Chap - 13 Strategies for Information

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Contents

chapter 13

Strategies for information

Introduction

Examination context

Topic List1 The role of information

2 Information and communications technology inorganisations

3 The strategic value of IT/IS in business

4 Knowledge management

5 Risks associated with IT/IS

Summary and Self-test

Answers to Self-test

Answers to Interactive questions

Business strategy

590 The Institute of Chartered Accountants in England and Wales, March 2009

Introduction

Learning objectives Tick off

Explain and demonstrate how information can be used to gain competitive advantage

Identify key changes needed in an information system in order to meet changes in the needsand resources of a business

Explain how a business collects and distributes information in order to manage its strategy

Identify the risks associated with use of information technology and the controls available

Specific syllabus references for this chapter are: 3g, i, j.

Practical significanceThe history of firms coming to grief as a result of inadequate management of Information Systems andInformation Technologies (IS/IT) is long and includes:

A UK food store forced to write off CU53m of development expenditure on a supply-chainmanagement system taking with it the job of the CEO who was forced to resign.

An online toy shop that failed to deliver its presents in time for Christmas and went out of business amonth later.

The UK Government's decision to outsource all passport and essential identity background checks onteachers to a private sector provider which led to huge backlogs and resort to the issuing of desperate'interim ID papers' that put the cause of national security and child protection back years.

A major bank launching an online banking system with inadequate security leading to hundreds ofaccounts being rifled for funds and confidential information thus eroding public confidence in onlinebanking systems.

The problems following Morrison's acquisition of Safeway, discussed in Chapter 10 is anotherillustration of the risks from IT/IS.

Therefore there is a need for proper management of IT/IS to ensure that systems are appropriate tobusiness needs, that money is properly spent, and that systems are properly secure.

Stop and thinkThe UK National Health Service (NHS) is developing a Care Records Service (CRS) that will give all NHSprofessionals 24/7 access to the care record of each and every NHS patient in the UK (i.e. everyone in theUK if they have used the NHS). This has been billed as the largest IS/IT project ever and dwarfs militaryapplications to date. It is hugely complex and very expensive.

What are the potential benefits from this system to health care in UK? What technical and social issues will need to be overcome if it is to be successful? What are the technical and social risks?

Working contextYou are likely to come across organisational information systems and their operation within the context ofaudit engagements.

Many ad hoc audit assignments are to conduct independent post-implementation reviews of an IT/ISimplementation.

STRATEGIES FOR INFORMATION

The Institute of Chartered Accountants in England and Wales, March 2009 591

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The Operating and Financial Review should include a statement of risks associated with IT/IS.

Internal control evaluation will normally be a key issue in an audit of IT/IS.

Syllabus linksSome of the risks associated with IT/IS have been covered in Chapter 9.

The strategic value of IT/IS is a new topic that complements earlier chapters on strategy.

Business strategy


Examination context

Exam requirementsIn the examination you may be required to comment upon the information available for decision making in ascenario question is there enough information available? What other information is needed? Is theinformation system adequate to fulfil the functions required of it by the business?

In the context of the exam, a key aspect of information strategy is that it should provide the appropriatetype and amount of information needed by management to select, implement and control its chosenbusiness strategy. The information strategy therefore needs to match the business strategy both in terms ofthe types of information available. Also the level of detail, the form of the information and its timing shouldbe appropriate to the role of the person(s) who receive it.



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1 The role of information

Section overviewInformation takes many forms and has many roles within the organisation. It comes from internal andexternal sources.

Organisations require information for a range of purposes.

Planning Controlling Recording transactions Performance measurement Decision making

Organisations require different types of information system to provide different levels of information in arange of functional areas, supporting the distinction between strategic, tactical and operational decisionmaking.

1.1 Why do organisations need information?

DefinitionsData is the raw material for data processing. Data consists of numbers, letters and symbols and relates tofacts, events and transactions.

Information is data that has been processed in such a way as to be meaningful to the person who receivesit.

Information is now recognised as a valuable resource, and a key tool in the quest for competitive advantage.A key aspect of IT/IS is that it should provide the appropriate type and amount of information needed bymanagement to select, implement and control its chosen business strategy. The information strategytherefore needs to match the business strategy.

More detailed information is also required, however, by lower level management for the day-to-daymanagement of an organisation, its functions and its divisions.

Easy access to information, the quality of that information and speedy methods of exchanging theinformation have become essential elements of business success.

For example the following businesses are highly dependent on information:

Supermarkets and other retailers using customer information as the basis of loyalty schemes

Investment fund managers that base buy and sell decisions on a huge variety of formal and informalinformation sources

Insurance brokerages that can only quote competitive premiums if they have access to detailedassessments of the risks from the client and of the offers available from underwriters against theserisks

The main purposes of information are:

Planning

Once any decision has been made, it is necessary to plan how to implement the steps necessary to makeit effective. Planning requires a knowledge of, among other things, available resources, possible time-scales for implementation and the likely outcome under alternative scenarios.

Business strategy


Controlling

Once a plan is implemented, its actual performance must be controlled. Information is required to assesswhether it is proceeding as planned or whether there is some unexpected deviation from the plan. Itmay consequently be necessary to take some form of corrective action.

In some cases information systems control the process without any human involvement at all e.g. roboticmachinery, e-commerce transactions and automated acknowledgements.

Recording transactions

Information about each transaction or event is required for a number of reasons. Documentation oftransactions can be used as evidence in a case of dispute. There may be a legal requirement to recordtransactions, for example for accounting and audit purposes. Detailed information on production costs canbe built up, allowing a better assessment of profitability. Similarly, labour utilised in providing aparticular service can be measured. Structured systems can be installed to capture transactions data.

Performance measurement

Just as individual operations need to be controlled, so overall performance must be measured in order toenable comparisons against budget or plan to be carried out. This may involve the collection ofinformation on, for example, costs, revenues, volumes, time-scale and profitability. It may also include nonfinancial information and other metrics such as KPIs in a balanced scorecard.

Decision making

Information is also required to make informed strategic and management decisions. This completes the fullcircle of organisational activity.

1.2 Levels of information in the organisationA modern organisation requires a wide range of systems to hold, process and analyse informationOrganisations require different types of information system to provide different levels of information in arange of functional areas. Strategic planning, management control and operational control may beseen as a hierarchy of decisions. This is sometimes called the Anthony hierarchy, after the writer RobertAnthony. One way of portraying this concept is shown on the following diagram.

Types of information systems



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System level System purpose

Strategic To help senior managers with long-term planning, and in assessing whether objectivesare being met. Information provided by such systems include overall profitability, theprofitability of different segments of the business, future market prospects, theavailability and cost of raising new funds, total cash needs, total manning levels andcapital equipment needs. The main function of such systems is to ensure that changesin the external environment are matched by the organisation's capabilities.

Management/tactical

To help middle managers monitor and control. Such information includes productivitymeasurements, budgetary control or variance analysis reports, forecasts and resultsfor particular departments, and short term purchasing requirements. These systemscheck if things are working well or not. Some management-level systems supportnon-routine decision making such as 'what if?' analyses.

Knowledge To help knowledge and data workers design products, distribute information andperform administrative tasks. These systems help the organisation integrate new andexisting knowledge into the business and to reduce the reliance on paper documents.

Operational To help operational managers track the organisation's specific and day-to-dayoperational activities. These systems enable routine queries to be answered, andtransactions to be processed and tracked.

The point to note from the above diagram is that the higher level applications such as managerialinformation depend to a great extent on skimming data from the operational systems maintained by thedifferent functional departments for their own purposes.

