IT 1 Module I.pdf

Module 1: Introduction To Information Technology Lesson 1: Information Systems and Business Why Information Systems? The Competitive Business Environment What Is an Information System? A Business Perspective on Information Systems Contemporary Approaches to Information Systems The New Role of Info...

Module 1: Introduction To Information Technology Lesson 1: Information Systems and Business Why Information Systems? The Competitive Business Environment What Is an Information System? A Business Perspective on Information Systems Contemporary Approaches to Information Systems The New Role of Information Systems in Organizations The Widening Scope of Information Systems The Network Revolution and the Internet New Options for Organizational Design: The Networked Enterprise Learning to Use Information Systems: New Opportunities with Technology Why Information Systems? Ask managers to describe their most important resources and they'll list money, equipment, materials, and people - not necessarily in that order. It's very unusual for managers to consider information an important resource and yet it is The Competitive Business Environment For many years computer technology was relegated to the backrooms or basements of a corporation. Only the "techies" worried about it and were often the only ones who really knew how it all worked. Now computers are all over the organization - one on every desk. It's not enough for you to know how to pound a keyboard or click a mouse. It's not enough for you to know how to surf the Web. Now every employee, including you, must know how to take advantage of Information Systems to improve your organization and to leverage the available information into a competitive advantage for your company. Emergence of the Global Economy Next time you purchase a product, any product, look at the fine print and see where it's made. It could be China, or the Philippines, or South America, or even in the USA. You can disagree with the many manufacturing jobs that are being moved from the U.S. to foreign countries. But look at the vast number of jobs that are being created in this country. Maybe they aren't the traditional factory jobs we're used to. In fact, many of our new jobs are in the information industry. Many of them service whole new markets that didn't exist just a few years ago. There was no position called "Webmaster" in 1991 because the Web didn't exist. But now, that particular job category is one of the fastest growing in the U.S. and overseas. The global economy Laudon & Laudon talk about is being made possible by technology. And that's why it's so important that you understand how to use Information Systems Technology instead of just computer technology. There's a big difference between the two, and we'll talk about it more. Transformation of Industrial Economies According to Laudon, "In a knowledge- and information-based economy, knowledge and information are key ingredients in creating wealth." Think back to the early 1900s when the horse and buggy were the main form of transportation. Along came a guy named Ford who built a whole new industry around the automobile. Many jobs, such as horse groomers, horse shoers, and buggy manufacturers, were lost forever. Now think about all the new jobs that were created - not just in the factories but all the other businesses associated with the car. The people in the horse and buggy industry adapted, retrained for the new jobs, and the whole country changed. The same thing is happening now with the information industry. Many of the new jobs that are being created have better working conditions, better pay, and more advantages than the old jobs had. You just have to be equipped to take advantage of the situation. You have to take advantage of retraining opportunities. You have to gain the skills necessary for the transformation of the industries that have been a mainstay of this country. It's not that hard - it just takes a lot of hard work. We often think of industries such as manufacturing and financial institutions as information-based. But even farmers and ranchers in this country are learning information-based skills so that they can become more efficient and cut costs. They are taking advantage of the technological explosion by using computers and Global Positioning Systems on their farms and ranches to increase crop yields or reduce workloads. They're catching on to the idea that Information Systems are a key to success. Transformation of the Business Enterprise It seems like every week we hear about thousands and thousands of people losing their jobs. Back in the 80s most of the job losses were in the blue collar sector. In the 90s it seems many of the cuts are being made in the white collar, management jobs. Why? Think about it. Technology, to a large extent, has driven organizations to change the way they operate and that includes the way they manage. We're going to take an in-depth look at how organizations work and how they've been transformed by technology. But it isn't always bad! You just have to ask yourself this question: "With all the job losses in the last few years, many driven by technological changes, why has the U.S. unemployment rate dropped to it's lowest in decades and remained so low?" Maybe this chart will help you understand the answer to that question. The growth of the information economy. What Is an Information System? Too often you hear someone say, "Oh yeah, I know how to use a computer. I can surf the Web with the best of them and I can play Solitaire for hours. I'm really good at computers." Okay. So that person can pound a keyboard, use a mouse at lightning speed, and has a list of favorite Web sites a mile long. But the real question is "Is that person information literate?" Just because you can pound the keyboard doesn't necessarily mean you can leverage the technology to your advantage or the advantage of your organization. An organization can gather and keep all the data on its customers that a hard drive can hold. You can get all the output reports that one desk can physically hold. You can have the fastest Internet connection created to date. But if the organization doesn't take advantage of customer data to create new opportunities, then all it has is useless information. If the output report doesn't tell the management that it has a serious problem on the factory floor, then all that's been accomplished is to kill a few more trees. If you don't know how to analyze the information from a Web site to take advantage of new sales leads, then what have you really done for yourself today? Most of us think only of hardware and software when we think of an Information System. There is another component of the triangle that should be considered, and that's the people side, or "persware." Think of it this way: In Chapter 1, Laudon & Laudon discuss the components of an information system. They talk about the input, processing, output and feedback processes. Most important is the feedback process; unfortunately it's the one most often overlooked. Just as in the triangle above, the hardware (input and output) and the software (processing) receive the most attention. With those two alone, you have computer literacy. But if you don't use the "persware" side of the triangle to complete the feedback loop, you don't accomplish much. Add the "persware" angle with good feedback and you have the beginnings of information literacy. A Business Perspective on Information Systems Using feedback completes the information processing loop. To be a good Information Systems manager, however, you must bring into that loop far more than just the computer data. For instance, your information system reports that you produced 100,000 widgets last week with a "throwback" rate of 10%. The feedback loop tells you that the throwback rate has fallen 2% in the last month. Wow, you say, that's a pretty good improvement. But if you put that information into a broader context, you're still costing the organization a huge sum of money because each percentage point on the throwback rate averages $10,000. And when you bring in available external environmental information, your company is 5% above the industry norm. Now that's information you can use to your advantage or disadvantage! If you, as a manager, can then take other information from the internal and external environments to come up with a solution to this problem, you can consider yourself "information literate." Organizations Organizations are funny things. Each one tends to have its own individual personality and yet share many things in common with other organizations. Look at some of the organizations you may be associated with - softball team, fraternity/sorority, health club, or a child's soccer team. See, organizations exist everywhere and each of them has its own structure, just as workplace organizations have their own structure and personality to fit their needs, or in some cases, habits. A baseball team needs talented, well-trained players at different positions. Sometimes, the success of the team depends on a good, well-informed coach or manager. So too with the workplace organization. Business organizations need many kinds of players with various talents, who are well-trained and well-informed, in order to succeed. Every organization requires tools to help it succeed. If the baseball team uses bats that are 25 years old against a team whose bats are 2 years old, they will have to work harder on their own to make up for that disadvantage. If your child's soccer team uses balls with torn seams, they're going to have a harder time hitting the ball into the goal. So if your organization is using older equipment or uses it the wrong way, it just stands to reason it is going to have a harder time beating the odds. Management Every good organization needs a good manager. Take professional baseball managers. They don't actually play the game, they don't hit the home run, catch the flyball for the last out, or hang every decoration for the celebration party. They stay on the sidelines during the game. Their real role is to develop the game plan by analyzing their team's strengths and weaknesses. But that's not all; they also determine the competition's strengths and weaknesses. Every good manager has a game plan before the team even comes out of the locker room. That plan may change as the game progresses, but managers pretty much know what they're going to do if they are losing or if they are winning. The same is true in workplace organizations. Technology Manufacturers are constantly offering us new vehicles, yet we tend to upgrade only every few years. Your personal computer may be a year old or three years old. Do you have the latest gadgets? Chances are you don't. Face it, you just can't keep up with all the new stuff. No one can. Think about how hard, not to mention expensive, it is for an individual to acquire everything introduced to the marketplace. Think how difficult it is sometimes to learn how to use every feature of all those new products. Now put those thoughts into a much larger context of an organization. Yes, it would be nice if your company could purchase new computers every three months so you could have the fastest and best technology on the market. But it can't. Not only is it expensive to buy the hardware and the software, but the costs of installing, maintaining, updating, integrating, and training must all be taken into account. We'll look at the hardware and software sides of the Information Systems triangle in upcoming chapters, but it's important that you understand now how difficult it is for an organization, large or small, to take advantage of all the newest technology. Contemporary Approaches to Information Systems There are several different approaches to Information Systems: technical, behavioral, sociotechnical. Think of this analogy: A "techie" looks at most things associated with computing as a series of zeroes or ones. After all, everything in a computer is ultimately reduced to a zero or a one. So using the technical approach, you could say that 2 + 2 = 4. The behavioral approach, on the other hand, takes into account the very nature of human beings. Nothing is totally black and white. Therefore the behavioral approach