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1.1 2006 by Prentice Hall

OBJECTIVES

Management Information SystemsChapter 1 Managing the Digital Firm

Explain why information systems are soimportant today for business and management

Evaluate the role of information systems intodays competitive business environment

Assess the impact of the Internet and Internettechnology on business and government

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Define an information system from both atechnical and business perspective anddistinguish between computer literacy andinformation systems literacy

Identify the major management challenges tobuilding and using information systems

OBJECTIVES (Continued)


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DaimlerChrysler Case

Challenge:104 plants, 37 countries, 14,000 suppliers

Solutions: Integrated Volume Planning Systemconnectsdemand side of business with suppliers, reducing

inventories.

Powerwayhelps 3,400 suppliers track parts and quality,reducing errors.

Demonstrates ITs role in operational excellence, better

quality products, and agilitytime to market

Illustrates the emerging digital firm landscape whereinformation can flow seamlessly among business partnersto create a superior customer experience

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WHY INFORMATION SYSTEMS?


Capital management

Foundation of doing business

Productivity

Strategic opportunity and advantage

Why Information Systems Matter

There are four reasons why IT makes a difference to thesuccess of a business:

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IT is the largest single component of capitalinvestment in the United States.

About $1.8 trillion is spent each year by Americanbusinesses.

Managers and business students need to know howto invest this capital wisely.

The success of your business in the future may welldepend on how you make IT investment decisions.

Capital Management:


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Information Technology Capital Investment


Source:Based on the data in U.S. Department ofCommerce, Bureau of Economic Analysis, National

Income and Product Accounts, Tables 5.2 and 5.8,2004.

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Most businesses today could not operate withoutextensive use of information systems and

technologies.

IT can increase market share.

IT can help a business become a high-quality,low-cost producer.

IT is vital to the development of new products.

Foundation of doing business:


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The Interdependence between Organizations andInformation Systems

Figure 1-2


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IT is one of the most important tools managershave to increase produc t iv i ty and eff ic iency ofbusinesses.

According to the Federal Reserve Bank, IT hasreduced the rate of inflation by 0.5 to 1% in thelast decade. For firms this means IT is a majorfactor in reducing costs.

It is estimated that IT has increased productivityin the economy by about 1% in the last decade.For firms this means IT is a major source of labor

and capital efficiency.


Productivity:

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Create competitive advantage:IT makes itpossible to develop competitive advantages.

New Business Models:Dell Computer has built itscompetitive advantage on an IT enabled build-to-order business model that other firms have not

been able to imitate.


Strategic Opportunity and Advantage:

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Create new services:eBay has developed thelargest auction trading platform for millions of

individuals and businesses. Competitors havenot been able to imitate its success.

Differentiate yourself from your competitors:

Amazon has become the largest book retailer inthe United States on the strength of its hugeonline inventory and recommender system. It hasno rivals in size and scope.


Strategic Opportunity and Advantage:

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Carr has written that whatever advantages firmsbuild using IT can be easily copied by

competitors.

This view is not supported by the evidence:Amazon, eBay, Dell, Wal-Mart and Apple's iTunes

are just a few firms that have built andmaintained technology-based advantages.

How Much Does IT Matter?


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Commoditization of technology is typically aspur to innovation and new business models,

products and services.

Competitive advantage derives not from thetechnology, but on how businesses use the

technology.

Innovations in business processes,management and organization are not easily

copied from one firm to another.

How Much Does IT Matter?


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Digital Dashboard

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Internet growth and technology convergence

Transformation of the business enterprise

Why IT Now?

Digital Convergence and the ChangingBusiness Environment (Assessed by five

factors)


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Growth of a globally connected economy

Growth of knowledge and information-basedeconomies

Emergence of the digital firm


Why IT Now? Digital Convergence and theChanging Business Environment (Continued)

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Growth of the Internet: 120 million online in theUnited States, 500 million global users

The Internet is bringing about a convergence oftelecommunications and computing: VoIPtelephones.


The Internet and Technology Convergence:

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Growth in e-business, e-commerce, and e-government

Internet is bringing about rapid changes inmarkets and market structure: financial servicesand banking such as eTrade.com.

The Internet is making many traditionalbusiness models obsolete: the corner musicstore and video store.