Strategic information Tactical information Operational information

Derived from both internal andexternal sources

Summarised at a high level

Relevant to the long term

Concerned with the wholeorganisation

Often prepared on an ad hocbasis

Both quantitative andqualitative

Uncertain, as the futurecannot be accuratelypredicted

Primarily generated internally(but may have a limitedexternal component)

Summarised at a lower level

Relevant to the short andmedium term

Concerned with activities ordepartments

Prepared routinely andregularly

Based on quantitativemeasures

Derived from internal sources

Detailed, being the processingof raw data

Relevant to the immediateterm

Task-specific

Prepared very frequently

Largely quantitative

Worked example: An evening newspaper Operational information will include supplies and returns from vendors to support invoicing, costs of

production, controls over inventories of paper, ink etc, hours worked by staff to support payroll,health and safety compliance.

Managerial information will include levels of sales to plan production runs of each edition (up to sevena day in some cities), the quality of stories and likely interest in them to plan production runs,advertising sales and success of special editions, supplements etc, the weather on the day and itseffects on sales. Clearly the main information that will be used at this level will be the articles andstories themselves and the editorial team will decide inclusion and position of each.

Business strategy


Strategic information includes the plans of rival newspaper owners, the policies of the presswatchdogs, potential sources of new advertising revenues, new printing technologies, the costs andefficiency of the various printing plants operated by the firm potential new markets for newspapers(e.g. morning free papers).

Knowledge level refers to a cadre of knowledge workers who use information from the operationalsystems in their work. Examples include:

Management accountants preparing month-end reports Credit controllers deciding which accounts to suspend and which debts to chase

1.3 The qualities of good informationThe qualities of good information are outlined below in mnemonic form. If you think you have seenthis before, note that the second A here stands for 'Authoritative', an increasingly important concerngiven the huge proliferation of information sources available today.

Quality Example

Accurate Figures should add up, the degree of rounding should be appropriate, thereshould be no typos, items should be allocated to the correct category,assumptions should be stated for uncertain information (no spurious accuracy).

Complete Information should includes everything that it needs to include, for exampleexternal data if relevant, or comparative information.

Cost-beneficial It should not cost more to obtain the information than the benefit derived fromhaving it. Providers of information should be given efficient means of collecting andanalysing it. Presentation should be such that users do not waste time working outwhat it means.

User-targeted The needs of the user should be borne in mind, for instance senior managers mayrequire summaries, junior ones may require detail.

Relevant Information that is not needed for a decision should be omitted, no matter how'interesting' it may be.

Authoritative The source of the information should be a reliable one (not, for instance, 'JoeBloggs' Predictions Page' on the Internet unless Joe Bloggs is known to be a reliablesource for that type of information).

Timely The information should be available when it is needed.

Easy to use Information should be clearly presented, not excessively long, and sent usingthe right medium and communication channel (e-mail, telephone, hard-copyreport etc).



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1.4 Information requirements in different sectors

Sector Information type Example(s) General comments

Strategic Future demand estimates

New productdevelopment plans

Competitor analysis

Tactical Variance analysis

Departmental accounts

Inventory turnover

Manufacturing

Operational Production reject rate

Materials and labourused

Inventory levels

The information requirements ofcommercial organisations areinfluenced by the need to make andmonitor profit. Information thatcontributes to the followingmeasures is important:

Changeover times

Number of common parts

Level of product diversity

Product and process quality

Strategic Forecast sales growthand market share

Profitability, capitalstructure

Tactical Resource utilisation suchas average staff timecharged out, number ofcustomers perhairdresser, number ofstaff per account

Customer satisfactionrating

Service

Operational Staff timesheets

Customer waiting time

Individual customerfeedback

Organisations have become morecustomer and results-oriented overthe last decade. As a consequence,the difference between service andother organisation's informationrequirements has decreased.Businesses have realised that mostof their activities can be measured,and many can be measured insimilar ways regardless of thebusiness sector.

Business strategy


Sector Information type Example(s) General comments

Strategic Population demographics

Expected governmentpolicy

Public sector (and non-profitmaking) organisations often don'thave one overriding objective.Their information requirementsdepend on the objectives chosen.The information provided oftenrequires interpretation (e.g. studentexam results are not affected bythe quality of teaching alone).

Information may compare actualperformance with:

Standards

Targets

Similar activities

Indices

Activities over time as trends

Tactical Hospital occupancy rates

Average class sizes

Percent of reportedcrimes solved

Public sector

Operational Staff timesheets

Vehicles available

Student daily attendancerecords

Strategic Activities of othercharities

Government (and insome cases overseasgovernment) policy

Public attitudes

Tactical Percent of revenue spenton admin

Average donation

'Customer' satisfactionstatistics

Non-profit /charities

Operational Households collectedfrom / approached

Banking documentation

Donations

Many of the comments regardingpublic sector organisations can beapplied to not-for-profitorganisations.

Information to judge performanceusually aims to assess economy,efficiency and effectiveness.

A key measure of efficiency forcharities is the percentage ofrevenue that is spent on thepublicised cause (e.g. rather than onadvertising or administration).



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Interactive question 1: Strategic decision making [Difficulty level: Intermediate]Decision making at the strategic level in organisations needs to be supported by information systems thatare flexible and responsive.

Requirement

(a) Describe the characteristics of information flows at the strategic level.

(b) Describe the sources of information required for strategic decision making and the characteristics ofan information system used to provide strategic information.

See Answer at the end of this chapter.

2 Information and communications technology (ICT)in organisations

Section overviewModern applications of ICT have moved beyond mechanisation of clerical tasks into becoming a strategicforce in their own right.

Developments in IT/IS have encouraged the flattening of organisation hierarchies and wideningspans of control.

The boundaries of organisations have become permeable as information is shared withcustomers, suppliers and business partners. Many staff now work from home as tele-workers.

The benefits of any new information system must however always be weighed against the costs.

2.1 Types of system

DefinitionsInformation systems (IS): These include all systems and procedures involved in the collection, storage,production and distribution of information.

Information technology (IT): This term describes the equipment used to capture, store, transmit orpresent information. IT provides a large part of the information systems infrastructure.

Information management: This refers to the approach that an organisation takes towards themanagement of its information systems, including:

Planning IS/IT developments Organisational environment of IS Control Technology

Business strategy


The use of IT has permitted the design of a range of information systems. We can identify seven types ofinformation system.

Executive Support Systems (ESS) Management Information Systems (MIS) Decision-Support Systems (DSS) Expert systems (ES) Knowledge Work Systems (KWS) Office Automation Systems (OAS) Transaction Processing Systems (TPS)

DefinitionsExecutive Support System (ESS) pools data from internal and external sources and makes informationavailable to senior managers in an easy-to-use form. ESS help senior managers make strategic, unstructureddecisions (sometimes called Executive Information Systems).

Management Information Systems (MIS) convert data from mainly internal sources into information(e.g. summary reports, exception reports). This information enables managers to make timely and effectivedecisions for planning, directing and controlling the activities for which they are responsible.

Decision Support Systems (DSS) combine data and analytical models or data analysis tools to supportsemi-structured and unstructured decision making.

An Expert system is a computer program that captures human expertise in a limited domain ofknowledge.

Knowledge Work Systems (KWS) are information systems that facilitate the creation and integrationof new knowledge into an organisation.

Knowledge Workers are people whose jobs consist of primarily creating new information andknowledge. They are often members of a profession such as doctors, engineers, lawyers and scientists.

Office Automation Systems (OAS) are computer systems designed to increase the productivity of dataand information workers.

A Transaction Processing System (TPS) performs and records routine transactions.

Worked example: The medical profession Executive Support Systems (ESS): The general managers of hospitals will have information on bed

usage, costs of procedures, the demographics of the hospital catchment, the priorities of government,the care provided nearby and the potential for epidemics or other issues. They will use this to setpriorities and decide the levels of provision for the coming years.

