Management Information Systems Lecture Notes PDF

 INDEX S. No Topic Page No Week 1 1 Introduction - Part 1 of 2 1 2 Introduction - Part 2 of 2...

 INDEX S. No Topic Page No Week 1 1 Introduction - Part 1 of 2 1 2 Introduction - Part 2 of 2 21 3 Dimensions of Information System 46 4 Information Management in the digital world 67 5 Class discussions and conclusion 90 Week 2 6 Data bases and information management 107 7 Data warehouse and business intelligence 123 8 Introduction to data mining 140 9 Data analytics tools and techniques 162 Week 3 10 What is ERP ? 182 11 ERP – Evolution and Benefits 202 12 Business Benrfits of ERP 221 13 ERP project management : Challenge , risks and best practices 240 14 Change management and conclusion 262 Week 4 15 Customer relationship management 282 16 Supply Chain Management ( Part 1) 303 17 Supply Chain Management ( Part 2) 325 18 Supplier relationship management 345 19 Product lifecycle maintenance 367 Week 5 20 Information Systems for manufacturing management 388 21 Information Systems for manufacturing management ( Contd. ) 407 22 Information Systems for materials management 420 23 Information Systems for quality management 437 24 Information Systems for marketing 453 Week 6 25 Information Systems for marketing ( Contd. ) 471 26 Information Systems for sales and distribution 488 27 Information Systems for finance and accounting 504 28 Information Systems for human resource management 524 29 Information Systems for human resource management ( Contd. ) 539 Week 7 30 Information Systems ( IS ) strategy 554 31 Aligning IT with business objectives 573 32 Balanced Score Card 586 33 Data Centers , Virtualization and cloud computing 604 34 Cloud computing and selection of cloud vendor 619 Week 8 35 Introduction to E - Commerce 636 36 B2C Business Models 663 37 B2C Business Models ( Contd. ) 677 38 Unique E - Commerce Business Models 692 39 Social Commerce & M - Commerce 746 Week 9 40 Cloud Computing Part - I 794 41 Cloud Computing Part - II 811 42 Internet of Things Part - I 831 43 Internet of Things Part - II 856 44 Internet of Things Part - III 920 45 Big Data and other Emerging Technologies 935 Week 10 46 Knowledge Management Systems ( KMS ) 953 47 Decision Support Systems 975 48 Executive Support Systems 990 49 Expert Systems 1005 50 Learning Management Systems ( LMS ) 1021 Week 11 51 Ethical and Social Issues in MIS - I 1031 52 Ethical and Social Issues in MIS - II 1048 53 Security Issues in MIS - I 1066 54 Security Issues in MIS - II 1083 55 Security Issues in MIS - III 1100 Week 12 56 Managing Global Organization - Globalization Part 1 1116 57 Global Strategies and Business Organization 1138 58 Shared Services 1160 59 Offshoring / Transitioning Global IT Systems 1182 60 Globalization of Corporates in a Flat World 1205  Management Information System Prof. Surojit Mukherjee Vinod Gupta School of Management Indian Institute of Technology, Kharagpur Week - 01 Introduction to MIS Lecture - 01 Introduction - Part 1 of 2 Hello students. Welcome to the new course on Management Information Systems which I will be taking along with two other colleagues of mine. To begin with, let me introduce myself. My name is Professor Surojit Mookherjee. I am a graduate from IIT Kharagpur; this institute and I have done my PhD in Material Science from IIT Kharagpur as well. I worked in various industries; core sector, metal cutting tools, powder metallurgy and then switched over to IT and business consulting, having joined Pricewaterhouse Coopers in 1998 and then worked 5 years in business consulting. I joined IBM India Limited, for global outsourcing and IT consulting and business process outsourcing type of job which I did for about 13 years and then I retired in 2016. Subsequently I joined here as a visiting professor at Vinod Gupta School of Management, IIT Kharagpur. (Refer Slide Time: 01:25) So, with that brief introduction let us move over to the subject which is of interest to you. Now, management information system is a broad area of subject which covers really the 1 various areas required to run a modern business and all of you know that it is all information driven. Here, we are all talking about data and data leads to information. Without data we are actually very helpless, like without electricity we are helpless; data is something very similar in today’s cyber world data you can say is somewhat equivalent to electricity in the real ( core ) world. In the Core sector what is “Electricity”in the cyber world, or in the digital world it is “Data”. That is why you see so much of stress on everyday everywhere its data, data and data which leads to information. Managing this data and generating or converting it to information and knowledge and finally, wisdom is what is covered under the subject of Management of Information Systems. So, with that I would like to set the learning objectives of this course. How are information systems transforming business and why are they so essential for running and managing a business today? It is all about running a business, so that is where we will be focusing on. Although we need data for everything even healthcare, you are seeing what is happening today in the corona situation. It is all about generating tonnes of data every day. We see some vital data and information everyday in every newspaper, in every magazine; what is happening, how many patients are becoming positive and how many are recovering etc. So, it is about collecting data and people are converting data into graphs to predict. And why do we need graphs? Because, we need to forecast and predict what is likely going to happen in the future, in immediate future; 1 week down the line, 2 weeks down the line, 3 weeks down the line, next month what is going to happen. In other words, what the situation will be like for this disease. Decision makers need this information so, that they can plan accordingly. So, the main thing is what information is doing is management information science and this is helping the decision makers to take decisions and plan their activities. So, it is very important for a management student to know what is planning, because after all a manager is always planning a situation such that he knows how he is going to handle the situation. The main job of a manager is to manage any situation, manage your work, manage your work force, manage your resources; since management of all these things is required for any business and for that you need to plan. You start everything with planning and to 2 start your planning you need information because without information you are nowhere, you are simply blank. So, what is an information system? And, we will talk about what is a system, and how does it work? So, the basics, are its management organization and technology components as the various component levels. Because this a preliminary level course , you should know what are the basic components and how it is constructed for the whole information system. It is not like a cloud sort of thing where there is lot of hardware, but softwares are also involved. Practical things, physical things are also required and we will talk about those. And, then what are some complimentary assets essential for ensuring that information system provides you a value for the organization. Ultimately you should position or think yourself as a manager in an organization and you have to take business decisions. You need the help of your information systems. So, your CIO or your CTO needs to provide you or your IT team or the IT support team needs to provide you on everyday basis information regarding the business performance. What is happening in the enterprise. And what academic disciplines are used to study information systems and how does each contribute to your understanding of information system? (Refer Slide Time: 05:20) 3 Moving on; goals of MIS I have already mentioned. We will use this acronym MIS very frequently.It is nothing, but Management Information Systems. You should become familiar with this acronym. We have talked about how it starts with data, then it leads to information. You need information from data. This is the starting point of MIS. From data and information you finally, generate knowledge by which you become knowledgeable and the last stage is of course, the highest one , which is “wisdom”. So, where you are really you know you have become a guru sort of thing. So, that is what we say when we have wisdom means you are an expert. So, you are a guru, but normally in our daily operations we stop at information and knowledge level. We restrict to these first three levels for daily management issue a manager needs to know. Start with data, get the information and then also generate knowledge. Because like for example, if I give you again this corona example now the people are discussing whether wearing mask is good or bad, is it useful or not useful ( Knowledge ).Some may at a different time say it is useful then somebody will say it is not useful. So, you can see varying opinions are still coming. Even after 3 months 100 percent people are not committed or confident as to whether wearing mask is helping or not helping; e.g.like the president of US himself does not acknowledge wearing masks. So, that is the knowledge level we need to reach where everybody will agree to a certain fixed norm. We decide fine yes we should all wear masks in public or something like that; anyway this is just an example. Because nowadays this is the hot topic so, that example easily comes to my mind. 4 (Refer Slide Time: 06:54) Now let us move to what is an information system. Now, we are coming to the basics. What is an information system? Information system is set of inter related components. It collects, processes, stores and distributes information. It supports decision making, coordination and control. I have already talked about little bit that how it helps in decision making, because that is what we are doing every day; we are taking decisions right? Whether to do this or not to do this; that is a decision making process. So, for that we need information that if I do this, this might happen, if I do not do it I might lose out. So, this what-if scenario we keep on doing analysis in our everyday life. Not only in business environment also even in your personal life, in your house, in your residence when you are interacting with your family, you are taking decisions. If you are head of a family you are definitely taking lot of decisions regarding your family children’s schooling and many such decisions we take every day in our daily life. That is what is managing information systems. We really manage information system in our residence or in our domestic or our home atmosphere as well. But, here of course, from a course perspective we will mostly be referring to the business environment. Now, information versus data; data are streams as we know and this data is the starting point. The raw fact is , today my body temperature is 98 degrees , that is a data. 5 Tomorrow my body temperature is 97.8 that is a data and day after tomorrow my body temperature is 99, now that is also a data. But, what is the information? The information is data shaped into a meaningful form that if my temperature is 98, the information is that I am healthy, I do not have any physical problem. But, if my temperature is 99 that data tells me the information that I am not well. So, I should either go to a doctor or should at least take some medicine. So, that is information. You need to understand what is data and what is information because throughout this course we will always be talking about data and information. Information is an ordered set of data