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Management Information Systems 8/eManagement Information Systems 8/eChapter 3 Information Systems, Organizations, Management, and StrategyChapter 3 Information Systems, Organizations, Management, and Strategy33

INFORMATION INFORMATION SYSTEMS, SYSTEMS,

ORGANIZATIONS, ORGANIZATIONS, MANAGEMENT, MANAGEMENT, AND STRATEGYAND STRATEGY

Chapter


Management Information Systems 8/eManagement Information Systems 8/eChapter 3 Information Systems, Organizations, Management, and StrategyChapter 3 Information Systems, Organizations, Management, and Strategy

• What do managers need to know about What do managers need to know about organizations in order to build and use organizations in order to build and use information systems successfully?information systems successfully?

• What impact do information systems have What impact do information systems have on organizations?on organizations?

• How do information systems support the How do information systems support the activities of managers in organizations?activities of managers in organizations?


OBJECTIVES



• How can businesses use information How can businesses use information systems for competitive advantage?systems for competitive advantage?

• Why is it so difficult to build successful Why is it so difficult to build successful information systems, including systems information systems, including systems that promote competitive advantage?that promote competitive advantage?

OBJECTIVES




1.1. Sustainability of competitive advantageSustainability of competitive advantage

2. Fitting technology to the organization 2. Fitting technology to the organization (or vice-versa)(or vice-versa)

MANAGEMENT CHALLENGES




ORGANIZATIONS AND INFORMATION SYSTEMS

Figure 3-1


MEDIATING FACTORS:MEDIATING FACTORS: Environment Environment Culture CultureStructure Structure Standard Procedures Standard Procedures Politics Politics Management Management Decisions ChanceDecisions Chance

ORGANIZATIONSORGANIZATIONS INFORMATION INFORMATION TECHNOLOGYTECHNOLOGY

The Two-Way Relationship Between Organizations and Information Technology



Organization:Organization:

• Stable, formal structureStable, formal structure

• Takes resources from environment and Takes resources from environment and processes them to produce outputsprocesses them to produce outputs





Technical Microeconomic Definition of the Organization



Figure 3-2



Behavioral definition of Organization: Behavioral definition of Organization:

• Collection of rights, privileges, obligations, Collection of rights, privileges, obligations, responsibilitiesresponsibilities

• Delicately balancedDelicately balanced

• Conflict resolutionConflict resolution






COMMON FEATURES OF ORGANIZATIONS

The Behavioral View of Organizations

Figure 3-3




• Organizations are bureaucracies that have Organizations are bureaucracies that have

certain structural featurescertain structural features


Common Features of Organizations




Structural Characteristics of Organizations:Structural Characteristics of Organizations:

• Clear division of laborClear division of labor

• HierarchyHierarchy

• Explicit rules and proceduresExplicit rules and procedures

• Impartial judgmentsImpartial judgments






Structural Characteristics of Organizations Structural Characteristics of Organizations (cont.):(cont.):

• Technical qualificationsTechnical qualifications

• Maximum organizational efficiencyMaximum organizational efficiency






Standard Operating Procedures:Standard Operating Procedures:

• Precise rules, procedures, and practicesPrecise rules, procedures, and practices

• Enable organizations to cope with all Enable organizations to cope with all expected situationsexpected situations






Organizational Politics:Organizational Politics:

• Divergent viewpoints leads to political Divergent viewpoints leads to political struggle, competition, and conflictstruggle, competition, and conflict

• Hamper organizational changeHamper organizational change






Organizational Culture: a set of Organizational Culture: a set of

fundamental assumptions about:fundamental assumptions about:• What products the organization should What products the organization should

produceproduce

• How and where it should produce themHow and where it should produce them

• For whom they should be producedFor whom they should be produced





All organizations have different:All organizations have different:• Structures/Organizational types Structures/Organizational types

• Goals Goals

• ConstituenciesConstituencies

• Leadership Styles, TasksLeadership Styles, Tasks

• Surrounding EnvironmentSurrounding Environment


ORGANIZATIONS & INFORMATION SYSTEMS

Unique Features of Organizations




• Entrepreneurial:Entrepreneurial: Start up business Start up business

• Machine bureaucracy:Machine bureaucracy: Midsize Midsize manufacturing firmmanufacturing firm