Management Information Systems (MIS): Managers exist at many levels such as practices, wards,clinics, procurement divisions etc. They will use information on demand and resource availability, costsand revenues etc to ensure care is given within budget. They will use balanced scorecard measures toensure all is controlled.

Decision-Support Systems (DSS): Clinical staff may use systems such as scans, blood test data,information on the patient's history and information on drug doses and effects to decide how to treatthe patient.

Expert systems: Some telephone triage services (e.g. NHS Direct in the UK) gather informationfrom the caller about the symptoms using a structured set of questions and the system will inferpotential causes and will generate further questions leading to a preliminary diagnoses and decision oncourse of action such as calling paramedics, recommending pain killers, etc.



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Knowledge Work Systems (KWS): Clinical staff will complete records and reports on officeautomated systems. They may keep up to date with their areas with on-line journals. Some specialistsuse teleconferencing and image sharing workflow systems to discuss cases or to provide expertdiagnoses to remote hospitals.

Office Automation Systems (OAS): The patient appointment system will be automated and allcorrespondence typed. The hospital menus will be prepared in a graphics package as will occasionalsignage.

Transaction Processing Systems (TPS): The pharmacy will order and dispense stock through itsTPS.

2.2 Intranets and extranetsOrganisations are increasingly using intranets and extranets to disseminate information.

An intranet is like a mini version of the Internet (covered in the following section). Organisationmembers use networked computers to access information held on a server. The user interface is abrowser similar to those used on the Internet. The intranet offers access to information on a widevariety of topics, and often includes access to the Internet.

An extranet is an intranet that is accessible to authorised outsiders, using a valid username andpassword. The username will have access rights attached determining which parts of the extranetcan be viewed. Extranets are becoming a very popular means for business partners to exchangeinformation.

2.3 The Internet

DefinitionThe Internet is a global network connecting millions of computers.

The Internet is the name given to the technology that allows any computer with a telecommunications linkto send and receive information from any other suitably equipped computer

The World Wide Web is the multimedia element which provides facilities such as full-colour, graphics,sound and video. Websites are points within the network created by members who wish to provide aninformation point for searchers to visit and benefit by the provision of information and/or by entering into atransaction.

Almost all companies have a Website on the Internet. A site is a collection of screens providinginformation in text and graphic form, any of which can be viewed simply by clicking the appropriatebutton, word or image on the screen.

The Internet provides opportunities to organise and automate tasks which would previously have requiredmore costly interaction with the organisation. These have often been called low-touch or zero-touchapproaches.

2.4 The benefits of a proposed information systemThe benefits from a proposed information system should be evaluated against the costs. To quantify thebenefits several factors need to be considered.

Business strategy


Increased revenue

Improved data collection, storage and analysis tools may indicate previously unknown opportunitiesfor sales. Such tools may include data-mining software which allows relationships to be discoveredbetween previously unrelated data.

Cost reduction

New technology can be used to automate previously manually intensive work. This saves staff time andmay result in a smaller workforce being required.

Systems such as stock control can benefit as losses from obsolescence and deterioration are reduced.

Enhanced service

Computerised systems that create a more prompt and reliable service will increase customersatisfaction. In some cases it may be a source of competitive advantage.

Improved decision making

Providing decision makers with the most accurate and up-to-date information that is possible can havesubstantial benefits. The main areas of benefit are:

Forecasting

Models can be created to forecast sales trends and the likely affect on costs. Organisations thatcan make accurate forecasts are in a better position to plan their structure and finances toensure long-term success.

Developing scenarios

Organisations facing uncertain times, or those which operate in dynamic, evolving environments,need to make complex decisions (often quickly) to take advantage of opportunities or to avoidthreats. Scenario planning models enable a wide range of variables to be changed (such asinflation rates or sales numbers), the overall effect on the business to be identified and a businessplan to be constructed.

Market analysis

Modelling can be extended into the market that the organisation operates in. Trends such assales volumes, prices and demand can be analysed. Relationships between price and sales volumecan be identified. These can be used by an organisation when deciding on a pricing strategy.Setting the best price for a product can help drive up sales and profitability.

Project evaluation

Organisations will benefit from improved decision making where systems can accurately evaluatea wide range of projects. Investment decisions often involve large capital outlays and if the systemprevents bad decisions it can prevent the organisation wasting large sums of money.

Systems can also prevent an organisation agreeing 'bad' deals. Tenders for suppliers or otherlong-term contracts can prove costly if the wrong choice is made.

3 The strategic value of IT/IS in business

Section overview Business analysis views the information system in the context of the organisation's operations and

strategy.

Portfolio techniques assess the relationship between information systems and business operations andperformance.

As the importance of information has increased, organisations have realised that information systemsand information technology can be used as a source of competitive advantage.



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3.1 Strategic implicationsWhen formulating an overall information technology strategy the following aspects should be taken intoconsideration:

What are the key business areas which could benefit most from an investment in informationtechnology, what form should the investment take, and how could such strategically important units beencouraged to use such technology effectively?

How much would the system cost in terms of software; hardware; management commitment andtime; education and training; conversion; documentation; operational manning; and maintenance? Theimportance of lifetime application costs must be stressed according to Roger Lee:

'Most companies try to assess how much it will cost them to install an information technologyfunction, but all too few measure the costs and benefits after implementation. Yet this is the areaof greatest potential loss.'

What criteria for performance should be set for information technology systems. Again quoting RogerLee:

'The quality of an information technology application should be measured in two ways: thetechnical standard it achieves and the degree to which it meets the perceived and often changingneeds of the user.'

What are the implications for the existing work force have they the requisite skills; can they betrained to use the systems; will there be any redundancies?

Whether such a strategy is based on a database approach will depend on a number of factors.According to the US Department of Commerce a database approach is called for when:

Application needs are constantly changing, with considerable uncertainty as to the important dataelements, expected update or processing functions and expected volumes to be handled.

Rapid access is frequently required to answer ad hoc questions.

There is a need to reduce long lead times and high development costs in developing newapplication systems.

Many data elements must be shared by users throughout the organisation.

There is a need to communicate and relate data across functional and department boundaries.

There is a need to improve the quality and consistency of the database and to control access tothat resource.

Substantial dedicated programming assistance is not normally available.

3.2 Earl's systems audit gridEarl suggests a grid to analyse an organisation's current use of information systems

BusinessHigh Renew Maintain, enhance

valueLow Divest Reassess

Low High

Technical quality

Business strategy


A system of poor quality and little value should be disposed of (divest).

A system of high business value and low technical quality should be renewed (invested in). Animportant system of low quality carries a high business risk.

A system of high quality but low business value should be reassessed. Is the system meeting aninformation need? Why is it under-utilised?

High quality systems with a high business value should be maintained to preserve the high quality,and if possible enhanced in the quest for competitive advantage.

Establishing where to place systems on the grid is the difficult part. Consultation with system users andthose for formulating and implementing information system strategy would be undertaken to form anopinion of each system. Again, judgements are subjective.

3.3 The strategic grid (McFarlan/McKenney)The importance of IS/IT to an organisation was studied by McFarlan and McKenney back in the early 1980s.

They devised a matrix designed to show the level of dependence on IS/IT within an organisation. The gridclassifies four levels of dependence.

High Turnaround Strategic

Low Support Factory

Low High

Strategicimportance ofplannedinformationsystems

Strategic importance of currentinformation systems

Organisations in the strategic quadrant currently depend on IS/IT for competitive advantage, andexpect to continue to do so.

Organisations in the turnaround quadrant do not currently view IS/IT as having strategic importance,but expect IS/IT will be strategically important in the future.

Organisations in the support quadrant see no strategic value in IS/IT.

Organisations in the factory quadrant see IS/IT as strategically significant at the moment, but predictthis will not be the case in the future.

