1. 06. Information Systems (IS) in Management & Strategic Information Systems (SIS) Rev: Feb, 2013 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH

2. Contents 1Information Systems in Management 1)The role of IS in Management 2)Hierarchy Level of IS in Management 2Strategic Information Systems 1)Introduction 2)Competitive Strategy & IT 3)Evaluation of SIS 3Case Study

3. 3 3-Axis MSS Model Model Data Intelligence IS Type = f(m, d, i) a? c? b? Ex) TPS = f(0.1, 0.9, 0) DSS = f(0.5, 0.3, 0.2) Ex) TPS = f(0.1, 0.9, 0) DSS = f(0.5, 0.3, 0.2) 1. Information Systems in Management 1) The role of IS in Management

4. 4 The view of Information Systems View Point 1 DataInformationDecision AidsKnowledge Statistical Analysis Math Analysis Reasoning View Point 2 Extreme top Top Middle low Extreme low EIS/ESS DSS IPS TPS OAS ERPERP View Point 3 Strategic Value IS Expansion H L L H ? ? 1. Information Systems in Management 1) The role of IS in Management

5. 5 Role of IS View Point 4 HelperA Function Management Marketing Financing Accounting IS Management IS MarketingAccounting Financing Controller IS Marketing Accounting Financing Melting Pot IS Marketing Accounting Financing All Functions are melted 1. Information Systems in Management 1) The role of IS in Management

6. 6 Management Hierarchy Level (1/2) Extreme top Top Middle low Extreme low Types of management Political strategic Strategic Tactical Operational Clerical Problem types to be dealt with Unstructured Semi – Structured and Structured Management Triangle 1. Information Systems in Management 2) Hierarchy Level of IS in Management

7. 7 Management Hierarchy Level (2/2) Use of data& Information Quality of Data Types of IS Roles of IS Strategic Importance Political decision & strategic High-degree decisional aids EIS/ESS Controller Strategic driver Very important (Strong SIS) Little importance (Weak SIS) Mathematical analysis of information Decisional aidsDSSController Statistical Analysis of data Information IPS MIS(s) Function Retrieval & use for Operational purpose Raw data TPS (EDPS) Helper to Each function Data processing OAS Assistant to helper to each function 1. Information Systems in Management 2) Hierarchy Level of IS in Management Extreme top Top Middle low Extreme low Management Triangle

8. 8 Strategic IT ■Technology is no longer an afterthought in business strategy, but the cause and driver ■IT can change the way businesses compete ■A strategic information system is any information system that uses IT to help an organization… –Gain a competitive advantage –Reduce a competitive disadvantage –Or meet other strategic enterprise objectives 2. Strategic Information System 1) Introduction Information System (IS)Strategic Information System (SIS) Definition Support activities to the business Integral and necessary part of the business Characteristics Mechanizes operations for better efficiency, control, and effectiveness Simply provides sufficient dependable information Doesn’t increase corporate profitability in itself Directly influences all aspects of marketplace profitability such as market share and earnings Directly affects the competitive stance of the organization

9. 9 Paradigm Shift Globe-drivenInformation-driven Customer-driven Technology-driven MIT (Management Innovation Technology) SM (Super Set) SIS (Subset) OASTPS (EDPS) IPS & MIS DSSEIS & ESS KMCRMMOT SA ERP & BPR EC  Dramatic Profit  Competitive Advantage 2. Strategic Information System 1) Introduction Overview of SIS

10. 10 Strategy Tree (1/2) Information (IT, IS) Automation Innovation ■Use of Information ■Automation ■Strategic Use of Information Automation Work Automation Manufacturing Automation Strategic Information System(SIS) Non-strategic Information System (NSIS) Strategic Use of Information (IT, IS) Success Failure 2. Strategic Information System 1) Introduction

11. 11 Strategy Tree (2/2) Strategic Management (SM) Non-strategic Management (NSM) Strategic Management Success Failure ■Strategic Management ■Information Strategy Tree Information Automation Innovation Work Automation Manufacturing Automation NSIS SIS SM NSM 2. Strategic Information System 1) Introduction

12. 12 Competitive Strategies (1/2) ■Using Competitive Strategies –These strategies are not mutually exclusive Organizations use one, some, or all A given activity could fall into one or more categories –Not everything innovative serves to differentiate one organization from another Likewise, not everything that differentiates organizations is innovative Competitive Forces and Strategies 2. Strategic Information System 2) Competitive Strategy & IT Businesses can develop competitive strategies to counter the actions of the competitive forces they confront in the marketplace.

13. 13 Competitive Strategies (2/2) ■Cost Leadership Strategy –Reducing their costs or increasing the costs of competitors ■Differentiation Strategy –Developing ways to differentiate a firm’s products and services from those of its competitors ■Innovation Strategy –Developing unique products and services or entering unique markets or market inches ■Growth Strategy –Expanding a company’s capacity to produce goods and services, expanding into global markets, diversifying into new products and services, or integrating into related products and services ■Alliance Strategy –Establishing new business linkages and alliances with customers, suppliers, competitors, consultants, and other companies 2. Strategic Information System 2) Competitive Strategy & IT Five Competitive Strategies Strategies Growth Cost Leadership Differentiation Alliance Innovation

14. 14 Ways to Implement Basic Strategies Basic Strategies in the Business Use of Information Technology Lower Costs ▶ Use IT to substantially reduce the cost of business processes. ▶ Use IT to lower the costs of customers or suppliers Differentiate ▶ Develop new IT features to differentiate products and services. ▶ Use IT features to reduce the differentiation advantages of competitors. ▶ Use IT features to focus products and services at selected market niches. Innovate ▶ Create new products and services that include IT components. ▶ Develop unique new markets or market niches with the help of IT. ▶ Make radical changes to business processes with IT that dramatically cut costs; improve quality, efficiency, or customer service; or shorten time to market. Promote Growth ▶ Use IT to manage regional and global business expansion. ▶ Use IT to diversify and integrate into other products and services. Develop Alliances ▶ Use IT to create virtual organizations of business partners. ▶ Develop interenterprise information systems linked by the Internet and extranets that support strategic business relationships with customers, suppliers, subcontractors, and others. Other Competitive Strategies  Lock in customers and suppliers  Create switching costs  Raise barriers to entry  Build strategic IT capabilities  Leverage investment in IT 2. Strategic Information System 2) Competitive Strategy & IT

15. 15 Evaluation of SIS ■When you evaluate a SIS… 1.Process automation or innovation 2.If innovation, which Hammer’s principle? 3.Which competing forces to e affected 4.Value chain activities to be reinforced 5.Type of IS 2. Strategic Information System 3) Evaluation of SIS

16. 16 Note ■MIT PPT material (SIS) –http://ocw.mit.edu/courses/sloan-school-of-management/15-565j-integrating-esystems-global- information-systems-spring-2002/lecture-notes/lecture02.pdfhttp://ocw.mit.edu/courses/sloan-school-of-management/15-565j-integrating-esystems-global- information-systems-spring-2002/lecture-notes/lecture02.pdf

17. 17 Reference ■O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 1O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 1 ■O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 2O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 2 ■Euiho Suh, “Information & Management (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)Euiho Suh, “Information & Management (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory) ■Euiho Suh, “Role of Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)Euiho Suh, “Role of Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory) ■Euiho Suh, “Strategic Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)Euiho Suh, “Strategic Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)