Unit C: Building Information systems in the digital firm

Redesigning the Organization with Information Systems 10.1 Systems as Planned Organizational Change 10.2 Systems Development and Organizational Change 10.3 Overview of Systems Development 10.4 Understanding the Business Value of Information Systems Discussion Questions

Lecture - 18
"What do you mean we have to change the way we make our candy bars? They are the number one selling product we have. Everyone loves them. Why can't we just keep doing things the way we've always done them? It's worked fine this long." It's not unusual to hear this type of dialog in many companies, large and small, all across the world. Change is hard on people and organizations. But it's one of those necessary evils that keeps companies in the lead or helps destroy them. In this chapter, we're going to focus on using Information Systems as a way to successfully help redesign organizations so they can improve their current processes or establish new ones.

10.1 Systems as Planned Organizational Change

In the last chapter, we said it would be nice if we could give you a checklist of how to establish an E-commerce plan. It would be nice, but we can't. No one can. What we provide in this chapter is information you can use to help plan and analyze organizational changes not only for E-commerce, but also for other improvements. The triangle that we've used before is back...

fig: 10.1 All three elements will pose their own unique challenges to managers, but you may be surprised to learn that the hardware and software will probably be the easiest of the three to manage.

Linking Information Systems to the Business Plan

Too many companies buy the hardware they determine is necessary for a new or improved Information System. Then they purchase some software to go along with the new hardware. Now they realize their hardware is inadequate for the new software, so they buy more powerful hardware. And the vicious cycle continues. Pretty soon they have a whole bunch of hardware and a lot of expensive software: but do they have an Information System? Only if they have made sure that all the hardware and software

purchases fit in with their organizational Information System plan and that their people know how to use it. "A what?" you say: "Another plan that stifles creativity and creates roadblocks to getting work done?" No, a good Information Plan will help companies systematically figure out what they need to get the job done and whether all the hardware and software is necessary and if they really do meet the requirements of the organization. A good Information Plan will also take personnel needs into account and help determine how all three elements of the triangle will work together for success. The problem is that too many companies don't have a plan for integrating new hardware and software purchases into their overall business plan, let alone meshing them with the persware side of the triangle. Of course, the Information Plan should support the overall business plan and not conflict with it. Make sure the plan includes all levels of the organization, including the strategic and executive levels. These two levels contain the people who often say they are exempt from having to determine information system needs. And don't forget the persware - the "people" requirements, the most important part of the whole thing.

Establishing Organizational Information Requirements

Ever heard the old saying, "If you don't know where you're going, how will you know when you get there?" Well, in order for a company to be successful, management needs to have a good idea of where it's going and how it's going to get there. Management also needs to know what tools it needs along the way.

Enterprise Analysis
Enterprise analysis, or business systems planning, uses the "big picture" approach. That is, you look at the overall organization and figure out how each unit, each function, all the processes, and each data element fits in. Think of a jigsaw puzzle: each piece is a vital part of making the picture whole. To understand the informational needs of an organization, you first need to understand the organization. To do enterprise analysis, you first ask each manager or a large sample of managers:

How they use information Where they get it What their environments are like What their objectives are How they make decisions What their information needs really are

You then compile that input into logical application groups (as opposed to the physical application groups we discussed before). From this method you can get an idea of how the processes work, who uses them, and how they fit together. Do you realize how long this process can take? Do you know how expensive it can be to get the managers to complete the input? Remember that the information will probably be biased because managers will operate from their own personal agenda - it's human nature. And what about the informational needs of non-managers? Don't they count? The biggest drawback to enterprise analysis is that it only asks questions about current processes and current uses of information. Nowadays this isn't good enough, especially when it comes to E-commerce and integrating new technologies. Enterprise analysis doesn't focus on the need for new processes or new methods of conducting business.

Strategic Analysis or Critical Success Factors

Critical Success Factors (CSFs) are simply the goals managers feel will make the organization a success. This method does broaden the scope of the analysis to include entire industries, the broader environment in addition to the firm itself and its managers. That's why it's called "strategic." Basically, you contact several of the top managers, ask them what they think will make the organization succeed, and then combine the results into a cohesive picture.