3.4 The value chain and IT/ISValue chain analysis, also covered in Chapter 5 can be used to assess the impact of IS/IT, and to identifyprocesses where IT could be used to add value.

IT can be used to automate and improve physical tasks in the manufacturing sector. It also providesextra information about the process.

3.4.1 Operations

Process control: Computer systems enable tighter control over production processes.

Machine tool control: Machine tools can be automated and, it is hoped, be made more precise.

Numerical control: Information to operate the machine tool is prepared in advance togenerate a set of instructions

Computer numerical control is where the computer produces the instructions

Direct numerical control is where the computer is linked directly to the machine tool.



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Robots can automate some of the process.

Computer aided manufacturing (CAM) involves a variety of software modules such as:

Production control, supervisory systems

Materials requirement planning (MRP 1) and Manufacturing Resources Planning (MRP II). Theseare automated component ordering and automated production scheduling systems respectively.

Capacity requirements planning

Computer Integrated Manufacturing (CIM) integrates all aspects of an organisation'smanufacturing activities. 'IT cannot solve basic organisational problems, but the essence is the use ofthe IT to provide integration though communication, effectiveness and efficiency'. Flexiblemanufacturing systems include:

Machine tools Materials handling conveyor sets Automatic guided vehicles

Enterprise Resource Planning (ERP) systems take MRP II systems a step further, and are notrestricted to certain types of organisation. ERP systems are used for identifying and planning theenterprise-wide resources needed to record, produce, distribute, and account for customer orders.

3.4.2 Logistics

In both inbound logistics and outbound logistics IT can have an impact.

The use of IT in inbound logistics includes stock control systems such as MRP, MRPII, ERP and IT.

Warehousing: The use of barcodes can increase knowledge about the quantity and nature of stock inhand.

It is possible to create computer models, or virtual warehouses, of stock actually held at suppliers.For example an organisation with several outlets might have each connected to a system whichindicates the total amount of stock available at different sites.

3.4.3 Marketing

Marketing and services can be made more effective by customer databases enabling market segmentation.

Buying and analysing a mailing list is a more precise method of targeting particular groups ofconsumers than television advertising.

A variety of market research companies use IT to monitor consumers' buying habits.

Supermarkets can use automated EPOS systems to have a precise hour-by-hour idea of howproducts are selling to enable speedy ordering and replenishments.

3.4.4 Service

Customer relationship management (CRM) describes the methodologies, software, and usuallyInternet capabilities that help an enterprise manage customer relationships.

For example, an enterprise might build a database about its customers that described relationships insufficient detail so that management, salespeople, service staff, and maybe the customer, could accessinformation, match customer needs with product plans, remind customers of service requirements andknow what other products a customer had purchased.

CRM consists of:

Helping an enterprise to identify and target their best customers, manage marketing campaigns withclear goals and objectives, and generate quality leads.

Assisting the organisation to improve telesales, account, and sales management by optimisinginformation shared, and streamlining existing processes (for example, taking orders using mobiledevices).

Business strategy


Allowing the formation of relationships with customers, with the aim of improving customersatisfaction and maximising profits; identifying the most profitable customers and providing them withthe highest level of service.

Providing employees with the information and processes necessary to know their customers,understand their needs, and effectively build relationships between the company, its customer base,and distribution partners.

3.4.5 Support activities

As far as support activities are concerned IT has some impact.

Procurement: IT can automate some purchasing decisions. Paperwork can be saved if theorganisation's purchase systems are linked directly to the sales order systems of some suppliers (e.g.by electronic data interchange).

Technology development. Computer automated design (CAD) is, in a number of areas, animportant influence.

Drafting: CAD produces engineer's drawings, component design, layout (e.g. of stores, wiringand piping) and electronic circuit diagrams in complex systems.

Updating: It is easy to change design in CAD systems and to assess ramifications of any changes.Some CAD systems have archive data (e.g. for reference).

CAD enables modelling to be checked without the necessity of producing working prototypes.Some 'stress testing' can be carried out on the model.

There is perhaps less impact on human resources. However, the HR applications include themaintenance of a skills database, staff planning (e.g. using network analysis), computer based training,time attendance systems, payroll systems, pension systems.

Worked example: Fast-growing firms say IT is their edgeThe fastest-growing companies in the United States attribute their competitive advantage to an edge in IT.A PricewaterhouseCoopers survey found that 52% of the 436 CEOs interviewed said that their companieshave a competitive edge in computer and information technology. The companies are identified as thefastest-growing U.S. businesses over the last five years.

The 'trendsetter' companies 'with an IT advantage are reaping the benefits,' Jim Atwell, global private equitydirector at PricewaterhouseCoopers, said in a statement. 'Their composite revenues have grown 20-foldover the past 5 years, 45% faster growth than their counterparts without an IT edge. And they also tend tobe larger with 58% higher revenues and 56% more employees.'

The study found that service firms lead product vendors in claiming an IT advantage, 58% compared to 46%.57% of the companies surveyed report having financial analysis/cash management systems; 52% have salesinformation systems; 37% have sales/customer service systems; 28% have marketing systems; and 24% havecustomer 'end user' systems. In addition, 47% report the Internet as being very important to their business.

Nearly all of the CEOs of the companies studied (97%) rated computers and information technology asimportant to their company's profitable business growth over the past two years, with 80% rating them asextremely or very important.

Companies that rated IT as extremely important to their business have grown their revenues ten-fold overthe past five years, or 72% faster than those who did not rate it as highly. Likewise, 96% of the CEOs saidcomputers and IT have generally lived up to their expectations for increased business productivity. 60%rated IT as performing extremely or very well against their original expectation.

Although a majority of the companies studied praised IT as a business necessity, 84% of growing companies'CEOs now express concern about information security, an increase of seven points from a similar studydone two years ago. 31% say security is a major concern, with this high degree of discomfort moreprevalent among service than product firms. To address this issue, more than half of the CEOs of thesecompanies have documented disaster recovery plans in place for IT emergencies.



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Looking ahead over the next year, 32% of the companies surveyed said they are planning to increase theirlevels of investment in computers and information technology, while only 11% are cutting back. About 55%expect to continue with current IT spending levels, and the remaining 2% are uncertain.

4 Knowledge management

Section overview Knowledge management (KM) refers to the harnessing of ICT to develop and disseminate relevant

knowledge throughout the organisation.

KM is a source of competitive advantage because it encourages process improvement and innovation.

Certain office efficiency applications are essential for effective KM.

4.1 Knowledge management programmes

DefinitionsKnowledge is information within people's minds.

Knowledge management describes the process of collecting, storing and using the knowledge heldwithin an organisation.

Knowledge Work Systems (KWS) are information systems that facilitate the creation and integrationof new knowledge into an organisation.

Knowledge workers are people whose jobs consist primarily of creating new information and knowledge.They are often members of a profession such as doctors, engineers, authors, lawyers and scientists.

Data workers process and distribute information, e.g. secretary, accounts clerk.

Knowledge management programmes extend beyond any particular piece of IT/IS and embrace changingthe attitudes of management and staff towards sharing information. They concern:

Designing and installing techniques and processes to create, protect and use explicit knowledge(that is knowledge that the company knows that it has). Explicit knowledge includes facts, transactionsand events that can be clearly stated and stored in management information systems.

Designing and creating environments and activities to discover and release tacit knowledge(explained below).

Tacit knowledge is expertise held by people within the organisation that has not been formallydocumented.

Tacit knowledge is a difficult thing to manage because it is invisible and intangible. We do not know whatknowledge exists within a person's brain, and whether he or she chooses to share knowledge is a matter ofchoice.

The motivation to share hard-won experience is sometimes low; the individual is 'giving away' their valueand may be very reluctant to lose a position of influence and respect by making it available to everyone.