to the same equation would be "2 + 2 = maybe 4 or perhaps 3.5 to 5.5, but we'll have to put it before the committee and see what the next quarter's figures say." Neither approach is better than the other, depending on the situation. Neither approach is more right than the other, depending on the situation. An organization can't afford to view its information resources as belonging to either the techies (technical approach) or the non-techies (behavioral approach). Responsibility for information belongs to everyone in the organization. This is the sociotechnical approach, that is, a combination of the two. Everyone has to work together to ensure that Information Systems serve the entire organization. To help you understand the importance of viewing Information Systems through the sociotechnical approach, look at what the current trade journals are saying. David Haskin, writing in the April 1999 issue of Windows Magazine, quotes Steve Roberts, vice president of information technology for Mind Spring Enterprises, an Atlanta-based Internet service provider: "The gap in understanding between technical and non technical people is the biggest challenge I've seen." Haskin goes on to say, "Because technology is the bedrock on which successful businesses are built, the stakes in making this relationship work are high. Failing to use the correct technology can put you at a competitive disadvantage, and glitches in existing technologies can bring a business to a grinding halt." The New Role of Information Systems in Organizations Managers can't ignore technology any more and pass it off to secretaries or clerical workers or the Information Technology department. Information Systems are critical to the success of an organization at all managerial levels. The Widening Scope of Information Systems If you take a look at the Figure above, you can understand the evolution of Information Systems in organizations. Technology was considered, well, too technical for the rest of us to understand. Computers were relegated to the back room with a few technicians running around in white coats. No one else understood what these people did or how they did it. It was a different world and actually seemed disconnected from the mainstream operations of the company. As the time line indicates, technology and its associated Information Systems are now integrated throughout the organization. Everyone is concerned about technology’s role and impact on their work activities. End users take on greater responsibilities for the success of Information Systems and are actually doing a lot of the work that once belonged to the techies. Even the executive levels of an organization can no longer ignore the technology and pretend that it belongs to someone else. We are constantly bombarded with new tools, new technology, and new methods of doing business. It almost seems as though just as you master a word processing program, here comes a whole new program you have to learn from scratch. But the plain fact is that organizations, especially larger ones, just can't change as fast as the technology. Companies make huge investments not just in hardware, but in software and persware. Training people, building new operating procedures around technology, and changing work processes take far longer than the technological pace will allow. The introduction of new technology can severely disrupt organizations. Productivity naturally slips. Learning curves cost time and money. Most system installations or changes used to affect mainly data workers or production workers. Now they affect every level of the organization, even the management and strategic levels. Every part of the organization is involved in the introduction or change of technology and everyone plays a part in its success. The Network Revolution and the Internet Even though the Internet as a whole has existed since 1969, the World Wide Web didn't exist until around 1993-1994. That's less than 10 years. Now you can't pick up a magazine or a newspaper, turn on the television or radio, even drive by a billboard, without some kind of reference to "dot com." Businesses are rushing to the Internet in an effort to keep up with the competition or to create whole new businesses. Now organizations struggle with such issues as how to design and develop a Web site or how to determine a fair email policy for employees. The fastest and biggest change in modern computing is the Internet. To say that the Internet is transforming the way we live, work, and play is probably the greatest understatement in years. Businesses can create new opportunities but they can also lose opportunities just as quickly. Now an organization has to design new systems, or transform old ones, with not just the company in mind, but 100 million other users of the Internet, Extranets, and Intranets. They have to decide how much or how little information to provide in what way, with what level of access, how best to present it, etc. It's a huge job! New Options for Organizational Design: The Networked Enterprise Many of the job losses of the 1990s occurred because technology allowed organizations operate efficiently with flatter organizations - with fewer levels of bureaucracy. One manager can now oversee a larger group of people. More important, technology increases the span of communication a manager can accomplish with a single email. You can make information available to a greater number of people much more easily than ever before. You can make that information available to more people, but you have to train them how to use it, and when it's appropriate to use it and with what latitude they can use it. Again, it all comes back to the "persware" portion of the triangle. Yes, your hardware enables more people to connect to the Information System, and the software is becoming much easier to use and more widespread than ever before. But you still have to concentrate on the people who are using the software to connect to the hardware. Technology now allows workers to work from anywhere. It's becoming common for companies to literally shift their work through time zones. That is, the person in New York will shift blueprints for a new product to a worker in California. The Californian can then collaborate on the product for an additional three hours before zipping it to another person across the ocean who will work on it while the others sleep. Talk about telecommuting! Technology now allows companies in foreign countries to merge their organizations in ways never before possible. Think of Daimler from Germany and Chrysler in Michigan. Opportunities for new products and new production methods exist with this merger. However, think of the challenges it poses to management information systems and employees. FIGURE 1.9 The figure above depicts the possibilities of virtual organizations. XYZ and ABC companies can team up, work on a project, and then go their separate ways. ABC could then seek out LMN corporation to develop a new technology from which both will gain but which neither could accomplish on their own. This is happening more and more in technology companies. In November 1998, America Online purchased Netscape. At the same time AOL announced a collaboration with Sun Microsystems to develop and deliver enhanced technology that AOL couldn't produce on its own. A few years ago, virtual organizations were difficult to develop and even more difficult to manage. New technologies and new management information systems now make such partnerships easier and more productive than ever before. As we'll see in future lessons, new technology allows businesses to reorganize their work flows, allowing them to become more efficient and to meet new challenges. The potential for saving money is tremendous, and so are the opportunities to better meet customer demands. Enterprise Resource Planning is only possible through new and improved technology. Companies are realizing that they can't afford "islands of information" and must have the means to share information resource across all boundaries. And speaking of boundaries, most of those are either rearranged or eliminated because of technological changes. Suppliers, customers, and governmental agencies are now linked electronically to organizations that increase the efficiency and decrease the cost of operations in what are called inter organizational systems. One common mistake with many organizations wanting to do business on the Internet is the idea that they can simply throw up a Web site, add an email software program for customer communication, and they are ready to do business in cyberspace. They haven't addressed any of their internal processes and possible changes to the way they do business. They've spent hundreds of thousands or millions of dollars and can't get enough sales to support a day's worth of expenses. Electronic markets are allowing businesses to take advantage of technology to create new methods of buying and selling. For a while it seemed as though the middleman was going out of business because of the direct connection between customers and merchants. While this is true in some industries, new opportunities are springing up for the middleman in other areas. We'll look at this issue in more detail later. Amazon.com, the largest retailer on the Internet selling books and CDs, loses millions of dollars a year and yet is one of the best success stories in E-commerce. Its fiercest rival, Barnes & Noble Books, has also spent millions of dollars converting traditional retailing operations to the Internet. Unfortunately, Barnes & Noble's efforts at E-commerce are considered somewhat of a failure. Why? Because Barnes and Noble hasn't fully changed its core processes to accommodate the changes required for doing business on the Web. There are many opportunities offered by the Internet, Extranets, and Intranets. Yet there are many problems associated with developing a company's electronic commerce and electronic business. It is easy to put up a Web site - a snazzy, colorful Web site that looks very pretty and may even be easy to use. But you must consider how you're going to incorporate that part of your business with the other, more established methods of doing business. What internal processes must you change or adapt? What new processes must you establish? What training must you do with the people who will run the E-business, both technical and non-technical? "Changes in business processes, customer and supplier relationships, data access, data ownership, distribution strategy, and marketing tactics underpin most Web-commerce efforts." Information Week magazine, Dec 7, 1997, page 53. Learning to Use Information Systems: New Opportunities with Technology Is this new technology worth the headaches and heartaches associated with all the problems that can and will arise? Yes. The opportunities for success are endless. The new technologies do offer solutions to age-old problems. Improvements are possible to the way you operate and do business. 1. The Strategic Business Challenge: Companies spend thousands of dollars on hardware and software, only to find that most of the technology actually goes unused. "How can that be?" you ask. Usually because they didn't pay attention to the full integration of the technology into the organization. Merely buying the technology without exploiting the new opportunities it offers for doing business smarter and better doesn't accomplish much. Think and rethink everything you do and figure out how you can do it better. Change is inevitable, and information must be managed just as you would any other resource. 2. The Globalization Challenge: The world becomes smaller every day. Competition increases among countries as well as companies. A good Management Information System meets both domestic and foreign opportunities and challenges. How does Daimler/Chrysler integrate its organizations and cultures into one - or almost one? 3. The Information Architecture Challenge: You have to decide what business you are in, what your core competencies are, and what the organization's goals are. Those decisions drive the technology, instead of the technology driving the rest of the company. Purchasing new hardware involves more than taking the machine out of the box and setting it on someone's desk. Remember the triangle of hardware, software, and persware. Take care of the people and they will take care of the rest! Information architecture describes how to incorporate technology into the mainstream processes in which the business is involved. How will the new Information System support getting the product produced and shipped? How will Advertising and Marketing know when to launch ad campaigns? How will Accounting know when to expect payment? 