that you can understand and act on. “Act” means you take the decision. When you can take a decision it means you are acting on the information. (Refer Slide Time: 09:22) This should be very clear to you at the beginning because this is a very fundamental concept. Here is an example : suppose this is a sales data region wise North, West, South, East and the sales volume in rupees is: 50 lacs, 40 lacs, 22 lacs and 10 lacs respectively. This is data. Now, what is the information? Information is sales is best in North region and worst in South and East region, where the target was 40 lacs for that year has not been met. Target has been missed. So, South and East are not doing as good as North and West; North is of course, very good; so, that is my information. I am a sales manager of that division, I am in charge of 6 this sales. Now, based on that information ,what decision I am going to take. Some of the decisions I need to take is : we appoint more sales engineers in South and East region, probably they do not have adequate sales engineers. So, they are not able to sell or spread out to various districts and towns to sell more. They are under staffed. So, that could be a decision. Increase advertisement budget. So, we advertise more; so, that people get aware of our product. Probably in rural areas they are not being getting the information regarding our products. So, they are not buying it. Another decision could be to offer more discounts to dealers. If I give discounts to dealers they will promote my product instead of the competitor’s product. So, probably in the eastern region or south and east, for the dealers probably we need to increase the discount, so that they can push my product and sell more. Now, you understand we start with a data, we generate a information and then as a manager we take a decision. (Refer Slide Time: 10:56) Three activities of information systems produce information organization needs. The three activities are : input which captures the raw data from organization and external environment, processing converts the raw data into meaningful form and output is the transferred process information to people. Now, the processing part can be manual in 7 many case like the previous example slide I showed, we did the processing in our head itself. And, we saw the data and we could process and we could find out what is the information. But, in many cases when there are lots of data and etc. then you need computers to do the processing for you and it comes out with a report. And, in the report you will get all the information that is based from this data. So, that is important, here in the previous slide we actually created a report, but mentally because it a very small four pieces of data and I could do a mental map; this is better, that is better. So, my report was done mentally, but a report was made. So, once you have a data you have to convert this into report either manually, if it is simple very few data points and if there are large data points of course, you will have to use computer. And, then computer will give you a table or a chart or a graph like what you are seeing in the newspapers today about corona virus etcetera. You put data in a excel file or somewhere and you generate a chart or a graph, and you can see whether it is going up or its going down on month to month basis and what is the variation that you are seeing. So, all that is an output from a computer, but it is nothing, but a report. So, that is the output. So, there are three thing : Input, Processing, Output. (Refer Slide Time: 12:28) 8 The feedback: the output is returned to appropriate members of organization to help evaluate or correct the input stage. Now, sometimes from the output you need a feedback because the output you may not like or may be the data information is not right or may be the analysis was wrong or the formula used was not right. So, there are some mistake and you can see some mistake. You need to give a feedback and the feedback will correct the loop. So, that the input will again get changed, correct the processing part or some change will done; so, that you get the right output. You always need a feedback to find out whether the output desired output was right or there was some error in the calculation, because after all it is a calculation; you are using a formula or something like that. So, there could be mistake; so, you need to check it. Now, computer and computer program versus information system. As I was talking about computers, computer and software are technical foundation and tools similar to the material and tools used to build a house, but are not complete by themselves. Just a computer and a software you need for information system, but they are not complete. So, you have to utilize them like as an example is you need components to build a house like bricks and cement material, but they are not complete by themselves. You have to build a house, then you have to do a furniture then you have to go and live, people have to start using it then only it becomes really a house. These are the foundation or the base for building any information systems. (Refer Slide Time: 13:59) 9 So, computers and softwares are the foundation or the base for building any information system. So, to start with you must have this minimum thing. How information system are transforming business? Global networking on real time, mobile digital platform, systems used to improve customer experience, respond to customer demand, reduce inventories and more. Growing online learning and leadership, expanding ecommerce and internet advertising; banking, finance and stock markets, new federal security and accounting laws. You see these are the various areas where information systems are transforming business. Transforming business means they are helping business to run, grow, modernize, change, improve. So, that is what all transformation is about because you know it is a changing world. So, every business has to keep changing. So, they need to really get into this management, managing their information system which helps them to change their business. Because, they are continuously getting continuously information that my product is doing well, not doing well, a new competitor has come, a new product has been developed which is threatening my business etc. So, I need to change. So, all that is because of information system, I need information. Without information I am in an island. I will be completely lost. Someday I will find that my products are not selling, my business is down and my company has to be closed. So, these are the various areas where information system actually helps you in running your entire system. Information System is so relevant in all functions starting from areas like finance, banking, manufacturing, digital platforms, networking, government departments that is very important, all the statistical department which generate so much of statistical data like the census for example. So, much of data is collected regarding population, demography, health, education etcetera and based on which the government can take major decisions in their budget for example. So, we need to provide more money for healthcare, we need to provide more money for education etc. All that information comes from data collected during census and such other service. So, these are all nothing, but managing the information system. So, anything, any area anywhere the government, private industry, hospital, bank, sports etc. it is all about information, information and information. 10 (Refer Slide Time: 16:17) So, information technology if you see a simple graph of capital investment is the line here it shows that the lower line IT investment, that its continuously increasing over time. Whereas, total investments also sometimes it dipped in some years, but then it keeps increasing, but investment in information system is a continuously increasing function. So, companies give so much of value that they spend lot of money on computers and softwares; so, that they can generate information regularly. (Refer Slide Time: 16:49) 11 What is new in management information system? Technology - nowadays you are hearing lot of things because technology changes, its changing very fast the typically computers, internet etcetera. So, what you aware of may be 5 years back, today it gets outdated because the computer technology changes so fast. So, nowadays we are currently talking about things like cloud computing for example, big data and internet of things, mobile digital platforms. So, these are the terms which we will hear and see in newspapers, magazines everywhere. And, all of these are playing a very important role in managing information system. All information systems are using these technology, that is the technology part. From a management part, the changes are new things like online collaboration and social networking software. So, nowadays you see social media is playing such an important role in so many things, you know it could be political, it could be anything, it could be even business etc. So, social networking is something which is being given very large importance by all concerned like Facebook etc. I mean these are big advertising platform, e.g Facebook. It is the new management style. Nowadays we are moving over to digital advertising. So, we are advertising more in the digital media not so much in the print media. Because, digital media is very easy to spread across the world, whereas, print media you know it is a physical thing. So, in print media you have to shift and move material (newspapers, magazines etc.) and that is a cost , but here there is no movement of any material in digital advertising. So, you can now publish anything anywhere, write a blog, give some ads etc. It can spread out all over the world. it can become like we are saying it is becoming viral. So, you post something very interesting and it becomes viral means you know it spreads like a fire across the world. So, today you have posted some video from Kolkata, and probably in few hours people in New York or China or Tokyo or wherever in UK they are seeing that same video. This we say, is “going viral”. Another topic is business intelligence, which is nothing, but another smart way of extracting information from basic data. So, it is again another tool, it is a IT tool. Many IT tools are available for business intelligence. BI tools can slice, dice and give you 12 various types of reports which are , more intelligent reports from the same set of data. So, that is why it is called Business Intelligence. Virtual meetings like you are seeing now its post Covid-19 it has become essential. Prime minister is addressing his chief ministers for example, over virtual meetings as there is no physical meeting. The chief ministers previously used to travel to Delhi to have a meeting with prime minister, but no more. Today in corona situation everybody is sitting in their office, in their states and prime minister is having a video conference with all the chief minister. So, similarly everywhere now it has become video conference, video conference and video conference, virtual meetings are being used by government, business etc.. So, it has almost completely replaced physical meetings after the Corona incidence. So, today it is beginning of July - 2020 and you know what is happening. The situation changed from say may mid of March or probably say beginning of April, , May, June; just in 3 months the way we managed things have got completely changed. (Refer Slide Time: 20:16) So, these are the changes which is happening very very fast. What is new in organization is that we are now globally connected enterprises. So, nowadays enterprises are all globally connected and not isolated. So, that is called globalization. An organization may be headquartered in US or any other country will have spread or reach in every country in the world and they are interacting on a real time basis. 