Organizations and Information Systems – Economic Effects MIS 2000

Outline Operation Efficiency and IS Porter's Value Chain Model Business Effectiveness and IS Business and IST strategy Porter's Competitive Forces Model Character (indirect) of IST impact on organizations Organizations and IS

IS and Economic Effects Organizational Design (structure, processes, political, culture) Efficiency of operations Economic Effects Effectiveness of business INFORMATION SYSTEMS 1 of 7 Organizations and IS

IS and Efficiency Operation efficiency: Save time & money = work faster, cheaper Problem with computers: While allowing for faster work on a old tasks, they may create time for: embellishing the tasks (unnecessary additions; e.g.: more formatting) adding odd tasks (more processing & data proliferation) idleness Manage time & follow efficiency benchmarks for tasks & processes Costs savings – major way of drawing efficiency benefits of IST! Organizations and IS2 of 7

Organizations and IS3 of 7 Model can help to determine possible savings – efficiency targets IS should be the vehicle for reaching efficiency targets Porter’s Value Chain Model

Organizations and IS4 of 7 Business Effectiveness – accomplishing competitive targets: New product (good or service) Differentiating characteristics of products (high quality, new features, combination of features) Positioning in market segments & increasing market share Customer service (speed, coverage, quality) Effectiveness targets usually formulated in strategic plans (business strategy) IS can help define business strategy, and should support it. IS and Effectiveness

Organizations and IS5 of 7 Porter’s Competitive Forces Model SUBSTITUTE PRODUCTS & SERVICES NEW MARKET ENTRANTS SUPPLIERSCUSTOMERS THE FIRM TRADITIONAL INDUSTRY COMPETITORS THE INDUSTRY Focus Old model of competition A firm must uses 5 forces (players) A firm competes on product differentiation & price (efficiency assumed) Model can help to determine competitive strategy and use IS for that (see Note)

Efficiency vs. Effectiveness The ideal is to accomplish both, but… Efficiency may counter effectiveness (e.g., working faster can be at expense of quality, an aspect of effectiveness; example in Note)* Realistic goal: Balancing efficiency and effectiveness, at least in certain aspects. IST can help (e.g., automated checks of data input in word processors, databases, spreadsheets – both speed and data accuracy accomplished) 6 of 7 Organizations and IS

Character of IS Effects Important! IS is not a magic wand that automatically efficiency & effectiveness at the organizational level. IS impact on performance is indirect: IS support professionals, managers, clerks) working on their tasks (informational aspects of tasks, or informational tasks), which support production core of an organization. IS impact on performance is more direct: When IS used in value chain, or when IS make the production technology and the organization’s product is informational in character (mass information & entertainment media, publishing, software industry). Differentiate b/w support jobs vs. job-based independent businesses. ** Information System Task User/Worker (information, knowledge) Organized data Organization’s products (goods, services) measured from efficiency and effectiveness perspectives Production Core 7 of 7 Organizations and IS