CHAPTER 1 Growing interdependence between ability to use information

INFORMATION SYSTEMS IN BUSINESS TODAY technology and ability to implement corporate strategies and
achieve corporate goals

The New Yankee Stadium Looks to the Future Business firms invest heavily in information systems to achieve six
strategic business objectives
Problem: Yankee fans choosing to watch games on TV or
choose other forms of entertainment 1. Operational excellence
2. New products, services, and business models
Solutions: Use information systems to enhance experience. 3. Customer and supplier intimacy
Game coverage, statistics, delivered via ubiquitous HDTV 4. Improved decision making
monitors, mobiles can order concessions, view replays 5. Competitive advantage
6. Survival
Cisco Systems provides technology to make Yankee Stadium
the most wired in all of baseball
Operational excellence
Demonstrates IT’s role in providing new products and services. ➢ Improvement of efficiency to attain higher
profitability
Illustrates the benefits of utilizing networks and mobile ➢ Information systems, technology an
applications to enhance entertainment, information. important tool in achieving greater
efficiency and productivity
➢ Walmart’s RetailLink system links suppliers to
stores for superior replenishment system
THE ROLE OF INFORMATION SYSTEMS IN BUSINESS TODAY

How information systems are transforming business New products, services, and business models
➢ Business model: describes how company
• Increase in wireless technology use, Web sites produces, delivers, and sells product or
• Increased business use of Web 2.0 technologies service to create wealth
• Cloud computing, mobile digital platform allows more ➢ Information systems and technology a major
distributed work, decision-making, and collaboration enabling tool for new products, services,
business models
Globalization opportunities o Examples: Apple’s iPod, iTunes,
iPhone, iPad, Google’s Android OS,
• Internet has drastically reduced costs of operating on and Netflix
global scale
• Presents both challenges and opportunities. Customer and supplier intimacy
➢ Serving customers well leads to customers
Information Technology Capital Investment
returning, which raises revenues and profits
o Example: High-end hotels that use
computers to track customer
preferences and use to monitor
and customize environment
➢ Intimacy with suppliers allows them to
provide vital inputs, which lowers cost
o Example: J.C.Penney’s information
system which links sales records to
contract manufacturer

Improved decision making

➢ Without accurate information
o Managers must use forecasts, best
Figure 1 – 1. Information technology capital investment, defined guesses, luck
as hardware, software, and communications equipment, grew o Leads to:
from 32 percent to 52 percent of all invested capital between ▪ Overproduction,
1980 and 2009 underproduction of
goods and services
In the emerging, fully digital firm ▪ Misallocation of resources
▪ Poor response times
• Significant business relationships are digitally enabled o Poor outcomes raise costs, lose
and mediated customers
• Core business processes are accomplished through o Example: Verizon’s Web-based
digital networks digital dashboard to provide
• Key corporate assets are managed digitally managers with real-time data on
customer complaints, network
Digital firms offer greater flexibility in organization and
performance, line outages, etc.
management

• Time shifting, space shifting ➢ Operational excellence

o Improvement of efficiency to
attain higher profitability
MIS IN YOUR POCKET
➢ New products, services, and business
✓ What are the advantages of using mobile handheld models
devices? What are the disadvantages? o Enabled by technology
✓ What features are needed in a mobile to make it a
business solution? ➢ Customer and supplier intimacy
✓ What business functions can be performed by using o Serving customers raises revenues
handhelds alone? How have other companies utilized and profits
handhelds? o Better communication with
suppliers lowers costs
 ➢ Improved decision making Three (3) activities of information systems produce
o More accurate data leads to information organizations need
better decisions
1. Input
Competitive advantage Captures raw data from organization or external
➢ Delivering better performance environment
➢ Charging less for superior products
➢ Responding to customers and suppliers in 2. Processing
real time Converts raw data into meaningful form
➢ Examples: Apple, Walmart, UPS
3. Output
Survival Transfers processed information to people or
➢ Information technologies as necessity of activities that use it
business
➢ May be: Feedback
o Industry-level changes, e.g.
Citibank’s introduction of ATMs ➢ Output returned to appropriate members of
o Governmental regulations organization to help evaluate or correct input stage
requiring recordkeeping
Computer/Computer program vs. information system
▪ Examples: Toxic
Substances Control Act, ➢ Computers and software are technical foundation
Sarbanes Oxley Act and tools, similar to the material and tools used to
build a house

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

Figure 1 – 2. 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.