13 It is not that you do something and they come to know of it tomorrow not like that, its actually instantaneous, real time. Changing business models, driven by new technology: example Uber and Airbnb. This example I will be repeating many times Uber the taxi service you all know and Airbnb which is something like a hotel. It is a new model completely, since Uber as a taxi service company, do not own any car. Similarly, Airbnb they do not have any hotel property like any other hotel you know. Airbnb just have a platform and people like you and me who have a house and we have maybe a house to spare or may be a room to spare, or two rooms to spare we register in Airbnb. Guests they contact through that Airbnb platform through internet from anywhere in the world. And, we agree and they come and stay in the house. We make arrangements to give the key to the guest. So, it is a very simple business model and Airbnb does not own any property. This is a completely new business model which has come up in the last may be 1 or 2, 2 or 3 or 4 years. These are all very very recent development, just last 4-5 years. Completely different business model and the entire existing companies are feeling threatened by this. Rapid change in technologies, we have already discussed that previously that so many technology changes are happening, Cloud, IoT etc. And, this is impacting information system management. Time and speed to market is something we need very fast. Time is very essential. You have a new product, but it is very important ,how soon can you send it to the market, because if you do not send it soon somebody else will. You will lose the business. Now, if you see this race for vaccines; countries are racing against each other or companies who will produce the first vaccine for Covid-19. I mean that company; obviously, will become a very rich company. So, it is all about speed and that is where information system plays a big role. It helps you to bring out products to the market in a shorter time. Social business example like education service, is a new kind of business we are talking about also nowadays in a big way. People are getting into social business where apart from typical profit there are other very good motives like you are helping the society. It is a not so very profit driven business. I mean the main idea behind social business is not to make just profit, but to 14 help the society as such. There are many sectors of society which need lot of help. For example in education in India, we still have plenty of gap. Our education level is very poor in many states and many districts; so, we need to spread education across the country. This is one kind of business which is coming up and which is helping the society to develop. These are called social business. (Refer Slide Time: 23:31) The emerging digital firm; is all about using digital technologies. So, we will talk about digital, digital and digital. What is happening in this field , how is the digital firm of today is coming up and how does it look like? So, in a fully digital firm how does it work ? Significant business relationships are digitally enabled and mediated. The example I give you with the prime minister interacting with chief ministers, it has now become digital today suddenly in last 3 months. Before that it was all physical, people used to travel; I mean important meeting everybody has to travel, sit in a room, have a meeting face to face, board meeting etc. But, nowadays it has just become opposite. As you know nobody wants to travel and nobody wants to be physically present in one room because of the Corona virus scare. They said let us sit in each of our rooms and we connect through video. That is a digital firm or a digital enabled organization. The entire country’s management is being now done using such digital techniques. So, what to talk about individual organizations, even entire education system is moving over online. 15 Why? Because, we are still not being able to get the students into a class room because of prevalent conditions. Hopefully these things will change, but now we are learning things. So, this will become an alternate method definitely, even if things change and there is no virus etc. This has got lot of advantages. So, we will have probably mix of both in the near future; physical as well as digital. That will give you the best of many things. In many cases you can spread you can now talk to more people say like a course in a class room. I can accommodate may be 20, 30, 40, 60, 100 students but in a digital mode I can teach any numbers 200, 300, 400 and no geographic limitation. The student can be accessing from anywhere in the world. We also talk about time shifting, space shifting etc. Time shifting means you know it is a multiple time zones across the world but we can work together by working from home. This type of working has been made possible by working from home. So, we are becoming very familiar with this concept of working from home. Previously it was typically IT industry in which many people, for various reasons were working from home. But, now this has become common in many sectors. (Refer Slide Time: 26:03) Strategic business objectives of information system are growing interdependence between ability to use information technology, ability to implement corporate strategies and achieve corporate goals. So, it is all about an interdependence between corporate objective and goals. So, I need information system. That is what I had talked to you 16 earlier why MIS is so important to achieve business objectives because the whole business runs on information. Speed to market is very important to firms introducing new products. How can IT help achieve that objective? - It is a question you can think about and if we get time later on we will discuss, but you can also read on your own. You can do some reading by yourself. Go to the internet where lots of material is available and try to find out. I gave you an example about the virus vaccine development, how speed is becoming very important, all of us can see. (Refer Slide Time: 26:57) Strategic business objective - Firms invest heavily in information system to achieve six strategic business objectives. Operational excellence, new product, services and business models, customer and supplier intimacy, improved decision making, competitive advantage and survival. These are the six objectives which I will discuss in the next session in details one by one. These are the areas where the firms invest heavily in information systems to achieve their strategic business objectives. So, that they achieve operational excellence since, that is what business is all about. We must be very productive and efficient, so as not to make loss, or make mistakes. That is called operational excellence in business. 17 We should produce the best quality product or service whatever we are involved in and develop new products and services and new business models as it is a changing world. Unless you are competitive, unless you are coming up with new products, new services and business models you will become outdated. There will be other competitors which will come like Uber and Airbnb and then they will knock you out. So, you have to be on top of the things and keep on developing new things. Customer and supplier intimacy is something related to having better relationship with customers and suppliers. Improved decision making is of course, the core because everything about management information system is for decision making. Why we need information? Because, we need to do decision making which is our one of the most important job of a manager. What you are doing from morning 9 to evening 6 is you are taking decisions and based on your decisions your business is moving or working. So, if you take a right decision its good for that business but if you take a wrong decision or you do a mistake in making a decision or you delay in making a decision that will be bad for the business. Sometime the timing is very critical. If you delay like in a war situation you know that the army leaders or the managers, the generals, the colonel and the brigadiers and the timing of the decision is very critical, it is very important. The whole thing is about timing, of the decision. If you delay then you have lost the battle. Competitive advantage is of course very important as everywhere we always compete against each other in business terms etc. Finally , Survival as I talked about this example of the hotel business and the taxi business, where Uber and Airbnb they really shaking up the conventional organizations. They are feeling threatened that they may not survive with their old models so, they have to change. 18 (Refer Slide Time: 29:41) The interdependency between the organization information system.- You have business strategic objectives of an organization and you need network or internet. And finally, on the right extreme you have the hardware, software and data management. This is a simple model of how management information system works with organization and with the help of network and internet along with hardware, software and data management tools. Without any connection the things will not work. So, these three core elements; the organization, the information system which has three parts viz. hardware, software and data management. the hardware part, software, data management type equipments and then the internet or the network which is ubiquitous. We need the internet to do anything in the digital world. 19 (Refer Slide Time: 30:30) These are some of the references. There is a book by Thomas Friedman - The World is Flat which is about globalization. It is a very interesting book and written on the Indian IT scenario modeled on the Infosys success story. You can read that book. The textbook for this course is - Management Information Systems: Managing the Digital Firm by Laudon and Laudon; Kenneth Laudon and Jane Laudon. This is a standard textbook in many business schools. You can follow these textbook of course, other than that there are plenty of literature available in the internet. Nowadays there is no dearth of information. You just have to search it, it is there somewhere. Thank you very much. 20  Management Information System Prof. Surojit Mukherjee Vinod Gupta School of Management Indian Institute of Technology, Kharagpur Week - 01 Introduction to MIS Lecture - 02 Introduction - Part 2 of 2 Hello everybody. Welcome back. So, we will do the Part 2 of the Introduction section of this course. (Refer Slide Time: 00:21) So, this we have covered, and so we will skip. 21 (Refer Slide Time: 00:23) Now, as I told in last session that we will be discussing strategic business objectives, the 6 business objectives which I had mentioned. Operational intelligence excellence is the first one. Improvement of efficiency to attain higher profitability; is very ok, logical and very understandable that improving of efficiency is required to attain higher profitability. And information systems technology is an important tool in achieving greater efficiency and productivity. So, why do we use MIS? Because it is an important tool in achieving greater efficiency and productivity. Now, take a look at some of the use cases and case studies for example, Amazon, Flipkart, Alibaba, etcetera from an operational excellence perspective. I mean they are very efficient