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Information Systems Strategic Management

Learning Outcome:

1. Candidates should be able to understand and describe the purpose of ‘Information Systems’ within different types of organisation and differentiate between ‘Operational’ and ‘Strategic’ management

Indicative Content:

1.1 Describe the various influences that are likely to determine the culture and structure of an organisation

It is commonly accepted that no two organisations are ever exactly the same. Different influences combine to shape the culture and structure of an organisation and will include both internal and external factors

• The nature of the business activity itself and the resulting skills mix of the employees will often determine many aspects of the organisation’s structure

• Location is also a major influence consequent of local employment laws and practices, proximity to the labour force and the logistics associated with multi-site or multi-national organisations

• Management style will affect the way an organisation operates and this can be influenced by key individuals within the management hierarchy or stakeholders such as investors and even the customer base

1.2 Identify the generic types of information system that are most commonly used in organisations and suggest what benefits might have been anticipated from using such systems

• Financial management systems – accurate and timely financial reports, indicating the financial status of the business both in the short and longer term, evaluation against forecasts and models,comparison with competitors

• People management systems (customers, patients, staff, group members) enabling improved and tailored services to customers, generating repeat business, up-selling of services and products; management of staff performance, motivation and compensation monitoring staff turnover; patient histories and early diagnosis of problems, subscriptions renewal, etc.

• Product management and inventory systems – product availability, stock locations, indexing, product allocations, maximum and minimum quantities, optimum stock value, stock replenishment, supplier management

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• Management information systems (Dashboard) – monitoring of key performance indicators

• Process control systems – threshold monitoring, output monitoring, resource scheduling, routing, tracking

1.3 Suggest reasons for the failure of some technology-based information system solutions to achieve their anticipated benefits

• The quality of the information being processed is too poor to be of any significant benefit

• The cost of collecting and maintaining the information may be greater than the benefit that it generates

• The technological implementation may have been badly project- managed

• The solution may have been implemented too late to achieve any significant advantage

1.4 Explain the key differences between ‘operational’ management and‘strategic’ management and how this might be reflected within an organisational structure

Operational management focuses on process-specific routines, linked to a single sphere of activity within the organisation and with generallyshort-term implications. Strategic management has implications for the organisation as a whole and aims to ensure the longer-term future of the organisation by optimising resources against outputs and maximising return on investment

Political/ Legal

Economic Social Technological

Environmental regulation and protection

Economic growth (overall; by industry sector)

Income distribution (change in distribution of disposable income)

Government spending on research

Taxation (corporate and consumer)

Monetary policy(interest rates)

Demographics (age structure of the population; gender; family size and composition; changing nature of occupations)

Government and industry focus on technological effort

International trade regulation

Government spending (overall level;specific spending priorities)

Labour/social mobility

New discoveries and development

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Learning Outcome:

2. Candidates should be able to critically evaluate the contribution that‘Strategic Management’ makes to the development and continuing success of an enterprise

Indicative Content:

2.1 Understand and describe the relationship between business goals and the development of policies that are needed to achieve these goals

Business goals set out what the organisation is trying to achieve and can be expressed as specific objectives at corporate and functional levels. At a corporate level the objectives concern the business as a whole, whilst at a functional level they focus attention on particular activities such as marking or customer support. In effect the goals of the organisation are translated into a set of everyday actions that are governed by company policies and are monitored to ensure compliance. For example if a business goal is to deliver ‘outstanding customer service’ then policies and standards should be established and monitored that test delivery

2.2 Identify and discuss the environmental and technological influences that might affect an organisation’s strategy

The table below lists some possible factors that could indicate important environmental influences for a business under the PEST headings:

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Political/ Legal

Economic Social Technological

Consumerprotection

Policy towardsunemployment (minimum wage, unemployment benefits, grants)

Lifestyle changes(e.g. home working, single households)

Speed oftechnology transfer

Employmentlaw

Taxation(impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates)

Attitudes to workand leisure

Rates oftechnological obsolescence

Governmentorganisation/attitude

Exchange rates(effects on demand by overseas customers; effect on cost of imported components)

Education Energy useand costs

Competitionregulation

Inflation (effecton costs and selling prices)

Fashions and fads Changes ininformation technology

Politicalstability

Stage of thebusiness cycle (effect on short- term business performance)

Health & welfare (Changes in)Internet

Economic‘mood’