4. The Information Systems Investment Challenge: Too often managers look at their technological investments in terms of the cost of new hardware or software. They overlook the costs associated with the non-technical side of technology. Is  productivity up or down? What is the cost of lost sales opportunities and lost customer confidence from a poorly managed E-Business Web site? How do you determine if your Management Information System is worth it? 5. The Responsibility and Control Challenge: Remember, humans should drive the technology, not the other way around. Too often we find it easier to blame the computer for messing up than to realize it's only doing what a human being told it to do. Your goal should be to integrate the technology into the world of people. Humans do control the technology, and as a manager, you shouldn't lose sight of that. Module 1: Introduction To Information Technology Lesson 1: Information Systems and Business Question 1 Why is it important to understand the difference between Computer Literacy and Information Literacy? Question 2 What are the three elements of an Information System that managers must consider? Question 3 What are some of the factors managers must consider when considering changes in technology? Question 4 What are some of the new roles Information Systems are playing in organizations? Module 1: Introduction To Information Technology Lesson 1: Information Systems and Business Question 1 Why is it important to understand the difference between Computer Literacy and Information Literacy? Answer Too often you hear someone say, "Oh yeah, I know how to use a computer. I can surf the Web with the best of them and I can play Solitaire for hours. I'm really good at computers." Okay. So that person can pound a keyboard, use a mouse at lightning speed, and has a list of favourite Web sites a mile long. But the real question is "Is that person information literate?" Just because you can pound the keyboard doesn't necessarily mean you can leverage the technology to your advantage or the advantage of your organization. An organization can gather and keep all the data on its customers that a hard drive can hold. You can get all the output reports that one desk can physically hold. You can have the fastest Internet connection created to date. But if the organization doesn't take advantage of customer data to create new opportunities, then all it has is useless information. If the output report doesn't tell the management that it has a serious problem on the factory floor, then all that's been accomplished is to kill a few more trees. If you don't know how to analyze the information from a Web site to take advantage of new sales leads, then what have you really done for yourself today? Question 2 What are the three elements of an Information System that managers must consider? Answer Most of us think only of hardware and software when we think of an Information System. There is another component of the triangle that should be considered, and that's the people side, or "persware." Question 3 What are some of the factors managers must consider when considering changes in technology? Answer We are constantly bombarded with new tools, new technology, and new methods of doing business. It almost seems as though just as you master a word processing program, here comes a whole new program you have to learn from scratch. But the plain fact is that organizations, especially larger ones, just can't change as fast as the technology. Companies make huge investments not just in hardware, but in software and persware. Training people, building new operating procedures around technology, and changing work processes take far longer than the technological pace will allow. The introduction of new technology can severely disrupt organizations. Productivity naturally slips. Learning curves cost time and money. Most system installations or changes used to affect mainly data workers or production workers. Now they affect every level of the organization, even the management and strategic levels. Every part of the organization is involved in the introduction or change of technology and everyone plays a part in its success. Question 4 What are some of the new roles Information Systems are playing in organizations? Answer The Strategic Business Challenge: Companies spend thousands of dollars on hardware and software, only to find that most of the technology actually goes unused. "How can that be?" you ask. Usually because they didn't pay attention to the full integration of the technology into the organization. Merely buying the technology without exploiting the new opportunities it offers for doing business smarter and better doesn't accomplish much. Think and rethink everything you do and figure out how you can do it better. Change is inevitable, and information must be managed just as you would any other resource. The Globalization Challenge: The world becomes smaller every day. Competition increases among countries as well as companies. A good Management Information System meets both domestic and foreign opportunities and challenges. How does Daimler/Chrysler integrate its organizations and cultures into one - or almost one? The Information Architecture Challenge: You have to decide what business you are in, what your core competencies are, and what the organization's goals are. Those decisions drive the technology, instead of the technology driving the rest of the company. Purchasing new hardware involves more than taking the machine out of the box and setting it on someone's desk. Remember the triangle of hardware, software, and persware. Take care of the people and they will take care of the rest! Information architecture describes how to incorporate technology into the mainstream processes in which the business is involved. How will the new Information System support getting the product produced and shipped? How will Advertising and Marketing know when to launch ad campaigns? How will Accounting know when to expect payment? The Information Systems Investment Challenge: Too often managers look at their technological investments in terms of the cost of new hardware or software. They overlook the costs associated with the non-technical side of technology. Is productivity up or down? What is the cost of lost sales opportunities and lost customer confidence from a poorly managed E-Business Web site? How do you determine if your Management Information System is worth it? The Responsibility and Control Challenge: Remember, humans should drive the technology, not the other way around. Too often we find it easier to blame the computer for messing up than to realize it's only doing what a human being told it to do. Your goal should be to integrate the technology into the world of people. Humans do control the technology, and as a manager, you shouldn't lose sight of that. Module 1: Introduction To Information Technology Lesson 2: The Strategic Role of Information Systems Key System Applications in the Organization Transactional Processing System Knowledge Work and Office Automation Systems Management Information Systems Decision Support Systems Executive Support Systems Relationships of Systems to One Another: Integration Information Systems and Business Strategy Business-Level Strategy and the Value Chain Model Firm-Level Strategy and Information Technology Industry-Level Strategy and Information Systems: Competitive Forces and Network Economics The Competitive Forces Model Using Systems for Competitive Advantage: Management Issues Managing Strategic Transitions Key System Applications in the Organization As we go through this lesson, we'll look at the six major types of Information Systems organizations use in their operations. To help distinguish between the type of function each one is designed to accomplish and to fit them all together, we're going to look at them in the context of manufacturing candy bars. We'll call the company WorldWide Candy and we'll give the candy bar the timely name of Cybernuts. You'll see at the end of this discussion the integral role each type of system plays from determining which kind of candy bar to make, to how to make it, to how many people the company will need to make the candy bar, to how to sell it, to how this particular candy bar fits into the strategic success of the company. GURE 2.2The six major types of information systems. As we move through this discussion, we'll dissect this figure and show you how the various systems fit together. Transactional Processing System The operational level of the organization includes the various units listed in the figure and is responsible for daily operations. The information systems used in this level of the organization are transactional processing systems (TPS), so-called because they record the routine transactions that take place in everyday operations. TPS combine data in various ways to fulfill the hundreds of information needs a company requires to be successful. The data is very detailed at this level. For instance, a TPS will record how many pounds of sugar are used in making our Cybernuts candy bar. It also records the time it takes from beginning to end to make the candy bar. And it can record the number of people working on the assembly line when our candy bar is made and what functions they perform. People using Transaction Processing Systems usually need information to help them answer routine questions such as "How many Cybernuts candy bars did we produce yesterday?" or "How much sugar do we have on hand for today's production run?" Since there's more to making the Cybernuts candy bar than just running the assembly line, a TPS will record the sales and marketing actions surrounding the sale of the product. The system will record not just the number of dollars used in the marketing program, but also how many stores are actually stocking the candy bar and where the product is located inside the stores. You have to remember that a lot of action is required to get the product from the manufacturing plant to the store shelves. How much did the company pay to package the product, store the product, and ship the candy bar to the stores? All that data can be recorded in a Transaction Processing System, right down to how many truck drivers were required to deliver the product to the local convenience store. As you see in the figure, the operational level of an organization also includes functions not directly associated with the actual production of the Cybernuts candy bar but vital in keeping the company running smoothly. The people in Accounting may not be pouring the chocolate over the nuts on the assembly line, but those workers that do appreciate the fact that they get a paycheck every two weeks. Production workers also like to know that the Human Resource division is keeping track of training programs that may help them advance within the company. Each of these divisions requires an information system that helps it keep track of the many, many details that make the production worker happy and productive. The best Transaction Processing System will be integrated throughout the organization to supply useful information to those who need it when they need it. Knowledge Work and Office Automation Systems Let¹s first look at the Knowledge Work Systems and then we'll discuss Office Automation Systems. You may not think of a Knowledge Work System as an integral part of the overall Information System of an organization. Most of the other systems have been recognized for many years, while this one may be thought of as relatively new. Knowledge workers are those who promote the creation of new knowledge and integrate it into the organization. Research scientists may discover new methods of mixing sugar and cocoa beans and dairy products to