as you know. You place an order it takes just few minutes. You save the selected item and put it in the cart, pay the money and then they tell you, you will get it in 3 days. And you get it in 3 days, it comes and then you accept the product or even if you want to send it back or return, etc. So, the whole thing is operationally very smooth and you know we call this as operational excellence. Now, how do they do it? They do it basically because they have got an excellent information system at the backend and that is how they get all the information. So, from 22 starting from the time you start searching for a product, they are recording everything, all your clicks, etcetera, which type of product you are searching. So accordingly they will advertise and push advertisement etcetera. And then when you put in cart and then they will give you certain offers like Amazon prime etcetera, and you accept, not accept, you place order. They get the money, you use credit card, UPI or whatever. But the whole thing I mean it just goes on in a jiffy to really say that and you do not feel anything. Sitting in your room ,in your home, you can buy virtually anything and it comes in the time whatever the time they promise it comes, 7 days, 7 days, 3 day,s 3 days. And then they say there is a pick up for return in 2 days, they come and pick up in 2 days in case you reject the item. (Refer Slide Time: 02:32) So, that is what information system is working behind because it is not possible for human beings to monitor you know when so many thousands or lakhs of people are placing orders with so many lakhs of sellers and obviously, it cannot be controlled by human beings over phone etcetera. So, it has to be all managed through information system using computers and softwares and technology. And that is what information system is all about. Now, another objective was new product services and business models. So, business models we have described. We are talking about Uber, Airbnb, Amazons, the new things which have come up. The retail industry is completely shaken up by Amazon. Your Uber 23 and Airbnb will frequently talk similar thing we know about the taxi service and the hotel service, etcetera. But these are the most successful two companies which have really again shaken up the entire business model. And Amazon, Flipkart, Alibaba etcetera, we know how they are impacting the entire retail business. I mean so we do not, nowadays go to a shop. This is not required. I can just order. Even in the time of for example, corona when you are supposed to stay at home, no problem. So, we could order grocery and stuff like that and it was delivered to home, without a problem. So, we can solve so many things with such technology. So, information systems and technology is a major enabling tool for new products and service business models. So, we call it as an enabler. So, because there is MIS, they could deliver this, do this business. How Amazon is being able to run their business? Because they are depending heavily on their information system. Without information system you cannot run such digital business. So, you need that environment, the digital ecosystem, the digital platform and the digital mind set and now the digital culture to run such companies. Examples are say iPad, Google’s Android OS and Netflix. So, these are all you know is giving you so much power from your phone which is android driven or iOS driven or whatever. Let us take android; I mean you can do so many things from your phone set. So, it is as simple as that. With your simple phone set you can do, you know, so many activities. All your apps are here in your phone. So, that is the power which information system is giving you. The class question to you is - What is IT’s role in development of electric or hybrid cars or green technologies like Wind and Solar power generation? You can look into the internet and find out. Read more about it because we are not talking this technology in the class but we are talking about Airbnb, Uber, Amazon. On your own you should also look into lot things like electric cars, which is coming in a big way because of environment reasons and so many things, hybrid cars. Then the green technology, we are talking about alternate sources of power, renewable sources of power because we do not like things like coal and you know because they are damaging our 24 environment. So, we need clean powers wind and solar. How information system is also helping in such technologies? ( Reading assignment ) (Refer Slide Time: 05:41) So, this I will give you as a homework, self-study. You will find some lot of interesting things which is happening in these industry sectors as well. Now, customer and supplier intimacy. Customer is of course, as we say is a most important component of a business because if you do not have a customer you do not have a business, very simple. So, serving customers well leads them to return , thus increasing revenue and profits. You want a customer to come back, right, so if I have sold him or given a service you expect that he will come back because he has either liked my product or he has liked my service. So, what is happening? And, example is that in high-end hotels. This is a very interesting example that use computers to track customer’s preferences and then monitor and customize the environment. See, even when you do any web surfing somewhere your data is getting collected by somebody, that is why we say this nowadays there is no privacy. Everything we are doing on the web is getting captured somewhere as a data may be by Amazon, may be by Google or somebody. Similarly, when you visit a hotel, you stay in hotel, hotel business traveler, I mean he has preferences, what he is ordering, what he is liking, etcetera, is being captured through 25 cameras etcetera and these phone calls and then he is ordering food etcetera. What type of food he is ordering gets recorded. Now, all that information is getting captured, converted into information and being informed to the management that this particular customer likes these things. So, next time when he comes, you give him proactively those things. Like in his room he likes a probably a yellow color or whatever. So, you give him a room which has got yellow curtains sort of things like that, furnishings. So, that becomes you know pleasant surprise for him. He likes that. So, that is called customer delight. So, what you have done with information is that I am giving you customer delight, so that that customer will become my regular customer and he will come back. So, that is what the entire business is all about; so, how can I make my customer come back. I will get a repeat business. So, that is an essence of a successful business model. Now, intimacy with suppliers and this allows them to provide vital inputs which lower cost. Like you know say Maruti for example, making cars. There lot of things are supplied by the vendors. And the Maruti purchase people , the vendor department they work very closely with the suppliers, so that you know, when you develop new technology, you develop new product and they ensure you that they give you good quality because you trust them. So, you work with them, you help them, you solve their problem, go to their shop floor find out what is the problem because end of the day you want that the product they supply, the components they supply for your car should be defect free because if their components are good quality your car will be of good quality. If their components are of not so good quality and you put it in your car after some time that car will have problem. The gear box will have a problem, or the battery will have a problem something like that and your customer will complain that your car is not good. But finally, you know you do not make as the battery was made by somebody else. 26 So, what you need to ensure that your battery supplier, your component supplier is your partner. He is not just a supplier, he is your partner. He is with you. So, finally, the quality of a product depends on the quality of all the individual components put together. See, anyone of them becomes defective your car will have a problem (Refer Time: 08:58). So, that is where supply intimacy constitute so importance and that is where again information system helps because you need information about what is happening at the suppliers end. You need to know these information then you can go out proactively to help him. So, another question for your study. Online sites achieving a high degree of customer intimacy Amazon, Swiggy, for example. How are they doing this? We keep ordering the food on home delivery for Swiggy. We like Swiggy. Why? What are they doing? How are they achieving? This customer awareness tells them that the customer likes Swiggy. So, we do not think of any other competitors. So, blindly any time I want to order food, I order on Swiggy. Similarly, when to buy something I go to Amazon or somebody goes to Flipkart. So, how they develop this customer intimacy? Read about that, find out the very interesting things to read and you will like them. It is too long to discuss in this class. So, do some own reading there are plenty of material available find out how the business model evolved, how they are working, how they are being successful etcetera, etcetera. Very interesting stuff, and it can give you lot of ideas you know how in the present days a different type of business models are being developed by smart people. 27 (Refer Slide Time: 10:19) Improved decision making: Of course, it is obvious because without accurate information, managers must use forecasts, best guess, luck etcetera, because you need information. Like, a manager I had said right in the beginning without information , one cannot take a decision. So, obviously, to improve decision making you need better quality of information. So, your quality of data and the quality of information should be better, so that you can take proper decision in your business operations because a decision making can result in over production or under production. As I told you it could be a, right decision or it could be a wrong decision, mis-allocation of resources, poor response times, these are what inefficient things can happen without an accurate information. If your information quality is not good then you can do mistakes. Your decisions may not be the best decision. So, when you do not take a best decision means things can happen, you can be doing misallocation of resources, you can make a loss, etcetera, and poor outcomes you know raise cost , lose customers, etcetera. So, all the negative things and bad things of a business happen without an accurate information. So that is why it is so important to have accurate information which you need for high quality decision making. 