Consumerconfidence

Living conditions(housing, amenities, pollution)

(Changes in)mobile technology

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Learning Outcome:

2. continued Candidates should be able to explain the contribution that‘Strategic Management’ makes to the development and continuing success of an enterprise

Indicative Content:

2.3 Describe the major elements of strategic management and the appropriate areas on which to focus

Strategic management is the process of aligning strategies, performance and business results; it is all about people, leadership, technology and processes. The effective combination of these elements will help with strategic direction and successful service delivery. It is a continuous activity of setting and maintaining the strategic direction of the organisation and its business, and making decisions on a day-to-day basis to deal with changing circumstances and the challenges of the business environment.

The task of strategic management is to direct the continuous processes of:

• maintaining an appropriate relationship between the organisation and its environment – preparing the organisation for an uncertain future

• developing and executing approaches for the implementation of the agenda for strategic change – progressing the themes of the strategy

• developing, reviewing and monitoring the policies which scope and constrain management decisions and implementation plans

• tracking technology to identify opportunities for innovation

2.4 Explain the importance of relevant information systems in decision support

The information systems of various kinds, from personnel systems to process control systems, that might be operating within an organisation can provide timely access to information, which can be critical in making strategic decisions. Information can be distributed to various groups and individuals simultaneously throughout the organisation and can be tiered through the application of security levels so that sensitive informationcan restricted on a ‘need-to-know’ basis. However, building information systems that can actually fulfil executive information requirements, even with the use of critical success factors and other information requirements determination methods, is still a challenge. Some aspects of senior management decision-making cannot be fully supported by information systems because the decisions are too unstructured and

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fluid. Even if a problem can be addressed by an information system, senior management may not fully understand its actual information needs. For instance, senior managers may not agree on the firm’s critical success factors, or the critical success factors they describe may be inappropriate or outdated if the firm is confronting a crisis requiring a major strategic change. Enterprise systems and data warehouses have made it much easier to provide decision support with data from many different systems that in the past would have been maintained in silos and impossible to cross reference. Other systems in this category aregroup decision-support systems (GDSS), which support decision-making in groups, and executive support systems (ESS), which provide information for making strategic-level decisions. These systems can enhance organisational performance, but they raise the following management challenges:

• changing management thinking to use the data that is available to maximum advantage, to develop better reporting categories for measuring firm performance, and to inform new types of decisions. Many managers use the new capabilities in DSS and ESS to obtain the same information as before

• management thinking will be required to get managers to ask better questions of the data

Examiner’s Tips:

Decision-support system (DSS) Such systems have powerful analytic capabilities to support managers during the process of arriving at a decision. The components of a DSS are the DSS database, the DSS software with models and analytical tools and the user interface.

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Learning Outcome:

3. Candidates should be able to compare and contrast a range of techniques used in ‘strategic analysis’ and explain the value of this analysis in relation to the development of a strategic plan

Indicative Content:

3.1 Use SWOT Analysis (Strengths, Weaknesses, Opportunities andThreats) to gain insights into an organisation

SWOT analysis provides a structure by which organisations can identify any misalignment between its vision of where it wants tobe and the reality of what it is achieving. It provides a framework for analysing and comparing a range of internal and external characteristics in a quadrant matrix diagram. A SWOT analysis can provide a clear basis for examining business performance and prospects. It can be used as part of a regular review process or in preparation for raising finance or bringing in consultants for areview

3.2 Describe how Critical Success Factor (CSF) analysis can influence strategic planning

A Critical Success Factor is some feature of the internal or external environment of an organisation that has a major influence on achieving the organisation’s aims. Critical success factor analysis is a technique to identify the areas in which a business must succeed in order to achieve its objectives. The technique is widely used for determining in detail where to place the efforts of the organisation, so that it achieves its vision and strategic goals

3.3 Discuss the nature and relevance of PESTLE (Political, Economic, Social, Technological, Legal and Environmental) analysis in developing a business strategy

PESTLE analysis is a technique for understanding the various external influences on a business – Political, Economic, Social, Technological, Legal and Environmental. The PESTLE analysis should be used to provide a context for the organisation’s/individual’s role in relation to the external environment. It covers Political, Economic, Social, Technological, Legal and Environmental factors. The factors can be at macro (e.g. World-, EU- or UK-wide) or micro (e.g. institutional or individual) level. Depending on the scope and scale of the exercise being undertaken, you may want to consider for each factor:

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• Which of the below are of most importance now?• Which are likely to be most important in a few years?• What are the factors influencing any changes?

