Organizations and IT

• Organizations and IT influence one another.
• An organization's structure, business processes, politics, culture, environment, and management decisions all affect this relationship.

Technical Definition of an Organization

• A formal social structure that processes resources from its environment to produce outputs.
• It exists as a formal legal entity with internal rules, procedures, and a social structure.

Behavioral Definition of an Organization

• A collection of rights, privileges, obligations, and responsibilities is delicately balanced over time through conflict and resolution.

Features of Organizations

• Hierarchical structure is used.
• Accountability and authority exist in a system of impartial decision-making.
• Adherence to the principle of efficiency is important.
• Routines and business processes are established.
• Organizational politics, culture, environments, and structures exist.

Routines and Business Processes

• Routines, also known as standard operating procedures, consist of precise rules, procedures, and practices developed to handle expected situations.
• Business processes are collections of routines.
• A business firm is a collection of business processes.

Organizational Politics

• Divergent viewpoints often lead to political struggle, competition, and conflict within an organization.
• Political resistance can significantly hinder organizational change.

Organizational Culture

• Encompasses a set of assumptions that define the organization's goals and products.
• Determines what products should be produced, how and where they should be produced, and for whom they should be produced.
• May be a powerful unifying force or a restraint on change within the organization.

Organizational Environments

• Organizations and their environments have a reciprocal relationship.
• Organizations are open to and depend on the social and physical environment.
• Organizations can influence their environments.
• Environments generally change faster than organizations do.
• Information systems can be instruments for environmental scanning, acting as a lens through which organizations view their surroundings.

Disruptive Technologies

• Technologies that serve as substitutes performing as well as, or even better than, those already existing.
• They bring sweeping change to businesses, industries, and markets.
• Personal computers, smartphones, Big Data, artificial intelligence, and the Internet are examples.
• First movers are the inventors of disruptive technologies.
• First followers are firms with the resources to capitalize on innovative technologies.

Organizational Structure (Mintzberg’s Five Basic Kinds)

• Entrepreneurial
• Machine bureaucracy
• Divisionalized bureaucracy
• Professional bureaucracy
• Adhocracy
• Information systems often mirror the organizational structure.

Other Organizational Features

• Goals can be coercive, utilitarian, or normative.
• Constituencies exist.
• Leadership styles vary.
• Different types of tasks must be performed.
• Environments may differ.

Economic Impacts of IT

• IT alters the relative costs of capital and information.
• Information systems technology serves as a factor of production, similar to capital and labor.
• IT influences the cost and quality of information.
• IT aids companies in shrinking in size by helping reduce transaction costs for engaging in markets.
• This includes outsourcing.

Transaction Cost Theory

• Firms aim to minimize transaction costs, which are the expenses associated with participating in markets.
• Vertical integration involves hiring more employees and buying suppliers or distributors,
• IT reduces market transaction costs, which firms find it more cost-effective to engage with other organizations rather than increase the workforce.

Agency Theory

• A firm constitutes a collection of contracts among self-interested parties that require supervision.
• Firms incur agency costs rise as the firm grows and manages/supervises.
• IT helps in decreasing these costs, thus enabling companies to expand without raising supervision expenses, as well as reducing the addition of new staff members.

Organizational and Behavioral Impacts of IT

• IT leads to flatter organizational structures.
• Decision-making is pushed down to lower levels.
• Fewer managers are required as IT enables faster decision-making and a wider span of control.
• In postindustrial organizations, authority relies on knowledge and competence rather than formal positions.

Internet's Impact on Organizations

• It increases the accessibility, storage, and distribution of information and knowledge.
• The Internet can considerably reduce transaction and agency expenses,
• For example, large firms distribute internal manuals to employees via corporate websites, saving millions of dollars in distribution costs.

Implications for Designing and Understanding Information Systems

• Factors include:
  • Environmental factors
  • Structure like hierarchy, specialization, routines, and business processes
  • Culture and politics
  • The organizational style of leadership
  • The main interest groups affected by the system, and their attitudes
  • Tasks, decisions, and business processes the system will assist

Porter's Competitive Forces Model

• Explains what causes some firms to lead their industries.
• Michael Porter's model gives insight into a firm, its competitors, and its surrounding environment.
• Five competitive forces: traditional competitors; new market entrants; substitute products and services; customers; and suppliers.

Porter’s Model: Traditional Competitors

• All firms share market space with competitors who are continuously devising new products, services, efficiencies, and switching costs

Porter’s Model: New Market Entrants

• Some industries have high barriers to entry
• For example: computer chip business
• New companies have new equipment, younger workers, but little brand recognition

Porter’s Model: Substitute Products and Services

• Substitutes customers might use if prices become too high
• For example: iTunes substitutes for CDs

Porter’s Model: Customers

• Addresses ease with which customers can switch to competitor's products
• Addresses customer force businesses to compete on price alone in transparent marketplace

Porter’s Model: Suppliers

• Addressed market power of suppliers when firm cannot raise prices as fast as suppliers

Information System Strategies for Dealing with Competitive Forces

• Four generic IT-enabled strategies: low-cost leadership, product differentiation, focus on market niche, and strengthen customer and supplier intimacy.

Strengthening Customer and Supplier Intimacy

• Aims to develop lasting relationships to increase loyalty using information systems.
• Involves increasing switching costs.
• Examples are Toyota and Amazon.

Low-cost Leadership

• Focuses on producing products and services cheaper than competitors.
• Walmart's efficient customer response system enables this.

Product Differentiation

• Centers on enabling new or improved convenience and/or experience.
• Example: Google Nike
• Implementing mass customization and customer experience management helps.

Focus On Market Niche

• Employs information systems to create a specialized strategy in a single market niche.
• Hilton Hotels' OnQ system illustrates this focus.

The Internet's Impact on Competitive Advantage

• Presents a transformation or threat to certain industries, such as travel agencies, printed encyclopedias, and media.
• Competitive forces remain at work, but rivalry intensifies.
• Universal standards allow new rivals to enter the market.
• Provides opportunities for building brands and loyal customer bases.