The Internet and Technology Convergence:

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Flattening

Large, bureaucratic organizations (before computerage) are often inefficient, slow to change, and less

competitive

information technology facilitates flattening of

hierarchies

Decentralization

Flexibility


Transformation of the Business Enterprise:

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Location independence

Low transaction and coordination costs

Empowerment

Collaborative work and teamwork


Transformation of the Business Enterprise (Continued):

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Management and control in a global marketplace

Competition in world markets

Global workgroups

Global delivery systems


Globalization:

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Knowledge and information-based economies

New products and services

Knowledge as a central productive and strategicasset


Rise of the Information Economy:

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Time-based competition

Shorter product life

Turbulent environment

Limited employee knowledge base


Rise of the Information Economy (Continued):

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The Growth of the Information Economy

Figure 1-3


Source: U.S. Department of Commerce, Bureau of theCensus, Statistical Abstract of the United States, 2003,

Table 615; and Historical Statistics of the United States,Colonial Times to 1970, Vol. 1, Series D, pp. 182-232.

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Digitally enabled relationships with customers,suppliers, and employees

Core business processes accomplished usingdigital networks

Digital management of key corporate assets


Emergence of the Digital Firm:

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Agile sensing and responding to environmentalchanges

Seamless flow of information within the firm, andwith strategic partners


Emergence of the Digital Firm (Continued):

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The Emerging Digital Firm

Figure 1-4


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Case Study Reading in Class

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PERSPECTIVES ON INFORMATION SYSTEMS


What Is an Information System?

Technology perspective:A set of interrelated

components that collect (or retrieve), process, store,

and distribute information to support decision

making and control in an organization

M I f i S

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What is an Information System? (Continued)

Data:

Streams of raw facts Representing events (business transactions)

Information:

Clusters of facts

Meaningful and useful to human beings

Helps in making decisions

M t I f ti S t

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Data and Information

Figure 1-5

M t I f ti S t

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Functions of an Information System

Figure 1-6

M t I f ti S t

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Rely on computer hardware and software

Processing and disseminating information

Fixed definitions of data and procedures

Collecting, storing, and using information


Computer-Based Information System (CBIS)

M t I f ti S t

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IS-an organizational and management solution to business challenges

Challenges are arise from the business environment.

IS are Based on information technology but also require significantinvestment in organizational and management changes and innovations

IS create value by changing business processes and management decisionmaking.

ExHandled computers in UPS, USADelivery Information Acquisition Device

(DIAD)drivers automatically capture customers signatures along with pickup,delivery, and time card information.UPS information systems use these data to track packages while they are being

transported.


A Business Perspective on Information Systems

M t I f ti S t

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The Business Information Value Chain

IS are series of value-adding activities for acquiring, transforming, and distributing information to improve decisionmaking, enhance organizational performance, and, ultimately, increase firm profitability

Management Information Systems

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Major Business Functions Rely on Information Systems


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Information systems literacy:Broad-basedunderstanding of information systems(includes

behavioral knowledge, management and individualsusing information systems and technical knowledgeabout computers

Computer literacy:Knowledge about informationtechnology, focusing on understanding howcomputer technologies work



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Information Systems Are More than Computers

Dimensions of IS


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Three Important Dimensions of Information Systems

Organizations

Managers

Technology


You will need to understand and balance thesedimensions of information systems in order to createbusiness value.

Dimensions of Information Systems


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People

Structure Business processes

Culture

Politics


The Organizational Dimension of Information Systems


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Managers are:

Sense makers

Decision makers

Planners

Innovators of new processes

Leaders: set agendas


The Management Dimension of Information Systems


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Hardware:Physical equipment

Software:Detailed preprogrammed instructions

Storage:Physical media for storing data and thesoftware


Information technology is one of the tools managersuse to cope with change:

The Technology Dimension of Information Systems


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Communications technology:Transfers datafrom one physical location to another

Networks:Links computers to share data orresources


The Technology Dimension of Information Systems(Continued)

Managers need to know about information technologyto make intelligent decisions to use IT for creatingbusiness value.


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Complementary assets:(Eg. realize value of automobiles requires complementary

investments in highways, roads,

gasoline stations, repair facilities, and a legal regulatory

structures) New business processes

Management behavior

Organizational culture

Training


Complementary Assets and Organizational Capital


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CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS


A Sociotechnical Perspective on Information Systems

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