Mis Slides ...Chapter1

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LEARNING OBJECTIVES

Explain why information systems are so essentialin business today.

Define an information system from both atechnical and a business perspective. Identify and describe the three dimensions of

information systems.


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Assess the complementary assets required forinformation technology to provide value to a

business.

Identify and describe contemporary approachesto the study of information systems and

distinguish between computer literacy and

information systems literacy.

LEARNING OBJECTIVES (Continued)


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Smart Systems and Smart Ways of Working Help Toyota Become Number One

Problem: Tough competition and demanding customers. Solutions: Redesigned order and production processes

reduce costs, increase revenue, and improve customer

service.

Oracle E-Business Suite makes it possible to build carsto order and forecast demand and production

requirements more accurately.

Demonstrates ITs role in analyzing market trends andmonitoring quality, efficiency, and costs.

Illustrates the emerging digital firm landscape wherebusinesses can use tools to analyze critical data.


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The Role of Information Systems in Business Today

How information systems are transformingbusiness

Increased technology investments Increased responsiveness to customer demands: A

Fed-Ex economy

Shifts in media and advertising New federal security and accounting laws

Globalizationopportunities Internet has drastically reduced costs of operating on

global scale


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Figure 1-1

Information technology investment, defined as hardware, software, and communications

equipment, grew from 34% to 50% between 1980 and 2004.Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis,National Incomeand Product Accounts, 2006.


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In the emerging, fully digital firm Significant business relationships are digitally enabled

and mediated

Core business processes are accomplished throughdigital networks

Key corporate assets are managed digitally Digital firms offer greater flexibility in

organization and management Time shifting, space shifting



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Read the Interactive Session and then discuss the following questions:

What are the advantages of working in a virtualenvironment like the one created by Accenture? What are

the disadvantages?

Would you like to work at a company like Accenture? Whyor why not? Explain your answer.

What kinds of companies could benefit from being runvirtually like Accenture? Could all companies be run

virtually like Accenture?



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Growing interdependence between ability to use informationtechnology and ability to implement corporate strategies andachieve corporate goals

Business firms invest heavily in information systems toachieve six strategic business objectives:

Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival



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Operational excellence:Improvement of efficiency to attain higher

profitability

Information systems, technology an importanttool in achieving greater efficiency andproductivity

E.g. Wal-Marts RetailLink system linkssuppliers to stores for superior replenishmentsystem



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New products, services, and businessmodels:Business model: describes how company

produces, delivers, and sells product orservice to create wealth

Information systems and technology a majorenabling tool for new products, services,

business models E.g. Apples iPod, iTunes and Netflixs Internet-based DVD rentals



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Customer and supplier intimacy:Serving customers well leads to customers

returning, which raises revenues and profits

E.g. High-end hotels that use computers to trackcustomer preferences and use to monitor and

customize environment

Intimacy with suppliers allows them to providevital inputs, which lowers costs E.g. J.C.Penneys information system which links

sales records to contract manufacturer



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Improved decision-making Without accurate information:

Managers must use forecasts, best guesses, luck Leads to:

Overproduction, underproduction of goods and services Misallocation of resources Poor response times

Poor outcomes raise costs, lose customers

E.g. Verizons Web-based digital dashboard toprovide managers with real-time data on customer

complaints, network performance, line outages, etc.



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Operational excellence: Improvement of efficiency to attain higher profitability

New products, services, and business models: Enabled by technology

Customer and supplier intimacy: Serving customers raises revenues and profits Better communication with suppliers lowers costs



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Competitive advantage Delivering better performance Charging less for superior products Responding to customers and suppliers in real time Often achieved when firm achieves one of first four

advantages

E.g. Dell: Consistent profitability over 25 years; Dellremains one of the most efficient producer of PCs inworld.

But Dell has lost some of its advantages to fastfollowers-- HP



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SurvivalInformation technologies as necessity of

business

May be: Industry-level changes, e.g. Citibanks introduction

of ATMs

Governmental regulations requiring record-keeping E.g. Toxic Substances Control Act, Sarbannes-Oxley Act



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There is a growing interdependence between a firms information systems and its business

capabilities. Changes in strategy, rules, and business processes increasingly require

changes in hardware, software, databases, and telecommunications. Often, what theorganization would like to do depends on what its systems will permit it to do.