Organisations should encourage people to share their knowledge. This can be done through a culture ofopenness and rewards for sharing knowledge and information.

Business strategy


Worked example: Mittal SteelBill Scotting, Director of Continuous Improvement at Mittal Steel, identifies the role of KnowledgeManagement as a rationale for growth by acquisition.

'Over the past decade and a half, Mittal Steel has grown into the world's leading steel producer. Thisachievement is I think testament not just to our ability to make the right acquisitions, but also to makethose acquisitions work for us. I think that in a company that grows so much through acquisition thatknowledge management is a vital part of it. A company formed through a merger or an acquisition will havemore knowledge than the two companies before the union, and the scope and potential that comes fromthis knowledge increases. The companies differ in geography, in history, in culture, and in operatingpractices bringing people together to benchmark, to share experiences and best practices, and to evenundertake joint problem solving. We try to foster knowledge sharing, and we always encourage ourmanagers to think entrepreneurially. I think with the various acquisitions we've made we've achieved thebenefits, be they financial or operational. By really focusing on addressing the business needs in each case.We've made targeted capital investments. We've applied our knowledge management programme. We'vepromoted the sharing of product and process capabilities. But I think most of all what drives all of this isthat it's the sharing of the knowledge and the experiences of the diverse management team that has cometogether to form this group through all these acquisitions that's what underpins success at the end of theday.

In 1992 we acquired a flat products producer in Mexico. In the year before we bought it, it was shippingaround half a million tons of production. It's now regularly doing 4 million tons. That's an eightfold increasein output. Temirtau in Kazakhstan is another one we acquired in I think 1995. It's grown from a productionand output of around 2.5 million tons at that time to over 4 million tons today. Since buying in South Africain 2001 we have successfully increased production by over a million tons at that operation. But it's not justabout increasing output and production in emerging countries. If I think of the developed world, think ofEurope, in Germany in 1995 we bought a long products business. In 2004, the peak of the market, weactually produced 20% more than it had been doing at that time. And in the US, at Inland Steel, a producerwe bought in 1998, we have seen an improvement in output of around 300,000 tons at that facility. Andthat's from a very strong starting base. I think in both these latter cases we've not just been focused onvolume growth, but we've also improved the value added mix through product development and processinnovation.'

Source: Securities and Exchanges Commission filing June 2006 (adapted)

Interactive question 2: Data and knowledge work [Difficulty level: Intermediate]In traditional industrial economies a large proportion of businesses produced or assembled goods and mostemployees worked in factories.

Many countries now have an information economy where most wealth originates in information andknowledge production and the majority of workers process or create information. Information work isdivided into two groups: data and knowledge work.

Requirements

(a) Distinguish between data workers and knowledge workers.

(b) Outline the role of a professional accountant as both a data worker and a knowledge worker andbriefly describe the support systems they require to work effectively.




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4.2 Systems that aid knowledge managementInformation systems play an important role in knowledge management, helping with information flowsand helping formally capture the knowledge held within the organisation.

Worked example: How to facilitate knowledge sharingThe business trend for the new millennium might well be summed up as, 'Tradition is out, innovation is in.'World-class companies now realise that the best ideas do not necessarily come from the executiveboardroom but from all levels of the company; from line workers all the way through to top management.

Companies that have cultures that encourage best practice sharing can unlock the rich stores ofknowledge within each employee: sharing promotes overall knowledge, and facilitates further creativity.World-class companies are innovatively implementing best practice sharing to shake them of out of the rutof 'the way it's always been done.' Programs such as General Electric's Work-Out sessions or Wal-Mart'sSaturday meetings help employees challenge conventions and suggest creative new ideas that drive processimprovement, increased efficiency, and overall, a stronger bottom line.

The fundamental goal of knowledge management is to capture and disseminate knowledge across anincreasingly global enterprise, enabling individuals to avoid repeating mistakes and to operate moreintelligently striving to create an entire learning organisation that works as efficiently as its mostseasoned experts.

Best Practices' recently updated report, Knowledge Management of Internal Best Practices, profiles innovativemethods used by world-class companies to communicate best practices internally. The study providesrecommendations for how to create a best practice-sharing culture through all levels of the organisation,how to use both external and internal sources to find best practices and how to capture that knowledgeand communicate it to all employees.

Best Practices, LLC contacted over fifty leading companies at the vanguard of knowledge management tocompile its report. Some of the vital issues these thought leaders addressed include measurement andmanagement of intellectual assets, best practice identification and recognition systems, best practiceprioritisation systems, communication of best practices, and knowledge sharing through technology.For example, in the area of best practice communications, the report examines how General Electricspreads best practices with regular job rotations.

4.3 GroupwareGroupware is a term used to describe software that provides functions for the use of collaborative workgroups.

Typically, groups utilising groupware are small project-oriented teams that have important tasks and tightdeadlines. Perhaps the best-known groupware products at present are Lotus Notes and MicrosoftExchange. However, there are many related products and technologies.

Features might include the following:

A scheduler (or diary or calendar), allowing users to keep track of their schedule and plan meetingswith others.

An electronic address book to keep personal and business contact information up-to-date and easyto find. Contacts can be sorted and filed in any way.

To do lists. Personal and business to-do lists can be kept in one easy-to-manage place, and tasks canquickly be prioritised.

A journal, which is used to record interactions with important contacts, record items (such as e-mailmessages) and files that are significant to the user, and record activities of all types and track them allwithout having to remember where each one was saved.

A jotter for jotting down notes as quick reminders of questions, ideas, and so on.

Business strategy


4.4 WorkflowWorkflow is a term used to describe the defined series of tasks within an organisation to produce a finaloutcome. Sophisticated workgroup computing applications allow the user to define different workflows fordifferent types of jobs. For example, in a publishing setting, a document might be automatically routed fromwriter to editor to proof reader to production.

Workflow systems can be described according to the type of process they are designed to deal with. Thereare three common types.

Image-based workflow systems are designed to automate the flow of paper through anorganisation, by transferring the paper to digital 'images'. These were the first workflow systems thatgained wide acceptance. These systems are closely associated with 'imaging' (or 'document imageprocessing' (DIP)) technology, and help with the routing and processing of digitised images.

Form-based workflow systems (form-flow) are designed to route forms intelligently throughout anorganisation. These forms, unlike images, are text-based and consist of editable fields. Forms areautomatically routed according to the information entered on them. In addition, these form-basedsystems can notify or remind people when action is due.

Co-ordination-based workflow systems are designed to help the completion of work byproviding a framework for co-ordination of action. Such systems are intended to improveorganisational productivity by addressing the issues necessary to satisfy customers, rather thanautomating procedures that are not closely related to customer satisfaction.

4.4.1 Intranets and extranets

An intranet is an internal network used to share information. Intranets utilise Internet technology andprotocols. The firewall surrounded an internet fends off unauthorised access.

The benefits of intranets are:

Savings accrue from the elimination of storage, printing and distribution of documents that canbe made available to employees on-line.

Documents on-line are often more widely used than those that are kept filed away, especially if thedocument is bulky (e.g. manuals) and needs to be searched. This means that there areimprovements in productivity and efficiency.

It is much easier to update information in electronic form.

Wider access to corporate information should open the way to more flexible working patterns,e.g. material available on-line may be accessed from remote locations.

An extranet is an intranet that is accessible to authorised outsiders. Only those outsiders with a validusername and password can access an extranet, with varying levels of access rights enabling control overwhat people can view. Extranets are becoming a very popular means for business partners to exchangeinformation.

Extranets therefore allow better use of the knowledge held by an organisation by facilitating access to thatknowledge.

Interactive question 3: Information and knowledge management[Difficulty level: Intermediate]

Increasingly the management of information sharing and group working ventures is a fundamental part ofbusiness management.