Example Profit concern

Goals Earning/share Return on investment Market share New Product Excellent healthcare Meeting government regulations Future health needs

CSF Automotive industry Styling Quality dealer system Cost Control Energy Standards Regional integration with other hospitals Efficient use of resources Improved monitoring of regulations

Nonprofit

TABLE 10.2

The table gives some good examples of Critical Success Factors and how they mesh with organizational goals. What makes this method work is that you have a much smaller sampling of data with which to develop an Information Plan. It's faster than enterprise analysis and therefore a little cheaper. And your plan revolves around just a few CSFs instead of a whole slew of information requirements. Using the CSF method also takes into account how the environment affects information needs, which is a tough question nowadays. Usually top management, the organizational

level most involved in this type of analysis, has a better idea of the environmental effects than perhaps lower levels of management. But hold on a minute. With all its advantages, there are some distinct disadvantages to this approach. Chief among them is that only a small group is interviewed. Their biases then become the biases of the system. How do you formulate the opinions of these few managers into an organization-wide plan? How aware of common tasks at the lower levels of the organization are the top managers? Are you sure the goals of the managers are representative of the goals of the organization? You hope so, but you don't know. Just because this level of management may be more aware of the external environment doesn't make the plan immune to change. That has never been truer than in today's rapidly changing world. CSFs can be a good start to analyzing a company's organizational needs, but they shouldn't be the end or the only methodology used.

10.2 Systems Development and Organizational Change

Change is disruptive; change is dangerous, change is good, change is necessary, change is constant.

The Spectrum of Organizational Change

FIGURE 10.3 Risks and rewards of organizational change.

Figure 10.3 shows the four degrees of organizational change. Automation is the easiest (except for those people losing their jobs), and the most common. But that doesn't mean you don't have to plan for the change first. Rationalization of procedures causes the organization to examine its standard operating procedures, eliminate those no longer needed, and make the organization more efficient. It's a good thing, as Martha Stewart would say! Both types of change cause some disruption, but it's usually manageable and easily accepted by the people. Business reengineering, on the other hand, can cause radical disruption. The mere mention of the term nowadays strikes fear in the hearts of workers and managers at all levels. Why? Because many companies use it as a guise for downsizing the organization and laying off workers. Business reengineering causes planners to completely rethink the flow of work, how the work will be accomplished, and how costs can be reduced by eliminating unnecessary work and workers. But if you want to talk radical change, take a look at paradigm shifts. Now we're talking about changing the very nature of the business and the structure of the organization itself. We're talking whole new products or services that didn't even exist before. We're talking major disruption and extreme change! The best example of a paradigm shift is looking right at you. Higher education is undergoing a major paradigm shift in the online delivery of education. Classes are now offered through the Internet so that students don't even go to classrooms. Many tried-andtrue teaching methodologies are being radically altered to accommodate this shift in how education should be offered. The Internet is causing all kinds of industries and businesses to alter their products, their services, and their processes in radical ways. Whole new organizations are being created to handle the paradigm shifts involved in E-commerce. Look at the automobile industry as an example of this type of change: traditional dealerships are being disrupted by the automalls and online buying opportunities. How can a local dealer compete on price with these two environmental challenges? What is the dealers role in the revolutionary changes taking place all around them? If business process reengineering and paradigm shifting are so disruptive and so dangerous, why even try? Because companies realize they have to take on the challenges in order to stay competitive within their industries and environments. They have had to cut costs and streamline their operations because of global economic pressures, in addition to meeting demands of their shareholders. And the rewards can be tremendous.

Business Process Reengineering

Because this is such a hot topic, let's look at it more closely. In order to make BPR successful, you must first redesign the process, then apply computing power to the new processes. If problems existed in the process before the new system is installed and those problems aren't resolved, the new system could actually make them worse. Very few processes in business are as efficient as they can possibly be. It's a fact of life. The idea behind successful BPR is to find improvements or even new opportunities. For instance, Federal Express and UPS both have on-line package tracking systems. That

simple process was never economically feasible before the Internet. They had to reengineer their business processes to incorporate this new paradigm shift. New information system software is giving businesses the methodology to redesign their processes. Work flow management offers the opportunity to streamline procedures for companies whose primary business is oriented towards paperwork. Instead of ten people handling a single bank loan application, you can install software that will speed up the process, allow several people to work on the document at the same time, and decrease the number of people who handle it altogether. BPR attempts fail 70% of the time. That's an astonishing figure when you think about it. What if your car failed to start 70% of the time? Some of the reasons for the high failure rate are lack of planning, management's inability to fully comprehend the enormity and complexity of the effort, and the fact that BPR usually takes much longer than expected. What can organizations, their managers and workers, do to help make BPR a success? It may be useful to have a diagram of how your processes work now and then envision how they will work after they are redesigned. Try just a few processes to get your feet wet and then expand to other units or processes within the organization. Document how much your current processes cost. You'll be able to measure costs savings (or costs increases) better if you have a baseline for comparison.