28 (Refer Slide Time: 11:37) Competitive advantage: Delivering better performance obviously, I mean you have to keep on improving day on day, otherwise your competitor will catch up and sometimes you will find that you are losing out. So, we have to keep on improving our performance. We have to keep on improving every day, every month and we have to come up with new products etcetera, etcetera. Charging less for superior products, so making it cost competitive. So, nowadays people customers are very price conscious. So, they always look out for discounts. You also know that we look out for discounts when we go to Amazon and Flipkart. We go on studying who gives a discount etcetera. We are always looking for discounts. We are very price conscious and price sensitive. So, that is where again you need lot of information because information will help you to you know gauge, how much discount you can give. Responding to customers and suppliers in real time: How fast you can respond? See, customer wants the product now, so he clicks and you know it should be available: so, to say yes or no but physically you may not be there, but it has to be handled through your information system. So, you have a product catalogue. You have a product catalogue, from which the customer selects the product. If the product whether it is there in stock or not will all depend on the backbone of the information system which you have in your 29 organizations something called a for example, an ERP system (Enterprise Resource Planning) which we will talk about much more in details in subsequent lectures. So, it is very important to have a backend system for getting these information. However, not today, next lecture I will talk more in details about ERP (enterprise resource planning). You can see how customer responses is such a vital thing and is being handled by a software product which is a very essential part of information system, a very core of information system. So, competitive advantage examples again Apple, Walmart, UPS, Airbnb, Uber, OYO, etcetera. Again, these names keep coming up again and again because these are the companies which have in the last few years shaken up the entire business world. They come up with such innovative models , business model, which people never had thought about earlier, and they were the people who came up and not only did they come up they became very successful. And some of their owners have become one of the richest people in the world. Apple, and owner of Alibaba (Jack Ma) is one of the richest Chinese person in the world. And, probably in the world ranking he will be somewhere in the top 10. They are all first generation entrepreneurs. I mean they have just started the business may be 10 years back, 15 years back, very new. Not like our companies like Tatas, etcetera which are running for almost 100 years - Birlas, Tatas. I mean. But you see these people, they are so smart, they come up with new buisness models and within few years, I mean 5 or 10 years is nothing you know when you compare to a Birla or Tata company running for about 100 years and they have reached the top. You see, Apple is now today the most successful company in the world, and they have now working for the last 30 - 40 years. They came up with one product the iPhone and the way they went up and now their business turn-over will be some 700-800 billion dollars or almost 900 billion dollars. Walmart, is another example of such a huge super market chain. 30 (Refer Slide Time: 15:02) Now, the last one is survival; information technology as necessity of business. I mean without information technology business will not survive that is for sure, very simple. Governmental regulations requiring record-keeping: Say examples like Toxic Substance Control Act, Sarbanes-Oxley Act. There are lot of compliances, we know financial, statutory, environmental, income tax, GST records, say everywhere it is information and without this information, I mean you know the business cannot run. The whole government machinery, the tax collection, GST everything runs on computer systems, i.e. information system, otherwise it is not manually possible for such a big country with so large population to run its policy and decision affairs. So, that is a part of survival. So, any organization, any complex thing to run, you have to have a information system, without that you cannot run a large complex organization, be it government, be it an industry, be it a service sector, anything. Now, if we will take the current pandemic situation, it is forcing organizations to work differently, for example, working from home, to survive. I brought it here because for surviving, like our education system today, you know to complete a course today we have to take lectures from home and students will have to attend lectures from their home otherwise the semester could not be closed, the annual examinations could not be held. So, we have to work from home. So, that has become a survival issue for the entire education sector. 31 Similarly, in various industries people have started working from home otherwise you know the businesses will stop, people will lose their job etc. So, this has become a major problem. The solution was technology again - information system using digital tools, we get digitally connected, through videos, etcetera, and we all of are working and many industries are surviving. (Refer Slide Time: 17:12) So, in next section it is about information system and organization strategy where we will talk little bit about strategy. Information technology and organizations, they influence one another. So, it is very important. I mean it is really two things they work together and the one is not complete without the other and organization without any information system or information system without an organizations. So, you need both. Following are the major influencers in an organization. I mean what are the influencers in an organization what actually you know helps an organization run. One is a structure that every organization should have a organization structure, about the hierarchies. They must have business processes because they need to have processes to you know run their business and things cannot be arbitrary. So, everything follows a particular method, you know step by step by step and things are done, so that is called process. So, every business also has a process. Then of course there is politics and then there is a culture. So, we say there is a culture, there is a Tatas have a good culture, this company has a bad culture, they have a very aggressive culture, 32 they are very passive. So, we use lot of you know terminologies and which explain what is the culture of that organization. So, by that we get an idea, we form an idea about that organization. We form a perception about an organization; oh, it is a government organization, so they will be not so efficient; oh, it is a private sector; oh, there must be very efficient, they are very productive. It is a multinational organization; they are very profit making, etcetera, etcetera. The motivation is profit. So, we form we have perceptions based on the culture of an organizations. Environment, of course, because everything is you know we have an environment we are all a part of the ecosystem. So, whatever we do has an impact to the environment either positive, mostly it is negative. Like we run a thermal power plant because we need power electricity obviously, we cannot do without electricity, but at the same time we are damaging the environment by pumping out lot of carbon dioxide. So, which is not good for the environment, but still we have to generate power, we cannot survive without power. Now, and finally, management decisions: Of course, that is what the whole subject we are talking about management decisions because we need information system to take management decisions. So, that is where information system really comes in. So, these are the influencers of an organizations, so these are the elements of an organization, very important elements of organization. 33 (Refer Slide Time: 19:30) Now, the features of an organization: If you want to now see how does a organization look like, what are the features of an organization, it will use an hierarchical structure obviously. So, there will be at the top a managing director, then a general manager, vice presidents, then senior manager, then junior managers, then supervisors, officers, then you know work man or staff and a clerk etcetera. So, you have an organization. So, you have a hierarchical structure that is the organization. Then accountability and authority in systems of impartial decision making: So, there is, you know, lot of decision making happening in an organization that is a how an organization works. And then for everybody taking a decision , somebody has to be accountable. If I take a decision means I am accountable for that, I am responsible for that. So, there is an authority. You can delegate authority. So, a decision taken by the CEO, of course he is a top man of the organization, so that decision everybody has to abide by it. It is very important, as the CEO has taken the decision. But if a decision is taken by a junior manager, many may not follow that decisions, some may find it is a junior manager’s decision and it can get changed or you can not follow knowing that nothing will happen etcetera, etcetera. So, there should be a system authority in the impartial decision making. 34 Adherence to principle of efficiency: One of the feature for any organization should be certain thing called an efficiency. So, we expect when you go into the office that my work will be done in as short a time as possible. I do not plan to spend hours in an office to get my work done. Let it be wherever, a municipal corporation, a government office somewhere you are going to pay tax or somewhere you are going to pay your LIC premium or you have to go to police station or a hospital, anywhere you go for work or a service you expect that there will be certain amount of efficiency there. So, that you do not have to spend unnecessary time, your time is not wasted because time is of lot of value to you. Your time is very important. So, if I go there and waste 2-3 hours I mean I do not feel good. You do not have a good opinion about that organization. Decision making at business processes, again that is a feature of an organization. We are always talking about decision making, obviously, without a decision making an organization will not run and you need to have processes, business, processes. Organization politics, culture and environment; which we have discussed in the last slide. And then finally, ethical practices; now that is something very important, and which we have seen many times when we open the newspaper and read about this scam, this banking scam, and somebody has taken a loan has not returned or run away from the country or doing some malpractice and giving some fraudulent product or maybe you know a copy product etcetera. So, these are all unethical practice; and we know many imitation type of things and etcetera, duplicate products, poor quality products, even in medicine, etcetera. So, these are we say, these are the unethical practices which are been done and which we do not expect. We expect that any organization which runs should follow ethical practices. Now, that is what we expect. But of course, there are expectations where it does not happen, so we have to be conscious. But that is what the expectation is from any organization that they should be have ethical practices. 