make a better chocolate. Maybe a team of engineers will develop a new method of packaging the Cybernuts candy bar to make it easier to open. The legal knowledge workers may spend their time determining the copyright protections that could be afforded to the Cybernuts product name. The knowledge work system (KWS) may not be where the research takes place; that could happen in a separate system devoted to research methodology, such as a Computer Aided Design (CAD) system. The knowledge work system is that part of the overall company-wide system that incorporates the research findings into the Information Systems maintained by the company so that the other divisions may take advantage of the data. For instance, let's assume that the Production Research Scientists have developed a richer, smoother, creamier chocolate for the Cybernuts candy bar. This new recipe calls for alterations to the recipe Production has used for the last 20 years. Right away, you can understand why production workers need to have the information in the Knowledge Work System so they can alter the assembly line for the new product. But, stop for a minute and think about all the other areas of WorldWide Candy Company that need to know the new recipe or at least parts of it. Procurement will need to know that instead of buying 1000 pounds of sugar for every 5000 candy bars produced, it now needs to order 1500 pounds of sugar. Instead of the 500 gallons of milk for the old recipe, the Cybernuts candy bar requires 750 gallons of milk. And so on. Product Packaging must be aware that instead of wrappers to fit a five-inch candy bar, it will need a wrapper to fit the 6-inch Cybernuts bar. But we can't stop there. This new product will require 25 fewer workers to make than the old candy bar. Human Resources must be able to help the excess workers find new positions either inside or outside the company. Perhaps they can be moved to other areas of the company and retrained for other jobs. Perhaps they will have to be furloughed. Accounting must know that the workers will be changing their jobs or leaving the company; Finance must also be aware of the new supply requirements and of the changing workforce. Now you can see how no part of the company will be unaffected by what may seem on the surface to be a simple change in the recipe for a new candy bar. An effective Knowledge Work System will help feed this information to those other parts of the company so that they can make any necessary changes. Even in this day of the promised paperless society, no job is completed until the paperwork is done. The Office Automation System (OAS) is dedicated mostly to data workers, who are no less important to the success of WorldWide Candy than any other worker. The new recipe discovered by the Knowledge Workers must be patented. An Office Automation System worker must complete the necessary paperwork to be filed with the U.S. Patent Office. The Office Automation System makes easy work of developing press releases that Sales and Marketing will use to announce the new and improved Cybernuts candy bar. The clerical workers in Human Resources will use their OAS to process the job changes the Production workers will need for their new positions. One of the newest forms of OAS is the Document Imaging Systems that have been incorporated into most effective systems in the last few years. Technological improvements now make the old file cabinet bulging with pieces of paper a relic that can be stored in the basement. Those pieces of paper can be optically stored on a small plastic platter (compact disc) and retrieved within minutes by software programs. No more human beings thumbing through piles and piles of paper. Management Information Systems Think about the functions of managers that you may have learned in other classes: directing, controlling, communicating, planning, decision making. Each manager takes on these roles countless times in a day. Managers review endless amounts of data that hopefully make their job easier and them more efficient. Those using Management Information Systems (MIS) require information on a periodic basis instead of a daily, recurring basis like those using a Transaction Processing System. Managers also require information on an exception basis. That is, they need to know if production is higher or lower than the targeted rate or if they are over or under their budgets. They also need to know about trends instead of straight numbers. The questions they may ask of the system would be "How far behind in production are we for this quarter?" or "How many more workers would we need if we increased production by 10,000 candy bars per quarter?" In the old days the managers had to perform many functions without the aid of technology. If they wanted to know how many candy bars were produced in a month, they had to wait until that one piece of information was produced in a report published at the end of the quarter. If there was a problem getting a shipment out to the convenience store in Podunk, the shipping manager may not have known about it until a customer complained six months later. The Human Resources Department manager would likely not be able to find out about new job opportunities in a different part of the company until after the workers were laid off and had found other employment. Worse yet, Production might have to stop the assembly lines because Accounting hadn't purchased enough supplies to cover the increase in the number of candy bars rolling off the line. Before integrated systems, managers received periodic printed reports that gave them lots of data but often didn't supply information that they could utilize to make timely decisions. Planning was sometimes a wasted effort because the information the managers needed just wasn't there when they needed it. With the integration of information systems up and down the management levels, and throughout the corporation, managers can often get needed information in a real-time mode. The data are kept on line, the system can gather the precise information managers need to make a decision, and the information can be cross-integrated into all departments of the company. All divisions in the company can see what's going on throughout the corporation. Information can be passed from department to department so that they are all working "off the same page." The MIS will draw data from the Transaction Processing System to help managers answer structured questions such as "How much more sugar must we purchase if we increase production from 5000 Cybernuts candy bars to 7000 candy bars?" The Human Resources Department alone can place vast amounts of personnel information, including job opportunities within the organization, on an Intranet that workers can access when they find it convenient. For the Cybernuts candy bar, with the improved Management Information Systems available, Accounting managers will know that they must increase their purchases of sugar and milk to support the new recipe. The Shipping manager will know in time to plan for the new size wrapper the Cybernuts candy bar will require. The Sales and Marketing manager can know almost instantaneously that the shipment to Podunk is going to be delayed and so can call the convenience store manager ahead of time to let her know. The greatest advantage of the new Management Information Systems is that managers no longer have to wait until a specific time of the month or quarter to receive information that they need to fulfill their daily functions. Decision Support Systems Decision Support systems (DSS) also serve the management level of an organization but in a somewhat different way than an MIS. An MIS uses internal data to supply useful information. A DSS uses internal data also but combines it with external data to help analyze various decisions management must make. Analyzing complex, interactive decisions is the primary reason for a company to use a DSS. The Sales and Marketing management of WorldWide Candy would use a DSS to answer a semistructured question such as "What price should we charge for the Cybernuts candy bar so that we can maximize our profits and minimize our costs?" Using a DSS the manager in charge of the Manufacturing Division could determine the best answer to the semistructured question, "How does the change in the size and packaging of the Cybernuts candy bar affect the other products we produce, not just in shipping, but also on the display shelf at the convenience store?" You'll notice we describe decisions at this level as semistructured. Not all decisions required for an organization to function smoothly are cut and dried. There are a lot of gray areas in successfully managing an organization, and the larger the company, the more diverse the decision-making process becomes. Since a company is affected not by what goes on within the company but also by external forces not under its control, Decision Support Systems can help upper-level management. What happens to the pricing structure and availability of the raw materials for the Cybernuts candy bar if civil war breaks out in the sugar-producing countries of Central America? The price of oil can greatly affect the profit and loss of the Cybernuts candy bar because of shipping costs. All these external events can be put into context in a Decision Support System so that WorldWide's management can make effective decisions. Decision Support Systems also help those functions of an organization that may not be directly related to manufacturing products. Remember the workers who were no longer required in manufacturing the Cybernuts candy bar? What is the best way for the Human Resources Department to handle this situation? Perhaps there is a planned increase in production coming up in the next quarter that will require these workers. The Human Resources Manager could use a Decision Support System to determine if it is better to keep them on the payroll even if they won't be fully utilized for the next three months because the unemployment rate is so low the company will have difficulty hiring new workers when it needs them. Or perhaps the workers have specialized skills that aren't easy to find, so the company will actually save money in the long run by keeping these employees on the books. Executive Support Systems FIGURE 2.2e Executive Support Systems (ESS) are used at the very upper echelons of management. At the strategic level, the typical decision is very unstructured. Often there is no specific question but rather a series of undefined situations executives may face. These executives require summarized, historical information gleaned from all other levels of the organization, coupled with large amounts of external data gathered from many sources. Let's assume that the Cybernuts candy bar is the most successful, most popular candy bar ever made. (You could say it's success is due to the effective use of the previous five information systems!) The Universal Food Products Corporation just can't create a product that comes close to the success of Cybernuts (its information systems aren't as good) and is very envious of WorldWide Candy. So Universal Food Products offers to buy the Cybernuts product from WorldWide for what seems to be an astronomical amount of money. WorldWide executives can use their Executive Support System to determine if this offer is in the best interest of all. They can analyze the information gathered from all of the internal information systems and couple that with external data to help them make the decision. By using an Executive Support System, company executives can analyze internal and external data and make their decision based on information, not on emotion. Since executives haven't been using computers that long or don't have time to fiddle around learning how to type, Executive Support Systems must be easy to use and the information must be easily manipulated. The ESS must be able to readily incorporate external information with internal data to offer concise, complete information dealing with the imprecise and incomplete scenarios executives face. And most important, the systems must have a fast response time. Relationships of Systems to One Another: Integration Interrelationships among systems. The key element for all these