? How were information systems important (or not important)? © Prentice Hall 2011

29 Business Processes and Information Systems
Workflows of material, information, knowledge Sets of activities, steps May be tied to functional area or be cross- functional Businesses: Can be seen as collection of business processes Business processes may be assets or liabilities Business processes are at the heart of every business. Ask students if they can give any examples of business processes that they come in contact with everyday. This could include anything from ordering a hamburger at McDonalds, to applying for a driver’s license at the DMV. Emphasize that studying a firm’s business processes is an excellent way to learn a great deal about how that business actually works. How could a business process be a liability? Think of some dysfunctional business processes or ask the students to come up with some really poor business processes. © Prentice Hall 2011

30 Business Processes and Information Systems
Examples of functional business processes Manufacturing and production Assembling the product Sales and marketing Identifying customers Finance and accounting Creating financial statements Human resources Hiring employees Other examples include checking the product for quality (manufacturing and production), selling the product (sales and marketing), paying creditors (finance and accounting), and evaluating job performance (human resources). You could ask students to contribute other examples of business processes and describe which of the four types they are. © Prentice Hall 2011

31 Business Processes and Information Systems
Information technology enhances business processes in two main ways: Increasing efficiency of existing processes Automating steps that were manual Enabling entirely new processes that are capable of transforming the businesses Change flow of information Replace sequential steps with parallel steps Eliminate delays in decision making Examples of entirely new business processes made possible by information technology are downloading a song from iTunes or buying a book or e-book from Amazon. You might also mention the Amazon book reader Kindle which is continuously connected to the Internet and allows customers to download books and pay for them using Amazon’s one click purchase method. Ask students if they can name any other business processes that have been transformed in the last few years. © Prentice Hall 2011

32 Types of Information Systems
Transaction processing systems Perform and record daily routine transactions necessary to conduct business Examples: sales order entry, payroll, shipping Allow managers to monitor status of operations and relations with external environment Serve operational levels Serve predefined, structured goals and decision making The purpose of these systems is to answer routine questions about the flow of transactions through the organization. These systems are a necessity for any business. © Prentice Hall 2011

33 Types of Information Systems
Management information systems Serve middle management Provide reports on firm’s current performance, based on data from TPS Provide answers to routine questions with predefined procedure for answering them Typically have little analytic capability Emphasize to students that management information systems is a specific category of information systems for middle management. It has the same name, but a very different meaning from the term introduced in Chapter 1 (the study of information systems in business and management). In other words, the study of management information systems involves looking at all the systems used in business. An MIS system is a specific type of an IS. It’s easy to get the two confused. © Prentice Hall 2011

34 Types of Information Systems
Decision support systems Serve middle management Support non-routine decision making Example: What is impact on production schedule if December sales doubled? Often use external information as well from TPS and MIS Model driven DSS Voyage-estimating systems Data driven DSS Intrawest’s marketing analysis systems You could ask whether or not students understand what is meant by non-routine decision making, as opposed to routine decision making, and why DSS are specifically designed to assist managers in making that type of decision. Ask students for examples of non-routine decisions they make or have made in the past as managers or employees. © Prentice Hall 2011

35 Types of Information Systems
Business intelligence Class of software applications Analyze current and historical data to find patterns and trends and aid decision-making Used in systems that support middle and senior management Data-driven DSS Executive support systems (ESS) This slide emphasizes the relationship between the class of software called “business intelligence” and the decision-support systems used by middle and senior management, DSS and ESS. Business intelligence is a type of software used in analyzing data, and is used in both DSS and ES. As an example, the BMW Oracle boat described in the chapter opening case was using business intelligence – the software analyzed huge amounts of data, including real-time data, to determine hidden factors and correlations that make a sailboat go faster, and help the sailors make decisions in navigating and managing the boat. © Prentice Hall 2011

