1. INFORMATION SYSTEMS & BUSINESS

2. Session objectives Upon completing this session you should be able to:
Define an information system
Distinguish between computer literacy and information systems literacy
Explain why information systems are so important
Explain why information systems are transforming organizations and management

3. Key topics Need for information systems
Approaches to information systems
Role of information systems
Opportunities with information systems

4. Need for information systems
Recent changes in the business environment:
Emergence and strengthening of global economy
Transformation of industrial economies and societies into knowledge & information-based service economies
Transformation of the business enterprise

5. Emergence of global economy
Economies worldwide depend on exports and imports
Foreign trade accounts for over 25% of the goods and services produced in the US
Success of firms today and in the future depends on their ability to operate globally
Globalization offers new opportunities and threats to businesses

6. IS & globalization Information systems provide:
Communication capabilities
Analytic power that firms need
Ability to conduct trade and manage businesses on a global scale
Controlling far-flung global corporations is a major business challenge that requires powerful information systems

7. IS, globalization & competition
Globalization and information technology bring new threats to business firms
Customers now can shop in a worldwide marketplace 24 hours a day
Phenomenon heightens competition and forces firms to play in open, unprotected worldwide markets
To become effective and profitable, firms need powerful information and communication systems

8. Globalization outcomes
Management and control must be done in a global marketplace
Competition is now in world markets
Global workgroups are commonplace
Global delivery systems are now the norm

9. Transformation of economies
Industrial economies are being transformed to knowledge & information-based service economies
Manufacturing has been moving to low-wage countries
In the new economies, knowledge & information are key ingredients in creating wealth

10. Knowledge & information
Knowledge & information revolution began at the turn of the 20th century and has gradually accelerated
Knowledge & information work now accounts for about 60% of the US gross national product and about 55% of the labor force
Knowledge & information are the foundations for many new services and products

11. Knowledge & production
Knowledge & information intense products require great deal of learning and knowledge to produce
Knowledge utilization in production of traditional products has increased significantly

12. Knowledge & IS
In knowledge & information-based economy, IT and systems take on great importance
Across all industries information and the enabling technologies have become critical strategic assets for business firms and their managers
Information systems are needed to optimize the flow of information and knowledge within the organization
Information systems also helps management maximize the firm’s knowledge resources

13. Benefits of disintermediation
The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.

14. Transformation of enterprise
Transformation of organizing and managing
Traditional business forms have been replaced
New business forms have developed
Traditional management has been transformed

15. Traditional business forms
Hierarchical & centralized
Structured arrangement of specialists
Reliance on standard operating procedures
Delivering mass-produced products and services
Targeting general mass markets

16. New business forms Flat & decentralized
Flexible arrangement of generalists
Reliance on instant information
Delivering mass customized products and services
Targeting specific markets or customers
Facilitated by information technology

17. Traditional management
Formal plans that establish goals
Rigid division of labor
Formal rules & procedures
Appeals to loyalty to ensure proper operation of the firm

18. New form of management
Informal commitments and networks to establish goals
Flexible arrangements of teams and individuals working in task forces
Customer orientation to achieve coordination among employees
Appeals to professionalism and knowledge to ensure proper operation of the firm

19. New management & IS
Information technology makes this style of management possible
Information technology makes the firm more dependent on knowledge, learning and decision-making of individual employees

20. Outcomes of enterprise transformation
Flattening of the firm
Decentralization
Flexibility of workers
Location independence
Low transaction and coordination costs
Empowerment of the worker
Collaborative work and teamwork

21. Transformation of business
How information systems are transforming business
Increase in wireless technology use, Web sites
Shifts in media and advertising
New federal security and accounting laws
Globalization opportunities
Internet has drastically reduced costs of operating on global scale
Presents both challenges and opportunities

22. Capital Investment in IT
Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2008.

23. Digital firms 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

24. Virtual Meetings: Smart Management
What are the advantages of using videoconferencing technologies? What are the disadvantages?
What is telepresence and what sorts of companies are best suited to use it as a communications tool?
What kinds of companies could benefit from using videoconferencing? Are there any companies that might not derive any benefits from this technology?

25. Corporate goals
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

26. Operational excellence
Improvement of efficiency to attain higher profitability
Information systems, technology an important tool in achieving greater efficiency and productivity
Example: Wal-Mart’s RetailLink system links suppliers to stores for superior replenishment system

27. Business model
Business model: describes how company produces, delivers, and sells product or service to create wealth
Information systems and technology: major enabling tool for new products, services, business models
Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-based DVD rentals

28. Customer & 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

29. 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.

30. Competitive advantage
Delivering better performance
Charging less for superior products
Responding to customers and suppliers in real time
Example: Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors – information systems are critical to the implementation of TPS

31. Survival Information technologies as a necessity for 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

32. Organizations & IT
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.

33. IS definitions Information system: Information vs. data
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

34. Data and Information
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.

35. IS activities Three activities 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

36. Feedback loop
Feedback – output that is returned to the appropriate members of the organization to help them
Evaluate the output
Correct the input
Computers and software are technical foundation and tools, similar to the material and tools used to build a house

37. Information systems & IT
Computers and related software programs are the technical foundations, i.e. tools and materials of modern information systems
Understanding information systems requires understanding:
Problems they are designed to solve,
Their architectural and design elements
The organizational process that lead to these solutions

38. Computers & IS
Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems. An information system creates value for the firm as an organizational and management solution to challenges posed by the environment.

39. Organizational dimension
Hierarchy of authority, responsibility
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers

40. Levels in a Firm
Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems serve each of these levels. Scientists and knowledge workers often work with middle management.

41. Business functions Separation of business functions
Sales and marketing
Human resources
Finance and accounting
Manufacturing and production
Unique business processes
Unique business culture
Organizational politics

42. Management dimension
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

43. Technology dimension 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

44. Example: UPS
Read the UPS Case and then discuss the following questions:
What are the inputs, processing, and outputs of UPS’s package tracking system?
What technologies are used by UPS?
How are these technologies related to UPS’s business strategy?
What problems do UPS’s information systems solve?
What would happen if these systems were not available?

45. UPS tracking system 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.

46. Business perspective
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

47. Business information 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

48. Information value chain
From a business perspective, information systems are part of a series of value-adding activities for acquiring, transforming, and distributing information that managers can use to improve decision making, enhance organizational performance, and, ultimately, increase firm profitability.

49. Returns from IT investments
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)

50. 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

51. Complementary assets - types
Organizational investments, e.g.
Appropriate business model
Efficient business processes
Managerial investments, e.g.
Incentives for management innovation
Teamwork and collaborative work environments
Social investments, e.g.
The Internet and telecommunications infrastructure
Technology standards