3.4 Explain how Porters ‘Five Forces’ model is used to identify external factors that determine the formulation of a strategy

Porter’s Five Forces model is an excellent model to use to analyse the particular environment of an industry. So for example, a company entering the PC industry would use Porter’s model to establish the following factors:

• Competitive rivalry• Power of suppliers• Power of buyers• Threats of substitutes• Threat of new entrants

The above five main factors are key factors that influence industry performance, hence it is common sense and practical to find out about these factors before you enter the industry

3.5 Suggest how Scenario Planning might contribute to strategic planning

Scenario Planning is a model that can be used to explore and learn about the future in which a corporate strategy is formed. It works by describing a small number of scenarios, by creating stories how the future may unfold, and how this may affect an issue that confronts the corporation. Scenario Planning method works by understanding the nature and impact of the most uncertain and important driving forces affecting the future

Examiner’s Tips:

Royal Dutch Shell, one of the first adopters, defines scenarios as follows: Scenarios are carefully crafted stories about the future embodying a wide variety of ideas and integrating them in a way that is communicable anduseful. Scenarios help us to link uncertainties about the future to the decisions that we must make today.

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Learning Outcome:

4. Candidates should be able to make recommendations on the formulation of Strategy at Operational, Business Unit and Corporate levels

Indicative Content:

4.1 Explain the term ‘Benchmarking’ and how this might be used in the context of strategic planning

The Benchmarking ProcessThe objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to ‘best practice’ and to identify areas and means of performance improvement. Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exerciseare applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment

Application of benchmarking involves four key steps:

• Understand in detail existing business processes• Analyse the business processes of others• Compare own business performance with that of others analysed• Implement the steps necessary to close the performance gap

Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice

4.2 Use appropriate techniques to identify the forces and factors that determine the formulation of a strategy

Porter’s Five Forces tool is a simple but powerful technique for determining where power lies in a business situation. This is useful as it provides the focus for taking advantage of the strengths exhibited by an organisation within a given context and highlights the areas that need to be improved to attain a desired position within a market or industry sector. Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation.

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These are:

Supplier Power – assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over the sector, the cost of switching from one to another, and so on. Fewer supplier choices and the more powerful suppliers are.

Buyer Power – assess how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to a business, the cost to them of switching from one supplier of products and services to those of someone else, and so on

Competitive Rivalry – assess the number and capability of competitors – if there are many competitors, and they offer equally attractive products and services, then no one supplier will have significant power in the situation. If suppliers and buyers do not get a good deal from one source, they will go elsewhere

Threat of Substitution – assess the opportunity for customers to find an alternative way of doing what a supplier does for them. For example, if it is the supply of a unique software product that automates an important process, customers may substitute the software by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens the power of the provider

Threat of New Entry – assess the potential for new providers to enter a market. If it costs little in time or money to enter a market and compete effectively, if there are few economies of scale in place, or if there is little or no protection for key technologies, then new competitors can quickly enter a market and weaken the position of existing suppliers. If there are strong and durablebarriers to entry, then a provider can preserve a favourable position and take fair advantage of it

To use this tool effectively, each of these factors must be analysed in some depth one by one

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Learning Outcome:

4. continued Candidates should be able to understand how to formulateStrategy at Operational, Business Unit and Corporate level

Indicative Content:

4.3 Discuss the differences between high level and detailed level analysis

Strategy can be formulated on three different levels:• corporate level• business unit level• functional or departmental level

Corporate level strategy is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses.At this level it is concerned with:

Reach – defining the issues that are corporate responsibilities; these might include identifying the overall goals of the organisation, the types of businesses in which the company should be involved, and the way in which businesses will be integrated and managed

Managing activities and business interrelationships – corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities

Management Practices – The organisations must decide how business units are to be structured; through direct corporate intervention (centralised) or through more or less autonomous government (decentralised), which relies on persuasion and rewards. Corporations are responsible for creating value through their businesses. They do so by managing their portfolio of business units, ensuring that each is successful over the long- term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio

Business Unit Level StrategyA strategic business unit may be a division, product line, or other profit centre that can be planned independently from the other business units of the company. At the business unit level, the strategic issues are less