36 Types of Information Systems
Executive support systems Support senior management Address non-routine decisions Requiring judgment, evaluation, and insight Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS Example: Digital dashboard with real-time view of firm’s financial performance: working capital, accounts receivable, accounts payable, cash flow, and inventory Emphasize the connection between ESS, MIS, and DSS. ESS rely on accurate inputs from a firm’s MIS and DSS to provide useful information to executives. These systems should not exist in isolation from one another. If they are isolated from each other, it is a kind of organizational dysfunction, probably inherited from the past. Note that the digital dashboard is a common feature of modern-day ESS. Emphasize that a critical feature of ESS is ease of use and simplicity of display. Executives using an ESS want quick access to the most critical data affecting their firm. © Prentice Hall 2011

37 Types of Information Systems
Systems from a constituency perspective Transaction processing systems: supporting operational level employees Management information systems and decision-support systems: supporting managers Executive support systems: supporting executives This slide is a recap of the previous slides describing these types of systems. In a constituency perspective, systems are distinguished on the basis of who uses the system– operational managers, middle management, senior management. Systems are often designed to fit the specific needs of each of these groups in a firm. These groups form “constituencies” that CIOs must appeal to for support. © Prentice Hall 2011

38 Types of Information Systems
Relationship of systems to one another TPS: Major source of data for other systems ESS: Recipient of data from lower-level systems Data may be exchanged between systems In reality, most businesses’ systems are only loosely integrated (but they are getting better!) This slide once again emphasizes the relationship between different types of systems, but explain that actually achieving such a high level of integration is rare. You could ask students to offer reasons why it might be difficult to do this. Firms have been and continue to make large investments in enterprise-wide systems that promise to integrate the many data flows that exist in all large organizations. © Prentice Hall 2011

39 Types of Information Systems
Enterprise applications Systems for linking the enterprise Span functional areas Execute business processes across firm Include all levels of management Four major applications: Enterprise systems Supply chain management systems Customer relationship management systems Knowledge management systems Enterprise applications are used to manage the information used in the systems discussed previously. In other words, enterprise applications are used to ensure that TPS, MIS, DSS, and ESS work together smoothly. © Prentice Hall 2011

40 Types of Information Systems
Enterprise systems Collects data from different firm functions and stores data in single central data repository Resolves problem of fragmented, redundant data sets and systems Enable: Coordination of daily activities Efficient response to customer orders (production, inventory) Provide valuable information for improving management decision making This slide emphasizes the singularity of enterprise systems (one system) that integrates information flows from a variety of sources and serves a wide variety of groups and purposes in the firm. Remind students of the difference between enterprise applications and enterprise systems: Enterprise applications are any applications that span the enterprise, and types of enterprise applications include CRM, SCM,KMS and enterprise systems. Enterprise systems refers to the larger database environment within which these applications reside and operate. Note that enterprise systems are referred to in some first as “enterprise resource planning systems (ERP). © Prentice Hall 2011

41 Types of Information Systems
Supply chain management (SCM) systems Manage firm’s relationships with suppliers Share information about Orders, production, inventory levels, delivery of products and services Goal: Right amount of products to destination with least amount of time and lowest cost Emphasize that SCM systems are inter-organizational systems, automating the flow of information across organizational boundaries. This distinction is important because SCM systems must be designed with the business processes of potential partners and suppliers in mind. © Prentice Hall 2011

42 Types of Information Systems
Customer relationship management systems: Provide information to coordinate all of the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention Integrate firm’s customer-related processes and consolidate customer information from multiple communication channels CRM systems are extremely important for both marketing and customer service. You could ask students if they’ve ever filled out a survey for a company. Then connect that to information systems, perhaps explaining that the information they entered was provided as input to a CRM system for analysis. © Prentice Hall 2011

43 Types of Information Systems
Knowledge management systems (KMS) Support processes for acquiring, creating, storing, distributing, applying, integrating knowledge How to create, produce, distribute products and services Collect internal knowledge and experience within firm and make it available to employees Link to external sources of knowledge The idea that business firms are repositories of knowledge may be new to many students. Ask students for examples of firm knowledge; for instance, the knowledge required to run a fast food restaurant, or the knowledge required to operate a Web site like Amazon. Explain that knowledge management systems are useful for helping a firm’s employees understand how to perform certain business processes or how to solve problems. What might the consequences be for a firm with poor knowledge management systems? © Prentice Hall 2011