35 (Refer Slide Time: 23:02) The major economic impacts of information system technology: The economic impacts are like it will change a relative costs of capital in the costs of information because of information system you can bring down lot of costs. So, you can do things much more efficiently. We will discuss (Refer Time: 23:22) various sections the cost element will come up in various examples, how we can improve efficiency; whenever you improve efficiency means your cost is coming down. So, you are doing something much faster in a lesser time, so you are being more productive. So, obviously, you are producing more in less time, so that means your cost is coming down. Information system technology is a factor of production like capital and labor. So, information system, although it is all about information, but still we say that it is a very important resource. Like in a factory you need capital you need money, right, you need labor, you need resources, you need raw material to make anything. Similarly, you can think that you need information system, so that is also one of your resource. So, do not think that it is something like a vague, you do not see it physically – this thing referred as information system. So, it does not exist, but it does exist, and consider it as a important resource for your business. So, if you want to start a business think about information system, what information system you should have in place, so that should also come in a very early stage of business you should plan. 36 IT affects the cost and quality of information and changes economics of information. So, again IT improves things very fast. I can share information at a very low cost because one example is emails for example. If I send an email to 100 people it does not cost me anything very little, but if I send an envelope or a postcard or whatever another something a physical letter to 100 people it is quite expensive, not only for paper, but the postal charges. So, over all in such it’s a simple example an email, but even your telephone or your you know we do video calls virtually free, even international calls through WhatsApp, etcetera, we do not pay. We can even do business calls using these technologies and its free. Google talk and Zoom and things like that. So, everything is becoming so cheap and we are getting so many facilities that it is changing the economics of information. Today, I can talk to somebody in US without paying anything just the internet cost that is all. If I have internet I can dial up and call, even have a video call and we have video chats virtually free. So, information technology helps firms contract in size because it can reduce transaction cost the cost of participating in a market. So, overall whenever you have lot of good information systems practice, you can shrink the business and you may not need so many people. An example is a bank for example. Previous days you know the banks had so many people sitting in a counter, but now if you go to a bank you see very few people. Because why? It is all computerized. So, we know that with less people, they are doing not only the same probably they are doing more work. So, that is where information system is actually helping to make firms or the business contract in size of employee numbers. So, you need less people to do more work. So, we are becoming more and more productive. And outsourcing is another very important thing , but we will not discuss here today. We will discuss in another subsequent lecture where information system plays a big role in outsourcing. 37 (Refer Slide Time: 26:37) Organizational behavioral impacts: IT flattens organizations. So, you know the world is flat, the book I was referring to in also is mentioned in this end of this slide - Thomas Freidman, the world is flat as IT flattens the organization. Similarly IT helps to flatten organization. Decision making is pushed to lower levels. So, we need less number of levels when we are heavily dependent on IT and we do not need so many hierarchical levels. So, with fewer management levels , managers need IT which enables faster decision making and increases span of control and we can communicate easily with so many people across the world, so that we do not need so many layers in an organization. So, that is how a flatter organization then becomes more efficient because each level means you know it takes time. I will take a decision it will go to my next level and he will do something again then he will wait and the other person has to wait for the decision. So, it takes time, but if I have lower number of levels the decisions will move much faster. So, it becomes more efficient. So, today’s organizations, flatten because in post-industrial societies authority increasingly relies on knowledge and competence rather than formal positions. So, we need more of dependent knowledge and competence rather than you know heavy designated people like your senior vice president, vice president, and general managers. 38 We do not need so many positions. But because lot of information is there in the management information system itself; we do not need physically so many people. (Refer Slide Time: 28:10) Organizational resistance to change: This is again a very important aspect of a modern society where information system becomes bound up in organizational politics and because this influences access to a key resource that is information. Now, there is also a resistance to change. Whenever you bring in some new technology or a new thing ,you will always find that people tend to resist a change because they are afraid of a change, that if something happens they will be impacted. Again, the classic example was introduction of computer systems into our banks, 30 years back. So, people thought that if you introduce computers in banks people will lose jobs and many other bad things will happen. So, there was tremendous amount of resistance in banks, but today you cannot imagine going into bank and not seeing computers. You cannot, do not even imagine, it is very difficult to imagine to going to bank which does not have a computer and not using core banking system. So, the whole perception has got changed. So, that is where information system again plays a big role and impact how this perceptions can change. Information system potentially changes an organizations structure, culture, politics and work. So, that is what is important. When you, with the help of information system you 39 can potentially change an organization structure, culture, politics and the way we work because nowadays we do not have to go from office to office, person to person, table to table, desk to desk because I can do everything from my computer, sending my message, sending my chat message, sending my mail, call him also over phones, I do not have literally to move from my chair. So, that way you can extend the imagination and see we can have a virtual office. Everybody sitting in their own house we can actually run a company nobody is going to, so we do not have to rent an office or hire a office or own a building. So, we can sit in our own house independent houses and we can interact and run a business. It is happening, plenty of business are running like that. In IT industry, this is very common, and many people do not go to the office at all. Most common reason for failure of large projects is due to organizational and political resistance to change. So, that is one of the thing which was found out that key reason of failure for large projects is when people resist change. So, one of the example I give you over that computerization of banks, so it got delayed, but finally, it was overcome and it was done. But many time, in many cases this resistance to change is very regressive. And it you refuse (Refer Time: 30:43) introduction of changes because for good or bad for whatever reason there could be sometimes valid reasons also that not any changes are acceptable or all changes are good, it is not that. But definitely we need to change that is for sure because we say change is the only constant in life because in our life everything is changing. Technology is changing, because our knowledge is changing, because the situation is changing, because the scenario is changing because the environment is changing. Today, in month of January did we ever think of a situation like this, that all of us will not be allowed to go out of our home. We cannot go out of our home or every time I go out will have to put a mask on our face. I mean, just 5 months back in January or February we never dreamt about it, but today it has become an essential part of our system that when we go out of house we put up on a mask. We try to maintain a physical distance; we are using sanitizer and washing our hand every now and then. 40 So, are we resisting that change? Many places you can see in newspapers in US, for example, many people are resisting this change. Even in our country you will find many markets where many people are not wearing the mask and they are also not maintaining distance and all that. That is a sign of resistance to change. I do not want to wear a mask nothing will happen to me. But we know that is not the right attitude, but it can create lot of impact if this resistance continues like this. (Refer Slide Time: 32:04) So, organizational resistance to change, I mean in an organization, the overall thing works like this. So, you have technology in one side, people on the other in between the two sides is the task and the process and that is where people have to either accept the process and the task or they give that resistance to anything that changes,when a new task comes in or a new process comes in. I mean the question of resistance comes up because there will be resistance. If I ask everybody to wear a mask probably 50 percent will wear it, another 50 percent will not wear it. So, they are showing resistance to change. 41 (Refer Slide Time: 32:39) What is happening you can see in US. For example, in US many people are refusing to wear masks and their cases are going up, I mean they are having a problem. Now, the last part is Michael Porter’s, we have got competitive forces model. This again very classical model in marketing etcetera. In field of marketing, 5 competitive forces are the following: traditional competitors, new market entrants, substitute products and services, customers and suppliers. So, these are the 5 forces which shape the fate of a firm. We will discuss about this later again part of this course. (Refer Slide Time: 33:11) 42 And here IT enabled strategies for managing competitive forces. So, this is just to show you how IT also interacts with this marketing model a typical conventional forces of Michael Porter’s classical model. See, low cost leadership example is Walmart, traditional competitors Walmart came in a big way to traditional competitors. Product differentiation example Apple and Google, new market example or new market entrants Apple and Google when they came in, they shook up everything, the whole world. Focus on market niche, Uber and Airbnb this is addressing that factor substitute products and services. So, new product and service came and the whole hotel industry and taxi industry and private business, etcetera they were taken by surprise. Strengthen customer and supplier intimacy, this is addressing the forces of customers and suppliers, examples are again Netflix and Amazon. So, nowadays with Netflix for example, people have stopped going to movie theaters. I mean you can see all your films which you want on Netflix, Amazon prime etc. Just simply sit at home pay some annual rental and you can see any number of films on your mobile devices, on your laptop, on your TV (Refer Time: 34:27). So, nobody will go to the Multiplexes and cinema halls. So, conventional cinema halls will probably you know lose their business in very short period of time and that is how this customer and supplier intimacy things play important role. that is where these models are bringing in intimacy level with a customers and suppliers. Suppliers again Amazon side if you see they have this whole bunch of suppliers, selling their products through Amazon platform. So, that is the e-commerce platform. So, one side your suppliers, one side is we the customers. And Amazon is maintaining a very good intimacy relationship , so that the whole system works very smoothly. So, that is a relationship with this model Michael Porter’s model. 