systems is integration. The Cybernuts candy bar wouldn't be near the success it is if all systems didn't work together and help each other. If the information from the Transaction Processing System didn't feed into the Management Information System which incorporated information from the Knowledge Work System which fed into the Office Automation System which helped the Decision Support System which then worked with the Executive Support System, then the Cybernuts candy bar would just be another junk food. Information Systems and Business Strategy Companies have every intention of beating their competition by using Strategic Information Systems. Keep in mind that when we discuss the strategic role of information systems in this section we aren't talking about strategic level information systems. The strategic level system discussed earlier involved a decision such as "Should we accept Universal Food Products' offer to purchase the Cybernuts candy bar line?" Information Systems can play a strategic role in an organization if they are used effectively throughout the company. Two ways to do that are through beating the competition and adding value to products or services. We can use Information Systems throughout WorldWide Candy to make Cybernuts better than any other candy bar, at perhaps a lower price, and to make consumption of the Cybernuts candy bar the "hip" thing to do. Business-Level Strategy and the Value Chain Model You have to decide where you want your business to fit in the marketplace. Are you going to: 1. Become the low-cost producer 2. Differentiate your product or service 3. Change the scope of competition Leveraging Technology in the Value Chain Be better than the competition. That's the mantra of most companies that are serious about winning the game. Areas of the organization most affected by leveraging technology are producing the product, getting it to the stores, and making the customer happy. Think of all the activities that go into getting the Cybernuts candy bar made, from procuring raw materials to actual production. Then consider how the candy bar gets from the factory to the store shelves. And what about all those product commercials? These are primary activities. Just as important are support activities: Human Resources, Accounting, Finance. These functions support the primary functions of Production, Shipping, and Sales and Marketing. The value chain model that Laudon and Laudon discuss in the text will help an organization focus on these activities and determine which are critical to its success. Information System Products and Services Cybernuts uses a better recipe for making chocolate than any other candy bar. We know that from our Knowledge Worker System. Sales and Marketing can use that information in promotional campaigns to advertise how much better and different Cybernuts is than any candy bar the consumer has ever eaten. Since our Office Automation System is top- notch and the clerical workers processed the patent information so quickly, our competition can't duplicate the recipe. They are left with the old, icky, bad-tasting chocolate everyone is tired of. Product differentiation allows you to bury the competition by making your product and service so different that your competitors can't match them. Systems to Focus on Market Niche Through the use of datamining, WorldWide's Product Research Department determined that most moms wanted a candy bar that didn't melt so fast and mess up kidsÕ clothes or the furniture. Since our Information Systems are integrated throughout the company, our Knowledge Workers were able to alter the recipe for Cybernuts to keep the chocolate in a more solid state. Now we can use focused differentiation in our promotional advertising by telling potential customers that the chocolate won't melt so fast. We also have useful information from our integrated Information Systems that tells us consumers want a bigger candy bar for the same or a lower price. We can now differentiate Cybernuts as being bigger than the competition's candy bars, therefore better, while the price is the same as the competitor's smaller candy bar. Supply Chain Management and Efficient Customer Response Systems Because of the tight link WorldWide has developed with SugarSweet Refiners, WorldWide has significantly reduced the cost of its product. Because of the integration of Information Systems throughout the organization, it can reduce costs and price Cybernuts well below the competition's candy bar. And because of the Information System WorldWide has developed with the convenience stores, the stores never have to worry about running out of Cybernuts because WorldWide will know to ship more product when the stock falls to a preset level. Supply chain management offers new opportunities for companies to integrate with suppliers and customers and lower costs for everyone. Since WorldWide Candy doesn't grow its own sugar cane, it must purchase the refined sugar from a supplier, SugarSweet Refiners. WorldWide buys a lot of sugar, as you can imagine. If it develops some kind of link with SugarSweet that is mutually beneficial to both sides, then each one can reduce costs but also develop a pricing policy that gives WorldWide significant cost savings. So WorldWide and SugarSweet decide they will use an integrated Information System that replaces the old-style purchasing paperwork with electronic billing and shipping. WorldWide Candy now places sugar orders via an electronic system that is tied directly to SugarSweet's electronic shipping system. Neither company has to process paperwork for orders or deliveries. Look at all the time and money both sides are saving, not to mention the reduction in errors that are inherent in any manual system. However, by tying into this method of ordering and delivering, it will be very expensive for WorldWide to find another sugar supplier. It will also be a significant loss to SugarSweet if it loses WorldWide as a customer because now it will have to find another company and set up the same system. So both sides are locked into this mutual system. On the flip side, WorldWide knows that it costs five times as much money to get a new customer as it does to keep an old customer. It decides to lock in its customers (in this case convenience stores that stock Cybernuts candy bars) by making it more expensive for that customer to switch to the competition. WorldWide offers to keep all the sales statistics for products on its Information System and to give that information to customers when it's convenient and in the format they require. That way the store doesn't have to track data and spend the money to process them into useful information. Through WorldWide's information system it, and not the convenience store, can keep track of stock levels and know when more products are needed. Through this agreement, WorldWide develops a link to customers that the customer finds extremely useful. You see, switching costs, as described in this section, works both ways: between suppliers and companies, and from companies to customers. Firm-Level Strategy and Information Technology Think of a picture puzzle with all its separate pieces scattered on the table. Separately, the pieces don't make a very pretty picture. But if you fit them together, they make quite a beautiful piece of art. So too for businesses. Separately, the various units of a business don't function well and certainly aren't successful on their own. But if you fit them all together, so they work in conjunction, you can create a successful business. Information technology can help you do this. What does a business do better than anyone else? Does it make the best jeans in the world? Do they produce the best movies? Does it deliver flowers faster and fresher than any of the competition? Whatever its main product or service is, that's its core competency. Successful companies can use information technology to improve their core competencies by sharing information across business units. They can also use technology to expand their core competencies by using knowledge stored in their information systems. Industry-Level Strategy and Information Systems: Competitive Forces and Network Economics Look at the relationship between America OnLine and Microsoft. On one hand, they are fierce competitors, going head to head in attracting Web users to their respective Web sites. On the other hand, they work together to supply Web users with desktop icons for accessing the Web. How is it that they can compete so vigorously in one area and yet cooperate so well in another? Because both make sense and make money for each company. Information Partnerships Many times it's more productive and cheaper to share information with other companies than to create it yourself. Information partnerships between companies, even competitors, can enhance a company's products by aligning them with an industry-wide standard. Vehicle tire manufacturers form information partnerships to share information about standard widths and sizes of tires. Can you imagine how difficult it would be for consumers and other businesses if each tire maker built tires differently? Other companies form information partnerships to add extra elements to their products which they couldn't offer on their own. Lots of companies offer credit cards with their logo and company information. They then share customer information with the credit card companies. Both companies win because they can offer extra services and products not available if they had to act alone. The Competitive Forces Model One way you can help your company compete is to have more information in a better form than the competition does. If WorldWide happens to know that the price of sugar usually falls in mid-summer, it can plan ahead and get a better price for the ingredient. Simply put, good information in a timely manner can help you win the game. The competitive forces model. The text describes five external threats and opportunities: Threat of new entrants into its market. The upstarts can give you fits when you least expect it - Amazon.com is a good example. Pressure from substitute products or services. Even if they aren't better than your product, substitutes may be cheaper and customers will be enticed by the lower price. Bargaining power of customers. The Internet offers customers a unique opportunity to quickly and easily compare prices. Bargaining power of suppliers. New technology offers suppliers the chance to integrate information systems that tie them closer to their customers.  