Managing the Digital Firm - … 418/Lectures/My...Emergence of the digital firm Why IT Now? Digital...

1

1.1 © 2006 by Prentice Hall

1Chapter

Managing the Digital Firm

Managing the Digital Managing the Digital FirmFirm


OBJECTIVES

Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm

• Explain why information systems are so important today for business and management

• Evaluate the role of information systems in today’s competitive business environment

• Assess the impact of the Internet and Internet technology on business and government


• Define an information system from both a technical and business perspective and distinguish between computer literacy and information systems literacy

• Identify the major management challenges to building and using information systems

OBJECTIVES (Continued)


2


Management

Technology

Organization

Solution

BusinessChallenge

InformationSystem


• Information Systems– What are some dominant names in the information

system industry?– Dell– Microsoft– IBM

• What is the product / service?• Computer information Systems future

– Augmented Reality movie


WHY INFORMATION SYSTEMS?


1.1. Capital managementCapital management

2.2. As a foundation of doing businessAs a foundation of doing business

3.3. ProductivityProductivity improvements (often via better communication of information)

4.4. Strategic opportunity and advantageStrategic opportunity and advantage via paradigm shifts

Why Information Systems Matter Why Information Systems Matter

There are four reasons why IT makes a difference to the There are four reasons why IT makes a difference to the success of a business:success of a business:

3



• IT is the largest single component of capital investment in the United States.

• About $1.8 trillion is spent each year by American businesses.

• Managers and business students need to know how to invest this capital wisely.

• The success of your business in the future may well depend on how you make IT investment decisions.

1. Capital Management: 1. Capital Management:




•• Most businesses today could not operate without Most businesses today could not operate without extensive use of information systems and extensive use of information systems and technologies.technologies.

•• IT can increase market share.IT can increase market share.

•• IT can help a business become a highIT can help a business become a high--quality, quality, lowlow--cost producer.cost producer.

•• IT is vital to the development of new products. IT is vital to the development of new products.

2. Foundation of doing business:2. Foundation of doing business:




The Interdependence between Organizations andThe Interdependence between Organizations andInformation Systems Information Systems

Figure 1-2


4



• IT is one of the most important tools managers have to increase productivity and efficiency of businesses.

• According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last decade. • IT is a major factor in reducing costs.

• It is estimated that IT has increased productivity in the economy by about 1% in the last decade. • IT is a major source of labor and capital efficiency.


3. Productivity:



• Create competitive advantage: IT makes it possible to develop competitive advantages.

• New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-order business model that other firms have not been able to imitate.


4. Strategic Opportunity and Advantage:



• Create new services: eBay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success.

• Differentiate yourself from your competitors:Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.


4. Strategic Opportunity and Advantage:

5




1.1. Capital managementCapital management

2.2. As a foundation of doing businessAs a foundation of doing business

3.3. ProductivityProductivity improvements (often via better communications)

4.4. Strategic opportunity and advantageStrategic opportunity and advantage via paradigm shifts

SUMMARY: Why Information Systems Matter SUMMARY: Why Information Systems Matter

There are four reasons why IT makes a difference to the There are four reasons why IT makes a difference to the success of a business:success of a business:



• Carr has written that whatever advantages firms build using IT can be easily copied by competitors.• Blackboard suing Desire2Learn

• News article

• This view is not supported by the evidence: Amazon, eBay, Dell, Wal-Mart and Apple's iTunes are just a few firms that have built and maintained technology-based advantages.

How Much Does IT Matter?




1. Internet growth and technology convergence2. Transformation of the business enterprise3. Growth of a globally connected economy4. Growth of knowledge and information-based economies5. Emergence of the digital firm

Why IT Now? Digital Convergence and the Changing Business Environment

Growing impact of IT in business firms can be assessed from the following five factors:


6



• Growth of the Internet: 120 million online in the United States, 500 million global users

• The Internet is bringing about a convergence of telecommunications and computing: VoIP telephones. • How does this affect legacy telephone companies such as the

Bell telephones?• What other industries are converging?

• The Internet is making many traditional business models obsolete: the corner music store and video store.


The Internet and Technology Convergence:



1. Flattening of the hierarchy2. Decentralization of power3. Flexibility of the enterprise/organization4. Location independence5. Lower transaction and coordination costs6. Empowerment of the individual


Transformation of the Business Enterprise:



• Management and control in a global marketplace

• Competition in world markets

• Global workgroups

• Global delivery systems


Globalization:

7



• Knowledge and information-based economies

• New products and services

• Knowledge as a central productive and strategic asset


Rise of the Information Economy:



The Growth of the Information Economy

Figure 1-3


Source: U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 2003, Table 615; and Historical Statistics of the United States, Colonial Times to 1970, Vol. 1, Series D, pp. 182-232.