43 (Refer Slide Time: 35:07) Internet’s impact on competitive advantage: Transformation, destruction, threat to some industries, example travel agencies, printed encyclopedia, newspaper. This is a typically where how internet is playing a role on this competitive advantage. Competitive forces still at work but rivalry more intense; example Booking dot com. Booking dot com is a site where you can book hotels. They will again give you a discounts, so the discount thing starts if you book a hotel through Booking dot com, you get very interesting discounts and you can book hotels anywhere in the world sitting here in India in Calcutta or wherever. So, you can book hotels through this and you do not have to talk to the hotel directly. Universal standards allow new rival entrants to market, example Amazon competing with Microsoft and IBM with Cloud technology. So, IBM and Microsoft are technology companies they run Clouds, but Amazon who is a book seller for online selling of books and then retail, are now selling Cloud business. Now Amazon, can you imagine a company which is selling book now is selling Cloud business. So, that is how technology, internet etcetera is playing a role in changing the business environment. New opportunities for building brands and loyal customer bases, example Uber, Airbnb. Again, as I told you Uber and Airbnb will come up very frequently because this is a classical development which really shook up everybody with their novel business models. 44 (Refer Slide Time: 36:35) So, finally, again the reference is the same two books are there. You should get this books and read yourselves. Thank you very much. 45  Management Information System Prof. Surojit Mukherjee Vinod Gupta School of Management Indian Institute of Technology, Kharagpur Week - 01 Introduction to MIS Lecture – 03 Dimensions of Information System Hello and welcome back. Today we will talk about Dimensions of Information System. We have talked already about in the introduction of what MIS consists of. The various (Refer Time: 00:32) components of technology, also the organization how it is related to an organization etcetera and how the whole thing works. And now we will talk about dimensions of information system. (Refer Slide Time: 00:48) So, the ecosystem; how does it look like. If you see overall see the yellow box. The whole outside is the total environment within which we have an organization which is within the red square or rectangle that is showing the organization and within the organization, we are just showing the information system part not anything else. There are of course, many other components of the organization which we are not showing here. 46 Now, this is the gray box here is the information system. Here we have an input and then, we are processing, arranging, analyzing and we have an output. So, that is what we had also discussed earlier. Input > processing> output. That is briefly all about the information system at a high level. And now, if you go outside the organization who are your stakeholders are? Who are interacting with you? You have customers , suppliers , regulatory agencies that is a governmental agencies and tax authorities etcetera. Then you have your shareholders, the owners, basically the people who own the company and then you have your competitors. Employees etcetera there are many other stakeholders which is not mentioned here, but that will be within the organization not outside. So, from outside, you have customers, competitors, shareholders, regulatory agencies and suppliers. That is the overall ecosystem of an information system. At the centre, at the core, at the heart is your information system and all of these people or the stakeholders are interacting with your information system or they are somehow linked to an information system. The outside world is seeing the organization through this Information System They are not seeing the information system, but they are seeing the organization and within the organisation, we have your information system and through your information system, the organization is interacting with the various stakeholders with the environmental components like suppliers, customers, agencies, shareholders and competitors because finally, in a business, one of the major activity that you are doing, is you are sharing information and when you are sharing information, you have to do use your information system. 47 (Refer Slide Time: 03:07) Dimensions of the information systems is the main theme of today’s this lecture. As I said, information system is at the center and then we have organizations, management and technology as the dimensions of this Information system All that I wanted to tell you is that or you should note it ( Information system ) is just not computers. So, when we talk about MIS or information system, just do not think computers. I mean of course, yes when you enter an organization or you go to an EDP section or whatever or the bank you see computers in front of the person and everybody you see , is looking at a computer typing something into the computer. He has a keyboard, he has a screen and computer. Physically what you see is a computer, but information system is not just the computer. It is the other three dimensions viz. organizations, management and technology which represent IS ( Information System ). 48 (Refer Slide Time: 04:05) Hierarchical levels in a firm; If you take an organizations hierarchical structure you have three major levels. I mean not necessarily three, but broadly we can classify into three levels. So, we have senior management on top, and then we have middle management. This is a very simplistic view so, that you can understand the various levels. Middle management we call them mainly knowledge workers because these are the people who take decisions and they need information. So, they need a lot of information. Operational management at the level lower level who are actually running the show, running the business, the production and the service and they are the data workers. They are called data workers because they are generating and collecting data. E.g. When you do a sale, you are collecting a data that I sold 10 pieces of component to a customer x , 5 pieces to customer y, 20 pieces to customer z and 100 pieces each to a customer b, c, d etc. Throughout the day I am doing this. I am selling and I am generating the daily sales data. So many pieces at such and such price to such and such customer. This is how the data will be structured. Date – Time – Customer name - Quantity – Price. Now, what the middle management will do is based on these, (the knowledge workers) then will generate a MIS report, the management report like the one report I had talked about earlier that north, south, east, west they have sold 40 lakhs, 50 lakhs, 30 lakhs worth of goods etcetera. These information comes up only when you collect the data at 49 that operational level. That is a very vital bottom of the pyramid level, the lower (operational) level who are actually collecting the data and that is the starting point of your information system. (Refer Slide Time: 05:48) Separation of business functions. Now that was hierarchical level and then now we go to into the functional outlook. So, the business can be structured as I said one was the hierarchy senior management, middle management, lower management and then, we have the pillars, the different departments which are the business functions. So, what are they? They are Sales and Marketing , Human Resources, Finance and Accounting, Manufacturing and Production etc. Of course, there could be many other departments depending if it is a service industry or it is a manufacturing industry etcetera or it is a bank. Generally we think about these are the four major functional areas , viz. manufacturing and production, finance and accounting, human resources and sales and marketing. But you should also keep in mind that, every business is different. So, although these functions are common across most companies, but their business is different, the business models are different and the business processes are different. 50 The point here is that the same MIS used by one company may not be used by another company. The hardware’s can be common, but the software’s can vary, the applications can vary, the tools can vary, depending on the particular business requirement. So, the functions are common, but business process wise they will differ. There is another exercise for your self-study: you must have heard about the famous dabbawalla, of Mumbai, the people who deliver your lunch dabbas to your office. They collect it from a house and deliver it to office and they are doing it for hundreds and thousands of people. They collect it, and then go by local train to a central point and then they distribute using the hub and spoke model. Probably they all meet at Dadar and then from Dadar, they distribute north line, west line, central line and so many lines in Bombay etcetera. Finally, it is delivered to your desk in your office at the right time. So, if you are expecting your lunch dabba to come at 1, it will come at 1 o clock roughly. It is a very classic supply-chain operation which has been studied as a business case by various B schools including Harvard, IIM Ahmedabad etc. Prince Charles is a big fan of this dabbawalla, he has studied this model , he has come and met them, and he is friends with the dabbawala owner to the extent that they attended their his marriage. Study this case and find out , what kind of MIS is practiced for achieving 0 defect service round the year. Throughout the year, 20 days a month, 5 or 6 days a week Monday to Friday I mean month after month, year after year they are delivering to thousands of people without any defect. They are a six sigma organizations and they have actually achieved nearly zero defect performance. It is a phenomenal organization. I request you to please study through internet and try to find, what sort of information system are they using - formal, informal, using computers or using their brains or memory whatever. You will find this is a very interesting case study. 51 (Refer Slide Time: 08:58) Dimensions of information system. Managers set organisational strategy for responding to business challenges. So, we have challenges every day like right now we are a facing a big challenge , the Corona crisis which is not only a challenge for the medical system but also for the business and the economy. What is important here is, the organizational strategy that is required to meet this particular challenge. In addition, managers also need to act very creatively. So, creativity is a very important characteristics of a good manager. You have to be original, you have to be innovative, you have to be creative and you have to come up with new ideas which should be very different as traditional things will not work for these new challenges like the corona virus challenge which came as a new thing. I have to develop my strategy based on my creativity because I never studied this type of problem before. It was not in my textbook when I studied management, there was nothing called pandemic and what happens if everybody has to stay at home and they cannot travel to office. How do I manage such a situation? No textbook has it, no management school has taught this in MBA courses. But today, I have to run the business and somehow survive because it is a question of survival so, I have to be creative to come up with some new strategy. Creation of new products and services, occasionally changing the organization, if required for example, mergers, acquisitions, hiving off, joint venture, collaborations. 