44 Types of Information Systems
Alternative tools that increase integration and expedite the flow of information Intranets: Internal company Web sites accessible only by employees Extranets: Company Web sites accessible externally only to vendors and suppliers Often used to coordinate supply chain Enterprise applications are typically extremely expensive as well as difficult to implement. Ask students why this would be so… Intranets and extranets use Internet technology to communicate internally to employees, allow employees to communicate with each other and share documents, and to help communication with vendors. They are essentially password protected Web sites. The simplest intranets and extranets may use static web pages to relay information, while more sophisticated versions may be database-driven and enable key business processes. Ask students if they have used an intranet or extranet before and what services or information it provided. Does their school have an intranet/extranet? Generally universities have a Web site with different levels of access for the general public, registered students, faculty and administrators. The public-facing part of the Web site can be thought of as the “extranet,” while the part of the Web site serving students and faculty can be thought of as the “intranet.” These terms (intranet and extranet) are fading from use, but students will occasionally find firms still using these terms. © Prentice Hall 2011

45 Types of Information Systems
E-business Use of digital technology and Internet to drive major business processes E-commerce Subset of e-business Buying and selling goods and services through Internet E-government: Using Internet technology to deliver information and services to citizens, employees, and businesses The use of Internet technology has transformed and continues to transform businesses and business activity. This slide aims to distinguish different terminology used in the book. E-business refers to the use of the Internet and networking to enable all parts of the business, while e-commerce refers to just that part of business that involves selling goods and services over the Internet. Internet technology has also brought similar changes in the public sector – the use of Internet and networking technologies in government is referred to as e-government. Ask students what changes in businesses or government due to new Internet technologies they have noticed. © Prentice Hall 2011

46 Systems for Collaboration and Teamwork
Short-lived or long-term Informal or formal (teams) Growing importance of collaboration: Changing nature of work Growth of professional work – “interaction jobs” Changing organization of the firm Changing scope of the firm Emphasis on innovation Changing culture of work A number of factors are leading to a growing emphasis on collaboration in the firm. Work is changing, requiring more cooperation and coordination. Professions play a larger role in firms than before, and this often requires more consultation among experts than before. Organizations are flatter, with many more decisions made far down in the hierarchy. Organizations are more far flung around the globe, in multiple locations. There’s an emphasis on finding and sharing ideas which requires collaboration. Finally, what it means to be a “good” employee these days is in part an ability to work with others, and collaborate effectively. The culture of work has changed. © Prentice Hall 2011

47 Systems for Collaboration and Teamwork
Business benefits of collaboration and teamwork Investments in collaboration technology can produce organizational improvements returning high ROI Benefits: Productivity Quality Innovation Customer service Financial performance Profitability, sales, sales growth Research regarding the business benefits of collaboration is anecdotal, however, business and academic communities generally regard collaboration as an essential driving factor in business success: Firms that collaborate more make more money. Ask students to give examples of how collaboration can improve productivity, product quality, and customer service. Has anyone had a fruitful collaborative experience in which an aspect of a company they worked at or an organization they were in? © Prentice Hall 2011

48 Systems for Collaboration and Teamwork
Building a collaborative culture and business processes “Command and control” organizations No value placed on teamwork or lower-level participation in decisions Collaborative business culture Senior managers rely on teams of employees Policies, products, designs, processes, systems rely on teams Managers purpose is to build teams Collaboration is not something that spontaneously arises – it must be enabled and nurtured. Collaborative culture is an essential factor – simply having collaborative technology will not result in collaboration if it isn’t seen as part of the business and rewarded. Have any students worked at “command and control” organizations? If so, were they able to see aspects of the business that could be improved but were unable to make contributions because of the firm’s culture? Are there any businesses or business functions that benefit by less collaboration? Are there any disadvantages to collaboration? © Prentice Hall 2011