Requirements

(a) Discuss how the management of information might differ from the management of knowledge.

(b) How can an organisation develop a knowledge strategy?




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5 Risks associated with IT/IS

Section overview The risks of IT/IS can be summarised as:

The risk of inadequacy: the failure by the firm to utilise IT/IS as effectively as its rivals will leadto loss of competitive advantage, e.g. inferior service, poorer products, excess costs.

The risk of breakdown: where the firm depends on IT/IS a breakdown in its operationsthreatens the business.

The risk of excess expense: IT/IS is a significant budget item. Botched projects, expensivecontracts, inappropriate systems or non-adoption presents a direct financial risk.

Risks are present at the system specification stage, and they carry through to implementation. Thereis also the risk of systems failure. Controls are therefore needed to protect data and information.

5.1 Development and implementation what can go wrongSome of these issues involve change and project management which we have covered elsewhere.

Problems that occur when implementing a new information system can usually be traced to deficiencies inthe development and specification process. The following table outlines some common mistakes thatadversely affect the implementation process.

Stage/activity Problems

Analysis The problem the system is intended to solve is not fully understood.

Investigation of the situation is hindered by insufficient resources.

User input is inadequate through either lack of consultation or lack of userinterest.

The project team is unable to dedicate the time required.

Insufficient time spent planning the project.

Design Insufficient user input.

Lack of flexibility. The organisation's future needs are neglected.

The system requires unforeseen changes in working patterns.

Failure to perform organisation impact analysis. An organisational impactanalysis studies the way a proposed system will affect organisation structure,attitudes, decision making and operations. The analysis aims to ensure thesystem is designed to best ensure integration with the organisation

Organisational factors sometimes overlooked include:

Ergonomics (including equipment, work environment and user interfaces)

Health and safety

Compliance with legislation

Job design

Employee involvement

Business strategy


Stage/activity Problems

Programming Insufficient time and money allocated to programming.

Programmers supplied with incomplete or inaccurate specifications.

The logic of the program is misunderstood.

Poor programming technique results in programs that are hard to modify.

Programs are not adequately documented.

Testing Insufficient time and money allocated to testing.

Failure to develop an organised testing plan.

Insufficient user involvement.

User management do not review and sign-off the results of testing.

Conversion Insufficient time and money allocated to data conversion.

Insufficient checking between old and new files.

The process is rushed to compensate for time overruns elsewhere.

Implementation Insufficient time, money and/or appropriate staff mean the process has to berushed.

Lack of user training increases the risk of system under-utilisation andrejection.

Poor system and user documentation.

Lack of performance standards to assess system performance against.

System maintenance provisions are inadequate.

A recurring theme when examining the reasons for information system failure is user resistance. Users maybe management and staff, but for outward-facing systems equally could involve customers, suppliers andother partners.

The three types of theories to explain user resistance are explained in the following table.

Theory Description Overcoming the resistance

People-oriented User-resistance is caused by factorsinternal to users as individuals or as agroup.

For example, users may not wish todisrupt their current work practicesand social groupings.

User training.

Organisation policies.

Persuasion.

User involvement in systemdevelopment.

System-oriented User-resistance is caused by factorsinherent in the new system designrelating to ease of use andfunctionality.

For example, a poorly designed user-interface will generate user-resistance.

User training and education.

Improve user-interface.

Ensure users contribute to thesystem design process.

Ensure the system 'fits' with theorganisation.



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Theory Description Overcoming the resistance

Interaction User-resistance is caused by theinteraction of people and the system.

For example, the system may be well-designed but its implementation willcause organisational changes that usersresist e.g. reduced chance of bonuses,redundancies, monotonous work.

Re-organise the organisation beforeimplementing the system.

Redesign any affected incentiveschemes to incorporate the newsystem.

Promote user participation andencourage organisation-wideteamwork.

Emphasise the benefits the systembrings.

5.2 Security controls

DefinitionSecurity means the protection of data from unauthorised modification, disclosure or destruction, and theprotection of the information system from the degradation or non-availability of services in other words,system failure.

The risks to data are:

Human error

Entering incorrect transactions Failing to correct errors Processing the wrong files

Technical error such as malfunctioning hardware or software Natural disasters such as fire, flooding, explosion, impact, lightning Deliberate actions such as fraud Commercial espionage Malicious damage Industrial action

Security can be subdivided into a number of aspects.

Prevention: It is in practice impossible to prevent all threats cost-effectively.

Detection: Detection techniques are often combined with prevention techniques: a log can bemaintained of unauthorised attempts to gain access to a computer system.

Deterrence: As an example, computer misuse by personnel can be made grounds for dismissal.

Recovery procedures: If the threat occurs, its consequences can be contained.

Correction procedures: These ensure the vulnerability is dealt with (for example, by institutingstricter controls).

Threat avoidance: This might mean changing the design of the system.

Methods of identifying and avoiding risks in an IT environment were discussed in Chapter 9.

Business strategy


Summary and Self-test

Summary

Uses ofinformation

Benefits Quality

IT/IS Strategy



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Self-testAnswer the following questions.

1 List five uses of information.

2 List five characteristics of strategic information.

3 List five characteristics of tactical information.

4 List five characteristics of operational information.

5 Match the following abbreviations with the appropriate description.

TPS, OAS, KWS, MIS, DSS, ESS.

(a) Information systems that facilitate the creation and integration of new knowledge into anorganisation.

(b) A system that pools data from internal and external sources and makes information available tosenior managers in an easy-to-use form.

(c) Computer systems designed to increase the productivity of data and information workers.

(d) A system that converts data, mainly from internal sources into information (e.g. summaryreports, exception reports).

(e) A system that combines data and analytical models or data analysis tools to support semi-structured and unstructured decision making.

(f) A system to perform and record routine transactions.

6 Distinguish between explicit knowledge and tacit knowledge.

7 Information systems used to collect, generate and manipulate information can be classified as follows.

(a) Transaction Processing Systems (TPS)(b) Office Automation Systems (OAS)(c) Knowledge Work Systems (KWS)(d) Management Information Systems (MIS)(e) Decision Support Systems (DSS)(f) Executive Information Systems (EIS) [also known as Executive Support Systems (ESS)]

Requirement

Describe each of the categories identified above in terms of the functions information systemsperform, and the level they serve in the organisation. (20 marks)

8 The SFA Company

The SFA Company manufactures clothing and operates from one location in a major city. It purchasescotton and other raw materials and manufactures these into garments of clothing, such as sweatshirts,T-shirts and similar articles in its factory. There are approximately 20 administration staff, 30 sales staffand 300 production workers. Although the company is profitable, three major concerns were raised ata recent board meeting about the operations of the company:

(1) The company does not always appear to obtain the best prices for raw materials, which hasdecreased gross profit in the last few years of trading.

(2) Many garments are made to order for large retail shops, but the company has spare capacity andso it maintains an active sales force to try to increase its total sales. However, the sales forcedoes not seem to be making many sales because of lack of information about the garments inproduction and stocks of finished garments.

(3) Some production is carried out using Computer Assisted Design and manufacture although thecompany has found limited use for this application to date. The system was purchased in a hurrytwo years ago with the objective of keeping up with competitors who had purchased similarsystems. The board believes that greater use could be made of this technology.

Business strategy


The Value Chain model produced by Porter provides a good summary of the primary and supportactivities of the company. An adaptation of Porter's general model follows.