Figure 1-2


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Information system: Set of interrelated components Collect, process, store, and distribute information Support decision making, coordination, and control

Information vs. data Data are streams of raw facts Information is data shaped into meaningful form

Perspectives on Information Systems


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Raw data from a supermarket checkout counter can be processed and organized to produce

meaningful information, such as the total unit sales of dish detergent or the total sales

revenue from dish detergent for a specific store or sales territory.

Figure 1-3


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Information system: Three activitiesproduce information organizations need

Input: Captures raw data from organizationor external environment

Processing: Converts raw data intomeaningful form

Output: Transfers processed informationto people or activities that use it



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Feedback: Output returned to appropriate members of

organization to help evaluate or correct input stage

Computer/Computer program vs.information system

Computers and software are technical foundationand tools, similar to the material and tools used to

build a house



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An information system contains information about an organization and its surrounding environment. Three basic activitiesinput,

processing, and outputproduce the information organizations need. Feedback is output returned to appropriate people or activities in the

organization to evaluate and refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatoryagencies, interact with the organization and its information systems.

Figure 1-4


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Using information systems effectively requires an understanding of the organization,

management, and information technology shaping the systems. An information system

creates value for the firm as an organizational and management solution to challenges posedby the environment.

Figure 1-5


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Organizational dimension ofinformation systems

Hierarchy of authority, responsibility Senior management Middle management Operational management Knowledge workersData workers

Production or service workers



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Business organizations are hierarchies consisting of three principal levels: senior

management, middle management, and operational management. Information systems serve

each of these levels. Scientists and knowledge workers often work with middle management.

Figure 1-6


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Organizational dimension of informationsystems (cont.)

Separation of business functionsSales and marketing

Human resources Finance and accounting Production and manufacturing)

Unique business processes

Unique business culture

Organizational politics



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Management dimension ofinformation system

Managers set organizational strategy forresponding to business challenges

In addition, managers must act creatively: Creation of new products and services Occasionally re-creating the organization



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Technology dimension of informationsystems

Computer hardware and software Data management technology Networking and telecommunications

technology

Networks, the Internet, intranets and extranets,World Wide Web

IT infrastructure: provides platform thatsystem is built on



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UPS Competes Globally with Information Technology



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Dimensions of UPS tracking system Organizational:

Procedures for tracking packages and managinginventory and provide information

Management: Monitor service levels and costs

Technology: Handheld computers, bar-code scanners, networks,

desktop computers, etc.



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Business perspective on informationsystems:Information system is instrument for

creating value

Investments in information technology willresult in superior returns:

Productivity increases Revenue increases Superior long-term strategic positioning



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Business information value chain Raw data acquired and transformed through

stages that add value to that information

Value of information system determined in part byextent to which it leads to better decisions, greaterefficiency, and higher profits

Business perspective: Calls attention toorganizational and managerial nature ofinformation systems



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From a business perspective, information systems are part of a series of value-adding

activities for acquiring, transforming, and distributing information that managers can use to

improve decision making, enhance organizational performance, and, ultimately, increase firmprofitability.

Figure 1-7


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Although, on average, investments in information technology produce returns far above

those returned by other investments, there is considerable variation across firms.

Figure 1-8


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Investing in information technology does notguarantee good returns

Considerable variation in the returns firmsreceive from systems investments

Factors: Adopting the right business model

Investing in complementary assets (organizationaland management capital)



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Complementary assets:Assets required to derive value from a

primary investmentFirms supporting technology investments

with investment in complementary assets

receive superior returns

E.g.: invest in technology and the people tomake it work properly



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Complementary assets include: Organizational investments, e.g.

Appropriate business model Efficient business processes

Managerial investments, e.g. Incentives for management innovation Teamwork and collaborative work environments

Social investments, e.g. The Internet and telecommunications infrastructure Technology standards



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The study of information systems deals with issues and insights contributed from technical

and behavioral disciplines.

Figure 1-9


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Technical approach Emphasizes mathematically based models Computer science, management science,

operations research

Behavioral approach Behavioral issues (strategic business

integration, implementation, etc.)

Psychology, economics, sociology

Contemporary Approaches to Information Systems


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Management Information Science Combines computer science, management science,

operations research and practical orientation with

behavioral issues Four main actors

Suppliers of hardware and software Business firms Managers and employees Firms environment (legal, social, cultural context)



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Approach of this book:Sociotechnical view Optimal organizational performance

achieved by jointly optimizing bothsocial and technical systems used in

production

Helps avoid purely technologicalapproach



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In a sociotechnical perspective, the performance of a system is optimized when both the

technology and the organization mutually adjust to one another until a satisfactory fit is

obtained.

Figure 1-10

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