• Divisionalized bureaucracy:Divisionalized bureaucracy: Fortune 500 Fortune 500

• Professional bureaucracy:Professional bureaucracy: Law firms, Law firms, hospitals, school systemshospitals, school systems

• Adhocracy:Adhocracy: Consulting firm Consulting firm


Organizational Structures




Figure 3-4

Organization and Its Environment





• Ultimate goalUltimate goal

• Different groups and constituenciesDifferent groups and constituencies

• Nature of leadershipNature of leadership

• Tasks and technologyTasks and technology


Other Differences Among Organizations



THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS


Information systems department:Information systems department:

• Formal organizational unitFormal organizational unit

• Responsible for information systems in Responsible for information systems in the organizationthe organization

Information Technology Infrastructure and Information Technology Services




Figure 3-5


Information Technology Services





Includes specialists:Includes specialists:

• Programmers:Programmers: Highly trained, write Highly trained, write softwaresoftware

• Systems analysts:Systems analysts: Translate business Translate business problems into solutions, act as liaisons problems into solutions, act as liaisons between the information systems between the information systems department and rest of the organizationdepartment and rest of the organization






Specialists (cont.):Specialists (cont.):• Information system managers: Information system managers: Leaders of Leaders of

various specialistsvarious specialists

• Chief information officer (CIO): Chief information officer (CIO): Senior Senior manager in charge of information systems manager in charge of information systems function in the firmfunction in the firm

• End users:End users: Department representatives Department representatives outside the information system department for outside the information system department for whom applications are developedwhom applications are developed




Economic theoriesEconomic theories

• Information technology is a factor of Information technology is a factor of production, like capital and laborproduction, like capital and labor



How Information Systems Affect Organizations



Transaction cost theory:Transaction cost theory: Firms can Firms can conduct marketplace transactions conduct marketplace transactions internally more cheaply to grow largerinternally more cheaply to grow larger






Transaction Cost Theory


Figure 3-6




• Agency theory:Agency theory: Firm is nexus of Firm is nexus of contracts among self-interested parties contracts among self-interested parties requiring supervisionrequiring supervision






Agency Cost Theory


Figure 3-7




Behavioral theories:Behavioral theories:

• Information technology could change hierarchy of Information technology could change hierarchy of decision makingdecision making

• Lower cost of information acquisitionLower cost of information acquisition

• Broadens the distribution of informationBroadens the distribution of information






Virtual organization:Virtual organization:

• Task force networked organizationsTask force networked organizations

• Uses networks to link people, assets, and ideas Uses networks to link people, assets, and ideas to create and distribute products and services to create and distribute products and services without being limited to physical locationswithout being limited to physical locations







Figure 3-8

Implementing Change and Organizational Resistance





Classical model of management:Classical model of management:• Traditional description of managementTraditional description of management

• Focuses on formal functions: plan, Focuses on formal functions: plan, organize, coordinate, decide, controlorganize, coordinate, decide, control

Behavioral model of management:Behavioral model of management:• Describes management based on Describes management based on

observations of managers on the jobobservations of managers on the job

MANAGERS, DECISION MAKING, AND INFORMATION SYSTEMS

The Role of Managers in Organizations




Managerial rolesManagerial roles

• Expectation of activities that managers Expectation of activities that managers should perform in an organizationshould perform in an organization






CategoriesCategories• Interpersonal: Interpersonal: Managers act as figureheads Managers act as figureheads

and leaders and leaders

• Informational: Informational: Managers receive and Managers receive and disseminate critical information, nerve centersdisseminate critical information, nerve centers

• Decisional: Decisional: Managers initiate activities, Managers initiate activities, allocate resources, and negotiate conflictsallocate resources, and negotiate conflicts






Process of Decision MakingProcess of Decision Making

• Strategic Decision Making:Strategic Decision Making: Determines long-term objectives, Determines long-term objectives, resources, and policiesresources, and policies

• Management Control: Management Control: Monitors Monitors effective or efficient usage of resources effective or efficient usage of resources and performance of operational unitsand performance of operational units


Managers and Decision Making




• Operational control:Operational control: Determines how to Determines how to perform specific tasks set by strategic and perform specific tasks set by strategic and middle-management decision makersmiddle-management decision makers

• Knowledge-level decision making: Knowledge-level decision making: Evaluates new ideas for products, Evaluates new ideas for products, services, ways to communicate new services, ways to communicate new knowledge, ways to distribute knowledge, ways to distribute informationinformation






