ORGANİZATİONS, MANAGEMENT AND THE NETWORKED ENTERPRİSEChapter 1

Doç.Dr. Aykut Hamit TURAN

04

/21

/23

Managem

ent In

form

atio

n S

yste

ms1

TOYOTA MOTOR COMPANY

The vehicle order system at Toyota Reduce production time and the cost of the

material as well as finished inventory Highly competitive environments require to

create highly tuned business process and information systems to promote agility, efficiency and quality

Respond instantly to changing customer needs

Toyota vehicle order management system reduces inventory costs and makes it easier for customers to buy exact model, make and desire

04

/21

/23

2

Managem

ent In

form

atio

n S

yste

ms

TOYOTA MOTOR COMPANY

With improved information transperancy, Toyota would be able to better readjust allocation of available product to markets that would be high in demand and to reduce stocks

Toyota has flourished in a highly competitive environment because it has created a set of finely tuned business processes and Information Systems (IS) instantly to customers and changes in the marketplace as events unfold, while working closely with suppliers and retailers

In an ongoing effort to monitor quality, efficiency and costs, Toyota management saw there was an opportunity to use IS to improve business performance

04

/21

/23

3

Managem

ent In

form

atio

n S

yste

ms

THE ROLE OF IS İN BUSİNESS TODAY In 2006, American Business spendt 1.8 trillion on IS

hardware, software and telecommunications equipment and spent additional 1.7 trillion USD on business and management consulting

Managers of every company makes large investment in IS and IT

Between 1980 to 2004, private business investments in IT consisting of hardware, sotware and communications equipment grew from 34 percent to 50 percent of all invested capital

In 2005, FedEx moved nearly 100 million packages in USA and UPS moved more than 380 million packages

There has been massive shift in media markets

04

/21

/23

4

Managem

ent In

form

atio

n S

yste

ms

THE ROLE OF IS İN BUSİNESS TODAY IT has been transforming businesses More wireless phones accounts have been opened up

in recent years than telephone lines installed Videoconferencing, iPhones, Android phones have all

become essential tools of businesses Millions of people do purchase something online

everyday and hundred of millions look Internet for information

35 million receive their news online. 32 million Americans now read blogs, eight million write blogs

Google’s E-Commerce and Internet advertising booming, surpassing 6 billion USD in 2005

04

/21

/23

5

Managem

ent In

form

atio

n S

yste

ms

GLOBALİZATİON OPPORTUNİTİES AND DİGİTAL FİRM

World economy today depends on imports and exports

Foreign trade occunts more than 25 percent of goods and services produced in US, more in Japan and Germany

Customers now can shop in a worldwide market, obtaining price and quality information reliably 24 hours a day

Firms can achieve extraordinary cost reductions by finding low cost suppliers and managing production facilities in other countries

04

/21

/23

6

Managem

ent In

form

atio

n S

yste

ms

GLOBALİZATİON OPPORTUNİTİES AND DİGİTAL FİRM All of the changes in our world coupled with equally

significant organizational redesign have created conditions for a fully digital firm

A digital firm can be defined as a firm that digitally enabled and mediated its relationships with its customers and suppliers

Digital firms nearly all significant business relationships with customers, suppliers and employees are digitally enabled and mediated

Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations

Business processes refer to set of logically related tasks and behaviors that organizations develop over time to produce specific business results

04

/21

/23

7

Managem

ent In

form

atio

n S

yste

ms

DİGİTAL FİRMS In a digital firm, any piece of information required to

support key business decisions available at any time and anywhere in the firm

Digital firms respond to its environments far more rapidly than traditional firms with more flexibility and ability to survive

Digital firms offer extraordinary opportunities for more flexible global organization and management. In digital firm both time shifting and space shifting are the norm

Time shifting refers to business being conducted continously 24X7, rather than norrow work day of 8am to 5 pm

Space shifting means that work takes place in global workshop, as well as within national boundaries. Work is accomplished physically whenever in the world is best accomplished

04

/21

/23

8

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

Why IS is so essential today? Why investing so much money in IS?