49 Systems for Collaboration and Teamwork
Technology for collaboration and teamwork 15 categories of collaborative software tools and instant messaging White boarding Collaborative writing Web presenting Collaborative reviewing Work scheduling Event scheduling Document sharing /wikis File sharing Mind mapping Screen sharing Large audience Webinars Audio conferencing Co-browsing Video conferencing Information systems enable collaboration. There are thousands of tools available ranging from free to very expensive. Ask students which of these tools they have used for work or schoolwork – and which of these they have found the most useful. © Prentice Hall 2011

50 Systems for Collaboration and Teamwork
Technology for collaboration and teamwork (cont.) Social Networking Wikis Virtual Worlds Internet-Based Collaboration Environments Virtual meeting systems (telepresence) Google Apps/Google sites Microsoft SharePoint Lotus Notes The text goes into more depth on each of these tools. Give an example for each type of tool . A business use of social networking is Facebook accounts for businesses; using wiki’ as extended, more complete FAQs, and virtual worlds to conduct online meetings for employees around the world. Distinguish these individual tools from Internet-based collaboration environments, which are suites of collected collaboration tools, enabling communication and data-sharing between tools. © Prentice Hall 2011

51 Systems for Collaboration and Teamwork
Two dimensions of collaboration technologies Space (or location) – remote or colocated Time – synchronous or asynchronous Six steps in evaluating software tools What are your firm’s collaboration challenges? What kinds of solutions are available? Analyze available products’ cost and benefits Evaluate security risks Consult users for implementation and training issues Evaluate product vendors When evaluating collaboration tools for your businesses, the first step is to identify the kind of problem you have. The key problems are time and location. Generally, no one has enough time and often key people are not in the right place. Some teams may need to work together in real-time, while others may simply need shared documentation. In analyzing collaboration tools by the space/time dimensions you can determine what types of tools will solve your problem. The six steps in evaluating software is applicable not only for collaboration tools but any software solution for your company. First determine the challenge or problem, look for solutions for this particular problem and so forth. © Prentice Hall 2011

52 The Information Systems Function in Business
Information systems department: Formal organizational unit responsible for information technology services Often headed by chief information officer (CIO) Other senior positions include chief security officer (CSO), chief knowledge officer (CKO), chief privacy officer (CPO) Programmers Systems analysts Information systems managers Defined simply, the information systems department of a firm is responsible for coordinating all of the systems previously mentioned in this chapter. How the department is organized depends on the nature and size of the business. Small companies may not have a formal department, while large companies may have several departments for different business functions, or they have an IT Department in each corporate division. Ask students what types of information systems departments they have had experience with. © Prentice Hall 2011

53 The Information Systems Function in Business
End users Representatives of other departments for whom applications are developed Increasing role in system design, development IT Governance: Strategies and policies for using IT in the organization Decision rights Accountability Organization of information systems function Centralized, decentralized, etc. As the development of business information systems matures, end users have been increasingly recognized as pivotal to developing a successful system. In addition, the information systems department has also been recognized as a powerful resource for developing new products, services and efficiencies. As such, IT governance is a central business concern – being able to use IT efficiently and effectively has become more and more essential to a business’ success. © Prentice Hall 2011

54 Learning Objectives Identify and describe important features of organizations that managers need to know about in order to build and use information systems successfully. Demonstrate how Porter’s competitive forces model helps companies develop competitive strategies using information systems. Explain how the value chain and value web models help businesses identify opportunities for strategic information system applications. You could ask students to recall some concepts from the previous chapters that might help managers build and use information systems successfully. Answers could include what business processes the company performs, the size of the company, or the organization of the information systems function. © Prentice Hall 2011

55 Learning Objectives (cont.)
Demonstrate how information systems help businesses use synergies, core competencies, and network-based strategies to achieve competitive advantage. Assess the challenges posed by strategic information systems and management solutions. Recall the business objectives that allow firms to achieve competitive advantage discussed in Chapter 1: operational excellence, new products, services and business models, customer and supplier intimacy, and improved decision making. © Prentice Hall 2011