• Digitally enabled relationships with customers, suppliers, and employees

• Core business processes accomplished using digital networks

• Digital management of key corporate assets• Agile sensing and responding to environmental

changes• Seamless flow of information within the firm, and with

strategic partners


Emergence of the Digital Firm:

8



The The Emerging Emerging Digital Firm Digital Firm

Figure 1-4




1. Internet growth and technology convergence2. Transformation of the business enterprise3. Growth of a globally connected economy4. Growth of knowledge and information-based

economies5. Emergence of the digital firm

Why IT Now? Digital Convergence and the Changing Business Environment

Growing impact of IT in business firms can be assessed from the following five factors:



PERSPECTIVES ON INFORMATION SYSTEMS


What Is an Information System?

Technology perspective:Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization

Business perspective:Business perspective: IS are a tool for creating value in an organization. (a superior investment, coping with regulations, staying competitive, productivity, etc.)

9




What is an Information System? (Continued)

• Data: Streams of raw facts representing events such as business transactions

• Information: Data shaped into a meaningful and useful form. The same data can be “shaped” in different ways:• POM, accounting, finance, marketing, human

resources, research/engineering, …• Governments, military, administration, …

1.26 © 2006 by Prentice HallFigure 1-5



Data and Information


INPUT OUTPUTPROCESS

FEEDBACK

Management Information Systems 8/eManagement Information Systems 8/eChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm

Technical view of IS

Data is transformed into information, that may be used for further processing (data mining, output for various functional areas, etc.). Knowledge is a correct application of information.

10




Functions of an Information System

Figure 1-6




Football Games Boy friend(s)

Expectations

Can students be viewed as Information systems processing data within an Educational Organization?

Student Info System

University

What other external forces affectthe University organization?

Economy?Wars?A Draft?

What internal forces can thestudents control?Study habits?


Lectures / Textbooks

Notes /Homework

Tests

Listen /Read /Write /

Practice /Study

FEEDBACKQ & A


System Diagram

11



•• Rely on computer hardware and software Rely on computer hardware and software forfor

•• Processing and disseminating information Processing and disseminating information usingusing

•• Fixed definitions of data and procedures Fixed definitions of data and procedures forfor

•• Collecting, storing, distributing, using informationCollecting, storing, distributing, using information


Computer-Based Information System (CBIS)




What Is an Information System?

Technology perspective:Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization

INPUT OUTPUTPROCESS

FEEDBACK



•• Information systems are an Information systems are an organizational and organizational and management solution to business challenges that arise from management solution to business challenges that arise from the business environmentthe business environment..•• Based on information technology but also require significant invBased on information technology but also require significant investment estment

in organizational and management changes and innovationsin organizational and management changes and innovations

•• IS create value primarily by IS create value primarily by changing business processeschanging business processes and and management decision making.management decision making.


Information systems are more than just technology. Businesses invest in IS in order to create value and increase profitability.

A Business Perspective on Information Systems

12




The Business Information Value Chain

Figure 1-7



•• Information systems literacy:Information systems literacy: BroadBroad--based based understanding of information systems that includes understanding of information systems that includes behavioral knowledge about organizations, behavioral knowledge about organizations, management and individuals using information management and individuals using information systems as well as technical knowledge about systems as well as technical knowledge about computerscomputers

•• Computer literacy:Computer literacy: Knowledge about information Knowledge about information technology, focusing on understanding how technology, focusing on understanding how computer technologies workcomputer technologies work




Three Important Dimensions of Information Systems

• Organizations

• Managers

• Technology


You will need to understand and balance these dimensions of information systems in order to create business value.

Dimensions of Information Systems

Management

Technology

Organization

InformationSystem

13


Dimensions of IS

• Complementary Assets & Organizational Capital– Technology alone does not increase value

• Different firms realize different returns on technology –why?

– Creating value with IS also requires supportive values, structures, and behavior within the organization

• New business processes, culture, management style, training, etc.




Information Systems Are More than Computers

Figure 1-8


CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS


Socio-technical Systems

Managers Optimize systems performance between:

• Technology and Organization mutually adjusting to one another until fit is satisfactory (or a politically acceptable compromise is reached, e.g. union jobs lost via technology)

14


CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS


A Sociotechnical Perspective on Information Systems

Figure 1-11

TrainingMake technology

easier to use



•• Sales and marketingSales and marketing

•• ManufacturingManufacturing

•• FinanceFinance

•• AccountingAccounting

•• Human resourcesHuman resources


Major Business Functions Rely on Information Systems

Figure 2-1


IS Management Challenges

1. Obtaining business value from IS investment2. Complementary assets needed to meet

strategic goals3. Globalization4. Infrastructure development/maintenance in

rapidly changing business & technical environments

5. Ethical & security challenges

15


Summary

• IS are a foundation for conducting business & are largest components of capital investment.

• IS plays key role in global competition & knowledge-based assets (products/services)

• Internet provides flexible, stable platform for global connectivity, e-commerce, digital firms

• Socio-technical perspectives of IS• Major management challenges posed by IS

Managing the Digital Firm - … 418/Lectures/My...Emergence of the digital firm Why IT Now? Digital...

Documents

Transcript of Managing the Digital Firm - … 418/Lectures/My...Emergence of the digital firm Why IT Now? Digital...