Positioning of traditional industry competitors. Efficient business processes can give companies the edge they need to place themselves in the lead. Network Economics You decide to throw a big party and invite a hundred of your closest friends. You buy tons of food and beverages-lots more than you really need. At the last minute, Sam calls and asks if he can bring his brother who unexpectedly dropped by. You agree since you won't have to purchase more food. The marginal cost of one more guest at your party is zero. That's how network economics work. If you build a network for a thousand users, adding one more probably won't cost you anything. However, if you add the second thousand users, you'll incur the cost of adding those extra users. The more users you add, the more your community is enriched. Allowing Sam's brother to attend your party enriched the experience for all, since he is a very popular rock star who plays excellent guitar! Many companies doing business on the Internet are realizing the value of network economics. They build Web sites to attract customers and then keep them coming back by providing chat rooms and other services for the customers. It doesn't cost much more to add these extra features, since they have already built the Web site and have the hardware available. However, the additional customer information they gather from the chat rooms and information forums is invaluable. Using Systems for Competitive Advantage: Management Issues Using Information Systems to beat the competition and increase the value of your product is not easy at all. It requires changing processes and methods that probably have been in the organization since time began. The responsibility for successfully developing and then using an integrated Information System will usually fall to the managers throughout the organization. Managing Strategic Transitions The changes taking place in an organization affect both the social element and the technical element of the organization and are strategic transitions. When your company installs a new information system, some people will lose their jobs, managers may be reassigned, hopefully you'll gain new customers, and your relationship with your old customers may change. At the very least, when a company installs a new system, the business processes should metamorphose to accommodate the new technologies. Retail businesses realize the value of vender-managed inventory and are eager to embrace it. Convenience stores and grocery stores give the responsibility for stocking shelves to their vendors. Tying those vendors into the store's information system gives the vendor critical information about stock levels and the pace of sales. Inventory costs for both retailer and vendor are reduced and the quality of information improves for both. What Managers Can Do The important thing to remember is the need to pay attention to the industry to which your business belongs. Look at what others are doing and how they're doing it. What are they doing right? What are they doing wrong. What can you do better than your competitors? What technologies can you exploit that the rest of your industry isn't using? Laudon and Laudon have an excellent list of questions on page 62 that managers should ask when identifying and developing a successful Information System. Take a moment to review them. What are some of the forces at work in the industry? How is the industry currently using information systems? Which organizations are the industry leaders in the application of information systems technology? How is the industry changing? Should the firm be looking at new ways of doing business? Are significant strategic opportunities to be gained by introducing new information systems technology? Is the organization behind or ahead of the industry? What is the current business strategic plan, and how does that plan mesh with the current strategy for information services? Does the firm have the technology and capital required to develop a strategic information systems initiative? (Kettinger et al., 1994) Where would new information services provide the greatest value to the firm? Module 1: Introduction To Information Technology Lesson 2: The Strategic Role of Information Systems Question 1 How can a Transaction Processing System help an organization's strategic level planning? Question 2 Determine the type of questions that the various information systems can answer for the differing organizational levels in a company. Question 3 How can managers use Information Systems to develop tighter relationships with suppliers and customers? Question 4 How can managers use Information Systems to play a strategic role in their organization? Question 5 Explain how a company can use Information Systems to improve its core competencies. Module 1: Introduction To Information Technology Lesson 2: The Strategic Role of Information Systems Question 1 How can a Transaction Processing System help an organization's strategic level planning? Answer TPS combine data in various ways to fulfill the hundreds of information needs a company requires to be successful. People using Transaction Processing Systems usually need information to help them answer routine questions. The best Transaction Processing System will be integrated throughout the organization to supply useful information to those who need it when they need it. Question 2 Determine the type of questions that the various information systems can answer for the differing organizational levels in a company. Answer People using Transaction Processing Systems usually need information to help them answer routine questions. Those using Management Information Systems (MIS) require information on a periodic basis instead of a daily, recurring basis like those using a Transaction Processing System. Managers also require information on an exception basis. That is, they need to know if production is higher or lower than the targeted rate or if they are over or under their budgets. They also need to know about trends instead of straight numbers. The questions they may ask of the system would be "How far behind in production are we for this quarter?" or "How many more workers would we need if we increased production by 10,000 candy bars per quarter?" Decision Support systems (DSS) also serve the management level of an organization but in a somewhat different way than an MIS. An MIS uses internal data to supply useful information. A DSS uses internal data also but combines it with external data to help analyze various decisions management must make. Analyzing complex, interactive decisions is the primary reason for a company to use a DSS. Executive Support Systems (ESS) are used at the very upper echelons of management. At the strategic level, the typical decision is very unstructured. Often there is no specific question but rather a series of undefined situations executives may face. These executives require summarized, historical information gleaned from all other levels of the organization, coupled with large amounts of external data gathered from many sources. Question 3 How can managers use Information Systems to develop tighter relationships with suppliers and customers? Answer Supply chain management offers new opportunities for companies to integrate with suppliers and customers and lower costs for everyone. By sharing and transferring information via an electronic system that are tied directly to each other, organizations can react quicker and more efficiently. Neither company has to process paperwork. Marketing advantages can therefore be obtained. Question 4 How can managers use Information Systems to play a strategic role in their organization? Answer Separately, the various units of a business don't function well and certainly aren't successful on their own. But if you fit them all together, so they work in conjunction, you can create a successful business. Information technology can help you do this. One way you can help your company compete is to have more information in a better form than the competition does. Question 5 Explain how a company can use Information Systems to improve its core competencies. Threat of new entrants into its market. The upstarts can give you fits when you least expect it - Amazon.com is a good example. Pressure from substitute products or services. Even if they aren't better than your product, substitutes may be cheaper and customers will be enticed by the lower price. Bargaining power of customers. The Internet offers customers a unique opportunity to quickly and easily compare prices. Bargaining power of suppliers. New technology offers suppliers the chance to integrate information systems that tie them closer to their customers. Positioning of traditional industry competitors. Efficient business processes can give companies the edge they need to place themselves in the lead. Module 1: Introduction To Information Technology Lesson 3: Information Systems, Organizations and Business Processes The Relationship Between Organizations and Information Systems What Is an Organization? Salient Features of Organizations Different Organizational Types Organizations and Environments Other Differences among Organizations Business Processes Levels of Analysis How Organizations Affect Information Systems Decisions about the Role of Information Systems Information Technology Services Why Organizations Build Information Systems How Information Systems Affect Organizations Economic Theories Behavioral Theories The Internet and Organizations Implications for the Design and Understanding of Information Systems The Relationship Between Organizations and Information Systems This lesson describes how organizations and information systems work together, or sometimes against each other. The idea of course is to keep them in sync, but that's not always possible. We'll look at the nature of organizations and how they relate to Information Systems. The Two-Way Relationship FIGURE 3.1 Relationship between organizations and information technology. This figure shows the complexity of the relationship between organizations and information technology. Installing a new system or changing the old one involves much more than simply plunking down new terminals on everyone's desk. What Is an Organization? An organization is very similar to the Information System described in lesson 1. FIGURE 1.2 Functions of an information system These figures have many things in common. Both require inputs and some sort of processing, both have outputs, and both then depend on feedback for successful completion of the loop. Information Systems use data as their main ingredient. Organizations rely on people. However, the similarities are remarkable. They are both a structured method of turning raw products (data/people) into useful entities (information/producers). Think of some of the organizations you've been involved in. Didn't each of them have a structure, even if it wasn't readily apparent? Perhaps the organization seemed chaotic or didn't seem to have any real purpose. Maybe that was due to poor input, broken-down processing, or unclear output. It could very well be that feedback was ignored or missing altogether. Often times an organization's technical definition, the way it's supposed to work, is quite different from the behavioral definition, the way it really works. For instance, even though Sally is technically assigned to the Production Department with Sam as her supervisor on paper, she really works for Tom in Engineering. When a company is developing a new information system, it's important to keep both the technical and behavioral definitions in perspective and build the system accordingly. Salient Features of Organizations This section gives you a perspective on how organizations are constructed and compares their common and uncommon features. Why Organizations Are So Much Alike: Common Features The class you're enrolled is an organization of sorts, isn't it? Think about it. Look at the table describing the characteristics of an organization: TABLE 3.1 When you hear the term bureaucracy, you immediately think of government agencies. Not so; bureaucracies exist in many private and public companies. Bureaucracies are simply very formal organizations with strict divisions of labor and very structured ways of accomplishing tasks. They are usually thought of in a negative way, but they can be positive. Standard Operating Procedures How many of these characteristics fit your college class? How many fit any organization you're in? Some of the Standard Operating Procedures (SOPs), politics, and culture are so ingrained in organizations that they actually hinder the success of the group. Think about your experiences in groups. You had a leader (hierarchy), a set of rules by which you operated (explicit rules and procedures), and people appointed to perform certain tasks (clear division of labor). You probably voted on different issues (impartial judgments), and you decided on the best person to fill various positions within the group (technical qualifications for positions). Hopefully, the organization was able to fulfill its goals (maximum organizational efficiency), whether winning a softball game or putting on an award-winning play. If your organization wasn't successful, perhaps it was because of the SOPs, the politics, or the culture. The point is, every group of people is an organization. The interesting question you could ask yourself would be "How would the world look and function without some kind of organization?" Organizational Politics Everyone has their own opinion about how things should get done. People have competing points of view. What might be good for Accounting may not be to the advantage of Human Resources. The Production Department may have a different agenda for certain tasks than the Shipping Department. Especially when it comes to the allocation of important resources in an organization, competition heats up between people and departments. The