56 Organizations and Information Systems
Information technology and organizations influence one another Complex relationship influenced by organization’s Structure Business processes Politics Culture Environment, and Management decisions This concept was briefly discussed in Chapter 1. Figure 1-2 and 1-3 as well as the figure on the next slide, 3-1, display this interdependent relationship graphically. © Prentice Hall 2011

57 Organizations and Information Systems
What is an organization? Technical definition: Stable, formal social structure that takes resources from environment and processes them to produce outputs A formal legal entity with internal rules and procedures, as well as a social structure Behavioral definition: A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution Which of the two definitions do students find more accurate and why? It is important to consider both definitions rather than exclusively use one at the expense of the other. The two definitions are complementary. © Prentice Hall 2011

58 Organizations and Information Systems
Features of organizations Use of hierarchical structure Accountability, authority in system of impartial decision making Adherence to principle of efficiency Routines and business processes Organizational politics, culture, environments and structures You could ask students to envision what would happen to an organization that did not use a hierarchical structure (would anything get done?), did not adhere to the principle of efficiency (would they provide any good or service worth using at an affordable price?), etc. © Prentice Hall 2011

59 Organizations and Information Systems
Routines and business processes Routines (standard operating procedures) Precise rules, procedures, and practices developed to cope with virtually all expected situations Business processes: Collections of routines Business firm: Collection of business processes You could ask students to describe examples of situations where a business they have interacted with has had a well-understood set of routines. One such example is at the doctor’s office, where the receptionist, nurses, and doctors all have a defined set of routines. Ask students to think about and describe routines they performed on their jobs. © Prentice Hall 2011

60 Organizations and Information Systems
Organizational politics Divergent viewpoints lead to political struggle, competition, and conflict Political resistance greatly hampers organizational change You could ask students to describe examples where organizational politics might hamper a firm’s ability to succeed, or examples where effectively managed organizational politics helps a company to undergo a smoother transition or make more intelligent decisions. Ask students to describe their personal experiences with “organizational politics.” © Prentice Hall 2011

61 Organizations and Information Systems
Organizational culture: Encompasses set of assumptions that define goal and product What products the organization should produce How and where it should be produced For whom the products should be produced May be powerful unifying force as well as restraint on change Culture may seem like a pretty abstract idea to many students. On the other hand, students with work experiences will easily be able to describe the cultures of firms where they have worked. Ask students to describe organizational cultures they have experienced while on the job, or other areas of their lives. What kind of organizational culture do students prefer and why? Ask students to describe different kinds of cultures and what types of firms are more likely to have them. © Prentice Hall 2011

62 Organizations and Information Systems
Organizational environments: Organizations and environments have a reciprocal relationship Organizations are open to, and dependent on, the social and physical environment Organizations can influence their environments Environments generally change faster than organizations Information systems can be an instrument of environmental scanning, act as a lens Explain that environmental scanning involves searching for and determining external changes that may require an organizational response. The current economic climate represents an example of external change that requires sweeping organizational responses to ensure survival. © Prentice Hall 2011

63 Organizations and Information Systems
Disruptive technologies Technology that brings about sweeping change to businesses, industries, markets Examples: personal computers, word processing software, the Internet, the PageRank algorithm First movers and fast followers First movers – inventors of disruptive technologies Fast followers – firms with the size and resources to capitalize on that technology Ensure that students understand that the PageRank algorithm is the underlying technology behind Google search. Ask students if they can give examples of any first movers that invented a disruptive technology, yet failed to last (examples might include the Altair personal computer, the Netscape Navigator Internet browser, etc.). © Prentice Hall 2011

64 Organizations and Information Systems
5 basic kinds of organizational structure Entrepreneurial: Small start-up business Machine bureaucracy: Midsize manufacturing firm Divisionalized bureaucracy: Fortune 500 firms Professional bureaucracy: Law firms, school systems, hospitals Adhocracy: Consulting firms Do students agree with the classification of these types of organizational structure? Can they come up with examples for each type of organization? © Prentice Hall 2011