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about the coordination of operating units and more about developing and sustaining a competitive advantage for the goods and services that are produced. At the business level, the strategy formulation phase deals with:

• positioning the business against rivals• anticipating changes in demand and technologies and adjusting the

strategy to accommodate them• influencing the nature of competition through strategic actions such

as vertical integration and through political actions such as lobbying• Michael Porter identified three generic strategies (cost leadership,

differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the Five Forces

Functional Level StrategyThe functional level of the organisation is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resourcesthrough which business unit level strategies can be executed efficiently and effectively. Functional units of an organisation are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functionalunits translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed

Examiner’s Tips:

There is a growing interdependence between business strategy, rules and procedures and information systems. Changes in strategy, rules, and procedures increasingly require changes in hardware, software, databases, and telecommunications. Therefore existing systems can act as a constraint on organisations, sometimes limiting what the organisation would like to do, to what its systems will permit

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Learning Outcome:

5. Candidates should be able to identify the role of Strategic InformationSystems in organisations

Indicative Content:

5.1 Explain the role of Strategic Information Systems in shaping, moulding and changing goals, operations, products, services and environmental relationships

At a strategic level Information Systems help organisations gain or maintain an edge over their competitors. They can influence fundamentally changes in the goals, operational procedures, products, services, and environmental relationships of organisations. Information systems can support strategy at three levels:

Business Level – by achieving product differentiation and focused differentiation, ‘locking in’ customers and suppliers using efficient customer response and supply chain management applications, significantly lowering their internal costs, allowing them to deliver products and services at a lower price than their competitors can provide

Organisational Level – by achieving new efficiencies or enhancing services through combining the operations of disparate business units and promoting the sharing of knowledge across the organisation

Industry Level – providing competitive advantage by facilitating cooperation with other firms in the industry, creating consortia or communities for sharing information, exchanging transactions, coordinating cross-organisational activities

5.2 Explain the significance of ‘Value Chain’ analysis in assessing the importance of information within an organisation

‘Value Chain’ analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of that business. Information relating to the different activities within a business forms the basis for determining which activities are core tothe objectives of the organisation. Michael Porter suggests that the activities of a business could be grouped under two headings:

(1) Primary Activities – those that are directly concerned with creating and delivering a product (e.g. component assembly) or service; and

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(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others (outsourced)

5.3 Discuss how Strategic Information Systems might help an organisation gain and sustain competitive advantage

What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business that wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. Strategic information systems can provide critical support in determining the areas of the business that require improvement. For example monitoring customer feedback and repeat business using a CRM system will provide valuable insight into areas of operation providing customer satisfaction. These can be contrasted with other areas of the business that exhibit less positive customer relationships. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used. Management Information Systems should provide amechanism for determining cost reductions. One example of this would be the decision by a company to switch emphasis from fast delivery consequent of maintaining high volumes of stock to lower prices with longer delivery times consequent of only producing goods to order. Some assessment has to be made by the organisation as to what its customer base values more, fast delivery or lower prices

5.4 Discuss the role of management control for the performance of operational units and the effective and efficient use of resources

Power in an organisation is based on having the authority to take decisions and the control of organisational resources. These two management responsibilities are critical in determining the conduct and outcome of a project. If handled correctly they will contribute significantly to the success of a project. However, they can also be used inappropriately to starve a project of necessary resources or to sanction unsuitable actions leading to project failure. Whilst appropriate levels of authority are essential in the management of a project, there should always be some mechanism for verifying decisions.

Examiner’s Tips:

Strategic-Level Systems: support the long-range planning activities of senior management – match external and internal environments.

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Management-Level Systems: support the monitoring, controlling, decision- making, and administrative activities of middle managers – periodic reports. Operational-Level Systems: monitor the elementary activities and transactions of the organisation – real time data.