Decisions are classified as:Decisions are classified as:

• Unstructured:Unstructured: Non routine, decision Non routine, decision maker provides judgment, evaluation, and maker provides judgment, evaluation, and insights into problem definition, no agreed-insights into problem definition, no agreed-upon procedure for decision makingupon procedure for decision making

• Structured:Structured: Repetitive, routine, handled Repetitive, routine, handled using a definite procedureusing a definite procedure






TPS

Organizational Level

OAS MIS

KWS

DSS

ESS

TYPE OFTYPE OFDECISIONDECISION OPERATIONAL KNOWLEDGE MANAGEMENT STRATEGIC

STRUCTURED ACCOUNTS RECEIVABLE

ELECTRONIC PRODUCTIONSCHEDULING COST OVERRUNS

SEMI- BUDGETSTRUCTURED PREPARATION

PROJECTSCHEDULING

FACILITYLOCATION

UNSTRUCTURED PRODUCT DESIGN NEW PRODUCTSNEW MARKETS

Figure 3-9


Different Kinds of Information Systems




• Intelligence:Intelligence: Collect information, identify Collect information, identify problemproblem

• Design:Design: Conceive alternative solution to a Conceive alternative solution to a problemproblem

• Choice:Choice: Select among the alternative Select among the alternative solutions solutions

• Implementation:Implementation: Put decision into effect Put decision into effect and provide report on the progress of solutionand provide report on the progress of solution


Stages of Decision Making




Figure 3-10


Decision-Making Process



• Rational:Rational: People, organizations, and People, organizations, and nations engage in consistent, value-nations engage in consistent, value-maximizing calculations or adaptations maximizing calculations or adaptations within certain constraintswithin certain constraints

• Cognitive style: Cognitive style: Underlying personality Underlying personality dispositions toward the treatment of dispositions toward the treatment of information, selection of alternatives, and information, selection of alternatives, and evaluation of consequencesevaluation of consequences



Models of Decision Making



• Systematic decision makers:Systematic decision makers: Cognitive style,Cognitive style, describes people who describes people who approach a problem by structuring it in approach a problem by structuring it in terms of some formal methodterms of some formal method

• Intuitive:Intuitive: Cognitive style, describes Cognitive style, describes people approaching a problem with people approaching a problem with multiple methods in an unstructured multiple methods in an unstructured mannermanner






• Organizational models of decision Organizational models of decision making:making: Consider structural and political Consider structural and political characteristics of an organizationcharacteristics of an organization






Factors to consider while planning aFactors to consider while planning anew system:new system:

• Organizational environment Organizational environment

• Organizational structure, hierarchy, Organizational structure, hierarchy, specialization, standard operating specialization, standard operating proceduresprocedures



Implications for the Design and Understanding of Information Systems



• Culture and politics of the organizationCulture and politics of the organization

• Type of organization and its style of Type of organization and its style of leadershipleadership






• Groups affected by the system and the Groups affected by the system and the attitudes of workers who will be using the attitudes of workers who will be using the systemsystem

• Kinds of tasks, decisions, and business Kinds of tasks, decisions, and business processes, information system is processes, information system is designed to assistdesigned to assist






Characteristics to be kept in mind Characteristics to be kept in mind

while designing systems:while designing systems:

• Flexibility and multiple options for Flexibility and multiple options for handling data and evaluating informationhandling data and evaluating information

• Capability to support a variety of styles, Capability to support a variety of styles, skills, and knowledge skills, and knowledge






• Capability to keep track of many Capability to keep track of many alternatives and consequencesalternatives and consequences

• Sensitivity to the organization’s Sensitivity to the organization’s bureaucratic and political requirementsbureaucratic and political requirements






INFORMATION SYSTEMS AND BUSINESS STRATEGY

• Computer system at any level of an Computer system at any level of an organization organization

• Changes goals, operations, products, Changes goals, operations, products, services, or environmental relationshipsservices, or environmental relationships

• Helps organization gain a competitive Helps organization gain a competitive advantageadvantage


What is Strategic Information System?