In the USA alone, more than 23 million managers and 113 million workers in the labor force rely on IS to conduct business and achieve business objectives

E-Commerce firms Amazon, eBay, Google and E-Trade exist today

There is a growing interdependence between a firm’s ability to use IT and its ability to implement corporate strategies and achieve corporate goals

04

/21

/23

9

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS Many sectors would exist without IS such as online

auction and commerce sites Many traditional firms such as WalMart, Sears and GE

need IS to survive and prosper IS is foundation of today’s businesses like telephones,

office building and elevators were once There is a growing interdependence between firm’s

ability to use IT and its ability to implement corproate strategies and achieve corporate goals

Firms future success depend on what Information Systems could do

Being low cost producer, introducing new products and services all depend on IS investment and their proper implementation

04

/21

/23

10

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

Operational excellence: Businesses continuously seek to improve the efficiency of their operations to achieve higher profitability

IS and technologies are some of the most important tools to achieve higher levels of efficiency and productivity in business operations

There is a growing interdependence between a firm’s IS and its business capabilities. Changes in strategy, rules and business processes increasingly require changes in hardware, software, databases and telecommunications

04

/21

/23

11

Managem

ent In

form

atio

n S

yste

ms

THE INTERDEPENDENCE BETWEEN ORGANİZATİONS AND IS

04

/21

/23

12

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

WalMart attained more than $285 billion in sales nearly one-tenth of retail sales in US in large part because of its RetailLink system, which digitally links its suppliers to every one of WalMart’s 5289 stores

As soon as a purchase occurs, suppliers would be notified and stock accounts have been updated

04

/21

/23

13

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

New products, services and business models: IS are a major enabling tool for firms to create new products and services as well as entirely new business models

A business model describes how a company produces, delivers and sells a product or service to create wealth Itunes, Netflix

Customer and Supplier intimacy: When a business really knows its customers and serves them well, the way they want to be served, the customers generally respond by returning and purchasing more

04

/21

/23

14

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS The more business engages with its suppliers, the better

the suppliers can provide vital inputs. This lower costs – Mandarin Hotel in NY

Improved Decision Making: Many managers operate in an information fog that they never really have the right information at the right time to make an informed decision

Managers rely on forecasts, best guesses and luck The result is over production and under production of

goods and services, misallocation of resources and poor response times

IS have made it possible for managers to use real time data from the marketplace when making decisions

Virozon uses web based digital dashboard to provide managers with precise real time information on customer complaints, network performance, storm demaged lines etc

04

/21

/23

15

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

Competitive advantage: When firms achieve one or more of these objectives: operational excellence, new products, services and business models, customer/supplier intimacy and improved decision making – chances are they have already achieved a competitive advantage

Doing things better than your competitors, charging less for superior products and responding to customers and suppliers in real time all add up to higher sales and higher profits that your competitors cannot match

Dell Computer showed profit increase as PC prices fell down. Online customized PC orders

04

/21

/23

16

Managem

ent In

form

atio

n S

yste

ms

STRATEGİC BUSİNESS OBJECTİVES OF IS

Survival: Business firms also invest in ICTs because they are necessities of doing business

Sometimes these necessities are driven by industry level changes ATMs, SABRE

There are many legal regulations that create a legal duty for companies and their employees to retain records, including digital records

Public companies should retain audit working papers and records, including all emails for five years

04

/21

/23

17

Managem

ent In

form

atio

n S

yste

ms

PERSPECTİVES ON IS

Information Technology consists of all the hardware and software that a firm needs to use in order to achieve its business objectives Computers, printers, handheld personal digital

assistants, iPods, iPads, but also software and thousands of computer programs

Information Systems are more complex and can be best understood by looking at them from both a technology and business perspectives

04

/21

/23

18

Managem

ent In

form

atio

n S

yste

ms

WHAT İS INFORMATİON SYSTEMS

IS can be technically defined as interrelated components that collect, process, store and distribute information to support decision making and control in an organization

In addition to support decision making, coordination and control, IS may also help managers and workers analyze problems, visualize complex subjects and create new products

IS contain information about significant people, places and things within the organization or in the environment surrounding it

04

/21

/23

19

Managem

ent In

form

atio

n S

yste

ms

WHAT İS INFORMATİON SYSTEMS

Information means data that have been shaped into a form that is meaningful and useful to human beings

Data in contrast are streams of raw facts representing events occurring in organizations or physical environment before they have been organized and arranged in a form that people can effectively understand and use

In a supermarket counters scan million of pieces of data. But pieces of data can be totaled and analyzed to provide meaningful information such as total number of detergents sold at a particular store

04

/21

/23

20

Managem

ent In

form

atio

n S

yste

ms

DATA VERSUS INFORMATİON

04

/21

/23

21

Managem

ent In

form

atio

n S

yste

ms

FUNCTİONS OF INFORMATİON SYSTEMS

04

/21

/23

22

Managem

ent In

form

atio

n S

yste

ms

WHAT İS INFORMATİON SYSTEMS

Three activities in an IS produce information that organizations need to make decisions, control operations, analyze problems and create new products and services

Input captures or collects raw data from within the organization or from its external environments