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Learning Outcome:

6. Candidates should be able to assess the strategic importance ofInformation Systems Project Management

Indicative Content:

6.1 Demonstrate an understanding of the main stages of InformationSystems Project Planning

• Definition stage (requirements analysis, feasibility study, specification)

• Planning stage (system design, task identification, sequencing, estimating and budgeting, critical path identification)

• Organisation stage (staffing, task allocation, establishing controls)

• Execution stage (coding, change management, reviewing, unit testing, installation, integration testing)

• Closing stage (acceptance testing, documentation, sign off, evaluation)

6.2 Describe the key elements associated with identifying and mitigating the risks linked to the implementation of strategic information systems

The risks linked to the implementation of strategic information systems can be grouped under four main headings:

• Technical failure – the system does not do what was intended either as a whole or in part, consequent of failure to adequately assess the requirements and ensure sufficient and appropriately skilled resources. Whilst technical failure is now less common, it can only be mitigated against by using appropriately qualified and skilled personnel throughout the life-cycle of the project

• Data failure – can be the result of incorrect data analysis, poor data transposition or errors in data entry. A range of techniques, including validation and verification, should be used to ensure the accuracy of data

• User failure – is often caused by the disaffection of users with the project and this can be overcome by regular consultation throughout the project, resolution of users’ concerns and by providing effective training

• Organisational failure – can be due to a misalignment with the established goals and an inappropriate fit with existing systems. This

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should be avoided through detailed and verified analysis of the various interfaces that exist between the new system and what is already in place and will be maintained

6.3 Explain the security implications of maintaining strategic information systems and discuss the associated legal and regulatory issues

Organisations that maintain information systems have a responsibility for ensuring that such systems are protected from unauthorised access,use, disclosure, disruption, modification or destruction. This responsibility is reinforced through legal and regulatory measures that apply in most countries and are consistent with legislation such as the UK Data Protection Act, the EU Data Protection Directive, Computer Misused Act and EU Data Retention Laws

6.4 Understand the significance of aligning the information system strategy, organisational strategy and overall business strategy

It is frequently difficult to improve the overall performance of organisational strategy because the collective goals are unclear. Employees are often only aware of the aims of their own section, and regard other parts of the organisation as having a different job. Individuals are often motivated to ‘do their bit’, but lack the overall understanding of where the organisation is going or how the various teams are supposed to work together for the collective good

6.5 Explain how this might be achieved using the balanced scorecard approach

The Balanced Scorecard can help to overcome issues regarding collective performance by providing a focus that unifies all parts of the business. It can therefore be a very effective tool for changing the organisational culture, breaking down the barriers between sections of the business, creating an overall team culture and thereby improving overall organisational performance

Examiner’s Tips:

Implementing the balanced scorecard typically includes four processes: Translating the vision into operational goals; Communicating the vision and linking it to individual performance; Business planning; Feedback and learning and adjusting the strategy accordingly.

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Learning Outcome:

7. Candidates should be able to understand the extent to which strategic information systems can affect business processes and impose changes to organisational structure

Indicative Content:

7.1 Explain the impact that the growth of eCommerce has had on some traditional business processes and identify some of the new business models that have developed as a consequence

The eCommerce revolution is epitomised by the following definitions, which describe on-line relationships:

• Business to Consumer (B2C) – a business sells a product or service to a consumer, in some cases producers sell directly to customers and this is called ‘disintermediation’, as exemplified in the tourism industry. ‘Infomediaries’ replace sales agents and distributors in the B2C process

• Business to Business (B2B) – a relationship between two or more businesses, not necessarily a buying/selling relationship – may be collaborative. Vertical – specialised goods/services targeted at a single industry, Horizontal – goods/services across industries

• Consumer to Business (C2B) – consumer drives the buying transaction, the consumer names a price they are willing to pay, consumer buying groups are established

• Consumer to Consumer (C2C)/Peer to Peer (P2P) – consumer sells directly to a consumer, often second-hand goods, auctions and classified ads. eBay is perhaps the most obvious example

• Business to Government (B2G) – relationship between a business and governing bodies, tax returns, regulatory controls, licensing and local authority single business rate transactions

7.2 Discuss the human and organisational issues that are associated withICT-enabled process change

The Internet and eCommerce has enabled small business to operate in a global environment, increasing their potential customer base without significant capital investment in a global infrastructure. Global businesses have been able to reduce their investment in supportinginfrastructure and staff resources, thereby increasing their efficiency and cost effectiveness. This has, in a number of instances, resulted in a distancing between the customer and the supplier, where contact is limited to an electronic or contact centre interface. It has also changed

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the nature of some employee activities, reducing the demand for some types of skill and increasing the requirement for others

7.3 Describe in detail how ICT and the Internet have influenced Supply Chain Management and explain the risks that are inherent in the evolved business processes

Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain as efficiently as possible. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. Electronic interfaces between the strategic information systems of constituent businesses aligned to a specific supply chain have streamlined the processes of production, supply and payment. However, this automation between business can result in increased dependency on a smaller number of suppliers. Failure of any of the interfaces can lead to delays, over- or under-production and loss of transactions

7.4 Understand the major elements and stages in a controlled Change Management process and the various techniques used to ensure a successful transition

A controlled Change Management process should enable the organisation to effect the following:

• Identify the requirements for change within a project• Put in place a process for submitting Change Requests (CRs)• Determine the feasibility of any changes that have been requested• Formally approve each change before they occur• Schedule change to happen, when the organisation wants it to

happen• Review the impact of each change on the project

Examiner’s Tips:

eCommerce is commerce in which the transactions are managed through the use of some form of electronic media. That is, at least part of a transaction is conducted using some electronic media. Typically, this means that one or more of the three parts of a transaction is conducted via the Internet or some other digital media.

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Learning Outcome:

8. Candidates should be able to understand the importance of knowledge management for achieving competitive advantage

Indicative Content:

8.1 Explain why knowledge management is an essential element of strategic management

Knowledge management is the ability of an organisation to capture and continuously update its ‘intellectual capital’ and to share it for the benefit of both internal and external customers. In the past this knowledge was widely dispersed, in a variety of formats and difficult to access, but ICT has provided a convenient and fast platform through which this intellectual capital can be distributed and analysed. There are three aspects to be considered in relation to knowledge management, these are discovery, collaboration and exploitation. Until a few years ago the major problem facingcorporate decision makers was gaining access to sufficient information to make sound business decisions. The evolution of ICT has reversed this situation and now the sheer volume of information available to decision makers is, of itself, a problem. Knowledge management software is the enabling tool which transforms information overload into a structured resource for strategic decision makers

8.2 Discuss the reasons for which knowledge management in organisations needs to be improved in the era of global connectivity and proliferated information systems

Global connectivity has widened the customer base for many organisations, introducing remote management of customers. This has placed greater emphasis on access to ‘knowledge’ because the supplier may not now have expert knowledge of the local environment. Things that were intuitive, where a direct relationship between supplier and customer existed, may now have to be simulated through context sensitive prompting. The availability of such large volumes of information also makes it necessary that presentation of information to customers is targeted based on established profiles

8.3 Recognise and describe some of the current knowledge management technologies

First generation knowledge management technologies relied on keyword search and Boolean string search capabilities. Examples of this type of solution were the early Internet search engines. The

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disadvantage of this approach is that all documents containing the word or words are retrieved and that the words to search on must be input exactly as they appear in the target document. Another first generation technology was ‘case-based reasoning’, which allowed the user to start with a question and through a series of selections of different options, end up with a proposed answer. This involved considerable effort to be expended in establishing what thequestions and answers needed to be and maintenance of these paths was not a trivial task. Second generation knowledgemanagement software relies on natural language processing andneural networking. This allows users to input the question in any way they wish, avoiding the need-to-know keywords. Words accepted through natural language processing serve two functions; firstly, they form the basis of a conceptual search of all the available knowledge and, secondly, they are used to confirm the context of the returned solution. Neural networking technology looks at the question and all the available knowledge as digital patterns and computesappropriate matches. The context of the question allows further refinement, so the user has only to select the most appropriateanswer. This information is then used to educate the software andthat particular answer is given a higher relevancy rating the next time a similar question is asked

8.4 Demonstrate an understanding of the Knowledge ManagementCycle (create, capture, refine, store, manage, disseminate)

Knowledge management can be depicted as a continuous cycle of six closely related activities: Creation, Capture, Organisation, Storage, Management, Distribution. The process begins when information is created by the organisation’s actions and processes. These actions interact with those of other organisations and systems to alter the environment, generating new information. Planning for information acquisition has become a complex function. The fragmentation of organisational activity into pockets of specialisation has led to a proliferation of information sources and services that cater to dedicated markets. Sources have to be constantlyevaluated, new sources have to be assessed, and the matching of sources to needs has to be regularly re-examined. Businesses need to recognise that the information they are generating has value, whether it is in a structured, digital form or requires organisation and transposition so that it can be captured within an electronic system. Managing the organisation’s information assets adds real value that can be exploited. The objective is to create an organisational memory that is the active repository of the organisation’s knowledge and expertise. The volume of data produced and collected needs to be given structure in ways that reflect the interests and potential use by the organisation and its members. Information technology can raise the efficiency and reliability of the organisation’s operational activities. Information is packaged into different levels of informationproducts and services that are targeted at the organisation’s different