PERSPECTIVES ON INFORMATION SYSTEMS

Information system

➢ Set of interrelated components Information Systems Are More Than Computers

➢ Collect, process, store, and distribute information
➢ Support decision making, coordination, and control Using information systems effectively requires an understanding
of the organization, management, and information technology
Information vs. data shaping the systems. An information system creates value for
the firm as an organizational and management solution to
➢ Data are streams of raw facts challenges posed by the environment.
➢ Information is data shaped into meaningful form

Data and Information

Figure 1 – 3. 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.
Organizational dimension of information systems UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY

Hierarchy of authority, responsibility Read the Interactive Session and discuss the following questions

• Senior management ✓ What are the inputs, processing, and outputs of UPS’s
• Middle management package tracking system?
• Operational management ✓ What technologies are used by UPS? How are these
• Knowledge workers technologies related to UPS’s business strategy?
• Data workers ✓ What problems do UPS’s information systems solve?
• Production or service worker What would happen if these systems were not
available?

Dimensions of UPS 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.

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
Levels in a Firm • Superior long-term strategic positioning

Business organizations are hierarchies consisting of three Business information value chain
principal levels: senior management, middle management,
Raw data acquired and transformed through stages that add
and operational management. Information systems serve each
value to that information
of these levels. Scientists and knowledge workers often work
with middle management. Value of information system determined in part by extent to
which it leads to better decisions, greater efficiency, and higher
Figure 1.6
profits

Business perspective
Organizational dimension of information systems (cont.)
Calls attention to organizational and managerial nature of
• Separation of business functions information systems
o Sales and marketing
The Business Information Value Chain
o Human resources
o Finance and accounting Figure 1. 7. From a business perspective, information systems are
o Manufacturing and production part of a series of value-adding activities for acquiring,
• Unique business processes transforming, and distributing information that managers can
• Unique business culture use to improve decision making, enhance organizational
• Organizational politics performance, and, ultimately, increase firm profitability.
Management dimension of information systems

• Managers set organizational strategy for responding

to business challenges
• In addition, managers must act creatively:
o Creation of new products and services
o Occasionally re-creating the organization

Technology dimension of information systems

• Computer hardware and software

• Data management technology
• Networking and telecommunications technology
o Networks, the Internet, intranets and
extranets, World Wide Web
• IT infrastructure: provides platform that system is built
on 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
Investing in information technology does not guarantee good Four main actors
returns
• Suppliers of hardware and software
Considerable variation in the returns firms receive from systems • Business firms
investments • Managers and employees
• Firm’s environment (legal, social, cultural context)
Factors
Approach of this book: Sociotechnical view
• Adopting the right business model
• Investing in complementary assets (organizational • Optimal organizational performance achieved by
and management capital) jointly optimizing both social and technical systems
used in production
Complementary assets • Helps avoid purely technological approach

• 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
• Complementary assets include:
o Organizational assets, e.g.
▪ Appropriate business model
▪ Efficient business processes
o Managerial assets, e.g.
▪ Incentives for management
A Sociotechnical Perspective on Information Systems
innovation
▪ Teamwork and collaborative work
environments
o Social assets, e.g. Figure 1.10. In a sociotechnical perspective, the performance
▪ The Internet and of a system is optimized when both the technology and the
telecommunications infrastructure organization mutually adjust to one another until a satisfactory
▪ Technology standards fit is obtained.

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.

Technical approach

• Emphasizes mathematically based models

• Computer science, management science, operations
research

Behavioral approach

• Behavioral issues (strategic business integration,

implementation, etc.)
• Psychology, economics, sociology

Management Information Systems

• Combines computer science, management science,

operations research and practical orientation with
behavioral issues