LECTURE 1: INFORMATION SYSTEMS IN BUSINESS TODAY

Management Information Systems
MANAGING THE DIGITAL FIRM, 12TH EDITION
INFORMATION SYSTEMS IN
BUSINESS TODAY
Chapter 1
VIDEO CASES
Case 1: UPS Global Operations with the DIAD IV
Case 2: IBM, Cisco, Google: Global Warming by Computer

Today’s Plan !!
• Introductions
• Course Outline
• Class Rules
• Share contact numbers (Phone no. and emails)

About you
• Your name
• Where you belong from?
• Previous internship/additional courses/activities
• Future aspirations

Course resources
• Lectures/Slides
• Case/Articles
• Text Book
• “Management Information System, Managing the Digital
Firm” by Kenneth C. Laudon, Jane P. Laudon 13th Global
Edition

INFORMATION IN BUSINESS SYSTEMS TODAY
• Understanding the effects of information systems
on business and their relationship to globalization.
• Explain why information systems are so essential in
business today.
• Define an information system and describe its
management, organization, and technology
components.
Learning Objectives
6

• Define complementary assets and explain how they
ensure that information systems provide genuine
value to an organization.
• Describe the different academic disciplines used to
study information systems and explain how each
contributes to our understanding of them.
• Explain what is meant by a sociotechnical systems
perspective.
Learning Objectives (cont.)
7

• How information systems are transforming business
– Increase in wireless technology use, Web sites
– Increased business use of Web 2.0 technologies
– Cloud computing, mobile digital platform, big data
Globalization opportunities
– Internet has significantly reduced costs of operating
on global scale
– Presents both challenges and opportunities
The Role of Information Systems in Business Today
8

• In the emerging, fully digital firm
– Significant business relationships are digitally enabled
and mediated
– Core business processes are accomplished through
digital networks
– Key corporate assets are managed digitally
• Digital firms offer greater flexibility in organization
and management
– Time shifting, space shifting
9

• Growing interdependence between ability to use
information technology and ability to implement
corporate strategies and achieve corporate goals
• Business firms invest heavily in information systems
to achieve six strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier relationship
4. Improved decision making
5. Competitive advantage
6. Survival
10

1. Operational excellence:
–Improvement of efficiency to attain higher
profitability
–Information systems, technology an
important tool in achieving greater
efficiency and productivity
–Walmart’s RetailLink system links suppliers
to stores for superior replenishment system
–Walmart and Amazon
11

2. New products, services, and business
models:
– Business model: describes how company
produces, delivers, and sells product or service to
create wealth
– Information systems and technology a major
enabling tool for new products, services,
business models
• Examples: Apple’s iPod, iTunes, iPhone, iPad,
Google’s Android OS, Netflix, Careem
12

3. Customer and supplier intimacy:
– Serving customers well leads to customers returning,
which raises revenues and profits
• Example: High-end hotels that use computers to
track customer preferences and use to monitor and
customize environment – Serena Hotel
– Intimacy with suppliers allows them to provide vital
inputs, which lowers costs
• Example: J.C.Penney’s information system which
links sales records to contract manufacturer
13

4. Improved decision making
– More accurate data leads to better decisions
– 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
– Example: Verizon’s Web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.
14

6. Competitive advantage
– Delivering better performance
– Charging less for superior products
– Responding to customers and suppliers in real
time
– Examples: Apple, Walmart, UPS
15

7. Survival
– Information technologies as necessity of business
– May be:
• Industry-level changes, e.g. Citibank’s
introduction of ATMs
• Governmental regulations requiring record-
keeping
– Examples: Sarbanes-Oxley Act
16

The Interdependence Between Organizations and Information Technology
In contemporary systems there is a growing interdependence between a firm’s information systems and its
business capabilities. Changes in strategy, rules, and business processes increasingly require changes in
hardware, software, databases, and telecommunications. Often, what the organization would like to do
depends on what its systems will permit it to do.
Figure 1.2
17

Information Technology vs Information Systems
18

• 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
19

Data and Information
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
20

• Three activities of information systems
produce information organizations need
1. Input: Captures raw data from organization or
external environment
2. Processing: Converts raw data into meaningful
form
3. Output: Transfers processed information to
people or activities that use it
21

• 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 foundation
and tools, similar to the material and tools used to
build a house
22

Functions of an
Information System
An information system
contains information about an
organization and its
surrounding environment.
Three basic activities—input,
processing, and output—
produce 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
regulatory agencies, interact
with the organization and its
information systems.
Figure 1.4
23

Information Systems
Are More Than
Computers
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 posed by the
environment.
Figure 1.5
24

• Organizational dimension of information
systems
– Hierarchy of authority, responsibility
• Senior management
• Middle management
• Operational management
• Knowledge workers
• Data workers
• Production or service workers
25

• Organizational dimension of information
systems (cont.)
– Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
– Unique business processes
– Unique business culture
– Organizational politics
26

• Management dimension of information
systems
– Managers set organizational strategy for
responding to business challenges
– In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization
27

• Technology dimension of information
systems
– Computer hardware and software
– Data management technology
– Networking and telecommunications technology
• Networks, the Internet, intranets and extranets,
World Wide Web
– IT infrastructure: provides platform that system
is built on
28

• Dimensions of TCS tracking system
– Organizational:
• Procedures for tracking packages and managing
inventory and provide information
– Management:
• Monitor service levels and costs
– Technology:
• Handheld computers, bar-code scanners,
networks, desktop computers, etc.
29

• Business perspective on information
systems:
– Information system is instrument for creating
value
– Investments in information technology will result
in superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning
30

• Business information value chain
– Raw data acquired and transformed through
stages that add value to that information
– Value of information system determined in part by
extent to which it leads to better decisions,
greater efficiency, and higher profits
• Business perspective:
– Calls attention to organizational and
managerial nature of information systems
31

The Business Information Value Chain
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 firm profitability.
Figure 1-7
32

Variation in Returns
On Information
Technology
Investment
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
33

• Investing in information technology does not
guarantee good returns
• Considerable variation in the returns firms
receive from systems investments
• Factors:
– Adopting the right business model
– Investing in complementary assets
(organizational and management capital)
34

• Complementary assets:
–Assets required to derive value from a
primary investment
–Firms supporting technology investments
with investment in complementary assets
receive superior returns
–E.g.: invest in technology and the people to
make it work properly
35

• Complementary assets include:
– Organizational assets, e.g.
• Appropriate business model
• Efficient business processes
– Managerial assets, e.g.
• Incentives for management innovation
• Teamwork and collaborative work environments
– Social assets, e.g.
• The Internet and telecommunications infrastructure
• Technology standards
36

Contemporary Approaches to Information Systems
Contemporary
Approaches to
Information Systems
The study of information
systems deals with issues and
insights contributed from
technical and behavioral
disciplines.
Figure 1.9
37

• Technical approach
– Emphasizes mathematically based models
– Computer science, management science,
operations research
• Behavioral approach
– Behavioral issues (strategic business integration,
implementation, etc.)
– Psychology, economics, sociology
38

• Management Information Systems
– 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
– Firm’s environment (legal, social, cultural context)
39

• Approach of this book:
Sociotechnical view
• Optimal organizational performance
achieved by jointly optimizing both
social and technical systems used in
production
• Helps avoid purely technological
approach
40

A Sociotechnical Perspective on Information Systems
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
41

All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system, or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise, without the
prior written permission of the publisher.
Printed in the United States of America.
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
42

LECTURE 1: INFORMATION SYSTEMS IN BUSINESS TODAY

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LECTURE 1: INFORMATION SYSTEMS IN BUSINESS TODAY