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user groups and aligned to its information needs. Such information products and services have to add value by enhancing the quality of the information and improving the fit between the raw information and the needs or preferences of users. The goal of information distribution is to increase the sharing of information. Widespread information sharing optimises organisational learning and creates new insight and knowledge about difficult problems or situations. End users should be given the best available information to perform their tasks, and the information should be delivered through channels and in a format that dovetails with users’ work patterns

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Learning Outcome:

9. Candidates should be able to understand the nature and value of Business Process Re-Engineering (BPR) and the role of Enterprise Resource Planning (ERP) within the context Strategic Management

Indicative Content:

9.1 Explain the objectives of Business Process Re-Engineering (BPR) and describe a suitable methodology

Business Process Re-engineering (BPR) is the radical restructuring of business processes within an organisation either to streamline the activity or before applying information technology to make them more efficient. Organisations often go through BPR simply because they have to in order to adopt ‘off-the-shelf’ software packages. However, if the drivers for BPR are business-related and not software-related, it can be a beneficial exercise. Particularly if the organisation is planning to use technology to do something they could not previously do.The following approach can be used:

• develop the business vision and process objectives• identify the processes to be redesigned• understand the opportunities for applying information

technology• build a prototype of the new process• refine plans and build new process and supporting IT

9.3 Recognise the risks of BPR in contrast to cross-functional enterprise wide resource planning (ERP)

The major risk associated with BPR is the linear approach looking at processes individually. Within a large organisation BPR may be affecting only one business unit and the breakthrough gains in business performance may not be realised because of the focus on how change will affect jobs, skill requirements, workflows, and reporting relationships. Fear of these changes breeds resistance, confusion, and even conscious efforts to undermine the change programme. ERP software attempts to integrate business processes across departments onto a single enterprise-wide information system. The major benefits of ERP are improved coordinationacross functional departments and increased efficiencies of doing business. The fact that ERP applies across the organisation, reduces the sense of isolation within business units targeted for BPR, though the same fears for jobs, skills redundancy and altered reporting lines are likely to persist

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9.4 Discuss ERP implementation issues in building a supportive ITinfrastructure and adopting ERP solutions

There are three commonly used methodologies for implementing ERPsystems

The Big Bang: organisations layout a grand plan for their ERP implementation and the installation of all modules happens across the entire organisation at once. The big-bang approach promised to reduce the integration cost in the condition of thorough and careful execution. This method dominated early ERP implementations but often contributed to a high rate of failure in ERP implementation. The premise of this implementation method is treating ERP implementation as similar to a large-scale information system, which typically follows SDLC (Systems Development Life Cycle). But an ERP system is much more than a traditional information system in the fact that the implementation of ERP continuously calls for the realignment of business processes. This method is rarely used today

Modular Implementation: this method goes after one ERP module at a time. This limits the scope of implementation usually to one functional department. This approach suits companies that do not share many common processes across departments or business units. Independent modules of ERP systems are installed in each unit, while integration of ERP modules takes place at the later stage of the project. This has been the most commonly used methodology of ERP implementation. Each business unit may have their own ‘instances’ of ERP and databases. Modular implementation reduces the risk of installation, customisation and operation of ERP systems by reducing the scope of the implementation. The successful implementation of one module can benefit the overall success of an ERP project

Process-Oriented Implementation: the process-oriented implementation focuses on the support of one or a few critical business processes which involves a few business units. The initial customisation of the ERP system is limited to functionality closely related to the intended business processes. The process-oriented implementation may eventually grow into a full-blown implementation of the ERP system. This approach is utilised by many small to mid-sized companies which tend to have less complex internal business processes

Examiner’s Tips:The financial services industry has benefited from extensive re-engineering of the mortgage application process. By replacing ‘desk-to-desk’ sequential work on documents with a ‘work cell’ approach many people can work on the same document simultaneously. Workflow management software can be used to move documents easily and efficiently between different users and locations, and with careful integration across organisations this workflow can span multiple organisations in a supply chain.