65 Organizations and Information Systems
Other organizational features Goals Constituencies Leadership styles Tasks Surrounding environments Ask students to give some examples of each organizational feature listed above. For example, different organizations (prisons, businesses, colleges) have different types of goals (coercive, utilitarian, normative, respectively). © Prentice Hall 2011

66 How Information Systems Impact Organizations and Business Firms
Economic impacts IT changes relative costs of capital and the costs of information Information systems technology is a factor of production, like capital and labor IT affects the cost and quality of information and changes economics of information Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets) Outsourcing IT figures to replace the function of more middle managers as time passes, as well as reduce the need for other forms of capital (buildings, machinery). Ensure that students understand what is meant by ‘economics of information’ and why outsourcing is a possibility due to IT. © Prentice Hall 2011

67 How Information Systems Impact Organizations and Business Firms
Transaction cost theory Firms seek to economize on transaction costs (the costs of participating in markets) Vertical integration, hiring more employees, buying suppliers and distributors IT lowers market transaction costs for a firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees Explain that using the market can be expensive. If you depend on the market, rather than hiring employees, you will need to search for talent, research the quality of providers and workers, write contracts for work to be performed, monitor the work, and so forth. When participation in markets is expensive, firms would rather hire employees to accomplish their work. But the Internet makes it less expensive to use the marketplace. With the Internet, firms find it more cost effective to use the marketplace and contract for work in a market, rather than hire employees. Ask your students why the Internet can make participating in markets less expensive than before. © Prentice Hall 2011

68 How Information Systems Impact Organizations and Business Firms
Agency theory: Firm is nexus of contracts among self-interested parties requiring supervision Firms experience agency costs (the cost of managing and supervising) which rise as firm grows IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees By characterizing employees as independent agents requiring constant supervision, agency theory underscores a key reason that costs increase as firms grow in size and scope – the need to expend more effort managing their employees. © Prentice Hall 2011

69 How Information Systems Impact Organizations and Business Firms
Organizational and behavioral impacts IT flattens organizations Decision making pushed to lower levels Fewer managers needed (IT enables faster decision making and increases span of control) Postindustrial organizations Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions Ask students to explain what is meant by authority relying on knowledge and competence rather than formal positions. Why might this ‘flatten’ the organization? The idea here is that with sufficient IT, competent workers will be able to accomplish more on their own than they would under a more hierarchical arrangement. © Prentice Hall 2011

70 How Information Systems Impact Organizations and Business Firms
Organizational resistance to change Information systems become bound up in organizational politics because they influence access to a key resource – information Information systems potentially change an organization’s structure, culture, politics, and work Most common reason for failure of large projects is due to organizational and political resistance to change Explain what is meant by changes in culture and politics of the firm. For example, workers may resist changes that disrupt their routines. Also explain to students that as important as technical understanding of information systems may be for potential managers, it is equally important to understand the people and organizational structures and customs affected by information systems. © Prentice Hall 2011

71 How Information Systems Impact Organizations and Business Firms
The Internet and organizations The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations The Internet can greatly lower transaction and agency costs Example: Large firm delivers internal manuals to employees via a corporate Web site, saving millions of dollars in distribution costs The Internet should also have a flattening effect on many organizations. Can students describe any businesses that have become more efficient and flat thanks to successful incorporation of the Internet in their operations? Some older students may remember the “bad old days” when seven or more levels of management needed to decide even simple issues in a typical firm. © Prentice Hall 2011

72 How Information Systems Impact Organizations and Business Firms
Central organizational factors to consider when planning a new system: Environment Structure Hierarchy, specialization, routines, business processes Culture and politics Type of organization and style of leadership Main interest groups affected by system; attitudes of end users Tasks, decisions, and business processes the system will assist Ask students to consider the results of an information system implemented without properly considering each of the above factors. For example, an information system designed without an understanding of the company’s culture and politics is likely to be unpopular, perhaps forcing employees to drastically deviate from their previous routines. © Prentice Hall 2011