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUNDLOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING& SALES

AFTER-SALES

SERVICE

MARGIN

MARGIN

SUPP

OR

TA

CTI

VIT

IES

PRIMARY ACTIVITIES

The board of SFA is currently considering introducing some form of information system or systems,such as a MIS, into the company for all staff to use. Because of the perceived weaknesses in thecurrent systems already mentioned, the directors are particularly interested in the areas of:

(1) Inbound logistics

(2) Marketing and sales

(3) Technology development

Requirements

(a) Explain what inputs will be needed for the information systems designed to support theoperations of the business in the three areas mentioned above. (14 marks)

(b) Explain what outputs will be required from those information systems. (6 marks)

Note: Do not describe Porter's general model. (20 marks)

9 The results obtained from conducting a current situation analysis are often depicted in Earl's audit gridformat.

Requirements

(a) Evaluate the use of current situation analysis and the resulting audit grid within the context ofdeveloping an information systems strategy. (10 marks)

(b) Examine a key information system in an organisation of your choice using Earl's audit grid as aframework. In your answer you should discuss which of the four quadrants is more applicable toyour chosen information system and why. (10 marks)

(20 marks)

10 CC Ltd

CC Ltd is a company employing 2,560 staff in 20 different offices within one country. The companyoffers a wide range of specialist consultancy advice to the building and construction industry. Thisincludes advice on materials to be used, relevant legislation (including planning applications) andappropriate sources of finance.

The information to meet client requirements is held within each office of the company. Although mostclients are serviced by a single office, a lot of the information used is duplicated between the differentoffices. This is not surprising given that legislation and other standard information such as details ofmaterials used are the same for the whole country.



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In the past there has been no attempt to share data because of the cost of transferring information and thelack of trust on the part of staff in other offices. Some senior managers tend to keep part of client dataconfidential to themselves.

The company has recently provided all employees with e-mail for communication within CC Ltd andto clients. Software with internet access is also available so that staff can obtain undated planninginformation from appropriate websites. The hardware in the company is quite old and only just meetsthe minimum specification for these purposes.

The marketing director has suggested that an Intranet should be established in the company so thatcommon information can be shared rather than each office maintaining its own data. This suggestion ismeeting with some resistance from all grades of staff.

Requirements

(a) Explain the objectives of an intranet and suggest how the provision of an intranet within CC Ltdshould result in better provision of information. (9 marks)

(b) Discuss the organisational and human reasons why information may not become more widelyavailable in CC Ltd, and suggest methods for overcoming these barriers. (7 marks)

(c) Briefly explain how an extranet differs from an intranet, and how CC Ltd could utilise anextranet. (4 marks)

(20 marks)

Now, go back to the Learning Objectives in the Introduction. If you are satisfied you have achieved theseobjectives, please tick them off.

Business strategy


Answers to Self-test

1 Planning, controlling, recording transactions, measuring performance and making decisions.

2 Five of:

Derived from both internal and external sources Summarised at a high level Relevant to the long term Concerned with the whole organisation Often prepared on an ad hoc basis Both quantitative and qualitative Uncertain, as the future cannot be predicted accurately

3 Five of:

Primarily generated internally (but may have a limited external component) Summarised at a lower level Relevant to the short and medium term Concerned with activities or departments Prepared routinely and regularly Based on quantitative measures

4 Five of:

Derived from internal sources Detailed, being the processing of raw data Relevant to the immediate term Task-specific Prepared very frequently Largely quantitative

5 (a) Knowledge Work Systems (KWS)(b) Executive Support Systems (ESS)(c) Office Automation Systems (OAS)(d) Management Information Systems (MIS)(e) Decision Support Systems (DSS)(f) Transaction Processing Systems (TPS)

6 Explicit knowledge is knowledge that an organisation already stores in formal systems. It includes facts,transactions and events that can be clearly stated and stored in information systems.

Tacit knowledge is expertise held by people within the organisation that has not been formallydocumented.

7 (a) Transaction Processing Systems (TPS) are operational level systems that perform andrecord the daily routine transactions necessary to conduct business. They provide informationabout the efficiency of operations and activities, but are limited in the support they provide tomanagement decision-making.

The TPS routinely captures, processes, stores and outputs the low-level transaction data. It isnormally characterised by the use of one of the following methods of processing.

Batch processing e.g., payroll systems Online processing sales order entry systems Real time processing inventory control systems

(b) Office Automation Systems (OAS) serve the information needs of the data workers at theknowledge level of the organisation. Typical office automation systems create, handle and managedocuments (through word processing, desktop publishing and digital filing), manage workflow andscheduling (through electronic calendars), help financial managers manage client portfolios,



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manage projects and communication (through electronic mail, electronic bulletin boards, voicemail or teleconferencing). Text and image processing systems evolved from word processors todesktop publishing, enabling the creation of professional documents with graphics and speciallayout features. Spreadsheets, presentation packages (like PowerPoint), personal databasesystems and note-taking systems (appointment book and notepad) are all part of OAS and aredesigned to increase the productivity of data workers in the office.

(c) Knowledge Work Systems (KWS) support knowledge workers at the knowledge level ofthe organisation. They are information systems that aid knowledge workers in the creation andintegration of new knowledge in the organisation. To do this they need to link the worker toexternal and internal (organisation) information.

KWS require much more powerful analytic, graphics, document management, andcommunications abilities than a typical microcomputer. They also need more computingprocessing power because knowledge workers tend to do more data-intense and computing-intense work than other workers. Examples of KWS include the following:

Computer Aided Design (CAD) systems

Virtual Reality systems for simulating the real world e.g., flight simulators

Investment workstations used in the financial industry

Group collaboration systems although the software can be counted among officeautomation systems, it is used to support knowledge workers also. Groupware is softwarethat supports shared activities: documents, ideas, calendars, e-mail, meeting software, etc.

Intranet environments include Internet technologies used for communication purposes e.g.,e-mail, chat groups, web tools.

Artificial Intelligence (AI) systems are based on human expertise, knowledge, and somereasoning patterns. They extend the power of experts, but lack the general reasoningcapabilities. These systems are useful to preserve the expertise that can be lost whenworkers leave a firm.

(d) Management Information Systems (MIS): Information systems at the management level ofan organisation that serve the functions of planning, controlling, and decision making by providingroutine summary and exception reports. An MIS is defined as 'a system to convert data frominternal and external sources into information, and to communicate that information in anappropriate form to managers at all levels and in all areas of the business to enable them to maketimely and effective decisions'.

The format of the information supplied is determined by the abilities of the user and by the usethat will be made of it.

Strategic management will require information that is broad, aggregated and summarised

Tactical management requires information that is more detailed and tailored to the user'sneeds or area of responsibility

Operational management require very detailed information specific to their responsibilityarea

The MIS produces reports that are mainly summarised and inflexible, e.g. scheduled reports,demand reports, exception reports etc.

(e) Decision Support Systems (DSS): Information systems also at the management level of anorganisation that combine data and sophisticated analytical models to support semi-structuredand unstructured decision-making. A DSS is defined as 'a computer-based system which enablesmanagers to confront ill-structured problems by direct interaction with data and problem-solvingprograms'. Their aim is to provide information in a flexible way to aid decision-making.

The DSS does not itself make the decision, it merely assists in going through the phases ofdecision making. The system sets up various scenarios and the computer predicts the result foreach scenario by using a process of 'what if?' analysis.

Business strategy


There are three basic elements to the DSS.

A language sub-system, which is likely to be non-procedural (called a structured querylanguage or SQL)

A problem processing sub-system, which includes spreadsheet, graphics, statistical analysis

A knowledge sub-system, which includes a database function

(f) Executive Information Systems (EIS): Information systems at the strategic level of anorganisation designed to address unstructured decision-making through advanced graphics andcommunication. Information is provided in a very summarised way and is specially designed forthe non-IT executive. The EIS has the ability to:

Call up summary data from an organisation's main systems e.g., summary income statement,balance sheet etc

Analyse the summary data to a more detailed level e.g., analysis of the inventory figureshown in the balance sheet

Manipulate summary data e.g., rearrange its format, make comparisons with similar data

Set up templates so that information from different areas of the business is alwayssummarised in the same format

Perform complicated 'what if?' analysis

8 (a) The SFA Company

Introduction

As a result of concerns raised at the recent board meeting a new Management InformationSystem (MIS) is currently being considered. Output from the main transaction processing systemswill form the input of the MIS.