internal competition can have a positive or negative influence on the organization, depending on how it's handled by management. The fact remains that politics exist in every organization and should be taken into account when it comes to the structure of the information system. Organizational Culture Just as countries or groups of people have their own habits, methods, norms, and values, so too do businesses. It's not unusual for companies to experience clashes between the culture and desired changes brought about by new technologies. Many companies are facing such challenges as they move toward a totally different way of working, thanks to the Internet. Unique Features of An Organization Would you consider the same organizational structure for a softball team as you would for a theatre production group? While there would be some similarities, the two groups would probably have some major differences. An automobile dealership would have some similarities to a department store (both sell products) and yet they would have major structural differences. We talked about virtual organizations in earlier. Organizations that enter into collaborative partnerships tend to seek out companies with similar structures. It is much easier for the employees to work together if they aren't required to learn a whole different work structure on top of learning new tasks. Different Organizational Types Organizational Description Example Type Entrepreneurial Young, small firm in a fast-changing Small start-up structure environment. It has a simple structure and is business managed by an entrepreneur serving as its single chef executive officer. Machine Large bureaucracy existing in a slowly changing Midsized bureaucracy environment, producing standard products. It is manufacturing firm. dominated by a centralized management team  and centralized decision making. Divisionalized Combination of multiple machine bureaucracies, Fortune 500 firms, bureaucracy each producing a different product or service, all such as General topped by one central headquarters. Motors. Professional Knowledge-based organization where goods and Law firms, school bureaucracy services depend on the expertise and knowledge systems, hospitals. of professionals. Dominated by department heads with weak centralized authority. Adhocracy "Task force" organization that must respond to Consulting firms rapidly changing environments. Consists of large such as the Rand groups of specialists organized into short-lived Corporation multidisciplinary teams and a weak central management. This table shows some common organizational structures. Think about your own experiences, in your workplace or your daily life, and try to list some organizations that fit into each category. They're all around you. Remember, just as organizations affect you in many different ways, so too do you affect the organizations. Organizations and Environments Some organizations are able to respond faster and better than others. Look back 10 years: The minivan didn't exist. But because of changing consumer requirements and tastes, the minivan is now one of the most popular and best selling vehicles on the road. If the organizations called automobile manufacturers hadn't responded to the changing environment, they wouldn't have been able to capitalize on new car sales. Notice that Chrysler responded faster than the others and gained tremendous market share in the meantime. Its organization is almost as big as those of Ford and GM. Yet those two weren't able to respond as rapidly to environmental changes and hence lost potential sales. Organizations differ because their ultimate goals differ. Some organizations are small by nature or small by design. Using the same thought process as you did for recognizing the different structures in organizations around you, think about the differences in those organizations. Why are they different: size, goals, environmental factors that restrict their growth? For instance, contrast a real estate company with an insurance company. The real estate company is constantly looking for new customers (buyers and sellers) and new products (houses or commercial properties) to sell. It may choose to stay small or to go with a nationwide conglomerate. The environmental factors that are likely to influence it are the state of the national economy or the nature of the local economy. Many external factors are out of its control. The employees of the company must respond quickly to potential customers or they simply won't make any money. This type of organization must be creative in the way it generates business and in the systems it uses. On the other hand, the insurance company has relatively stable customers. People sign up with the insurer and pay their premiums on a regular basis. While customers may come and go, turnover is fairly low. Because most state governments require people to carry insurance, the company and its agents have a stable stream of income from premiums. While the parent company may suffer large losses from a sudden influx of customer claims, the small agency is not as heavily influenced by environmental factors. It doesn't have to devise ingenious ways of using or generating data, and its systems needs are very ordinary. Both businesses are small and entrepreneurial. But they must respond to employees, customers, and potential customers in very different ways. Each has different business processes it must use to meet the goal of staying in business. Other Differences among Organizations The external forces on an organization are tremendous. You're living in a time when these forces are causing many organizations-public, private, and governmental-to reevaluate and alter their organizations because of the Internet. Some organizations are responding faster and easier than others. Why? Much of the cause can be attributed to the structure of the organization. If the structure and culture of the organization promotes new ideas, new products, and new methods, the organization can deal with environmental changes faster than a more staid organizational structure. Some companies are simply so big that they can't change their structure as fast as technology demands. Business Processes What would happen if you walked into work one day to find the management telling employees they could do anything, anything at all, they wanted to do that day. If Jimmy from Production decided he wanted to work in Sales and Marketing, he could. If Sally, who normally works in Accounting, wanted to spend the day in Shipping, she could do that too. No one would have to follow any rules, or any set procedures. They could accomplish the work any way they chose. Mary decides she doesn't want to use FedEx to ship out products that day even though the company has a contract that saves lots of money. She decides to use an alternate shipping service which will cost the company more and slow down the shipment significantly. She doesn't see a need to tell Accounting about the change. Jimmy decides not to use the same old packing materials when he's preparing glass bowls for movement across the country. He determines that it is faster if he just plops the bowls into a box, closes the lid, and sends it down the line. Unfortunately, his co-worker Tim (who doesn't know anything about Jimmy's decision) is responsible for answering customer complaints. Bill in Accounting decides that he needs a pay raise to help pay for his upcoming vacation. Normally he would be required to get his supervisor's approval to change any pay record, but since there aren't any established procedures he can just go ahead and enter the new salary data in the system. While he's at it, he gives ten of his best friends pay raises also. While Bill's friends may like the idea, the rest of the employees in the company are pretty upset. You can imagine from this scenario how quickly chaos would reign without established business processes. Processes that deliver the best product for the lowest cost in the most efficient manner are imperative to success. The way a business organizes its workflows, the methods it uses to accomplish tasks, and the way it coordinates its activities among employees, customers, and suppliers determines its business processes. Organizations, from the smallest one- or two-person group to the largest you can imagine, must have orderly processes that all divisions can understand. No part of the organization can work in isolation from any other part. Some processes may have contributed to the organization's success and now outgrown their usefulness. Information Systems can help an organization recognize processes that need to be changed. An Information System could be used to automate some of those processes or determine that they are no longer needed. And a successful organization will use an Information System to determine which processes are working well. The key to using Information Systems to analyze, change, automate, or delete processes is that the organization must determine the appropriateness of the recommendations. In other words, if the system says a process should be changed but it truly doesn't make sense to change it, then don't make the change. The system supplies recommendations; humans still have the ultimate decision-making responsibility. Levels of Analysis Every organization has many separate functions and different levels of management. It wouldn't make good sense for an executive to use a Transaction Processing System to determine whether the company should merge with another. The Production Manager wouldn't want the external data contained in a Decision Support System to help her count the number of candy bars produced. As you move up the management levels of an organization, the span of consideration widens to include not just a single entity, but multiple departments or divisions. The Information System must respond to this widening circle of interest and supply increased information useful to the level of management using it. How Organizations Affect Information Systems Change is the only constant in the relationship between information systems and organizations. You need to consider: How have organizations actually used information systems? How has the organizational role of information systems changed?  Who operates information systems? Why do organizations adopt information systems in the first place? Decisions about the Role of Information Systems Years ago Information Systems consisted of a huge mainframe computer with a few terminals connected to it. You had to schedule a specific time to use the computer if your company had one at all. All data were kept on one machine, and in some respects the data were available to whoever could access them. When personal computers were introduced in the early 1980s, it became the norm for most people to have individual computing islands on their desks. The computers weren't connected, so if you wanted to exchange data or information, you had to somehow get the data from your desk to the other person's desk. It wasn't easy. Now it seems we've come full circle: we've combined the storage and data processing on a central machine with personal computing available on desktops. The data are available to anyone who can use them or has authorized access through a network with links literally all over the world. The changes that have taken place in computing have affected the business environment in a big way. Over 40% of the equipment investment in the last decade has been for computing equipment. Organizations are finding more efficient ways to accomplish tasks via networking, either through internal networks or by connecting to external networks. Technology has caused many changes in the way businesses connect to customers and suppliers. We'll examine many of these changes throughout this course. Information Technology Services Many new jobs have been created because of technology. Information Systems departments, previously a tiny group of people usually assigned to the financial group, have moved into the mainstream of most companies. Programmers have taken on more important positions within organizations. They must understand not only the technical side of computing, but also the business processes within the company so they can adapt