IS, Organisations, and Strategy 28 November 2011

IS, Organisations, and Strategy Important to understand the relationship between organisations, information systems, and strategy. IS and organisations influence each other – IS are built to meet particular requirements of the firm – Organisation dynamics can be changed and influenced by introduction of IS

IS and Organisation The relationship between IS and organisation is very complex – There are many mediating factors that affect how an organisation interacts with and IS and vice versa! – For instance, business processes, culture, politics, power are just some of the many factors that may mediate this relationship

IS and Organisation Important to understand how an IS can change the social context of the organisation The lecture at the start of the year discussed information as a source of power! Lynne Markuss 1983 study MIS: Power, Politics, and MIS Implementation

The Two-Way Relationship Between Organizations and Information Technology Figure 3-1 This complex two-way relationship is mediated by many factors, not the least of which are the decisions madeor not madeby managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment.

What is an Organisation An organisation is a stable, formal social structure that takes resources from the environment and processes them to produce outputs (Laudon & Laudon) This definition focuses on 3 main elements: – Capital and Labour are the primary production factors – The inputs are transformed into products and services (outputs) – These products and services are consumed and provide supply inputs in return

Organisations They are more stable than informal groups – such as friends that meet up once a week! They are formal legal entities that have internal rules and procedures and must obide by governing laws

Organisations Organisations are also Social Structures – They are a collection of social elements – The professionals working in the organisation must come together within the social structure of the organisation

Features of Organisations 1.Routines and Business Processes 2.Organisational Politics 3.Organisation Culture 4.Organisational Environments 5.Organisational Structure

1. Routines and Business Processes Taking the definition of organisations earlier, in order to produce services and/or products an organisation will need to transform various inputs using their various capital and labour Over time a firm will develop routines for producing these goods or services. These routines are sometimes called standard operating procedures. Business processes are collections of these routines

1. Routines and Business Processes Routines or standard operating procedures are explicit rules, procedures, and practices that have been developed to cope with virtually all expected situations (Laudon and Laudon) Important to spot the limitation here!!

1. Routines and Business Processes Organisations often focus on refining and fine tuning their business processes by improving their standard operating procedures. For example, when you go to the doctors, the receptionist will rely upon well defined standard operating procedures to gather information from you; the doctor similarly will have well-defined set of routines to deal with you (Laudon & Laudon)

1. Routines and Business Processes IS can be used to improve routines and business processes Closely aligned to the material covered on TPS – By implementing a TPS an organisation may be able to gain improvements in routines – Boole Library – New IS to manage book withdrawals: stores student data, fines, book due date. This reduces the need for some manual routines that were needed previously!

1. Routines and Business Processes However, there are limitations to operational effectiveness and efficiency as a means of gaining competitive advantage Operational efficiency refers to improving the utilisation of your inputs (Michael Porter, 1996) Strategic positioning refers to performing different activities from rivals or performing similar activities in different ways

2. Organisational Politics Organisation is typically made up of many different individuals with different expertise, positions, concerns, and perspectives. The distribution of rewards, resources, punishments and so on will vary as a result Different stakeholders of the organisation will have different relative degrees of political power

2. Organisational Politics Political resistance is a huge factor in any organisational change The introduction of an IS as a change may often be met with resistance by parties holding different degrees of political power. Lynne Markus (1983) very important! Paradoxically, political power can be an important influencer of change – including IS implementation

3. Organisation Culture Organisations often have underlying assumptions, goals, routines that determine their actions The culture of the organisation will often encompass these assumptions. Business processes are usually bound within the cultural makeup of the organisation.

3. Organisation Culture These cultural assumptions will guide the various high level questions such as: – What should we produce – How should we produce – Where should we produce – Who should we produce for Organisational culture can paradoxically be a powerful restraint or a powerful influencer of change

4. Organisational Environments The environment around an organisation allows them to draw on resources and to supply goods and services On one hand, the organisation is dependent on the social and physical environment surrounding them – The human and financial resources required for their work On the other hand, organisation can influence their environments – Local services and firms may set up to serve the larger organisation (E.G. Dell in Limerick)

4. Organisational Environments Information Systems help organisations perceive changes in their environments. IS are key instruments that enable environmental scanning Environmental scanning enable organisations to identify external changes that might require an organisational response – e.g. Minimum wage changes; new corporate tax rate; etc

5. Organisational Structure Organisations have a structure or a shape. The ISs you will find in a firm are often the result of the particular structure within that firm. E.g. in a very large hospital it may be common to find many patient record systems operated by many different departments or units E.g. in a small entrepreneurial start-up company it may be common to find a range of ad hoc IS that have been added as needs required

5. Organisational Structure An large firm that has focused on improving there IS may have integrated systems in the hope to achieve effectiveness and efficiency. – Integrated systems help reduce or eliminate many duplicated and disparate sources of information – Rather than having many IS each with its own set of data/information; integrating into one central IS is much more effective Whilst desirable – its not often attainable!! (We will be focusing on this in term 2)

Implications for designing IS To deliver benefits and IS must be built with a clear understanding of the organisation in which they will be used – Environment – Structure of the org – Culture and Politics – Type of organisation and leadership – The types of business processes guiding action

IS in the pursuit of Competitive Advantage Competitive advantage is fundamental to the performance of a firm A firm that does better than others in their area are said to have competitive advantage Achieving competitive advantage is a primary focus of most firms

IS in the pursuit of Competitive Advantage Apple is considered to have a clear competitive advantage in many of their markets – There iPhones, Mac Books, iPods, iPads, iTunes all serve to facilitate Apples competitive advantage Facebook has a competitive advantage over its competitors such as bebo or myspace. Intel has competitive advantage over AMD in microprocessor chip development

IS in the pursuit of Competitive Advantage A firm with competitive advantage has either: – Access to special resources that others do not, or – They make use of commonly available resources to every competitor more efficiently and effectively iPhones do not have any unique physical resources that competitors have! However, the resources are brought together to facilitate Apples dominance in this market – Design – Look and feel, – Ease of use, – Etc

IS in the pursuit of Competitive Advantage Michael Porters competitive forces model Provides general view of firm, its competitors, and environment Five competitive forces shape fate of firm 1.Traditional competitors 2.New market entrants 3.Substitute products and services 4.Customers 5.Suppliers

Porters Competitive Forces Model Figure 3-10 In Porters competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four forces in the industrys environment: new market entrants, substitute products, customers, and suppliers.

The Value Chain Model Figure 3-11 This figure provides examples of systems for both primary and support activities of a firm and of its value partners that can add a margin of value to a firms products or services. Using Information Systems to Achieve Competitive Advantage