Assumption Field, personnel need offices to receive, store, and transmit information. Information can appear only in one place at one time.

Technology Wireless Communications

Option

Examples

Personnel can send and Manitoba receive information wherever Insurance they are. Price Waterhouse People can collaborate on the U.S. West same project from scattered Banc One locations; information can be used simultaneously wherever it is needed.

Shared databases

People are needed to ascertain where things are located.

Automatic Things can tell people where United Parcel identification and they are. Service tracking technology Schneider National Just-in-time delivery and stockless supply Wal-Mart Baxter International

Businesses need Communications reserve inventory to networks and EDI prevent stockouts.
TABLE 10.5

This table shows how you can use new technologies to redesign work processes.

Process Improvement and Total Quality Management (TQM)

Just when you're all settled into a routine at work and everything seems to be flowing along, upper management decides to change things. Even though things do seem to be going well, management is concerned about the quality of the organization's processes, products, and customer service. Data supplied by feedback from the Information System indicates improvements can and should be made. Total quality management (TQM) relies on an excellent Information System to give workers and management the data necessary to continuously improve products and drive down costs. The lack of good, useful information may not be apparent until the organization can't figure out what its doing wrong, or doing right. Data from all types of Information Systems can be fed into quality management and make it easier to develop and improve products that blow away the competition. There is a difference between changes brought about by Business Process Reengineering (BPR) and Total Quality Management (TQM): BPR changes tend to be Draconian and done on a one-time basis, whereas TQM changes are usually less abrupt and happen gradually over time.

How Information Systems Promote Quality

Here are some ways companies can use Information Systems to achieve Total Quality Management: Simplify processes by using information to determine what the processes are in the first place. Managers can step back from the day-to-day operations and analyze each step of the process. They can ask themselves what would happen if they didn't complete a step or completed it differently. Are all the steps absolutely necessary or are they completed out of habit or left over from earlier times? Identify benchmark targets they want or need to meet in order to show improvement. First, they can identify current statistics. For instance, the Information System shows the company is currently experiencing a 10% customer dissatisfaction rate. It decides it wants to reduce that rate to 5%. Now there is a standard, or benchmark, upon which to measure improvement. Use customer demands to improve products by harnessing information from all the data they gather. Efficient use of datamining will give the company pointers on how it can increase the quality of its services and products, or reduce costs. Reduce the cycle times of production processes by gathering information about how much time each step takes and whether it is possible to truly reduce the time. Improve the quality and precision of product design by using up-to-date software programs and improved technology to change the way they create and process the product designs. It may take a lot of work and time to learn the newest CAD program or to adopt upgrades, but in the long run the improvements will be noticeable. If a company is still designing products manually or with software that's 5 years old, well, what can we

say? Increase the precision of production with new software and data from the Information System. The software can help managers analyze each step of the process better and easier and look for ways to decrease the time for production. Use the right tools, and improvements will come. The normal reaction to quality improvement suggestions is "Oh no, we can't do it any better than we already do." If you make use of the Information System, take a hard look at every process and every product, you'll be surprised to find that you really can change things for the better. You can improve upon current practices to the benefit of both customers and the organization. Try it. Bottom Line: Continuous change is a necessary part of corporate life. Managing organizational information requirements through planned analyses and structured system development rather than a haphazard approach will help a company succeed. Quality and product can be improved through the reliable, useful information produced by a well-developed, well-managed and integrated Information System. Regardless of good current processes, products, and services seem to be, you can always improve some part of each one.

Lecture - 19 10.3 Overview of Systems Development

System Development includes everything and every step that goes into producing an Information System that solves a problem or helps the organization take advantage of new opportunities. Don't start thinking right away "Oh, we're going to develop a new computer system? Well, that problem belongs to the IT (Information Technology) department." Nowadays, system development belongs to you as much as it belongs to the techies. You have to work hand-in-hand from start to finish with the entire organization to develop a usable system that will serve everyone.