Processing converts this raw input into a meaningful form

Output transfers the processed information to the people who will use it

IS also requires feedback, which is output that is returned to appropriate members of organization to help them evaluate or correct the input stage

04

/21

/23

23

Managem

ent In

form

atio

n S

yste

ms

DİMENSİONS OF INFORMATİON SYSTEMS

To fully understand IS, we must understand the broader organization, management and information technology dimensions of systems

This broader understanding of IS encompasses an understanding of the management and organizational dimensions of systems as well as technical dimensions of systems as IS literacy

The field of Management Information Systems (MIS) tries to achieve this broader information system literacy

MIS deals with behavioral issues as well as technical issues surrounding the development, use and impact of IS used by managers and employees in a firm

04

/21

/23

24

Managem

ent In

form

atio

n S

yste

ms

INFORMATİON SYSTEMS ARE MORE THAN COMPUTERS

04

/21

/23

25

Managem

ent In

form

atio

n S

yste

ms

ORGANİZATİONS

IS are integral part of organizations Some firms such as credit organizations without IS,

there is no business The key components of organizations are its

people, structure, business processes, politics and culture

Organizations have structures composed of different levels and specialties

Senior managers make long term decisions about products and services

Middle managers carry out programs and plans of senior managers and the business

Operational managers responsible for monitoring daily activities of the business

04

/21

/23

26

Managem

ent In

form

atio

n S

yste

ms

ORGANİZATİONS Knowledge workers such as engineers,

scientist design products or services and create new knowledge for the firm

Data workers such as secretaries or clerks assist with paperwork at all levels of the firm

Production and service worker produce the product or service

Each organization has a unique culture or fundamental set of assumptions, values and ways of doing things that has been accepted by most of its members

Parts of organizational culture can always be found embedded in its IS

04

/21

/23

27

Managem

ent In

form

atio

n S

yste

ms

ORGANİZATİONS The major business function consist of sales and

marketing, manufacturing and production, finance and accounting and human resources

An organization coordinates work through its hierarchy and through its business processes

Each organizations has a unique culture or fundamental set of assumptions, values and ways of doing things that has been accepted by most of its members

Parts of organization’s culture can always be embedded in its information systems

Different levels and specialties in organization create different interest and points of view. These views sometimes conflict on how resources and rewards should be distributed

04

/21

/23

28

Managem

ent In

form

atio

n S

yste

ms

MANAGEMENT Management’s job is to make sense of the

many situations faced by organizations and formulate actions to solve organizational problems

Management perceive business challenges in the environment; set the organizational strategies to respond those challenges and coordinate the work and achieve success

A substantial part of managerial responsibility is creative work driven by new knowledge and information

Information Technologies can play a powerful role in helping managers design and deliver new products and services

04

/21

/23

29

Managem

ent In

form

atio

n S

yste

ms

TECHNOLOGY IT is one of many tools managers use to cope

with change Computer hardware is the physical equipment

used for input, processing and output activities in an information system

Computer software consists of the detailed, preprogrammed instructions that control and coordinate computer hardware components in an IS

Data management technologies consist of the software governing the organization of data on physical storage

Network and telecommunications technologies consist of both physical devices and software that link various pieces of hardware and transfer data from one physical location to another

04

/21

/23

30

Managem

ent In

form

atio

n S

yste

ms

TECHNOLOGY A Network links two or more computers to

share data or resources, such as printers The world’s largest and most widely used

network is the Internet Internal corporate networks based on

Internet technology are called intranets Private intranets extended to authorized

users outside the organization are called extranets

The World Wide Web is a service provided by the Internet that uses universally accepted standards for storing, retrieving, formatting and displaying information in a page format on the Internet

04

/21

/23

31

Managem

ent In

form

atio

n S

yste

ms

TECHNOLOGY Information technology infrastructure provides the

foundation or platform on which the firm can build its specific information systems

Each organization must carefully design and manage its IT infrastructure so that it has set of technology services needed to accomplish the works

IS must provide information to satisfy the needs of managers and employees

UPS’s technology consists of handheld computers, bar code scanners, wired and wireless communication networks, desktop computers, UPS’s central computer, storage technology, in house package trafficking software and software to access Internet

The result is IS solution to business challenge of providing high level of service with low prices in the face of mounting competition

04

/21

/23

32

Managem

ent In

form

atio

n S

yste

ms

A BUSİNESS PERSPECTİVE ON IS Managers and business firms invest in IT and IS

because they provide real economic value to the business

The decision to build or invest in IS assume that the returns on this investment will be superior to other investments in buildings, machines or other assets

IS enable firms to increase its revenues or decrease its costs by providing information that helps managers make better decisions to improve the execution of business processes