73 Using Information Systems to Achieve Competitive Advantage
Why do some firms become leaders in their industry? Michael Porter’s competitive forces model Provides general view of firm, its competitors, and environment Five competitive forces shape fate of firm Traditional competitors New market entrants Substitute products and services Customers Suppliers Porter’s competitive forces model is intended to explain why some firms do better than others. Do students believe that this model captures this idea effectively? Which factor is most important to a firm’s success? You can make a list of five well-known firms on the blackboard or screen and ask students for each firm which do they think are the most important competitive forces. © Prentice Hall 2011

74 Using Information Systems to Achieve Competitive Advantage
Traditional competitors All firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs New market entrants Some industries have high barriers to entry, e.g. computer chip business New companies have new equipment, younger workers, but little brand recognition Ask students to name different industries and describe the benefits and drawbacks of being a new market entrant in each industry. © Prentice Hall 2011

75 Using Information Systems to Achieve Competitive Advantage
Substitute products and services Substitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs Customers Can customers easily switch to competitor’s products? Can they force businesses to compete on price alone in transparent marketplace? Suppliers Market power of suppliers when firm cannot raise prices as fast as suppliers Ask students to name different businesses and describe whether or not customers have great control over the business or vice versa, or whether substitute products are a large or insignificant threat to the success of the business. © Prentice Hall 2011

76 Using Information Systems to Achieve Competitive Advantage
Four generic strategies for dealing with competitive forces, enabled by using IT Low-cost leadership Product differentiation Focus on market niche Strengthen customer and supplier intimacy Here you can make a list of five well-known firms and then analyze with students the major thrust of their strategy. Wal-Mart is a good example to start with because of its emphasis on low-cost leadership. © Prentice Hall 2011

77 Using Information Systems to Achieve Competitive Advantage
Low-cost leadership Produce products and services at a lower price than competitors while enhancing quality and level of service Examples: Wal-Mart Product differentiation Enable new products or services, greatly change customer convenience and experience Examples: Google, Nike, Apple Do students believe it is possible to design information systems that focus both on low-cost leadership and product differentiation? Some may say it is with sufficient planning and innovation; perhaps a new product is even cheaper to produce than older ones. Some may say that the investment in innovation required for product differentiation precludes that firm from maintaining low-cost leadership. © Prentice Hall 2011

78 Using Information Systems to Achieve Competitive Advantage
Focus on market niche Use information systems to enable a focused strategy on a single market niche; specialize Example: Hilton Hotels Strengthen customer and supplier intimacy Use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs Example: Netflix, Amazon You could ask students to provide other examples from their own experience of companies that exemplify strong focus on market niche as well as excellent customer and supplier intimacy. © Prentice Hall 2011

79 Using Information Systems to Achieve Competitive Advantage
The Internet’s impact on competitive advantage Transformation, destruction, threat to some industries E.g. travel agency, printed encyclopedia, newspaper Competitive forces still at work, but rivalry more intense Universal standards allow new rivals, entrants to market New opportunities for building brands and loyal customer bases Do students believe it is easier or harder to gain a competitive advantage via the Internet as opposed to more traditional means? Table 3-5 describes the impact of the Internet on various competitive forces. © Prentice Hall 2011

80 Using Information Systems to Achieve Competitive Advantage
Business value chain model Views firm as series of activities that add value to products or services Highlights activities where competitive strategies can best be applied Primary activities vs. support activities At each stage, determine how information systems can improve operational efficiency and improve customer and supplier intimacy Utilize benchmarking, industry best practices How does the value chain model differ from the Porter model? (It offers more specific detail about what exactly to do to achieve competitive advantages.) How do primary activities differ from support activities? © Prentice Hall 2011