Digital firmsDigital firms

• Manage the supply chain by building Manage the supply chain by building efficient customer “sense and response” efficient customer “sense and response” systemssystems

• Participate in “value webs” to deliver new Participate in “value webs” to deliver new products and services products and services


Business Level Strategy and the Value Chain Model




Value Chain Model:Value Chain Model:

• Highlights the primary or support Highlights the primary or support activities adding a margin of value to activities adding a margin of value to products or servicesproducts or services

• Helps achieve a competitive advantageHelps achieve a competitive advantage






Primary Activities:Primary Activities: • Directly related to the production and Directly related to the production and

distribution of a firm’s products or servicesdistribution of a firm’s products or services

Support Activities:Support Activities:• Make the delivery of primary activities Make the delivery of primary activities

possiblepossible• Consist of the organization’s infrastructure, Consist of the organization’s infrastructure,

human resources, technology, and human resources, technology, and procurementprocurement







Firm Value Chain

Figure 3-11




Value Web:Value Web:

• Customer-driven network of independent Customer-driven network of independent firms firms

• Uses information technology to coordinate Uses information technology to coordinate value chains for collectively producing a value chains for collectively producing a product or service product or service







The Value Web

Figure 3-12




Product Differentiation:Product Differentiation:

• Competitive strategy Competitive strategy

• Creates brand loyalty by developing new Creates brand loyalty by developing new and unique products and services and unique products and services

• Products and services not easily Products and services not easily duplicated by competitorsduplicated by competitors






Focused Differentiation:Focused Differentiation:

• Competitive strategy Competitive strategy

• Enables development of new market Enables development of new market niches for specialized products or servicesniches for specialized products or services

• Helps businesses compete better than Helps businesses compete better than competitors in the target areascompetitors in the target areas






Efficient Customer Response System:Efficient Customer Response System:

• Directly links consumer behavior back to Directly links consumer behavior back to distribution, production, and supply distribution, production, and supply chainschains


Supply Chain Management and Efficient Customer Response System




Switching costs:Switching costs:

• Expense incurred by a customer or Expense incurred by a customer or company in terms of time and expenditure company in terms of time and expenditure of resources when changing from one of resources when changing from one supplier or system to anothersupplier or system to another


Supply Chain Management and Efficient Customer Response System




Figure 3-13


Stockless Inventory Compared to Traditional and Just-in-time Supply Methods




Figure 3-14


Business-Level Strategy




Core Competency:Core Competency:

• Activity at which a firm excels as a world-Activity at which a firm excels as a world-class leaderclass leader

• Information system encouraging the Information system encouraging the sharing of knowledge across business sharing of knowledge across business units enhances competencyunits enhances competency


Firm-Level Strategy and Information Technology




Information partnership:Information partnership:

• Cooperative alliance formed between two Cooperative alliance formed between two or more corporations for sharing or more corporations for sharing information to gain strategic advantageinformation to gain strategic advantage

• Help firms gain access to new customers, Help firms gain access to new customers, creating new opportunities for cross-creating new opportunities for cross-selling and targeting productsselling and targeting products


Industry-Level Strategy and Information Systems




The competitive forces model:The competitive forces model:

• Describes the interaction of external Describes the interaction of external influences, specifically threats and influences, specifically threats and opportunities, affecting an organization’s opportunities, affecting an organization’s strategy and ability to competestrategy and ability to compete






Figure 3-15


Porter’s Competitive Forces Model




Figure 3-16


New Competitive Forces Model




Network Economics:Network Economics:

• Model of strategic systems at the industry Model of strategic systems at the industry level level

• Based on the concept of a network Based on the concept of a network

• Adding another participant entails zero Adding another participant entails zero marginal costs but can create much larger marginal costs but can create much larger marginal gainmarginal gain






Managing strategic transitions:Managing strategic transitions:

• Movement from one level of Movement from one level of sociotechnical system to anothersociotechnical system to another

• Required when adopting strategic Required when adopting strategic systems demanding changes in the social systems demanding changes in the social and technical elements of an organizationand technical elements of an organization


Using Systems for Competitive Advantage: Management Issues


Management Information Systems 8/eManagement Information Systems 8/eChapter 3 Information Systems, Organizations, Management, and StrategyChapter 3 Information Systems, Organizations, Management, and Strategy33

INFORMATION INFORMATION SYSTEMS, SYSTEMS,

ORGANIZATIONS, ORGANIZATIONS, MANAGEMENT, MANAGEMENT, AND STRATEGYAND STRATEGY

Chapter

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