1 1 1 managing the digital firm digital firm chapter this lecture is based on materials in...

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MANAGING THEMANAGING THE

DIGITAL FIRMDIGITAL FIRM

Chapter

This lecture is based on materials in Essentials of Management Information Systems by Laudon and Laudon 5/e and the summary slides available on their website. However, some material herein also represents the perspective of Gregory Rose of Washington State University. Where materials are taken verbatim from the Laudon and Laudon slides, they represent the views of the book and are copyrighted by the authors and the publisher. Where the sequence or content differ, the content is considered the work of Gregory Rose with all copyrights reserved.

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• What is the role of information systems in today’s competitive business environment?

• What exactly is an information system? What do managers need to know about information systems?

• How are information systems transforming organizations and management?

• How has the Internet and Internet technology transformed business?

Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm

OBJECTIVES- at the end of this lecture, we should be able to answer the following

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The New Role: The Widening Scope of Information Systems

TOWARD THE DIGITAL FIRM: THE NEW ROLE OF CBIS’s IN ORGANIZATIONS

Relative

importance

---------------

Area of

impact

What happened!

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WHY (COMPUTER-BASED) INFORMATION SYSTEMS?

Non-existent in 1940’s due to technologyExpensive in 1950’s-1970’sAffordable in 1980’s but not unequivocally valuable

until 1990s - WHY?Coincided with four radical worldwide changes that

have altered the business environment:• Emergence of the Global Economy• Transformation of Industrial Economies• Transformation of the Business Enterprise• The Emerging Digital Firm• Will talk about each of these in details later (write these

down). But first, what do CBIS’ do that enabled these…

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• Computers (and computer systems) are great at four things (write these down):

• Storage and retrieval of data • Distribution of digital content• Enabling and enforcing standardization of process• Automation (most effectively of tedious tasks or those

too complex to be done reliably by humans)– Can automate whenever you see a pattern

• Let’s look at each of the 4 changes in the business environment and discuss how these radical changes may have been enabled by CBIS’…but first an overview of how radical change occurs


Computer-Based Information System (CBIS)


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S1 S2 S3 S4

Pattern:

Phase:

Stages of Innovation Resulting from Discontinuous Tech Change (DTC).Happens when limits in base technologies are overcome, causing an innovation wave.

fluid

Stage:

transition specific

Adapted from Lambe and Speckman (1997).

Product Exploration Product ExploitationProcess Exploration

Product ExploitationProcess Exploitation

Radical Product

Innovation dominant

Radical Process

Innovation dominantIncremental Product and Process Innovation dominant

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Each Discontinuous Tech Change (DTC) wave moves along until the nextlimits in base technologies are overcome, causing the next wave.

Adapted from Lambe and Speckman (1997).

Cumulative research effort

Per

form

ance

DTC1 (Mainframes)

DTC2 (Personal Computers)

DTC3 (Local Area Networks)

DTC4 (Internet Computing)

Here is an example of innovation for computer-based innovations. Cumulative research effort is within a domain. So this diagram would bethe same for any innovation domain such as metallurgy or electronics.

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First of 4 changes: Emergence of the Global Economy

• Management and control in a global marketplace – helped by IT because distributed, fast, real-time or

asynchronous, rich interface, reduced media breaks– Global work groups

• Allows low marginal cost competition in world markets– 24x7 point of contact– Global delivery systems of digital products

• How did 4 things computers do well enable this? (e.g. what was possible before computers & what limits do they overcome to allow innovation?)

The Competitive Business Environment and the Emerging Digital Firm


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Second Change: Transformation of Industrial EconomiesSecond Change: Transformation of Industrial Economies


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2. Transformation of Industrial Economies• Knowledge- and information-based economies in developed

world – Knowledge: a central productive and strategic asset– High margin & tougher to replicate– Marked by time-based competition, shorter product life, and

turbulent environment– Low-knowledge jobs more commodity-like and mostly fled

to LDCs– Allows some poorer economies to leapfrog in status (e.g.,

Finland, India and Ireland)• How did 4 things computers do well enable this? (e.g. what was

possible before computers & what limits do they overcome to allow innovation?)