the technology to the needs of the business. System analysts serve as the bridge between the techies and the non-techies. Heading this group of people are the information systems managers. Their importance to businesses has grown as the emphasis on technology's role within organizations has grown. Just as most organizations have a Chief Financial Officer, the position of Chief Information Officer has been created to handle the problems and opportunities businesses face in today's technologically driven environment. Perhaps the most important role of all is the end user. The responsibility for successful integration of Information Systems has extended past the "techies" and become part of everyone's job. No one is isolated from the effects of computers and technology any more. Why Organizations Build Information Systems FIGURE 3.9 The systems development process. Organizations incorporate technology for many reasons. The most obvious reason should be to save money through improved work processes and reduced manpower requirements, and to beat the competition. Unfortunately, some organizations adopt the latest technology just because the competition has it. The company may not fully understand all the implications of incorporating the new technology into its core business and fail dismally. Some companies use Information Systems to help them create a better mousetrap. That is, they use the advantages of Information Systems to create new services, build better products more efficiently, or invent new products altogether. But there is more to an organization that what happens internally. Much of what drives change in an organization, good or bad, are external forces (environmental factors). Over the last decade or so, government entities and the public at large have demanded more and more information. Consumers want more information about the products or services companies produce, and the government requires more and more paperwork. It can be prohibitively expensive for a company to use pencil and paper to gather, process, disseminate, and store all the required information. Information Systems make the whole process easier and more efficient. Ease in dissemination of information is most evident in the many informational Web sites companies have set up. The very nature of a business may change in such a way that it is possible to carry on only by incorporating an Information System (institutional factors). For instance, all the major airlines offer programs that give customers incentives for flying with their company instead of the competition. The airlines couldn't afford to offer these programs if it weren't for Information Systems. Imagine the number of workers it would take, not to mention the time and paper, to track every customer earning and using the incentives. How Information Systems Affect Organizations Laudon and Laudon discuss two major types of theories about how Information Systems affect organizations: economic theories and behavioral theories. Economic Theories It's sometimes cheaper to hire a computer than to hire a person. We may not like the idea that machines can replace human beings, but when you think about it, they have been doing this for thousands of years (microeconomic model). To better illustrate this concept, let's take a look at how a company can find it cheaper to use an Information System to develop and disseminate a Human Resources policy regarding dress codes for employees. The HR assistant may write the first draft of the policy and give it to the HR director on paper. The director will review it and make changes. The assistant then must incorporate the changes and reprint the document. Wait! If there is an Information System, the assistant can submit the draft to the director electronically and the director can make changes to the electronic version of the file and return it to the assistant. Of course others in the organization must review the new dress code policy. The proposed policy can be printed in fifteen copies, a person can manually send the copies out, track where they went and when, and then track all the changes made to the proposal. Or, the proposed policy can be sent electronically to reviewers who will electronically collaborate on necessary changes. Each of the reviewers can see in "real time" what the others think and the changes they would like to make. Once the policy is set, it has to be sent to each employee. We could do that through the old method of printing hundreds of copies. Or we could send the policy to each person electronically (email). Everyone would have a personal copy stored on computer. There no need to print it out on paper since it will be stored electronically and can be accessed whenever it is convenient. By acknowledging receipt of the policy via email, the HR department knows everyone has received it. So what about the people who don't have their own personal computer? You could post the new policy to the company Intranet, which would be available to all employees whenever they find it convenient. Again, time and resources are cut drastically through the use of an Information System. If the policy needs to be revised, the same process can be used to make and send out changes. The revised policy can be posted on the Intranet for all to see. This is just one example of how technology is helping organizations reduce the costs of doing business. The transaction cost theory supports the idea that through technology, businesses can reduce the costs of processing transactions with the same zeal that they use to reduce production costs. One way that technology in general, and information systems in particular, save companies a lot of money is in the reduced number of managers needed to oversee larger numbers of workers. The technological changes support agency theory, which says that owners hire agents to do work but then must have others supervise the agents to be sure they work in the company’s interest. Technology allows a manager to supervise more employees, thus reducing agency cost. Behavioral Theories Technology doesn't automatically transform organizations. There is no magic wand companies can wave and have all their problems solved just because they install the latest information system. People using technology efficiently and effectively, however, can transform organizations. Communications up and down the organization and from one department to another on the same managerial level can be enhanced and increased by using technology. As our example with the dress code policy shows, communications are much faster and better using technology. The lines of communication are shorter, clearer, and more concise. Technology makes virtual organizations more feasible, cheaper, and easier to set up and tear down than before. If you had a small group of people from each functional area of the company collaborating on a new production method, you can bring them together, hammer out the new methodology, and then return them to their regularly assigned units. Let's say your company decides to develop a new method of shipping hammers. You would need to draw people from the Production department, the Shipping department, the Packaging department, and the Accounting department to help develop the new procedures. Without an Information System, you would need to have a clerical worker available to record and send out all the information to everyone before and after the meetings. You would have to set up a time and place for team members to meet. Scheduling everyone's time is often a nightmare! Because of the political nature of organizations and people, which we'll talk about later in this chapter, most of those assigned to this team would probably have to be middle managers. If your company had the proper Information System, much of the hassle and expense of this scenario could be eliminated. By using technology, most of the collaboration and communication throughout the organization, top to bottom, side to side, could be accomplished quicker and cheaper. One of the biggest benefits would be the fact that the decision-making process can be pushed to lower levels, and management can check progress electronically. Perhaps the managers wouldn't be as afraid to delegate responsibility because they can keep an eye on the committee throughout the process. Everyone in the entire organization could have access to the work of the committee. What about those people not physically located in the same place? No problem: electronically they have the same access to the process as everyone else. The behavioral theory of the integration of Information Systems in an organization says that the political structure of an organization changes through access to information. The common status symbol in an organization used to be the corner office. Now the status symbol is how much information a person has access to. When a company introduces change to the organizational structure because of a new or revamped information system, political changes will occur at the same time. Some people will gain and some will lose. Naturally people will resist changes that affect them negatively. It's human nature. The Internet and Organizations The example used earlier of posting personnel policies to the company Intranet is but one small example of how businesses are using network technologies to reduce costs and enhance their business processes. Business-to- business commerce is growing at a tremendous pace because of the cost savings the Internet allows. The Internet provides an open platform technology which allows transaction processing between businesses at much cheaper cost plus an easy-to-use interface. The innovative ways organizations are using the Internet, Intranets, and Extranets to improve their business processes are simply amazing. Implications for the Design and Understanding of Information Systems The integration of an Information System into an organization naturally causes change for the organization. Sounds simple enough. What isn't so simple to manage is the very fact that many people do not readily accept change. No matter how much technology you employ, it is still the people of an organization who will make or break it. Change can be so traumatic to some organizations that they find it easier to keep doing business the same old way for as long as they can get away with it. That's why some organizations seem to be stuck doing business the way they did in 1969. Module 1: Introduction To Information Technology Lesson 3: Information Systems, Organizations and Business Processes Question 1 What are the salient features of an organization? Question 2 What are the key points to consider when changing a process within an organization? Question 3 Change is the only constant in the relationship between information systems and organizations. What must be considered when making such changes? Question 4 Discuss the environmental and institutional factors that should be considered in the systems development process. Module 1: Introduction To Information Technology Lesson 3: Information Systems, Organizations and Business Processes Question 1 What are the salient features of an organization? Answer Clear division of labour Hierarchy Explicit rules and procedures Impartial judgments Technical qualifications for positions Maximum organizational efficiency Question 2 What are the key points to consider when changing a process within an organization? Answer The key to using Information Systems to analyze, change, automate, or delete processes is that the organization must determine the appropriateness of the recommendations. In other words, if the system says a process should be changed but it truly doesn't make sense to change it, then don't make the change. The system supplies recommendations; humans still have the ultimate decision-making responsibility. Question 3 Change is the only constant in the relationship between information systems and organizations. What must be considered when making such changes? Answer How have organizations actually used information systems? How has the organizational role of information systems changed? Who operates information systems? Why do organizations adopt information systems in the first place? Question 4 Discuss the environmental and