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

04

/21

/23

33

Managem

ent In

form

atio

n S

yste

ms

ORGANİZATİONAL CAPİTAL AND THE RİGHT BUSİNESS MODEL Awareness of the organizational and managerial

dimensions of IS can help us understand why some firms achieve better results from their IS than others

Studies of returns from IS investments show that there is considerable variation in the returns firms receive

Some firms invest a great deal and receive a great deal; other invest an equal amount and receive few returns

Some firms fail to adopt the right business model that suits the new technology or seek to preserve an old business model that is doomed by the new technology

Some firms refused to change their old business model like recording label companies. As a result online legal music sales are dominated not by record companies, but by a technology company Apple

04

/21

/23

34

Managem

ent In

form

atio

n S

yste

ms

ORGANİZATİONAL CAPİTAL AND THE RİGHT BUSİNESS MODEL Complementary assets are those assets required to

derive value from a primary investments To realize value from automobiles requires substantial

investment in highways, roads, gasoline stations, repair facilities and a legal regulatory structure to set standards and control drivers

Firms that support their technology investments with investments in complementary assets such as new business models, new business processes, management behavior, organizational culture receive superior returns, whereas those firms failing to make these complementary investments receive less or no returns on their IS investments

Key organizational complementary investments supportive business culture that values efficiency and effectiveness, an appropriate business model, efficient business processes, decentralization of authority, highly distributed decision rights and a strong IS development team

04

/21

/23

35

Managem

ent In

form

atio

n S

yste

ms

CONTEMPORARY APPROACHES TO IS

The study of IS is multidisciplinary field. No single theory or perspective dominates the field

The field can be divided into technical and behavioral approaches

Information technologies are sociotechnical systems. Though they are composed of machines, devices and hard physical technology, they require substaintial social, organizational and intellectual investments to make them work properly

04

/21

/23

36

Managem

ent In

form

atio

n S

yste

ms

CONTEMPORARY APPROACHES TO IS

04

/21

/23

37

Managem

ent In

form

atio

n S

yste

ms

TECHNİCAL APPROACH The technical approach to IS emphasizes

mathematically based models to study IS as well as the physical technology and formal capabilities of these systems

The disciplines that contribute to technical approach are computer science, management science and operations management

Computer science is concerned with establishing theories of computability, methods of computation and methods of efficient data storage and access. Management science emphasizes the development of models for decision making and management practices. Operations research focuses on mathematical techniques for optimizing selected parameters of organizations such as transportation, inventory control and transaction costs

04

/21

/23

38

Managem

ent In

form

atio

n S

yste

ms

BEHAVİORAL APPROACH An important part of the IS field is concerned with behavioral

issues that arise in the development and long term maintenance of IS

Issues such as strategic business integration, design, implementation, utilization and management cannot be explored usefully with models used in technical approach

Sociologists study IS with an eye toward how groups and organizations shape the development of systems and how systems affect individuals, groups and organizations

Psychologists study IS with an interest in how human decision makers perceive and use information. Economists study IS with an interest in understanding the production of digital goods, the dynamics of digital markets and understanding how new IS change the control and cost structure of firms

Behavioral approach does not ignore technology. Indeed, IS is often the stimulus for a behavioral problem or issue

04

/21

/23

39

Managem

ent In

form

atio

n S

yste

ms

SOCİOTECHNİCAL PERSPECTİVE

The study of MIS arose in the 1970s to focus on the use of computer based systems in business firms and government agencies

MIS combines the work of computer science, management science and operations research with a practical orientation toward developing system solutions to real world problems and managing IS resources

There is no single approach effectively captures the reality of IS. The success and failures of information are rarely all technical or behavioral

04

/21

/23

40

Managem

ent In

form

atio

n S

yste

ms

SOCİOTECHNİCAL PERSPECTİVE It is better to try to understand both perspectives In sociotechnical view of IS, optimal organizational

performance is achieved by jointly optimizing both the social and technical systems used in production

Adopting sociotechnical systems perspective helps to avaoid a purely technological approach to IS. The fact that IT is rapidly declining in cost and growing in power does not necessarily or easily translate into productivity enhancement or bottom line profits. The fact that a firm has recently installed an enterprisewide financial reporting system does not necessarily mean that it will be used or used efficiently.

It is important to optimize firms performance as whole. Both technical and behavioral components need attention.

Organizations and individuals must also be changed through training, learning and planned organizational change to allow the technology operate and prosper

04

/21

/23

41

Managem

ent In

form

atio

n S

yste

ms

SOCİOTECHNİCAL PERSPECTİVE

04

/21

/23

42

Managem

ent In

form

atio

n S

yste

ms