The MIS manipulates this data into summary level information for control and decision-makingpurposes to support the monitoring and control of the key functions of the organisation. The MISwill require inputs relating to the three key primary activities of inbound logistics, marketing andsales and technology development.

lnbound logistics

The inbound logistics function aims to ensure the right materials are available at the rightprice and at the right time. A key element of this involves ensuring the best possible price forraw materials of the required quality is negotiated. Output from the Computer Assisted Design(CAD) and Computer Assisted Manufacture (CAM) systems will become inputs into the MIS. TheMIS will manipulate and summarise this data, resulting in information that will enable thepurchasing department to plan and meet its responsibilities in the most efficient manner. Forexample, negotiations with suppliers can be faced with improved knowledge of the quantitiesof raw materials required in the medium term which should help win improved prices.

Marketing and sales

The MIS can provide information on the activities of customers and salespeople, showing who isbuying and selling what. Over time, useful trends should become apparent. The links with theCAM system will enable customers to be given accurate information relating to both orders inprogress and finished goods. Forecast demand can be made available via the feeder systems tothe MIS, and when matched with production scheduling information, instances of spare capacityshould be able to be established and appropriate action taken.

Technology development

The new MIS should provide information that will allow the increased use of ComputerAssisted Design (CAD) and Computer Assisted Manufacture (CAM). Use of CAD andCAM techniques will improve efficiency, resulting in the faster production of garments, andimproved garment quality. Prototypes can be produced rapidly allowing customer feedbackto be acted on at the design stage.



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The MIS can monitor sales and production information and when necessary provide controlinformation to ensure orders are delivered on time. One difficult area to predict in the clothingindustry is future demand levels for fashion items, as a change in consumer taste can often berapid and on the surface unpredictable. The MIS will therefore require information feeds from'outward looking' sources such as fashion show trends and market research.

(b) Outputs required

Outputs from the CAD/CAM systems should include performance measures that showwhether the design, development and production activities are achieving their targets, andhow these functions are contributing to the overall performance of SFA. The performancemeasures should be available for on-screen viewing, and be included in control reports thathighlight areas in need of corrective action.

Reports from the MIS should also show supplier and buyer performance, including informationon price, quantity and quality (including service quality). Marginal cost information should feedfrom the accounting system to the MIS, as this information is vital when negotiating pricesrelating to 'extra' production runs to utilise any spare capacity.

Conclusion

The proposed MIS will consolidate information from the main transaction processing systems. Itwill 'pull-together' information from the separate functions of SFA, allowing the overall pictureto be seen more clearly. This will enable SFA to identify and respond quickly to circumstancesthat require action. The MIS will enable SFA to operate more efficiently and effectively andshould be implemented as soon as possible.

9 (a) Current situation analysis (CSA) involves a review of all information systems and informationtechnology used within an organisation. The review includes all aspects of hardware, software,communications devices, network topologies, systems development methodologies, maintenanceprocedures, contingency plans and IS/IT personnel.

CSA may be used in conjunction with Earl's grid. Earl devised a grid to analyse an organisation'scurrent use of information systems. Current systems are plotted on the following grid the gridis shown below.

HighRenew Maintain, enhance

Businessvalue

Low DivestReassess

Low High

Technical quality

The four quadrants in the grid suggest the following.

If a system has little business value and is low on technical quality the system should be disposedof (divest). In the context of information systems strategy, these systems will have very littleimpact on strategic planning.

If a system has a high business value and low technical quality, then the appropriate action is torenew the current system by investing in it. The information systems strategy should take theneed for investment in these systems into account.

If the system is judged to have high technical quality but low business value, the system should bereassessed. An investigation is required before a course of action for these systems can bedevised. Relevant questions could include whether the system is meeting an information need isthe system really required?

Business strategy


Finally, if a system has high business value and high technical quality the system should be wellmaintained and if possible enhanced. Systems in this quadrant contribute significantly towardsthe achievement of organisational goals and must be given due consideration in the informationsystems strategy.

(b) Considering an 'Internet retailer' such as Amazon, their website represents an informationsystem that has high technical quality and high business value. As such, this system would beplaced in the 'maintain/enhance' quadrant on Earl's grid.

This quadrant is most appropriate for this system for the following reasons.

The technical quality of the system is important in terms of the customer experience itprovides and in ensuring reliability (as downtime means lost revenue as potential customerswill simply click onto another site).

As the site is in effect the organisation's 'retail outlet', it is the means by which it is able toattract customers and earn revenue. The business value of the website as an informationsystem is therefore extremely high.

The site is also a potential source of competitive advantage relative to traditionalretailers and other websites. To achieve an advantage requires a user-friendly, reliable siteand order fulfilment procedures of equally high quality.

To ensure Amazon remains the 'e-trailer' of choice for many customers requires almostconstant improvements (i.e. maintain and enhance) to make things easier for users and toremain ahead of the competition.

For these reasons, the website definitely represents an information system of strategicimportance in this organisation and belongs in the maintain/enhance quadrant of Earl's grid.

The fact that both business value and technical quality are high discounts all of theother three quadrants of the grid as possibilities.

10 CC Ltd

(a) An intranet uses software and other technology originally developed for the internet on internalcompany networks. An intranet comprises an organisation-wide web of internal documents thatis familiar, easy to use and comparatively inexpensive. Each employee has a browser enabling himor her to view information held on a server computer and may offer access to the internet.

The main objective of an intranet is to provide easy access to information that helps peopleperform their jobs more efficiently. Many roles require increased access to knowledge andinformation. An intranet is a way of making this knowledge readily available.

Other objectives are outlined in the following paragraphs.

To encourage the use of reference documents: Documents on-line are more likely to beused than those stored on shelves, especially if the document is bulky (for instance proceduremanuals).

To create a sense of organisational unity: An intranet 'pulls together' in a co-ordinatedfashion information from disparate parts of an organisation. It may be the only visible way someparts of a large organisation are linked.

The provision of an intranet within CC Ltd should result in better provision of informationby:

Ensuring consistency in information held and provided to clients. The intranet will enableone set of data to be held and accessed by all 20 offices.

Providing easy access to a larger pool of data: Information that managers previously'kept to themselves' will be available to others.

The intranet-Internet link will ensure the most up-to-date planning information isavailable. It would be useful to develop an intranet page complied from appropriatewebsites. (This must be kept up to date.)



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(b) Even after an intranet and e-mail have been implemented at CC Ltd, organisational and humanreasons will hinder the process of making information more widely available. Steps need to betaken to overcome these barriers to information sharing.

Human reasons that will need to be overcome include the following.

Information is only available if people know how to find it. The people at CC Ltdwho could use the information held on the intranet must be told that the information isavailable, and trained so that they are confident enough to access it.

Efficient communication (including a company-wide e-mail explaining the intranet) andstaff training programmes demonstrating intranet use will help overcome this problem.

Some staff will not choose to share information or knowledge. People may protectthe information they have to boost their own performance relative to their colleagues. Aculture change within CC Ltd is required before staff will be willing to share knowledge andinformation so that the organisation as a whole can benefit.

To tackle this problem, techniques and processes to encourage the sharing ofinformation could be included as part of a communication and knowledge managementprogramme.

Organisational reasons that will need to be overcome include the following.

The hardware used by CC Ltd is too old to support the new communication tools. This islikely to lead to user frustration with slow response times and pr

Chap - 13 Strategies for Information

Documents

Transcript of Chap - 13 Strategies for Information