52 Again, sometimes it so happens that, my organization is not doing well, I am not being able to survive. So, what do I do? Can I merge with somebody more successful or can I go for acquisition and acquire another company or maybe I can hive up a part of my company e.g , the loss picking division to another company or with somebody who is interested to form a joint venture, collaboration etcetera. So, all of such things happen when you want to recreate and change the organization. There are plenty of examples available. Example of a large Indian Joint venture is Maruti Suzuki. Sometimes, I need a partner because the partner brings in money and also most important in most cases for India, example the partner brings in technology. When I do not have the technology, I take a joint venture partner who brings in the technology and both of us bring the equal amount of equity, fund etcetera and we can start a business. Mergers , like the banks for example, the government decides that three banks will merge into one bank. Last year state bank merged with all the other subsidiary state banks. Many public sector banks ( about 6 or 7 ) were merged with Punjab National Bank in April 2020. Mergers keep happening so that, the organizations can be made stronger , because due to competition , small banks, can have lot of problems in surviving. Lot of scams are happening in our banks and banks are going under a loss. So, to help them to survive, mergers may be required, so that weak banks can be combined to form one big strong bank. These mergers impact information system in big way. A class discussion for you MIS issues relate to the recent merger of public sector banks like three banks were merged now they have difference in their MIS systems which will affect how they work after the merger. So, how do MIS issues get resolved? When you become one, you have to homogenize as you cannot have three different information systems working in a same organization. So, how do you handle such situation? I would suggest if you can do some reading on your own this will be interesting and this had happened recently , in last 1 or 2 years when several public sector banks got merged 53 in India. Please read about that and find out how they handled their information system merger homogenization. (Refer Slide Time: 12:59) From a technology perspective, the dimension of a information system are as, we had discussed: hardware and software. We know that we need fundamentally computer hardware and software and the data management technology or applications / tools. You need another tool to handle the data ( ERP for example ) is one such tool , which captures data and then helps you to generate report. Business intelligence type of tools are used to manage your data and convert data into meaningful reports, intelligent reports, smart reports so that, it helps managers to take better decisions. Because if I get more information and better quality of information, different ways of looking at the same information , you get a lot of views. This is done by slicing and dicing of the available data and the information ( in the form of charts , graphs etc.) can be seen from angles to get more clarity and I can get a better perspective or I can get different perspectives. What happens if my customers are from North India? What happens if my customers are from East India? What happens if my customers are from the North East? So many perspectives are required and for taking smart decisions and that is where such tools help. 54 Networking and telecommunication technologies are very important of course, as without network, ( internet, intranet, worldwide web ) nothing moves today. So, we cannot think about a life without internet for example, and all the computers we use are connected with in an organization which is called intranet or LAN ( local area network). All the offices in the country for example, will be connected through extranets. That is called WAN (wide area networks) not only the country, but also for a multinational company which has got offices in many countries in the world. All of them will be connected through their own extranet or WAN ( wide area network). And then finally, we have the www (world wide web). Using this ( www ) we can connect anybody to anybody from anywhere in the world. That is the open connectivity. Anybody having a web service can talk to each other or they can connect with each other for exchanging data. These are the very essential dimensions of information technology from the technology perspective of information system. IT infrastructure provides a platform on which the system is built on. Finally, we are talking about how the management information system will be built on this IT platform. The IT infrastructure provides a platform and on that platform, we build this knowledge system through which we manage the entire knowledge data base of any organization. What we say finally is that, information technology is at the heart of information systems. So, the heart is the technology without these technical components we cannot run an information system. Ee need hardware, we need software, we need connectivity. So, we need to be interconnected of course through Internet ( which is the backbone ) and we also need computers and softwares. 55 (Refer Slide Time: 16:01) The business information value chain. See on the left is the information processing activities. What are they? Data collection and storage, transformation into business systems. So, first is a collection part like how much sales you are doing etcetera , I collect and store. You have to store somewhere using a computer and then, transform the stored data into business information. And then dissemination. Dissemination means now you spread it out. Take out a report and then give it to the person concerned because you do not give everything to everybody. The purchase related information, the vendor related information etc. I will give it to the purchase manager. The sales related information I will give it to the sales manager, the manufacturing related information I will give it to the production manager, production in charge and all the finance related information I will give it to the finance manager. Now the business processes they are on the top layer. The top layer business processes consist of supply chain management, enterprise management, customer management, knowledge management. These are the different processes where the actual transactions are happening and generating data. Whenever a transaction happens, it creates data. The output of any transaction is a data apart from what business action / outcome it is supposed to do. From an information system MIS perspective, the output of any 56 transaction is data and you collect the data and then convert and disseminate it in the MIS section shown on the left hand side of the chart. In the lower side here, what you see is management activities. What are these management activities? Planning we have been talking planning, right as managers you start the day with planning, and then you are coordinating. Coordinating means integrating various functions. We will talk about this more, when we talk about ERP (enterprise resource planning ) as to what coordination is all about. The production manager has to coordinate with the purchase manager because he needs to know when his vendor will be giving the raw material or the sub assembly or the components which he needs for his final production line. This is an example of coordination. The purchase manager has to coordinate with the finance department because he needs money to buy things. So, he has to coordinate with the finance guy and the sales guy has to coordinate with the production manager because he needs to know when his material will be ready for the customer because the customer is waiting for it and he is calling him up as to when he ( customer ) will get his material. HR is of course, there, which talks with everybody regarding employees etcetera. Everywhere we need the have a lot of control functions because the business is all about controls and we have to control things because otherwise it will become unmanageable. Based on the information you are getting from your MIS system, you work with models and what-if scenarios and then you make decisions , for example , whether to give discount, when shall we give the discount during the Durga puja vacation, during Christmas vacation, during the summer seasons etcetera.Many products can be seasonal products like air conditioner , refrigerator etc. and they sell more during April, May, June the hot months, they do not sell so much in the November, December. So, shall we give discounts in the winter so that we can sell some air conditioners during the lean season. All such decision-making is being done here. This is the management activity. Finally, is the firms profitability and strategic position. So, ultimately, whatever we are doing is basically to ensure profitability and strategic positioning of the organization. 57 This diagram is taken from the textbook MIS by Ken Laudon and Laudon. It is a very significant diagram and you should try understand the entire business information value chain. Because it takes care of three basic things like the business process, the management activities and information processing activity and shows us how Information Processing is linked with the two main arms of the business, namely, the business processes and the management activities. These are the two main arms the one on top and the one of the bottom and they are being supported by the MIS - the information processing activities because without this they will not be able to survive on their own. (Refer Slide Time: 21:04) Complementary assets. Organizational capital and the right business model. Assets required to derive value from a primary investment. So, you have many primary business that is where you need assets to derive value from your primary investment. Assets means whatever is being used e.g. machineries, plants, information system etcetera we consider information system also an asset. So, you need to derive value from a primary investment. Firms supporting technology investments with investment in complementary assets receives superior returns. Apart from your basic assets which you need like plant and 58 machinery etcetera to make your products , you need to encourage investment in information technology. This has been seen to give superior returns. We have been talking how MIS helps business in making decisions, making smart decisions, making intelligent decisions etcetera , which result in getting better performance. A very interesting thing happens when you invest in technology and the people to make it work properly. I will give you an example how it happens, it not so much in India but we find this very common in Europe and US petrol pumps. The oil companies their business is to sell petroleum or diesel and all stuff like that. But along with that, in their petrol pumps they also do lot of retail business. They have a retail store and those stores are very popular and they also have a restaurant. So, people stop to take petrol and then they buy things and then have coffee and snacks. So, that is also owned by that oil company. So, the oil company is not only selling oil, it is also selling retail products and doing a restaurant business as well. This is an example of complementary asset. That is where information management system helps that you can run very disconnected business environments and business activities using the help of complementary assets along with the help of information technology. It is a question of selecting the right business model. (Refer Slide Time: 23:28) Some of the examples of organisational assets are appropriate business model, efficient business proces