81 Using Information Systems to Achieve Competitive Advantage
Value web: Collection of independent firms using highly synchronized IT to coordinate value chains to produce product or service collectively More customer driven, less linear operation than traditional value chain Explain that a value web extends beyond the boundaries of an individual firm and represents the coordination of value chains across multiple independent firms. A value web is flexible and adapts to changes in supply and demand and changing market conditions. © Prentice Hall 2011

82 Using Information Systems to Achieve Competitive Advantage
Information systems can improve overall performance of business units by promoting synergies and core competencies Synergies When output of some units used as inputs to others, or organizations pool markets and expertise Example: merger of Bank of NY and JPMorgan Chase Purchase of YouTube by Google Explain that information technology’s role in promoting synergy is often tying together operations of disparate business units so that they can act as a whole. Why might this lead to reduced costs and increased efficiency? © Prentice Hall 2011

83 Using Information Systems to Achieve Competitive Advantage
Core competencies Activity for which firm is world-class leader Relies on knowledge, experience, and sharing this across business units Example: Procter & Gamble’s intranet and directory of subject matter experts Can students name any other notable examples of core competencies among firms? (Google: search, Microsoft: office productivity software; Intel processors, etc.) © Prentice Hall 2011

84 Using Information Systems to Achieve Competitive Advantage
Network-based strategies Take advantage of firm’s abilities to network with each other Include use of: Network economics Virtual company model Business ecosystems Examples of firms that use this type of strategy to achieve an advantage are eBay and iVillage. Many other companies are following suit in using a network-based strategy – can students name any? eBay, iVillage, and social networking firms like Facebook, are based on networks of millions of users. These companies have used the Web and Internet communication tools to build communities. The more people who join these communities, the more benefit members receive. © Prentice Hall 2011

85 Using Information Systems to Achieve Competitive Advantage
Traditional economics: Law of diminishing returns The more any given resource is applied to production, the lower the marginal gain in output, until a point is reached where the additional inputs produce no additional outputs Network economics: Marginal cost of adding new participant almost zero, with much greater marginal gain Value of community grows with size Value of software grows as installed customer base grows Explain the difference between these two schools of economics. What aspect of network economics allows value to continue to increase with the size of the community? © Prentice Hall 2011

86 Using Information Systems to Achieve Competitive Advantage
Virtual company strategy Virtual company uses networks to ally with other companies to create and distribute products without being limited by traditional organizational boundaries or physical locations E.g. Li & Fung manages production, shipment of garments for major fashion companies, outsourcing all work to over 7,500 suppliers Explain to students that companies like this are ‘virtual’ because they do not actually own any factories, machines, or other similar infrastructure. Instead, they offer a series of services, aided by information systems and uninhibited by geographical boundaries. © Prentice Hall 2011

87 Using Information Systems to Achieve Competitive Advantage
Business ecosystems Industry sets of firms providing related services and products Microsoft platform used by thousands of firms Wal-Mart’s order entry and inventory management Keystone firms: Dominate ecosystem and create platform used by other firms Niche firms: Rely on platform developed by keystone firm Individual firms can consider how IT will help them become profitable niche players in larger ecosystems Can students see the similarities between business ecosystems and value webs? Can they appreciate the key difference (that business ecosystems extend across industries as opposed to just firms within the same industry)? © Prentice Hall 2011

88 Using Information Systems for Competitive Advantage: Management Issues
Sustaining competitive advantage Because competitors can retaliate and copy strategic systems, competitive advantage is not always sustainable; systems may become tools for survival Performing strategic systems analysis What is structure of industry? What are value chains for this firm? Managing strategic transitions Adopting strategic systems requires changes in business goals, relationships with customers and suppliers, and business processes Emphasize the importance and difficulty of aligning information technology with the business. What does this phrase mean? It seems pretty simple. Why do so many companies fail at this critical task? Can students think of any other important questions that management should ask about their company before designing their IT systems? What is a solution for the fact that many competitive advantages can be copied? This fact highlights the importance of continuous innovation in order to stay ahead. © Prentice Hall 2011

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