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Third Change: Transformation of the Business EnterpriseIT accommodates management in orgs that are:

• Flattening

• Decentralizing• Flexible• Location independent• And striving for:

–Low transaction and coordination costs; empowerment; collaborative work and teamwork

• How did 4 things computers do well enable this? (e.g. what was possible before computers & what limits do they overcome to allow innovation?)



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Benefits of media break reduction and subsequent automation. There are negative consequences too. We will look at this with the Cisco case next week.

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Fourth Change: Emergence of the Digital Firm• We talk about digital firms in this class. The book doesn’t

provide a definition of “digital” and it should. Basically, digital firms use digital networks throughout their processes. Digital networks send digital information across them.

• For purposes of understanding what it is to be a digital firm, please consider the definition on the following two slides from Whatis.com (source http://whatis.techtarget.com/definition/0,,sid9_gci211948,00.html)



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Digital describes electronic technology that generates, stores, and processes data in terms of two states: positive and non-positive. Positive is expressed or represented by the number 1 and non-positive by the number 0. Thus, data transmitted or stored with digital technology is expressed as a string of 0's and 1's. Each of these state digits is referred to as a bit (and a string of bits that a computer can address individually as a group is a byte).

Digital Defined:


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• Prior to digital technology, electronic transmission was limited to analog technology, which conveys data as electronic signals of varying frequency or amplitude that are added to carrier waves of a given frequency. Broadcast and phone transmission has conventionally used analog technology.

• Digital technology is primarily used with new physical communications media, such as satellite and fiber optic transmission. A modem is used to convert the digital information in your computer to analog signals for your phone line and to convert analog phone signals to digital information for your computer.

Digital definition continued:


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With that in mind - Fourth Change: Emergence of the Digital Firm

• One with almost no media breaks in, within, or out– Digitally-enabled relationships with customers,

suppliers, and employees– Core business processes accomplished via

digital networks– Digital management of key corporate assets

• Rapid sensing and responding to environmental changes



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• Truly digital firm is one that uses Web and Internet-based tools and protocols to create a firm without media breaks

• Book says: “all significant business processes and relationships with customers, suppliers, and employees are digitally enabled, and key corporate assets are managed through digital means”

• That is extreme. Subset of digital firm is electronic business that reduces media breaks and uses those tools and protocols


To Be a Digital Firm


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•How did 4 things computers do well enable this? (e.g. what was possible before computers & what limits do they overcome to allow innovation?)

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An information system is a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making, and control in an organization.

It can also generate product in an information services

firm for others to use in decision making and control.


I have made the case why CBIS’s are important.

So, what exactly is an Information System?


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INPUT OUTPUTPROCESS

FEEDBACK


The three activities in an information system


(Feedback enables modification of input stage)

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IS’s serve the firm within and outwardly


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That was a summary of what Information Systems are in general.

And not all IS’s are computerized.

But Computer-Based Information System (CBIS) are what we cover in this course

So what are they?



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• Finally: Definition of CBIS’ and what they do:• CBIS’s are formal systems

– Fixed definitions of data, procedures– Collecting, storing, processing, disseminating, using data

• But they are indeed also computerized…so they take advantage of the 4 things computers do well

• Are technology-enabled organizational and management solutions to challenges posed by the environment.

• Automated support for input, processing, and output of business processes.



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CHARACTERISTICS OF (COMPUTER-BASED) INFORMATION SYSTEMS?

Conclusion:• IT went from obscure luxury for only largest

organizations to mainstream and mission critical across entire enterprise

• You will need to adopt and manage this resource regardless of your discipline

• Next week we talk about all the ways IT can support functionality of the firm

• Consider it a menu from which your firm could shop• Then we will talk about how to buy off the menu

with a finite budget

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MANAGING THEMANAGING THE

DIGITAL FIRMDIGITAL FIRM

Chapter

1 1 1 managing the digital firm digital firm chapter this lecture is based on materials in...

Documents

role of information

computer systems

emerging digital firm

digital firm objectives

radical changes

following slide

innovation wave

stages of innovation